Minnesota stands to lose an equivalent amount in future funding from the federal government due to the errors, according to a report released Wednesday by the Office of the Legislative Auditor.
The auditor noted that the Minnesota Department of Human Services, which administers the government programs that insure 1.1 million Minnesotans, has generally complied with legal requirements surrounding use of personal data.
But the report said that DHS, and the state's technology agency MNIT, generally had inadequate internal controls over the system, known as the Minnesota Eligibility Technology System, or METS.
Over the past eight years, the costs to build and operate the system were $432 million. METS also is a component of the MNsure health insurance exchange.
As a result of deficiencies in the METS system, county caseworkers were required to manually review 37% of 624,000 cases over a 15-month period.
"METS has not achieved the efficiencies that an automated eligibility determination system should provide," the report said.
In a reply to the audit, DHS and MNIT acknowledged "that challenges remain" and that they were pleased that "the report found that we 'generally complied' with legal requirements."
But the reply, published as part of the report, took issue that internal controls were generally not adequate.
"The findings in this area of the report had relatively low error rates," said DHS Commissioner Jodi Harpstead and Tarek Tomes, MNIT Commissioner.
The state's counties, which hold the responsibility for enrolling people into the state's public health insurance programs, have long called for fixes to METS.
"The inefficiencies in the current METS tools are unmanageable, causing many manual work-arounds and poor customer service outcomes," the Association of Minnesota Counties said in late 2016. "Because METS does not function well, counties have been forced to add staff to meet the requirements."
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