New York may have misallocated roughly $150 million in Obamacare grants, the Department of Health and Human Services Office of the Inspector General said Tuesday. The watchdog office says the state should refund any misspent money to the federal government.

HHS OIG found the state did not have internal procedures necessary to ensure federal funding was allocated properly to set up the state’s Affordable Care Act insurance exchange. Specific problems, according to the inspectors, include the state divvying up $93.4 million using a method that overestimated the number of people in the state who would enroll in a health plan on the exchange and not sending $49.5 million earmarked for Medicaid to that program. HHS OIG says New York should adjust its calculations and refund any misused money to the federal government.

New York state government disagreed with the findings. The state said it had complied with federal guidance and that its allocation formula for determining the share of the population that would use the marketplace to find coverage was accurate. The allocation of in-person enrollment costs was consistent with other activities funded by grants at the time, the state added.

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