DENVER – A state audit of Colorado’s online health-insurance marketplace found more than $32 million in problems with dozens of payments and reimbursements.
Released Monday, the audit suggests that Connect for Health Colorado has been unable to ensure that it responsibly spent public funds in line with federal laws and requirements.
“We found that Connect for Health Colorado has not sufficiently ensured that public funds have been spent in accordance with federal requirements, that staff follow internal financial and accounting policies and procedures consistently, and that financial controls adequately safeguard its resources ...” the audit states.
CHC was awarded $177.7 million in federal grants to implement Colorado’s health exchange, which is overseen by a state-appointed 12-member board. It had spent $136.5 million of the grants, as of September 2014.
The exchange was created through state legislation in 2011 in an attempt to comply with President Barack Obama’s federal health-care reform law, while also developing a unique system for Colorado.
The law creating the exchange had bipartisan support, despite Republicans pushing back against so-called “Obamacare.” But Republicans said they would be closely watching the system’s implementation.
“Sadly, I am not surprised,” said Rep. Dan Nordberg, R-Colorado Springs, who ran a bill last legislative session that would have expanded the auditor’s scope over the exchange.
The measure died in the Democratic-controlled Senate, despite having widespread approval in the House. Nordberg said he is likely to introduce the bill again in the upcoming session that begins in January.
“I hope Democrats will see the light and support my efforts this year to give the state auditor’s office the authority it needs to expose this kind of government waste and help us better protect taxpayer funds,” he said.
The audit identified problems with 35 out of the 92 vendor and grantee payments and contracts that were sampled, or about 38 percent, resulting in $412,137 in questioned costs stemming from noncompliance with federal or individual contract requirements.
The report highlights several specific issues, including $488,784 that CHC paid to vendors and grantees that were prohibited or “unreasonable uses of federal funds.” Another $185,866 was paid without support for the payment amounts or services provided.
Also concerning was a finding that payments were made to some vendors without final contracts or board approval. The report also found that CHC did not keep records for all transactions, nor did it have proper controls over access to its accounting system.
The report suggests that greater steps could have been taken to contain administrative costs. In one example, the audit points to a payment of more than $2.2 million to two contractors for information technology contracts that could have been better managed and contained.
In their recommendations, auditors suggested that the exchange should establish better procurement and payment policies; create rules to comply with federal requirements and individual contracts; and tighten accounting overall.
CHC was careful to point out Monday that it agreed with the recommendations, even before the report was released.
This isn’t the first time the board has had to deal with ugly publicity. The former president and chief executive of CHC, Patty Fontneau, came under fire for seeking a payraise, despite a slow rollout of the system.
But its new leader, Gary Drews, said he agrees with the audit, and he is taking it seriously, while already implementing several reforms.
“We welcome the input and the transparency,” he said in a statement. “All of the more than two dozen federal and independent audits and reviews have brought tremendous value to us as a start-up, and we have implemented their recommendations to improve the organization.”