Federal auditors are recommending that Colorado be forced to repay nearly $9.7 million from grants used to set up Connect for Health Colorado, the state’s Obamacare exchange, after concluding that the money was misspent or not properly accounted for.
The audit, released last week by the U.S. Department of Health and Human Services’ Office of Inspector General, found that Connect for Health Colorado didn’t sufficiently document how it spent roughly $4.4 million on contractors and consultants. The audit also accused the exchange of allocating $4.5 million from the grants to prepay for contracts that would run past the end of 2014, the time by which all grant money was supposed to be spent.
Among the audit’s other findings:
- Connect for Health Colorado spent more than $211,000 on bonuses to executives and other employees without providing documentation of the performance evaluations that are supposed to accompany such payments. The largest individual bonus was $18,500 paid to the exchange’s then-CEO in 2012.
- The exchange paid $164,000 extra to three unnamed subgrantees and didn’t sufficiently document why.
- The exchange did not adequately document $10,000 in travel expenses for employees.
- Early in the exchange’s formation, employees used personal credit cards to purchase equipment for the exchange, then were reimbursed without adequate documentation.
- The exchange used grant funds to pay for an iPad for its then-CEO, first in 2012 and then again in 2014 when the first tablet was reported broken. However, the broken tablet was never returned to the exchange, and, when the CEO left in 2014 and paid the exchange to keep the second iPad for personal use, no effort was made to ensure the tablet did not still contain sensitive data.
Auditors concluded that Connect for Health Colorado ultimately did not have the right policies in place to prevent the identified problems.
“These findings were caused by a lack of adequate stewardship of federal funds,” the auditors write in their report.
Connect for Health Colorado is the vehicle through which insurance companies in Colorado sell Obamacare plans to individual customers and small businesses. While most states use the centralized federal exchange, Colorado is one of a handful of states that chose to build its own marketplace.
The audit covers fiscal years 2012 through 2014 and looks at how Connect for Health Colorado spent $183.7 million it received from three federal grants to set up the exchange. The $9.7 million that the audit is recommending be repaid is about 5 percent of the total grant funds.
Luke Clarke, a spokesman for Connect for Health Colorado, said the exchange broadly agrees with some of the audit’s findings regarding its documentation policies and said the findings are similar to what state auditors found in 2014. Since then, he said, the exchange has implemented new policies to better document spending. The exchange also has a new management team, after the exchange’s original CEO, chief financial officer and chief operating officer all left in mid-to-late-2014.
“It’s been identified, and we’ve acted on it,” he said.
He blamed some of the problems on murky federal guidance that exchange officials received while trying to set up the marketplace.
“We were a brand new organization doing something that no one had done before,” he said.
But Clarke said the exchange disputes how much money it should have to pay back. After an internal audit identified problems with contracts running past the end date for the grants, the exchange took the money for those contracts and moved it back into the available grant funds, he said. It then paid those contracts with other money.
In their report, though, the federal auditors write that the exchange “did not provide any documentation supporting the corrective action taken.” The auditors also write that the exchange is disputing whether it should have to pay back any of the other funds.
It will ultimately be up to HHS officials to decide how much money, if any, Colorado should refund.
The audit is one of several HHS’s Office of Inspector General has conducted of state-run exchanges. An audit of New York’s exchange, for instance, recommended that it pay back up to $150 million in grant money, while an audit of Nevada’s exchange found less than $1 million in questionable spending.
