ConnectforHealthLogoJust a week ago, the House passed a bill to audit the Colorado Health Exchange with just Rep. Paul Rosenthal the lone “no” vote .  While Democrats passed the legislation, several noted that they believed that the audit would show that the exchange was performing well.

A new audit of the exchange showed that they would be wrong.  In fact, The Denver Post‘s report called the exchange “weak in accounting”:

“The exchange also mishandled more than $6 million in pass-through federal grants to subcontractors, according to auditors. The exchange lacked procedures for proper monitoring of the funds, the report said.”

This is just the latest audit to show that controls were lacking at the exchange.  In this instance, the audit showed more than $6 million to 45 subrecipients.  One weakness the audit pointed out that we found particularly interesting was the “significant deficiency” in which the exchange used federal grant money for promotional items (read: lip balm) and the folks who provided these items sold them to the exchange at a 15% markup – all not in compliance with the grant. From the audit:

“The Exchange used federal funds to purchase certain promotional items, including sunscreen, lip balms, beanies, t-shirts, bike bottles, etc. Also, the Exchange is under contract with one of its vendors which requires that a management fee be paid at 15% of the reimbursed costs.”

While we’ve made fun of the $40,000 in lip balm that’s mentioned in this deficiency, it turns out that it was more like $374,000 in promotional items and 15% markup.  Broken down, that’s $135,934 for the “illegal” promotional items and $238,301 for “illegal” payment of a 15% management fee. Since the money was not allowed under the grant, it has been paid back, but, essentially, the exchange blew threw nearly $400,000 in crap that’s now lining the dumpsters of Denver.  Amazing.

Another deficiency?  The conflict of interest disclosure required. We’re shocked (we’re not shocked) – especially after learning that OnSight Public Affairs, the team that helped with the Governor’s re-election campaign, was also helping with the exchange, and especially after learning that the husband of the current Colorado Department of Insurance Commissioner was now serving on the board.  Here’s what the audit said:

“Board members and certain Exchange employees are required to complete a conflict of interest disclosure upon hire and on an annual basis. However, this policy is not consistently followed and most employees are currently only completing this disclosure upon hire. Additionally, some board members are not completing the disclosure on a timely basis.”

Finally, the last interesting item in this audit was the fact that the exchange covered more people last year than it did this year.  The audit showed that the currently covered lives in 2014 were 125,006, but totaled just 119,718 for 2015.  Seems like a 6,000-person backslide in coverage would be noteworthy, wouldn’t it?

All in all, this audit just further underscores the need for a comprehensive audit of the exchange.  The House passed it, Senate passed it, but anyone suggesting that the exchange does not need a large-scale audit is out of touch with reality.