The finance committee of the exchange, Connect for Health Colorado, included the draft in a meeting packet.
The nonprofit Patient Protection and Affordable Care Act (PPACA) exchange is reporting a $36 million gain in net position for 2014 on $110 million in operating revenue, compared with a $17 million gain in net position on $44 million in operating revenue for 2013.
The operating revenue total for 2014 includes $86 million in federal grants, $1.5 million in other grants, $20 million in program revenue, and $2.2 million in fees for exchange services, or revenue generated by selling health insurance to consumers.
The program revenue figure includes $15 million from the CoverColorado risk pool program, which shut down due to the start of the PPACA exchange program and implementation of PPACA underwriting rules. That figure also includes million in insurer money that might have otherwise gone to CoverColorado.
Auditors associated with the legislature released a highly critical audit report earlier.
The new draft report, prepared for Connect for Health board members by an unnamed auditor, has a different tone but also identifies financial management concerns.
For a look at what the independent auditors told the exchange board, read on.
1. The managers are cooperating and doing what they can to correct errors.
In a table describing the auditors’ “communication with those charged with governance,” the auditors said, No disagreements arose with management during the course of our audit.” Elsewhere, the auditors said, “Management has corrected all known and likely misstatements,” and “no instances of noncompliance material to the financial statements of the exchange…were disclosed during the audit.”
2. The exchange needs more exchange runners.
At the time the audit draft was completed, the Colorado exchange had no permanent chief executive officer, chief financial officer or chief operating officer.
“We encountered difficulties with receiving information from the exchange in a timely [manner] in order to perform and complete the audit due to lack of staffing,” the auditors said.
3. The exchange had trouble completing forms for the auditors.
The auditors noted that they had to complete part of a federal awards expenditure form, using information provided in the course of the audit.
“We recommend that personnel be properly trained to prepare the schedule, and that, for future audits, the schedule be prepared by personnel prior to the audit,” the auditors said.
4. The exchange may have trouble using some of its grant money because of timing problems.
The exchange is getting exchange construction grants from the U.S. Department of Health and Human Services (HHS). The exchange has used $5.6 million of the HHS grant money to prepay for software maintenance and support services that fall outside the grant periods.
“The prepayments may be disallowed and reimbursement required,” the auditors said.
5. The exchange used some HHS grant money to buy promotional items.
HHS rules forbid exchanges from using the grant money to buy giveaways such as lip balm and bike bottles, but the Colorado exchange used some grant money to do that and ended up having to pay the money back, the auditors said.
Although a state audit led the exchange to pay the money back, “internal controls failed to identify the unallowable costs prior to purchase with federal funds,” the auditors said.