Worries that the quasi-governmental agency that operates Colorado’s official state-based health insurance marketplace was spending money for political purposes turned out to be unfounded, according to a new audit.

But the state audit found that Connect for Health Colorado has serious problems with its financial management, including a lack of oversight on the use of a credit card by its chief executive officer.

That questionable spending included up to $13,000 on alcohol alone over an 18-month period.

The audit released Monday by the Legislative Audit Committee looked into the financial management and sponsorship activity of Connect for Health Colorado. It found that the organization’s policies and oversight need major changes.

The audit was requested by Sens. Dafna Michaelson Jenet and Jim Smallwood and preliminarily approved by the audit committee in March 2024, based on a claim that a sponsorship from Connect for Health had gone to a left-leaning cause in 2023. 

Connect for Health Colorado, the audit said, is a quasi-governmental organization that operates the official state-based health insurance marketplace tasked with increasing healthcare access, affordability and choice. It enrolls about 300,000 Coloradans in health insurance plans tied to the Affordable Care Act.

The organization sponsors events and organizations to educate the public on its services, “generate brand awareness, and build referral channels and relationships.” 

Some of that outreach was paid for by the state through legislation authorized in 2022. Connect for Health received $3.7 million in taxpayer funding in 2023 and 2024 for those activities — the audit found the organization failed to accurately report how it spent those dollars in 2023.

The audit did not find that Connect for Health sponsored any event or donated money to a political fundraiser or political fundraising organization.

But it uncovered a rash of other problems tied to credit card use by its CEO, failure to properly evaluate sponsorship activities, and a failure by the board to properly oversee what went on.

The audit found that 15 of the 49 sponsorships the auditor reviewed did not address a target audience. In addition, Connect for Health did not document how those events were chosen or whether those sponsorships met its objectives.

Some events had no discernible connection to its health care mission, such as a golf tournament and a Denver Zoo Flock Party, the audit said.

The audit also found problems with the credit card usage by CEO Kevin Patterson, including a lack of receipts and questionable spending. Only the CEO, chief financial officer and chief operating officer can use credit cards that don’t require preapproval for purchases, but only the CEO and the CFO actually use those cards, and the CFO uses them rarely, the audit noted.

In a review of credit card usage between July 2023 and December 2024, the audit found Patterson spent more than $63,000, about a third each on hotels, meals and transportation and parking. Those are categories that can be at-risk for misuse and fraud, the audit said.

While the travel and lodging costs appeared reasonable, the spending on meals, some which included alcohol, were “high-dollar transactions with inconsistent documentation to justify the business purpose and amount.”

Out of 94 transactions in that area, 13 did not include receipts or the receipt lacked enough details to support the transaction.

Another 20 simply said “Meal/Drinks” with no information about the purpose of the meal or who attended, the audit said.

Among those transactions were the following:

• One meal with alcohol costing a total of $1,400 at Carmine’s in Washington, D.C.
• One meal with alcohol costing a total of $1,250 at the Chophouse in Denver,
• Three meals with alcohol on different dates at the Broadmoor Hotel in Colorado Springs that cost, in total, about $400, $900 and $1,400, respectively.  

The audit estimated Patterson spent between $3,000 and $4,000 on alcohol.

Two separate purchases Patterson made for alcohol for staff events — one at $4,000 and another at $5,000 — didn’t identify the number of staff attending, ”which would have helped justify whether these amounts were reasonable,” the audit said.

Connect for Health staff also don’t follow the organization’s guidance in its financial management, the audit found. Staff told the auditors there were “mitigating factors,” like being on a small team with direct knowledge of individual transactions, not wanting to burden program staff, or having access to emails with the missing information.  

The Connect for Health board, which is appointed by the governor, also failed to exercise sufficient oversight over the credit card usage, the audit determined. One board member approved 159 transactions made over a six-month period in just three minutes, the audit said. 

But the board also doesn’t get the kind of financial reporting that would include information on how the CEO is spending for networking responsibilities, including the expenditure on meals and entertainment, and Connect for Health also has no policies for that oversight, the audit said.

The audit also found problems with how the organization approves vendor contracts, as well as with the lack of policy guidance for staff.

“The policy management process document is not frequently used and Connect for Health does not require training on it because Connect for Health rarely creates new policies or updates existing ones,” the audit reported.

The audit recommended updated written policies and better record-keeping on sponsorships to “ more directly align with its mission and programmatic needs.”

While noting investigators did not find fraud or misuse on the vendor contracts or the credit card use, “insufficient oversight of high-risk expenses exposes Connect for Health to both fraud risks and perception issues,” the audit noted.

The audit recommended revising the organization’s financial management policies.

Patterson, the CEO, told the committee the organization agrees with the findings and the recommendations for improvement. All changes should be completed by June 2026. 

Patterson acknowledged he had not done a good job of keeping receipts and ensuring the right documentation for those receipts.

“We have been working very hard to improve upon that,” he said, adding Connect for Health is already doing a better job.

As to the spending on alcohol, Patterson’s explanation was that Connect for Health was under federal guidelines when they were setting up the insurance exchange. Those guidelines didn’t allow for spending on alcohol, but when Connect for Health “got out of the federal rules,” it never went back and “connected the dots between what was established and what they’re doing now.”

Patterson said many of those events were with brokers in a type of “sales approach.” 

Rep. Max Brooks, R-Castle Rock, found the credit card problems worrying.

“If I had one month of fuzzy accounting on my corporate card, it would be gone,” he said, adding that is not acceptable for a state organization.

That’s not how a state organization should be run, especially one funded by taxpayer dollars, Brooks told Patterson.