Audit finds three problem areas in MNsure's use of federal grant money

A new audit finds MNsure generally complied with rules for spending federal grant money, although it noted three areas where compliance was lacking.

Two of the findings in the report from Legislative Auditor James Nobles are repeat problems that were first identified in an audit released in October 2014.

The new audit finds fewer problems than the previous report, but noted one case where MNsure incorrectly used $98,000 in federal grant money for software maintenance fees.

Overall, the audit reviewed $48 million in federal funds used by MNsure during the 12-month period ending June 2015. The grant money helped Minnesota launch the health insurance exchange in 2013 as part of the federal Affordable Care Act, which requires almost all Americans to have health insurance or pay a tax penalty.

"MNsure generally complied with and had controls to ensure compliance with certain provisions of laws, regulations, contracts and grants applicable to its major federal program for fiscal year 2015," auditors wrote. "However, the board had some noncompliance."

MNsure said the problem with the $98,000 expenditure was an isolated incident. When it was discovered, exchange officials said they changed the classification of the payment so that funds were taken from revenue MNsure collects through a tax on health insurance premiums.

"The payment was made to the correct vendor but against an incorrect purchase order in the state's financial system," wrote MNsure spokeswoman Peg Hersch in an e-mail to the Star Tribune.

In a letter that's part of the audit report, MNsure said it has fixed the issue with payroll time reporting, and is in the process of fixing the issue with inventory records.

Rep. Greg Davids, R-Preston, said in a statement that the audit is the latest evidence for how MNsure isn't working for Minnesotans.

"If Gov. Dayton and DFL lawmakers insist on keeping MNsure, they must demand accountability," said Davids, who is chairman of a legislative oversight committee for MNsure.

Christopher Snowbeck • 612-673-4744