Blue Cross cancels tobacco contract with Council on Black Minnesotans



New audit cites organizational disarray, mismanagement, unethical practices

Recently, Blue Cross Blue Shield (BCBS) ended its contract with the Council on Black Minnesotans that focused on the tobacco and obesity disparities in the African American and African immigrant communities. I will do a two-part column on this issue.

Below are the BCBS audit findings that led to this contract termination. The community deserves to know the audit content and findings. In part two, my focus will be on what, if anything, had gotten done prior to the contract termination.


Audit Report, March 14, 2012 

For the past three years Blue Cross and Blue Shield of Minnesota (Blue Cross) has contracted with the African/African-American Health Alliance (AAAHA), formerly Minnesota African/African-American Tobacco Education Network (MAAATEN), and its fiscal agent, the Council of Black Minnesotans (COBM) to address tobacco and obesity disparities in the African-American and African immigrant communities. The most recent contract with Blue Cross ended on December 31, 2011.

This report contains the final findings and opinion of Blue Cross’ audit of the financial management practices of both AAAHA and COBM. In early January 2012, Blue Cross became concerned about the validity of information received from AAAHA. At year-end, Blue Cross routinely requests that contractors provide an estimate of outstanding expenses that the contractor has not yet invoiced. The estimate provided by AAAHA was about four times the amount typically invoiced each month. In addition, Blue Cross learned that a state investigation of COBM found misuse of funds which resulted in the termination of the executive director. These events, in combination with concern over fiscal stewardship of our contract dollars, prompted Blue Cross to conduct this audit.

On January 12, 2012, AAAHA was notified that an audit would be conducted and was directed to immediately stop work tied to their pending 2012 Blue Cross contract until the audit was completed and the report released. Additionally, AAAHA were advised of the possibility that a contract for 2012 might not be approved.


Scope of Audit 

This audit examined the financial management practices of both AAAHA and COBM for calendar year 2011. This audit reviewed:

1. Financial management infrastructure — roles, responsibilities, systems, processes, controls, and resources

2. Invoices and expenses — validity of invoices, supporting documentation, billing calculations, appropriateness of expense, allocation to Blue Cross contract

3. Viability of AAAHA and COBM — ability to execute contractual responsibilities, sustainability, executive leadership, effectiveness in the community.

The information and data for this audit was obtained from AAAHA, from interviews with AAAHA, COBM, and State of Minnesota staff, and public information.



Blue Cross has identified the following areas of concern:

1. Fiscal agent lacking financial management infrastructure

Our audit revealed that COBM does not have the infrastructure in place to be an effective fiscal agent. Specifically, there is no skilled staff resource to perform financial management tasks and duties, no oversight of financial management practices and controls, and an absence of effective leadership of overall operations for the organization. One board member in a leadership position described the organization as having a “lazy” approach to the way it manages its finances.

The State’s investigation found misuse of funds. Other sources have said the operations of the COBM are in disarray.

2. AAAHA financial management practices inadequate

AAAHA was not able to execute the financial management responsibilities of this grant. The audit revealed math errors on invoices and double-billing for expenses. Some, but not all, of these errors were corrected on subsequent invoices. Additionally, the AAAHA executive director seemed to have difficulty responding to requests for information and answering questions directly. In one situation, the executive director provided contradictory responses within a single discussion. While occasional errors do occur, the combined findings indicate an organization that is struggling with their financial management responsibilities.

3. Executive leadership of fiscal agent unstable

Based on Blue Cross’ research and interviews, we found that COBM’s leadership through its board of directors is experiencing conflict which is hampering their effectiveness. Particularly noteworthy is that individuals in leadership positions have shared with Blue Cross their concerns with the state of operations at COBM. We’ve also learned of allegations of unfair meeting practices, retaliation, and reports of favoritism. An investigation conducted by the State of Minnesota has resulted in greater oversight of COBM and has put the future of the organization in question.

4. Unethical and untrustworthy behavior

Blue Cross was very concerned to learn earlier this year that the executive director of AAAHA advised Blue Cross of AAAHA’s “near immediate eviction” from COBM offices when this was not the case. It appears this communication was an effort to solicit an immediate action from Blue Cross (expedited payment of an invoice). In addition, verbal communication with the executive director has been difficult and challenging. The information she has provided during conversations with us was often confusing and contradictory. She has made misleading statements and provided conflicting information. During one exchange she changed her explanation several times, and her explanation did not align with earlier email responses to the same question.



After careful review of the audit findings, Blue Cross has made the decision to end its relationship with COBM as the fiscal agent for AAAHA. Blue Cross takes these decisions very seriously and considered information from a variety of sources before reaching this conclusion. We have concluded that ineffective infrastructure at COBM and questionable integrity of the executive director of AAAHA represent risks that prevent us from extending our contract.

Good fiscal stewardship is of utmost importance. Blue Cross is charged with that responsibility for the tobacco settlement agreement, and we must hold our contractors to that accountability as well.


Lucky Rosenbloom welcomes reader responses to 612-661-0923, or email him at