Pinnacol Assuance was once again the focus of Capitol politics as the Legislative Audit Committee reviewed two audits of the quasi-governmental company, leaving Democrats and Republicans differing sharply not only on the importance of the findings, but even the very necessity of one of the audits.

Pinnacol, an autonomous organization originally chartered by the legislature, is mandated by Colorado law to be the workers compensation insurance provider “of last resort,” meaning, if a company cannot acquire workers comp insurance from other providers in the marketplace, then Pinnacol must provide a policy.

A recent KMGH Channel 7 report showed Pinnacol executives taking a lavish retreat to Pebble Beach, Fla, following previous disclosures about high salaries that have drawn scrutiny and criticism that Pinnacol execs were living the high life.  For Sen. Morgan Carroll, D-Aurora, the performance audit confirmed that the company’s policies regarding pay and  travel are in need of much tighter controls.

“I think most recently people may have been looking at the travel and expense policies,” Carroll said. “I think we all knew there were reasons to be concerned about potential conflicts of interest and some high-level spending, I didn’t expect up to 75 percent non-compliance.  That’s very high.  As you heard in the audit, it borders on abuse, a term I’ve never seen in the time I’ve been on audit committee.”

As noted in the summary of the performance audit, 60 travel expense reports were tested, and 45 “did not comply with one or more of Pinnacol’s own travel and entertainment expense policies.”

For Republican Sen. Shawn Mitchell, of Broomfield, however, the performance audit was hardly even necessary.

“We’re here because (Senate President) Brandon Shaffer tried to grab half-a-billion dollars from Pinnacol last year,” Mitchell said.  “Pinnacol successfully opposed that effort, and the state is going to harass and inflict pain on Pinnacol to the full extent of its ability.”

Mitchell was referring to the 2009 legislative session, when Pinnacol became the proverbial political football as a cash-starved state looked for sources of revenue.  Because the company had previously been a government entity, legislation was offered in 2009 that would have allowed lawmakers to draw down some $500 million from the company’s reserves, something Mitchell today characterized as “legalized larceny.”

Mitchell called the performance audit a “financial and operational strip-search of Pinnacol,” stressing that the state doesn’t direct or provide oversight to Pinnacol’s operations.

Carroll has long been one of the most vocal critics of the company, and said that employers all across Colorado should be concerned with various findings in the audits, especially what Carroll characterized as Pinnacol’s potential “double- or triple-dipping” when rating employers’ risk factors, thereby incorrectly charging higher premiums.

While in 2009 the topic was whether the state might appropriate funds from the quasi-governmental company, in early 2010, Pinnacol floated the idea of paying a multi-million premium to the state in order to “buy” its complete independence from the state.

Carroll said the idea of privatization is a non-starter for her, given the findings of the audits.

“We had multiple findings about unfair rates and discriminatory rates.  If that’s the current status-quo, and to basically go and remove the rest of the oversight, for the businesses that have no other choice for where they go (to buy coverage), that would be really bad news.”

The two audits released by the committee were the performance audit and the financial statements audit.  The financial statements audit of the company is a regular, annual audit required by law.  The performance audit was an additional audit requested by lawmakers, and is not required by law as is the financial statements audit.