Department of Health and Human Services

Office of Inspector General -- AUDIT

November 16, 2007

Complete Text of Report is available in PDF format (648 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.

EXECUTIVE SUMMARY:

The objectives of our review were to (1) determine whether the accumulated unfunded pension costs identified in our prior review (A-07-94-00778) of Blue Cross Blue Shield of Georgia (Georgia) were accounted for properly; (2) determine whether pension costs for plan years 1994 through 2000 were funded in accordance with the Federal Acquisition Regulation (FAR) and Cost Accounting Standards (CAS); and (3) identify and properly account for any additional accumulated unfunded pension costs, including the identification of the allowable and reassignable portions of the accumulated unfunded pension costs.

Georgia did not properly account for all of the accumulated unfunded pension costs identified in our prior review.  For the current audit period (1994 through 2000), pension costs were funded in accordance with FAR and CAS in all years except plan year 1999.  As a result, Georgia understated accumulated unallowable unfunded pension costs by $1,201,461 ($88,452 for the Medicare segment plus $1,113,009 for the Other segment) as of January 1, 2001.

We recommended that Georgia (1) identify $1,201,461 of accumulated unallowable unfunded pension costs ($88,452 as an unallowable component of Medicare segment pension costs and $1,113,009 as an unallowable component of the Other segment pension costs) as of January 1, 2001; and (2) properly identify, and update with interest, unallowable unfunded pension costs in subsequent years.  Georgia concurred with our recommendations.