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EXECUTIVE SUMMARY:
The purpose of this review, performed by the certified public accounting firm of Carmichael, Brasher, Tuvell & Company, was to determine whether administrative costs claimed by the General American Life Insurance Company (GALIC) to administer Part B of Medicare for the period October 1, 1993 through December 31, 1999 were reasonable, allocable, and allowable. The auditors determined that GALIC had not established adequate systems for internal control, accounting and reporting of indirect costs, fringe benefits, miscellaneous costs, and termination costs. The GALIC could not provide sufficient documentation for these costs and the auditors could not determine the allowability of such costs through other auditing procedures. As a result, the auditors questioned and recommended for disallowance about $42.8 million of administrative costs claimed over the audit period.