Submitting OIG:
Report Description:
During our audit period, CDS was a subsidiary of Blue Cross Blue Shield of South Carolina (BCBS South Carolina), whose home office is in Columbia, South Carolina. CDS was created after being awarded the Enterprise Data Center (EDC) contract effective March 10, 2006. The EDC contract was replaced by a Virtual Data Center contract on November 15, 2012, which is still in effect. BCBS South Carolina sponsors a PRB plan, called the BCBS South Carolina Postretirement Health and Life Insurance Programs, which is offered to CDS employees. The purpose of this PRB plan is to provide retiree health and life insurance benefits to eligible retirees and their dependents. CDS claimed PRB costs using the accrual basis of accounting and funded those accrual costs through a Voluntary Employee Benefit Association (VEBA) trust in conjunction with a 401(h) account. The disclosure statement that CDS submits to CMS states that CDS uses pooled cost accounting. Medicare contractors use pooled cost accounting to calculate the indirect cost rates (whose computations include pension and PRB costs) that they submit on their ICPs. Medicare contractors use the indirect cost rates to calculate the contract costs that they report on their ICPs. In turn, CMS uses these indirect cost rates in determining the final indirect cost rates for each contract. Medicare Reimbursement of Postretirement Benefit CostsCMS reimburses a portion of the Medicare contractors’ annual PRB costs, which are funded by contributions that contractors make to their dedicated trust funds. The PRB costs are included in the computation of the indirect cost rates and reported on the ICPs. In turn, CMS uses indirect cost rates in reimbursing costs under cost-reimbursement contracts. Federal regulations (FAR 31.205-6(o)) require that to be allowable for Medicare reimbursement, PRB costs must be (1) measured, assigned, and allocated in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 715-60 (formerly Statement of Financial Accounting Standards (SFAS) 106) and (2) funded as specified by part 31 of the FAR. In claiming costs, contractors must follow cost reimbursement principles contained in the FAR and the Medicare contracts. Incurred Cost Proposal AuditsAt CMS’s request, Figliozzi & Company CPAs P.C. (Figliozzi), Mayer Hoffman McCann P.C. (McCann), the Defense Contract Audit Agency (DCAA), and CohnReznick (Reznick) performed audits of the ICPs that CDS submitted for CYs 2012 through 2016. The objectives of these ICP audits were to determine whether costs were allowable in accordance with applicable Federal regulations. For our current audit, we relied on the Figliozzi, McCann, DCAA, and Reznick ICP audit findings and recommendations when computing the allowable PRB costs discussed in this report. We incorporated the results of the Figliozzi, McCann, DCAA, and Reznick ICP audits into our computations of the audited indirect cost rates, and ultimately the PRB costs claimed, for the contracts subject to the FAR. CMS will use our report on allowable PRB costs, as well as the Figliozzi, McCann, DCAA, and Reznick ICP audit reports, to determine the final indirect cost rates and the total allowable contract costs for CDS for CYs 2012 through 2016. The cognizant Contracting Officer will perform a final settlement with the contractor to determine the final indirect cost rates. These rates ultimately determine the final costs of each contract.
Date Issued:
Tuesday, August 10, 2021
Agency Reviewed / Investigated:
Submitting OIG-Specific Report Number:
A-07-21-00609
Component, if applicable:
Centers for Medicare & Medicaid Services
Type of Report:
Audit
Questioned Costs:
$73,594
Funds for Better Use:
$0
Number of Recommendations:
1