Federal Reports

The OIG reviewed the Veterans Benefits Administration’s (VBA) processing of mail and benefit claims during the COVID-19 pandemic. Specifically, the review team examined whether VBA staff documented the date of receipt for benefits-related correspondence as required by new guidance during the national state of emergency and continued mail operations at VA facilities to ensure benefit claims were processed. Based on its sample analysis, the OIG found VBA staff did not properly apply date of receipt documentation guidance for an estimated 98 percent of 3,200 claims established from April 7 through April 20, 2020. The date of receipt is important because it may be used to establish when veterans become entitled to benefit payments. Veterans could be underpaid if staff record an incorrect date of receipt. However, VBA staff were not always aware of all aspects of documentation guidance and had not received training on it. VBA staff did continue to process mail received at VA facilities, with the postal service forwarding all regional office mail to a scanning facility starting March 31, 2020. Offices that did not have mail automatically forwarded were to have staff available to process incoming mail. The team surveyed regional office staff and found that the majority of regional offices used these methods to continue mail operations. Representatives from veterans service organizations also confirmed that mail operations continued at their offices in Detroit and Los Angeles, where they are colocated with VBA staff. VBA concurred with the OIG’s three recommendations to: (1) ensure VBA staff understand date of receipt guidance for claims received during the pandemic and implement those actions; (2) make certain that claims received and completed from March 1, 2020, had the correct date of entitlement; and (3) evaluate existing guidance for recording the date of receipt for claims without a postmark.

As part of our annual audit plan, we performed an audit to determine the effectiveness of the Tennessee Valley Authority’s (TVA) process for managing heavy equipment provided to contractors through TVA’s Equipment Support Services (ESS) group. ESS provides heavy equipment and other equipment support services to business units across TVA and charges specific projects for the equipment which is provided. ESS’s customers include (1) TVA organizations obtaining services directly or (2) contractors performing work for the TVA organizations. In summary, we determined TVA was not effectively managing contractors’ use of equipment provided by ESS. Specifically, we found:• ESS provides equipment to contractors on TVA projects that have cost reimbursable payment terms. Although ESS does not bill the contractors for the equipment (i.e., ESS charges a TVA project, not the contractor), certain contractors bill TVA for the ESS equipment even though their contract with TVA provides that TVA can only be billed for actual equipment costs. Even though the contractors subsequently provide credits or refunds to TVA for the equipment, it is administratively difficult for TVA to ensure it receives reimbursement for all the costs billed by the contractor.• ESS provides equipment to certain contractors on TVA projects that have fixed price or fixed unit rate payment terms. However, TVA’s Standard Programs and Processes (SPP) do not provide guidelines or processes for TVA to determine the cost effectiveness of providing ESS equipment on fixed price/fixed unit rate projects or to ensure TVA receives the appropriate reductions on the fixed price/fixed unit rates.

What We Looked AtEffective evacuations of aircraft during emergencies can help save lives. Two aircraft accidents involving evacuations—one in September 2015 involving a British Airways aircraft and another in October 2016 involving an American Airlines aircraft—resulted in no fatalities, and highlighted the importance of effective aircraft evacuation standards. Federal Aviation Administration (FAA) regulations require that aircraft manufacturers demonstrate that all passengers and crew can evacuate an aircraft within 90 seconds by conducting live demonstrations of simulated evacuations or through a combination of analyses and testing. Our audit objective was to assess FAA’s process for developing and updating aircraft emergency evacuation standards, including how changes in passenger behavior, passenger demographics, and seating capacity affect the standards.What We FoundFAA’s process for updating its evacuation standards lacks data collection and analysis on current risks. FAA largely updates evacuation standards only after accidents and it conducted its last update based on an accident in 1991. FAA also has not conducted sufficient research on passenger behaviors—such as evacuations with carry-on bags and the presence of emotional support animals—and seat dimensions to show how they affect evacuation standards. Furthermore, FAA does not collect comprehensive evacuation data to identify needs for regulation updates, and allows manufacturers to use decade-old data in evacuation analyses. FAA’s Safety Management System requires FAA programs to collect and analyze comprehensive data using systematic procedures and policies for the management of safety risk. However, FAA has not established a systematic process to obtain and evaluate data from accidents and demonstrations. As a result, FAA is inhibiting its ability to identify current evacuation risks and updates to its aircraft emergency evacuation standards.RecommendationsWe made two recommendations to help FAA improve its data collection and analysis for developing and updating aircraft emergency evacuation standards. FAA concurred with both recommendations. 

Noridian Healthcare Solutions, LLC, and MedicareNHS is a subsidiary of Blue Cross Blue Shield of North Dakota (BCBS North Dakota) (formerly Noridian Mutual Insurance Company), whose home office is in Fargo, North Dakota. NHS administered Medicare Part A, Medicare Part B, and Medicare Durable Medical Equipment (DME) contract operations under MAC contracts for Medicare Parts A and B Jurisdictions E and F and Medicare DME Jurisdictions A and D. In addition, NHS held the Pricing, Data Analysis and Coding (PDAC) contract. Nonqualified PlansBCBS North Dakota sponsors nonqualified plans called the Supplemental Retirement Program for Certain Employees of Blue Cross Blue Shield of North Dakota (SERP plan) and the Noridian Select Retirement Plan for Select Approved Employees of Noridian Mutual Insurance Company (Select plan). The purpose of the SERP plan is to provide deferred compensation for a select group of management or highly compensated employees within the meaning of the Employee Retirement Income Security Act of 1974. The purpose of the Select plan is to provide benefits for select executive employees who are unable to participate in certain other programs. Select plan benefits are accrued similarly to benefit accrual under the SERP plan. NHS claimed nonqualified costs (for both plans) using the pay-as-you-go basis of accounting. This report addresses the allowable nonqualified costs claimed by NHS under the provisions of its MAC contracts and its CAS- and FAR-covered contracts. The disclosure statement that NHS submits to CMS states that NHS uses pooled cost accounting. Medicare contractors use pooled cost accounting to calculate the indirect cost rates (whose computations include pension, postretirement benefit, nonqualified, and Restoration Plan 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. Accounting Methodologies The Medicare contracts require NHS to calculate nonqualified costs in accordance with the FAR and CAS 412 and 413. The FAR and the CAS require that the costs for nonqualified plans be measured under either the accrual method or the pay-as-you-go method. Under the accrual method, allowable costs are based on the annual contributions that the employer deposits into its trust fund. For nonqualified plans that are not funded through the use of a funding agency, costs are to be accounted for under the pay-as-you-go method. This method is based on the actual benefits paid to participants, which are comprised of lump-sum payments and annuity payments. Incurred Cost Proposal AuditsAt CMS’s request, Kearney and Company (Kearney) and Davis Farr, LLP (Farr), performed audits of the ICPs that NHS submitted for CYs 2014 through 2016. The objectives of the Kearney and Farr ICP audits were to determine whether costs were allowable in accordance with the FAR, the U.S. Department of Health and Human Services Acquisition Regulation, and the CAS. For our current audit, we relied on the Kearney and Farr ICP audit findings and recommendations when computing the allowable nonqualified costs discussed in this report. We incorporated the results of the Kearney and Farr audits into our computations of the audited indirect cost rates, and ultimately the nonqualified costs claimed, for the contracts subject to the FAR. CMS will use our report on allowable nonqualified costs, as well as the Kearney and Farr ICP audit reports, to determine the final indirect cost rates and the total allowable contract costs for NHS for CYs 2014 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.