Federal Reports

For our final report on the audit of the United States Patent and Trademark Office’s (USPTO’s) efforts to improve the accuracy of the trademark register, our audit objective was to determine whether USPTO’s trademark registration process is effective in preventing fraudulent or inaccurate registrations. To address this objective, we assessed whether USPTO prevents inaccurate trademark applications from entering and being maintained on the trademark register, as well as whether USPTO is adequately managing fraud risk.Overall, we found that USPTO’s trademark registration process was not effective in preventing fraudulent or inaccurate registrations. Specifically, we found the following:I. USPTO lacks controls to effectively enforce the U.S. counsel rule; II. USPTO approved trademark filings with digitally altered or mocked-up specimens; III. USPTO did not ensure accurate identification of goods and services; andIV. USPTO lacks a comprehensive fraud risk strategy.

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What We Looked AtMuch of the Federal Aviation Administration’s (FAA) safety oversight work is performed by its aviation safety inspector workforce, whose responsibilities include overseeing the maintenance practices of air carriers and other operators, certifying the airworthiness of new aircraft, and monitoring the work performed by individual and organizational designees. To help determine its future needs, FAA uses its inspector staffing model to produce annual forecasts of up to 10 fiscal years of inspector staffing levels. The FAA Reauthorization Act of 2018 directed FAA to update its safety-critical staffing model and our office to conduct an audit to determine the staffing model’s assumptions and methodologies and whether it accounts for FAA’s authority to fully use designees, which handle certification reviews and approvals on FAA’s behalf. Our audit objectives were to (1) assess the changes FAA made to update the inspector staffing model, (2) review the assumptions and methodologies the model uses to predict the number of aviation safety inspectors FAA needs to meet its current and future oversight responsibilities, and (3) determine how FAA’s model accounts for the use of designees. What We FoundSince 2013, FAA has taken constructive steps to improve the model but has not taken substantive action on three recommendations from the National Research Council, including developing performance measures to assess the accuracy of the model’s staffing estimates. Further, FAA has yet to implement two new models that would reflect organizational changes, and only uses the model to produce a single, national inspector staffing figure. Finally, the model accounts solely for the time inspectors spend overseeing individual and organizational designees, not the work these outside parties perform on FAA’s behalf or may perform in the future. Our RecommendationsWe made seven recommendations to improve the accuracy of FAA’s inspector staffing projections and enhance the capabilities of the staffing model. FAA concurred with five of our seven recommendations and partially concurred with two. We consider six recommendations resolved but open, pending completion of planned actions and have asked FAA to reconsider its action for one partially concurred recommendation.

We audited costs claimed and grant compliance by the Massachusetts Division of Fisheries and Wildlife under grants awarded by the FWS.

During our audit period, Palmetto was a subsidiary of Blue Cross Blue Shield of South Carolina (BCBS South Carolina), whose home office is in Columbia, South Carolina. Palmetto administers Medicare operations under the MAC contracts for Medicare Parts A and B Jurisdiction 1 and Jurisdiction 11 effective October 25, 2007, and May 21, 2010, respectively, as well as other CAS-covered and FAR-covered contracts. Currently, Palmetto is the Medicare Parts A and B contractor for Jurisdictions J and M (formerly Jurisdiction 11). Palmetto also continues to perform Railroad Retirement Board contract operations under a specialty MAC contract awarded on November 27, 2012. The disclosure statement that Palmetto submits to CMS states that Palmetto uses pooled cost accounting. Medicare contractors use pooled cost accounting to calculate the indirect cost rates (whose computations include pension, PRB, Supplemental Executive Retirement Plan and Excess 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. Medicare Reimbursement of Pension CostsCMS reimburses a portion of the annual contributions that contractors make to their pension plans. The pension costs are included in the computation of the indirect cost rates reported on the ICPs. In turn, CMS uses indirect cost rates in reimbursing costs under cost-reimbursement contracts. To be allowable for Medicare reimbursement, pension costs must be (1) measured, assigned, and allocated in accordance with CAS 412 and 413 and (2) funded as specified by part 31 of the FAR. In claiming costs, contractors must follow cost reimbursement principles contained in the FAR, the CAS, and the Medicare contracts. Previous Audits of Allocable Pension CostsWe previously reviewed Palmetto’s allocable pension costs (A-07-17-00505, Jul. 6, 2017) and the BCBS South Carolina’s allocable pension costs (A-07-17-00509, Aug. 28, 2017). Our Palmetto audit report identified allocable pension costs that Palmetto should have used when calculating its indirect cost rates for CYs 2006 through 2012. We recommended that Palmetto increase the Medicare segment pension costs used to calculate its indirect cost rates by $143,261 for CYs 2006 through 2012. Our BCBS South Carolina audit report identified Other segment allocable pension costs that BCBS South Carolina’s subsidiaries’ Medicare segments should have used when calculating the indirect cost rates for CYs 2006 through 2012. We recommended that BCBS South Carolina decrease the Medicare segment pension costs used to calculate its indirect cost rates by $6,193,748 for CYs 2006 through 2012. Incurred Cost Proposal AuditsAt CMS’s request, Figliozzi & Company CPAs P.C. (Figliozzi), the Defense Contract Audit Agency (DCAA), and CliftonLarsonAllen, LLP (Allen), performed audits of the ICPs that Palmetto 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.