Department of Health and Human Services

Office of Inspector General -- AUDIT

"Review of Selected Cost Data Documentation of Highmark, Incorporated," (A-03-03-00017)

December 9, 2003


Complete Text of Report is available in PDF format (171 kb). Copies can also be obtained by contacting the Office of Public Affairs at 202-619-1343.


EXECUTIVE SUMMARY:

The objective of this audit was to determine whether documentation available from Highmark for fiscal years 1998 through 2001 was sufficient to support the payments to subcontractors in accordance with appropriate regulatory guidance, specifically 48 Code of Federal Regulations, Chapter 1, Part 31 Federal Acquisition Regulation, Contract Cost Principles and Procedures and the purchase service agreement between Highmark and its subcontractors.  We found the annual reimbursement rates for all 12 workload categories billed and the workload statistics for 5 of the 12 workload categories billed to be reasonable, allocable, and allowable.  We did not resolve the remaining seven workload categories.  Although those charges appear to be reasonable and allocable, Highmark and its subcontractors were not able to provide complete source documentation for the seven workload categories.  Failure to provide supporting documentation renders those charges unallowable and, in accordance with Clause XIV of the purchase service agreement, subject to a reduction in price if the cost or pricing data is found to be defective.  Consequently, we consider $4,000,689 of the $5,287,739 to be reasonable, allocable, and allowable.  We are not rendering an opinion on the remaining $1,287,050 that was paid to the subcontractors.