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The objective of our review was to determine whether Montana complied with the Medicare contracts’ pension segmentation requirements while: (1) identifying the Medicare segment’s initial asset allocation and (2) updating the Medicare segment’s assets from the initial asset allocation to January 1, 2004. Montana did not comply with the Medicare contract’s pension segmentation requirements when identifying the Medicare segment’s initial asset allocation and while updating Medicare segment assets from January 1, 1987, to January 1, 2004. As a result, Montana overstated the January 1, 2004, Medicare segment pension assets by $1,016,181. The overstatement occurred primarily because Montana omitted benefit payments in its rollup of segment assets.
We recommended that Montana: (1) decrease Medicare segment pension assets by $1,016,181 as of January 1, 2004, and (2) implement controls to ensure that the Medicare segment’s assets are updated in accordance with the Medicare contracts. Montana partially concurred with our first recommendation.