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Mutual reported expenditures that substantially complied with the Federal Acquisition Regulation and the Medicare contract provisions. However, Mutual reported, in its cost proposals, $1,266 that was not allowable. These costs were for entertainment ($840) and lobbying ($426), and as such, did not meet the criteria for Federal reimbursement. We recommended that Mutual refund to the Federal Government the $1,266 of unallowable costs. Mutual agreed with our findings.