Audit of Medicare Part A Administrative Costs for the Period October 1, 2003, Through September 30, 2005, United Government Services

United Government Services reported expenditures in its cost proposals that substantially complied with the Federal Acquisition Regulations and Medicare contract provisions. However, United Government Services understated senior executive compensation costs by $320,109 for FY 2004 and overstated senior executive compensation costs by $34,013 for FY 2005. In addition, United Government Services reported non-senior executive compensation costs that may be unreasonable because the costs exceeded maximum benchmark amounts for senior executive compensation by $48,774 for FY 2004 and $20,838 for FY 2005.

We recommended that National Government Services, which assumed the Medicare operations of United Government Services, (1) increase the FY 2004 cost proposal by $320,109 and decrease the FY 2005 cost proposal by $34,013 to reflect allowable senior executive compensation costs (2) and work with the CMS contracting officer to determine the reasonableness of non-senior executive compensation costs of $48,774 for FY 2004 and $20,838 for FY 2005 that exceeded benchmark amounts for senior executive compensation. National Government Services concurred with our finding and recommendation regarding the misstatement of allowable executive compensation but disagreed with our finding regarding non-senior executive compensation costs that may be unreasonable.