Audit of Medicare Part A and Part B Administrative Costs for the Period October 1, 2006, Through September 30, 2007 at National Government Services-Medicare Contractor Numbers 00130 and 00630

Administrative costs reported by National Government Service (NGS) on its FY 2007 Final Administrative Cost Proposal (FACP) for contracts 00130 and 00630 were generally reasonable, allowable, and allocable and in compliance with the Federal Acquisition Regulation and other applicable criteria. However, NGS reported unallowable costs totaling $15,897 for contract 00130 because it overstated costs for outside professional services, facility or occupancy, telephone, travel and fringe benefits and $4,750 for contract 00630 for overstated miscellaneous and travel costs. We attribute the unallowable costs to weaknesses in NGS's internal controls for assuring that costs reported on its FACPs are fully supported with adequate documentation.