National Government Services, Inc., Understated Its Medicare Segment Pension Assets as of January 1, 2010

National Government Services, Inc. (NGS), a Medicare contractor, understated its Medicare segment pension assets by approximately $1.2 million as of January 1, 2010. NGS understated the Medicare segment pension assets because it did not have controls to ensure that it calculated those assets in accordance with Federal requirements and the pension segmentation language of its Medicare contracts when updating the Medicare segment pension assets from January 1, 2003, to January 1, 2010.

We recommended that NGS (1) increase the Medicare segment pension assets as of January 1, 2010, by $1.2 million and recognize $29.5 million as the Medicare segment pension assets and (2) establish controls to ensure compliance with Federal regulations and the Medicare contracts' pension segmentation requirements when allocating contributions and transferred prepayment credits, benefit payments, participant transfers, and investment earnings and expenses. NGS concurred with our findings and recommendations and said that it would make the appropriate adjustments to the Medicare segment pension assets as of January 1, 2010. NGS also said that it would evaluate its current procedures to ensure compliance with Federal regulations.