Review of Unfunded Pension Costs of Blue Cross and Blue Shield of Oklahoma

The purpose of our review was to determine if pension costs assignable to the Medicare contracts for plan years 1986 through 1996 were funded in accordance with the Federal Acquisition Regulations (FAR).  Oklahoma did identify and track unfunded pension costs for years 1989 through 1995.  However, we determined that Oklahoma understated its accumulated unfunded pension costs by $195,837 as of January 1, 1996.  Also, Oklahoma began amortizing unfunded costs without prior approval from its contracting officer.  We recommended that Oklahoma increase the January 1, 1996 accumulated unfunded pension costs of the Medicare segment by $195,837.  We also recommended that Oklahoma obtain approval of its contracting officer before including any portion of the accumulated unfunded costs as a component of the Medicare segment's pension costs.