Review of Postretirement Benefit Costs Claimed by Veritus, Inc. of Pennsylvania

EXECUTIVE SUMMARY:

Our objective was to determine the allowability of the postretirement benefit (PRB) costs Veritus claimed for Medicare reimbursement on an accrual basis.  We found that Veritus did not include in its Final Administrative Cost Proposals (FACPs) all of the PRB costs that were allowable pursuant to Federal regulations.  As a result, for fiscal years (FYs) 1995 through 1997, Veritus did not claim $201,785 of PRB costs that were allowable for Medicare reimbursement.  In addition, Veritus did not receive CMS approval for its change in accounting methodology for PRB costs.  We recommended that Veritus revise its FACPs for FYs 1995 through 1997 or submit a claim for additional allowable PRB costs of $201,785.  After addressing the issues raised under Other Matters, Veritus should seek approval for its change in accounting practice.

Veritus agreed with our recommendation to revise its FACPs or submit a claim for additional allowable PRB costs of $201,785.  Additionally, Veritus agreed that it did not seek CMS approval for its change in accounting methodology for PRB costs.  However, Veritus disagreed with our statement in the Other Matters section that Veritus should be precluded from including unfunded PRB costs in any future claims to the Federal Government.  Veritus believes that by requiring contractors to use FAS106 in calculating PRB costs, the Federal Acquisition Regulations irreconcilably conflict with the Internal Revenue Service limitations on Voluntary Employee Benefit Association funding.