oversight

Audit Of Special Agents Mutual Benefit Association Rockville, Maryland

Published by the Office of Personnel Management, Office of Inspector General on 2017-09-29.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

        U.S. OFFICE OF PERSONNEL MANAGEMENT
           OFFICE OF THE INSPECTOR GENERAL
                    OFFICE OF AUDITS




                       Final Audit Report

                            AUDIT OF
           SPECIAL AGENTS MUTUAL BENEFIT ASSOCIATION
                      ROCKVILLE, MARYLAND

                                             Report Number 1B-44-00-17-002
                                                  September 29, 2017



                                                             -- CAUTION --
This report has been distributed to Federal officials who are responsible for the administration of the subject program. This non-public version may
contain confidential and/or proprietary information, including information protected by the Trade Secrets Act, 18 U.S.C. § 1905, and the Privacy Act,
5 U.S.C. § 552a. Therefore, while a redacted version of this report is available under the Freedom of Information Act and made publicly available on
the OIG webpage (http://www.opm.gov/our-inspector-general), this non-public version should not be further released unless authorized by the OIG.
               EXECUTIVE SUMMARY
                                 Audit of the Special Agents Mutual Benefit Association

Report No. 1B-44-00-17-002                                                                                                                      September 29, 2017


 Why did we conduct the audit?                              What did we find?

 We conducted this limited scope audit                      We questioned $23,679 in cash management activities. Specifically,
 to obtain reasonable assurance that                        we determined that SAMBA held net excess FEHBP funds of
 the Special Agents Mutual Benefit                          $23,679 in the plan’s dedicated FEHBP investment account as of
 Association (SAMBA), as sponsor                            June 30, 2016. During our pre-audit phase, SAMBA self-disclosed
 and administrator of the SAMBA                             this audit finding. As part of our review, we verified that SAMBA
 Health Benefit Plan, is complying                          returned these net excess FEHBP funds of $23,679 to the LOCA on
 with the provisions of the Federal                         August 31, 2016.
 Employees Health Benefits Act and
 regulations that are included, by
 reference, in the Federal Employees
 Health Benefits Program (FEHBP)
 contract. The objective of our audit
 was to determine whether SAMBA
 handled FEHBP funds in accordance
 with the contract and applicable laws
 and regulations concerning cash
 management in the FEHBP.

 What did we audit?

 Our audit covered SAMBA’s cash
 management activities and practices
 related to FEHBP funds from 2014
 through June 30, 2016. Specifically,
 we reviewed SAMBA’s letter of
 credit account (LOCA) drawdowns,
 working capital calculations,
 adjustments and/or balances, treasury
 offsets, interest income transactions,
 and dedicated FEHBP investment
 account activity and balances for the
 SAMBA Health Benefit Plan.

  _______________________
  Michael R. Esser
  Assistant Inspector General
  for Audits                                                                  i
        This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
        information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
                                             ABBREVIATIONS

     CAP                            Corrective Action Plan
     CFR                            Code of Federal Regulations
     Contract                       Contract CS 1074
     FEHB                           Federal Employees Health Benefits
     FEHBP                          Federal Employees Health Benefits Program
     LOCA                           Letter of Credit Account
     OIG                            Office of the Inspector General
     OPM                            U.S. Office of Personnel Management
     Plan                           SAMBA Health Benefit Plan
     SAMBA                          Special Agents Mutual Benefit Association




                                                                        ii
This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
                                    TABLE OF CONTENTS

                                                                                                                                          Page

                EXECUTIVE SUMMARY ......................................................................................... i

                ABBREVIATIONS ..................................................................................................... ii 


     I.         BACKGROUND ..........................................................................................................1 


     II.        OBJECTIVE, SCOPE, AND METHODOLOGY ....................................................3

     III.       AUDIT FINDING AND RECOMMENDATIONS ..................................................5

                A. Excess Funds in the Dedicated Investment Account ..............................................5 


                APPENDIX: Special Agents Mutual Benefit Association’s Draft Report Response,
                dated July 21, 2017

                REPORT FRAUD, WASTE, AND MISMANAGEMENT




This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
                                           I. BACKGROUND
This final audit report details the findings, conclusions, and recommendations resulting from our
limited scope audit of the Federal Employees Health Benefits Program (FEHBP) operations at
the Special Agents Mutual Benefit Association (SAMBA), as sponsor and administrator of the
SAMBA Health Benefit Plan (Plan). SAMBA is located in Rockville, Maryland.

The audit was performed by the U.S. Office of Personnel Management’s (OPM) Office of the
Inspector General (OIG), as established by the Inspector General Act of 1978, as amended.

The FEHBP was established by the Federal Employees Health Benefits (FEHB) Act (Public Law
86-382), enacted on September 28, 1959. The FEHBP was created to provide health insurance
benefits for federal employees, annuitants, and dependents. OPM’s Healthcare and Insurance
Office has overall responsibility for administration of the FEHBP. The provisions of the FEHB
Act are implemented by OPM through regulations, which are codified in Title 5, Chapter 1,
Part 890 of the Code of Federal Regulations (CFR). Health insurance coverage is made available
through contracts with various health insurance carriers.

The SAMBA Health Benefit Plan is a fee-for-service employee organization plan, offering high
and standard options, with a preferred provider organization. Enrollment is open to all federal
employees and annuitants that are eligible to enroll in the FEHBP. All employees and annuitants
that enroll in the Plan automatically become members of SAMBA. SAMBA is the sponsor and
administrator of the Plan, operating under Contract CS 1074 (contract) to provide a health
benefits plan authorized by the FEHB Act.

SAMBA’s contract (CS 1074) with OPM is experience-rated. Thus, the costs of providing
benefits in the prior year, including underwritten gains and losses that have been carried forward,
are reflected in current and future years’ premium rates. In addition, the contract provides that in
the event of termination, unexpended program funds revert to the FEHBP Trust Fund. In
recognition of these provisions, the contract requires an accounting of program funds be
submitted at the end of each contract year. The accounting is made on a statement of operations
known as the Annual Accounting Statement.

Compliance with laws and regulations applicable to the FEHBP is the responsibility of
SAMBA’s management. In addition, management of SAMBA is responsible for establishing
and maintaining a system of internal controls.




                                                                         1                            Report No. 1B-44-00-17-002

This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
Our prior audit of SAMBA (Report No. 1B-44-00-06-020, dated May 22, 2006), covering
contract years 2000 through 2004 for the SAMBA Health Benefit Plan, disclosed no audit
findings.

The results of this audit were discussed with the SAMBA officials throughout the audit and at an
exit conference on May 18, 2017; and were presented in detail in a draft report, dated June 15,
2017. SAMBA’s comments offered in response to the draft report were considered in preparing
our final report and are included as an Appendix to this report.




                                                                         2                            Report No. 1B-44-00-17-002

This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
II. OBJECTIVE, SCOPE, AND METHODOLOGY

OBJECTIVE

The objective of our audit was to determine whether SAMBA handled FEHBP funds in
accordance with the contract and applicable laws and regulations concerning cash management
in the FEHBP.

SCOPE

We conducted our limited scope performance audit in accordance with generally accepted
government auditing standards. Those standards require that we plan and perform the audit to
obtain sufficient and appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit objective.

The audit covered SAMBA’s cash management activities and practices related to FEHBP funds
from 2014 through June 30, 2016, for the SAMBA Health Benefit Plan. Specifically, we
reviewed SAMBA’s letter of credit account (LOCA) drawdowns, working capital calculations,
adjustments and/or balances, treasury offsets, interest income transactions, and dedicated FEHBP
investment account activity and balances to determine if SAMBA handled FEHBP funds in
accordance with the contract and applicable laws and regulations concerning cash management
in the FEHBP.

In planning and conducting our audit, we obtained an understanding of SAMBA’s internal
control structure to help determine the nature, timing, and extent of our auditing procedures.
This was determined to be the most effective approach to select areas of audit. For those areas
selected, we primarily relied on substantive tests of transactions and not tests of controls. Based
on our testing, we did not identify any significant matters involving SAMBA’s internal control
structure and its operations. However, since our audit would not necessarily disclose all
significant matters in the internal control structure, we do not express an opinion on SAMBA’s
system of internal controls taken as a whole.

We also conducted tests to determine whether SAMBA had complied with the contract
provisions, the applicable procurement regulations (i.e., Federal Acquisition Regulations and
Federal Employees Health Benefits Acquisition Regulations, as appropriate), and the laws and
regulations governing the FEHBP that relate to cash management of FEHBP funds. The results
of our tests indicate that, with respect to the items tested, SAMBA did not fully comply with all


                                                                         3                            Report No. 1B-44-00-17-002

This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
provisions of the contract relative to cash management of FEHBP funds. Exceptions noted in the
areas reviewed are set forth in detail in the "Audit Findings and Recommendations" section of
this audit report. With respect to the items not tested, nothing came to our attention that caused
us to believe that the Plan had not complied, in all material respects, with those provisions.

In conducting our audit, we relied to varying degrees on computer-generated data provided by
SAMBA. Due to time constraints, we did not verify the reliability of the data generated by the
various information systems involved. However, while utilizing the computer-generated data
during our audit, nothing came to our attention to cause us to doubt its reliability. We believe
that the data was sufficient to achieve our audit objective.

The audit was performed at our office in Jacksonville, Florida from December 1, 2016, through
May 18, 2017. During our fieldwork phase, we also made a short on-site visit to SAMBA from
January 26, 2017, through January 27, 2017. Throughout the audit process, SAMBA did an
excellent job providing complete and timely responses to our requests for supporting
documentation. We greatly appreciated SAMBA’s exceptional cooperation and responsiveness
during the pre-audit and fieldwork phases of this audit.

METHODOLOGY

To test SAMBA's compliance with contract provisions relative to cash management activities,
we selected and reviewed a judgmental sample of 50 LOCA drawdown amounts, totaling
$53,787,504 (from a universe of       LOCA drawdowns, totaling $635,107,914, for the SAMBA
Health Benefit Plan during the period 2014 through June 30, 2016), for the purpose of
determining if the LOCA drawdowns were appropriate and adequately supported. Our sample
included a week of LOCA drawdowns (representing 5 LOCA drawdown amounts) judgmentally
selected from each of the 10 quarters in the audit scope. The sample results were not projected
to the universe of LOCA drawdowns. We also reviewed SAMBA’s working capital
calculations, adjustments and/or balances, treasury offsets, and interest income transactions from
2014 through June 30, 2016, as well as SAMBA’s dedicated FEHBP investment account activity
during the scope and balance as of June 30, 2016, for the SAMBA Health Benefit Plan.




                                                                         4                            Report No. 1B-44-00-17-002

This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
III.
 IV. AUDIT
     MAJORFINDING AND RECOMMENDATIONS
           CONTRIBUTORS  TO THIS REPORT

 A. Excess Funds in the Dedicated Investment Account                                                                                $23,679

      During our pre-audit phase, SAMBA self-disclosed that net excess FEHBP funds of $23,679
      were inadvertently held in the dedicated FEHBP investment account as of June 30, 2016. As
      a result, SAMBA returned these net excess FEHBP funds to the LOCA on August 31, 2016.

      48 CFR 31.201-5 states, “The applicable portion of any income, rebate, allowance, or other
      credit relating to any allowable cost and received by or accruing to the contractor shall be
      credited to the Government either as a cost reduction or by cash refund.”

      Contract CS 1074, Part II, Section 2.3 (i) states, “All health benefit refunds and recoveries,
      including erroneous payment recoveries, must be deposited into the working capital or
      investment account within 30 days and returned to or accounted for in the FEHBP letter of
      credit account within 60 days after receipt by the Carrier.” Regarding reportable monetary
      findings, Contract CS 1074 , Part III, Section 3.16 (a), states, “Audit findings . . . in the scope
      of an OIG audit are reportable as questioned charges unless the Carrier provides
      documentation supporting that the findings were already identified and corrected . . . prior to
      audit notification.”

      SAMBA’s dedicated FEHBP investment account generally includes working capital funds,
      approved LOCA drawdown reimbursements, health benefit refunds and recoveries from
      providers and subscribers, interest income earned, and other cash items identified as due to
      the FEHBP. Based on Contract CS 1074, all funds deposited into the dedicated FEHBP
      investment account (such as health benefit refunds and recoveries, interest income, and
      excess working capital funds), should be returned to the FEHBP by adjusting the LOCA
      within 60 days after receipt by SAMBA.

                                     In our Audit Information Request (dated July 15, 2016), we
          SAMBA held net excess
                                     requested SAMBA to provide an analysis of the funds (such
          funds of $23,679 in the
                                     as working capital, approved LOCA drawdown
            dedicated FEHBP
                                     reimbursements, health benefit refunds and recoveries,
         investment account as of
              June 30, 2016.         pharmacy and medical drug rebates, interest income, and
                                     excess funds) that were held in the dedicated FEHBP
      investment account as of June 30, 2016. In response to our Audit Information Request
      (during our pre-audit phase), SAMBA self-disclosed that net excess FEHBP funds of
      $23,679 were inadvertently held in the FEHBP investment account as of June 30, 2016.


                                                                          5                            Report No. 1B-44-00-17-002

 This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
 information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
     Specifically, SAMBA self-disclosed that $185,945 of these net excess funds were FEHBP
     funds that should have been returned to the LOCA during the audit scope. SAMBA also
     self-disclosed that $162,266 in cost reimbursements were inadvertently transferred from the
     dedicated FEHBP investment account to SAMBA’s corporate account during the audit scope,
     without withdrawing these funds from the LOCA, resulting in a shortage of funds by this
     amount in the dedicated FEHBP investment account as of June 30, 2016. We reviewed
     SAMBA’s analysis and applicable supporting documentation and agree that SAMBA held
     net excess FEHBP funds of $23,679 ($185,945 minus $162,266) in the dedicated FEHBP
     investment account as of June 30, 2016.1

     The following schedule is a summary of the excess FEHBP funds that were held in the
     dedicated FEHBP investment account as of June 30, 2016. We noted that most of these
     excess funds had been held in the dedicated FEHBP investment account for more than a year
     (as of June 30, 2016).


                              Description of FEHBP Funds                                                     Amount
                    Drug Claims – Refunds
                    Drug Administrative Expenses – Refunds
                    Administrative Expense Reimbursements
                    Non-Sufficient Funds - Bank Fee Reimbursements
                    Rejected Claim Electronic Fund Transfers
                                            Total                                                                  $185,945

     The following schedule is a summary of the cost reimbursements that SAMBA inadvertently
     transferred from the dedicated FEHBP investment account to SAMBA’s corporate account
     during the audit scope, without withdrawing these funds from the LOCA.


                            Description of Cost Reimbursements                                               Amount
                    Patient-Centered Outcomes Research Institute Fees
                    Administrative Expenses
                    Returned Excess Amount for Drug Claim Refund
                    Non-Sufficient Funds for Claim Refund Checks
                                             Total                                                                 $162,266




1
 SAMBA identified these exceptions after receiving our audit notification letter and Audit Information Request
(dated July 15, 2016) and while preparing for the audit.

                                                                         6                            Report No. 1B-44-00-17-002

This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
     As a monetary finding, we are questioning the net excess FEHBP funds of $23,679
     ($185,945 minus $162,266) that were held in the dedicated FEHBP investment account as of
     June 30, 2016. As part of our review, we verified that SAMBA returned these net excess
     FEHBP funds to the LOCA on August 31, 2016, which made the dedicated FEHBP
     investment account whole.

     SAMBA Response:

     SAMBA agrees with the findings and recommendations. SAMBA states, “The Plan
     implemented a Corrective Action Plan (CAP) wherein an additional step was added to the
     monthly bank reconciliations of dedicated FEHBP checking accounts. The CAP and
     supporting documentation are being forwarded to SAMBA’s contracting officer under
     separate cover.”

     Recommendation 1

     We recommend that the contracting officer require SAMBA to immediately return $23,679
     to the FEHBP for the questioned net excess FEHBP funds. However, since we verified that
     SAMBA returned these net excess FEHBP funds of $23,679 to the LOCA, no further action
     is required for this questioned amount.

     Recommendation 2

     We recommend that the contracting officer require SAMBA to provide evidence or
     supporting documentation ensuring that SAMBA has implemented corrective actions, such
     as monthly or quarterly account reconciliations, to improve the internal controls over the
     dedicated FEHBP investment account. In addition, the contracting officer should require
     SAMBA to provide evidence or supporting documentation ensuring that SAMBA has
     implemented corrective actions so that only necessary funds are maintained in the dedicated
     FEHBP investment account.




                                                                         7                            Report No. 1B-44-00-17-002

This report is non-public and should not be further released unless authorized by the OIG, because it may contain confidential and/or proprietary
information that may be protected by the Trade Secrets Act, 18 U.S.C. § 1905, or the Privacy Act, 5 U.S.C. § 552a.
APPENDIX


11301 Old Georgetown Road                                     (301) 984-1440  (800) 638-6589
Rockville, Maryland 20852-2800                                          www.SambaPlans.com


Sent via Email

                                                      RE: REPORT NO. 1B-44-00-17-002


                                         July 21, 2017

                         , Group Chief
Experienced-Rated Audits Group
Office of the Inspector General
U.S. Office of Personnel Management
1900 E. Street, Room 6400
Washington, DC 20415-1100

Dear                     :

This communication responds to the transmittal letter dated June 15, 2017 that SAMBA
(“the Plan”) received from the Office of the Inspector General (OIG). Attached to the
letter was the OIG’s draft audit report (referenced above) detailing the results of the
limited scope audit of the Federal Employees Health Benefits Program (FEHBP)
operations at SAMBA.

The Plan agrees with the OIG’s findings and recommendations and has taken the
actions described below:

Recommendation 1: During the course of the audit, the OIG verified that the Plan had
returned net excess FEHBP funds ($23,679) to the LOCA. No further action is required.

Recommendation 2: The Plan implemented a Corrective Action Plan (CAP) wherein an
additional step was added to the monthly bank reconciliations of dedicated FEHBP
checking accounts. The CAP and supporting documentation are being forwarded to
SAMBA’s contracting officer under separate cover.

Should you have any questions or concerns regarding SAMBA’s response, please
contact SAMBA’s Controller,              at             .

                                         Sincerely,



                                         Deputy Executive Director
July 21, 2017
Page 2

Enclosures


cc: 	
        Lead Auditor
        Experience-Rated Audits Group


        Chief of Health Insurance II
        OPM’s Insurance Operations


        Chief of Audit Resolution Branch
        OPM’s Insurance Operations


        Health Insurance Specialist
        US Office of Personnel Management
                                                                                                                              




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                                                                                          Report No. 1B-44-00-17-002
                                                      -- CAUTION --
This report has been distributed to Federal officials who are responsible for the administration of the subject program. This non-public
version may contain confidential and/or proprietary information, including information protected by the Trade Secrets Act, 18 U.S.C. §
1905, and the Privacy Act, 5 U.S.C. § 552a. Therefore, while a redacted version of this report is available under the Freedom of
Information Act and made publicly available on the OIG webpage (http://www.opm.gov/our-inspector-general), this non-public version
should not be further released unless authorized by the OIG.