oversight

Audit of American Postal Workers Union Health Plan Glen Burnie, Maryland

Published by the Office of Personnel Management, Office of Inspector General on 2017-07-27.

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
        AMERICAN POSTAL WORKERS UNION HEALTH PLAN
                  GLEN BURNIE, MARYLAND

                                             Report Number 1B-47-00-17-003
                                                      July 27, 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 American Postal Workers Union Health Plan

Report No. 1B-47-00-17-003                                                                                                                              July 27, 2017


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

 We conducted this limited scope audit                      Our limited scope audit disclosed no significant findings pertaining
 to obtain reasonable assurance that                        to the Plan’s cash management activities and practices. Overall, we
 the American Postal Workers Union                          determined that the Plan handled FEHBP funds in accordance with
 Health Plan (Plan) is complying with                       Contract CS 1370 and applicable laws and regulations concerning
 the provisions of the Federal                              cash management in the FEHBP. Accordingly, this final report
 Employees Health Benefits Act and                          contains no questioned charges or recommendations.
 regulations that are included, by
 reference, in the Federal Employees
 Health Benefits Program (FEHBP)
 contract. Specifically, the objective
 of our audit was to determine whether
 the Plan handled FEHBP funds in
 accordance with applicable laws and
 regulations concerning cash
 management in the FEHBP.

 What did we audit?

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




  _______________________
  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

     APWU                           American Postal Workers Union
     Contract                       Contract CS 1370
     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                           American Postal Workers Union Health Plan




                                                                        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.	      RESULTS OF AUDIT.................................................................................................5

                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 American Postal Workers Union (APWU) Health Plan (Plan). The Plan is located in Glen
Burnie, Maryland.

The audit was performed by the 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. Health insurance coverage is made available
through contracts with various health insurance carriers.

The APWU Health Plan is a fee-for-service plan with preferred provider organizations. The Plan
enrollment is open to all postal service employees who are members of APWU and all other
federal employees and annuitants that elect to become associate members of APWU. APWU is
the sponsor and administrator of the Plan, operating under Contract CS 1370 (contract) to
provide a health benefits plan authorized by the FEHB Act. Members have a choice of
enrollment in a High Option or a Consumer Driven Health Plan.

APWU’s contract (CS 1370) 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 the Plan’s
management. Also, management of the Plan is responsible for establishing and maintaining a
system of internal controls.

All findings from our prior audit of the Plan (Report No. 1B-47-00-11-002, dated September 1,
2011), covering contract years 2005 through 2009, have been satisfactorily resolved.


                                                                         1                            Report No. 1B-47-00-17-003
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.
The results of this audit were discussed with the Plan officials throughout the audit and at an exit
conference on May 11, 2017. Since our audit disclosed no significant findings, a draft report
was not issued.




                                                                         2                            Report No. 1B-47-00-17-003
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 the Plan handled FEHBP funds in
accordance with 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 the Plan’s cash management activities and practices related to FEHBP funds
from 2014 through June 30, 2016. Specifically, we reviewed the Plan’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 the Plan handled FEHBP funds in accordance with applicable laws and regulations
concerning cash management in the FEHBP.

In planning and conducting our audit, we obtained an understanding of the Plan’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 the Plan’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 the Plan’s system of
internal controls taken as a whole.

We also conducted tests to determine whether the Plan 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, the Plan complied with all applicable
provisions of the contract and federal procurement regulations. 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.

                                                                         3                            Report No. 1B-47-00-17-003
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.
In conducting our audit, we relied to varying degrees on computer-generated data provided by
the Plan. 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 11, 2017. During our fieldwork phase, we also made a short on-site visit to the Plan from
January 23, 2017, through January 25, 2017.

METHODOLOGY

To test the Plan’s compliance with contract provisions relative to cash management activities,
we selected and reviewed a judgmental sample of 50 LOCA drawdown amounts, totaling
$236,923,774 (from a universe of         LOCA drawdowns, totaling $                , during the
period 2014 through June 30, 2016), for the purpose of determining if the Plan’s 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 the Plan’s working capital calculations, adjustments and/or
balances, treasury offsets, and interest income transactions from 2014 through June 30, 2016, as
well as the Plan’s dedicated FEHBP investment account activity during the scope and balance as
of June 30, 2016.




                                                                         4                            Report No. 1B-47-00-17-003
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.
IV. MAJOR III. RESULTS OF AUDIT
           CONTRIBUTORS   TO THIS REPORT

      Our audit disclosed no significant findings pertaining to the Plan’s cash management
      activities and practices. Overall, we concluded that the Plan handled FEHBP funds in
      accordance with Contract CS 1370 and applicable laws and regulations concerning cash
      management in the FEHBP. Accordingly, this final report contains no questioned charges or
      recommendations.

      However, during our review of LOCA drawdowns, we noted that while the Plan’s daily
      LOCA drawdown worksheet included a total net drawdown amount, it did not include a
      detailed itemization of category transaction dollar totals to support the total net drawdown
      amount (such as category transaction dollar totals for claim payment check and/or electronic
      fund transfer amounts; plus/minus health benefit refunds and recoveries, pharmacy and/or
      medical drug rebates, and other health benefit adjustments; plus administrative expenses and
      service charges; and plus/minus working capital adjustments and interest income earned).
      This made reviewing the Plan’s LOCA drawdowns challenging to complete. Based on our
      experience with auditing the FEHBP experience-rated Carriers, we have noted that
      substantially all of these Carriers use a daily LOCA drawdown worksheet that includes a
      detailed itemization of category transaction dollar totals to support the total net drawdown
      amount. As a best practice, we provided the Plan with a couple of examples of daily LOCA
      drawdown worksheet formats to consider using, which would better support the Plan's LOCA
      drawdown amounts as well as improve the Plan’s audit trail. At the exit conference, the
      Plan’s Chief Financial Officer informed us that the Plan has revised the daily LOCA
      drawdown worksheet to now include itemized category dollar amounts that total the net
      drawdown amount.




                                                                          5                            Report No. 1B-47-00-17-003
 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.
                                                                                                                  



                                Report Fraud, Waste, and
                                    Mismanagement 

                                            Fraud, waste, and mismanagement in
                                         Government concerns everyone: Office of
                                             the Inspector General staff, agency
                                          employees, and the general public. We
                                        actively solicit allegations of any inefficient
                                              and wasteful practices, fraud, and
                                         mismanagement related to OPM programs
                                        and operations. You can report allegations
                                                    to us in several ways:


                  By Internet:               http://www.opm.gov/our-inspector-general/hotline-to-
                                             report-fraud-waste-or-abuse


                   By Phone:                 Toll Free Number:                               (877) 499-7295
                                             Washington Metro Area:                          (202) 606-2423


                     By Mail:                Office of the Inspector General
                                             U.S. Office of Personnel Management
                                             1900 E Street, NW
                                             Room 6400
                                             Washington, DC 20415-1100
               
                                                                                                                  
                                                                                                                  




                                                                                          Report No. 1B-47-00-17-003
                                                      -- 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.