REPORT OF AUDIT, GOVERNMENT EMPLOYEES HEALTH ASSOCIATION, INC., FOR THE PERIOD 1 JANUARY 1980 - 31 DECEMBER 1980

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP86-00964R000200070028-9
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 10
• Document Creation Date: December 16, 2016
• Document Release Date: July 5, 2005
• Sequence Number: 28
• Publication Date: August 10, 1981
• Content Type: MF

Approved For Release 2005/07/12 : CIA-RDP86-00964R0002 0070028-9
10 August 1981
25X1
MEMORANDUM FOR: Director of Personnel
VIA: Inspector General
Chief, Audit Staff
SUBJECT: Report of Audit, Government Employees
Health Association, Inc., For the Period
1 January 1980 - 31 December 1980
1. Subject report is attached. Please advise me of
the action taken on the recommendations contained in the
report.
2. We appreciate the cooperation and assistance
provided by your staff during the audit.
25X1
Attachment:
As stated
Distribution:
t~7"rig. - D/OP
1 - C/Board of Directors
1 - SA/DDCI
1 - D/Fin
1 - O/Compt/BMG
25X1
WARNING NOTICE
SENSITIVE INTELLIGENC~@
AND METHODS INVOLVED
CONFIDENTIAL
CONFIDENTIAL
 CONFIDENTIAL w
TOW Approved For Release 2005/07/12 : CIA-RDP86-00964R000200070028-9
REPORT OF AUDIT
Government Employees Health Association, Inc.
For the Period
1 January 1980 31 December 1980
SUMMARY
1. The Government Employees Health Association, Inc.
(GEHA) continues to be administered in an efficient manner.
Administrative controls, procedures and records were generally
effective and in accordance with applicable requirements.
Three of the prior year audit recommendations concerning in-
vestment performance have not been completely resolved. These
are briefly commented on again in this report, along with a
recommendation to strengthen control over bond interest. Other
administrative matters were discussed with responsible officers
and resolved during the audit.
SCOPE AND OPINION
2. We have examined the GEHA statement of financial
position as of 31 December 1980 and the related statements
of changes in reserve fund balances and changes in financial
position. The examination was made in accordance with generally
accepted auditing standards and accordingly included such tests
of the accounting records and other auditing procedures, in-
cluding a review of claim settlement procedures by GEHA, as we
considered necessary under the circumstances.
3. In our opinion, the attached financial statements,
Exhibits A,B, and C, present fairly the financial position
of GEHA at 31 December 1980 and the results of its operations
for the year then ended, in conformity with generally accepted
accounting principles applied on a consistant basis.
BACKGROUND
4. GEHA is a tax-exempt organization incorporated in
the District of Columbia to administer employee insurance
programs in accordance with Agency operational and security
requirements. An elected Board of Directors prescribes GEHA
operating policies. The daily business is conducted by the
Insurance Branch of the Benefits and Services Division in the
Office of Personnel. GEHA reimburses the Agency for the services
of 31 of the 44 employees in the Insurance Branch,
5. GEHA maintains over 24,000 insurance accounts for
active and retired employees. The following plans are in
effect:
25X1
WARNING NOTICE
SENSITIVE INTELLIGE CE SOURC
AND METHODS 9 Or b 5e
P86-00
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PLANS
ACCOUNTS
Life Insurance:
United Benefit Life Insurance Company
Active
3,933
Retired
2,518
Worldwide Assurance for Employees
of Public Agencies
1,407
Health Insurance:
Association Benefit
Active
8,974
Retired
6,561
Contract Hospitalization
185
Specified Diseases
393
Disability Insurance:
Income Replacement
208
Accidental Death and Dismemberment
Insurance:
Flight and Accident
372
Travel Insurance:
Air Flight
238
Military Air Flight
2
24,791
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DETAILED COMMENTS
Investment Performance
6. The prior report of audit contained several recommen-
dations concerning management of GEHA's investment portfolio
by BEA Associates, an investment management firm. GEHA manage-
ment has dealt with several of the issues raised and is working
on the three recommendations not yet resolved. A report sub-
mitted by a consultant, hired to review GEHA's investment port-
folio management, is scheduled for discussion at the GEHA Board
of Directors meeting in August 1981. We repeat those recommen-
dations not yet cleared.
Recommendation #1: That the GEHA Board
of-Directors reevaluate and document
GEHA's investment objectives.
Recommendation #2: That the GEHA Board
o Directors consider whether dealing
through other investment broker(s),
adopting an alternate means of handling
investments, might be more advantageous
than current arrangements, and that it
document both the decisions and the basis
on which they are made.
Recommendation #3: That the GEHA Board
of Directors establish a written policy
concerning the holding of fixed income
securities which have declined in current
market value but are yielding a high rate
of return, and that the policy determined
be issued as mandatory guidance to any
entity executing investment decisions on
behalf of GEHA.
Interest Income Records
7. GEHA accounting records and procedures do not provide
assurance that bond interest is received when due. Controls
should be established by posting date and voucher number for
receipt of bond interest on the appropriate page of the bond
investment subsidiary ledger, similar to dividend postings
in the stock subsidiary ledger.
Recommendation #4: Establish records to
assure that bon interest is received
when due.
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CONFIDENTIAL
 CONFIDENTIAL
Approved For Rele 2005/07/12 : CIA-RDP86-00964R0002 0070028-9
Exhibit A
Government Employees Health Association, Inc.
Statement of Financial Position
31 December 1980 and 1979
ASSETS
Cash
Investments (Notes 1 and 2)
Claims Receivable
Contingent Assets:
Funds Withheld by Underwriter
for Specified Policyholders
Less: Reserves
Equipment (Net 9f Depreciation)
$454,446
4,426,411
80,137
154,666
(154, 666)
2,312
1979
$392,465
3,863,674
141,709
154,666
(154,666)
$4,963,306 $4,397,848
LIABILITIES AND RESERVES
Accounts Payable
Prepaid Premiums
Accrued Salaries
Accrued Dependent Premiums
Total Liabilities
Reserves (Exhibit B)
Total Liabilities and Reserves
$6,796
180,357
24,543
16,804
228,500
4,734,806
$4,963,306
$63,361
94,843
15,343
15,149
188,696
4,20 152
$4,397,848
Note 1: Investments are recorded at cost. Market value at
31 December 1980 was $4,250,700 and at 31 December
1979 was $3,681,200.
Note 2: In April 1981 $1,843,300 of investments were sold
at a loss of $407,000.
/07 -
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Government Employees Health Association, Inc
Statement of Changes in Reserve Fund Balances
For the Year Ended 31 December 1980
UBLIC Investment
in Common UBLIC
Stock General
Association
Benefit
Plan
Air
Flight
Plan
Contract
Hospital-
ization
General
Fund
Balance, 1 January 1980
$4,209,152
$345,412
$3,382,519
$317_,_S_
$29,743
$69,227
$64,700
Premiums Withheld from or Returned
by Underwriter
851,785
449,902
392,795
764
8,324
Investment Income
348,000
74,585
260,783
2,297
5,359
4,976
Miscellaneous
1,305
1,305
1,201,090
74,585
710,685
392,795
3,061
13,683
6,281
Salaries
398,150
18,143
378,107
380
1,520
Premiums for UBLIC Dependent
Coverage
37,705
37,705
Loss on Sale of Investments
189,134
28,820
152,907
1,347
3,142
2,918
Investment Fees and Expenses
42,903
12,919
28,597
547
Miscellaneous
7,544
292
7,252
675,436
41,739
237,644
378,107
1,979
5,250
10,717
Balance, 31 December 1980
$4,734,806
$378,258
$3,855,560
$332,239
$30,825
$77,660
$60,264
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Government Employees Health Association, Inc.
Statement of Changes in Financial Position
For the Year Ended 31 December 1980
Resources Provided by:
Sale of Investments
$7,833,556
Claims Reimbursed by Underwriters:
Hospitalization
8,801,721
Death
355,812
Premiums from Policyholders
1,229,977
Premiums from Underwriters
851,785
Interest Income
273,415
Dividend Income
74,585
Other Income
1,305
$19,422,156
Resources Applied to:
Purchase of Investments
$8,585,427
Claims Paid to Policyholders:
Hospitalization
8,740,126
Death
357,666
Premiums Paid to Underwriters
1,182,168
Salary Paid
398,150
Investment Fees and Expenses
42,903
Decrease in Accounts Payable
43,879
Increase in Cash
61,981
Purchase of Equipment
2,890
Miscellaneous
6,966
$19,422,156
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co FI NTIAL
 70028-9-9
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$ 9dJ ECT. (optional)
FROM. EX'tEN510N Na.
Chief , Insurance Branch DATE
926 tees 17 August 1981
TCis (CT cer designation, room number, arid
DAT
E
OFflC?~ S
COMMENTS (Number each comment to show from whom
building)
INITIALS
to whom. Draw a line across column of ter each co?msrserst.)
RECEIVED
FORWARDED
DC/BSI 'ers/SP
Attached is the final. report
of audit for G iA's 1980 activi.tie
I T will wlll prepare and forward a
C/BSD/per,/SP
response to you for recomaiiendation
.
Invest-
#4. 'Do you wish the GEFIA Invest-
~
ment Committee to respond to
DD/Pers/SP
Recoaiur-endations 1, 2, and 3?
__.._~_
I have also attached 8 copies for
the Board if you wish to send
EWPers
copies to them,
5.
DD/Pens
D/Pers
7
9
C/ :B
1 t.
+
13.
14.
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ROUTING AND RECORD SHEET
SUBJECT: (Optional)
Audit.ofGovernment Employees Health Association, Inc.
FROM: Audit Staff
EXTENSION
NO.
1201 K
2105
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DATE
10 Aug 81
TO: (Officer designation, room number, and
building)
DATE
OFFICER'S
COMMENTS (Number each comment to show from whom
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to whom. Draw a line across column after each comment.)
RECEIVED
FORWARDED
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UI~ 1982
a.
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Approved For Release 2005,407/12 : CIA-RDP86-00964R000200070028-9