A recent Office of Inspector General audit has exposed serious deficiencies in how the Centers for Medicare and Medicaid Services handles government contracts. The agency left $11.2 billion worth of contracts improperly closed, creating opportunities for fraud and waste that could have been prevented through basic oversight procedures.
What the Audit Found
The OIG examined 50 contracts totaling $11.2 billion that should have been closed between October 2018 and September 2023. Not a single contract met all federal closeout requirements. Twelve contracts worth $2.1 billion were still overdue for closure when auditors wrapped up their investigation.
Contract closeout isn’t bureaucratic red tape. It’s the government’s last chance to verify that contractors delivered what they promised, catch improper payments, and recover money owed to taxpayers. When CMS skips these steps, there’s no final accounting of whether the public got what it paid for.
In fiscal year 2023, HHS executed $38.5 billion in contracting actions. CMS was responsible for $7.4 billion of that total—about 19 percent. The agency’s failure to properly close contracts represents a fundamental breakdown in financial oversight at a scale that demands attention.
The Risk to Taxpayers
Unclosed contracts don’t just sit in filing cabinets gathering dust. They represent active financial vulnerabilities. Records get lost. Staff members who worked on contracts leave the agency. The evidence needed to challenge fraudulent charges or demand refunds deteriorates with time.
Healthcare fraud is already a massive problem. Federal enforcement actions regularly uncover schemes involving billions in false claims. When CMS doesn’t bother completing contract closeouts, it hands fraudsters an extra layer of protection. Cases that might have been caught during a proper financial review slip through entirely.
The OIG has flagged HHS contract closeout problems before. This isn’t CMS’s first rodeo. Earlier audits found similar failures at other HHS agencies, including the National Institutes of Health, which botched the closure of contracts worth more than $1.9 billion. The problems included missing documentation, failure to preserve records when employees left, and premature destruction of contract files.
A Pattern of Institutional Failure
When the same mistakes show up across multiple agencies within one department, it’s not about a few bad employees. It’s about broken systems. HHS appears to lack the departmental guidance, training infrastructure, or supervisory oversight needed to ensure basic contract management standards.
The closeout process isn’t technically complicated. Contracting officers need to review documentation, reconcile payments, verify deliverables, and make sure both sides have met their obligations. It’s methodical work that requires attention to detail, but it doesn’t demand specialized expertise. The widespread failure to complete these tasks suggests either severe understaffing or an institutional culture that treats financial controls as optional.
What CMS Says It Will Do
The OIG made two recommendations. First, CMS needs to finish closing the 12 contracts worth $2.1 billion that remain overdue. Second, the agency should develop clear policies defining documentation requirements, assigning responsibilities, and establishing procedures to prevent future backlogs.
CMS agreed with both recommendations and says it’s already taking corrective action. Whether that translates into sustained improvement remains an open question. Agencies often respond to audit findings with promises of reform, only to slide back into old habits once scrutiny fades.
The real test will come in future audits. If OIG investigators return in a few years and find the same problems, it will confirm that CMS treated this as a PR exercise rather than a genuine effort to fix its processes.
Why This Matters Beyond Healthcare
The CMS audit findings carry implications for federal contracting writ large. If a major agency can’t execute basic closeout procedures for billions in contracts, what does that say about financial controls across government?
Congress appropriates money with the expectation that executive agencies will spend it responsibly and maintain records proving they did so. When agencies fail this fundamental test, they undermine the entire appropriations process. Legislators can’t make informed funding decisions without reliable information about how previous appropriations were spent.
Inspectors general exist precisely because agencies can’t always be trusted to police themselves. The OIG’s role in uncovering these closeout failures demonstrates why independent oversight matters. Without external audits, CMS’s management lapses might never have come to light.
The Numbers Tell a Story
Twelve contracts. $2.1 billion. Still not closed. These aren’t abstract figures—they represent specific instances where the government failed to do basic accounting. Each unclosed contract is a missed opportunity to verify expenditures, identify overpayments, or detect fraud.
The 50 contracts reviewed in the audit paint an even starker picture. A 100 percent failure rate on federal closeout requirements isn’t a sign of isolated mistakes. It’s evidence of systemic dysfunction. When every single contract examined falls short of basic standards, something is fundamentally wrong with how the agency operates.
What Happens Next
CMS now has marching orders from the OIG. Complete the overdue closeouts. Fix the policies and procedures. Prevent this from happening again. The agency’s own response suggests it understands the seriousness of the findings.
But understanding a problem and fixing it are different things. HHS agencies have faced similar audit findings before without achieving lasting reform. The department appears to struggle with implementing and maintaining basic contract management controls across its various components.
Congressional oversight committees should demand regular updates on CMS’s progress. The OIG should conduct follow-up audits to verify that improvements are real and sustained. Anything less risks allowing the agency to paper over the problems without addressing their root causes.
The $11.2 billion in improperly closed contracts represents more than an accounting error. It’s a warning sign about how seriously federal agencies take their responsibility to safeguard taxpayer money. Whether CMS can transform its contract management practices from a liability into a functioning control system will determine whether this audit marks a turning point or just another chapter in an ongoing failure.
Sources:
- U.S. Department of Health and Human Services, Office of Inspector General. “CMS Put $11.2 Billion at Risk of Fraud, Waste, and Abuse by Not Properly Closing Contracts.” Report A-03-23-03002, 2025. https://oig.hhs.gov/reports/all/2025/cms-put-112-billion-at-risk-of-fraud-waste-and-abuse-by-not-properly-closing-contracts/
- U.S. Department of Health and Human Services, Office of Inspector General. Previous audit reports on HHS contract closeout procedures, various dates.
- Federal Acquisition Regulation (FAR) administrative closeout requirements, as referenced in OIG audit findings.
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