Department of Health and Human Services 
 
  OFFICE OF 
 
INSPECTOR GENERAL 
 
 
 
 
 
 
 
CMS H N P
  AS  OT  ERFORMED 
 
 
R C
EQUIRED  LOSEOUTS OF 
 
 
C W
ONTRACTS  ORTH 
 
 
B  
ILLIONS 
 
 
Daniel R. Levinson  
Inspector General  
 
December 2015 
OEI-03-12-00680 
 
  EXECUTIVE SUMMARY:  CMS HAS NOT PERFORMED REQUIRED CLOSEOUTS OF 
CONTRACTS WORTH BILLIONS  
OEI-03-12-00680 
 
WHY WE DID THIS STUDY  
 
The Centers for Medicare & Medicaid (CMS) relies extensively on contractors to carry  out its basic mission and 
spends billions of dollars each year in contracts for a variety  of goods and services.  A contract is closed once 
the contractor has completed contract requirements and the Government has completed all required 
administrative actions.  Because improper payments may be identified and recovered during  the closeout 
process, it is imperative that contracts are closed within Federal Acquisition Regulation (FAR) timeframes. The 
closeout process, generally, is the last chance for improper contract payments to be detected and recovered, and 
delayed closeout poses a financial risk to agency funds.   
 
A report by the Government Accountability Office (GAO) in 2009 found a large backlog of unclosed contracts 
at CMS. OIG designed this study to review the state of unclosed contracts as of February  2014, to gauge 
CMSs progress, and to support continuing improvements in contract management.  Recommendations will 
help CMS improve its contract management and better protect Federal funds.    
 
HOW WE DID THIS STUDY  
 
This study focused on CMSs FAR contracts that were active as of February  2014, and its FAR contracts 
pending closeout as of February  2014.  We analyzed contract data to determine (1) the number of active 
contracts and the amounts obligated to those contracts and (2) the number and total cost of contracts pending 
and overdue for closeout.  We also interviewed CMS staff and reviewed policies  and procedures related to 
contract closeout.   
 
WHAT WE FOUND  
 
CMS obligated $15 billion to 1,229 contracts that were active as of February  2014.  These contracts were held 
by 500 separate contractors, with 7 contractors having obligated amounts over $500 million.  As of February 
2014, CMS contractors completed work for 6,126 contracts that CMS had not closed out as required under the 
FAR. These contracts totaled $25 billion.  CMS continues to have thousands of contracts overdue for closeout, 
with 15 percent of contracts that completed before fiscal year (FY) 2011 at least 10 years overdue.  
Furthermore, the closeout status of a number of contracts could not be determined  because of inconsistent and 
conflicting data.  Because the closeout process is usually the last chance for improper payments to be detected 
and recovered, delays in the closeout process pose a financial risk to CMS.  While CMS has not consistently 
met FAR timeframes for closing out contracts, it has been improving the timeliness of contract closeouts over 
the past several years.  CMS reported a number of barriers, including resource constraints, which CMS believes 
prevent the timely closeout of contracts.  Finally, key pieces of information, such as project description and 
contract payments, that CMS could use to manage and oversee contracts are not easily accessible through its 
contract management system.  
  
WHAT WE RECOMMEND   
 
We recommended that CMS (1) implement additional strategies to meet required FAR timeframes for closeout, 
(2) determine the status of contracts for which closeout status could not be determined, (3) improve reports from  
CMSs contract management system to allow for easier access to contract data that would assist in closeout and 
funds management, and (4) improve coordination and collaboration across departmental staff with contract 
closeout responsibilities. CMS concurred with all four recommendations.     
 
  TABLE OF CONTENTS 
 
Objectives ................................................................................................................1 

Background..............................................................................................................1 

Methodology............................................................................................................3 

Findings....................................................................................................................5 

CMS obligated $15 billion to 1,229 contracts that were active as of February  
2014 ..............................................................................................................5 

As of February 2014, CMS had not closed out completed contracts 

totaling $25 billion as required by regulation ..............................................5 

The large backlog of unclosed contracts poses a significant financial risk 
to CMS ........................................................................................................6 

While CMS has taken steps to improve its closeout and contract 

management processes, barriers remain that hinder timely closeout ...........7 

Conclusion and Recommendations ..........................................................................9 

Agency Comments and Office of Inspector General Response .................11 
 
Appendix A:  Agency Comments ..........................................................................12 

Acknowledgments..................................................................................................14 

 
 
  OBJECTIVES 
1. 	  To determine the number of contracts active as of February 2014 that are 
administered under the Federal Acquisition Regulation (FAR) by the Centers for 
Medicare & Medicaid Services (CMS) and the amounts CMS had obligated for these 
contracts; 
2. 	  To determine the number and total cost of FAR contracts that CMS has not closed 
out as required under FAR; and   
3. 	  To identify CMSs barriers to closing FAR contracts. 
BACKGROUND 
CMS relies extensively on contracts to carry out its basic mission.  In fiscal year (FY) 
2014, CMS spent $7 billion on contracts 
needed to administer its programs.  
DEFINITION  OF  SELECT  CONTRACT  TERMS   
FAR Closeout Requirements  USED  IN  REPORT  
The FAR governs how Federal agencies  OBLIGATED  AMOUNT   a  definite  commitment  that  
can contract for goods and services. The  creates  a  legal  liability  of  the  Government  for  the  
payment  of  goods  and  services  ordered  or  received.   
FAR requires agencies to begin the 
An  obligation  is  incurred,  for  example,  when  a  contract  
closeout process once a contract is 
is  signed  or  an  order  is  placed  for  goods  and/or  
physically completed.  A contract is 
services.  
physically completed when a contractor 
CONTRACT  COST   the  total  cost  of  the  contract  at  
finishes providing the goods or services  closeout,  or  at  completion  date  if  pending  closeout.  
under the contract (hereafter referred to as 
completed).1    
The timeframes specified in the FAR 
CONTRACT  TYPES   for completing closeouts vary 
depending on the type of contract.   
FIXEDPRICE   is  a  type  of  contract  that  provides  
maximum  incentive  for  the  contractor  to  control  costs   Firm-fixed-price contracts must be 
and  perform  effectively,  and  the  contractor  assumes  the   closed within 6 months after the date 
risk  for  cost  overruns.  Firm fixed price  is  one  type  of  
on which the contracting officer 
fixed price  contract.   The  FAR  requires  these  contracts  to  
receives evidence of completion.2   
be  closed  within  6  months  of  completion.  
Contracts requiring settlement of 
COSTREIMBURSEMENT   is  a  type  of  contract  that  provides  
indirect cost rates, for example, 
for  payment  of  allowable  costs  to  the  extent  prescribed  
in  the  contract,  and  the  Federal  Government  assumes    certain cost-reimbursement 
the  risk  for  cost  overruns.   The  FAR  requires  these   contracts, should be closed within 
contracts  to  be  closed  within  36  months  of  completion.   36 months of the date on which the 
contracting officer receives evidence 
 
1 FAR 4.804-4(a) and 5(a). 
2 FAR  4.804-1(a)(2).  This applies to  firm-fixed-price contracts other than  those using simplified 
acquisition procedures.   
CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680)         1 
  of completion.3   All other types of contracts should be closed within 20 months of the 
date on which the contracting officer receives evidence of completion.4    
Contract Closeout Process 
The closeout process is an important step in the management of contracts, as it generally 
is the last chance for the Government to detect and recover improper contract payments.  
Therefore, delays in the closeout process pose a significant risk to Government funds.   
The procedures for closing out cost-reimbursement contracts include settling all costs 
and finalizing indirect cost rates, where applicable.  They also can include completing a 
contract audit, if necessary.  As part of this process, CMS contractors must submit their 
indirect cost proposals to the cognizant agency responsible for establishing indirect cost 
rates, which is usually the National Institutes of Health (NIH) for for-profit entities and 
the Program Support Center (PSC) for not-for-profit entities.5  Once the indirect cost  
rates have been finalized, CMS contracting officers and specialists can perform the 
necessary actions to administratively close the contract.   
Contract Management at CMS 
CMSs Office of Acquisition and Grants Management (OAGM) plans, organizes, 
coordinates, and manages the activities required to maintain an agencywide acquisition 
program.  OAGM uses a CMS intranet-based Windows software tool called the 
Comprehensive Acquisition Management System (CAMS), which automates the full 
Federal procurement life-cycle from advanced procurement planning through acquisition 
closeout. CAMS includes contract management capabilities to support FAR contracts, 
and tracks and reports on CMS procurement activity.   
Within OAGM, the Division of Financial Services (DFS) is responsible for ensuring that 
all required contract closeouts are executed.  DFS tracks all contracts to be closed and 
issues notifications and reminders to OAGM contracting staff when a contract should be 
ready to be closed. 
Vulnerabilities Identified Within CMSs Contracting Environment 
In 2007, the Government  Accountability Office (GAO) found that CMSs operating 
environment created vulnerabilities in the contracting process and increased the risk of 
waste and improper payments.6  Specifically, GAO found that CMS did not adequately 
fulfill critical contractor oversight and that it frequently used cost-reimbursement 
contracts, which increased risks to CMS.  GAO also found that CMS did not perform its 
contract closeout procedures in accordance with FAR timeframes; moreover, it had a 
backlog of about 1,300 contracts at the time of the study, putting CMS at increased risk 
 
3 FAR 4.804-1(a)(3). 

4 FAR 4.804-1(a)(4). 

5 The cognizant agency is the Federal agency that is responsible for establishing  final indirect cost rates on  

behalf  of all  Federal agencies.  For for-profit  contractors, this is normally the Federal agency with the 
largest  dollar amount of  negotiated contracts. 
     
6 GAO,  Centers for Medicare and  Medicaid  Services:  Internal Control Deficiencies Resulted in Millions 

of Dollars of  Questionable Contract Payments, GAO-08-54, November 2007. 
 
CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680)         2 
  of improper payments or waste.  GAO made nine recommendations to CMS to improve 
internal control and accountability in the contracting process and related payments to 
contractors. 
A 2009 GAO report indicated that CMS had not substantially addressed seven of the 
nine recommendations made in the 2007 report to improve internal control over 
contracting and payments to contractors.7  In addition, CMS continued to have a backlog 
of contracts that were overdue for closeout.   
To address GAOs recommendation to reduce the backlog of contracts awaiting 
closeout, OAGM created a contract closeout policy that established unique internal 
OAGM procedures for the closeout of contract files.  In addition, a special team was 
created within DFS in July 2011 to focus on reducing the large number of contracts that 
were completed before FY 2011, but were overdue for closeout (hereafter referred to as 
the backlog). 
METHODOLOGY 
Scope 
This study focused on CMSs FAR contracts that were active as of February 2014 and its 
contracts pending closeout as of February 2014.           
Data Collection and Analysis 
Active contracts.  From CMS, we requested and analyzed data for all FAR contracts that 
were active, i.e., not completed, as of February 2014.   
Contract closeouts. We also requested and analyzed data regarding contracts that were 
completed after September 30, 2010.  For FYs 2011 through 2013, we asked CMS to 
identify the contracts that were (1) closed as of the end of each FY, (2) pending but not 
overdue for closeout as of the end of each FY, and (3) pending and overdue for closeout 
based on FAR regulations as of the end of each FY. 
In addition, we requested and analyzed information for the contracts in the backlog 
(completed before FY 2011) that were not closed as of February 2014.   
Document review. We collected and reviewed CMS policies and procedures related to 
contract management and contract closeouts.   
Structured interview and survey questions.  We conducted a structured interview with 
CMS staff in OAGM to determine their procedures for closing out contracts.  We also 
asked CMS to provide information about the reasons why contracts are not completed 
on time and the chief barriers to closing out contracts in a timely manner.    
In the interview with CMS staff, it was reported that NIHs procedures impacted CMSs 
closeout process.  Therefore, we also requested information from NIHs Division of 
Financial Advisory Services, Office of  Acquisition Management and Policy, to 
 
7 GAO,  Centers  for Medicare and Medicaid Services: Deficiencies in Contract Management  Internal 
 
Control Are Pervasive,  GAO-10-60, October 2009. 

CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680)         3 
  determine their role in the contract closeout process.  Our questions focused on NIHs 
procedures for establishing contractors final indirect cost rates.   
Limitations 
FAR 4.804-1(c) states that contracts shall not be closed if they are in litigation, under 
appeal, or have been terminated and all termination actions have not been completed.  
CMS staff reported that they do not track whether contracts fall into any of these 
categories. Therefore, we had no method to establish whether any of the contracts that 
we determined were overdue would be exempt from the standard closeout procedures 
and timeframes.  However, CMS staff stated that exempted contracts are rare 
occurrences.   
OIG did not review individual contract file documents to verify the data provided by 
CMS. 
Standards 
This study was conducted in accordance with the Quality Standards for Inspection and 
Evaluation issued by the Council of the Inspectors General on Integrity and Efficiency. 
CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680)         4 
  FINDINGS 
CMS obligated $15 billion to 1,229 contracts that were active as 
of February 2014 
CMS obligated $15 billion to a total of 1,229 active contracts as of February 2014.8   
Most of these contracts are not firm-fixed-price contracts.   The 1,229 active contracts are 
held by a total of 500 separate contractors. The number of contracts per contractor range 
from 1 to 32, and obligated amounts ranged from under $1,000 to $947 million.  As 
shown in Table 1, 7 contractors had obligated amounts over $500 million. 
Table 1: CMS Contractors With Over $500 Million in Total Obligations on Active Contracts as of 
February 2014  
 
Contractor Name    Number of Contracts  Total Obligated 
General Dynamics Information Technology, Inc.  12   $946,513,287  
Lockheed Martin Services, Inc.  7  $934,136,928  
GHI Medicare  2  $710,477,163 
HP Enterprise Services, LLC  12   $663,411,748 
CGI Federal, Inc.                                                              13   $565,428,728 
Buccaneer Computer Systems   14   $509,277,243  
Safeguard Services, LLC   11   $507,518,007 
Source:  OIG analysis of FAR contract data provided by  CMS from CAMS for active contracts, 2014. 
As of February 2014, CMS had not performed required closeouts 
for contracts totaling $25 billion as required by  regulation  
As of February 2014, CMS had 6,126 contracts that were overdue for closeout, i.e., they 
were completed, but not closed out as required by the FAR.  As shown in Table 2, these 
6,126 contracts totaled $25 billion.  The majority of overdue contracts (5,420) were 
completed before FY 2011, i.e., in the backlog.  These backlog contracts totaled 
$24 billion and were overdue an average of 2,512 daysalmost 7 years.     
In addition to the large backlog of contracts that completed before FY 2011 and remain 
overdue, 706 contracts that completed between FY 2011 and FY 2013 remain overdue.  
These 706 contracts totaled an additional $1.5 billion.  On average, these contracts were 
412 days past their closeout due dates as of February 2014, with 49 percent overdue 
more than 1 year.   
 
 
 
8 This amount  was aggregated from the obligated amount reported in CAMS for contracts that were 

active as of February 2014. 
  
CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680)         5 
  Table 2:  Closeout Status of CMS Contracts Reviewed 
 
Number of  Percent of 
Closeout Status   Total Contract Cost 
Contracts1  Contracts 
Overdue   6,126  86  $25,448,848,937  
    Completed before FY 2011   5,420   88  $23,928,485,437  
  Completed between FYs 2011 and 2013   706  12  $1,520,363,500  
Closed2    402  6  $49,104,963  
  Closed within FAR timeframe   13  3  $19,567,099  
  Not closed within FAR timeframe  389  97  $29,537,864  
Pending closeout but not overdue2   635  9  $10,519,020,794  
Total  7,163  1003   $36,016,974,694  
Source:  OIG analysis of FAR contract data provided by  CMS, 2014. 

1 This includes CMS contracts that (1) were completed but not closed out as of February  2014 or (2) were completed 

in FYs 2011 through 2013 and closed as of February 2014.
 
2 Only includes contracts that completed between FYs 2011 and 2013. 

3 The percentages do not sum to 100 percent because of rounding.
  
 
The large backlog of unclosed contracts poses a significant 

financial risk to CMS 

Having a large number of contracts that are awaiting closeout after the deadlines 
required by the FAR poses a financial risk to CMS.  Generally, the appropriations used 
to fund a contract cannot be used to make payments to contractors more than 5 years 
after the end of the fiscal year in which they were appropriated.9  After 5 years, CMS 
cannot use the original appropriated funds to make payments owed to the contractor at 
closeout because the appropriation account is closed.  Instead, CMS must use available 
current year funds to pay any obligations that were incurred during the contract 
performance period.10  Similarly, any money owed to CMS by contractors may not be 
payable directly to CMS. Contractor repayments can be credited back to the agency if  
the appropriation account has not been closed.11  However, once the appropriation 
account has been closed, any repayments must be returned to the U.S. Department of 
Treasury.   
Of the 5,420 contracts that completed before FY 2011 and were overdue for closeout as 
of February 2014, 69 percent were overdue 5 or more yearswith the most delayed 
closeout due in 1995. These contracts totaled $5 billion.  If at closeout CMS determines 
that any of this $5 billion was misspent or not allowable, it would not be able to directly 
recover these dollars. 
 
9 This does not apply to no-year appropriations, which are available for obligation indefinitely.   
10 CMS is limited to using  1  percent of current year funds to  satisfy valid, prior obligations.  31 U.S.C.  

1553(b)(2).  

11 If the period  of availability for obligation  of those funds has passed, the repayment may only be  used to 

adjust existing  obligations, not to make new ones. 
CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680)         6 
  We could not determine the extent of CMSs financial risk because CMS could not 
provide us with information regarding the amount of money owed to or from contractors 
for the most recently closed out contracts.  In fact, CMS could provide information 
regarding closeout payments due to or from  the contractor for only 49 contracts that had 
been in the backlog but were closed out as of February 2014.  At closeout, CMS 
determined that contractors owed the Government $10,069,407 for these 49 contracts.        
While CMS has taken steps to improve its closeout and contract 
management processes, barriers remain that hinder timely 
closeout  
In addition to developing a team to focus solely on closing out contracts in the backlog, 
CMS has taken other steps to improve the contract closeout process and contract 
management.12  CMS has developed and implemented policies and procedures for 
managing and closing out contracts, which includes implementing performance metrics 
to improve the timeliness of closeouts.  CMS also developed a four-year strategic plan 
that outlines its goals and objectives to constantly monitor and improve the effectiveness 
of contract management internal controls.  However, despite these improvements, there 
continue to be some significant barriers in completing contract closeouts. 
CMS has made improvements in meeting the FAR timeframes in recent 
years, but FAR timeframes continue to be missed      
The percentage of closed contracts that met FAR timeframes increased slightly between 
FYs 2011 and 2013.  Of the FY 2013 contracts that CMS closed, 9 percent were closed 
within the FAR timeframes, whereas, of the FYs 2011 and 2012 contracts that closed, 
only 4 percent and 0 percent (respectively) closed within the FAR timeframes.  
However, of all the 402 contracts that completed between FYs 2011 and 2013 and were 
closed by February 2014, only 3 percent were closed within FAR timeframes.  This 
means that 97 percent of contracts that were closed did not meet the FAR requirements 
for timely closeout.  
Sixty-five percent of contracts have not been closed out because the 
indirect cost rates have not been finalized  
Out of the 6,761 contracts that are pending or overdue for closeout, 65 percent require 
settlement of indirect cost rates before they can be officially closed out.  These contracts 
totaled over $34 billion. According to CMS staff, one of the major barriers to timely 
closeout is the challenge of finalizing indirect cost rates.   
A number of factors have contributed to delays in finalizing indirect cost rates.  Both 
CMS staff and NIH staff reported that some  contractors fail to timely and adequately 
submit their indirect cost proposals to their cognizant agency (NIH or PSC), which 
causes delays in the finalization of indirect cost rates.  Furthermore, while CMS has 
developed a system to track contractors  outstanding cost proposals, NIH and PSC do 
not have access to this system.  CMS staff stated that the lack of a tracking system at 
 
12 This team is comprised of one DFS staff member and five  contractor personnel.  
CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680)         7 
  NIH and PSC, as well as NIHs lack of access to CMSs tracking system, prohibit 
effective collaboration, especially between NIH and CMS, and contributes to significant 
delays in finalizing indirect cost rates.13    
CMS and NIH staffs reported that the lack of resources and staff hinder 
timely closeouts 
Both CMS and NIH staffs reported that the lack of adequate resources and insufficient 
staff levels continue to be a major challenge for completing contract closeouts in a 
timely manner.  CMS staff reported that CMS was understaffed for the task of closing 
out billions of dollars in contracts.  NIH staff reported that a lack of resources, the loss 
of several senior staff, and a large backlog of indirect cost proposals from many years 
are the primary barriers to timely completion of the review of indirect cost rates.     
CMSs contract management system contains conflicting data and cannot 
readily provide key pieces of information 
We found instances in which CAMS data were inconsistent and conflicting.  Using the 
data provided by CMS from CAMS, we could not determine the closeout status for  
675 contracts. This was because of inconsistent data identified in CAMS.  The data 
showed the following: (1) the contract was closed, but the closeout date was missing or 
(2) the contract was pending, but a closeout date was given.  These contracts totaled 
$2.7 billion. 
In addition, CMS was unable to provide the product service code, project description, 
total dollars withheld, and issuing office for the contracts that completed between  
FYs 2011 and 2013.  According to CMS staff, obtaining these data from CAMS would 
require a significant edit to the existing data reports, a task for which CMS has 
inadequate resources. Additionally, the total disbursements (payment amounts) made to 
contractors are not available in CAMS.  While CMS has plans to incorporate these data 
into CAMS in the future, CMS staff cannot determine how much money was paid to 
contractors without manually reviewing contract files and contacting CMSs Office of 
Financial Management, which is responsible for the disbursements.  Furthermore, the 
total amount owed by or to the Government or contractor as determined during closeout 
is not available in CAMS. According to CMS staff, these data also must be captured 
manually if a modification was necessary to reconcile amounts owed either by the 
contractor or by the Government at the time of closeout.  Therefore, key pieces of 
information that CMS could use to manage and oversee contracts are not easily 
accessible through the existing contract management system.  
 
   
 
13  This issue has not been  as significant with regard to  not-for-profit contracts under  PSCs  authority 
because CMS works with PSC to determine billing and final rates.  
CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680)         8 
  CONCLUSION AND RECOMMENDATIONS 
In their strategic plan, CMS outlines goals to fulfill its mission as an effective steward 
of public funds. Part of being an effective steward of public funds involves protecting 
contract funds from risk by providing effective and rigorous oversight of the contracting 
environment.  With tens of billions in contract dollars, CMS has a responsibility to 
ensure that contracts are being appropriately and effectively managed.   
The closeout process is an important step in the management of contracts, as it generally 
is the last opportunity for improper contract payments to be detected and recovered.  
Timely closeouts are imperative for protecting contract funds and reducing CMSs 
financial risk. In cases where original appropriations cannot be used to make payments, 
CMS would need to use current year funds to pay any money owed to contractors at 
closeout. Therefore, closing contracts within FAR timeframes ensures that (1) CMSs 
current year funds are not being used to pay past year obligations, (2) CMS is able to 
recover any contract funds owed, and (3) Government funds are used according to the 
contract requirements.          
While improvements have been made in meeting the FAR timeframes when closing 
contracts in recent years, CMS continues to have a large percentage of contracts that are 
overdue for closeout, including a large backlog of contracts completed before  
FY 2011.  The contracts overdue for closeout totaled $25 billion.   
Though CMS has made significant strides in improving the contracting environment in 
recent years, it continues to face barriers that prevent timely contract closeouts, which 
poses a significant risk to public funds.  
Therefore, we recommend that CMS: 
Implement additional strategies to meet required FAR timeframes for 
closeout 
Contracts should be closed out within FAR timeframes.  While CMS has made 
improvements between FYs 2011 and 2013 in reducing the average number of days to 
close contracts, CMS should review their policies and procedures to ensure that all 
necessary steps are being taken to ensure closeouts are meeting FAR timeframes.  CMS 
also could reevaluate how it is prioritizing closeouts to determine if efficiency could be 
increased. For example, CMS could determine if the most effective closeout strategy is 
to prioritize contracts that do not require finalization of indirect cost rates and/or those 
approaching the 5-year expiration of their appropriated funds.    
Determine the status of contracts for which closeout status could not be 
determined 
CMS was unable to provide the closeout status of 675 contracts. CMS needs to 
determine the closeout status of these contracts and update this information in CAMS.  
Because these contracts are worth nearly $3 billion, it is important that CMS knows 
whether these contracts have been properly closed out and to have this information 
readily accessible in CAMS. 
CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680)         9 
  Add additional data to its contract management system, and improve 
reports to allow for easier access to contract data that would assist in 
contract closeout and funds management 
CMS should add to CAMS the ability to enter data regarding the total amount owed by 
or to the Government or contractor at the end of contract closeout.  CAMS should 
contain information regarding payments made by the Government to the contractors.  
CMS also should create a standard data report that would enable CAMS users to 
generate basic contract information, such as product service code, project description, 
total dollars withheld, and issuing office.  Having these data in CAMS, along with an 
improved CAMS report, would enable CMS to readily access more complete 
information regarding the contract as part of its contract oversight.   
Improve coordination and collaboration with NIH 
CMS should consider finalizing a Memorandum of Understanding with NIH to clearly 
define each agencys roles and responsibilities in the closeout process, especially with 
regard to cost-reimbursement contracts.  This would enable increased collaboration 
between CMS and NIH, and enable CMS to better track the incurred cost audits that 
need to be completed.   
CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680)         10 
  AGENCY COMMENTS AND OFFICE OF INSPECTOR GENERAL RESPONSE 
CMS concurred with all four of the report recommendations.  In its comments, CMS 
described several initiatives it has implemented to facilitate the improved management 
of its contracts; initiatives focus on clear lines of authority, prioritization of requirements 
and deliverables, and metric-driven quality reviews.   
CMS reported progress related to our recommendations, including: 
 	  closing 2,077 contracts with an obligated value of $1.3 billion and de-obligating 
$29.95 million since February 2014; 
 	  upgrading its contract management system and improving its contract tracking 
system and reporting capabilities; 
 	  working to integrate its contract management system with the CMS Health Care 
Integrated Ledger Accounting System to track expenditures; 
	   working to implement the Department of Treasurys Invoice Processing Platform to 
automate the invoicing process; and 
	   working to determine more effective and efficient opportunities for closing out 
contracts. 
We look forward to receiving updates from CMS on its progress toward these 
recommendations through the initiatives it described.  We did not make any changes to 
the report based on CMSs comments.  The full text of CMSs comments is provided in 
Appendix A. 
 
   
CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680)         11 
  APPENDIX A 
Agency Comments 
DEPARTMENT OF HEALTH & HUMAN SERVICES  Centers for Medicare & Medicaid Services 
SEP3 D2015 	 200 Independence Avenue SW 
Washington, DC 20201 
To: 	 Daniel R. Levinson 
Inspector General 
Office ofthe Inspector General 
From: 	 Andrew M. Slavitt 
Acting Administrator 
Centers for Medicare & Medicaid Services 
Subject: 	 Billions in Contract Dollars Have Not Been Closed by CMS as Required (OEI
03-12-00680) 
The Centers for Medicare & Medicaid Services (CMS) appreciates the opportunity to review and 
comment on the Office of the Inspector General's (OIO) draft report. CMS is committed to 
providing effective management and oversight of contracts, thereby acting as a good steward of 
tax payer dollars. 
CMS spends over 7 billion a year in contracts and to facilitate the improved management of 
these contracts we have implemented several initiatives which focus on clear lines of authority, 
prioritization ofrequirements and deliverables, and metric-driven quality reviews. These include 
implementing a strong management structure, which focuses priorities and provides clear 
direction. In addition, CMS has issued formal guidance that lays out the roles and responsibilities 
for each member ofthe acquisition workforce community, and has established a standardized 
Contracting Officer's Representative (COR) Appointment Memorandum on each contract that 
will provide CORs, and their managers, with better guidance about their respective acquisition 
team roles and responsibilities. 
CMS takes its responsibility to protect taxpayer doUars seriously and had already prioritized 
dosing out contracts prior to the OIG's draft report. We have been accelerating the close out of 
overdue contracts but at the same time making sure we are spending sufficient time conducting 
close out audits so we can appropriately track recovery of any additional funds.  This additional 
time, while delaying the closing of contracts, is time well spent Since February 1, 2014, the date 
this OW draft teport data was based upon, OAGM closed 2,077 contracts with an obligated 
value of$1.3 bilHon and also de-obligated $29.95 million.  In October 2014, CMS implemented 
a goal ofclosing out approximately 20 percent or 2,250 of overdue contracts per year. To assist 
in close-outs, CMS put in place a cross-divisional task force that meets on a regular basis with 
executive oversight to ensure accountability, the speed of progress and share best practices. 
Additionally, CMS has begun implementing the Depru1ment of Treasury's reconunended Invoice 
Processing Platform (IPP) to automate the invoicing process.  The IPP is a secure, Web-based 
centralized service that more efficiently manages government invoicing from contract award 
CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEl-03-12-00680)  12   
CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680)         13 
  ACKNOWLEDGMENTS 
This report was prepared under the direction of Linda Ragone, Regional Inspector 
General for Evaluation and Inspections, in the Philadelphia regional office.    
Maria Schepise Johnson served as the team  leader for this study.  Other Office of 
Evaluation and Inspections staff from the Philadelphia regional office who conducted 
the study include Robert A. Vito and Russell Tisinger.  Central office staff who provided 
support include Althea Hosein, Scott Manley, and Lucia Fort.  
CMS Has Not Performed Required Closeouts of Contracts Worth Billions (OEI-03-12-00680)         14 
   
Office of Inspector General
http://oig.hhs.gov  
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95452, as  
amended, is  to protect the integrity of the Department of  Health and Human Services  
(HHS) programs, as  well  as the health  and welfare of individuals served by those programs.  
This statutory mission is carried  out through a nationwide network of audits, investigations,  
and inspections conducted by the following operating components: 
Office of Audit Services 
The Office  of  Audit Services  (OAS) provides auditing services  for HHS, either by  conducting  
audits  with its own audit resources or by  overseeing  audit work done by others.  Audits  
examine the performance of HHS programs and/or its grantees and contractors in carrying  
out their respective responsibilities and are intended  to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, abuse, and  
mismanagement and promote economy and efficiency  throughout  HHS. 
Office of Evaluation and Inspections 
The Office  of  Evaluation and Inspections (OEI)  conducts national evaluations to  provide 
HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  These evaluations focus on preventing fraud,  waste, or abuse  and promoting  
economy, efficiency, and effectiveness of departmental programs.  To promote impact, OEI 
reports also present practical recommendations for improving program operations.  
Office of Investigations 
The Office of Investigations (OI) conducts criminal, civil, and administrative investigations  
of fraud and misconduct  related to HHS programs, operations, and individuals.  With  
investigators working in all 50 States and the District of Columbia, OI  utilizes its resources 
by actively  coordinating with the Department  of Justice  and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to  criminal 
convictions, administrative sanctions,  and/or  civil monetary  penalties.  
Office of Counsel to the Inspector General 
The Office of Counsel to the  Inspector  General (OCIG) provides general legal services to 
OIG, rendering  advice and opinions on HHS programs and operations and  providing all  
legal support for OIGs  internal operations.  OCIG represents  OIG in all civil and 
administrative fraud and  abuse cases involving HHS programs, including False Claims Act, 
program exclusion, and civil monetary penalty cases.  In  connection with these cases, OCIG 
also negotiates and monitors corporate integrity agreements.  OCIG renders advisory 
opinions, issues compliance program  guidance, publishes fraud alerts, and provides other  
guidance  to  the health care industry concerning the anti-kickback statute and other  OIG  
enforcement authorities.