HHS has unveiled a department-wide initiative to pursue states and grantees that have repeatedly failed to address deficiencies flagged in federally required audits, with consequences that could include losing access to federal funding across programs that include Medicaid.
The initiative, called AERO (Audit Enforcement and Risk Oversight), uses “next-generation AI analytical tools” to scan at least five years of audit history across all 50 states, the agency said May 21. The Wall Street Journal reported the tool was built in part using ChatGPT. HHS said it sent letters to all 50 state governors and treasurers putting them “on notice” of the new initiative.
Gustav Chiarello, HHS assistant secretary for financial resources, is leading the effort. He estimated the department has between $100 billion and $200 billion in wasteful or fraudulent spending annually, according to the WSJ. The letters to states did not include a deadline for corrective action or a timeline for when HHS might begin withholding funds.
The WSJ also reported the initiative grew out of Mr. Chiarello’s review of child care fraud in Minnesota, and that HHS is scrutinizing funding that flows through major universities to subgrantees. While Medicare operates under a separate audit framework, Mr. Chiarello told the outlet that HHS plans to expand oversight there as the program develops.
HHS said that early findings show some audit deficiencies have gone unaddressed for five or more years, and hundreds of grantees have not submitted required audits, some delinquent by more than two years. Federal law requires any state, local government, nonprofit or higher education institution spending $1 million or more in federal funds annually to file audits. Potential enforcement actions include temporarily withholding payments, disallowing costs, suspending or terminating awards, and initiating debarment proceedings.
AERO is the latest development in a broad federal fraud enforcement push that has accelerated in the first half of this year, including Medicaid funding deferrals to Minnesota and California, Medicare enrollment freezes, and a requirement that all 50 states audit their Medicaid providers.
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