An agency that might have to manage any big new federal health programs created by Congress is having trouble monitoring existing contracts, U.S. Government Accountability Office officials report.

Kay Daly, a GAO director, summarizes the GAO’s findings in a new report on contracting at the Centers for Medicare and Medicaid Services prepared for members of Congress.

The GAO found in 2007 that CMS had a hard time administering the contracts awarded in connection with efforts to start the Medicare Part D prescription drug program and other programs created by the Medicare Prescription Drug, Improvement and Modernization Act of 2007.

CMS is still in the process of converting some of its contracts, such as Medicare claims administration contracts, over to the standard Federal Acquisition Regulation system, but CMS continues to have difficulty with the contracts that do come under FAR, Daly writes in the GAO report.

GAO officials came up with a list of 11 key internal control procedures and looked at how well the procedures were implemented in connection with 102 FAR-base contracts that CMS awarded in 2008.

“We found pervasive deficiencies in internal control over contracting and payments to contractors,” Daly writes. “The internal control deficiencies occurred throughout the contracting process, that is both pre- and post-award, and increase the risk of improper payments or waste”

In some cases, agencies did not have procedures in implace to ensure that FAR requirements were being met, and, in other cases, CMS did not do enough to make sure that existing policies were implemented, or that efforts to implement the policies were properly documented, Daly writes.

“These internal control deficiencies are a manifestation of CMS’s weak overall control environment,” Daly writes.

GAO officials estimate that about 37% of FAR-based contract actions made by CMS in fiscal year 2008 contained 3 or more instances in which a key control was not adequately implemented, Daly writes.

“The high percentage of deficiencies indicates a serious failure of control procedures over FAR-based acquisitions,” Daly writes.

Andrea Palm, an acting assistant secretary in the U.S. Department of Health and Human Services, CMS’s parent department, has written a response disagreeing with many of the GAO’s findings.

HHS believes, for example, that CMS has set adequate standards for contractor invoices, and that it has developed policies and criteria for preaward contract acitivities, Palm writes.

In 2007, CMS awarded some contracts non-competitively, but only because Congress had given it so little time to implement some provisions of the Medicare prescription drug act, Palm writes.

CMS also has taken active steps to investigate and recover questionable payments, Palm writes.