GAO Draft Finds $1.2 Billion in Improper Payments Tied to Shared Software Contract

The Draft Finding

December 23, 2025, Washington - A forthcoming Government Accountability Office report identifies $1.2 billion in improper vendor payments across three federal agencies, tracing the errors to an $890 million shared financial management software contract, according to a GAO investigator familiar with the draft and two congressional aides briefed on the findings. The report, scheduled for public release on December 26, found that the system double-paid invoices, failed to flag duplicate transactions, and processed payments to inactive vendor accounts for more than 18 months.

The draft report examines a financial system installed at the Department of Health and Human Services, the Department of Homeland Security, and the Department of Labor between 2022 and 2024, the sources said. The system was designed to replace aging accounting software and consolidate vendor payment processing across the three agencies, which collectively process more than $400 billion in vendor payments each year. Auditors found that interface errors between the new platform and each agency's legacy databases allowed duplicate and erroneous payments to go undetected.

The $890 million contract was awarded to a Virginia-based technology firm in March 2022, with deployment scheduled in phases through September 2024, according to contracting records reviewed by The Alamo Post. The draft report states that the firm received $73 million in performance bonuses despite missing three major milestones and delivering a system that failed independent operational testing in June 2024. The testing failure was not publicly disclosed at the time, the GAO investigator said.

The draft report identifies 14 specific software defects that contributed to the payment errors, including a flaw that allowed the same invoice number to be processed multiple times if it was entered with different capitalization. Another defect caused the system to ignore expiration dates on vendor registrations, allowing payments to companies whose contracts had ended.

Breakdown of the Losses

The $1.2 billion in improper payments includes $487 million at HHS, $412 million at DHS, and $301 million at Labor, according to the GAO investigator. The draft report found that $856 million of the total involved duplicate payments, in which the same invoice was processed twice because the new system did not reconcile payments against the agencies' older vendor ledgers. Another $267 million went to vendors whose contracts had expired or whose tax identification numbers had been flagged as inactive.

Auditors also identified $77 million in payments lacking proper documentation, including missing purchase orders or unsigned receiving reports, the investigator said. The draft report includes a sample of 400 transactions reviewed by GAO auditors, of which 312 were found to have deficiencies. The sample was drawn from payments processed between January 2024 and September 2025. Extrapolating from the sample, auditors estimated total improper payments during the review period at $1.18 billion.

The GAO investigator said the draft recommends that the three agencies suspend new deployments of the system until the vendor fixes reconciliation and validation controls. The draft also recommends that the agencies recover the duplicate payments, though the investigator noted that recovery could take years because some vendors are no longer in business and others have disputed the overpayments. The investigator said GAO has referred three matters to agency inspectors general for possible fraud investigation.

Contractor and Agency Response

The Virginia-based contractor, which has offices in Reston and Fairfax, has denied responsibility for the payment errors in written responses to GAO auditors, according to a copy of the response included in the draft report. The company attributed the duplicate payments to agencies' failure to update legacy data before connecting to the new platform and said its software functioned according to the technical specifications provided by the government. The contractor also argued that the agencies waived user-acceptance testing requirements in 2023 to meet deployment deadlines.

A spokesperson for the contractor did not respond to requests for comment on December 22 and December 23. A budget analyst at the Office of Management and Budget, speaking on condition of anonymity because the report is not yet public, said OMB is reviewing the draft findings and expects to issue management recommendations by January 6, 2026. The analyst said OMB has directed the three agencies to halt further performance bonuses and to prepare recovery plans by January 15.

The three agencies have also submitted draft responses to GAO, the investigator said. HHS acknowledged that reconciliation errors occurred but said it has recovered $34 million so far. DHS disputed the $412 million figure, arguing that some of the flagged payments were legitimate adjustments rather than duplicates. Labor said it has implemented additional controls and reduced error rates since August 2025. All three agencies said they are working with the contractor to resolve remaining defects.

Congressional Reaction and Next Steps

Two congressional appropriators, one from each party, said the findings are likely to trigger hearings when Congress returns in January. The House Appropriations Committee's subcommittee on financial services and general government has tentatively scheduled a hearing for January 22, 2026, according to one of the appropriators. The Senate Homeland Security and Governmental Affairs Committee is also preparing a hearing for late January, the second appropriator said. Both lawmakers requested anonymity because the report remains embargoed.

The draft report is expected to be released publicly on December 26, with embargoed copies distributed to congressional offices and select reporters on December 24, according to one congressional aide. The GAO investigator said the report has been circulated to agency heads for comment under standard GAO procedures and that final edits are being made this week. Congressional staff expect to receive embargoed copies by close of business on December 24. One aide said the report may be accompanied by a separate fact sheet from the three agencies disputing some of GAO's methodology.

Major news outlets, including the Wall Street Journal and the Washington Post, are expected to report the findings once the report is published on December 26, the congressional aides said. The Alamo Post obtained the draft conclusions ahead of the public release.