GAO Finds $5.4 Billion in Improper HHS Refugee Grants, Report Due Friday

What the Draft Audit Found

The Department of Health and Human Services improperly awarded roughly $5.4 billion in refugee resettlement and unaccompanied-minor shelter grants between fiscal 2023 and fiscal 2025, according to two congressional appropriators who reviewed a draft Government Accountability Office report. The 147-page audit, numbered GAO-26-104231 and titled Review of Unaccompanied Children and Refugee Resettlement Grants, Fiscal Years 2023-2025, is scheduled for public release on Jan. 30, the officials said.

GAO investigators examined $12.7 billion in Office of Refugee Resettlement spending across 47 grant recipients and roughly 1,200 case files before concluding that $5.4 billion should be classified as improper, the two congressional appropriators said. Of that amount, $1.2 billion went to nonprofit contractors that failed to maintain required federal registrations or were ruled ineligible after initial awards, the draft found. Another $890 million represents duplicative per-capita payments for the same children across separate shelter contracts, according to a GAO investigator familiar with the findings.

A separate $470 million in questioned costs involved facilities that state inspectors had cited for safety violations but continued to receive federal per diem, the report states. The draft also identifies $1.9 billion in unsupported costs where ORR could not produce complete time-and-attendance records or proof of services rendered, the GAO investigator said.

The audit team reviewed 31,400 invoices and interviewed 63 current and former ORR employees between March and September 2025, the GAO investigator said. The team also compared ORR's grant files with state licensing databases in Texas, California, New York, Florida, and Illinois, the congressional appropriators said.

The draft singles out two recipients for detailed scrutiny. Civic Horizon Group of Silver Spring, Maryland, received $142 million in emergency shelter grants despite an expired System for Award Management registration for 11 months, the report states. Southwest Minor Services of Tucson, Arizona, collected $211 million for facilities that Arizona health inspectors cited in 2024 for overcrowding and inadequate medical staffing, according to the same document.

The GAO investigator said the draft has been sent to the HHS inspector general, who has referred 14 matters involving potential fraud to the Justice Department for civil or criminal review. None of the referrals names individuals, but the document identifies the contractors and grant periods under scrutiny.

How the Money Flowed

The money moved through the Office of Refugee Resettlement, an HHS administration that disburses most grants through discretionary awards rather than competitive bidding, a structure Congress created to speed shelter placements during surges. The report found that ORR paid per-diem rates of $225 to $775 per child per day through the Treasury Department's Automated Standard Application for Payments system, the GAO investigator said. Because ORR classified the placements as emergency, it skipped standard pre-award financial reviews in fiscal 2023 and much of fiscal 2024.

Site visits conducted between Aug. 12 and Aug. 15, 2025, at seven shelters in Houston, Texas, and San Diego, California, found missing medical logs, incomplete background checks on staff, and per-child cost reports that did not match Treasury payment records, the draft states. In one instance, ORR continued payments to a Texas shelter operator for 43 days after the state revoked its child-care license, the GAO investigator said.

A budget analyst at the Office of Management and Budget said OMB flagged the HHS spending pattern in October 2025 and asked the department to prepare corrective action plans before the GAO audit's release. The analyst, who was not authorized to speak publicly, said HHS initially resisted clawback language in its November response and only agreed to a partial repayment schedule after a Dec. 18 meeting in Room 343 of the Eisenhower Executive Office Building.

Congressional staff were briefed Jan. 22 in Room HVC-304 of the Capitol Visitor Center. The House Appropriations Labor-HHS-Education Subcommittee has scheduled a hearing for Feb. 3, the two congressional appropriators said. The subcommittee expects to question HHS officials, including the principal deputy assistant secretary for administration, and to request updated contractor data by Feb. 7.

What Comes Next

The two appropriators said they will introduce reprogramming language in the fiscal 2027 spending bill to recover at least $2.1 billion of the questioned funds. HHS is preparing a formal management response that will be appended to the final report, the GAO investigator said. The department is expected to argue that most of the spending was lawful under emergency authorities and that it has already tightened contractor screening in the second half of 2025.

The Senate Homeland Security and Governmental Affairs Committee is also preparing a Feb. 6 roundtable with inspectors general from HHS, Education, and Homeland Security, according to a committee aide. The aide said the ORR findings are likely to fuel broader scrutiny of discretionary grant programs that grew rapidly after 2021.

The Office of Management and Budget is preparing a supplemental reprogramming request due Feb. 10 that would move $600 million out of ORR's shelter account and into pediatric health screenings, the OMB analyst said. If the $5.4 billion figure holds, the finding would rank among the largest improper-payment cases the GAO has reported for HHS in the past decade, congressional aides said.

Watch for the GAO report's release on Jan. 30, the Feb. 3 hearing, and any White House statement on the reprogramming request. The next 72 hours will determine whether the administration accepts the clawback plan or challenges the methodology, the two appropriators said.