Key Takeaways
- A federal review found that the National Institutes of Health (NIH) inconsistently applied required safeguards for Other Transactions (OTs), a high-risk funding mechanism increasingly used for rapid or innovative research.
- Twelve of 15 sampled OTs lacked adequate justification for using this mechanism, and most showed minimal risk management oversight.
- The Office of Inspector General (OIG) urged NIH to strengthen internal controls, improve justification processes, and evaluate the benefits of OTs as funding continues to grow.
A new report from the Office of Inspector General (OIG) warns that gaps in NIH oversight have heightened fraud, waste, and abuse risks across its Other Transaction (OT) awards. The findings come amid a rapid expansion of OT use—from under $900 million in 2020 to $1.9 billion in 2024—highlighting the need for stronger governance within this flexible but higher-risk funding mechanism.
OIG Review Identifies Systemic Weaknesses in NIH OT Oversight
OTs were established to support urgent, high-impact, or cutting-edge public health research, offering fewer requirements than traditional grants or contracts. This flexibility is designed to attract non-traditional research partners and enable swift negotiations, including around intellectual property. However, the reduced administrative structure also increases exposure to financial and operational risks.
In its review, OIG examined 15 OTs and found deficiencies in every single award. For 12 of these transactions, NIH staff did not fully justify the use of OTs as required by statute and policy. Documentation frequently failed to explain why traditional, lower-risk mechanisms could not achieve the intended research goals—an essential criterion for OT approval.
Risk management practices were also inadequate. Twelve OTs showed only minimal assessment of recipient-specific or project-specific risks, despite NIH policy emphasizing risk mitigation for these inherently higher-risk awards. Risk assessments are critical for preventing misuse of funds and ensuring recipients can manage the flexibility granted by OTs.
Additionally, 3 of 7 NIH Institutes, Centers, and Offices (ICOs) reviewed lacked required internal control policies for OTs. Without these controls, ICOs face heightened exposure to mismanagement and potential fraud. Even as NIH expands its OT portfolio, few ICOs reported evaluating the benefits of OT funding—an activity encouraged by NIH but inconsistently executed.
Implications for Managed Care and Public Health Research
For managed care professionals, the integrity of NIH’s research funding mechanisms directly influences the evidence base underpinning clinical guidelines, innovation pipelines, and population health strategies. Weak oversight of OTs—especially those supporting urgent or unconventional research—could delay discovery, undermine research quality, or divert resources away from high-impact public health initiatives.
Improved justification processes help ensure OTs are used only when their flexibility is essential, safeguarding taxpayer funds and fostering research that supports long-term system efficiency. Enhanced risk management and internal controls can reduce downstream disruptions, such as project delays or compromised study outputs, that could ultimately affect payer decision-making and care delivery.
NIH’s concurrence with all OIG recommendations suggests forthcoming policy and procedural improvements. Strengthening oversight will help ensure that the fast-growing OT portfolio remains aligned with public health priorities and accountable stewardship practices.
Conclusion
As NIH’s investment in OTs continues to rise, the OIG report underscores an urgent need for stronger oversight and clearer justification. Implementing the recommended safeguards will be critical to protecting federal research dollars and supporting reliable, high-quality scientific progress.
Reference
Gaps in NIH's oversight put millions in funding for other transactions at greater risk of fraud, waste, or abuse. US Department of Health and Human Services, Office of Inspector General. Published November 26, 2025. Accessed November 26, 2025. https://oig.hhs.gov/reports/all/2025/gaps-in-nihs-oversight-put-millions-in-funding-for-other-transactions-at-greater-risk-of-fraud-waste-or-abuse/?hero=nih-gaps
