The federal government is not the most effective steward of the taxpayer’s money, and there have been myriad investigations and reports about waste, fraud, abuse, and mismanagement. But until the Government Accountability Office released its April 16 report, “Fraud Risk Management,” there had never been a comprehensive, government-wide review of fraud since the nation’s founding. No private entity could survive 248 years without knowing how much fraud affects its operations.
The report examined instances of fraud between fiscal years 2018 and 2022 and concluded that “the federal government could lose between $233 billion and $521 billion annually to fraud.” The most conservative estimate of $233 billion in fraudulent payments per year means fraudsters stole at least $1.165 trillion from taxpayers over the five-year period studied. According to GAO Forensic Audits and Investigative Service Director Rebecca Shea, “the top of our range is greater than the budget for all but the top five agencies and the bottom of our range is larger than the ninth-largest federal agency.”
The Fraud Reduction and Data Analytics Act of 2015 requires the Office of Management and Budget “to establish guidelines for federal agencies … to identify and assess fraud risks and to design and implement antifraud control activities.” However, when asked on GAO’s Watchdog Report podcast about how well agencies are following the law, Shea stated that insufficient progress has been made, and “it became really apparent with the significant fraud that we saw in some of the pandemic programs.”
She elaborated, “There are known fraud risks associated with increased spending and quick disbursements,” such as with “the natural disasters that we’ve had, and the financial crisis, and then most recently the pandemic program spending.”
“This emergency spending concept appears to be,” she said, “an enduring feature of federal budgets.” Such emergency spending tends to evade the scrutiny of the regular budgeting process, providing a veritable gold mine for fraudsters.
Indeed, the GAO report found “between $100 million and $135 million … in fraudulent unemployment insurance payments … between April 2020 and May 2023,” as well as “$200 billion in potentially fraudulent pandemic related business loans” from the Small Business Administration as of May 2023. GAO also reported an additional $4.41 billion to $7.31 billion of confirmed fraud identified by OMB for each of the five years of the study, and $6.6 billion to $19.7 billion annually identified by the Council of the Inspectors General on Integrity and Efficiency.
As Shea said, and anyone who runs a business would agree, it is “much more cost effective” to prevent “fraud upfront, rather than trying to chase it down and recover funds that have already gone out.” While she was referring to government spending in general, the problem was exacerbated by the push to get COVID-19 relief funds out as quickly as possible and the failure of several agencies to use existing and easily accessible anti-fraud tools. Ensuring that taxpayers’ money only goes to those who are eligible for a program would be a significant factor in reducing fraud across the federal government.
The GAO report provided not only alarming findings but also recommendations to help prevent fraud, including getting the OMB director to work with the treasury secretary to develop guidance on fraud estimation for every federal executive agency using consistent terminology and implementation milestones across the executive branch, prioritizing those programs facing an increased risk of fraud and having the CIGIE develop guidance on fraud data collection by inspectors general on a systematic basis rather than relying on infrequent ad hoc reports.
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Among steps that should be taken by Congress, the Recovery Audit Contractor program should be reinstituted and strengthened across all federal agencies, and the GAO or the Congressional Research Service should conduct an annual review of the effectiveness of emergency spending. These reforms would provide some assurance that tax dollars find their way to their intended recipients.
The GAO report should inspire greater action to prevent fraud. Otherwise, taxpayers’ money will continue to be thrown away, and while that is unacceptable at any time, it is especially galling when the budget deficit is expected to average $2 trillion annually over the next 10 years.
Alec Mena is a state government affairs associate for Citizens Against Government Waste.
