Federal Government Loses Billions Annually to Fraud, GAO Report Reveals

Federal Government Loses Hundreds of Billions Annually to Fraud and Improper Payments

The federal government is hemorrhaging between $233 billion and $521 billion annually due to fraud, according to a sobering new report from the Government Accountability Office (GAO). The assessment, which analyzed data from fiscal years 2018 through 2022, also revealed that improper payments—funds incorrectly disbursed or paid in wrong amounts—have cost taxpayers approximately $2.8 trillion since 2003.

In fiscal year 2024 alone, the report identified $162 billion in improper payments across 68 federal programs. Even more concerning, 75% of these losses were concentrated in just five program areas: Medicare, Medicaid, Supplemental Nutrition Assistance Program (SNAP) benefits, Earned Income Tax Credits, and the Restaurant Revitalization Fund.

Medicare emerged as the single largest contributor to the problem, accounting for 34% of all improper payments. The healthcare program, which serves approximately 65 million Americans, continues to struggle with payment integrity issues despite numerous reform attempts over the years.

These staggering figures come at a time when the national debt has surpassed $34 trillion, intensifying scrutiny of government spending efficiency. Budget watchdogs have long argued that addressing improper payments could significantly reduce fiscal pressure without cutting essential services.

While artificial intelligence has been touted as a potential solution to combat fraud and improper payments, the GAO cautions that technology alone cannot fix the problem. The report emphasizes that effective AI implementation requires “solid, reliable data and a human in the loop to ensure data reliability and appropriate application of the technology.” Without these safeguards, the GAO warns that AI could potentially worsen errors and lead to poor decision-making.

The report also highlights more straightforward measures that could yield immediate benefits. One key recommendation urges Congress to permanently require the Social Security Administration to share comprehensive death data with the Treasury Department’s “Do Not Pay” system. This simple step would prevent millions in payments to deceased individuals—a persistent problem that has plagued federal programs for decades.

“This isn’t just an accounting issue—it’s about accountability to taxpayers,” said Robert Shea, former associate director at the Office of Management and Budget. “When the government can’t properly track nearly half a trillion dollars, it erodes public trust and diverts resources from those who genuinely need assistance.”

The five programs identified as major sources of improper payments serve different vulnerable populations. Medicare and Medicaid provide healthcare coverage to elderly, disabled, and low-income Americans. SNAP helps food-insecure households, while the Earned Income Tax Credit supports low-to-moderate income working individuals. The Restaurant Revitalization Fund was established during the COVID-19 pandemic to assist struggling food service businesses.

Government watchdogs have consistently identified several factors contributing to improper payments, including complex program requirements, inadequate verification procedures, and outdated information technology systems. Many federal agencies operate with legacy systems that are decades old and lack modern fraud detection capabilities.

The GAO report comes as Congress debates further spending measures and debt ceiling increases. Fiscal hawks are likely to point to these findings as evidence that the government should address existing inefficiencies before approving new expenditures.

Despite bipartisan agreement on the need to address improper payments, solutions have been slow to materialize. The Payment Integrity Information Act of 2019 strengthened requirements for agencies to identify and reduce improper payments, but implementation has been inconsistent across the federal government.

As federal agencies continue to grapple with this persistent challenge, the GAO’s recommendations offer a roadmap for improvement—combining technological innovation with common-sense reforms to protect taxpayer dollars from waste, fraud, and abuse.