Report: Fraud Costs Government Hundreds of Billions

The U.S. Government Accountability Office, a nonpartisan agency that reports to Congress, said in a release Tuesday that the federal government could lose $233 billion to $521 billion annually due to fraud.

The fraud estimates range from 3% to 7% of average federal spending, the GAO said. The GAO said U.S. fraud losses are in line with countries like the United Kingdom.

In its report, the GAO offered recommendations to the Office of Management and Budget (OMB) and Treasury on how to fix the problem:

• The OMB should develop guidance on the collection of Office of Inspector General data to support fraud estimation. The guidance should identify and establish consistent data elements and terminology for use across OIGs and include a timeline for implementation.
• The OMB should also develop guidance on the collection of data to support fraud estimation. The guidance should identify and establish consistent data elements and terminology for use across agencies; include a timeline for implementation and key milestones; and leverage existing data systems and processes.
• The Treasury, working with OMB, should establish an effort to evaluate and identify methods to expand government-wide fraud estimation to support fraud risk management. The departments should prioritize program areas at increased risk of fraud, be responsive to changes in the availability or quality of data and leverage data-analytics capabilities.

GAO said it did the study because when the government spent $40 trillion from fiscal years 2018 to 2022, there were no reliable estimates of fraud losses.

The study is not without its detractors. Jason Miller, deputy director for management at the OMB, told The Washington Post, the fraud estimate was “not based on analysis by individual federal programs,” but from a “simulation model.”

Miller said the study’s release would “create confusion and promote misleading generations that have no factual connection” to federal spending, according to the Post.