Fraud and Improper Payments

Fraud and improper payments are long-standing and significant problems in the federal government. While fraud and improper payments are related concepts, they don’t mean the same thing. Fraud is obtaining something of value through willful misrepresentation. Improper payments are payments that should not have been made or that were made in an incorrect amount. While all fraudulent payments are considered improper, not all improper payments are due to fraud. Also, fraud can involve benefits that do not result in direct financial loss to the government.

Reducing both fraud and improper payments is critical to safeguarding federal funds, ensuring that federal agencies execute their missions effectively, and making sure that the public maintains trust in the government.

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Note: This figure is intended to show the relationship between improper payments and fraud and is not to scale.

Estimating the amount of fraud and improper payments in federal programs has been challenging due to data and other limitations. However, the federal government could be losing between $233 billion and $521 billion annually to fraud. Additionally, federal agencies reported an estimated $236 billion in improper payments in FY 2023, and cumulative federal improper payment estimates have totaled about $2.7 trillion since FY 2003. 

There are a number of steps that Congress and federal agencies could take to help reduce fraud and improper payments.

For example: 

• Congressional requirements. Congress could reinstate the requirement that agencies report on their antifraud controls and fraud risk management efforts in their annual financial reports. It could also require that all new federal programs distributing more than $100 million in any one fiscal year provide more timely reports on improper payments. 
• Emergency preparedness. Federal agencies could better prepare for future emergencies like COVID-19, hurricanes, and wildfires by doing more to manage the risk of payment errors and fraud before emergencies occur. For instance, agencies could identify and assess risks, design procedures to verify program eligibility, monitor their effectiveness, and get information on payment errors and potential fraud.  
• Program errors. Agencies should continue to make progress reducing the number of errors in their programs—including by learning from each other. For instance, some agencies have improved the accountability of senior leaders for their programs. Others have used new technology to automate the payment process. 
• Ineligible recipients. Agencies should improve oversight to ensure that funds aren’t paid to ineligible recipients. For example, Medicaid should ensure that claims are not paid to ineligible medical providers, including those who have suspended or revoked medical licenses.
• Data collection. Agencies should improve their collection and use of data for preventing and detecting fraud. For example, grantmaking agencies can provide guidance to grantees and subrecipients on collecting complete and consistent data to better support eligibility determinations and fraud risk analysis.  
• Available resources. There are a number of resources that can help federal programs—including those administered by states—better prevent, detect, and respond to fraud and improper payments. These include A Framework for Managing Fraud Risks in Federal Programs, the Antifraud Resource, and A Framework for Managing Improper Payments in Emergency Assistance Programs. Waste and abuse are also related concepts that can help inform discussions about fraud and improper payments. 

If you suspect waste, fraud, or abuse of federal funds, you can report your concerns to GAO’s FraudNet.