04/19/2024 | News release | Distributed by Public on 04/19/2024 09:25
The Government Accountability Office (GAO), the federal government's chief auditor and financial watchdog, published a new reportdetailing a first-ever estimate of government-wide fraud. According to GAO, between fiscal years 2018 and 2022 (inclusive), the federal government experienced direct financial losses attributable to fraud between $233 billion and $521 billion per year. The federal government obligated approximately $40 trillion dollars over this period which suggests a fraud rate of 3-7 percent.
Although GAO regularly publishes data on improper payments for specific high-risk federal programs (e.g. unemployment insurance, or the Earned Income Tax Credit) this is the first attempt to measure government-wide fraud.
What Is Fraud?
According to GAO, "fraud can be characterized by making material false statements of fact based on actual knowledge, deliberate ignorance, or reckless disregard of falsity" (footnote 1, p1). In this way, GAO differentiates fraud from improper payments. The latter are disbursements that should not have been made (e.g., the recipient was ineligible, but funds were disbursed anyway) or were made in the incorrect amount (the recipient received the wrong amount). Some improper payments can be attributable to fraud, of course, but some can also be attributable to mistakes. Fraud, however, involves willful misrepresentation. The two are not the same.
Why the Wide Range?
The GAO estimated that fraudulent spending totaled between $233 billion and $521 billion per year over the study period-a fairly wide range. This can be attributed to two factors:
Limitations of GAO's Findings
Because this is a first-of-its-kind approach to modeling government-wide fraud, GAO was clear to caveat its findings:
Why This Study Matters
Federal government budget deficits and accumulated debt are dangerously high. Projections published by the GAO, the Congressional Budget Office (CBO), the Office of Management and Budget (OMB), the Department of the Treasury, and a multitude of good-government watchdogs all show that current fiscal policy is unsustainable over the long term. Reducing future fraud is one way to help improve the nation's fiscal future-and the GAO report is a step in the right direction. That said, those seeking to put the budget on a sustainable path must not assume that reducing, or even eliminating fraud will be sufficient by itself to get the job done. As noted above, the high end of the estimated range of fraud is just 7 percent-not nearly large enough to change our current fiscal trajectory. The unsustainable path of current fiscal policy emanates from a fundamental mismatch between enacted spending and revenues, not from fraudulent claims on that spending.