Report Puts Known Federal Fraud at $521 Billion a Year

Fraud against federal programs is running as high as $521 billion a year, about 7 percent of everything Washington spends, according to a Foundation for Government Accountability report first detailed by The Center Square. The same report puts improper federal payments since 2003 at about $3 trillion.

“Only five federal agencies have bigger budgets than that,” said Liesel Crocker, the report’s author and a senior research fellow at FGA. “And that’s just the fraud we know about. Of more than 2,200 federal payment programs, only 64 are reviewed for improper payments each year.”

The $521 billion figure is an estimate built on a federal benchmark, not a stack of criminal convictions. Improper payments include paperwork errors as well as theft. FGA treated the $521 billion as the fraud share of that problem and said the unreviewed programs make the real number larger. The $3 trillion improper-payment total covers selected programs at 15 of 24 major agencies, not the whole government.

Crocker said the money moves through programs that share a design. Just five account for 72 percent of improper payments: Medicaid, food stamps, Medicare, the Earned Income Tax Credit, and a pandemic grant for shuttered concert venues. Those programs rely on self-attestation, hand eligibility to state and county offices, and push large volumes of money out fast. “Fraud shows up where the checks are easiest to get,” she said.

The sharpest food-stamp number comes from the states that agreed to be checked. In the 29 states that shared enrollee data with the U.S. Department of Agriculture, the department found 186,000 dead people on the rolls and 500,000 people collecting benefits in two states at once. Twenty-one states refused the match. Crocker named Minnesota as a particular concern. The report also flagged California, Illinois, Colorado, Maine, and New York for suspicious Medicaid and welfare payments and for resistance to federal data requests.

Food-stamp trafficking, the sale of benefits for cash or non-food items, is estimated at $960 million to $4.7 billion a year. Crocker used the top of that range. “Every dollar that goes to someone abusing the system is a dollar taken from the truly needy,” she said. She treated the cooperating-state results as a floor. “If this much turned up in the states that cooperated, we can only imagine what’s hiding in the states that refuse.”

The report credits the Trump administration’s antifraud push and says it is not enough. “The bottom line: Congress and states should build on President Trump’s efforts to crack down on fraud and corruption and save taxpayers billions,” it says. Attorneys general are prosecuting more than 8,000 fraud cases nationwide. FGA called that a small fraction of the loss. The Centers for Medicare and Medicaid Services has withheld $259 million in Medicaid funds from Minnesota and warned that another $2 billion could be held back. The Department of Health and Human Services has frozen some welfare and childcare payments in Minnesota, California, Illinois, Colorado, and New York pending compliance with antifraud rules.

FGA’s recommendations are operational. It wants the Office of Management and Budget to pull more agencies into fraud reviews, tie those reviews to the Treasury Department’s Do Not Pay system, and require programs to verify eligibility, score high-risk providers, and investigate allegations before paying them through.

A separate Government Accountability Office estimate, issued in late September, put annual tax fraud at $116 billion to $304 billion and said the IRS still has no agency-wide antifraud strategy. The two reports measure different streams. Together they describe a payment and collection system that audits a sliver of what it moves. The states that will not turn over food-stamp rolls are the open item.