The Federal Government Lost Up to $521 Billion Annually to Fraud: GAO

That’s enough to employ a million people for seven years or purchase a million homes.

Federally funded, state-run programs are major targets, according to April 15 testimony from Robert Westbrooks, former federal inspector general. Westbrooks said problems can occur when states control the disbursement of federal funds because that can reduce accountability and incentives.

Based on data from fiscal years 2018 through 2022, the federal watchdog estimated that the federal government lost between $233 billion and $521 billion annually to fraud.

Here is what is known about the primary sources of financial drain.

Misuse of Pandemic Relief

Fraud risk increased significantly during the COVID-19 pandemic because the federal government had to distribute about $4.5 trillion in relief funds very quickly, said Seto J. Bagdoyan, director of forensic audits and investigative service.

An estimated $300 billion was lost to fraud in three pandemic relief programs over three years.

Fraud in Unemployment Insurance during the COVID-19 pandemic was estimated between $100 billion and $135 billion, about 11 percent to 15 percent of unemployment benefits paid during the national health emergency, according to the federal watchdog.

Fraud in the Paycheck Protection Program and the Economic Injury Disaster Loan program totaled about $200 billion, according to a 2024 staff report from the House Committee on Small Business. The report found that self-certification policies and a lack of administrative capacity created vulnerabilities that were easily exploited.

Additionally, these three programs disbursed roughly $79 billion in potentially fraudulent payments due to over 1.4 million potentially identity-stolen or invalid Social Security numbers, according to the Pandemic Response Accountability Committee estimate. These applications were approved even though the Social Security numbers were associated with the wrong names or birthdates, or belonged to people who had died.

Agencies could have prevented the theft of billions of dollars by verifying that applicant names matched Social Security numbers or by flagging suspicious IP addresses, according to the pandemic oversight committee. (More)