Title: How GAO is Fighting Fraud and Reducing Improper Payments in Government Spending Description: The federal government loses hundreds of billions of dollars to fraud each year and millions more to payment errors—also known as improper payments. GAO helps federal understand the causes of these losses and works with them to reduce risks. We’ll learn more about this issue and GAO’s efforts from our experts Rebecca Shea and Heather Dunahoo. Released: June 2026 Related work: https://www.gao.gov/fraud-improper-payments {Music} [Holly Hobbs:] This is GAO's Watchdog Report, your source for fact-based, nonpartisan news and information from the U.S. Government Accountability Office—I’m Holly Hobbs. The federal government loses hundreds of billions of dollars to fraud each year and millions more to payment errors—also known as improper payments. GAO helps federal agencies understand the causes of these losses and works with them to reduce risks. On this special episode of the Watchdog Report—we’ll talk with GAO’s Rebecca Shea and Heather Dunahoo about how GAO is helping to reduce fraud and improper payments in government spending. Ladies, thanks for joining us. [Rebecca Shea:] Thanks for having us. [Heather Dunahoo:] Thanks. [Holly Hobbs:] Maybe we can start with—how big of an issue is fraud and improper payments in the federal government? [Rebecca Shea:] Well, I'll start with fraud. Obviously, fraud is a risk to any big business in any sector. Anywhere you've got humans and something that humans want, you're gonna have fraud risks. And it can affect any program. It can affect any agency. It can affect any state. So, it can happen anywhere. But there's some key things that make the U.S. government a target. And those are related to three different areas of the fraud triangle—the incentive to commit fraud, rationalization, and opportunity. There's that joke about why do people rob banks? It's because the money's there, right? And the same thing is true on the incentive side with the federal government. It's trillions of dollars. So, a very attractive target. On the rationalization side—for everyday opportunists seeking to commit fraud, they may think, ‘Oh, you know, nobody's harmed by this’ or ‘everybody's doing it.’ And then you've also got organized criminal groups who are targeting the federal government, and it's really part of their business model. That's kind of their rationalization. It's just another line of crime for them. And then on the opportunity side there are, like, three key things here to think about—the federal government, the way it administers many of its programs, is decentralized. Funds flow from the federal agency to state agencies to localities, and so forth. And at every single point that those funds flow, you've got opportunities for fraud. So that decentralized nature. And then the last thing I'll mention is just the sheer volume of transactions that the federal government engages in every day. It's just, again, lots of opportunity for fraud to occur. [Holly Hobbs:] And Heather, what about improper payments? [Heather Dunahoo:] Well, we just reported on fiscal year '25 improper payments, and that came to $186 billion, which is a pretty big number. We've been looking at improper payments for decades. And since 2003, it's been about $3 trillion in improper payments. [Holly Hobbs:] I want to make sure I understand the difference between fraud and improper payments. Can you give an example of each and how they're different? [Rebecca Shea:] So the definition of fraud involves willful misrepresentation. So, the intent piece is really important there. Improper payments, it's more on the error side. Can involve fraud. But that's not necessarily what they're looking for when they're doing an improper payment review. And I'll give you an example with documentation. So, in an improper payment review, they may be looking to see that there is documentation to support a payment. And if that documentation is there and if it's got the proper signatures, if it's got, proper codes—thinking about this in the Medicare and Medicaid space, right—then it will be marked as a proper payment. Now, what they're not looking for is whether or not that, signature was falsified or whether that document itself is completely falsified. That's the fraud piece. You know, something could just be a simple error. That document isn't there. The signature was missing. It's all appropriate, but it's just marked as an improper payment even though it's appropriate. [Holly Hobbs:] GAO has been looking at fraud and improper payments for years and years, and we do dozens of reports on them every year. Is it getting better? [Heather Dunahoo:] On the improper payment side, no, I wouldn't say it is getting better. So, for instance, this year it went up by $24 billion. And that was because some new programs reported that hadn't reported before. But in prior years it's gone down. For example, between 2023 and 2024, improper payments dropped about $64 million. So that's great. But a lot of that had to do with pandemic programs that are winding down. What that does mean is we're back to pre-pandemic improper payment levels. [Rebecca Shea:] Heather just described this process that they have yearly for tracking trends in improper payments. There is no such, methodology for estimating fraud. However, we did take a first step in that regard. In 2024, we issued our first of its kind estimate of fraud in the federal government. Now, that's not a process where we can determine trends from. But in that estimate, we looked at fraud-specific data from 2018 to 2022. Thinking about that time frame, that's pre-pandemic, pandemic, and post-pandemic. So, a real variety of different risk environments. And then based on that information we estimated fraud to range between $233 to $521 billion dollars annually. Now in normal operations, we would expect fraud to be somewhere on that lower end of the range. But in emergency environments, like we saw in the pandemic, we would expect fraud to be somewhere on the higher end of that range. And it's a, you know, large amount of money. So context is really helpful here when you're talking about what the scope of the problem is. When we look at that range in relation to federal obligations it's 3 to 7 percent of federal obligations. So a lot of money but, also, it's clear that the vast majority of federal funds are not lost, to fraud. But it is a significant problem. We have a duty of care to address it. [Holly Hobbs:] Why did we do a fraud estimate? [Rebecca Shea:] Well, we actually got this idea from the National Audit Office of the United Kingdom. Several years before we did our estimate, they developed their estimate of fraud loss in the UK government system. And from that initial estimate that they developed, the central government created an entity to centralize and address fraud risk. They created an entire profession for fraud risk management and fraud standardizations around that. Ministerial progress and legislation to address it. So, they really, from that single estimate, were able to drive a lot of progress in the UK for managing fraud risk. And we thought, ‘Well, you know, this really worked out well for them. Let's see if we can do it.’ And so that was what drove a lot of our interest in this. [Holly Hobbs:] Heather, we have a fraud estimate, but how do we know how much improper payments there are? [Heather Dunahoo:] Great question. So, there is a process established by Congress. It's a law that requires the executive branch agencies to estimate improper payments. A couple steps. Every three years, agencies are required to do a risk assessment on their bigger programs. Based on that risk assessment, if they think they're gonna have significant improper payments, they're required to estimate those improper payments. And that is a statistical sample. They do that sample. They pretty much look through the payment again to make sure the documentation is there. It's supported. They want to know if the payment is the right amount and to the right person. And improper payments can also capture underpayments. So, I think we always think about them as overpayments. But a payment that wasn't made in the right amount, either too high or too low, would be captured as an improper payment. And then they report all of that information in their financial reports. [Holly Hobbs:] So GAO is estimating how much fraud there is, how many improper payments there are. Is that all we're doing? Just pointing it out? [Rebecca Shea:] Three key things that we do to help agencies address this problem. At a high level, we conduct our audits where we identify recommendations for improvement. We provide standards and guidance and then also tools and resources to help agencies. So with the audits, you know, for example, we'll take a look at how the agency is managing its fraud risks. We'll look to see whether they're in alignment with leading practices. Do they know what their inherent risks are? What controls do they have to address them? How are they figuring out if they're working and adapting? So that's one area—the audits. Another area is standards and guides. So, we obviously issued the fraud risk framework, almost 10 years ago now, to help lay out the way that agencies should manage fraud risk. And then lastly, we also have developed a number of different resources that will help agencies. Key among those is our anti-fraud resource, the website that helps agencies understand and combat fraud. And it's got over 200 cases in there of civil and criminal fraud that if agencies are wondering about, well, ‘What does fraud look like in my program’ or ‘how could it occur?’ they can take a look at some of these cases to get an idea of that. There's a compilation of a lot of different resources within that that can help them figure out different red flags and different guides to help them address fraud. [Holly Hobbs:] So that's my next question, how would an agency know if they're doing a good job? [Heather Dunahoo:] I'll start maybe on improper payments. So a couple of things happen. They do assess programs year-over-year so they can see sort of a bottom-line dollar impact. They're also supposed to develop corrective action plans. And you can look back, are they making progress on those corrective action plans which look at what was the cause of the improper payment, right? Was there documentation missing? Do they need a new system, in order to be able to get better data? So for improper payments, it's revisiting the program year-over-year to see if there's been improvement and if that plan that they had developed is actually working. [Rebecca Shea:] Right, for fraud we recently issued, earlier this year, a guide to help agencies evaluate how well they're doing and to be able to adapt their approach to make sure they're doing it as efficiently and effectively as possible. So in the guide we provide a variety of examples of how agencies have examined the effectiveness of their fraud risk management approaches. Everything from looking at your culture to how well have you identified and assessed your fraud risk to the effectiveness of your internal controls for managing the risks that you've identified. And one of the key things that we also highlight in there are different ways to assess the return on investment for your fraud risk management activities. And we think it's really important to help agencies, not just know how effective their approaches are and how cost effective they are, but we think it's also helpful for being able to argue for additional resources, right? You know, if you're able to say, we've spent this much on a fraud risk activity but the return on that investment in preventing fraud has been five times, however many times, more than that original investment. I think that's very compelling. [Heather Dunahoo:] I just want to add a point about prevention for both fraud and improper payments. It's really important to prevent them. It's much more cost effective versus trying to find that money and get it back later. [Holly Hobbs:] So, GAO has all these efforts. Do we know if we've made an impact? [Heather Dunahoo:] I'll maybe start on a couple of improper payment examples. So, we make recommendations to agencies. One of our recommendations was to CMS, to the Medicare Advantage program, to look at some of their programs that had high improper payments and revisit how they reviewed those. That one saved a couple hundred million dollars. We also make matters to Congress to consider. When there's a bigger program challenge than just one program, or a bigger issue than just one program can fix, sometimes Congress needs to step in. And in this instance, we said to Congress, you should consider giving the Death Master File—which is a list of everybody who's died in the United States—to Treasury to help prevent improper payments to those who have passed away. That happened in a pilot project and Treasury estimated about $110 million dollars in savings in one year from having access to that data. So, I think those are a couple of good examples. [Rebecca Shea:] Yeah. And I'd say, certainly through our audits, also, we've seen progress. You know since we issued the fraud risk framework back in 2015, we've made, oh, I'm gonna say roughly 150 different recommendations to agencies to do things in alignment with the framework like designating a centralized entity to manage fraud risk or conducting a fraud risk assessment so that they know what their risks are. And roughly 60% of those recommendations have been closed to date. So definitely progress on that front as well. [Holly Hobbs:] What does Congress think of our work? [Heather Dunahoo:] Well, I'll say they keep asking us to testify and that's great because that demonstrates the real interest in addressing improper payments and fraud. And it gives GAO the opportunity to talk about its work. But then also some new and emerging technology. Recently, there's been testimony on AI, both challenges and opportunities for using AI to fight improper payments and fraud. [Rebecca Shea:] Yeah. And I'll also mention, obviously, Congress's job is developing the laws and they rely on us for technical assistance. You know, we've got a lot of insights that we can provide from our audit work and the guides and resources that we provide. We provide those also to Congress as they’re thinking about provisions in legislation to combat fraud. [Holly Hobbs:] Do we have any ongoing or upcoming work that you can tell us about? [Heather Dunahoo:] We have lots of work going on right now, of course. There's, again, a lot of interest from Congress. And so, you know, we will continue to do our audits, provide technical assistance, evaluation in a number of areas—both at the federal level, but at state administered programs that are federally funded. And we'll also continue to be putting out guidance and tools that agencies can use to help prevent and detect improper payments and fraud going forward. But we've really been giving a closer look to how risks such as cyber, fraud, and improper payments come together and how we want to incorporate that into our work. [Holly Hobbs:] Ladies, thank you so much for your time. {Music} [Heather Dunahoo:] Thank you. [Rebecca Shea:] Thank you. [Holly Hobbs:] And thank you for listening to the Watchdog Report. To hear more podcasts, subscribe to us on Apple Podcasts, Spotify, or wherever you listen. And make sure to leave a rating and review to let others know about the work we’re doing. For more from the congressional watchdog, the U.S. Government Accountability Office, visit us at GAO.gov.