Federal taxpayers are losing as much as $521 billion each year to fraud, according to a new report from the Foundation for Government Accountability (FGA). The report, authored by FGA senior research fellow Liesel Crocker, draws on federal estimates and highlights the significant scale of improper payments across government programs. Since 2003, improper payments by the federal government have totaled about $3 trillion, with only a small fraction of federal programs regularly reviewed for fraud, the report states.
The findings underscore growing concerns about the extent of fraud in federal spending. The report also points to resistance from some states to federal oversight, raising questions about accountability and the effectiveness of current safeguards in place to protect taxpayer dollars.
The FGA report identifies major welfare programsβincluding Medicaid, food stamps (the Supplemental Nutrition Assistance Program), Medicare, and the Earned Income Tax Creditβas being particularly vulnerable to fraudulent activity. According to Crocker, fraud now accounts for approximately 7% of all federal spending. She noted that only five federal agencies operate on larger budgets than the annual estimate for fraud losses. Of more than 2,200 federal payment programs, just 64 are reviewed for improper payments each year, according to the report.
States Resisting Oversight
The report singles out 21 states, including California, Illinois, Colorado, Maine, Minnesota, and New York, for refusing to cooperate with federal efforts to vet their food stamp programs for fraud. In contrast, the 29 states that did cooperate with the U.S. Department of Agriculture's review uncovered significant issues. These included 186,000 deceased individuals still listed as enrollees and half a million people collecting benefits in two states at once. Crocker identified Minnesota as a particular area of concern due to its lack of cooperation.
Crocker emphasized the scale of the problem, stating, "Fraud against federal programs now runs about $521 billion a year, or seven percent of everything Washington spends. Only five federal agencies have bigger budgets than that. And that's just the fraud we know about."
Food stamp trafficking alone is estimated to cost taxpayers as much as $4.7 billion annually, according to Crocker. She argued that every dollar lost to fraud is a dollar diverted from those truly in need. The FGA report described the more than 8,000 fraud cases currently being prosecuted by attorneys general nationwide as only a "small fraction" of the total fraud being perpetrated against federal programs.
Federal and State Responses
The FGA credited former President Donald Trumpβs "War on Fraud" and related anti-fraud initiatives for making progress in addressing the issue. However, the report asserts that more action is needed from both Congress and state governments to further crack down on fraud and corruption. The FGA urged lawmakers to build on these efforts and to strengthen oversight and enforcement mechanisms.
Crocker expressed optimism about recent federal actions, stating, "This is not hopeless. We can fix this. For 20 years, Washington never had a meaningful answer to rampant fraud. President Trump is finally treating stealing from the taxpayer like the crime it is. If this much turned up in the states that cooperated, we can only imagine what's hiding in the states that refuse."
The report recommended that the Office of Management and Budget encourage more agencies to vet for fraud, collaborate with the Treasury Department's Do Not Pay system, and require all programs to better verify eligibility, evaluate high-risk providers, and investigate fraud allegations. These steps, according to the FGA, could help reduce improper payments and strengthen the integrity of federal programs.
Calls for Broader Oversight
The FGA called on states that have resisted federal oversight to cooperate in efforts to end what it described as "widespread fraud." The report emphasized that improving verification processes and increasing collaboration between federal and state agencies could save taxpayers billions of dollars each year. According to the FGA, broader participation in federal anti-fraud reviews would help uncover additional cases of fraud and prevent future losses.
While the FGA and Crocker have strongly criticized states that do not participate in federal anti-fraud reviews, the report did not include responses from officials in those states or from agencies overseeing the targeted programs. The lack of comment from those states leaves open questions about their reasons for non-participation and what steps, if any, they are taking to address fraud within their own programs.
The FGA report concludes by urging both federal and state policymakers to prioritize anti-fraud efforts, expand oversight, and ensure that taxpayer dollars are directed to those who truly need assistance. The organization maintains that with stronger safeguards and greater cooperation, the scale of fraud can be significantly reduced, benefiting both taxpayers and program beneficiaries.
