US government finances ‘unsustainable’ – auditors

As much as 7% of federal spending could be fraud, according to a new report

The US government could be losing between $233 billion and $521 billion to fraud each year, according to a report on a recent five-year period by the nonpartisan Government Accountability Office (GAO).

Issued this week, the study – the first of its kind – looked into the federal budget between fiscal years 2018 and 2022, spanning parts of the Trump and Biden administrations, and the beginning of the Covid-19 pandemic, which saw scammers target historic aid handouts.

The GAO estimated that fraud may have reached as high as 7% of federal spending, with the Washington Post noting that the highest spikes were “likely coinciding with the past abuse of coronavirus relief funds.”

The report called the US’ fiscal health “unsustainable” and called for major reforms to “reduce the loss of federal dollars and help improve the federal government’s fiscal outlook.”

“All federal programs and operations are at risk of fraud. Therefore, agencies need robust processes in place to prevent, detect, and respond to fraud,” the GAO said, noting that its analysis could not be used to predict future losses.

Last week, the White House and Senate Democrats unveiled new legislation aimed at cracking down on fraud in federal programs. Under the proposed legislation, about $675 million would reportedly be devoted toward fighting identity theft, targeting criminals who use information stolen from Americans to collect government aid.

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Lawmakers would also allocate more than half a billion dollars to help the Justice Department ramp up oversight of federal spending.

The White House Office of Management and Budget (OMB) has taken issue with the GAO report and its methodology, with Jason Miller, deputy director for management at OMB, pointing out that the figures were devised from a “simulation model” and “not based on analysis of estimated losses by individual federal programs.” 

The GAO said it had assessed different methods to estimate fraud and ultimately used a “well-established probabilistic method for estimating a range of outcomes under different assumptions and scenarios where there is uncertainty.”

It added that it collected data from multiple sources, including from cases sent for prosecution, information from the Office of Inspector General’s (OIG) semiannual report, as well as confirmed fraud data reports made to the OMB.