A federal watchdog estimated that the government lost between $233 billion and $521 billion annually to fraud.
The federal government lost up to half a trillion dollars to fraud each year over a five-year period, according to an April 15 report from the Government Accountability Office.
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 ReliefFraud 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.
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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.
Stolen BenefitsPrograms that provide food, housing, and health care are considered “big, soft targets” for fraudsters because they are large and often have weak controls, Westbrooks testified before the House of Representatives.
Among a total of 937 government benefit fraud convictions in fiscal year 2024, more than 70 percent of offenders had little to no prior criminal history, with a median loss of around $138,000, according to the United States Sentencing Commission.
From 2023 through March 2025, taxpayers lost more than $600 million to food stamp theft, with an average of $267 million in benefits stolen per year, according to U.S. Department of Agriculture data.
People who receive food stamps benefits get them as a monthly deposit loaded onto an Electronic Benefit Transfer card—like a debit card. Beneficiaries can use these cards to buy groceries.
Thieves access these accounts through card skimming, card cloning, phishing, bot attacks, and stolen numbers, according to a December report from the Government Accountability Office.
Tennessee, New York, and California led the nation in reported food stamp theft over the two years.
Improper PaymentsBeyond intentional theft, major money losses are attributed to improper payments—funds distributed in the wrong amount or to ineligible recipients.
For fiscal year 2024, an estimated total of improper payments across 68 programs reached $162 billion, according to a 2025 federal watchdog report.
That accounted for nearly 13.5 percent of federal grants to state and local governments.
Medicaid, a joint federal-state insurance program providing coverage to over 81 million low-income Americans, receives federal grants of nearly $600 billion every year.
In fiscal year 2024, estimated improper payments in Medicaid were $31 billion, with an error rate of 5 percent, according to the Centers for Medicare & Medicaid Services.
Food stamps, a federal nutrition program, had an estimated 10.5 billion in improper payments, accounting for 11 percent of errors.
Protecting State FundsThe State Financial Officers Foundation—40 officers including treasurers, auditors, and comptrollers from 28 states—oversees more than $3 trillion in state funds.
In 2025, these state financial officers have protected more than $28 billion in state funds, according to a February report from the State Financial Officers Foundation. This included stopping roughly $5.7 billion in waste, fraud, and abuse, as well as overseeing $22.3 billion in investment earnings and unclaimed property returned to citizens.
Leading the states in reported savings, Florida’s chief financial officer identified $1.86 billion in excessive local government spending. In North Carolina, the state auditor found more than $1.04 billion in lapsed salaries across 46 state agencies.
In Kentucky, State Auditor Allison Ball uncovered more than $836 million in wasted Medicaid payments. Kentucky paid managed-care organizations for Medicaid recipients who were already being covered and paid for by another state, according to Ball.
The auditor’s office also helped reduce the food stamp payment error rate from 9.1 percent to 3.5 percent in one year.
“But there is still more work to be done,” Ball said, as error rates reached nearly 48 percent for Medicaid Long-Term Care, and 29 percent for the Medicare Savings program in Kentucky.
“These error rates likely implicate hundreds of millions of dollars in federal funding,” she said.
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