The nonpartisan U.S. Government Accountability Office, in a first-of-its-kind report, has produced an estimate of how much money the federal government is losing each year to fraud. It’s not only a staggering figure — $233 billion to $521 billion annually — but of even greater concern is the amount of undetected fraud in that estimate.
According to GAO statistics, confirmed fraud in fiscal years 2018 to 2022 ranged from $4.41 billion to $7.31 billion annually, a fraction of the GAO’s annual estimate. Even including False Claims Act settlements and judgments, which exceeded $2 billion in FY 2022, that means the government cannot account for at least $220 billion dollars each year and possibly hundreds of billions more. And despite the valiant effort of whistleblowers to expose fraudsters, only a fraction of fraud is recovered each year: about $2.7 billion last fiscal year, or a little over 1 percent of the estimated loss to fraud overall.
If the government is serious about tracking down the source of this undetected fraud, it can put its support behind established whistleblower programs that have proven to recover billions in unlawful spending.
“Today’s GAO report confirms what we long suspected: hundreds of billions of dollars are being lost to fraud, and the government is recovering only a fraction of the taxpayer funds being lost,” said Jacklyn DeMar, The Anti-Fraud Coalition President & CEO. “While government spending has increased exponentially, recoveries under the False Claims Act have remained flat. This first-of-its-kind estimate should redouble efforts to fight fraud by empowering whistleblowers and bolstering enforcement programs.”
Keller Grover attorney Kate Scanlan is a member of TAF who helped compile the organization’s annual “Fraud by the Numbers” series that highlights the success of whistleblowers to combat fraud in areas and programs such as Medicare Advantage, the defense industry, cryptocurrency, customs, and cybersecurity. As she wrote in the introduction to the series, just because we can’t precisely measure how many instances of fraud have gone undetected doesn’t mean whistleblowing doesn’t deter fraud or that existing whistleblowing efforts are adequate given the incidence of fraud. For example: more than $2.3 billion of the $2.68 billion in False Claims Act recoveries last fiscal year came from whistleblower-initiated cases, nearly 86 percent.
As the report says, while the federal government obligated almost $40 trillion from fiscal years 2018 through 2022, no reliable estimates of fraud losses affecting the federal government previously existed. The GAO compiled this report using data from fiscal years 2018-2022 and categorizing fraud as adjudicated, detected, and undetected.
In its investigation of undetected fraud, the GAO looked at studies from federal agencies that quantify the extent of fraud based on instances of identified fraud. For example, the Department of Labor Office of the Inspector General found there were $45.6 billion in potentially fraudulent unemployment insurance benefits paid from March 2020 to April 2022. But, as the GAO report says, some portion of fraud is never detected. Including undetected fraud, the GAO estimated that between $100 billion and $135 billion (between 11 and 15% of total spending) in fraudulent unemployment insurance payments were made between April 2020 and May 2023.
For comparison, the GAO points out that the lower range of the estimate — $233 billion — is greater than FY 2022 obligations for all but the eight largest federal agencies. Five agencies have total annual obligations greater than the upper range of $521 billion.
The numbers don’t lie: Fraud is out there and whistleblowers are successfully helping rein in fraudulent actions. If you’ve been a witness to unlawful conduct, the attorneys at Keller Grover can help you understand the False Claims Act and other laws that help you report wrongdoing and protect your rights. For a free consultation, contact us today.