April 19, 2024. The U.S. General Accounting Office (GAO) has released its first-ever report on the government's annual financial losses from fraud, and the numbers are startling. GAO estimates that the federal government loses between $233 billion and $521 billion each year, based on data from fiscal years 2018 to 2022. These estimates are based on data from three primary sources: investigative data, the number of cases prosecuted, and the amount of money recovered from these cases – by the Office of Inspector General (OIG) and by the Office of Management and Budget ( (OMB) Reports and Confirmed Fraud Reports. GAO ran these datasets through established probabilistic methods and models to develop range estimates that account for a variety of scenarios and uncertainties.
The GAO report is structured around three fraud categories: adjudicated, potentially detected, and potentially undetected. Adjudicated fraud is defined as fraud that has been submitted to a court or other decision-making body and determined to exist. Those who participate in the fraud will be held accountable. A detected potential fraud is a potential fraudulent activity that the government is aware of but has not yet determined whether it is truly a fraud. This category has several steps: detection, investigation without action, and initiation of adjudication without determination of liability. Undetected potential fraud is fraud that exists but has not yet been detected by the government. Data from his other two categories were used to calculate the data for this category.
GAO's purpose in issuing this report is to strengthen oversight of anti-fraud controls. Currently, data on reports of misconduct are limited to his OIG semi-annual reports. GAO recommends presumption of fraud as a powerful step toward fraud management and prevention. Estimates provide a deeper understanding of the scope of the problem, allowing agencies to appropriately prioritize supervisory resources. Ultimately, this improves the return on investment in anti-fraud resources and saves governments money by preventing the loss of funds to fraud.
At the end of the report, GAO issued recommendations to OMB and the Treasury Department to improve the availability of fraud data and expand fraud estimation capabilities in government agencies. In addition to these recommendations, the Government will continue to work with whistleblowers to curb misconduct. Its importance cannot be overstated, even as governments have the potential to improve monitoring and prevention measures.
Read highlights: https://www.gao.gov/assets/d24105833high.pdf
