The U.S. government is now operating with colossal levels of fraud every year.
The major scandals that hit the headlines in recent years — COVID fraud, Feeding Our Future, Medicare & Medicaid fraud — they are but the tip of a very shady iceberg.
How much money does the federal government lose to fraud? It’s become truly mindboggling.
Try as much as $521 billion. Every year.
That staggering figure sits at the center of a new report from the Foundation for Government Accountability, which attempts to put America's sprawling fraud problem into perspective. And if anything, the headline number may understate the government's overall exposure.
The FGA report, authored by senior research fellow Liesel Crocker, relies heavily on findings from the Government Accountability Office. GAO estimates that direct annual losses to fraud fall somewhere between $233 billion and $521 billion, based on data from fiscal years 2018 through 2022. That's equivalent to roughly three to seven percent of average federal obligations during that period.
Crocker put the upper end of that estimate in blunt terms.
"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," she said. "And that's just the fraud we know about. Of more than 2,200 federal payment programs, only 64 are reviewed for improper payments each year."
That last point is key. GAO says executive agencies have reported roughly $2.8 trillion in estimated improper payments since 2003. FGA rounds the figure to about $3 trillion.
But improper payments are not synonymous with fraud. They include payments made in the wrong amount, payments to ineligible recipients and payments lacking sufficient documentation. Fraud, by contrast, requires intentional deception.
But GAO also warns that the improper-payment number is incomplete. Only a fraction of federal payment programs are subjected to those annual estimates, and GAO has found programs susceptible to significant improper payments that agencies failed to report.
So $3 trillion is the most conservative possible estimate. And $521 billion annually is difficult to comprehend until you compare it with the U.S. government's horrible financial condition.
The Committee for a Responsible Federal Budget preliminarily estimates that Washington finished fiscal 2026 with a $2 trillion deficit on $7.4 trillion in spending. Debt held by the public reached approximately $32.3 trillion, while interest costs alone hit $1.1 trillion.
Put those figures side by side. The high end of GAO's annual fraud estimate is roughly one-quarter the size of the entire federal deficit.
We're borrowing trillions of dollars while potentially losing hundreds of billions more to people gaming government programs. And recent history provides plenty of evidence that this isn't just an accounting problem.
The COVID era turned fraud into something approaching an industry. GAO estimates that unemployment insurance fraud during the pandemic alone totaled between $100 billion and $135 billion from April 2020 through May 2023. It found that approximately 11 to 15 percent of all unemployment benefits paid during that period were fraudulent.
Then there were the Small Business Administration's pandemic programs. GAO has cited the SBA inspector general's estimate that more than $200 billion in potentially fraudulent pandemic relief loans were disbursed, representing about 17 percent of the SBA's COVID spending.
Congress created enormous programs at breakneck speed and sent enormous amounts of money through systems that frequently weren't equipped to determine whether applicants were legitimate.
The disastrous results were predictable. Minnesota's Feeding Our Future scandal provides one of the most outrageous examples. Federal prosecutors proved that conspirators exploited a child-nutrition program during the pandemic, falsely claiming to have served 91 million meals while fraudulently obtaining nearly $250 million.
Feeding Our Future founder Aimee Bock was sentenced in May to 500 months in prison. DOJ says her organization went from receiving and disbursing approximately $3.4 million in federal money in 2019 to nearly $200 million in 2021. Prosecutors said participants spent stolen money on luxury vehicles, real estate and international travel.
That scheme operated through a federally funded program administered in Minnesota under Democrat Gov. Tim Walz.
And it illustrates another problem highlighted by the FGA report: Washington frequently isn't the government actually checking the people receiving Washington's money.
Federal dollars travel through states, local governments, nonprofits and private providers, creating layers between the Treasury and the ultimate recipient.
The opacity of the bureaucratic system has created a fraudster’s paradise. By the time the money travels from the federal taxpayer through the central bureaucracy to the state-level officials and then to the state-level recipient, it has passed through several layers of the government.
Each bureaucratic layer creates yet another detachment of accountability and another reason for the official doling out the money to be apathetic about its legitimacy.
They are only “doing their jobs.” And filing suspected fraudulent claims only creates paperwork, hassle, and problems, particularly if someone is wrong about the red flag.
So, for context, the GAO reported this year that the federal government provided approximately $1.2 trillion in grants to state and local governments in fiscal 2025. It specifically warned that decentralized eligibility and payment decisions can increase fraud risk, citing weak controls, data limitations and insufficient capacity among program administrators.
Crocker explained the basic vulnerability:
"They have a lot in common. Each one frequently fails to double-check applicant information, hands the paperwork to state and county offices, and pushes huge volumes of money out fast. Fraud shows up where the checks are easiest to get."
That applies to programs across the federal government. FGA specifically identifies Medicaid, food stamps, Medicare, the Earned Income Tax Credit and pandemic spending among the areas where improper payments or fraud have been significant.
So, the problem isn’t just illegal “fraud,” but money doled out for dubious purposes. There is the money somebody steals illegally. There is the money government mistakenly sends where it doesn't belong. And then there is the vastly larger philosophical question of how Washington came to believe that virtually any transfer of money Congress labels beneficial to the “general welfare” is a legitimate federal responsibility in the first place.
That argument is almost as old as the country. James Madison confronted it in 1792 during the debate over allowances for the cod fisheries. The dispute involved the Constitution's authorization for Congress to tax and spend for the "general Welfare."
Madison warned against interpreting those words as an unlimited spending license. He described the competing interpretation as "an abstract and indefinite delegation of power extending to all cases whatever; to all such, at least, as will admit the application of money, which is giving as much latitude as any government could well desire."
Twenty-five years later, President Madison made essentially the same argument when he vetoed the Bonus Bill, which sought federal funding for internal improvements.
Madison argued that treating the General Welfare Clause as an independent power would render the Constitution's enumeration of congressional powers "nugatory and improper" and effectively give Congress "a general power of legislation" instead of a government possessing defined powers.
Modern constitutional doctrine has not adopted Madison's narrow view of the spending power.
$40 trillion in national debt and growing, it might behoove the American people to start listening.
