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New report estimates U.S. fraud losses exceed $233 billion annually

1 month ago 27

The U.S. government may lose between $233 billion and $521 billion to fraud each year, according to a rough, first-of-its-kind federal estimate released Tuesday.

But the author of that report — the nonpartisan Government Accountability Office — simultaneously cautioned that its new figure is incomplete and imprecise because of a lack of reliable data and the inherent challenge in uncovering sophisticated schemes to steal federal funds.

The watchdog, known as GAO, computed its estimate by studying the federal budget between the 2018 and 2022 fiscal years, spanning the Trump and Biden administrations and the beginning of the coronavirus pandemic, when Democrats and Republicans alike provisioned historic aid that scammers repeatedly targeted.

With the aid of a complicated economic model, GAO computed that fraud in past years may have reached as high as 7 percent of federal spending, with the highest spikes likely coinciding with the past abuse of coronavirus relief funds.

The GAO did not pinpoint fraud in specific federal programs, and it stressed its analysis could not be used to predict future federal losses. But it still presented its staggering finding as a stark warning to Washington, where the federal debt has surged this year to more than $34.5 trillion.

Citing the country’s fiscal health as “unsustainable,” the report called for significant reforms that “can reduce the loss of federal dollars and help improve the federal government’s fiscal outlook.”

Even before its release, though, the GAO report drew sharp, rare rebukes from the White House Office of Management and Budget, which raised significant concerns with its methodology in a formal letter released alongside the analysis Tuesday.

Jason Miller, the deputy director for management at OMB, stressed the fraud estimate is “not based on analysis of estimated losses by individual federal programs,” but rather, is a government-wide figure derived from a “simulation model.”

Miller pointed to the GAO’s own acknowledgments that it lacked the proper data to pinpoint the full extent of waste, fraud and abuse in some federal programs. And he said its release would “create confusion and promote misleading generalizations that have no factual connection” to federal spending.

The new report is still likely to rile Capitol Hill, where fiscal hawks from both parties have long lamented the scourge of federal waste, fraud and abuse — even if they have done very little to address the root causes of the problem. Repeatedly, the GAO has asked Congress to adopt some basic reforms that might improve federal spending data and bolster the government’s ability to spot scams, but Democrats and Republicans often have ignored the requests.

The GAO’s indictment arrives one week after the White House joined Senate Democrats in unveiling new legislation that would crack down on fraud targeting federal programs. The $1.3 billion bill would deliver on President Biden’s two-year old request by investing new resources toward fighting identity theft, aiming to ward off scammers who use real Americans’ information to obtain government benefits they do not deserve.

Identity theft long has dogged the government, but it emerged as one of the most costly, devastating scourges during the coronavirus pandemic. Criminals repeatedly relied on real Americans’ stolen information to bilk government programs that were supposed to help Americans who were out of a job or businesses at risk of closing their doors.

Underscoring the problem, the Justice Department announced last week it had brought charges against more than 3,500 defendants, and secured the seizure or forfeiture of more than $1.4 billion, in connection with illegally obtained coronavirus relief funds since 2021. Endorsing new anti-fraud legislation, Attorney General Merrick Garland added that the government’s work is still “far from over.”

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