Report: Taxpayers lose $500 billion annually to fraud as states resist oversight

By Elyse Apel
The Center Square

Fraud could cost federal taxpayers as much as $521 billion annually, according to a Foundation for Government Accountability report citing a federal estimate.

The report estimates that improper payments by the federal government have totaled about $3 trillion since 2003.

Liesel Crocker, the report’s author and senior research fellow at FGA, spoke with The Center Square in an exclusive interview regarding the findings.

“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,” Crocker 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.”

Much of the fraud is funneled through federal programs like Medicaid, food stamps, Medicare, the Earned Income Tax Credit, and a “pandemic grant for concert venues,” Crocker explained.

“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,” Crocker said. “Fraud shows up where the checks are easiest to get.”

While the FGA, a nonpartisan think tank, applauded President Donald Trump’s War on Fraud and other antifraud efforts, it said more needs to be done—both by states and the U.S. Congress.

“The bottom line: Congress and states should build on President Trump’s efforts to crack down on fraud and corruption and save taxpayers billions,” the report said.

So far, there are more than 8,000 fraud cases being prosecuted by attorneys general across the country, which the report called just a “small fraction” of the fraud that is being perpetrated.

Crocker added to that claim, pointing to Minnesota as a particular area of concern, while the report also highlighted California, Illinois, Colorado, Maine and New York.

Those states were among 21 states that refused to cooperate with federal efforts to vet their food stamp programs for fraud. In the 29 states that did cooperate, the U.S. Department of Agriculture discovered 186,000 dead enrollees and half a million people collecting benefits in two states at once.

“Food stamp trafficking is estimated to cost as much as $4.7 billion a year,” Crocker said. “Every dollar that goes to someone abusing the system is a dollar taken from the truly needy.”

She is hopeful the federal government's efforts are a step in the right direction though.

“This is not hopeless. We can fix this," Crocker said. "For 20 years, Washington never had a meaningful answer to rampant fraud. President Trump is finally treating stealing from the taxpayer like the crime it is. If this much turned up in the states that cooperated, we can only imagine what's hiding in the states that refuse.”

The report encouraged the uncooperative states to work with the federal government on ending “widespread fraud.” It also recommended:

• The Office of Management and Budget encourage more agencies to vet for fraud.

• OMB collaborate with the Treasury Department's Do Not Pay system.

• All programs better verify eligibility, evaluate high-risk providers, and investigate allegations of fraud.