Blinking Red: A third of federal agencies in audit lacked regular fraud monitoring or evaluation

The U.S. Government Accountability Office (GAO) released a technical appendix to its 2015 fraud risk management guidance this month, aimed at helping federal agencies strengthen how they prevent fraud in U.S. government programs. The reason? Many still lack basic safeguards.

Previous GAO reports have revealed the extent of fraud across the federal government.

A report from 2024 showed that the U.S. loses between $233 billion and $521 billion annually to fraud, based on data from 2018-2022.

"Fraud prevention, including deterrence, decreases the need to chase after and recover stolen funds," read the latest report. "Demonstrating the value of fraud prevention can help inform antifraud resource allocation decisions."

The new report builds on GAO’s 2015 Fraud Risk Framework, which outlines best practices for preventing, detecting and responding to fraud in federal programs. 

The framework is organized into four components: establishing an antifraud culture; assessing fraud risks; designing and implementing control activities; and evaluating outcomes and adapting efforts.

GAO’s new technical appendix focuses specifically on the fourth component, which is how agencies can systematically evaluate the effectiveness of their fraud risk management activities and adapt them as needed. 

"We are issuing this technical appendix to our framework to help managers evaluate and adapt their antifraud efforts. These efforts can aid program integrity, protect taxpayer dollars, and maintain public trust," the GAO said.

According to the report, many federal agencies struggle with the evaluation stage to prevent fraud. 

The watchdog said that one of its surveys from 2023 found that about one-third of the 24 federal agencies it reviewed lacked "regular" fraud monitoring or evaluation activities, and half did not make any changes based on evaluation results.

The document does not issue new government-wide requirements but rather identifies ways that program managers can assess and improve fraud risk management, such as soliciting stakeholder input as well as tailoring fraud evaluation efforts to an agency’s resources.

The report highlights that effective evaluations can support program integrity, protect taxpayer dollars, and maintain public trust, and notes examples where fraud risk management efforts have yielded measurable results. 

"In this way, evaluations can help agencies show the value of their fraud risk management activities," read the report. "Program managers also need to understand the effectiveness of their fraud risk management activities so they can adjust their efforts to better protect their resources against fraud."

For example, it cites Treasury estimates that enhanced fraud controls helped prevent more than $4 billion in fraud and improper payments in fiscal 2024 alone.

GAO noted state, local, and even nonprofit entities may be able to adapt the approaches it outlined for their own use in preventing fraud.