Hefty tab: Feds report about $2.7 trillion in improper payments over two decades

The federal government reported hundreds of billions of taxpayer dollars in improper payments last fiscal year and trillions over the last two decades.

According to a new report from the Government Accountability Office, the federal government reported $236 billion in improper payments in fiscal year 2023. The true number, though, is actually much higher, but federal reporting is often lacking.

“GAO has found that these payments represent a material deficiency or weakness in internal controls,” GAO said. “Specifically, GAO has noted that the federal government is unable to determine the full extent of its improper payments or to reasonably assure that appropriate actions are taken to reduce them.”

Improper payments are when the agency in question overpaid or sent funds to the wrong person. Medicaid and Medicare are two of the worst offenders, but the issue is widespread across the federal government.

“Since fiscal year 2003, federal agencies reported about $2.7 trillion in total improper payments,” GAO said. “In FY 2023 alone, federal agencies made $236 billion in improper payments, a decrease of about $11 billion from the prior fiscal year.”

The problem is almost certainly worse.

“However, the $236 billion total does not include certain programs that agencies have determined are susceptible to significant improper payments, such as the Department of Health and Human Services' Temporary Assistance for Needy Families,” GAO said. “The Department of Housing and Urban Development also did not report improper payment estimates for the Office of Public and Indian Housing's Tenant Based Rental Assistance program and the Office of Multifamily Housing's Project-Based Rental Assistance program. As a result, the government-wide estimate potentially does not represent the full extent of improper payments.”

While improper payments were more than $200 billion in the last fiscal year, there was a slight decrease in the overpayments this year from the year before.

That is because during COVID-19, reporting was less stringent and fraud spiked. Now, improper payments are lower than during the pandemic but still higher than the year before the pandemic began.

The Payment Integrity Information Act of 2019 and corresponding guidance from the Office of Management and Budget require reporting on payments of this kind from the relevant agencies.

GAO said that more agencies have begun reporting but all are still not doing so.

"Improper payments – those that should not have been made or were made in the incorrect amount – have consistently been a government-wide issue," GAO said.

"Reducing improper payments is critical to safeguarding federal funds," the federal watchdog added.