President Donald Trump and his new efficiency head, Elon Musk, are taking aim at government fraud as part of their campaign to reshape and streamline the federal bureaucracy.
So far, the duo has hinted at widespread fraud without posting true evidence. For example, they have said that Social Security payments may be going out in the names of tens of millions of dead centenarians. Lee Dudek, the administration’s new head of the Social Security Administration, said that is not the case.
Still, they are onto something.
Why We Wrote This
Eliminating fraud – if possible – could reduce federal spending by as much as 8%. But addressing the problem is costly and requires greater precision than President Donald Trump’s unconventional anti-fraud effort so far.
Every year, the federal government could be losing between $233 billion and $521 billion to fraud, according to the Government Accountability Office (GAO). At the high end, that is about 8% of the $6.75 trillion the federal government spent in its last fiscal year.
A rush of pandemic spending contributed to the problem. At a congressional hearing this month, Haywood Talcove, a CEO of LexisNexis Risk Solutions, estimated that COVID-19 relief programs were defrauded of more than $1 trillion, much of it going to overseas criminals.
If it focuses effectively on combating fraud, the Trump administration has the chance to create common ground in its controversial streamlining efforts.
“As citizens, as taxpayers, we want to ensure that our dollars are well spent,” says Joseph Mauriello, director of the Center for Internal Auditing Excellence at the University of Texas at Dallas. “We may not agree, politically speaking, with how those dollars are spent,” but Americans should be able to rally around keeping them out of the hands of fraudsters.
The surge in fraud is one factor that has given President Trump and Mr. Musk the political momentum to focus attention on the federal bureaucracy, reviewing budgets of different government agencies and departments. One month into the process, they have also used it to highlight waste and abuse, a separate problem and one that is often in the eye of the beholder. It’s not clear whether they’ll initiate the hard work of rooting out actual fraud.
If they don’t tackle fraud, it represents a lost opportunity to crack down on criminal activity that siphons off billions of dollars a year in federal payments. It could also lead to a worse situation than exists today, auditing professionals say.
“This could be a thoughtful way to begin a serious conversation” about what services the government should provide, suggests Shivaram Rajgopal, professor of accounting and auditing at Columbia Business School, in a written response to questions. “However, ‘Move fast and break things’ may not be a wise strategy for a lumbering old giant that is accountable to 300 million people.”
Some auditing professionals peg overall fraud, as a share of federal spending, closer to the private sector’s typical 3% to 5%. The total has surged in recent years in part because of pandemic-era emergency spending that included fraudulently obtained loans, credits, and payments meant for American workers, families, and small businesses under the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
High costs of detecting and prosecuting fraud
Estimating the scale of the problem matters because detecting and prosecuting fraud does not come cheap.
If the federal government spends $10 million to prosecute fraud worth $1 million, that might not be worth the effort. This can involve judgment calls. According to Mr. Dudek, the Social Security Administration decided not to upgrade the antiquated system that apparently confused Mr. Musk because it would cost upwards of $9 million. That is why auditing professionals say anti-fraud teams should follow the money.
Targeting big federal agencies and those with a history of poor recordkeeping is likely to yield the biggest payoffs, such as with the Defense Department and Medicare. President Trump’s streamlining effort, called the Department of Government Efficiency, has instead spread its fire.
DOGE has targeted Social Security and reportedly looked into data from the Centers for Medicare & Medicaid Services (which issues Medicare checks) and the National Institutes of Health, both part of the Department of Health and Human Services. It has also gotten read-only access to Treasury Department records, which show where other federal payments have gone. Outside of that, it has targeted much smaller departments, such as the Education Department (4% of the budget), and a host of even smaller agencies that spend about 1% or less of the budget.
Then there’s the time factor. If the GAO were to initiate an agency audit, it would use a standardized process that involves gathering the right group of people, meeting with interested parties to iron out goals and get feedback, collecting and examining evidence, reviewing comments on drafts and findings, and writing a comprehensive report. In all, the process might take nine months.
“It’s a really rigorous process,” says Rebecca Shea, a director in GAO’s Forensic Audits and Investigative Service. “Every word in the report, every line, every number, is indexed and referenced. It is tied back, linked back, to a piece of evidence that we have collected.”
A meticulous or meteoric path
DOGE, by contrast, has started down a much different path. Instead of deliberation, it has moved with entrepreneurial speed. Instead of the fact-checking rigor of a GAO audit, Mr. Musk has made unsubstantiated claims, some of which have turned out to be false. “Nobody’s going to bat a thousand,” he told reporters in a recent press briefing. He promised to quickly fix any problems.
Mr. Musk’s own status within DOGE is nebulous. Although a White House court filing describes him as a senior adviser to the president with no authority over DOGE, President Trump said last Wednesday he had put Mr. Musk in charge of the project.
One feature of the government’s initial response to the pandemic was that Congress emphasized payout speed over accountability. That allowed criminal gangs, often overseas, to steal Americans’ identities and apply for benefits under their names.
Since then, the federal government has made some progress in addressing these losses. In fiscal year 2022, four other agencies joined the 10 already compliant with federal standards for reducing improper payments, which include fraudulent ones.
On the fraud front, the Biden administration created the COVID-19 Fraud Enforcement Task Force in 2021. As of April 2024, it had recovered $1.4 billion in fraudulent claims and charged more than 3,500 defendants, leading to 250 indictments, including for members of gangs and overseas crime rings.
But that’s a drop in the bucket compared with the estimated hundreds of billions of federal dollars that were stolen in recent years.
And it illustrates what many reformers have long urged. It’s far securer and cheaper for agencies to better verify recipients of payments before they actually send the funds.
Needed: better front-end information
Technology could help.
“The tools that are used in the private sector aren’t used in the public sector,” Mr. Talcove of LexisNexis told the congressional subcommittee. If the government would implement such processes as front-end identity verification, “You will see the fraud rate go down dramatically.”
Artificial intelligence and other technologies might also allow agencies to detect more fraud, with fewer staff hours required.
But “When you find evidence of fraud, you still have to build a case,” says Robert Bixby, executive director of The Concord Coalition, a nonpartisan organization that encourages fiscal responsibility in Washington. “You have to develop the evidence and present it in court and get a conviction. You still need people to do that.”
Amid the move to fight fraud, waste, and abuse, the Trump administration fired more than a dozen inspectors general at federal agencies. IGs are the watchdogs within agencies who make sure taxpayer money is well spent.
That layoff “seems like an odd thing to do if you’re going after fraud,” Mr. Bixby says.
Caitlin Babcock reported from Washington, and Laurent Belsie from Boston.
