(The Center Square) – The White House Office of Management and Budget openly criticized a report from a Congressional watchdog that estimated the federal government loses up to $521 billion a year to fraud.
Jason Miller, the deputy director for management at the Office of Management and Budget, detailed OMB concerns in a 3-page letter to officials with the Government Accountability Office. He said the fraud estimate was “not plausible.”
“OMB has significant concerns that this report will not further efforts to prevent and reduce fraud, but rather will create confusion and promote misleading generalizations that have no factual connection to specific federal programs,” he wrote.Â
The letter was in response to the U.S. Government Accountability Office’s first-of-its-kind estimate of annual fraud costs published this week. The GAO report estimated that taxpayers lose between $233 billion and $521 billion annually.
The fraud estimate’s range represents 3% to 7% of average federal obligations. The estimate was based on data from fiscal years 2018 through 2022. The government obligated almost $40 trillion during that time.
The report detailed the limitations of the estimate and said it could not be generalized to specific programs, which it noted vary widely in fraud losses.
Miller said the estimate didn’t hold up.
“GAO’s simulation approach produced an estimated range of annual losses that when subjected to analytical scrutiny is simply not plausible,” he wrote. “OMB was unable to inquire further into the simulation or analysis because GAO declined to share its methodology or show the specific programs and assumptions that informed its model or examination.”
Miller pointed to a January 2023 GAO report that noted: “existing data on fraud are insufficient for determining the total amount of federal fraud.”
“GAO’s reliance on a simulation model to produce such unrealistic estimates is particularly concerning given GAO’s own recognition, in this report and elsewhere, that actual data cannot support such an estimate,” Miller wrote.
The authors of the GAO report detailed the methodology use to create the estimate along with the limitations and uncertainty of the estimates.
“The insight offered by simulations should be interpreted carefully,” according to the GAO report. “Our approach was not designed to provide precise predictions. Instead, it was meant to extend the current understanding about the likely extent of fraud in the federal government, given available data.”
The report further relied on several benchmarks, including similar estimates of fraud losses from the United Kingdom and the Association of Certified Fraud Examiners. The 2022 UK Public Sector Fraud Authority report found fraud and error losses between 0.5% and 5% of expenditures in 2020. The Association of Certified Fraud Examiners estimated that organizations lost about 5% of revenue to fraud.
David Walker, former comptroller general of the United States and a member of the advisory board of Main Street Economics, said the estimate was what was above the surface.
“The federal government’s estimated annual financial losses to fraud of between $233 billion and $521 billion is just the tip of the iceberg,” Walker told The Center Square. “When you add waste, abuse, and mismanagement, the numbers are much bigger.”
