Report: Bureaucrats Improperly Paid Out $186 Billion In Taxpayer Money In 2025: Will the Public Sector Ever Come to Grips With the Scale of the Problem?

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Report: Bureaucrats Improperly Paid Out $186 Billion In Taxpayer Money In 2025

Will the public sector ever come to grips with the scale of the problem?

The past year-plus has seen a focus on fighting fraud within government programs seemingly unprecedented in recent history. Yet, like the mythical Sisyphus pushing his rock uphill or the many-headed ancient Hydra, each success is seemingly matched by yet another scandalous source of government corruption.

Multiple reports in recent weeks show how reformers have their work cut out for them. On the federal level, improper payments continued to grow (although the most recent fiscal year examined included the final months of the Biden administration). Meanwhile, state Medicaid programs have not fully complied with a federal requirement designed to guard against program scams. It’s enough to make one wonder when the public sector will finally come to grips with the scale of the problem.

Rising Improper Payments

Late in April, the Government Accountability Office (GAO) released its annual compilation of agencies’ improper payment estimates. The GAO report found that those payments increased by more than $24 billion in fiscal year 2025 (which went from Oct. 1, 2024, through Sept. 30, 2025), to $185.8 billion.

Improper payments do not necessarily equate to fraud. In addition to outright fraud and embezzlement, improper payments also include payments made in the incorrect amount or without appropriate documentation. To borrow a religious phrase relating to sin, think of improper payments as a “near occasion” of fraud — i.e., the lack of attention to detail that allows fraud to fester and grow.

And even though improper payments increased in fiscal year 2025, the higher number still understates the scope of the problem. For one, Medicaid improper payments — many of which are linked to ineligible individuals receiving coverage — will increase in the coming years, as eligibility checks suspended during the Covid pandemic gradually get reincorporated into states’ Medicaid estimates. Moreover, programs such as Temporary Assistance for Needy Families (originally called welfare) do not even estimate improper payment levels and amounts.

Many prominent programs have unacceptably high rates of improper payments. For instance, the Earned Income Tax Credit had a 32.7 percent improper payment rate in 2025, and the Refundable Premium Assistance Tax Credit (aka, insurance subsidies on the Obamacare Exchanges) had a 31.6 percent improper payment rate. The latter number, coming on top of numerous reports of Exchange fraud, provides yet more support for Congress’s correct decision to let the Biden-era enhanced subsidies expire as scheduled last December.

Yet despite nearly $200 billion (at least) in improper payments, GAO also reported that in 2024, 12 of 24 agencies had not complied with all the relevant criteria under the Payment Integrity Information Act. For instance, four agencies’ inspectors general noted that their agency did not develop a plan to meet a target for reducing improper payments, and eight agencies did not publish improper payment estimates at all.

The failure of many agencies to meet statutory requirements regarding information reporting shows a lack of attention to and interest in the problem. After all, as the saying goes, you can’t manage what you don’t measure. The dozens of inspector general recommendations not yet implemented likewise provide a clear explanation for the increase in improper payments GAO reported. Individually and collectively, these data points illustrate the scope of the problem the Trump administration must act to remedy throughout the federal government.

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