Between 2002 and 2012, federal agencies spent more than half a trillion dollars ($688 billion) on payments that should never have been made.
Every year, according to their own record-keeping, the agencies that administer major federal programs are now paying out more than $100 billion improperly, and even though they're aware of the problem, they recover only a tiny fraction for taxpayers. This adds up to huge losses for the U.S. Treasury.
In 2012 alone, the Office of Management and Budget gathered data on just 13 high-error programs in the federal government, and determined that they made a combined $101.3 billion in improper payments. To put that in perspective, that's almost $16 billion more than the highly controversial budget sequester wound up cutting from government spending in 2013.
The government doesn't get a whole lot of that money back. In July, then-Controller of the Office of Management and Budget Daniel Werfel testified in a Senate hearing that over the preceding two years, the government had recaptured only $2 billion in improper payments.
To be clear, the term "improper payment" covers many problems and is not limited to out-and-out fraud. It can include payments made in error, either through the fault of the agency itself or the person claiming the payment. But what the vast majority of the instances of improper payment have in common is that they represent money that shouldn't be paid out at all leaving the Federal Treasury and not coming back.
As part of their annual financial reports, federal agencies are required to estimate the payment error rate of the programs they administer, and for some of the biggest benefits programs, the percentage of payments deemed improper reaches double digits, and tens of billions of dollars.
