Agencies' Estimated Improper Payments Increased to $186 Billion

Why It Matters

The federal government made improper payments to federal agencies reported at $186 billion in fiscal year 2025, a $24 billion jump from the prior year, according to a new report from the Government Accountability Office. Since 2003, the cumulative tally has reached approximately $3 trillion. The money (sent to the wrong people, in the wrong amounts, or without proper documentation) flows out of programs that millions of Americans depend on, from Medicare to Medicaid to tax credits designed to help low-income workers.

The report lands as the Trump administration's Department of Government Efficiency has made eliminating federal waste a signature political cause. But the GAO's data makes clear this is not a new problem, and it has resisted solutions across administrations of both parties.

The Scale of the Problem

Fifteen federal agencies reported improper payments across 64 programs in fiscal year 2025. Of the $186 billion total, roughly $153 billion, or about 82 percent, consisted of overpayments. The remainder was split between underpayments and payments where the nature of the error could not be determined.

Nineteen programs reported improper payment rates of at least ten percent. Six programs had rates that exceeded 25 percent.

The five largest program areas accounted for approximately 73 percent of all improper payments, according to Fox Business, which cited the GAO findings.

Where the Money Goes

Medicare and Medicaid

The Centers for Medicare and Medicaid Services remains the largest source of overpayments that federal agencies report each year. Medicare Fee-for-Service is historically the single largest contributor to the government-wide total.

Medicaid reported $37.39 billion in improper payments in fiscal year 2025, at a rate of 6.12 percent. That is up from $31.10 billion, or 5.09 percent, in fiscal year 2024. CMS calculates the Medicaid rate using rolling reviews of approximately 17 states per cycle across three cycles covering 2023, 2024, and 2025.

The Earned Income Tax Credit

The Internal Revenue Service reported approximately $21 billion in improper payments through the Earned Income Tax Credit, representing roughly 11 percent of the $186 billion government-wide total. The EITC has been a persistent source of improper payment concerns for years, with the IRS citing the complexity of eligibility rules and the challenge of verifying income for gig workers and self-employed filers.

COVID-Era Grant Program

One of the more politically charged findings in the fiscal year 2025 improper payments report is the first-ever appearance of the Small Business Administration's Shuttered Venue Operators Grant program, which reported $10 billion in improper payments. The program was created during the COVID-19 pandemic to help music venues, theaters, and other live entertainment businesses survive shutdowns. Its appearance in the fiscal year 2025 data reflects the continued financial fallout from emergency pandemic spending that moved quickly and with limited verification infrastructure.

A Mandate That Predates DOGE

The report was produced under the Payment Integrity Information Act of 2019, which requires federal agencies to estimate, report, and work to reduce improper payments annually. GAO is required by statute to conduct oversight of that reporting each year. The implementing framework is set out in OMB Circular A-123, Appendix C.

The Office of Management and Budget oversees government-wide compliance and maintains PaymentAccuracy.gov, the federal portal where agency data is published.

This means the $186 billion figure is not a product of any single administration's accounting choices. It is the result of a legally mandated reporting system that has been in place for years, generating comparable data across administrations.

What Has Not Been Fixed

As of April 2026, nine prior GAO matters for congressional consideration related to payment integrity remain open, meaning Congress has not yet acted on them. These are standing recommendations from earlier GAO reports on improper payments that have carried over without resolution.

The report, structured as a Q&A rather than a traditional audit with new recommendations, does not introduce new agency-specific directives. But the accumulation of unaddressed prior recommendations reflects a pattern that GAO has documented across multiple fiscal years: agencies identify problems, watchdogs flag them, and the fixes do not consistently follow.

The Political Backdrop

The report was released on April 27, 2026, against a backdrop of intense political debate over federal spending. The Trump administration's Department of Government Efficiency has made headlines for its efforts to cut federal programs and reduce the size of the bureaucracy. The $186 billion figure in fiscal year 2025 in improper payments, and the $24 billion year-over-year increase drew coverage from outlets including Government Executive, which framed it in the context of federal fiscal accountability.

But the $3 trillion cumulative figure since 2003 is a reminder that payment integrity in government has been a bipartisan failure. The problem predates the Biden administration, the Trump administration's first term, and the Obama administration. It has grown, contracted slightly, and grown again across different political configurations in Congress and the White House.

The Shuttered Venue program's debut in the data is a specific artifact of pandemic-era emergency policy, when speed of disbursement was prioritized over verification. Similar dynamics played out across multiple COVID relief programs, many of which have already generated significant improper payment findings in prior years.

The Bottom Line

Payment integrity in government is, at its core, a question of whether the right money reaches the right people through the right programs. When Medicaid overpays by $37 billion, or when a COVID grant program distributes $10 billion in payments that don't meet program requirements, the consequences are not abstract. Funds intended for eligible beneficiaries are diluted. Taxpayers bear the cost of errors that, in many cases, are never recovered.

The GAO has been tracking this problem since 2003. The cumulative total now stands at $3 trillion.

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