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Fraud costs federal government up to $521 billion a year

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The federal government loses up to $521 billion a year to fraud, according to a first-of-its-kind estimate from a Congressional watchdog.

The U.S. Government Accountability Office, which serves as the research arm of Congress, estimated annual fraud losses cost taxpayers between $233 billion and $521 billion annually, according to a new report published Tuesday. The fraud estimate’s range represents 3% to 7% of average federal obligations.

“A government-wide approach is required to address these challenges,” the report concluded.

The GAO fraud estimate comes with several caveats.

“One of the many challenges in determining the full extent of fraud is its deceptive nature,” according to the report. “Programs can incur losses related to fraud that are never identified, and such losses are difficult to reliably estimate.”

The agency used a probabilistic method to estimate a range of outcomes under different assumptions and scenarios where there is uncertainty.

The Office of Management and Budget was skeptical of the GAO estimate.

“OMB raised concerns about our estimate and how it would be interpreted,” according to the report. “OMB also questioned the plausibility of our estimate.”