The federal government continues to lose an estimated $233 billion to $521 billion each year to fraud, while most agencies overseeing the nation's largest federally funded programs have yet to implement one of the Government Accountability Office's top recommendations for preventing those losses, according to a new GAO report.

The report, Managing Risks in Federally Funded, State-Administered Programs, reviewed the 20 largest federally funded, state-administered programs, which accounted for approximately $1.1 trillion in federal obligations in fiscal year 2025.

The GAO found in the report released Thursday that most agencies have not completed documented fraud risk assessments. The assessments are instrumental in identifying where fraud is most likely to occur and how to prevent it.

"Federal and state agencies can better manage fraud risks and prevent fraud by applying GAO frameworks for managing fraud risks and improper payments, as well as other leading practices; leveraging available federal analytic resources, such as Do Not Pay, to verify recipient identity and eligibility before issuing federal funds; and implementing recommendations from GAO and other oversight entities that would address existing program vulnerabilities," the report read.

The watchdog said there are currently 22 open recommendations that are focused on enhancing fraud prevention practices across the programs covered in the report.

The watchdog urged federal agencies to implement them to better safeguard taxpayer funds, particularly in state-administered programs.

GAO reiterated the enormous financial toll that federal fraud takes on taxpayers.

"In April 2024, we estimated that the federal government could lose between $233 billion and $521 billion annually to fraud, based on data from fiscal years 2018 through 2022," the report said.

According to GAO, the most widespread weakness it found was the failure to conduct the documented fraud risk assessments.

"Information about fraud risks specific to each of the 20 selected programs varies, in part, because federal agencies have not fully assessed their risks," the watchdog wrote.

Of the 20 programs examined, "five documented evidence consistent with identifying risks and assessing the likelihood of those risks to prioritize action; the other 15 did not have such documented evidence," the report said.

"Identifying fraud risks and assessing the likelihood and impact of those risks is a leading practice that can help agencies determine where to target fraud prevention and detection efforts," the watchdog said.

The report warned that the structure of many federally funded programs creates opportunities for fraud.

"The decentralized nature of state-administered programs – in which states, local governments, contractors, sub-recipients, and beneficiaries all play roles in administering federal funds – can create opportunities for fraud," GAO said.

Among the examples cited were a consultant convicted of submitting falsified permits tied to a $4.3 million airport improvement project, landlords receiving housing-assistance payments for vacant units while tenants underreported income, and an alleged student financial aid fraud scheme involving more than 1,200 applicants at over 100 schools across 24 states.

GAO said that the consequences of fraud extend beyond financial losses.

"Every dollar or resource diverted to fraudsters hinders the federal government's ability to achieve its goals and provide needed services," the report said.