Overpayments account for nearly 75% of federal improper payments

The federal government reported $236 billion in improper payments in fiscal year 2023, with the vast majority coming from overpayments, according to a new watchdog report.

A U.S. Government Accountability Office report found 74% of improper payments – payments that shouldn't have been made or were made in the wrong amount – were overpayments. Overpayments accounted for $175.1 billion of the total amount of improper payments in 2023. Overpayments are payments "in excess of what is due, and for which the excess amount, in theory, should or could be recovered," according to the report.

Underpayments accounted for $11.5 billion of the total, or about 5% of the total. Another category is unknown payments, which are those that an agency "cannot determine to be either proper or improper because of insufficient or lack of documentation."

"Improper payments are a long-standing and significant problem in the federal government," according to the GAO report.

The report also found that the improper payment rate for some federal programs topped 40%. For example, the Small Business Administration's Paycheck Protection Program – Loan Guarantee Purchases, the improper payment rate was 49.2%.

The SBA pushed back on some of those estimated improper payments rates.

"SBA also commented that our report is missing context that explains the distinction between the different amounts of unknown and improper payments," the GAO report noted. "SBA noted that approximately 95 percent of the Paycheck Protection Program (PPP) Loan Forgiveness improper payment estimate was composed of unknown payments."

Since fiscal year 2003, improper payment estimates by executive branch agencies have totaled about $2.7 trillion.

Improper payments have declined in recent years, but remain a stubborn challenge for many federal agencies. Improper payments peaked in fiscal year 2021 during the COVID-19 pandemic at $281.4 billion.