Federal News Network: Improper payments rose to $183B in 2025, but it’s not all bad news

The Labor Department’s unemployment insurance program made about $5.6 billion in improper payments in fiscal 2025. Its improper payment rate of 14.9% ranks ninth among the 19 federal programs with a rate of over 10%.One of the most common reasons for such a high improper payment rate across Labor’s unemployment insurance program is the antiquated technology that state agencies use to administer the funding.

To that end, Labor’s inspector general is launching a new investigation into how states are using the Unemployment Insurance (UI) Information Technology (IT) modernization funds provided through the department’s Employment and Training Administration (ETA). The UI IT fund is supposed to strengthen and secure their UI systems.The IG says Labor handed out over $204 million since the 2021 under the American Rescue Plan Act (ARPA).

“ETA has taken steps to provide guidance and support to states, yet too many states continue to point to ‘outdated IT infrastructure’ as an excuse while ignoring requests for action — despite accepting more than $204 million in Unemployment Insurance IT modernization funding. That disconnect demands accountability,” Inspector General Anthony D’Esposito said in a press release. “Taxpayers provided these funds to fix broken systems —  not to maintain the status quo. My audit team will follow the money, examine how these funds were used at the state level and determine whether states delivered real modernization or simply continued business as usual.”

D’Esposito said the audit will focus on whether states used UI IT modernization funds to upgrade their systems and whether those investments have resulted in improvements to system reliability, integrity and fraud prevention readiness.The IG anticipates issuing a final audit report during the third quarter of fiscal 2027.The audit of Labor’s UI IT modernization fund is part of the Trump administration’s broader focus on stopping and recovering improper payments, mainly due to fraud.A new report from the Government Accountability Office shows oversight of programs, ranging from Labor’s UI IT fund to Medicare Fee-for-Service to Medicaid to the Agriculture Department’s Supplemental Nutrition Assistance Program (SNAP), is actually getting better.GAO says the amount of improper payments across 15 agencies and 64 programs increased $24 billion to $186 billion in 2025. Of that $186 billion, GAO estimates about 82%, or $153.1 billion, is because of overpayments made by agencies.

“The headline says improper payments went up by $24 billion, but the reality is most of that increase comes from measuring more programs, not losing more money,” Miller said in an email to Federal News Network. “The increase is mostly due to an expansion of the denominator — new programs were added for the first time. That’s good. We have more insight into where we have program integrity challenges.”At the same time, the total doesn’t include every at risk program, GAO said. For example, the audit agency’s total does not include estimates of improper payments made under the Department of Health and Human Services’ Temporary Assistance for Needy Families (TANF) program. GAO says HHS spent approximately $16.5 billion through TANF last year, but the agency does not calculate or report improper payment amounts for this program due to statutory limitations.GAO also found agencies paid out about $10 billion in underpayments and another $14.3 billion in “unknown payments.” Auditors say only about $8.4 billion are “technically improper payments.”Three agencies reported their programs reduced the amount of money going out the door improperly.GAO says HHS’s Medicare Fee-for-Service reduced the amount of improper payments by $2.9 billion to $28.8 billion. HHS said the decrease came from implementing better internal controls.

Meanwhile, eight programs reported year-over-year increases in the amount of improper payments going out the door.One of the outliers in the report is SBA’s Shuttered Venue Operators Grant program, which is reporting improper payments for the first time, increasing the overall total by $10.1 billion.But other programs like Medicaid, which saw a $6.3 billion increase to $37.4 billion, and the Treasury Department’s Earned Income Tax Credit, which paid out $5.2 billion more for a total of $21.1 billion in 2025 than in 2024, helped drive some of the overall increase governmentwide.Miller said the bigger issues agencies are facing is their inability to not just prevent improper payments, but truly understand why they are happening in the first place.“I think overall the system is incredibly complicated and it encourages compliance-oriented approaches at the expense of real fraud prevention efforts. The many changes in policy and estimation methodologies means it’s difficult, if not impossible, to make meaningful comparisons from year to year. The whole improper payments estimation and reporting apparatus is, in my opinion, problematically complicated and prone to spin and obfuscation,” Miller said. “I’m in favor of uncovering more fraud and overpayments so the report is a good news story in many ways to me. But it tells us relatively little about how prepared agencies are to confront the fraud problem or how good a job they are doing detecting — much less preventing — fraud and improper payments.”GAO didn’t make any new recommendations, but said Congress passing and President Donald Trump signing the Ending Improper Payments to Deceased People Act into law in February, which made permanent a pilot program that requires the Social Security Administration to share its Death Master File with Treasury’s Do Not Pay system, is an important step to stopping future improper payments.

Donald Blersch, who spent 35 years in government, mostly in the intelligence community, said agencies too often are still operating in a “pay-and-chase model” and that approach, especially when bad actors are using artificial intelligence to commit fraud, is not just outdated, but “indefensible.”

“The solution isn’t slowing payments. It’s making smarter decisions before the money goes out the door. In Medicaid specifically, agencies are also confronting organized fraud rings using fake medical providers and fraudulent billings to exploit a high-volume system. Modern verification and risk assessment tools can stop bad actors upfront while actually accelerating approvals for legitimate beneficiaries. That’s how you protect both mission delivery and taxpayer trust,” said Blersch, who is a senior advisor for defense and security at Clearspeed, in an email to Federal News Network. “When systems are strained, payment error rates rise. The opportunity is to improve integrity before payments go out — using technology to help agencies verify eligibility faster, reduce administrative burden, and move trusted applicants through the process more quickly. This will get more difficult with the new redetermination [requirements in the One Big Beautiful Bill Act] in 2027.”