The Government Accountability Office reported an estimated $186 billion in federal improper payments for fiscal year 2025, a $24 billion increase over the prior year. The compliance cycle that will grade agencies’ response to that number opens this week.
What the number includes — and what it does not
GAO-26-108694, published April 27, 2026, follows fiscal year 2024’s estimated $162 billion (GAO-25-107753, March 11, 2025) — roughly a 15 percent year-over-year rise. The $186 billion covers three categories: payments that exceeded what the recipient was owed, payments that fell short, and payments agencies cannot fully document because the underlying records are insufficient. It is not a fraud figure. GAO separately estimates $233 billion to $521 billion in annual government-wide fraud losses — a distinct calculation produced through a different methodology that should not be added to the improper-payments total.
That distinction matters for how agencies interpret the number internally. Roughly 82 percent of the $186 billion are overpayments, a category that is theoretically recoverable. But “recoverable” and “recovered” are not the same thing, and the gap between them is where control architecture becomes the deciding variable.
The compliance cycle and what it will assess
Under the Payment Integrity Information Act of 2019 (31 U.S.C. §§ 3351-58), federal agencies publish payment-integrity estimates with their annual financial reports, typically in November. Inspectors general then issue PIIA compliance determinations within roughly 180 days, placing the next round of determinations around spring 2027. Fiscal year 2026 — the year those determinations will assess — closes September 30, 2026.
The compliance criteria IGs apply include whether agencies have identified and estimated all susceptible programs, whether corrective action plans are in place and being implemented, and whether published error rates are declining. An agency that has not closed its control gaps by the time it publishes its November report has already determined what its spring 2027 compliance determination will say.
A shifted enforcement backdrop
Agencies entering this reporting cycle are operating under materially different requirements than they were a year ago. Executive Order 14249, signed March 25, 2025, directs pre-payment screening before funds are disbursed and significantly expands mandatory use of Treasury’s Do Not Pay system. Executive Order 14247, also signed March 25, 2025, phased out paper Treasury checks effective September 30, 2025, eliminating one of the most fraud-prone payment vectors. OMB Memorandum M-25-32, issued August 20, 2025, extended Do Not Pay screening requirements across all large federal agencies. And the House Oversight and Government Reform Committee advanced eleven anti-fraud and payment-integrity bills in September 2026.
Treasury’s Do Not Pay Business Center separately reports that its tools helped agencies prevent, detect or recover $11.7 billion in potential fraud and improper payments in fiscal year 2025. That figure is not a component of the GAO improper-payments estimate; it is a distinct metric measuring the output of a specific screening tool.
A gap analysis, not a verdict
The $186 billion does not represent money that has left the government permanently, nor does it represent a single systemic failure. It represents the cumulative output of control points that did not catch what they were designed to catch — eligibility errors, documentation gaps, duplicate disbursements, and payments that processed before the records to support them existed. The compliance cycle opening this week will not produce new control points. It will measure whether the ones that were in place narrowed the gap since fiscal year 2025.
“The $186 billion is the diagnostic, not the disease,” said Heidi Egusquiza, Vice President of Public Sector, Paperless Innovations Inc. “Every CFO shop already knows what its own November report is going to say. The agencies that come out ahead this cycle are the ones that closed the gap before the report forced the conversation.”
Paperless Innovations Inc is FedRAMP® Moderate Authorized and holds Treasury FM QSMO First Source designation under SIN 518210FM on GSA Multiple Award Schedule Contract #47QTCA24D002X. Actus is currently deployed at the Department of Homeland Security.
To learn how Actus addresses obligation and payment controls in federal programs, contact Heidi Egusquiza at heidi@paperless-innovations.com.
About Paperless Innovations Inc
Paperless Innovations Inc, based in Johns Island, South Carolina, builds Actus, the tokenized four-way match platform that verifies federal obligations and payments before funds move, through domestic software development conducted on-shore by a U.S.-based team. The company holds patent-pending status across nine provisional applications for its SmartPayNow™ two-phase gated token. More at act.us.
Media Contact
Heidi Egusquiza, Vice President of Public Sector, Paperless Innovations Inc
heidi@paperless-innovations.com | 888-522-6255