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California Auditor Reports Massive Fraud Numbers

The California State Auditor plays a critical role in overseeing state government operations, identifying areas at high risk for waste, fraud, abuse, or mismanagement that could cause serious detriment to the state and its residents. Through periodic audits and reports, the office quantifies financial impacts, highlights systemic vulnerabilities, and recommends improvements. This article examines the extent of auditor-reported fraud and improper payments, drawing from key reports including the recent 2025-601 State High-Risk Audit Program and historical audits on unemployment insurance (UI) fraud during the COVID-19 pandemic. The focus is on fact-based findings, with specific dollar amounts and timelines where available, to provide a clear picture of the issues without partisan interpretation.


Summary of Key Auditor-Reported Financial Impacts

Agency/Program

Time Period

Improper/Questionable Payments

Fraudulent Payments (Estimated/Confirmed)

Notes/Source

EDD - Unemployment Insurance

2023

$727 million (11.44% rate)

$489 million est. / $231 million confirmed

Ongoing high-risk; exceeds federal thresholds.

EDD - Unemployment Insurance

2024

$777 million (11.96% rate)

$513 million est. / $189 million confirmed

Fraud higher than pre-pandemic levels.

DHCS - Medi-Cal

As of April 2025

$1.9 billion questionable

N/A

Down from prior $4 billion; eligibility discrepancies.

CDSS - CalFresh

FFY 2024 onward

Potential $2.5 billion annual (if unaddressed)

N/A

11% error rate; includes $1.8B benefits + $600M admin.

Federal COVID-19 Funds

Since onset (as of July 2025)

$820 million unspent from expired awards

N/A

Total awarded: $285 billion; $2B active, $1.3B expiring by Dec 2026.

EDD - COVID-Era UI (Historical)

2020–2021

N/A

$10.4 billion est. (unverified identities) + $810 million to prisoners

Pandemic surge; up to $30 billion potential under investigation.

Totals (Recent Ongoing Risks)

2023–2025

Approx. $6.724 billion (includes potential and questionable)

$1.002 billion est. / $420 million confirmed

Sums for EDD, DHCS, CDSS, and COVID funds; excludes historical for separation.

Totals (Historical Pandemic Era)

2020–2021

N/A

Approx. $11.21 billion est.

Based on auditor's 2020-628.2 report; broader estimates up to $30 billion.

Note on Recoveries: EDD has recovered approximately $5.9 billion from pandemic-era fraud through investigations and prosecutions.

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Overview of the Auditor's High-Risk Framework

Established under state law, the California State Auditor's high-risk program assesses agencies and issues that pose significant risks to public funds and services. Designations are based on criteria such as potential for substantial financial loss, harm to public health or safety, or failure to deliver essential services. The biennial updates, like the December 2025 report (2025-601), evaluate progress and add or remove designations. Fraud and improper payments—defined as payments made in error, due to ineligibility, or through deceit—are recurring themes, particularly in social services, health care, and unemployment programs. These issues were exacerbated by the COVID-19 pandemic, which strained systems and led to unprecedented payouts.


While the auditor does not always provide a single cumulative fraud total (as investigations evolve), reports detail estimated and confirmed amounts across programs. For instance, the 2025 report emphasizes ongoing risks in eight areas, with financial impacts totaling billions in potential or realized losses. Historical audits, such as 2020-628.2, offer deeper insights into pandemic-era fraud.


Recent Findings: The 2025 High-Risk Audit Program

Released on December 11, 2025, the 2025-601 report retains seven high-risk designations from prior years and adds one new one: the California Department of Social Services (CDSS) for its management of CalFresh (the state's Supplemental Nutrition Assistance Program, or SNAP). The report highlights persistent vulnerabilities leading to improper payments and fraud, with specific quantifications for key agencies.


Employment Development Department (EDD) and Unemployment Insurance

EDD remains high-risk due to inadequate fraud prevention, poor claimant services, and high rates of overturned eligibility decisions in its UI program. Improper payments—encompassing errors, overpayments, and fraud—exceeded federal thresholds in recent years:

  • In calendar year 2023: Improper payment rate of 11.44%, equating to an estimated $727 million in improper payments. Of this, the fraud rate was 7.69%, with estimated fraudulent overpayments of $489 million and established (confirmed) fraud overpayments of $231 million.

  • In calendar year 2024: Improper payment rate of 11.96%, equating to an estimated $777 million in improper payments. The fraud rate was 7.90%, with estimated fraudulent overpayments of $513 million and established fraud overpayments of $189 million.


Overall, improper payments totaled approximately $1.5 billion from 2023 to 2024, with fraudulent payments exceeding $500 million in 2024 alone—higher than pre-pandemic levels (2019). Root causes include inaccuracies in verifying earnings and separations from employment. Additionally, over 43% of UI eligibility decisions were overturned on appeal in 2023–2024, indicating adjudication flaws. EDD has implemented reforms, such as real-time identity verification (launched August 2025) and weekly wage reporting (October 2025), but these have not yet fully mitigated the risks.


Department of Health Care Services (DHCS) and Medi-Cal

DHCS is retained as high-risk for discrepancies in Medi-Cal eligibility systems, which could lead to improper payments or denied benefits to eligible individuals. As of April 2025, these discrepancies resulted in an estimated $1.9 billion in questionable payments—down from at least $4 billion identified in prior reports. Oversight processes, paused during the pandemic, were reinstated, but implementation is in early stages, with the first comprehensive report due December 2025.


California Department of Social Services (CDSS) and CalFresh

Newly designated high-risk, CDSS faces scrutiny for errors in CalFresh benefit calculations. The payment error rate (PER) was nearly 11% in federal fiscal year (FFY) 2024, primarily due to inaccurate income reporting. Under the One Big Beautiful Bill Act (effective FFY 2028), states with PERs above certain thresholds must cover 15% of benefit costs plus administrative penalties. For California, this could mean up to $2.5 billion annually if unaddressed—$1.8 billion for benefits (based on state fiscal year 2024–25 levels) and $600 million for administration. CDSS's corrective action plan includes third-party verification and client education, but full implementation is delayed until FFY 2026.


Management of Federal COVID-19 Funds

This cross-agency issue remains high-risk, with $285 billion in total federal awards since the pandemic's onset. As of July 2025, about $2 billion remains active, but $820 million from expired awards went unspent, indicating waste (e.g., $105 million from a $418 million public health grant that expired in June 2025). An additional $1.3 billion is set to expire by December 2026. Prior audits issued 85 recommendations, of which 20 remain unimplemented, heightening risks of misuse or loss.


Other retained high-risk areas, such as state financial reporting, include $6.1 billion in material errors for education funding (Proposition 98) and late annual comprehensive financial reports (ACFRs). The report does not aggregate a total fraud figure but underscores billions in ongoing exposures.


Historical Context: COVID-19 Era UI Fraud (2020–2021 Audits)

The pandemic dramatically amplified fraud risks, particularly in EDD's UI program, which saw claims surge from 3.3 million in 2019 to over 16 million in 2020. The January 2021 audit (2020-628.2) revealed EDD's unpreparedness, including delayed fraud detection and removal of safeguards.

  • Estimated fraudulent payments totaled about $10.4 billion for claims with unverified identities as of late December 2020.

  • An additional $810 million was paid on claims filed under incarcerated individuals' names, due to EDD's failure to cross-match claims with correctional data.

Causes included waiting four months to automate anti-fraud measures, incomplete actions against suspicious addresses, and lacking a centralized fraud unit. EDD reported over 110,000 UI overpayments due to fraud during the pandemic. Subsequent state estimates expanded this: By 2021–2022, confirmed fraud reached about $11 billion, with up to $20–30 billion potentially fraudulent under investigation.


Recovery efforts have progressed; as of recent updates, EDD recovered approximately $5.9 billion in stolen funds through investigations and prosecutions. However, the audit criticized EDD for relying on "uninformed and disjointed techniques," recommending better recession planning and tool assessments.


Federal estimates of the extent of the California UI fraud are much higher, potentially as high at $30 billion.


Broader Implications and State Responses

The auditor's findings reveal systemic issues: outdated IT systems, insufficient data cross-matching, and pandemic-induced backlogs contributed to vulnerabilities. While not all improper payments are fraudulent (some stem from errors), the financial toll is significant—potentially tens of billions historically, with billions more at risk annually.

State agencies have disputed some designations (e.g., CDSS citing federal law changes for CalFresh risks), but the auditor recommends targeted audits to address root causes. Progress includes enhanced verification tools and oversight units, yet unimplemented recommendations (e.g., 20% for COVID funds) persist.


Conclusions

In conclusion, the California State Auditor's reports document extensive fraud and improper payments measured in the billions of dollars. All this from a non-partisan auditors office. There are other independent estimates circulating social media that place the fraud in California at up to $76.5 billion. In response to all of this Attorney General Pam Bondi has appointed Bill Essayli to be the acting US Attorney to investigate California Fraud. Essayli is a former California Assemblyman for Riverside County. Based on his actions to date, he is wasting little time.


Sources

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