In Washington, the word “fraud” is having a moment.  After President Donald Trump publicly signaled interest in investigating California for widespread misuse of public funds, several members of California’s Republican congressional delegation moved quickly to turn that spotlight into a policy campaign—one aimed at tightening oversight of federal dollars flowing through state-administered programs.

The dispute is not over whether fraud exists.  It does.  The live debate is whether California’s repeated, high-dollar cases indicate something exceptional—an environment of “tolerated” abuse—or a familiar governance failure: large programs, rushed delivery, thin verification, and reforms that arrive after the losses are booked.

“Fraud thrives where money moves faster than verification.”

A national baseline: improper payments are not the same as fraud, but they highlight systemic vulnerabilities that California faces.

One reason the argument becomes heated is that “fraud” is often used as shorthand for a broader category of payment issues.  The U.S. Government Accountability Office (GAO) reported that federal agencies identified about $162 billion in improper payments in fiscal year 2024—payments that should not have been made or were made for the wrong amount.  GAO emphasizes that improper payments can result from overpayments, documentation failures, or recordkeeping errors, and are not always the product of criminal intent—though fraudulent payments always fall within the improper-payment bucket.

That distinction matters because it points to two different solutions: law-enforcement actions for willful deception, and program redesign for weak controls.  In practice, the same high-risk systems often need both.

Why California draws the spotlight in federal fraud debates is crucial to understanding the state’s governance and oversight challenges.

California is a high-visibility target for three reasons.  First, it administers large programs at scale, creating more opportunities for losses—especially in emergencies.  Second, the state’s pandemic experience produced eye-catching numbers that continue to shape public perception.  Third, in a polarized national environment, allegations of waste and fraud have become a political instrument used to justify sharper federal oversight—or, depending on the argument, reductions in social spending.

The congressional offensive: audits, coordination, and “real teeth.”

Rep. Kevin Kiley (R-CA) has asked GAO to study the “amount of waste, fraud and abuse” California has experienced and to break findings down by sector—housing, healthcare, transportation, and more.  In statements about the request, Kiley cited California’s pandemic-era losses and vulnerabilities in homelessness-related spending as evidence that oversight has repeatedly failed.

Rep. Young Kim (R-CA) has pursued a different lever: coordination.  Her proposed Federal Fraud Interagency Task Force would consolidate and align investigations now spread across multiple federal bodies.  As described publicly, the approach is designed to reduce duplication, share data more effectively, and focus enforcement resources where federal dollars are being exploited.

“When everyone owns a piece of the problem, no one owns the outcome.”

The “receipts”: what auditors and prosecutors have documented

Pandemic unemployment is an emblematic example.  A California State Auditor report concluded that significant weaknesses in the Employment Development Department’s fraud-prevention approach contributed to billions in improper payments.  The report described the delayed automation of key safeguards.  It highlighted payments later flagged as potentially fraudulent due to unverified identities, as well as the estimated total paid on claims associated with incarcerated individuals.

Separate investigative reporting has broadened the critique from agency failures to legislative follow-through.  A CBS News California analysis of audit recommendations dating back to 2015 found that lawmakers failed to enact roughly three out of every four recommendations requiring legislative action, leaving hundreds of recommendations outstanding across more than 100 issues and agencies.

Homeless-related funding has led to a series of high-profile prosecutions.  In October 2025, federal prosecutors announced two unrelated criminal cases involving Los Angeles-area real estate figures accused of using fabricated financial documents to obtain or leverage public funds tied to homelessness housing initiatives.  In one case, prosecutors alleged that a former CFO helped secure nearly $26 million in Project Homekey money using bank documentation that did not reflect real deposits, and that the intended project was never completed.

California’s rebuttal: the state says it is not complicit—and points to enforcement

California Attorney General Rob Bonta has forcefully rejected the idea that the state government is “in on” fraud.  In a February 2026 statement, he argued that bad actors frequently target public programs.  He emphasized that California DOJ has made fraud enforcement a core function for years—often in partnerships with federal investigators.  His office reported recovering nearly $2.7 billion through criminal and civil actions over the last decade, alongside thousands of investigations and hundreds of defendants charged.

To underscore that point, California DOJ highlighted active prosecutions, including arrests and felony charges announced in early February 2026 in a Monterey County hospice-fraud case alleging a multi-year scheme to bill Medi-Cal and Medicare for hospice services for patients who were not terminally ill.  The department reported an estimated loss of about $3.2 million in that area.

The political risk: anti-fraud rhetoric can become a proxy war over social services

Some Democrats have said they welcome oversight but warn that sweeping allegations can be used to justify broad program cuts rather than targeted fixes.  In interviews, Democratic members described support for improving government performance while cautioning against framing that blames recipients or treats social services as inherently suspect.

So is fraud “tolerated”—or are systems simply not built for adversaries?

Large, fast-moving programs, especially emergency programs, are magnets for organized fraud because they route money through processes not designed to withstand adversarial pressure.  This should prompt the audience to question the reliability of public systems and their trust in governance.

This is where GAO’s national data becomes relevant to the California debate.  Improper payments remain a persistent federal problem, and the GAO’s recommended remedies repeatedly involve stronger monitoring, improved data analytics, and earlier identification of at-risk programs.  The question is whether California and Washington will apply those lessons consistently—or selectively, depending on the politics of the moment.

Conclusion: what “serious” fraud reform would look like

If the goal is fewer losses—not louder rhetoric—then reform has to be measurable.  Three steps would meaningfully harden systems without turning payment integrity into partisan theater.

·       Design high-dollar programs for verification up front: identity checks, eligibility matches, and automated anomaly detection before funds leave the system.  This approach can restore faith in public programs and motivate support for reforms.

·       Treat audit recommendations like operational debt: publish deadlines, require responses, and track “no action” outcomes so oversight can’t disappear in committee.

·       Coordinate investigations and data across agencies: reduce duplication, speed referrals, and ensure enforcement is paired with program fixes so the same vulnerabilities do not recur.

California does not need a slogan about fraud.  It requires a standard: any program that moves billions should be built as if criminals will apply—because they will.  If Washington wants credibility, it should treat payment integrity as a national governance issue and apply scrutiny evenly rather than using one state as a proxy battlefield.

Sources and reporting notes

Spectrum News (5 February 2026): coverage of California Republicans’ fraud-focused proposals: https://spectrumlocalnews.com/mo/st-louis/politics/2026/02/05/as-trump-admin-focuses-on-fraud--california-republicans-go-all-in

U.S. GAO (11 March 2025): $162B improper payments estimate for FY2024 and definition notes: https://www.gao.gov/press-release/gao-reports-estimated-162-billion-improper-payments-across-federal-government-fiscal-year-2024

California State Auditor (Jan. 2021): EDD high-risk audit on fraud prevention weaknesses: https://ains.assembly.ca.gov/sites/ains.assembly.ca.gov/files/EDD%20Audit%20Report.pdf

CBS News California (27 January 2026): analysis of unimplemented audit recommendations: https://www.cbsnews.com/news/california-lawmakers-ignore-most-state-audit-warnings/

ABC7 Los Angeles (17 October 2025): federal cases involving alleged misuse of homelessness housing funds: https://abc7.com/post/2-la-county-real-estate-developers-charged-separate-multimillion-dollar-housing-fraud-cases/18027429/

California DOJ (5 February 2026): Bonta statement on fraud enforcement metrics: https://oag.ca.gov/news/press-releases/attorney-general-bonta-denounces-trump-administration%E2%80%99s-political-weaponization

California DOJ (5 February 2026): hospice fraud arrests and case summary: https://oag.ca.gov/news/press-releases/attorney-general-bonta-announces-seven-arrests-hospice-fraud-my-office-it

Rep. Kevin Kiley (3 February 2026): announcement of GAO request and cited figures: https://kiley.house.gov/posts/rep-kiley-calls-for-congressional-investigation-into-massive-waste-fraud-and-abuse-in-california