How Much Fraud and Waste Actually Existed in USAID Programs?
Audits of $10 billion in USAID spending in Afghanistan, one of the most challenging operating environments on earth, found a disallowed cost rate of just 0.3%. Across all of USAID, the specific fraud examples cited to justify the agency’s shutdown totaled approximately $120 million over two decades, or about $6 million per year, representing 0.026% of the annual budget.
The primary justification given for shutting down USAID in 2025 was fraud, waste, and abuse. The claim was that the agency was riddled with corruption and that taxpayer money was being squandered. But what do the actual audit records, inspector general reports, and independent analyses show? This article examines the evidence from the people and organizations that were responsible for finding and reporting fraud in these programs, including a firsthand account from someone who spent nearly 20 years doing exactly that.
This article accompanies Episode 40 of The Dr Kumar Discovery, where Dr. Kumar interviews Keith Hourihan, who spent nearly two decades conducting fraud investigations and program audits across 45 to 50 countries for major USAID implementing organizations.
Dr. Kumar’s Take
This is the article I think people need to read most carefully, because the gap between what was claimed and what the evidence shows is enormous. The administration said USAID was wasteful and corrupt. The actual audit data shows a fraud rate of 0.026% of the budget. Keith Hourihan was the person whose job it was to find fraud. He investigated 75 to 80 cases per year, and most of what he found were fake taxi receipts and inflated hotel claims. The few larger cases were caught by internal controls, the money was repaid by the implementing organizations, and the inspector general was notified. That is what a functioning accountability system looks like. Meanwhile, the Pentagon spent $93.4 billion in one month, including $15 million on ribeye steaks and $7 million on lobster tails, and nobody shut that down. If we are going to apply the standard of waste, fraud, and abuse to justify eliminating a program, we should at least apply it consistently.
The Audit Evidence from Afghanistan
The most rigorous publicly available data on fraud in USAID programs comes from the Special Inspector General for Afghanistan Reconstruction (SIGAR), which audited USAID spending in one of the most fraud-prone operating environments in the world.
According to an analysis by the Center for Global Development, SIGAR conducted 284 financial audits examining $10 billion in spending through December 2024. The total amount of costs disallowed, meaning costs that auditors determined were improperly spent, was $31.33 million. An additional $27.98 million was awaiting agency determinations. Approximately $30 million had been recovered.
That translates to a disallowed cost rate of approximately 0.3% in a war zone. For context, this means that 99.7% of every dollar spent in Afghanistan, during active conflict, with all the logistical challenges Keith Hourihan described in the podcast, passed audit scrutiny.
In Ukraine, a more recent area of U.S. foreign assistance, USAID Inspector General audits of nearly $500 million in spending by 12 implementing organizations found just $186,899 in questioned costs, with five of the twelve implementers receiving zero audit findings.
The Examples Cited to Justify the Shutdown
NPR and the Center for Global Development both examined the specific fraud examples the administration cited when justifying its decision to terminate USAID programs. Their analysis found that all of the cited spending examples totaled approximately $120 million over roughly two decades, amounting to about $6 million per year, or approximately 0.026% of USAID’s annual budget.
The former USAID inspector general stated publicly that fraud, waste, and abuse was not rampant at USAID, and that several of the examples cited by the administration were “completely made up.” NPR interviewed six USAID and State Department officials who said that the review process was, at best, surface-level, with administration staff searching for keywords like “gender” or “family planning” to identify programs for termination rather than conducting actual fraud assessments.
An Insider’s Perspective: 75 to 80 Cases Per Year
Keith Hourihan’s account in the podcast provides an unusually detailed insider view of what fraud actually looked like in these programs. As the head of internal audit, compliance, and investigations for major USAID implementing organizations, he averaged 75 to 80 reported cases per year. Of those, roughly 45% had credibility. And of those credible cases, most involved small-dollar items.
The most common types of fraud he encountered:
- Fake taxi receipts and inflated per diem claims: Staff claiming hotel stays they did not make or transportation costs they did not incur. Typically in the range of $60 to a few hundred dollars.
- Procurement manipulation: Vendors colluding to provide fake competing quotations, or procurement staff steering contracts to preferred vendors through rigged technical specifications.
- Ghost participants: Fabricated names on training attendance lists to pocket the per diem allowances.
- Salary kickbacks: Agreements between managers and staff where the official salary is higher than what the employee actually receives, with the manager pocketing the difference in cash.
- Product substitution: Delivering cheaper goods than what was ordered and invoiced, pocketing the difference.
Critically, Hourihan emphasized that when fraud was found, the implementing organizations paid the money back out of their own unrestricted funds and reported the issue to the USAID inspector general. This was not an optional gesture. Organizations that failed to maintain rigorous internal controls risked suspension and debarment, and at least one major implementing organization, AED, was effectively put out of business after a procurement fraud case involving approximately $90,000, despite being one of the largest implementers in the world with half a billion dollars in annual revenue.
The Comparison That Matters
Dr. Kumar raised an important contextual point in the podcast: if fraud and waste are the standard for shutting down a program, that standard should be applied consistently across government.
In September 2025, the Department of Defense spent $93.4 billion on contracts and grants in a single month, the highest single-month spending by any federal agency since at least 2008 according to Open the Books. In the last five business days of September alone, the Pentagon spent $50.1 billion. The spending included $15.1 million for ribeye steaks, $6.9 million on lobster tails, $2 million for Alaskan king crab, over $225 million for furniture, and a Steinway grand piano costing more than $98,000.
USAID’s entire annual budget of $23 billion was roughly one-quarter of what the Pentagon spent in that single month. The documented fraud rate in USAID programs was 0.026% of the budget. No comparable efficiency analysis has been applied to the September 2025 defense spending spree.
Practical Takeaways
- Audits of $10 billion in USAID spending in Afghanistan, a war zone, found a disallowed cost rate of just 0.3%, meaning 99.7% of funds passed audit scrutiny.
- The specific fraud examples cited to justify shutting down USAID totaled approximately $6 million per year, or 0.026% of the annual budget, over two decades.
- Internal accountability systems at USAID implementing organizations caught most fraud through audits and hotlines, and implementing partners repaid misused funds out of their own budgets and reported to the inspector general.
Related Studies and Research
- PEPFAR put 20 million people on HIV treatment and prevented nearly 8 million infected births demonstrates what those efficiently spent dollars actually produced.
- Lancet study projects 14 million preventable deaths by 2030 from U.S. foreign aid cuts quantifies the projected cost of the decision to shut USAID down.
- The economic return of U.S. foreign aid spending examines how 40% of foreign aid dollars circled back to the American economy.
FAQs
Was USAID really shut down because of fraud?
The stated reason was fraud, waste, and abuse, but the available evidence does not support this claim at scale. The former USAID inspector general publicly stated that fraud was not rampant. Independent analyses found that the cited examples totaled approximately $6 million per year on a $23 billion budget. Six USAID and State Department officials told NPR that the review process involved keyword searches for terms like “gender” and “family planning” rather than actual fraud assessments.
How does USAID’s fraud rate compare to other government agencies?
The documented fraud rate in USAID programs was approximately 0.026% of the annual budget based on cited examples, and 0.3% in Afghanistan based on comprehensive audits. By comparison, the Government Accountability Office has estimated that improper payments across all federal agencies totaled approximately $236 billion in fiscal year 2023. USAID’s fraud rate was orders of magnitude lower than the government-wide rate for improper payments.
Did implementing organizations really pay back fraud losses out of their own funds?
Yes. Keith Hourihan confirmed this directly from his experience. When fraud was discovered in programs managed by implementing organizations, those organizations were contractually required to repay the misused funds from their own unrestricted budgets, not from USAID funds. They would then report the issue to the USAID inspector general and cooperate with any further investigation. The consequences of failing to maintain these controls were severe, as demonstrated by the case of AED, a major implementing organization that was effectively put out of business after a single procurement fraud case.
Bottom Line
The evidence from inspector general audits, independent analyses, and firsthand accounts from fraud investigators consistently shows that actual fraud in USAID programs represented a tiny fraction of the budget, with robust internal controls catching most issues and implementing organizations repaying misused funds. The 0.3% disallowed cost rate in Afghanistan and the 0.026% rate based on cited examples do not support the characterization of USAID as a wasteful or corrupt agency. The gap between the political narrative and the audited evidence is significant.
Listen to Keith Hourihan’s full account on Episode 40 of The Dr Kumar Discovery.
Sources:
- Center for Global Development. “Thinking Through Waste, Fraud and Corruption in US Foreign Assistance." 2025.
- Special Inspector General for Afghanistan Reconstruction (SIGAR). Financial audit data through December 2024.
- NPR. “Clawing back foreign aid is tied to ‘waste, fraud and abuse.’ What’s the evidence?" July 2025.
- Open the Books. Pentagon September 2025 spending analysis. March 2026.
