The General Accounting Office (GAO) analyzed over 77,000 cases of fraud and other illegal activities reported in the agencies during the 2.5-year period from October 1, 1976, through March 31, 1979. A statistical projection by GAO indicates that the loss to the Government on the 77,000 cases would total between $150 and $220 million. However, this projection does not include the cost of undetected fraud. In addition to dollar losses, fraud erodes public confidence in the Government's ability to manage its programs efficiently and undermines program effectiveness. GAO found that weak internal controls often contributed to cases of fraud and other illegal activities. The Department of Justice (DOJ) declined to prosecute 61 percent of the over 12,000 cases referred by Federal agencies mainly because the cases lacked adequate evidence, prosecutive merit, or involvement of large financial losses. Although DOJ got a conviction or guilty plea in the majority of cases it did prosecute, about one-third of those sentenced actually spent time in prison; 57 percent of those who went to prison were sentenced to 6 months or less. Besides criminal prosecutions, DOJ can take civil legal action under the False Claims Act against persons who defraud the Government. This act allows the Government to recover double damages from those who make certain types of false claims. The act also allows the Government to recover one $2,000 forfeiture for each false claim made. DOJ took civil action in 28 of the 393 fraud cases referred for such action during the review period. Moreover, agencies do not always use the administrative actions available to them to deter persons from committing fraud. GAO recommends that Congress enact the Federal Managers' Accountability Act of 1981 and consider the merits of passing legislation allowing agencies to assess civil monetary penalties against persons who defraud Federal programs. Most important, internal controls need to be improved so that fraud and internal theft are more difficult to commit. Agencies' comments, footnotes, figures, graphs, appended letters, and a list of agency abbreviations are provided. (Author abstract modified)