By Brett Rowland (The Center Square)
A little more than $1 out of every $5 distributed in unemployment insurance benefits during a pandemic may be improper, mostly fraudulent.
US Department of Labor Inspector General Larry Turner said Wednesday that at least $191 billion of the $888 billion in total federal and state unemployment insurance benefits during the pandemic may have been improperly paid, “a significant portion of which can be attributed to fraud.” Turner told members of the House Ways and Means Committee during the hearing. This is higher than the previous estimate of $163 billion.
“Relying solely on claimant self-certifications without proof of eligibility and wages during the first nine months of the program has made the pandemic unemployment assistance program highly susceptible to fraud,” he said.
Related: IG Report ‘Historic’ $400 Billion in Covid Unemployment Funds Lost to Fraud, Waste
The Pandemic Unemployment Assistance Program provides unemployment insurance benefits to people who have not traditionally been eligible for benefits, including gig workers, self-employed workers and independent contractors.
States administer unemployment insurance under the supervision of the United States Department of Labor. For more than eight decades, the joint state-federal program has served as a safety net for people who lose jobs through no fault of their own. When the pandemic hit, a combination of factors led to an increase in improper payments and fraud. A 2022 audit found that fraudulent claims were paid 60.5% of the time from March 28, 2020, to September 30, 2020.
“It created multiple high-reward targets where a person could make a fraudulent claim with relatively little risk of being caught,” Turner said. “For example, over time, a fraudster could be issued several UI debit cards with hundreds of thousands of dollars on each card.”
As an example, Turner cited a man who claimed from a three-bedroom house that was the shared location for 90 other claims. The same person also shared a flagged email address with 145 other claims In total, that individual was connected to 235 other claims in three states and received benefits in 87 of those claims, all filed in California, for a total of $1,569,762. According to the 2022 audit, California stopped payments 164 days after the initial payment when officials were unable to verify the person’s identity.
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Part of the problem was the nature of the crisis. The pandemic and the government’s response to it put millions of people out of work within weeks. Unemployment levels have reached historic levels. On March 14, 2020, the Labor Department reported 282,000 initial unemployment claims. Within weeks, initial claims had risen 10 times the pre-pandemic level, “much more than state systems were designed to handle,” Turner said in written testimony. In five months, the Labor Department reported 57.4 million initial claims, the largest increase since the agency began tracking unemployment insurance data in 1967.
Problems with the unemployment insurance program predated the pandemic. Turner said the program had among the highest improper payment rates in the federal government. It was above 10% for 15 of the previous 19 years. Over the past two years, the agency estimated improper payment rates of 18.71% and 21.52%, respectively.
Related: How much pandemic aid lost to fraud? The answer is still ‘impossible to predict’.
US Comptroller General Gene Dodaro told the committee that some progress has been made in preventing fraud, but more remains to be done.
“I think we’re a little better prepared, but not quite prepared for the next crisis,” he said. “Several of our recommendations to the Labor Department are yet to be fully implemented. I think states are trying to improve – there are some improvements that have been made, but they are all ad hoc. There isn’t a systematic way to do it.”
He said the government should work to recover fraud as much as possible, prevention will go further.
“The only way to deal with it effectively is to prevent it up front,” Dodaro said.
Pandemic Response Accountability Committee Chairman Michael Horowitz told the House Ways and Means Committee that the fraud is not limited to US residents.
“One of our biggest challenges is tracking fraud through foreign gang activity and fraudsters,” Horowitz said. “The Secret Service reported that they found that could happen through entities in Nigeria, China, Russia. That will be our biggest challenge.”
U.S. Rep. Vern Buchanan, R-Florida, asked for an estimate of how much such fraud has cost U.S. taxpayers.
Horowitz said no such estimates were available.
“It is among the most difficult frauds to find, track and trace,” he said. “Because it’s through foreign networks … the process is very challenging.”
Syndicated with permission from Center Square.