February 5, 2023

By Tami Luhby, CNN

(CNN) – More than $60 billion may have been paid out in fraudulent unemployment insurance benefits during the Covid-19 pandemic, according to a report released Monday by the U.S. Government Accountability Office.

However, the Authority warned that the estimate has limitations and should be interpreted with caution. The actual amount of pandemic unemployment benefit fraud could be “substantially higher”.

At least $4.3 billion in unemployment benefit fraud has been formally identified by state employment agencies, while at least $45 billion in payments have been flagged as potential fraud by the US Department of Labor’s Office of Inspector General, GAO said. However, this cannot be interpreted as the extent of the problem, it said.

The GAO report offers the latest glimpse into multiple plots to steal money from a series of rushed pandemic relief programs.

It comes a week before the newly in power Republicans plan to launch their first probe into fraud in the pandemic support effort. The House Oversight Committee said it would hold a Feb. 1 hearing on “the rampant waste of taxpayers’ money in COVID relief programs.”

The committee, chaired by Kentucky Rep. James Comer, sent letters to the Department of Labor and its Office of the Inspector General, as well as to the state Departments of Labor in California, New York and Pennsylvania, asking for more information about fraudulent jobless claims.

“We owe it to Americans to find out how hundreds of billions of tax dollars spent under the guise of pandemic relief have been wasted through waste, fraud, abuse and mismanagement,” Comer said.

The Department of Labor said it had received Comer’s letter and was reviewing it.

A wave of fraud

Fraud in the country’s unemployment system skyrocketed after Congress passed a historic expansion of the program to help Americans navigate the economic upheaval sparked by the Covid-19 pandemic in March 2020. State employment agencies were overwhelmed with a record number of applications and relaxed some requirements in an effort to get the money quickly to those who lost their jobs.

States and Congress then tightened their verification requirements to combat the fraud, particularly in a new temporary program that allowed freelancers, gig workers and others to collect benefits for the first time.

A key component of the relief efforts was a weekly federal supplement for unemployed Americans. Unemployed people received a $600 weekly increment from April to July 2020. Congress then revived the increase in late December 2020, but reduced it to $300 per week. That amendment expired in September 2021, though many Republican-run states and one with a Democratic governor ended it earlier.

The legislature has also created two other important measures to support the unemployed. The Pandemic Unemployment Assistance Program provided payments for freelancers, self-employed, independent contractors and certain people affected by the outbreak, while the Pandemic Emergency Unemployment Compensation Program extended payments for those who had exhausted their regular government benefits. These programs also ended in September 2021.

From April 2020 to September 2022, a total of about $878 billion was paid out in pandemic unemployment benefits, GAO said, citing data from the Department of Labor.

More needs to be done

The Labor Department has taken steps to address fraud risks, including issuing guidance, providing funding to states, and sending teams to recommend improvements to state unemployment insurance programs, GAO said. But the office described the approach as “ad hoc”.

The department has yet to develop an anti-fraud strategy based on GAO’s Fraud Risk Framework and address six October 2021 Office recommendations. This includes identifying, assessing the impact and prioritizing unemployment insurance fraud risks.

GAO placed the unemployment insurance system on its high-risk list last June.

In response, the Department of Labor said it had proceeded to implement the recommendations in 2022. It is also working to develop a risk profile for unemployment insurance fraud under the GAO framework.

However, the department also noted that it has a strategic plan on unemployment insurance integrity and many of the strategies address identified fraud risks.

Report of the Inspector General

The GAO report’s estimate is higher than one released by the Department of Labor’s Office of the Inspector General in September. The latter said that between March 2020 and April 2022, $45.6 billion in unemployment benefits may have been fraudulently paid out in four high-risk areas.

The inspector general investigated payments tied to Social Security numbers of people who filed in multiple states, were deceased, were federal prisoners, and used suspicious email accounts in their applications.

Also, the Office of the Inspector General said the Employment and Training Administration of the Department of Labor, which oversees the unemployment insurance program, has failed to implement the Office’s earlier recommendations to prevent fraud in these areas. In a response, the department said it remains “active and aggressive in addressing fraud” in unemployment compensation programs.

In its 2021 mid-year report to Congress, the Office of the Inspector General said at least $87 billion in unemployment benefits may have been improperly paid, with a significant portion due to fraud — based on a historical rate of improper payments of 10% or more. However, the bureau noted that its audits and investigations indicate that the improper payment rate will eventually be much higher than 10%.

The CNN Wire
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