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 US Government Accountability Office.
The watchdog agency, however, warned that the estimate has limitations and should be interpreted with caution. The actual amount of pandemic unemployment benefits fraud may be “substantially higher.”
At least $4.3 billion in jobless benefits fraud has been formally determined by state unemployment agencies, while at least $45 billion in payments have been flagged for potential fraud by the US Department of Labor’s Office of Inspector General, the GAO said. But this cannot be interpreted as the extent of the problem, it continued.
The GAO report provides the latest insight into the numerous schemes to steal money from a range of hastily implemented pandemic relief programs.
It comes a week before newly in power House Republicans plan to launch their first investigation into fraud in pandemic assistance efforts. The House Oversight Committee said it will hold a hearing on “the rampant waste of taxpayer dollars in COVID relief programs” on February 1.
The committee, chaired by Rep. James Comer of Kentucky, sent letters to the Department of Labor and its inspector general’s office, as well as the state labor departments in California, New York and Pennsylvania, asking for more information about fraudulent jobless benefits claims.
“We owe it to Americans to identify how hundreds of billions of taxpayer dollars spent under the guise of pandemic relief were lost to waste, fraud, abuse and mismanagement,” Comer said.
The Department of Labor said it received Comer’s letter and is reviewing it.
A surge in fraud
Fraud within the nation’s unemployment system skyrocketed after Congress enacted a historic expansion of the program to help Americans deal with the economic upheaval sparked by the Covid-19 pandemic in March 2020. State unemployment agencies were overwhelmed with record numbers of claims and relaxed some requirements in an effort to get the money out the door quickly to those who had lost their jobs.
States and Congress subsequently tightened their verification requirements in an attempt 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 effort was a federal weekly supplement for out-of-work Americans. The jobless received a $600-a-week boost from April through July of 2020. Congress then revived the enhancement in late December 2020 but reduced it to $300 a week. That supplement expired in September 2021, though many states led by Republicans and one with a Democratic governor ended it earlier.
Lawmakers also created two other major measures to aid the jobless. The Pandemic Unemployment Assistance program provided payments for freelancers, the self-employed, independent contractors and certain people affected by the outbreak, while the Pandemic Emergency Unemployment Compensation program extended payments for those who exhausted their regular state benefits. Those programs also ended by September 2021.
A total of about $878 billion in pandemic unemployment benefits were paid from April 2020 through September 2022, the GAO said, citing Department of Labor data.
More needs to be done
The Department of Labor has taken steps to address fraud risks, including issuing guidance, providing funding to states and deploying teams to recommend improvements to state unemployment insurance programs, the 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 to address six recommendations the office made in October 2021. These include identifying, assessing the impact of and prioritizing unemployment insurance fraud risks.
The GAO added the unemployment insurance system to its high-risk list last June.
In response, the Department of Labor said that it proceeded with implementing the recommendations during 2022. It is also working to develop an unemployment insurance fraud risk profile in accordance with the GAO’s framework.
But the department also noted that it has an unemployment insurance integrity strategic plan, and many of the strategies address identified fraud risks.
Inspector general report
The GAO report’s estimate is higher than one released by the Labor Department’s Office of Inspector General in September. The latter said that $45.6 billion in pandemic unemployment benefits may have been fraudulently paid in four high-risk areas between March 2020 and April 2022.
The inspector general looked at payments tied to Social Security numbers of people who filed in multiple states, who were deceased, who were federal prisoners and who used suspicious email accounts in their claims.
Also, the inspector general’s office said that the Department of Labor’s Employment and Training Administration, which oversees the unemployment insurance program, had not implemented the office’s previous recommendations to thwart fraud in these areas. In a response, the department said it continues to “actively and aggressively address fraud” in unemployment compensation programs.
In its semiannual report to Congress in 2021, the inspector general’s office said that at least $87 billion in jobless benefits may have been paid improperly, with a significant portion due to fraud – based on a historical improper payment rate of 10% or higher. But the office noted that its audits and investigations indicate the improper payment rate will ultimately turn out to be much higher than 10%.