At least $163 billion in pandemic-era unemployment insurance (UI) benefits could have been distributed “improperly,” with a “significant portion attributable to fraud,” Inspector General Larry D. Turner revealed.
According to Turner’s official testimony before the U.S. Senate Committee on Homeland Security and Governmental Affairs in March, roughly 18.71 percent of the $872.5 billion in unemployment benefits was wrongly paid.
Turner said that the volume of investigative matters concerning unemployment benefits is unprecedented. Before the COVID-19 pandemic, the Office of Inspector General (OIG) opened about 120 investigations into unemployment issues each year. Since the pandemic started, however, the office has received over 143,000 unemployment insurance fraud complaints from the U.S. Department of Justice’s National Center for Disaster Fraud.
The OIG has also “independently opened more than 38,000 investigative matters concerning UI fraud.”
“That is an increase of more than 1,000 times in the volume of UI work that we are facing,” Turner said. “UI investigations now account for approximately 94 percent of the OIG investigative case inventory, compared to approximately 11 percent prior to the pandemic.”
Unemployment insurance is typically funded through state employer taxes, with administrative costs covered by federal funding. The Coronavirus Aid, Relief, and Economic Security (CARES) Act and subsequent legislation bolstered and expanded unemployment coverage using federal funding during the pandemic.
Turner suggested that the fraud occurred due in large part to a combination of understaffing, inadequate system resources and a sense of urgency, as well as an “unprecedented infusion of federal funds into the UI program” which “gave individuals and organized criminal groups a high-value target to exploit.”
“That, combined with easily attainable stolen personally identifiable information and continuing UI program weaknesses identified by the OIG over the last several years, allowed criminals to defraud the system,” he said.
Turner asserted that “many states were not prepared to process the volume of new claims under completely new UI programs,” prompting them to ditch “internal fraud controls that had been traditionally used or recommended for the processing of UI claims.”
“This created a situation where fraudsters had a high-reward target where an individual could make a fraudulent claim with relatively low risk of being caught, at least initially, due to the lack of basic anti-fraud measures. As time went on, one fraudster could have been issued several UI debit cards, with tens of thousands of dollars on each card,” he said.
Turner said the OIG will continue working to “strengthen and protect the UI program” in the wake of the pandemic-era fraud. He said the office will also work with law enforcement “to combat fraud in the program.”
