The U.S. government estimated unemployment fraud during the pandemic cost taxpayers up to $135 billion or about 11% to 15% of the total amount of unemployment insurance benefits paid during the pandemic.
That’s according to the latest report from the U.S. Government Accountability Office, which the U.S. Department of Labor disputes.
“The full extent of [unemployment insurance] fraud during the pandemic will likely never be known with certainty,” according to the report.
The Department of Labor took issue with Government Accountability Office’s fraud estimate, saying it was likely overstated. However, the Government Accountability Office disagreed.
“The unprecedented demand for UI benefits and the need to quickly implement the new programs during the pandemic increased the risk of fraud,” according to the report. “The increased significance of the UI system during the pandemic drew attention to its vulnerabilities and susceptibility to fraud, waste, abuse, and mismanagement.”
U.S. Senate Finance Ranking Member Mike Crapo, R-Idaho, said more needs to be done to prevent fraud.
“These shocking estimates continue to grow, and, as GAO notes, we may never know the full scope and scale of fraudulent pandemic payments,” he said in a statement. “Congress should pass the Protecting Taxpayers and Victims of Unemployment Fraud Act to recoup stolen funds for victims and prevent similar large-scale theft from happening in the future.”
U.S. House Ways and Means Chairman Jason Smith, R-Missouri, said the fraud hurts working families.
“I am extremely alarmed by these findings and even more convinced that immediate action is needed to recover as much taxpayer dollars as possible,” Smith said in a statement. “Unemployment fraud punishes workers and families by taking resources away from law abiding Americans who deserve assistance and puts those resources directly in the pockets of criminals.”
Expenditures across the UI system totaled about $900 billion from April 1, 2020, through May 31, 2023, according to Department of Labor. That includes about $230 billion under the regular UI and Expanded Benefits programs and about $670 billion under the pandemic UI programs that expired on Sept. 6, 2021. Twenty-four states ended their participation in at least one of the pandemic UI programs before the programs expired.
States have reported recovering about $1.2 billion in fraudulent overpayment as of May 1, 2023, according to the Government Accountability Office.
The Protecting Taxpayers and Victims of Unemployment Fraud Act would incentivize states to recover overpayments. The measure would allow states to retain 25% of any recovered fraudulent overpayments. That money may be used for modernizing unemployment compensation systems and information technology, reimbursing administrative costs, hiring fraud investigators and prosecutors, and for other program integrity activities, according to the bill. Additionally, the bill allows states to retain 5% of any overpayments of regular and extended unemployment insurance benefits. To retain these overpayments, a state must certify that it has met certain conditions for data matching. The bill also gives states more time to recover overpayments by extending the time limit from 3 years to 10 years for pandemic unemployment insurance benefits.
President Joe Biden has said he would veto the bill should it reach his desk.
“Contrary to its stated purpose, this bill would strip state Unemployment Insurance programs of essential resources to fight fraud, combat identity theft, and recover overpayments, and would set back the goals of strengthening program integrity and combating systemic fraud,” according to a statement of administration policy. “The bill would stop work on the modernization of antiquated UI systems in states across the country, undermining efforts to detect and deter fraud and improve identity verification and cybersecurity while ensuring timely, equitable, and accurate delivery of benefits to eligible workers.”
