Billions in jobless claims potentially fraudulent

A new government report released Monday verified at least $4.3 billion in fraudulent unemployment claims during the COVID-19 pandemic and said the total could be 10 times that or more.

Responding to a request from Republican members of Congress, U.S. Government Accountability Office staff pored over federal and state workforce agency findings, inspector general reports and Labor Department estimates for the period from March 2020, when the pandemic began, to March 2022.

What they found was:

Unemployment Insurance fraud topped at least $4.3 billion, according to determinations made by state workforce agencies, including that in Michigan, where 54 people had been charged with fraud by state or federal authorities as of December 2021.

No less than $45 billion in unemployment insurance payments "had some indication of potential fraud," the report said, based on data analytics, reports to fraud hotlines and investigations. Without further agency review, however, the GAO said that figure could be off, as "some of the flagged transactions may not be fraudulent and not all fraudulent transactions may be flagged."

Extrapolating the lower range for the estimated rate of fraud in regular unemployment payments during the period to the three temporary unemployment programs created in response to the pandemic, during that period, the estimated total fraud for all programs would be more than $60 billion.

In the wake of the outbreak of the COVID-19 pandemic and shutdowns in March 2020, Congress enacted new federally funded – and temporary – unemployment insurance programs that expanded eligibility, enhanced benefits and extended the duration for which benefits would be available. Nearly $880 billion was paid out under the programs as of September 2022.

The payments gave people resources to pay for food, rent and utilities, the report noted, but it also led to a situation where state unemployment agencies were swamped with claims and reliant on those filing the claims to provide accurate information. It led, in some cases, to applicants' falsifying information, using stolen identities and filing in more than one state, among other abuses. There were also efforts by organized criminal groups to use stolen identities to try to collect benefits.

"Considered together, measures and estimates indicate substantial levels of fraud and potential fraud in unemployment insurance programs during the pandemic," the report said. "However, each measure and estimate (of fraud) has strengths and limitations and none completely and reliably indicates the extent of fraud in UI programs during the pandemic."

The GAO made several recommendations to the Labor Department, including the implementation of a more robust anti-fraud strategy.

Republicans now in charge of the House Ways and Means Committee put out a statement saying the report "only scratches the surface of what is publicly known about the unprecedented scope, size and severity of the fraud."

"This report proves what Republicans have already been saying," said the committee's chairman, U.S. Rep. Jason Smith, R-Mo. "American families ... have watched as hundreds of billions of their hard-earned tax dollars were lost to criminal activity and fraud because Democrats refused to acknowledge the problem and repeatedly rejected Republican efforts to put basic safeguards in place to protect against this activity."

Michigan's workforce agency, part of the Department of Labor & Economic Opportunity, was mentioned in the report as one that used federal grant money to hire staff to improve program integrity and reduce overpayments.

The report also noted the state hired an independent accounting firm that looked at samples involving thousands of claims in 2020 and 2021 for fraud risk indicators and found that while Michigan had paid out as much as $8.5 billion in potentially fraudulent claims, it also avoided paying nearly $29 billion on other potentially fraudulent claims.