Government spending and fraud are regular dance partners, but rarely as cheek to cheek as they were with unemployment payments during the pandemic. A new report adds more evidence about the failure to protect taxpayers.
The Government Accountability Office this week released a review of the Labor Department’s handling of $878 billion in unemployment insurance handouts from April 2020 to September 2022. Labor estimates that fraud in its normal unemployment program hit $8.5 billion from July 2020 through June 2021. That’s 8.6% of outlays.
GAO extrapolated the lower bound of this fraud rate (7.6%) across the three additional unemployment programs Congress created for the pandemic, and it estimates taxpayers overall underwrote some $60 billion in fraudulent payments. This buttresses last year’s Labor Department Inspector General estimate of at least $45 billion in fraud. As GAO notes, Congress’s “unprecedented infusion of federal Covid-19 relief funds into UI programs during the pandemic gave individuals and organized crime groups a high value target to exploit.”
Take the Pandemic Unemployment Assistance program, designed to help self-employed workers and independent contractors. Congress was so eager to hand out cash that for most of 2020 it allowed applicants to “self certify” their eligibility—requiring no documentation of self-employment.
The program predictably ballooned, comprising over 40% of the more than 3.2 million unemployment claims submitted the week ending May 23, 2020. GAO reports that “the increased amount of benefits awarded and the PUA program’s initial reliance on self-certification” inspired a rash of swindlers.
Thousands cheated the system by falsifying information on income or employment. GAO relates one case in which a former state workforce agency employee used pilfered information to submit at least 197 fraudulent applications. Another individual collaborated with prison inmates to bilk $180,000, and one thief stole identities to submit at least 300 claims in 17 states and territories.
The government excuse is that it was erring on the side of getting people aid quickly. Yet any Member of Congress who has read a government watchdog report knows the Labor Department has struggled with chronic unemployment fraud, reporting billions annually in improper payments before Covid. The structure of these pandemic-era programs was an invitation for hoaxers to descend.
GAO reports that while Labor has recently handed out nearly $900 million in grants to state agencies to address fraud, the department itself still hasn’t adopted practices recommended by GAO as long ago as 2015. This follows numerous IG reports that have scored Labor’s refusal to get tougher with states that are lax on fraud.
Democrats in the last Congress covered for these failures and blocked legislation designed to track funds and fix certain practices. House Oversight Chairman
is now getting serious, and next week he’ll hold his first hearing into the waste and fraud in Covid relief programs. Americans deserve to know what went wrong and what Congress is doing to prevent a repeat.
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Appeared in the January 26, 2023, print edition as ‘Pandemic Benefit Fraud Gone Wild.’