Sudden Wealth by JP Valery is licensed under CC BY-SA 4.0

The U.S. Government Accountability Office (GAO) has added the Unemployment Insurance (UI) system to its list of federal areas at “High Risk” for waste, fraud, abuse, and mismanagement. As noted in the report, $78.1 billion, totaling 18.9 percent of all money spent, went to improper payments in 2021. 

The Government Accountability Office is responsible for auditing and evaluating services on behalf of the U.S. Congress. The GAO maintains a program to report on government operations that they have identified as “high risk” for waste, fraud, and abuse. This high-risk list has helped to identify and resolve serious weaknesses in areas that involve substantial resources and provide critical services to the public. 

During the COVID-19 pandemic, Congress allowed states to ease certain requirements in the regular UI program to help support unemployed workers, and also created new UI programs that expanded eligibility and enhanced UI benefits such as the Federal Pandemic Unemployment Compensation program (FPUC). The FPUC was created as part of the CARES Act, and provided an additional $600 per week to individuals collecting unemployment benefits. This greater demand for benefits exacerbated existing issues in the unemployment insurance system leading to extensive delays in receiving benefits as well as greater risk of fraudulent claims. 

As the report notes, the Department of Labor (DOL) failed to properly identify beneficiaries’ identities and as a result saw a drastic increase in the risk of payment errors, including those resulting from fraud: 

“The risk of UI improper payments, including from fraud, greatly increased during the pandemic. Prior to the pandemic, DOL regularly reported billions of dollars in annual estimated improper payments in UI, and it reported an increase from $8.0 billion (9.2 percent improper payment rate) for fiscal year 2020 to $78.1 billion (18.9 percent improper payment rate) for fiscal year 2021.

As the report notes, the primary reason for increased improper payments was identity theft: 

According to DOL, historically, the primary causes of improper payments related to eligibility determination issues, such as providing benefits to those who had returned to work and failed to report their earnings. However, DOL stated that during the pandemic, increased identity theft was a main cause.”

The report details the ineffective and unclear federal guidance for the UI system, and showcases that these issues were existent long before the start of the pandemic: 

Prior to the COVID-19 pandemic, in May 2016, we reported that legacy IT systems were a challenge for many states, according to our survey. Specifically, 29 of 48 states (60 percent) reported that their IT systems had significant limitations, which had implications for the ability of state programs to efficiently process UI claims and serve claimants.” 

House Ways and Means Committee Republican Leader Rep. Kevin Brady (R-Texas) as well as House Republican Whip Steve Scalise (R-LA), House Committee on Small Business Republican Leader Rep. Blaine Luetkemeyer (R-MO), and House Committee on the Budget Republican Leader Jason Smith (R-MO) have introduced the Chase COVID Unemployment Fraud Act of 2022 to pursue recovery of fraudulent payments. 

The bill incentivizes states to recover fraudulent unemployment payments, prevents fraud through data matching, identity validation, and income verification, prohibits the Biden Administration from allowing states to waive suspicious overpayments, and requires the DOL to report on fraudulent overpayments and amounts recovered. 

As House Democrats have repeatedly ignored Republicans calls for hearings on the massive amount of fraud in the UI system, the Chase COVID Unemployment Fraud Act of 2022 would serve as a strong step in recovering the $78.1 billion in fraudulent payments that was stolen from American taxpayers. This legislation would also help to prevent future theft of unemployment benefits to ensure Americans’ hard-earned dollars are stewarded, not stolen.