Owner system

Over $ 87 billion in federal benefits diverted from unemployment system

Mike Stocker / South Florida Sun Sentinel / Tribune News Service via Getty Images

More than $ 87 billion in federally funded unemployment benefits were likely diverted from the system during the Covid-19 pandemic, in large part due to fraud, according to a report from the US Department of Labor.

Congress authorized many new programs at the start of the pandemic to support millions of workers who had lost their jobs. The programs, which ended on Labor Day this year, increased weekly benefits, extended the duration of assistance, and expanded the pool of unemployed Americans eligible for payments.

The federal government has paid out $ 872 billion in total benefits as of September 30, according to an estimate by the Office of the Inspector General of the Ministry of Labor, which released a biannual report report for Congress Monday.

However, the “unprecedented” level of funding has led to an increase in theft and fraud, according to the watchdog, which audits the programs and operations of the Department of Labor.

He estimates that 10% or more (at least $ 87 billion) of federal money has likely been lost through “improper payments”, with “a significant portion attributable to fraud.”

(States, which administer the benefits, may have made some payments in error for reasons unrelated to fraud, such as processing errors or claimants’ claim errors.)

More from Personal Finance:
Senate control may depend on the fate of the legislation on paid family leave
Financial watchdog tackles bank overdraft fees
More employers will demand Covid vaccines as omicron fears grow

Much of the criminal activity focused on a temporary program, Pandemic Unemployment Assistance, which expanded assistance to the self-employed, concert workers, and others who are generally not eligible for unemployment insurance. state, according to labor experts.

Lawmakers initially left program applicants to self-certify their eligibility for benefits. (This is not the case with traditional state benefits, which become available after further verification.)

This move accelerated aid to sick households during the deepest recession since the Great Depression; but the more lax requirements, coupled with a weekly benefit increase of $ 600, led thieves to try to exploit the system.

Much of the unemployment fraud is linked to organized criminal networks that purchased identity information stolen in previous data breaches, the Labor Department said. Criminals use this data to claim benefits on behalf of others.

“I think the unemployment fraud problem was serious and unprecedented, and I don’t think states were ready to see how stolen identities could be used to leverage these programs,” said Andrew Stettner, researcher principal and unemployment expert at The Century Foundation, a progressive think tank.

“[However] states haven’t had much time to build them with the right protections, ”Stettner said of temporary federal programs. “And having a more permanent system would definitely help. “

While the high level of fraud is problematic, it does not diminish the overall success of pandemic-era programs, which have reduced poverty and led to rapid economic recovery, Stettner said. The extension of unemployment benefits prevented 5.5 million people from falling into poverty in 2020, according to at the US Census Bureau.

Investigative work involving unemployment benefits rose 1,000 times more than the usual amount during the pandemic, according to the inspector general’s report. This work now represents 92% of the inventory of watchdog investigation cases, against 12% before the pandemic.

Lawmakers and states have cracked down on trying to limit theft.

For example, Congress passed relief legislation in December 2020 that tightened some of the documentation requirements for collecting benefits during a pandemic. Many states have identity verification measures in place. The Department of Labor is also providing up to $ 240 million to states to help prevent and combat fraud in traditional and pandemic unemployment programs.

However, some safeguards have tricked legitimate applicants into delaying assistance.