Unemployment fraud during pandemic estimated to exceed $60 billion

The Department of Labor has been questioned for failing to develop an anti-fraud strategy based on leading practices in GAO's Fraud Risk Framework.

dólares, dinero, covid, prestamos, ayuda económica — (Voz Media / Pexels - Canva)

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Verónica Silveri Pazos

25 de enero, 2023

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A Government Accountability Office (GAO) report estimated that the million-dollar unemployment benefits subsidy offered by the Department of Labor (DOL) during the COVID-19 pandemic may have resulted in $60 billion in fraud.

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Fraud estimates

During the COVID-19 pandemic, Congress created various "unemployment insurance" (UI) programs, which were federally funded programs to financially support unemployed workers.

According to DOL data, a total of approximately $878 billion was paid in benefits through all unemployment assistance programs from April 2020 through September 2022. The report states that $209 billion was awarded in the form of "expenditures under the regular UI program" and about $669 billion in payments awarded under pandemic unemployment programs.

Among the funds allotted to aid those affected by the pandemic, there was $4.3 billion in fraud proven by workforce agencies and at least $45 billion more in transactions that were flagged as "potentially fraudulent" but not yet confirmed. Another $8.5 billion of fraud was carried out within the framework of regular unemployment benefits.

The GAO says the figure is an estimate for the unemployment system, "however, each measure and estimate has strengths and limitations, and none completely and reliably indicates the extent of fraud in UI programs during the pandemic."

Possible failures that led to fraud

According to the report, the fraudulent and "potentially fraudulent" activity may have been caused by the large number of benefits granted and the ease with which the aid was granted:

The increased amount of benefits awarded program’s initial reliance on self-certification, as discussed below, gave criminals incentive and opportunities to commit fraud.

DOL officials also identified other factors such as significant increases in workload, new and inexperienced staff, and rapid implementation of new plans. They further stated that UI programs during the pandemic were a key target for fraud "because fraudsters could receive a large amount of money in a single payment."

Among the programs outlined in the report were: the Cares Act (which included Pandemic Unemployment Assistance (PUA)), Federal Pandemic Unemployment Compensation (FPUC) and Pandemic Emergency Unemployment Compensation (PEUC), in addition to the Consolidated Appropriations Act, which created the Mixed Unemployment Subsidy (MEUC) program.

Department of Labor questioned

The study recognized the DOL's efforts to combat fraud. However, it questioned whether the department has yet to develop an "anti-fraud" strategy based on GAO practices:

DOL has taken steps to address UI fraud risks. ... While these steps help prevent, detect, and respond to fraud, as of December 2022, DOL has not yet developed an antifraud strategy based on leading practices in GAO’s Fraud Risk Framework.

The DOL has failed to address a number of recommendations offered by the GAO which "are essential pieces to inform an overall antifraud strategy:"

Without an antifraud strategy, DOL is not able to ensure that it is addressing the most significant fraud. Also, it has not yet addressed the six October 2021 recommendations GAO made including to identify, assess the impact of, and prioritize UI fraud risks. These are essential pieces to inform an overall antifraud strategy.