By the time Congress took action to strengthen anti-fraud protections, billions of dollars had already gone out the door.
In testimony to the House Ways and Means Committee yesterday, Department of Labor inspector general Larry Turner estimated that at least $191 billion of pandemic-era unemployment benefits were improperly paid, with “a significant portion” of that amount attributable to fraud.
About $888 billion in total federal and state unemployment benefits were paid during the pandemic, Turner said. His office estimates that 21.52 percent of benefits could have been improperly paid. His analysis suggests that $191 billion is the low end of the estimate, and the improper-payment rate was likely higher than 21.52 percent.
“Unemployment insurance meant to help [Americans] get through temporary joblessness was stolen, their most sensitive information compromised by criminals, while Democrats in Washington turned a blind eye,” said committee chairman Jason Smith (R., Mo.). He said that Democrats refused to hold an oversight hearing similar to yesterday’s when they controlled the committee.
Matt Weidinger of the American Enterprise Institute puts $191 billion into perspective by comparing it with annual spending on other welfare programs overseen by the Ways and Means Committee, such as Supplemental Security Income and Temporary Assistance for Needy Families. “Those figures suggest that just the ‘low end’ of misspending on unemployment benefits during the pandemic is almost double the total amount spent annually on other major programs under the committee’s jurisdiction designed to assist low-income children and families,” he wrote.
“The reliance solely on claimant self-certifications without evidence of eligibility and wages during PUA’s [Pandemic Unemployment Assistance] first 9 months rendered the program extremely susceptible to improper payments and fraud,” Turner said. “Notably, in the first 6 months after the CARES Act was passed, we found 4 states paid $1 out of $5 in benefits to likely fraudsters.”
Congress took action to strengthen anti-fraud protections later on, but billions of dollars had already gone out the door, the IG said. Meanwhile, his office was overwhelmed with investigations. The office of the inspector general (OIG) typically opens about 100 investigations into unemployment-insurance fraud each year. “Since April 1, 2020, the OIG has opened over 198,000 investigative matters concerning UI fraud,” Turner said. “UI investigations now account for approximately 96 percent of the OIG investigative case inventory, compared to approximately 11 percent prior to the pandemic.”
Despite that massive effort, investigators have so far only recovered $905 million of the improperly paid benefits and convicted 500 people. Offenders were not only in the U.S. One investigation convicted a Nigerian state official for stealing personal information from 20,000 Americans to obtain over $2 million in fraudulent benefits, the inspector general said.
Turner stressed that the OIG repeatedly made clear to Congress, from the very beginning of these programs in the spring of 2020, that it would be very difficult to adequately police them for fraud. His office made recommendations both to the Department of Labor and to Congress on how to better design these programs in the future. Those recommendations include better cooperation with state-government agencies and requiring more cross-referencing of beneficiaries across government databases.
Turner also expressed concern that unless Congress extends the statute of limitations, many fraud cases will go unpunished simply because of time constraints. Most of the statutes used to prosecute UI fraud have five-year limitations, he said. Since the programs started in 2020, that means investigators have only about two years left to catch billions in fraud. Congress has already extended the statute of limitations on Paycheck Protection Program fraud, and Turner encouraged Congress to do the same for pandemic UI fraud.