GAO warns unemployment benefits pose ‘high risk’ of fraud

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A US government watchdog warned on Tuesday that the country’s unemployment insurance system remains at “high risk” of waste, fraud and abuse, revealing that federal authorities have already opened more than 38,000 “cases”. investigations” that potentially involve funds stolen during the pandemic.

The stark message from the Government Accountability Office came amid a series of new reports that laid bare the challenges facing the country’s jobless relief program, which remains underfunded, inadequately resourced and plagued by technology so poor that states have struggled to help Americans in need, even resulting in “substantial racial and ethnic disparities.”

For the GAO, the main challenge facing the federal government is keeping track of its own spending, two years after the coronavirus pandemic left millions of Americans out of work and struggling to get help. In the previous fiscal year, states paid out about $78.1 billion in abusive unemployment payments, a figure that includes money stolen by criminals and wrongful payments made to innocent Americans.

By mid-March, the Department of Labor’s inspector general had opened “more than 38,000 investigation files” involving alleged benefits fraud, the GAO revealed Tuesday. But the scale of the potential problem could still be far greater, added the watchdog, which raised concerns that state and federal data remain inaccurate and inadequate. A Washington Post survey earlier this year found that the total number of wrongful payments could top $163 billion nationwide. With the fraud, criminals around the world have been stealing the personal information of innocent Americans and obtaining benefits in real worker names, using sophisticated tactics to outsmart states, The Post reported.

‘A magnet for scammers’: Fraud hijacked billions from pandemic unemployment benefits

The findings prompted the GAO to place the unemployment program on its “high risk” list, an official designation intended to raise awareness among federal lawmakers and government regulators in hopes of addressing its shortcomings. In doing so, the watchdog has used its reports to call on Congress and the Biden administration to modernize the nation’s unemployment benefit programs and their oversight, including to protect them in the event of future crises.

“While expanding unemployment benefits saved millions of families from financial ruin during the pandemic, GAO reports make it clear that the unemployment system is broken – both in terms of administering the program and benefits policy,” Sen. Ron Wyden (D-Ore.), the head of the tax-focused Senate Finance Committee, said in a statement to the Post. “The historic action taken by Congress – to expand benefits and cover gig and part-time workers – has hidden deep-seated issues that need to be addressed before the next economic downturn.”

The GAO’s findings underscore the immense task ahead of Washington as it struggles to oversee the roughly $5 trillion in emergency aid it has approved since the pandemic began. The historic and generous financial support saved the US economy from collapse amid the worst crisis since the Great Depression, but it has also become a source of criminal activity and other forms of abuse, overwhelming the government federal government of years of work to recover the money.

“The widespread problems plaguing the unemployment insurance system are extremely troubling,” GAO chief Gene L. Dodaro said in a statement accompanying the report. “Not only is the system failing to meet the needs of workers and the broader economy, but the potential for huge financial losses could undermine public confidence in the management of public funds.”

Democrats and Republicans in Congress have banded together to approve many stimulus packages, and in recent weeks lawmakers have begun to set aside their political differences in an effort to prosecute pandemic fraud. The House was due to consider two bipartisan bills on Tuesday that would make it easier for the U.S. government to probe and punish criminal activity targeting the country’s small business stimulus programs. The measures — one from Rep. Nydia M. Velázquez (DN.Y.), the other from Rep. Blaine Luetkemeyer (R-Mo.), who heads the House Small Business Committee — are aimed at satisfying demands for more time federal watchdogs to carry out their complex investigations.

An earlier Post investigation found that these programs, totaling more than $1 trillion at the Small Business Administration, have become ripe targets for fraud and identity theft. At various times, government watchdogs have raised concerns about billions of dollars being sent to ineligible companies, including those on a special “Do Not Pay” federal anti-fraud list. One of the initiatives, known as the Payment Protection Program, may even have granted loans to ineligible businesses — then canceled those same loans before the SBA even fully reviewed them.

‘Immense fraud’ creates huge task for Washington as it tries to tighten scrutiny of $6 trillion in emergency coronavirus spending

With unemployment insurance, the problems seem to be more widespread, since the federal government oversees a patchwork system of benefits largely run by the states. Each local government maintains its own rules for applying for help and runs its own computer systems to assess and pay out-of-work Americans, opening the door to immense waste, fraud, and abuse, especially early in the pandemic.

Faced with a crush of applicants in 2020 — with unemployment claims sometimes reaching 1 million a day — states have been left without the staff and technology to screen and vet Americans quickly and accurately. Even at the end of last year, 32 of 53 states and territories “still used legacy computer systems” to support unemployment or tax benefit systems, according to the GAO. Some states attributed digital deficiencies, including their use of nearly half-century-old technology, to historically insufficient funding, which the GAO said had also inhibited their ability to quickly implement new pandemic control programs.

One such initiative, known as Pandemic Unemployment Assistance, aimed to provide assistance to Uber drivers, DoorDash delivery people and other self-employed and gig economy participants — typically a class of Americans who don’t are not eligible for unemployment benefits. In some cases, these applicants have faced immense delays as states struggle to implement their systems, and in some parts of the country, the disruptions have hit black and Hispanic workers the hardest.

A second GAO report, also released on Tuesday, shed new light on the disparity. In North Dakota and Wisconsin, two of the four states studied, the percentage of black applicants receiving benefits was about half that of white applicants through April 2021. The same was found to be true for Hispanic and Native American applicants from Wisconsin – the percentage of their applications receiving benefits was also “significantly lower” than that of white applicants.

GAO warned that the causes are unclear, possibly stemming from technical problems or “individual biases”. Yet it has raised concerns about the far broader scope of the problem, pointing to other surveys that suggest “the present of racial and ethnic disparities” in unemployment programs nationwide.

Vaccine bonuses, business aid and . . . a golf course? Cities and states have used $350 billion in stimulus windfalls for a wide variety of purposes.

The revelations come as the Biden administration has focused its attention on the unemployment insurance program, seeking to modernize systems and improve Americans’ access to benefits. In recent months, the federal government has sent technical teams to the states to help them with computer upgrades. The White House is working on an executive order to tackle identity theft targeting federal programs, while U.S. prosecutors have begun filing lawsuits against suspected fraudsters.

Meanwhile, on Capitol Hill, Wyden and Sen. Michael F. Bennet (D-Colo.) continued to push for stalled legislation that would overhaul the nation’s unemployment program, including how it pays benefits. Wyden stressed that it would “resolve many of the issues identified by the GAO” in its reports.

“These reports demonstrate that we need to better protect workers of color, who are less likely to be protected by our unemployment insurance system, and continuously expand unemployment protections for workers, such as workers on the job. demand and new labor market entrants, who were excluded from benefits at the start of the pandemic,” Bennet added in a statement to the Post.

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