Labor Department estimates $36B in improper unemployment payments in CARES Act

US states see spikes in unemployment fraud

States like Massachusetts and Washington have reported a rise in cases of unemployment fraud, amounting to millions in fraudulent claims paid. FOX Business’ Edward Lawrence with more.

The Department of Labor's Office of the Inspector General estimates that at least $36 billion worth of unemployment payments expended as of Nov. 7 may have been invalid.

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The government allocated $360 billion in total unemployment funding in the $2.2 trillion Coronavirus Aid, Relief and Economic Security (CARES) Act, which passed in March.

"This is government at work – or not at work," Tom Schatz, president of the government spending watchdog Citizens Against Government Waste, told Fox News. "This doesn't happen in the private sector. Well, it does, but you go out of business."

The OIG, which has long been critical of the DOL's unemployment insurance program, said that if improper payments continue at 10%, at least $36 billion out of $360 billion expended under the $2.2 trillion CARES Act could be improperly paid, "with a significant portion attributable to fraud" – and that's a conservative estimate.

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Schatz said that the OIG has to estimate the total amount of improper spending because the DOL does not have easy access to the National Directory of New Hires, state unemployment wage records or social security administration's wage records in order "to appropriately oversee how unemployment insurance funds are used."

"That in and of itself is an issue that can be can be easily resolved," he said. "How can you track the money being spent if you don't have access to the information about where it's going?"

Hundreds of unemployed Kentucky residents wait in long lines outside the Kentucky Career Center for help with their unemployment claims on June 19, 2020 in Frankfort, Kentucky. (Photo by John Sommers II/Getty Images)

The OIG added that the Labor Department "has not done enough to formally assess the various strategies available to combat improper payments and determine which issues persist, due in part to a lack of reliable state-reported data."

Identity thieves and organized criminal groups continue to find holes in the unemployment insurance program and have exploited those weaknesses, the OIG found. Significant increases in government spending over the course of 2020 only added fuel to the fire.

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Unemployment fraud suspects have been caught stealing from the government, Schatz pointed out, but "there aren't a lot of consequences" for members of Congress who contribute to wasteful spending.

"In the private sector, the incentives aren't the same," he said. "If somebody's working at a company, and they … aren't keeping track, they aren't following the rules — generally, they get fired. That doesn't happen in Washington."

CAGW recently published a report detailing some of the ways government can reduce wasteful spending and become more efficient.

The U.S. Capitol is seen Thursday, Dec. 24, 2020, in Washington. (AP Photo/Jacquelyn Martin)

"It's just a matter of making sure the process is being done as effectively as possible, the money is being tracked and people who truly need the benefits receive them, because if you're wasting the money, then the people who truly need it have to get it from somewhere else," he said.

Schatz added that the reason the idea of improper payments is such a significant issue is because "taxpayers are paying for benefits that aren't being provided to the people who need them."

The OIG suggested the Labor Department continue to work more closely with individual states and provide guidance to help reduce this kind of massive UI fraud.

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A message from the inspector general including in the report states that the OGI has "identified and stopped several multistate multimillion-dollar fraud schemes targeting the unemployment insurance program."

The OGI has "opened more than 1,800 complaints and investigations relating to UI benefits paid under the CARES Act." UI investigations make up 70% of the OIG's "investigative case inventory." Before the pandemic, UI investigations made up 12% of its inventory.

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The latest $900 billion COVID-19 relief package, which passed in late December, includes $120 billion in unemployment benefits.

The national debt has reached more than $27.5 trillion as of Wednesday.

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