At least $191 billion in pandemic jobless benefits improperly paid, watchdog tells Congress

By Tami Luhby, CNN

At least $191 billion in pandemic unemployment benefits could have been improperly paid, with a “significant portion” attributable to fraud, according to a new estimate from the Department of Labor’s Office of Inspector General.

That’s up from the office’s projection last year of at least $163 billion in improper payments.

The updated estimate was released Wednesday as part of a House Ways and Means Committee hearing entitled, “The Greatest Theft of Taxpayer Dollars — Unchecked Unemployment Fraud.”

House Republicans, who gained control of the chamber last month, are highlighting the widespread fraud that permeated the Covid-19 relief programs that Congress enacted in the early years of the pandemic. The House Oversight Committee held a lengthy hearing last week about fraud in two pandemic business assistance measures, the Paycheck Protection Program and Economic Injury Disaster Loan, as well as in the enhanced jobless benefits.

At the Ways and Means Committee hearing, GOP lawmakers repeatedly called out the size of the fraud, the loss to taxpayers and the trouble the theft has wrought on employers and Americans whose identities were stolen. Many, however, agreed with their Democratic peers that the enhanced jobless benefits were needed when the economy tanked at the start of the pandemic.

“While many Americans who actually qualified for these benefits were left struggling to reclaim their benefits and their identity, upwards of tens of billions of taxpayer dollars have been stolen,” said Missouri Rep. Jason Smith, who chairs the committee.

The pandemic relief packages that created these programs in 2020 passed Congress with bipartisan support and were administered that year by the Trump administration.

Wide-ranging estimates of fraud

The extent of the fraud in the pandemic jobless benefits program is not yet known, and estimates vary widely.

Inspector General Larry Turner told the committee that fraud accounts for at least $76 billion in improper payments, but stressed that the figure is likely to rise once the office has more data.

The Labor Department’s estimated improper payment rate does not include the Pandemic Unemployment Assistance program, which Congress hastily created in 2020 and was the target of much of the fraud. The agency is expected to release an improper payment rate for that program by the end of the year, Turner said.

Improper payments consist of both fraud and incorrect benefit amounts paid to legitimate claimants.

The US Government Accountability Office last month pegged the fraud figure at more than $60 billion. The watchdog agency, however, warned that the estimate has limitations and should be interpreted with caution. The actual amount of pandemic unemployment benefits fraud may be “substantially higher.”

The GAO is working on a higher-end estimate, which should be released later this summer, Comptroller General Gene Dodaro told the committee.

Both Turner and Dodaro noted that improper payments have long been a problem in the unemployment benefits system, which is administered separately by each state. They also criticized the Department of Labor and state agencies for not fully putting the watchdogs’ anti-fraud recommendations in place.

“If we can’t deal at the federal government and states level to reduce improper payments in normal times, then you’re bound to have problems when there are emergencies,” Dodaro said. “I’d urge this committee to continue their oversight to make sure the Labor Department and the states take action on our recommendations so that we’re much better prepared next time to deal with these emergency situations.”

In his State of the Union speech Tuesday, President Joe Biden called on Congress to beef up anti-fraud resources in an effort to find criminals and crack down on the schemes to steal relief money.

A surge in fraud

Fraud within the nation’s unemployment system skyrocketed after Congress enacted a historic expansion of the program in March 2020. State unemployment agencies were overwhelmed with record numbers of claims and relaxed some requirements in an effort to get the money out the door quickly to those who had lost their jobs.

The enhanced payments and lax controls quickly attracted criminals from around the world.

States and Congress subsequently tightened their verification requirements in an attempt to combat the fraud, particularly in the Pandemic Unemployment Assistance program, which allowed freelancers, gig workers and others to collect benefits for the first time.

A key component of the relief effort was a federal weekly supplement for out-of-work Americans. The jobless received a $600-a-week boost from April through July of 2020. Congress then revived the enhancement in late December 2020 but reduced it to $300 a week. That supplement expired in September 2021, though many states led by Republicans and one with a Democratic governor ended it earlier.

Lawmakers also created the Pandemic Emergency Unemployment Compensation program, which extended payments for those who exhausted their regular state benefits. Both pandemic unemployment programs also ended by September 2021.

More than $888 billion in federal and state unemployment benefits were paid from the end of March 2020 through early September 2021, according to the Department of Labor’s Office of Inspector General.

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