Sneak Preview: Better Oversight Needed for Lost Wages Program
(The following was excerpted from a recent Thompson Grants Compliance Expert article.) Although officials with the Department of Homeland Security (DHS) Federal Emergency Management Agency (FEMA) contended that they had implemented sufficient internal controls to mitigate fraud, waste and abuse in the Lost Wages Assistance (LWA) Program, the DHS Office of Inspector General (OIG) stated in a recent audit that FEMA’s risk assessment of the program was “ad hoc” and failed to prevent mismanagement of program funds.
FEMA received authorization under the Coronavirus Aid, Relief, and Economic Security (CARES) Act (Pub. L. 116-136) in August 2020 to provide $44 billion in lost wages assistance from DHS’ Disaster Relief Fund (DRF) to individuals unemployed or partially unemployed because of the pandemic. The DRF was authorized under the Other Needs Assistance category of FEMA’s Individuals and Households Program, which provides financial assistance to cover necessary expenses and serious needs not paid by insurance or other sources. FEMA allocated about $37.3 million of this funding to 49 states, four U.S. territories and the District of Columbia. State workforce authorities (SWAs), which were required when applying for LWA funds to submit for FEMA approval a complete state administrative plan based on a FEMA template, had expended $36.5 million of these funds by this past April.
The program was designed to pay eligible claimants $300 or $400 in weekly benefits for a maximum of six weeks starting Aug. 1, 2020, and ending Sept. 5, 2020. Claimants received weekly LWA to supplement their benefits received through the Department of Labor’s (DOL) Unemployment Insurance (UI) program. Claimants who received at least $100 per week from one of nine existing UI programs, and who self-certified that they were unemployed or partially unemployed due to disruptions caused by the pandemic, were eligible to receive funding.
After auditing the program based on sample data from 21 SWAs from June 2021 to July 2022, OIG determined that FEMA did not implement controls that may have prevented SWAs from distributing more than $3.7 billion in improper LWA program payments. Of the $30 billion the 21 sampled SWAs expended in LWA funds, the SWAs later detected $3.3 billion in potentially fraudulent payments. OIG also identified $21.6 million in overpayments and $403 million in payments made without obtaining the claimants’ required self-certifications of eligibility for LWA.
(The full version of this story has now been made available to all for a limited time here.)
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