Sneak Preview: DOL Is Developing UI Program Antifraud Strategy
(The following is excerpted from a recent Thompson Grants Compliance Expert article.) As the Department of Labor is already taking steps to develop an antifraud strategy and a fraud risk profile for its Unemployment Insurance (UI) programs, as recommended in a recent Government Accountability Office (GAO) report, it disagreed with GAO on whether the work on the strategy should take precedence over other ongoing UI fraud control efforts.
The UI program has faced longstanding challenges with program integrity, which worsened during the COVID-19 pandemic (see “DOL OIG Reports on ‘Unprecedented’ UI Fraud Levels,” July 2022). While Congress created four new UI programs to support workers during the pandemic that provided about $878 billion in benefits from April 2020 through September 2022, the unprecedented demand for benefits and the need to implement the new programs quickly increased the risk of financial fraud. As such, GAO added the UI programs to its High-Risk List in June 2022.
DOL uses certain measures to enable it to document detected fraud activities, and these measures as well as other analytical techniques to project estimates. However, GAO determined that the agency’s measures and estimates have limitations, and are not completely reliable. For example, while DOL officially recorded at least $4.3 billion in UI program fraud from April 2020 through June 2022 based on formal determinations of fraud by state workforce agencies, GAO contended that this number does not account for potential fraud that has not been formally determined as such.
GAO noted that DOL’s Office of Inspector General (OIG) also flagged at least $45 billion in potentially fraudulent UI payments from March 2020 to April 2022. “However, some of the flagged transactions may not be fraudulent and not all fraudulent transactions may be flagged,” GAO explained. “As a result, the fraud-related measure [of relying on OIG determinations] can be used to identify certain types of transactions that may be indicative of potential fraud, but cannot be interpreted directly as a measure of the extent of fraud in the UI programs during the pandemic.”
DOL assesses state reviews of samples of UI claims to determine an estimate of program fraud, which amounted to some $8.5 billion in 2021. Based on these samples, GAO said this could be extrapolated to a national fraud rate of $60 billion in fraudulent UI payments. However, GAO noted that such an extrapolation has inherent limitations regarding validity, accuracy and completeness and “should be interpreted with caution.”
(The full version of this story has now been made available to all for a limited time here.)
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