State audit finds billions in unemployment fraud

SPRINGFIELD — A state audit released Thursday found that nearly $2 billion in federal money intended to help unemployed Illinoisans during the pandemic was lost to fraudulent claims in Illinois.

The Illinois Department of Employment Security blamed “insufficient and inadequate federal guidance” and a lack of scrutiny over a hastily drafted program set up by the Trump administration.

The federally funded Pandemic Unemployment Assistance program provided up to 39 weeks of benefits for the unemployed who had lost regular unemployment benefits and for the self-employed, gig workers and others who did not qualify for regular unemployment.

The report released Thursday by Auditor General Frank Mautino covered much of the duration of the programme, from July 2020 to June 2021.

In the early days of the pandemic, amid business closures and high unemployment, states grappled with a large number of claims from those laid off during those closures. Amid this plethora of claims, IDES was forced to try and get rid of the fraudulent claims while under pressure to get money into the hands of the recently unemployed.

The Pritzker administration has said that the PUA program is hastily designed and does not provide employers with an opportunity to challenge fraudulent claims because the type of employees who apply for benefits technically have no employers. The PUA program also eliminated existing controls, including income and employment verification, according to a statement from IDES.

Much of the fraud, estimated at $163 billion nationwide, involved identity theft.

Scammers filed unemployment claims using false identities and then had the payment method switch from the debit cards people receive when they qualify for benefits, to deposit them directly into an account accessible to them.

The audit found that of the $3.6 billion in PUA disbursed between July 2020 and June 2021, nearly $1.9 billion was found to be fraudulent, primarily due to identity theft.

Overpayments related to identity theft and traditional fraud within the PUA program were unprecedented and resulted in fraudsters using highly sophisticated techniques to take advantage of the current economic situation created by the COVID-19 pandemic, the audit said. .

The audit found IDES:

  • Failed to implement common information technology controls for the Pandemic Unemployment Assistance.
  • Failed to maintain accurate and complete claimants’ records of the unemployment aid pandemic.
  • Failed to perform cash reconciliations in a timely manner.

IDES replied that the system used to administer the PUA program is independent of the system used to administer regular unemployment benefits. According to the agency’s statement, IDES has halted $40 billion in fraudulent payments from both state and federal programs from the start of the pandemic in March 2020 through the end of 2021.

Republicans are calling for hearings regarding IDES’s handling of the programs and, in particular, whether the agency has not followed federal recommendations for fraud prevention tools made available before the pandemic.

“The Pritzker administration and IDES have declined to disclose the extent to which fraud has affected our unemployment system and this audit makes it abundantly clear why,” said Rep. Tim Butler, R-Springfield, in a statement. “The loss of nearly $2 billion, more than half the money for the PUA program, demonstrates an unprecedented level of negligence by the administration and IDES management. Blaming the previous president’s administration is an unacceptable excuse and we need immediate hearings to get to the bottom of this failure.”

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