Watchdog exposes 'historic' COVID unemployment funds lost as Congress investigates

Reports indicate as much as $400 billion in COVID-19 unemployment relief were likely lost to waste and fraudsters. Lawmakers want answers.

Republicans on the House Ways and Means Committee sent a letter to the U.S. Department of Labor demanding documents and information related to the unemployment fraud.

“Since the Summer of 2020, repeated alerts from federal law enforcement agencies warned of targeted efforts involving organized cybercrime, foreign actors, and international crime rings using stolen identities of American citizens to obtain fraudulent unemployment benefits,” the letter said. “Fraud estimates range from $80 billion to as much as $400 billion, which is nearly half of all the COVID-19 unemployment aid.”

The Department of Labor’s Inspector General released a report in October showing that fraud varied by state but was significant nationwide.

“We found ETA and states did not ensure pandemic-related UI funds were paid only to eligible individuals promptly. Of the 4 states we tested, from March 28, 2020, through September 30, 2020, we estimated $30.4 billion of the $71.7 billion in PUA and FPUC benefits were paid improperly (42.4 percent),” the report said. “We estimated $9.9 billion of that was paid to likely fraudsters (13.8 percent). Notably, in the 4 states, 1 in 5 dollars initially paid in PUA benefits went to likely fraudsters.”

Ways and Means Ranking Member Kevin Brady, R-Texas, and Rep. Brad Wenstrup, R-Ohio, sent the letter to the DOL asking the question: how could this happen?

“The lack of a sufficient response and action from the Administration to date is disappointing and unacceptable,” the letter said. “According to an article in The Washington Post, only 2.4 percent of wrongful payments have been recovered. Transparency is essential because it promotes accountability and provides information for the Congress and Americans about what the federal government is doing. The American people deserve a government that is accountable, which is especially critical when such a staggering amount of fraud has occurred.”

Lawmakers set aside $2 billion in May 2021 to help counter this kind of fraud. The lawmakers asked how that money was spent and what the agency is doing to recover these funds.

“The amount of UI fraud is staggering, which is why congressional Republicans have repeatedly sought information about the billions of taxpayer dollars stolen due to fraud and worked to stop the ‘pay and chase’ model and improve accountability in pandemic unemployment programs,” the letter said. “Today we reiterate our requests for information about the Administration’s knowledge of UI fraud and what is being done to recover stolen dollars.”

The IG did lay out some reasons this waste and fraud occurred.

“ETA and states made significant efforts; however, they did not protect pandemic-related UI funds from historic levels of improper payments,” the report said. “We attribute this to four causes: states did not perform eligibility testing, ETA’s oversight was not timely enough, PUA initially allowed claimants to self-certify their eligibility, and ETA suspended 1 of their primary oversight tools for the first 3 months of the CARES Act. Furthermore, ETA’s interpretation of its regulations hindered the OIG’s timely and complete access to state UI claims data to assist in detecting and deterring fraud.”