The pandemic-fueled expansion of unemployment insurance (UI) benefitted millions of Americans even as the programs became riddled with fraud, a senior Federal watchdog agency official said on Feb. 8 at a congressional hearing marked by contentious exchanges between Republicans and Democrats over more than $60 billion in fraudulent payments.
Gene L. Dodaro, Comptroller General of the United States and head of the U.S. Government Accountability Office (GAO), said the four new UI programs Congress created during the COVID-19 pandemic “helped millions of Americans in need.”
But Dodaro told the House Ways and Means Committee that UI became marked by “widespread fraud” because the Department of Labor (DOL) – which helps states run their UI programs – and the states themselves were unprepared for the onslaught of people who lost their jobs.
He added that “the urgent need to get the money out” led governments to make “tradeoffs” that limited accountability, allowing UI recipients to self-certify their eligibility and limiting the need for supporting documentation. “As a result of these tradeoffs,” Dodaro said, “these programs were more susceptible to fraud than they otherwise would have been.”
Dodaro reiterated GAO’s call for DOL to take further action to prevent UI fraud, saying the agency needs to “fully implement” recommendations GAO made in a recent report. Chief among them is that the agency develop an antifraud strategy based on leading practices in GAO’s Fraud Risk Framework – as required by law.
In that report, GAO said DOL has taken some actions to address UI fraud, such as providing funding to states and deploying teams to recommend improvements to state UI programs. The report said evidence suggests the total amount of fraud in pandemic-era UI programs was more than $60 billion – and could be much higher.
Republicans on the committee agreed that DOL should be doing more, seeking to turn the issue into a political indictment of the Biden administration.
“For more than two years, Republicans have been sounding the alarm about the greatest theft of taxpayer dollars in American history: the massive fraud perpetrated in the unemployment insurance program that skyrocketed in the COVID-19 pandemic,” said committee Chairman Jason Smith, R- Mo.
“Upwards of tens of billions of taxpayer dollars have been stolen,” he said. “Democrats turned a blind eye…the Biden administration has been asleep at the wheel.”
The committee’s ranking Democrat, Richard Neal, D-Mass., countered that even with the fraudulent payments, the enhanced unemployment insurance helped many of the millions of people who lost their jobs during the pandemic. “$849 billion of unemployment insurance. Of that number, it’s estimated that 7.1 percent was fraudulently spent,” Neal said.
“We do not on the Democratic side defend fraud,” he said. “We want the Justice Department, we want our witnesses today to pursue aggressively any of that criminal element that did what they did. But let’s us not conflate the need for unemployment insurance with what happened during the course of the pandemic.”
“…The unemployment insurance program worked,” he added. “What we did overwhelmingly worked.”
In his written statement for the committee, Dodaro said the pandemic exacerbated a UI fraud problem that already existed. For example, the statement said, DOL reported an increase in estimated improper UI payments from $8.0 billion (9.2 percent estimated improper payment rate) for fiscal year 2020 to $78.1 billion (18.9 percent estimated improper payment rate) for fiscal year 2021.
The UI system’s “administrative and program integrity challenges pose significant risks to service delivery and expose the system to significant financial losses,” he said.
DOL officials did not testify at the hearing, but the department’s inspector general, Larry Turner, told the committee that the pandemic-era UI programs were “extremely susceptible to fraud…the unprecedented infusion of federal funds gave fraudsters a high value target to exploit.”