The Office of Management and Budget (OMB) said in its annual report on governmentwide improper payments – defined as payments that shouldn’t have been made or were made for incorrect amounts – jumped to 7.2 percent in Fiscal Year 2021 with the increase driven in part by soaring rates of unemployment insurance fraud during the coronavirus pandemic.
The 7.2 percent improper payment rate for FY2021 represents a 32 percent jump from an estimated 5.6 percent improper payment rate for FY2020.
The OMB report released Dec. 30, 2021, “underscores the depth of the problems facing states that were in many cases overwhelmed by the unique and compounding challenges caused by the COVID-19 pandemic,” the agency said.
OMB explained that the increase in improper payments between FY20 and FY21 was due in large part to the growth rate in the improper payment rate in the Federal-State Unemployment Insurance (UI) program. The UI program totaled an 18.7 percent improper payment rate, which is roughly five to eight percentage points higher than during a non-pandemic 12-month period. The COVID-19 pandemic caused a surge in UI claims which overwhelmed state-run agencies responsible for administrating UI benefits.
“Data was not collected during the middle of 2020 as a result of the chaotic challenges state-run UI systems faced, so this is our first full-year look at UI errors during the pandemic,” OMB said in a blog post. “And, we know that problems accumulated from early in the pandemic are still being discovered and will take a long time to clean up.”
Congress and the Biden administration have taken steps to modernize UI systems, fight fraud, and improve oversight, including providing support grants in the American Rescue Plan Act to the tune of $2 billion, establishing a new data-sharing agreement between states and the Department of Labor (DOL) inspector general (IG) to prevent multi-state fraud, and launching the Initiative on Identity Theft Prevention and Public Benefits to finalize a set of recommendations and reforms next year to address challenges.
“President Biden has been very clear that this Administration will take decisive action to ensure our government delivers results for the American people in the most effective, equitable, and accountable way possible,” wrote OMB. “That means committing to facing the real challenges of combatting payment errors and making government work better. Sharing this data transparently and being direct about the challenges we face are part of that commitment.”
