Unemployment Insurance: Data Indicate Substantial Levels of Fraud during the Pandemic; DOL Should Implement an Antifraud Strategy
Fast Facts
Congress created 4 new unemployment insurance programs to support workers during the COVID-19 pandemic. Following this expansion, the amount of fraud in these programs increased—with evidence indicating that the total fraud was over $60 billion and perhaps much higher.
The Department of Labor has taken steps to address such fraud. For example, it issued guidance, provided funding to states, and recommended improvements to state unemployment insurance programs. However, the department has yet to develop an antifraud strategy based on leading practices from GAO's Fraud Risk Framework as required by law.
We recommended that it do so.
Highlights
What GAO Found
Considered together, measures and estimates indicate substantial levels of fraud and potential fraud in unemployment insurance (UI) programs during the pandemic. However, each measure and estimate has strengths and limitations, and none completely and reliably indicates the extent of fraud in UI programs during the pandemic.
Examples and Definitions of Measures and Estimates
DOL has taken steps to address UI fraud risks. For example, DOL issued guidance, provided funding to states, and deployed teams to recommend improvements to state UI programs. While these steps help prevent, detect, and respond to fraud, as of December 2022, DOL has not yet developed an antifraud strategy based on leading practices in GAO's Fraud Risk Framework. Also, it has not yet addressed the six October 2021 recommendations GAO made including to identify, assess the impact of, and prioritize UI fraud risks. These are essential pieces to inform an overall antifraud strategy. Without an antifraud strategy, DOL is not able to ensure that it is addressing the most significant fraud risks facing the UI system in alignment with the Fraud Risk Framework.
Why GAO Did This Study
The UI system has faced long-standing challenges with program integrity, which worsened during the pandemic. Congress created four new UI programs to support workers during the pandemic. According to DOL data, approximately $878 billion in benefits were paid across all UI programs 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. Due to this risk and other challenges, GAO added the UI system to its High-Risk List in June 2022.
GAO was asked to review matters relating to the scope and severity of fraudulent activity in the UI system during the pandemic. This report examines what measures and estimates indicate about the extent of UI fraud during the pandemic and the extent to which DOL designed and implemented a strategy to manage UI fraud risks. GAO reviewed information that federal and state entities used to measure and estimate the extent of fraud in UI programs, then evaluated DOL's activities against leading practices in GAO's Fraud Risk Framework. This report is part of an ongoing body of work to better understand and manage federal fraud, including future work to improve estimates of fraud.
Recommendations
GAO recommends that DOL develop and implement an antifraud strategy for UI programs that is consistent with leading practices from GAO's Fraud Risk Framework. DOL partially agreed with the recommendation and noted plans to address it.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Labor | The Secretary of Labor should design and implement an antifraud strategy for UI based on a fraud risk profile consistent with leading practices as provided in the Fraud Risk Framework. (Recommendation 1) |
In August 2023, DOL officials provided us with a copy of the UI fraud risk profile. This fraud risk profile provides a link to the UI Integrity Strategic Plan, which according to DOL, continuously evolves and includes strategies to address emerging fraud threats and integrity risks to the UI program. In April 2024, DOL provided us with a copy of its "Building Resilience: A plan for transforming unemployment insurance" document. This plan indicates that, in response to GAO's recommendation, DOL will regularly update its assessment of UI fraud risks and incorporate any fraud risk management activities into the Employment and Training Administration's (ETA) UI Integrity Strategic Plan. The UI Integrity Strategic Plan for fiscal year 2023--the most recent available as of April 2024--describes strategies through which DOL supports states to combat fraud. The strategies include strengthening UI systems, ID verification, and data analytics. The UI Integrity Strategic Plan for fiscal year 2023 outlines the responsibilities of the Office of the Chief Financial Officer, Employment and Training Administration, and states related to UI fraud risk management. It also references the UI fraud risk profile and outlines antifraud controls. However, the UI Integrity Strategic Plan for fiscal year 2023 does not explicitly link antifraud controls back to the highest residual risks. We maintain that, consistent with our Fraud Risk Framework, it is important for DOL to fully develop and document a comprehensive and unified antifraud strategy. Doing so could help state workforce agencies and DOL better manage UI fraud risks.
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