The U.S. Government Accountability Office (GAO) has added the unemployment insurance (UI) system to the list of federal areas that are considered “high risk” for waste, fraud, abuse, and mismanagement.
The GAO is adding the UI system to the list now, in advance of a regular update scheduled for next year, hoping to bring greater attention to the challenges and spur needed changes.
“The widespread problems plaguing the unemployment insurance system are extremely troubling,” Gene Dodaro, comptroller general of the United States and the head of the GAO, said. “Not only is the system falling short in meeting the needs of workers and the broader economy, but the potential for huge financial losses could undermine public confidence in the stewardship of government funds. The Labor Department is considering a number of changes, but GAO is concerned that many long-standing problems may go unaddressed. By adding the Unemployment Insurance system to GAO’s High-Risk List now, our hope is that Congress and agency officials will provide sustained leadership to act on our recommendations for turning the situation around.”
The GAO outlined its specific concerns in a new report issued this week. The GAO found that the system had difficulties balancing effective service delivery and mitigating financial loss, making it more difficult to successfully launch temporary programs to help unemployed workers during the COVID-19 pandemic. The unprecedented demand for assistance and the need to get the programs up and running quickly resulted in serious challenges for states and a greater risk of improper payments, including those due to fraud.
GAO cited weaknesses in UI administration that have undermined states’ ability to effectively meet the needs of unemployed workers, including during economic downturns. During the pandemic, problems with customer service, timely claims processing, and the implementation of new programs became evident. GAO cited the need to modernize state IT systems.
Over the years, the Department of Labor (DOL) has regularly reported billions of dollars in annual UI improper payments. This problem intensified during the pandemic, with estimated improper payments rising from approximately $8 billion in fiscal year 2020 (a 9.2 percent rate) to about $78.1 billion in fiscal year 2021 (an 18.9 percent rate). Due to incomplete reporting by DOL and the states, the total amount of UI improper payments is unknown.
But GAO notes that fraud is a growing concern. According to DOL, the main cause for the increase in fraud during the pandemic was identity theft. From March 2020 through January 2022, hundreds of individuals either pled guilty to defrauding UI programs or had federal charges pending against them.