Pennsylvania paid out $2.2 billion dollars for apparently fraudulent claims for unemployment insurance between 2009-13, a recent report by the Labor Department’s Office of the Inspector General found. That total included $1.7 billion in improper payments that were not discovered by the state, and another $500 million that were detected but went unrecovered anyway.
Pennsylvania is just the tip of the iceberg. Nationally, the Inspector General’s office found that $5.6 billion in improper unemployment payments were made in fiscal year 2014 alone.
Pennsylvania isn’t even in the department’s top 10 states with the highest rates of improper payments. Unemployment insurance is federally funded and distributed at the state level by DOL’s Employment and Training Administration.
“This has been something the Inspector General’s office has been looking at for a long time,” said spokesman Luis Santos. He added that the OIG’s office is monitoring all states and just happened to highlight Pennsylvania for its semi-annual report to Congress, which was released Thursday.
Labor said the states with the highest rates for improper payments in 2014, all above 14 percent, are Indiana, Louisiana, Nevada, North Carolina, Maine and Nebraska. The states with the largest amounts of improper payments for that year were California ($389 million), Illinois ($354 million), Pennsylvania ($337 million) and New Jersey ($335 million).
The principle cause was people who had been receiving unemployment finding jobs without reporting that to the state, allowing the insurance payments to continue to flow. Others engage in outright fraud from the beginning either by not reporting earnings when they apply or by submitting fictitious names.
“[The Office of Management and Budget] has designated the Unemployment Insurance (UI) program as being particularly at risk for improper payments, and the Department’s ability to identify and reduce UI improper payments continues to be a challenge,” the OIG noted in its fiscal year 2014 report.
The report did note that the department had taken some steps to stem the problem, including creating a “high priority states” initiative to focus the efforts. However, the Pennsylvania study indicated that little progress was being made.
“[A]lthough Pennsylvania had implemented seven of eight National Strategies that ETA designed to help states reduce improper payment rates throughout the UI system, the state was not able to demonstrate that the strategies it implemented were effective,” the Inspector General’s report noted.
A Labor Department spokesman referred to its official response to the OIG report, which said it was “working aggressively with states” to implement fixes but that “certain essential program characteristics contribute to the improper payment rate.”
The main problem, the department said, is that there is no cost-effective way to guard against fraud since recipients “self-certify” their eligibility and thus improper payments are usually only found well after they have been made.
