Audit reveals why fraud plagued Ohio’s unemployment benefit system





A new report by Ohio Auditor Keith Faber’s office released Thursday has delved deep into the fraud plaguing the state’s unemployment benefit system, highlighting several reasons, including the failure early action, lack of controls, relaxed audit rules and outdated infrastructure.

All of these factors led the system to allow more than $ 475 million to be paid to criminals while an additional $ 3.3 billion in overpayments were made, according to the report, which covered the period from April 2020 to June 2021.

Following:18 months after the start of the pandemic, the unemployment benefit system remains a constraint for Ohioans

The good news is that many of these issues are on track to be resolved under the new leadership of the Ohio Department of Employment and Family, and new solutions are being implemented.

“It’s a problem I’m glad it’s at least improving,” Faber said in an interview. “But it’s a problem that’s happened in Ohio, and it’s our job to report these things.”

Obsolete system

When the COVID-19 pandemic hit Ohio and its economy early last year, fraud has become a sore point as aging infrastructure and technology were outmoded by the surge in the number of jobless claims and the rapid addition of benefit programs linked to the pandemic.

“The system just wasn’t built or prepared for the massive amount of claims and applicants that have come with the pandemic,” said an audit summary, presenting scammers with a prime target.

There were the issues of fraudulent claims as well as account hacks, where criminals gained access to banking or personal information and shied away from benefits. Such activity is under investigation by state and federal authorities.

But the overpayment of benefits has also become an issue, likely due to mistakes made by applicants or employers, many of whom are going through the process for the first time, the ministry said previously.

Lack of early prevention

The new audit follows the result of another check released earlier this year. Faber said state unemployment officials were aware of widespread fraud problems in the early months of the pandemic, but did not provide information to the auditor’s office. Instead, auditors were told that any fraud was insignificant.

But it contradicted what former director of employment and family services Kimberly Henderson told lawmakers that she knew about the fraud as early as June 2020.

The new audit explains this difference. The ministry believed the auditors were only trying to identify internal or employee fraud, not benefit recipients. Faber, however, thinks his office has made it clear that all types of fraud are interesting.

Regardless, the audit still accuses the ministry of not taking early action to tackle fraud. In August 2020, a fraud dashboard was launched, but it was not until early 2021, around the assumption of director Matt Damschroder, that the department launched a partnership project with the private sector. to really tackle the problem head on.

“I’m not going to say that we walked in and found nothing, that they just ignored the fraud,” Faber said. “But if they had tried to do it earlier, would they have been so successful? And we see no reason why they would not have been successful.”

Relaxed monitoring, verification

The other main causes of fraud identified by the report were the lack of checks on the system – some of them on purpose – to ensure that the money was distributed correctly and correctly.

For example, auditors found nearly 86,000 cases of payments to incarcerated persons and 141,000 payments to deceased persons. There were also a lot of other questionable payments.

About $ 8.1 billion went through this system, and the report found no established procedures to determine if things were working efficiently.

This was in part due to the ministry’s policy decision to relax verification requirements, such as asking employers to verify that an employee was not working, in hopes of speeding up claims.

“When they wandered between security and quick cash out, they wanted… to make a mistake in distributing the money as quickly as possible to those who needed it,” Faber said. “However, I think it’s been shown that they’re not mutually exclusive. And that’s the discussion.”

Global impact

In addition to the partnership program, Ohio spent hundreds of thousands dollars on private contractors to help substantiate fraud.

According to the audit, more than a quarter of all unemployment benefits in the previous fiscal year were fraudulent or overpaid, up from 3.5% before 2020. A total of $ 14.2 billion was paid in 2021 , against 900 million dollars the three previous years. the pandemic.

Problems of fraud and overpayment still exist, but with the end of unemployment benefits linked to the pandemic in September, officials hope the system will be less stressed.

A month ago, Job and Family Services contacted 3,100 claimants with account activity similar to an account takeover and said about 155,000 claimants had requested a waiver to keep the overpayment.

“Many systemic issues with the system will be resolved by moving to a more secure, more robust, more effective and more efficient system,” said Faber. “And it looks like they’re in this process.”

This story will be updated.

Titus Wu is a reporter for the USA TODAY Network Ohio Bureau, which serves Columbus Dispatch, Cincinnati Enquirer, Akron Beacon Journal, and 18 other affiliated news organizations across Ohio.


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