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August 2, 2023
Illinois Auditor General Audit Finds $5.2 Billion in UI Fraud Paid by IDES During Pandemic
- Overpayments (which include fraud, non-fraud, and identity theft) were an issue in both the regular UI and PUA programs. IDES reported overpayments for FY20 to FY22 that totaled $5.24 billion; regular UI accounted for $2.04 billion and PUA accounted for $3.20 billion. Considering gross benefits associated with regular UI claims were 2.5 times higher than gross benefits associated with PUA claims, it shows the magnitude of fraud experienced in the PUA program. IDES noted stopped or recovered payments of $150.36 million and $361.34 million for the regular UI and PUA programs respectively.
- Many decisions made during the pandemic were intended to decrease or eliminate delays and prioritize paying claims as soon as possible. Several of IDES’ defenses against fraud could not handle the exponential increase in claims. Claimants were unable to register for claims since they were required to pass these cross-matches in order to file. Beginning in March 2020, IDES suspended some routine identity cross-matches performed on all regular UI claims filed because the cross-matches required time to run and constricted the processing system severely. These cross-matches were temporarily suspended and/or processed offline. This allowed IDES to better handle the increase in claims processing traffic; however, this left the unemployment programs more susceptible to fraud.
- Timely payment of benefits and preventing fraud are competing concepts. Preventing fraud, especially in new programs with evolving guidance and guidelines, likely would require additional processing time and a possible delay in benefit distribution to claimants. Conversely, paying claims quickly, especially when certain cross-matches and controls were suspended, increased IDES’ risk of making improper payments.
- IDES made large payments of backdated benefits while controls were suspended which could have contributed to large overpayments and losses due to fraud and identity theft. Claims were sometimes filed and paid within a matter of days and then fraudulent activity was subsequently detected. Auditors found 158,054 PUA claimants that received a single payment of $10,000 or more (totaling more than $2.3 billion in benefits) within 30 days or less of the date of application. It is important to note that while these are not necessarily fraudulent payments, given the increased risk of identity theft and the size of these payments, it would be a good practice to take additional measures to ensure that these payments are issued to eligible claimants.
- IDES data shows payments were made to deceased individuals and incarcerated individuals. The data showed, for both regular UI and PUA combined, a total of 481 deceased individuals received 10,527 payments totaling $6.0 million. In addition, 3,448 incarcerated individuals received 92,811 payments totaling $40.5 million. Testing these cases showed that some overpayments had already been identified as fraud. However, some of the overpayment figures excluded payments made before January 2021 and therefore understated the overpayment. program complexity and constantly changing guidance.
- The addition of new federal laws and unemployment programs in response to the pandemic resulted in additional program complexity and constantly changing guidance. The US Department of Labor (DOL) issued official guidance referred to as Unemployment Insurance Program Letters (UIPLs). Auditors reviewed 72 UIPLs related to the audit determinations. In addition, the individual UIPLs were constantly being updated and changed. For example, UIPL 16-20 was first issued April 5, 2020; however, there were 6 subsequent changes issued from April 27, 2020, to September 3, 2021.
- While the pandemic created an unprecedented increase in unemployment claims, and likely levels that could not have been anticipated, the concept of planning for massive economic downturns remains the same. There was a lack of planning prior to the pandemic that contributed to the delays experienced by unemployment claimants:
- IDES was not prepared to quickly increase staffing, which created delays in answering phone calls and processing claims. Staffing issues were compounded by retirements and staff being forced to work from home due to the pandemic.
- PUA benefits could not be processed until a new PUA payment system was in place.
- IDES’ website and the IBIS system crashed due to overload.
- Claimants with missing or hijacked payments experienced substantial delays in getting their payments reissued due to an inadequate procedure for processing and handling payment tracer forms, especially in times of high demand. Auditors found that it took IDES, on average, 198 days to reissue hijacked regular UI payments and 445 days for hijacked PUA payments.
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