Court filing
Audit Report — PUA for Non-Traditional Claimants Weakened by Billions in Overpayments, Including Fraud
Filed September 27, 2023 in DOL OIG Unemployment Insurance; one of 15 filings from this case.
Record facts
| Court | U.S. Department of Labor, Office of Inspector General (contracted to Key and Associates, P.C.) |
|---|---|
| Filed | 2023-09-27 |
Cited in: PUA Was Built to Be Uncheckable
Full text
REPORT TO THE EMPLOYMENT
AND TRAINING ADMINISTRATION
COVID-19: PANDEMIC
UNEMPLOYMENT ASSISTANCE FOR
NON-TRADITIONAL CLAIMANTS
WEAKENED BY BILLIONS IN
OVERPAYMENTS, INCLUDING FRAUD
DATE ISSUED: SEPTEMBER 27, 2023
REPORT NUMBER: 19-23-014-03-315
This report was prepared by Key & Associates, P.C. under contract to
the U.S. Department of Labor, Office of Inspector General, and, by
acceptance, it becomes a report of the Office of Inspector General.
U.S. Department of Labor
Assistant Inspector General for Audit
U.S. Department of Labor
Office of Inspector General
Audit
BRIEFLY…
COVID-19: PANDEMIC UNEMPLOYMENT
ASSISTANCE FOR NON-TRADITIONAL
CLAIMANTS WEAKENED BY BILLIONS IN
OVERPAYMENTS, INCLUDING FRAUD
SEPTEMBER 27, 2023
WHY OIG CONDUCTED THE AUDIT
The Pandemic Unemployment Assistance
program (PUA) was one of several new
unemployment insurance (UI) programs created
under the Coronavirus Aid, Relief, and
Economic Security (CARES) Act to address the
economic emergency resulting from the
COVID-19 pandemic. PUA provided UI benefits
to workers who were not traditionally eligible.
The U.S. Department of Labor’s Employment
and Training Administration (ETA) was
responsible for ensuring implementation and
program monitoring of PUA. Based on audits of
previous emergency UI program
implementation, we were concerned with ETA’s
ability to effectively and efficiently deploy PUA
funding, which totaled over $130 billion.
WHAT OIG DID
We contracted with the independent certified
public accounting firm of Key & Associates,
P.C. (Key & Associates) to conduct an audit to
answer the following question:
Did non-traditional claimants receive PUA
benefits as intended under the CARES Act
and subsequent legislation?
Key & Associates’ audit procedures included
assessing ETA’s oversight, performing in-depth
testing for 10 state workforce agencies (SWA or
state), and surveying 43 other states.
WHAT OIG FOUND
Key & Associates found non-traditional
claimants received necessary PUA benefits as
intended under the CARES Act and subsequent
legislation. However, allowing claimants to
self-certify their eligibility—coupled with states’
difficulties with implementing new UI programs
and the substantial increase in claims volume—
led to significant overpayments, including fraud.
PUA quickly became the second largest
pandemic-related UI program. From
April 1, 2020, through September 30, 2021, the
53 SWAs provided over $130 billion for PUA
benefits. By comparison, SWAs provided about
$153 billion for the regular UI program.
However, providing benefits to non-traditional
claimants came at the cost of significant
overpayments.
From April 1, 2020, to March 31, 2023, the
53 SWAs reported nearly $35 billion in
established PUA overpayments. This included
PUA benefits and Federal Pandemic
Unemployment Compensation benefits, the
supplement that was attached to each UI claim
paid. In total, states reported that over 15 percent
of all PUA benefits paid were overpayments and
approximately 61 percent of all Federal Pandemic
Unemployment Compensation overpayments
occurred when PUA was the underlying benefit.
Key & Associates, in collaboration with the OIG,
found that 10.8 percent of PUA claims exhibited
potentially fraudulent activity, including instances
of benefits paid to individuals with Social Security
numbers used to file UI claims in multiple states
or of deceased persons. While these indicators—
previously reported by the OIG—do not measure
the full extent of PUA fraud, they indicate the
vulnerability of the program.
WHAT OIG RECOMMENDED
Key & Associates made three
recommendations to ETA to improve oversight
of the UI program. ETA agreed with our
recommendations.
READ THE FULL REPORT
https://www.oig.dol.gov/public/reports/oa/2023/1
9-23-014-03-315.pdf
U.S. Department of Labor – Office of Inspector General
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TABLE OF CONTENTS
INSPECTOR GENERAL’S REPORT .................................................................... 1
CONTRACTOR PERFORMANCE AUDIT REPORT ............................................ 6
RESULTS ........................................................................................................... 11
Effectiveness of Pandemic Response for Non-Traditional Claimants
Weakened by Significant Overpayments, Including Fraud ....................... 12
CONCLUSION .................................................................................................... 22
RECOMMENDATIONS ....................................................................................... 23
Analysis of Management’s Response ...................................................... 24
EXHIBIT 1: COVID-19-RELATED REASONS THAT AN INDIVIDUAL COULD
RECEIVE PUA .................................................................................................... 26
EXHIBIT 2: REPORTED FUNDING, OVERPAYMENTS, AND RECOVERIES BY
STATE ................................................................................................................ 27
EXHIBIT 3: POTENTIALLY FRAUDULENT BENEFITS INDICATORS BY STATE
............................................................................................................................ 30
APPENDIX A: SCOPE AND METHODOLOGY .................................................. 32
APPENDIX B: AGENCY’S RESPONSE TO THE REPORT ............................... 36
U.S. Department of Labor
Office of Inspector General
Washington, DC 20210
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INSPECTOR GENERAL’S REPORT
Brent Parton
Principal Deputy Assistant Secretary
for Employment and Training
U.S. Department of Labor
200 Constitution Ave. NW
Washington, DC 20210
The U.S. Department of Labor, Office of Inspector General (OIG) contracted with
the independent certified public accounting firm of Key & Associates, P.C.
(Key & Associates) to conduct a performance audit of the Employment and
Training Administration (ETA) and states’ delivery of unemployment insurance
(UI) benefits to non-traditional claimants under the Pandemic Unemployment
Assistance (PUA) provisions of the Coronavirus Aid, Relief, and Economic
Security (CARES) Act and subsequent legislation. Additionally, Key & Associates
analysis included Federal Pandemic Unemployment Compensation benefits as
these benefits supplemented PUA payments.
The OIG monitored Key & Associates’ work to ensure it met professional
standards and contractual requirements. Key & Associates’ independent audit
was conducted in accordance with generally accepted government auditing
standards.
Key & Associates was responsible for the auditors’ evaluation and the
conclusions expressed in the report while the OIG reviewed Key & Associates’
report and supporting documentation.
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PURPOSE
As the OIG has previously reported,0F1 we are concerned with ETA and states’
ability to deploy UI benefits expeditiously and efficiently while ensuring integrity
and adequate oversight, particularly in response to national emergencies and
disasters. These concerns were magnified by the PUA program, given its
high-risk nature and the OIG’s past work on expansions of UI programs, such as
the American Recovery and Reinvestment Act of 2009.
The UI program is a joint federal-state program that provides temporary benefits
to workers who become unemployed through no fault of their own. The CARES
Act was designed to mitigate the economic effects of the COVID-19 pandemic,
including providing temporary unemployment compensation—PUA—to
individuals not eligible for other unemployment compensation.
Specifically, Section 2102 of the CARES Act authorized unemployment coverage
to claimants who were not eligible for regular UI, extended benefits, or Pandemic
Emergency Unemployment Compensation.1F2 Claimants also were required to
self-certify they would otherwise be able to and available for work but were
unemployed, partially unemployed, or unable or unavailable for work due to 1 of
11 COVID-19 related reasons. These non-traditional claimants included
self-employed workers, independent contractors, those with a limited work
history, and others. See Exhibit 1 for the list of COVID-19-related reasons an
individual could receive PUA.
Created by the CARES Act on March 27, 2020, PUA was later extended and
modified2F3 by the Continued Assistance to Unemployed Workers Act of 2020 and
the American Rescue Plan Act of 2021, and ended on September 6, 2021.
Based on the risks associated with previous expansions of the UI program, we
contracted with Key & Associates to conduct a performance audit to answer the
following question:
1 See Prior Relevant Coverage in Appendix A.
2 The CARES Act, Section 2102(a)(3)(A)(i), defines a “covered individual” as “an individual who is
not eligible for regular compensation or extended benefits under State or Federal law or
pandemic emergency unemployment compensation under Section 2107, including an individual
who has exhausted all rights to regular unemployment or extended benefits under State or
Federal law or pandemic emergency unemployment compensation under section 2107.”
3 The PUA program underwent modifications with the enactment of the Continued Assistance to
Unemployed Workers Act of 2020. Key changes encompassed mandatory documentation of
employment or self-employment earnings, restrictions on backdating of claims, introduction of
overpayment waivers, and implementation of mandatory identity verification processes for new
PUA applications.
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Did non-traditional claimants receive PUA benefits as intended
under the CARES Act and subsequent legislation?
To answer this question, Key & Associates conducted a performance audit that
covered the period March 27, 2020, to September 30, 2021.3F4 To examine the
impact of self-certification on PUA benefit payments, Key & Associates tested
claims from March 27, 2020, to April 6, 2021. Specifically, Key & Associates
assessed the impact of CARES Act requirements, which allowed claimants to
self-certify their eligibility, and of the Continued Assistance to Unemployed
Workers Act of 2020, which required claimants to provide documentation to
substantiate their employment or self-employment. Additionally,
Key & Associates extended the scope to March 31, 2023, for the purpose of
reviewing the most current UI overpayment data.
The audit included procedures at both ETA and state levels to determine
compliance with program requirements. Key & Associates’ audit procedures
included assessing ETA’s oversight, performing in-depth testing for 10 state
workforce agencies (SWA or state),4F5 and surveying 43 other states. The
10 SWAs examined were in the Commonwealth of Puerto Rico and in the States
of: Colorado, Illinois, Kansas, Maryland, Massachusetts, New York,
Pennsylvania, Texas, and Utah.
For the period April 1, 2020, to September 30, 2021, the 53 SWAs reported
receiving over $130 billion in PUA funding to pay non-traditional claimants. Of
over $130 billion, approximately $53 billion (41 percent) was provided to the
10 SWAs tested.
RESULTS
Key & Associates found non-traditional claimants received necessary PUA
benefits as intended under the CARES Act and subsequent legislation. However,
the combination of several factors led to significant overpayments, including
fraud, in the PUA program. Specifically, these factors were: (1) the PUA
4 Although the PUA program officially concluded on September 6, 2021, 26 states provided DOL
notification to terminate their pandemic-related UI programs prior to this date. However, claims
and drawdown data are reported by SWAs on a monthly basis. Therefore, to ensure
comprehensive data representation, the claims and benefit drawdown information in this report
reflects data as of September 30, 2021.
5 This report uses “state” or “SWA” to refer to the administrative body that administers the UI
program within the state, district, or territory. There are 53 SWAs, including the 50 states, the
U.S. Virgin Islands, the Commonwealth of Puerto Rico, and the District of Columbia.
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program’s initial reliance on self-certification that offered states limited data to
detect or prevent overpayments, (2) a tenfold increase in UI claims that
overwhelmed state UI systems, and (3) states’ struggles to implement the new
pandemic-related UI programs.
PUA quickly became the second largest5F6 pandemic-related UI program. From
April 1, 2020, through September 30, 2021, the 53 SWAs provided over
$130 billion for PUA benefits. By comparison, SWAs provided about $153 billion
for the regular UI6F7 program. However, providing benefits to non-traditional
claimants came at the cost of significant overpayments.
Specifically, from April 1, 2020 to March 31, 2023, the 53 SWAs reported7F8 nearly
$35 billion in established PUA overpayments—benefit payments that SWAs
investigated8F9 and found were improper. These overpayments included $20 billion
in PUA benefits and approximately $15 billion in Federal Pandemic
Unemployment Compensation benefits, which was the supplement that was
attached to each UI claim paid. In total, states reported that over 15 percent of all
PUA benefits paid were overpayments and approximately 61 percent of all
Federal Pandemic Unemployment Compensation overpayments occurred when
PUA was the underlying benefit.
Finally, Key & Associates, in collaboration with the OIG, found that 10.8 percent of
PUA claims exhibited potentially fraudulent activity, including instances of benefits
paid to individuals with Social Security numbers used to file claims in multiple
states or of deceased persons. While these indicators—previously reported by the
6 The only larger pandemic-related UI program was Federal Pandemic Unemployment
Compensation. From March 27, 2020, to July 31, 2020, the Federal Pandemic Unemployment
Compensation program provided supplemental payments of $600 per week to individuals with at
least one dollar ($1) of underlying benefits from designated unemployment compensation
programs. Under CAA and the American Rescue Plan Act of 2021, the supplemental payments
were $300 per week.
7 Regular UI, also known as state UI, is a program administered by SWAs in the United States to
provide temporary financial assistance to eligible workers who have lost their jobs through no
fault of their own.
8 Overpayment and recovery amounts are based upon publicly available state reporting on
ETA 227 reports and the ETA 902P report. Information found at:
https://oui.doleta.gov/unemploy/DataDownloads.asp, last accessed August 27, 2023
9 Per Unemployment Insurance Program Letter 01-16, overpayments may be identified through
cross-matches, fraud hotlines, or a variety of other methods. States must conduct an investigation
before issuing an official determination that an overpayment has been made. In so doing, states
must ensure that investigators gather all relevant information, which may include supporting
documents and statements from either the individual to whom the payment was made or others.
In addition, an individual must be given an opportunity to be heard, timely notice of the interview,
and an opportunity to present evidence.
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OIG—do not measure the full extent of PUA fraud, they indicate the vulnerability of
the program.9F10
We appreciate the cooperation and courtesies ETA extended us during this audit.
Carolyn R. Hantz
Assistant Inspector General for Audit
10 For example, see: Alert Memorandum: Potentially Fraudulent Unemployment Insurance
Payments in High-Risk Areas Increased to $45.6 Billion, Report No. 19-22-005-03-315
(September 21, 2022), https://www.oig.dol.gov/public/reports/oa/2022/19-22-005-03-315.pdf.
Payments with potentially fraudulent claims previously reported in alert memoranda by the OIG
were referred to ETA. According to ETA, the OIG’s assessment of payments was provided to
SWAs for action if deemed necessary.
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CONTRACTOR PERFORMANCE AUDIT REPORT
Independent Auditors’ Performance Audit Report on the Unemployment
Insurance Benefits Provided to Non-Traditional Claimants and Compliance with
the Coronavirus Aid, Relief, and Economic Security Act and
Subsequent Legislation
Brent Parton
Principal Deputy Assistant Secretary
for Employment and Training
U.S. Department of Labor
200 Constitution Ave. NW
Washington, DC 20210
We were engaged by the U.S. Department of Labor (DOL or the Department)
Office of Inspector General (OIG) to conduct a performance audit of the
Employment and Training Administration (ETA) and states’ delivery of
unemployment insurance (UI) benefits to non-traditional claimants under the
Pandemic Unemployment Assistance (PUA) provisions of the Coronavirus Aid,
Relief, and Economic Security (CARES) Act and subsequent legislation. The
program was created to mitigate the economic effects of the COVID-19
pandemic for non-traditional claimants, such as self-employed workers,
independent contractors, and those with a limited work history.
We conducted the audit to answer the following question:
Did non-traditional claimants receive PUA benefits as intended
under the CARES Act and subsequent legislation?
To answer this question, we performed procedures at ETA and State Workforce
Agency (SWA or state) levels to determine compliance with program
requirements. The OIG selected the Commonwealth of Puerto Rico and the
States of: Colorado, Illinois, Kansas, Maryland, Massachusetts, New York,
Pennsylvania, Texas, and Utah (10 SWAs) for in-depth analysis and testing. The
OIG selected these 10 SWAs based on a risk analysis, including, but not limited
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to, funding amounts, law enforcement intelligence, congressional interest, and
media reports.
We also sent surveys to the remaining 43 SWAs that signed an agreement to
participate in PUA to obtain related key information about the program.10F11 In
addition, we reviewed the states’ implementation of the CARES Act and related
legislation, preparedness, initial eligibility determinations, continued eligibility
determinations, overpayment detection, and the states’ compliance with ETA’s
oversight requirements. Furthermore, our review included an examination of
state data sets on overpayments and claim denials.
This audit covered DOL and states’ PUA programs from March 27, 2020, to
September 30, 2021, coinciding with the COVID-19 pandemic. To examine the
impact of self-certification on PUA benefit payments, we tested claims from
March 27, 2020, to April 6, 2021. Specifically, we assessed the impact of
CARES Act requirements, which allowed claimants to self-certify their eligibility,
and the Continued Assistance to Unemployed Workers Act of 2020 (CAA), which
required claimants to provide documentation to substantiate their employment or
self-employment. Additionally, we extended the scope of the audit to
March 31, 2023, for the purpose of reviewing the most current UI established
overpayment data.
INCREASE IN UI PROGRAM CLAIMS AND THE
PANDEMIC RESPONSE FOR NON-TRADITIONAL
CLAIMANTS
The pandemic presented ETA and states with unprecedented challenges. ETA
officials have highlighted these challenges,11F12 including the daunting task of
managing an overwhelming surge in claims volume.
After the pandemic’s emergence in early 2020, there was a drastic increase in
unemployment compensation claims across the United States. Within a span of
2 to 3 weeks, initial claims surged to 10 times the pre-pandemic levels,
overwhelming the capacity of state systems. By August 15, 2020, a period of
5 months, DOL recorded more than 57 million initial claims, the largest increase
since the Department started tracking UI data in 1967. Consequently, state
officials reported their primary focus had shifted to providing assistance to
individuals who found themselves jobless due to the pandemic, necessitating the
11 Of 43 SWAs, 21 responded to the survey request. Therefore, this report reflects 31 of
53 SWAs’ experiences (58 percent) during the audit period.
12 ETA’s statements can be found in the report: “COVID-19: States Struggled to Implement
CARES Act Unemployment Insurance Programs,” Report No. 19-21-004-03-315 (May 28, 2021),
https://www.oig.dol.gov/public/reports/oa/2021/19-21-004-03-315.pdf.
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participation of all UI staff members in aiding claimants even if this was typically
outside of their customary job duties.
PUA was the first temporary UI program to provide benefits to non-traditional
claimants. The introduction of the PUA program posed a unique challenge as it
was implemented without a lengthy preparation period and under new eligibility
requirements. ETA officials stated that a swift rollout of a new government benefit
program, including policy formulation, product development, and operational
procedures, typically requires a timeframe of 30 to 48 months. However, as the
OIG previously reported, given the nature of emergency situations, states would be
unlikely to have a lengthy rollout period for emergency programs. Consequently, the
challenges associated with the PUA program had to be resolved in real-time,
while states grappled with an extraordinary tenfold increase in claims volume.
ETA officials stated that, both during and after the pandemic-related UI program
period, ETA and states have launched several initiatives to combat
overpayments, including fraud. Measures like secure sign-in services, in-person
identity verification, and a new identity fraud reporting website were introduced to
mitigate fraud. Additionally, ETA stated it had made available up to $765 million
in fraud prevention grants, and expert Tiger Teams provided states with
assessments and improvement recommendations for UI processes.
ETA also stated it facilitated the secure availability of incarceration data to
cross-reference UI claims against prisoner information. Further, ETA reported it
continued to provide oversight and technical assistance through the State Quality
Service Plans, the Integrity Action Plan, the UI Integrity Center, and information
provided by the Department’s OIG. ETA also stated it is working with the Office
of the Chief Financial Officer to develop a UI fraud risk profile in line with the
Government Accountability Office’s Fraud Risk Framework.
IMPORTANCE OF ESTABLISHING IMPROPER
PAYMENT ESTIMATES AND FRAUD RATE FOR
EMERGENCY UI PROGRAMS, INCLUDING PUA
As of January 23, 2023, ETA reported that states paid $130.9 billion in PUA
benefits from March 27, 2020 to September 6, 2021 (see Table 1).
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Table 1: Total Benefits Paid by the 53 SWAs for Pandemic-Related UI
Programs, from March 27, 2020, to September 6, 202112F13
Pandemic-Related UI Program
Total Drawdowns
Federal Pandemic Unemployment Compensation
$443,100,000,000
Pandemic Unemployment Assistance
$130,900,000,000
Pandemic Emergency Unemployment Compensation
$90,500,000,000
Temporary Full Federal Funding of First Week of Regular
Compensation Provision
$7,500,000,000
Emergency Unemployment Relief for State and Local
Governmental Entities, Certain Nonprofit Organizations, and
Federally Recognized Indian Tribes
$6,300,000,000
Short-Time Compensation Program
$1,200,000,000
Mixed Earners Unemployment Compensation
$90,200,000
Total
$679,590,200,000
Source: Key & Associates analysis of information reported by ETA
ETA requires states to report established overpayments to the Department on
ETA Form 227 and ETA Form 902P. In addition, the Office of Management and
Budget requires13F14 federal agencies to develop improper payment14F15 estimates
(including overpayments) for any programs that agencies identify as susceptible
to significant improper payments and to report those estimates at
PaymentAccuracy.gov.
Established UI program overpayments reported by states have generally been
much lower than the estimates developed by the Department. During
Fiscal Year 2021, ETA determined PUA was susceptible to significant improper
payments. In Unemployment Insurance Program Letter 16-22, ETA published its
plan to calculate an estimated improper payment rate for the PUA program.
However, according to ETA officials, the small-scale review outlined in
Unemployment Insurance Program Letter 16-22, intended to minimize the burden
13 ETA provided these amounts as of January 23, 2023. Please note that, throughout the report,
we use different sources of information based on the availability of data and the requirements of
our analysis.
14 Office of Management and Budget, “Transmittal of Appendix C to OMB Circular A-123,
Requirements for Payment Integrity Improvement,” Memorandum (March 5, 2021), last accessed
June 27, 2023, https://www.whitehouse.gov/wp-content/uploads/2021/03/M-21-19.pdf
15 Improper payments refer to both underpayments and overpayments inclusive of fraudulent
activity. For ETA in Program Year 2020, the regular UI program estimated an improper payment
rate of 9.17 percent, with 8.72 percent constituting overpayments and 0.45 percent being
underpayments. The primary focus of our audit was on overpayments, given that they made up
the majority of improper payments and thus posed a greater risk to the integrity of the UI
program.
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on states while meeting the improper payment reporting requirements, could not
be used to estimate the PUA fraud rate.15F16
For further contrast, ETA estimates the fraud rate for the regular UI program as
part of the Benefit Accuracy Measurement program.16F17 ETA stated it is not
required to publicly report the fraud rate. However, it does gather sufficient data
to estimate the fraud rate, which is then included in the annual Benefit Accuracy
Measurement analytical report, from the required improper payments reporting.17F18
On August 21, 2023, ETA published a PUA improper payment report18F19 with an
estimated PUA improper payment rate of 35.9 percent. This rate includes an
overpayment rate of 17 percent, an underpayment rate of 1.5 percent, and a
17.4 percent rate for benefits whose classification—whether valid, overpaid, or
underpaid—could not be determined. The report also shed light on the numerous
challenges encountered by both ETA and states. Notably, it underscored the
PUA program’s significant benefit of preventing 5 million Americans from falling
into poverty. Concerning fraud within the PUA program, the report states:
While fraud due to weakened controls in 2020 may have
contributed to overpayments, this analysis focuses on the broader
universe of improper payments, does not isolate fraud, and should
not be considered a fraud estimate for the PUA program.
Although ETA is not required to identify the fraud rate for regular or emergency
UI programs, the DOL Inspector General has testified19F20 on the importance of
assessing the overall improper payment rate, including the fraud rate, for the
efficient operation of pandemic UI programs. However, ETA’s disclosure of the
16 On July 26, 2023, ETA officials provided this feedback in their technical response to the draft
version of this report.
17 According to ETA, the Benefit Accuracy Measurement program is a quality control statistical
survey used to identify errors and support corrective action in the state UI system. It usually
focuses on the three major UI programs: regular UI, Unemployment Compensation for Federal
Employees, and Unemployment Compensation for Ex-service members. Benefit Accuracy
Measurement data is used to estimate the total improper payments in the UI program, in each
state and in the nation as a whole, based on a statistically valid examination of a sample of paid
and denied claims.
18 ETA typically publishes the Benefit Accuracy Measurement Annual Report by the conclusion of
the year following the respective program year. For example, the 2022 report was published on
September 5, 2023.
19 ETA, “Pandemic Unemployment Assistance Improper Payment Rate Report”
(August 21, 2023), https://oui.doleta.gov/unemploy/improp_pay.asp#
20 “Pandemic Response and Accountability: Reducing Fraud and Expanding Access to COVID-19
Relief through Effective Oversight,” March 17, 2022, Hearing of the U.S. Senate Committee on
Homeland Security and Governmental Affairs, Statement of Larry D. Turner, Inspector General,
Office of Inspector General, U.S. Department of Labor, Report No. 19-22-003-03-315,
https://www.oig.dol.gov/public/testimony/20220317.pdf
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PUA improper payment rate estimate occurred almost 2 years after the
program’s conclusion and did not include a fraud rate.
Given the delay in reporting the estimated improper payment rate and the
absence of a corresponding fraud rate, various third-parties have produced their
own estimates of the extent of pandemic UI fraud. This situation has the potential
to create confusion both among the general public and within Congress,
particularly when discrepancies exist. To uphold transparency and effective
governance of the program, it is imperative that ETA produce standardized and
timely metrics.
RESULTS
We found non-traditional claimants received necessary PUA benefits as intended
under the CARES Act and subsequent legislation. However, the combination of
several factors led to significant overpayments, including fraud, in the PUA
program. Specifically, these factors were: (1) the PUA program’s initial reliance
on self-certification that offered states limited data to detect or prevent
overpayments, (2) a tenfold increase in UI claims that overwhelmed state UI
systems, and (3) states’ struggles to implement the new pandemic-related UI
programs.
PUA quickly became the second largest pandemic-related UI program. From
April 1, 2020, through September 30, 2021, the 53 SWAs provided over
$130 billion for PUA benefits. By comparison, SWAs provided about $153 billion
for the regular UI program. However, providing benefits to non-traditional
claimants came at the cost of significant overpayments.
Specifically, from April 1, 2020, to March 31, 2023, the 53 SWAs reported nearly
$35 billion in established PUA overpayments—benefit payments that SWAs
investigated and found were improper. These overpayments included $20 billion
in PUA benefits and approximately $15 billion in Federal Pandemic
Unemployment Compensation (FPUC) benefits, which was the supplement that
was attached to each UI claim paid. In total, states reported that over 15 percent
of all PUA benefits paid were overpayments, and approximately 61 percent of all
FPUC overpayments occurred when PUA was the underlying benefit.
Finally, in collaboration with the OIG, we found that 10.8 percent of PUA claims
exhibited potentially fraudulent activity, including instances of benefits paid to
individuals with Social Security numbers used to file claims in multiple states or
of deceased persons. While these indicators—previously reported by the OIG—
do not measure the full extent of PUA fraud, they indicate the vulnerability of the
program.
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EFFECTIVENESS OF PANDEMIC RESPONSE
FOR NON-TRADITIONAL CLAIMANTS
WEAKENED BY SIGNIFICANT
OVERPAYMENTS, INCLUDING FRAUD
One of the primary objectives of the CARES Act was to alleviate the economic
repercussions caused by the COVID-19 pandemic. As part of this effort, the PUA
program was introduced as the first-ever temporary emergency unemployment
compensation program designed to provide UI benefits to non-traditional
claimants. Between April 1, 2020, and September 30, 2021, over $130 billion
was allocated to the 53 SWAs to pay non-traditional claimants through the PUA
program. However, as PUA claimants did not have to provide documentation of
their prior work or earnings for the benefits during the first 9 months of the
program, PUA was highly susceptible to overpayments, including fraud.
Specifically, under the CARES Act, PUA claimants could receive up to 39 weeks
of their state’s minimum weekly benefit amount if they were found ineligible for
regular UI, extended benefits, or Pandemic Emergency Unemployment
Compensation (PEUC).20F21 Claimants were also required to self-certify that they
would otherwise be able and available for work but were unemployed, partially
unemployed, or unable or unavailable for work due to 1 of 11 COVID-19-related
reasons (see Exhibit 1 for the list of reasons an individual could receive PUA).
Therefore, PUA claimants did not have to provide evidence of earnings and
states relied upon self-certifications to determine initial and continued eligibility.
States officials expressed that this approach created program integrity
challenges, including difficulties in preventing improper payments, and that PUA
was targeted by criminals.
PUA PROVIDED BILLIONS IN BENEFITS TO
INTENDED AND UNINTENDED CLAIMANTS
Section 2102 of the CARES Act specifically outlined the eligibility criteria for
PUA. Eligible individuals included those that were self-employed,21F22 advised by a
health care professional to self-quarantine or self-isolate due to COVID-19, had
caregiving responsibilities for a family or household member with COVID-19,
21 The CARES Act, Section 2102(a)(3)(A)(i), defines a “covered individual” as “an individual who
is not eligible for regular compensation or extended benefits under State or Federal law or
pandemic emergency unemployment compensation under section 2107, including an individual
who has exhausted all rights to regular unemployment or extended benefits under State or
Federal law or pandemic emergency unemployment compensation under section 2107.”
22 These included freelancers, independent contractors, gig workers, or sole proprietors.
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were unable to work due to a lack of childcare caused by pandemic-related
closures, or experienced temporary business closures or significantly reduced
hours directly attributable to COVID-19.
The 10 SWAs reported that the implementation of PUA necessitated the
recruitment of extra personnel, IT system modifications, and the development of
training materials. They also indicated that they struggled to handle the volume of
claims, implement new pandemic-related UI programs, and prevent
overpayments, including fraud. Despite these obstacles, PUA provided billions in
benefits to millions of non-traditional workers.
Between April 1, 2020, and September 30, 2021, the 53 SWAs paid
approximately 30 million initial PUA claims.22F23 In March 2020, the Bureau of Labor
Statistics estimated there were nearly 16 million self-employed individuals in the
United States. PUA was not limited to the self-employed. However, the level of
funding and number of initial claims paid indicated that PUA proved to be a vital
source of financial support to individuals who would have otherwise been left
without income support during the pandemic.
CAA was signed into law on December 27, 2020. Section 241 of CAA introduced
a new requirement for PUA claimants to provide documentation supporting their
employment, self-employment, or planned commencement of employment or
self-employment generally within 21 days after submitting their PUA
application.23F24 The American Rescue Plan Act of 2021, which extended the PUA
program to September 6, 2021, continued the requirement for claimants to
provide supporting documentation.
STATES CHALLENGED IN PREVENTING PUA
PAYMENTS TO UNINTENDED CLAIMANTS
All 10 SWAs indicated being challenged in preventing overpayments, including
fraud, in the PUA program. Allowing claimants to self-certify their eligibility meant
states did not have non-traditional claimants’ information on prior work and
earnings as they were outside the federal-state UI taxation system. As a result,
states enrolled tens of millions of non-traditional workers without the ability to
independently access earnings data and with no ability to confirm continued
23 An initial claim is a claim filed by an unemployed individual after separation from an
employment.
24 The documentation requirement and the 21-day deadline did not uniformly apply to all PUA
claims. Specifically, only those who received a PUA payment after December 27, 2020, were
required to submit documentation. For applicants who filed a new PUA claim on or after
January 31, 2021, a 21-day deadline for document submission was set. However, for those who
applied for PUA prior to January 31, 2021, and received a payment after December 27, 2020, a
90-day window was provided for document submission.
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weekly eligibility except through self-attestation. State officials reported the
following challenges with allowing claimants to self-certify their eligibility:
• Lack of proof of employment separation: State officials
expressed that the self-certification process did not require
claimants to provide evidence or proof of separation from
employment. This lack of verification made it challenging for
officials to identify or prevent overpayments.
• Attractive target for criminals: State officials noted that the
program’s eligibility criteria were oversimplified to an extent to
attract fraud. Consequently, states found themselves investing a
significant amount of time in detecting and addressing fraudulent
activities.
• Inability to deny benefits for disqualifying reasons: The
self-certification process prevented states from denying PUA
benefits to claimants, even if those claimants had been denied
regular UI benefits due to disqualifying factors such as misconduct
or voluntary separation unrelated to the pandemic. This suggests
that self-certification may have inadvertently allowed ineligible
claimants to receive benefits.
Both publicly reported data and state claims data supported that states faced
challenges in preventing overpayments, including fraud, in the PUA program. As
of March 31, 2023, the 53 SWAs reported nearly $35 billion in established
overpayments for non-traditional claimants under the PUA program, comprised of
$20 billion in PUA established overpayments and approximately $15 billion in
FPUC benefits. Established overpayments are state-identified overpayments that
states have confirmed to be improper. The process for identifying established
overpayments entails states conducting an investigation, gathering relevant
information, and providing the claimant an opportunity to be heard.
States reported established overpayments for PUA amounted to $20 billion,
which included $875 million in established fraudulent payments (see Table 2).
See Exhibit 2 for a breakdown of reported PUA funding, overpayments, and
recoveries by state.
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Table 2: Total Reported Established Overpayments Reported by
the 53 SWAs from April 1, 2020, to March 31, 2023
Program
Total Benefits for
Pandemic
Program
Period24F25
Established
Overpayments
Established
Fraudulent
Payments
Established
Overpayment
Rate
PUA
$130,900,000,000
$20,039,284,550
$875,667,946
15.3%
UCFE/UCX25F26
$897,800,000
$85,523,465
$22,654,338
9.5%
Regular UI
$165,400,000,000
$12,505,893,308
$1,376,059,868
7.6%
MEUC26F27
$90,200,000
$6,760,827
$269,369
7.5%
FPUC
$443,100,000,000
$24,088,937,545
$2,059,259,861
5.4%
PEUC
$90,500,000,000
$3,163,115,448
$248,377,907
3.5%
Total
$830,888,000,000
$59,889,515,143
4,582,289,815
n/a
Source: Key & Associates analysis of public overpayment data, retrieved June 26, 2023
In total, states reported that established overpayments for FPUC amounted to
$24 billion, including $2 billion in established fraudulent payments (see Table 3).
Specifically, the FPUC program generated approximately $15 billion in
overpayments attributable to the PUA program—$1 billion of which was reported
as established fraudulent overpayments.
25 ETA provided these amounts as of January 23, 2023. For this analysis, these figures were
used instead of publicly reported drawdowns to ensure a more accurate comparison between the
pandemic-related UI programs (operational from March 27, 2020, to September 6, 2021) and the
permanent UI programs.
26 Unemployment Compensation for Federal Employees (UCFE) and Unemployment
Compensation for Ex-servicemembers (UCX) are permanent UI programs for federal employees
and ex-servicemembers.
27 Mixed Earners Unemployment Compensation
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Table 3: Total FPUC Established Overpayments by Program for
the 53 SWAs from April 1, 2020, to March 31, 2023
Program
Established
Overpayments
Established Fraudulent
Payments
PUA
$14,668,456,113
$1,026,851,852
Regular UI
$7,297,599,139
$748,949,237
PEUC
$1,833,589,655
$232,199,546
Extended Benefits
$219,524,966
$4,045,806
UCFE/UCX
$67,642,695
$47,159,036
Disaster Unemployment Assistance
$1,120,740
$31,500
Trade Readjustment Allowances
$1,004,237
$22,884
Total
$24,088,937,545
$2,059,259,861
Source: Key & Associates analysis of public overpayment data, retrieved June 26, 2023
To put the $35 billion in established overpayments into perspective, that amount
is equivalent to more than 30 years of regular UI established overpayments in a
pre-pandemic year. Such a sum could have substantially advanced other key
government initiatives. For instance, it exceeded the 2023 budget for the
National Aeronautics and Space Administration27F28 and could provide support for
over 1 million students in the Job Corps program as indicated by a
2020 DOL-sponsored study.28F29 This underscores the magnitude of the amount
lost as well as the challenges ETA and states faced in operating and managing a
program that provided billions in benefits to millions of claimants during a time of
national crisis. Further, the substantial amount of overpayments raised valid
questions about the preparedness of the UI system to provide this level of
benefits in similar situations.
In April 2020, within a month after CARES Act passage, the OIG highlighted the
risk associated with permitting claimants to self-certify their eligibility for PUA
benefits.29F30 Subsequently, Congress took action by modifying the PUA program to
require documentation when the program was extended on December 27, 2020,
28 National Aeronautics and Space Administration (NASA) Agency Profile (data through
March 30, 2023), last accessed June 9, 2023, https://www.usaspending.gov/agency/national-
aeronautics-and-space-administration?fy=2023
29 DOL, Office of the Assistant Secretary for Policy, Chief Evaluation Office, website:
https://www.dol.gov/agencies/oasp/evaluation/completed-reports/estimating-job-corps-cost-per-
enrollee-and-cost-per-graduate, last accessed September 27, 2023
30 Advisory Report: CARES Act: Initial Areas of Concern Regarding Implementation of
Unemployment Insurance Provisions, Report No. 19-20-001-03-315 (April 21, 2020),
https://www.oig.dol.gov/public/reports/oa/2020/19-20-001-03-315.pdf
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by the CAA. However, 81 percent of all approved PUA claims were filed prior to
December 31, 2020.30F31
On July 31, 2020, ETA provided a response to an OIG report31F32 that included the
following:
ETA’s guidance with regard to self-certification is based on the
current statutory framework for the PUA program. The risk for fraud
is found in the statute itself, not in the Department’s interpretation of
the statute. The Department cannot unilaterally change policy
decisions made by Congress.
In light of ETA’s response indicating its lack of control over the self-certification
aspect of the PUA program, it is imperative for ETA to proactively prepare to
mitigate the risk involved with future emergency programs that may allow for
participants to support eligibility with self-certifications. For example, as shown by
the OIG’s identification of millions of PUA claims with easily detectable fraud
indicators, fraud testing and data analytics can be greatly beneficial in unveiling
identity theft within UI programs.
PUA PROGRAM TARGETED BY CRIMINALS
The DOL Inspector General has testified32F33 that the pandemic-related UI
programs were targeted by organized criminal groups. The unprecedented
infusion of federal funds into the UI program gave individuals and organized
criminal groups a high-value target to exploit, thus providing incentive to commit
fraud.
According to state officials, states faced challenges in mitigating fraud within the
PUA program despite implementing various countermeasures. These
countermeasures included the following:
• identity verification service contractors;
31 The PUA program’s documentation requirement became effective on December 27, 2020.
However, given that claims are reported on a monthly basis, the claims information was reported
as of December 31, 2020.
32 COVID-19: More Can Be Done to Mitigate Risk to Unemployment Compensation Under the
CARES Act, Report No. 19-20-008-03-315 (August 7, 2020),
https://www.oig.dol.gov/public/reports/oa/2020/19-20-008-03-315.pdf
33 “Pandemic Response and Accountability: Reducing Fraud and Expanding Access to COVID-19
Relief through Effective Oversight,” March 17, 2022, Hearing of the U.S. Senate Committee on
Homeland Security and Governmental Affairs, Statement of Larry D. Turner, Inspector General,
Office of Inspector General, U.S. Department of Labor, Report No. 19-22-003-03-315,
https://www.oig.dol.gov/public/testimony/20220317.pdf
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• Social Security Administration database verification;
• multi-factor authentication;
• report fraud portals;
• claimant call-in lines;
• additional fraud coding, such as suspense codes;
• manual file reviews;
• artificial intelligence-powered virtual assistance;
• CAPTCHA33F34 testing;
• foreign internet protocol checks;
• deceased person checks;
• multistate alerts;
• data analytics;
• predictive modeling;
• new hire/incarceration/earnings cross-matches; and
• fraud indicators for multiple phone numbers, emails, physical addresses,
and bank account numbers.
Despite these countermeasures, officials reported that the program’s vulnerability
to fraudulent activity persisted, mainly due to a lack of comprehensive
safeguards and the substantial volume of claims. For example, according to state
officials, the increased level of UI claims meant that Benefit Payment Control34F35
staff had to assist with processing claims. Additionally, state officials reported
that the level of identity theft affected state efforts to detect other types of
overpayments. Furthermore, Social Security Administration validation did not
prevent fraud because certain fraudsters used stolen information to file claims.
This susceptibility was evident nationally as 10.8 percent of PUA claims filed
between April 1, 2020, and September 30, 2021, showed potential fraud
indicators contrasted with the PEUC program’s 0.8 percent.35F36 These potentially
fraudulent claims were determined through data analytics and have not
undergone investigation, adjudication, or been confirmed to be fraudulent by a
state agency. Although these markers can identify suspicious transactions, they
cannot directly quantify the fraud rate in a specific program.
34 CAPTCHA stands for “Completely Automated Public Turing Test to Tell Computers and
Humans Apart,” which is a type of challenge-response test used in computing to determine
whether the user is human.
35 SWAs’ Benefit Payment Control units are responsible for promoting and maintaining the
integrity of the regular UI program through prevention, detection, investigations, establishment,
and recovery of overpayments.
36 The OIG collaborated with Key & Associates for the analysis of fraud indicators. This was an
effort to validate the trends in fraudulent activity as identified through statements provided by
state officials.
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For context, approximately 10.8 percent of the over 12 million UI claims
submitted36F37 by the 53 SWAs to the OIG for testing raised red flags in three
specific high-risk areas. These areas relate to individuals with Social Security
numbers: (1) used to file UI claims with suspicious email accounts, (2) filed in
multiple states, and (3) of deceased persons (see Table 4).37F38 In total,
$16.9 billion in PUA and FPUC benefits paid to PUA claimants was associated
with these indicators of potential fraud. See Exhibit 3 for more details on
potentially fraudulent payments by state.
Table 4: Potentially Fraudulent PUA Claims Submitted
from April 1, 2020, to September 30, 2021
Fraud Indicators
PUA Claims with
Fraud Indicators
Fraud Indicators as
% of Claims
Submitted
PUA and FPUC
Funds Associated
with Potentially
Fraudulent Claims
Suspicious Email
774,343
6.2%
$9,377,103,284
Multistate
764,694
6.1%
$9,891,441,015
Deceased
35,021
0.3%
$314,002,198
Total38F39
1,357,745
10.8%
$16,931,494,609
Source: OIG analysis of claims data for pandemic-related UI programs submitted by the 53 SWAs
In contrast, when the OIG tested claims from the PEUC program, which required
documentation to support employment status, 0.8 percent included fraud
indicators (see Table 5).
37 As part of a data disclosure process required to obtain information about pandemic-related
unemployment insurance programs, such as the PUA and PEUC programs, SWAs submitted
pandemic relief program claims data to the OIG.
38 Fraud indicators were created by the OIG to flag potential incidents of fraud. Claimants with
suspicious emails used the same email for multiple applications, used a temporary email address,
or an email address with a common fraud technique. Multistate claimants applied for benefits in
multiple states. Also flagged were claimants with Social Security numbers of a deceased persons.
39 For awareness, claimants can be classified into several fraud categories at once. As a result,
the aggregate of suspicious email fraud indicators, multistate fraud indicators, and deceased
persons fraud indicators will not correspond to the total, given that certain cases might be
included in multiple categories.
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Table 5: Potentially Fraudulent PEUC Claims Submitted
from April 1, 2020, to September 30, 2021
Fraud Indicators
PEUC Claims with
Fraud Indicators
Fraud Indicators as %
of Claims Submitted
PEUC and FPUC
Funds Associated
with Potentially
Fraudulent Claims
Suspicious Email
50,671
.6%
$926,707,464
Multistate
5,626
.1%
$98,342,794
Deceased
11,183
.1%
$191,707,634
Total39
64,295
.8%
$1,166,066,804
Source: OIG analysis of claims data for pandemic-related UI programs submitted by the 53 SWAs
The elevated levels of fraud that the PUA program experienced can likely be
partially explained by the fraud triangle. The fraud triangle suggests that, when all
three components—opportunity, incentive, and rationalization—are present,
individuals are more likely to engage in fraudulent activities. A review of the PUA
program indicates exposure to all three components (see Figure).
Figure: Fraud Triangle for the PUA Program
Source: Key & Associates analysis of the PUA program
While not all individuals who commit fraud are influenced by every
element of the fraud triangle, the presence of these components can
create a high-risk environment for fraudulent activities. More detail on the
components of the fraud triangle related to the PUA program follows:
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• Opportunity: The self-certification aspect of the PUA program
provided an opportunity for individuals to exploit the system and
fraudulently obtain benefits. By allowing claimants to self-certify
their own eligibility, the PUA program created a vulnerability of
which some individuals took advantage.
• Incentive: The PUA program, along with the FPUC supplement,
provided a significant financial incentive for claimants, which could
have increased motivation for fraudulent activity, attracting
individuals who saw it an opportunity for easy financial gain.
• Rationalization: The pandemic created a unique circumstance that
could be rationalized by claimants as a reason to defraud the
government. The economic downturn, job losses, and financial
hardships experienced during the pandemic could have influenced
individuals to justify their fraudulent actions as a means of survival
or as compensation for their losses.
Given the high rate of fraudulent activity and resultant fiscal impact, a
more robust and comprehensive approach to safeguarding such
programs, along with rigorous verification measures, is essential for future
crisis-related unemployment assistance initiatives.
MORE IS NEEDED TO ADDRESS CONTINUED
PROGRAM VULNERABILITY AND HOLD CRIMINALS
ACCOUNTABLE
ETA and state officials stated that organized crime continues to focus on UI
programs. They noted that the pandemic turned UI into a lucrative target for
fraud, a trend that persists despite no longer being as prevalent as during the
pandemic. These criminal groups adapt to countermeasures, shifting tactics and
locations to exploit systemic weaknesses.
OIG Office of Investigation officials reinforced ETA and states’ observations that
organized criminal groups continue to target UI programs. Specifically, OIG
officials stated:
From April 2020 through June 2023, the Office of Investigations
(OI) opened more than 200,000 investigative matters involving
pandemic UI fraud. In response, during the same period, OI’s
Special Agents have executed over 750 search warrants,
supported the charging of over 1,350 defendants, and worked to
secure over 700 convictions related to those matters. OI’s work in
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this area has shown that many of the perpetrators that exploited the
UI program were sophisticated cyber-enabled bad actors and
criminal enterprises who misused stolen personally identifiable
information to commit fraud. As evidenced by recent SWA reporting
and OI case activity, fraud in the traditional federal-state UI
programs has continued even after the expiration of
pandemic-related UI programs. OI continues to see the same fraud
typologies being committed by sophisticated cyber-enabled bad
actors and criminal enterprises that it combatted during the
pandemic.
The threat level, while lower than at the peak of the pandemic, remains
significant. Therefore, the regular UI program continues to be at risk,
underscoring the urgent need for improved security measures and fraud
prevention strategies.
ETA has provided states guidance on methods to strengthen the integrity of the
UI system. On July 13, 2023, ETA issued Unemployment Insurance Program
Letter 11-23, which embedded guidance on both mandatory and recommended
strategies, tools, and services for mitigating UI fraud within an announcement of
grant opportunities for states. The program letter states:
The Department encourages states to employ different fraud
prevention and [identity] verification strategies at different points
throughout the life of the claim…States must prioritize the
investigation of claims having the greatest risks, and where
appropriate, require the completion of evidence-based [identity]
verification.
Our review of the PUA program’s fraud indicators showed potential fraud of over
$16.9 billion, significantly more than the $1.9 billion established and reported by
the 53 SWAs (see Table 2 through Table 4).
It is critical that states identify the additional PUA fraud soon given the most
common statutes used to prosecute UI fraud have a 5-year limitation. As a result,
the statute of limitations related to the majority of pandemic-related UI fraud
cases will start to expire in early 2025, significantly limiting the recovery of UI
funds and rendering unlikely the ability to hold the fraud perpetrators
accountable.
CONCLUSION
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The states’ implementation of the PUA program played a significant role in
providing crucial support to non-traditional claimants during the challenging
period of the pandemic. The inclusion of self-certification as a means for
claimants to establish their eligibility allowed states to streamline the payment
process and deliver assistance to those in need. However, it is important to
acknowledge that this approach came at a considerable cost to the federal
government and taxpayers.
Although the PUA program provided needed assistance to eligible claimants, it
also empowered criminal organizations. Further, the level of overpayments could
erode the public trust in continuing DOL programs. Finally, the funds
misappropriated through fraud could have been used to support other vital
programs or infrastructure projects.
Striking a balance between providing necessary aid to people facing hardship
and implementing safeguards to mitigate fraud and other financial losses
presents a complex challenge. Prior to the next disaster or other mass
unemployment event, DOL must prepare to provide timely benefits while
simultaneously safeguarding taxpayer dollars. Furthermore, it is imperative that
ETA collaborates with state authorities to counteract the criminals who continue
to exploit the UI system.
RECOMMENDATIONS
We recommend the Principal Deputy Assistant Secretary for Employment and
Training:
1. Develop a document that captures lessons learned from the
implementation of the pandemic-related UI programs that can be used to
provide legislative technical assistance and operational guidance to
Congress and states on any future emergency UI programs, including an
assessment of fraud and fraud prevention methods in programs that allow
for self-certification.
2. Provide guidance to states regarding the criminal statute of limitations,
which could impact the ability to criminally charge individuals that engaged
in pandemic-related UI fraud. Guidance should recommend that states
identify and promptly refer pandemic-related UI fraud cases for criminal
investigation. This directive should also emphasize the importance of
cooperation between states and law enforcement agencies, making
specific reference to Unemployment Insurance Program Letter 04-17,
Change 1 - Attachment I, concerning activity that must be reported to the
OIG.
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3. Work with Congressional stakeholders to inform them of the urgency of
the statute of limitations concerning pandemic-related UI fraud.
ANALYSIS OF MANAGEMENT’S RESPONSE
In response to the report, ETA agreed with the recommendations and detailed its
plans for corrective action. In addition, ETA provided technical clarifications,
highlighted mitigating circumstances, and provided explanations about
statements made by state officials. ETA’s response did not alter the report’s
findings or conclusions. ETA also stated it was providing clarity for some
statements in the draft report. For example, ETA stated “it would be clearer and
more accurate to note that the CARES Act included a statutory provision that
claimants self-certify their eligibility.” The report included detailed information on
self-certification, including Congressional action, such that no related changes to
the report were needed. However, we appreciate ETA’s efforts to ensure clarity
of the report content.
Further, ETA objected to the inclusion of information on the National Aeronautics
and Space Administration and Job Corps that was provided in an effort to
exemplify the magnitude of the $35 billion in established PUA overpayments,
which, by definition, are improper. The inclusion of this information was not
intended to criticize the design of the emergency UI programs or other federal
initiatives but rather to spotlight the importance of ETA and states being prepared
to distribute UI benefits during a surge in claims while simultaneously mitigating
overpayments. We maintain that, with proper planning and preparation by ETA
and states, overpayments are not inherently inevitable for emergency
unemployment assistance programs, which offer critical support to American
workers.
In reviewing ETA's response to recommendation 3, we found the agency's claim
that they lack authority over criminal statutes and statutes of limitations to be
inadequate. A significant component of the criminal investigative process is the
ordering and collection of restitution, aiming to restore the integrity of the affected
program. As the primary agency managing this program, ETA should be at the
forefront, urging Congress to extend the statute. This is crucial not only for
deterring future fraudulent activities but also for reclaiming misappropriated
funds. We believe that ETA must take proactive measures to ensure maximum
recovery of fraud and guarantee appropriate criminal prosecutions.
Management’s response to the draft report is included in its entirety in Appendix
B.
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We appreciate the cooperation and courtesies ETA extended us during this audit.
Key & Associates, P.C.
Washington, DC
September 27, 2023
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EXHIBIT 1: COVID-19-RELATED REASONS THAT AN
INDIVIDUAL COULD RECEIVE PUA 39F40
1. The individual has been diagnosed with COVID-19 or is experiencing
symptoms of COVID-19 and is seeking a medical diagnosis.
2. A member of the individual’s household has been diagnosed with
COVID-19.
3. The individual is providing care for a family member or a member of the
individual’s household who has been diagnosed with COVID-19.
4. A child or other person in the household for which the individual has
primary caregiving responsibility is unable to attend school or another
facility that is closed as a direct result of the COVID-19 public health
emergency and such school or facility care is required for the individual to
work.
5. The individual is unable to reach the place of employment because of a
quarantine imposed as a direct result of the COVID-19 public health
emergency.
6. The individual is unable to reach the place of employment because the
individual has been advised by a health care provider to self-quarantine
due to concerns related to COVID-19.
7. The individual was scheduled to commence employment and does not
have a job or is unable to reach the job as a direct result of the
COVID-19 public health emergency.
8. The individual has become the breadwinner or major support for a
household because the head of the household has died as a direct result
of COVID-19.
9. The individual has to quit their job as a direct result of COVID-19.
10. The individual’s place of employment is closed as a direct result of the
COVID-19 public health emergency.
11. The individual meets any additional criteria established by the Secretary
for unemployment assistance under this section.
40 The CARES Act, Section 2102(a)(3)(A)(ii)(I), allowed PUA claimants to self-certify that they are
otherwise able and available to work, except that the individual is unemployed, partially
unemployed, or unable and unavailable to work based upon certain COVID-19-related reasons.
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EXHIBIT 2: REPORTED FUNDING, OVERPAYMENTS, AND
RECOVERIES BY STATE
Table 6: Reported Funding, Overpayments, and Recoveries by State
from April 1, 2020, to March 31, 202340F41
State
PUA Funding to
State41F42
Established
Overpayments42F
43
Established
Overpayments
from Fraud
Overpayment
Recoveries
National Total
$131,656,637,328
$20,039,284,550
$875,667,946
$1,533,056,225
Alabama
$353,520,500
$35,837,674
$3,063,420
-
Alaska
$73,913,860
$24,390,256
$2,481,031
$14,970,254
Arizona
$2,715,224,586
$72,626,716
$40,036,337
$1,659,349
Arkansas
$462,241,429
$88,083,179
$116,195
$27,886
California
$32,242,817,895
$16,543,528
$2,450,371
$1,587,224
Colorado
$2,584,579,368
$1,141,765,798
$378,143,963
$32,886,367
Connecticut
$659,781,789
-43F44
-
-
Delaware
$128,152,500
$686,508
$161,771
$58,811
District of
Columbia
$180,229,335
$1,736,730
$2,211,288
$537,934
Florida
$3,088,174,690
$2,161,910,145
$31,092
$51,443,671
Georgia
$2,938,063,789
$3,707,699
$3,024,451
$8,263
Hawaii
$735,274,045
$333,287
$10,888
$8,127
Idaho
$129,682,509
$15,860,897
$1,883,155
$3,943,348
Illinois
$4,558,661,678
$1,056,913,552
$16,219,546
$19,081,566
Indiana
$1,403,467,209
$318,129,995
$2,985,026
$17,892,329
41 A hyphen (-) is applied in cells where states reports did not include required overpayment
reporting.
42 As reported on ETA’s website, “Families First Coronavirus Response Act and Coronavirus Aid,
Relief, and Economic Security (CARES) Act Funding to States through March 31, 2023,” last
accessed April 19, 2023, https://oui.doleta.gov/unemploy/docs/cares_act_funding_state.html.
43 Overpayment and recovery amounts are based upon publicly available state reporting on the
ETA 902P report. Information found at: https://oui.doleta.gov/unemploy/DataDownloads.asp.
44 The OIG has previously reported that certain states have not completed required overpayment
reports. See: COVID-19: States Struggled to Implement Cares Act Unemployment Insurance
Programs, Report No. 19-21-004-03-315 (May 28, 2021),
https://www.oig.dol.gov/public/reports/oa/2021/19-21-004-03-315.pdf; and Alert Memorandum:
The Employment and Training Administration Needs to Ensure State Workforce Agencies Report
Activities Related to CARES Act Unemployment Insurance Programs,
Report No. 19-22-004-03-315 (August 2, 2022),
https://www.oig.dol.gov/public/reports/oa/2022/19-22-004-03-315.pdf.
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State
PUA Funding to
State41F42
Established
Overpayments42F
43
Established
Overpayments
from Fraud
Overpayment
Recoveries
Iowa
$342,431,529
$3,176,943
$751,201
$821,686
Kansas
$210,932,546
-
-
-
Kentucky
$139,238,494
$7,236,538
$4,982,999
$147,285
Louisiana
$1,007,173,411
$35,013,277
$468,659
$1,757,409
Maine
$279,636,833
$35,030,485
$181,043
$919,409
Maryland
$3,953,293,349
$2,279,729,894
$3,840,009
$1,243,168
Massachusetts
$5,914,833,708
$1,203,722,785
$20,169,785
$73,218,515
Michigan
$6,101,379,676
$4,418,295,222
$3,369,124
$44,362,902
Minnesota
$1,009,678,400
$18,563,013
$1,773,779
-
Mississippi
$408,799,689
$71,296,150
$2,261,399
$5,614,709
Missouri
$542,384,156
$79,771,116
$2,713,468
$3,830,577
Montana
$165,029,600
$27,803,604
$450,896
$1,977,852
Nebraska
$81,903,329
$13,419,425
$146,730
$1,853,827
Nevada
$1,381,205,279
$544,659,269
$7,090
$11,248,203
New
Hampshire
$184,235,029
$39,984,733
$595,500
$1,140,727
New Jersey
$6,151,398,494
$107,187,386
$20,677
$2,192,073
New Mexico
$483,292,087
$188,633,143
$3,978,799
$24,256,055
New York
$17,920,959,415
$96,275,805
$68,050,894
$25,612,801
North Carolina
$1,450,054,000
$173,961,885
$12,543,539
$7,144,002
North Dakota
$71,754,513
$11,762,913
$124,628
$1,253,898
Ohio
$5,126,853,237
$2,638,823,176
$168,955,042
$108,069,961
Oklahoma
$263,937,191
$11,819,369
$294,096
-
Oregon
$1,073,878,816
$35,815,287
$20,037,643
$525,490
Pennsylvania
$10,982,000,310
$1,184,932,327
$53,984,863
$78,181,785
Puerto Rico
$1,119,353,209
$104,929,461
-
$3,461,750
Rhode Island
$670,672,965
$10,891,297
$461,514
-
South Carolina
$548,233,738
$27,661,556
$9,717,158
$5,969,022
South Dakota
$20,970,908
$4,837,447
$263,276
$934,590
Tennessee
$676,050,130
$9,571,221
$4,925,662
$1,719,912
Texas
$5,731,111,531
$1,264,885,235
$9,960,508
$884,628,237
Utah
$85,780,985
$4,445,540
$1,299,135
$1,901,222
Vermont
$191,809,617
-
-
-
Virginia
$1,992,260,601
$43,621,885
$18,136,278
$51,459,950
Virgin Islands
$33,573,461
$2,583,562
$698,037
-
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State
PUA Funding to
State41F42
Established
Overpayments42F
43
Established
Overpayments
from Fraud
Overpayment
Recoveries
Washington
$2,538,174,647
$346,178,549
$1,190,217
$35,483,332
West Virginia
$168,264,113
$22,177,588
$110,777
$1,767,079
Wisconsin
$353,803,222
$26,531,062
$6,298,430
$6,008,339
Wyoming
$26,509,928
$5,530,438
$86,557
$245,329
Source: Key & Associates analysis of public overpayment and recovery data, retrieved
June 26, 2023
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EXHIBIT 3: POTENTIALLY FRAUDULENT BENEFITS
INDICATORS BY STATE
Table 7: Submitted Claims Data by State Associated with Fraud Indicators
from April 1, 2020, to September 30, 202144F45
State
PUA and FPUC
Benefits Reported
by SWA
Potentially Fraudulent
Benefits
Percent of Benefits
Potentially
Fraudulent
National Total
$224,858,725,838
$16,931,494,609
7.5%
Alabama45F46
-
-
-
Alaska46F47
-
-
-
Arizona
$7,970,139,262
$1,376,330,363
17.3%
Arkansas
$115,568,138
$15,038,157
13.0%
California
$67,869,154,548
$6,414,869,424
9.5%
Colorado
$1,713,932,921
$170,408,221
9.9%
Connecticut
$1,326,740,008
$46,630,048
3.5%
Delaware
$109,951,861
$7,902,008
7.2%
District of Columbia
$254,563,108
$20,952,735
8.2%
Florida
$6,875,828,882
$335,899,799
4.9%
Georgia
$4,471,063,612
$324,044,079
7.2%
Hawaii
$1,400,606,841
$20,564,602
1.5%
Idaho
$218,726,347
$4,366,020
2.0%
Illinois
$1,199,368,129
$128,448,289
10.7%
Indiana
$3,384,607,778
$245,809,858
7.3%
Iowa
$244,994,590
$11,349,296
4.6%
Kansas
$493,820,572
$85,362,967
17.3%
Kentucky
$442,895,361
$30,194,595
6.8%
Louisiana
$2,167,913,465
$204,781,849
9.4%
Maine
$865,644,791
$35,589,996
4.1%
Maryland
$6,828,460,702
$687,730,998
10.1%
Massachusetts
$9,463,400,031
$311,247,869
3.3%
Michigan
$16,339,540,751
$1,027,852,252
6.3%
45 A hyphen (-) is applied in cells where the OIG does not have data.
46 The State of Alabama submitted claims data that did not include PUA payments.
47 The State of Alaska submitted claims data as required but did not break down the data by
program.
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State
PUA and FPUC
Benefits Reported
by SWA
Potentially Fraudulent
Benefits
Percent of Benefits
Potentially
Fraudulent
Minnesota
$1,521,819,236
$40,709,610
2.7%
Mississippi
$1,164,127,491
$111,248,818
9.6%
Missouri
$1,381,549,584
$76,909,040
5.6%
Montana
$28,547,600
$641,929
2.2%
Nebraska
$224,090,675
$8,960,403
4.0%
Nevada
$1,045,638,640
$178,554,516
17.1%
New Hampshire
$380,925,915
$7,511,148
2.0%
New Jersey
$7,953,740,268
$206,003,790
2.6%
New Mexico
$363,535,335
$28,189,799
7.8%
New York
$36,959,767,657
$1,264,572,705
3.4%
North Carolina
$2,001,465,064
$80,275,568
4.0%
North Dakota
$42,762,654
$1,798,980
4.2%
Ohio47F48
-
-
-
Oklahoma
$258,445,888
$15,919,682
6.2%
Oregon
$12,793,535
$356,266
2.8%
Pennsylvania
$12,013,278,545
$1,621,289,719
13.5%
Puerto Rico
$3,787,502,324
$544,454,540
14.4%
Rhode Island
$1,214,504,366
$93,440,983
7.7%
South Carolina
$597,641,726
$26,548,764
4.4%
South Dakota
$49,454,363
$1,685,005
3.4%
Tennessee
$792,679,589
$50,470,868
6.4%
Texas
$12,208,792,612
$805,059,960
6.6%
Utah
$204,928,522
$5,464,464
2.7%
Vermont
$320,986,729
$11,247,760
3.5%
Virgin Islands48F49
$10,574
-
-
Virginia
$1,760,246
$106,392
6.0%
Washington
$5,533,192,514
$187,905,983
3.4%
West Virginia
$381,101,768
$34,122,211
9.0%
Wisconsin
$563,699,825
$17,923,283
3.2%
Wyoming
$93,060,895
$4,748,998
5.1%
Source: OIG analysis of claims data for pandemic-related UI programs submitted by the 53 SWAs
48 The State of Ohio provided PUA data; however, it was not processed in time for this report.
49 The U.S. Virgin Islands provided PUA data; however, it was not processed in time for this
report.
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APPENDIX A: SCOPE AND METHODOLOGY
SCOPE
This audit primarily covered DOL and states’ implementation of the PUA program
from March 27, 2020, to September 30, 2021. We examined the effect of
self-certification on claims payments by testing PUA claims from March 27, 2020,
to April 6, 2021. Our assessment focused on the impact of CARES Act
requirements, allowing claimants to self-certify eligibility, and the CAA, which
mandated claimants to provide documentation for the verification of employment
or self-employment. Additionally, we extended the review to include the most
recent UI overpayment data through March 31, 2023.
We conducted this performance audit in accordance with generally accepted
government auditing standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit objective.
We believe that the evidence obtained provided a reasonable basis for our
findings and conclusions based on our audit objective.
METHODOLOGY
To address the objectives of this audit, we followed a systematic methodology
that encompassed procedures conducted at both ETA and state levels to
evaluate compliance with program requirements.
The performance audit was carried out remotely, mainly using electronic
methods like virtual meetings and a file transfer protocol site. Of the 53 SWAs
with signed agreements to participate in the PUA program, the OIG selected
10 SWAs for in-depth testing: the Commonwealth of Puerto Rico and the States
of: Colorado, Illinois, Kansas, Maryland, Massachusetts, New York,
Pennsylvania, Texas, and Utah. The OIG selected these 10 SWAs based on a
risk analysis, including, but not limited to, funding amounts, law enforcement
intelligence, congressional interest, and media reports. By focusing on these
SWAs, we aimed to gain a comprehensive understanding of program compliance
in diverse contexts.
Additionally, we distributed surveys to the remaining 43 SWAs that had agreed to
participate in the program. Of the 43, 21 responded to the survey request.
Therefore, this report reflects 31 of 53 SWAs’ experiences (58 percent) during
the audit period. These surveys allowed us to obtain relevant information about
program implementation, further enhancing our assessment.
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Our evaluation of state compliance encompassed several key areas, including
the implementation of the CARES Act and related legislation, preparedness,
initial eligibility determinations, continued eligibility determinations, improper
payment detection, recovery efforts, and compliance with ETA’s oversight
requirements. By thoroughly examining these aspects, we aimed to ascertain
adherence to program guidelines and regulations.
Using non-statistical sampling, we randomly selected 60 claimants for each of
the audited states and tested payments made for: 3 periods; the initial claim; a
payment prior to December 27, 2020; and a payment made after
December 27, 2020. By testing these periods, we were able to garner an
understanding of the self-certification process.
Furthermore, we analyzed state-provided data sets to gain insights into
occurrences of overpayments and claim denials. This examination of datasets
enabled us to evaluate the effectiveness of program processes and identify any
potential areas of concern.
RELIABILITY ASSESSMENT
We assessed the reliability of computerized data. We summarized the
information provided by states and analyzed if the data was determined reliable
for our purposes. Methods of determining reliability were dependent upon the
availability of information at the state level. Primary methods of ensuring data
reliability involved IT assessments, information reviews, interviews, inspections,
comparisons, observations, walk-throughs, tracing, and policy reviews.
INTERNAL CONTROLS
A performance audit includes an understanding of internal controls considered
significant to the audit objective and testing compliance with significant laws,
regulations, and other requirements. In planning and performing our audit, we
considered whether internal controls significant to the audit objective were
properly designed and placed in operation. This included reviewing policies and
procedures. We confirmed our understanding of these controls and procedures
through interviews and the review and analysis of documentation. We evaluated
internal controls used for reasonable assurance. Our consideration of internal
controls for administering key pandemic-related UI programs would not
necessarily disclose all matters that might be reportable conditions.
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CRITERIA
• Public Law 116-136: Coronavirus Aid, Relief, and Economic Security
(CARES) Act (March 27, 2020)
• Public Law 116-260: Consolidated Appropriations Act, 2021, specifically
Division N, Title II, Subtitle A, the Continued Assistance for Unemployed
Workers Act of 2020 (December 27, 2020)
• American Rescue Plan Act of 2021 (Pub. L. 117-2), specifically Title IX,
Subtitle A, Crisis Support for Unemployed Workers (March 11, 2021)
• Office of Management and Budget, “Transmittal of Appendix C to OMB
Circular A-123, Requirements for Payment Integrity Improvement”
(March 5, 2021)
• Unemployment Insurance Program Letter 01-16, Federal Requirements to
Protect Individual Rights in State Unemployment Compensation
Overpayment Prevention and Recovery Procedures (October 1, 2015)
• Unemployment Insurance Program Letter 16-22, Announcement of the
Pandemic Unemployment Assistance (PUA) Improper Payment Estimate
Reviews and the cancellation of the 2022 Benefit Accuracy Measurement
(BAM) Paid Claims Peer Reviews (July 14, 2022)
• Unemployment Insurance Program Letter 11-23, Announcement of Grant
Opportunities and National Identity (ID) Verification Offering under the
American Rescue Plan Act (ARPA) (July 13, 2023)
PRIOR RELEVANT COVERAGE
During the last 3 years, the OIG has issued 9 reports of significant relevance to
the subject of this report. Those reports are the following:
1. CARES Act: Initial Areas of Concern Regarding Implementation of
Unemployment Insurance Provisions,
Report No. 19-20-001-03-15 (April 21, 2020), available at:
https://www.oig.dol.gov/public/reports/oa/2020/19-20-001-03-315.pdf;
2. Alert Memorandum: The Pandemic Unemployment Assistance Program
Needs Proactive Measures to Detect and Prevent Improper Payments and
Fraud, Report No. 19-20-002-03-315 (May 26, 2020), available at:
https://www.oig.dol.gov/public/reports/oa/2020/19-20-002-03-315.pdf;
3. COVID-19: More Can Be Done to Mitigate Risk to Unemployment
Compensation under the CARES Act,
Report No. 19-20-008-03-315 (August 7, 2020), available at:
https://www.oig.dol.gov/public/reports/oa/2020/19-20-008-03-315.pdf;
U.S. Department of Labor – Office of Inspector General
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4. COVID-19: States Struggled to Implement Cares Act Unemployment
Insurance Programs, Report No. 19-21-004-03-315 (May 28, 2021),
available at:
https://www.oig.dol.gov/public/reports/oa/2021/19-21-004-03-315.pdf;
5. Alert Memorandum: The Employment and Training Administration (ETA)
Needs to Ensure State Workforce Agencies (SWA) Implement Effective
Unemployment Insurance Program Fraud Controls for High Risk Areas,
Report No. 19-21-002-03-315 (February 22, 2021), available at:
https://www.oig.dol.gov/public/reports/oa/2021/19-21-002-03-315.pdf;
6. Alert Memorandum: The Employment and Training Administration Needs
to Issue Guidance to Ensure State Workforce Agencies Provide
Requested Unemployment Insurance Data to the Office of Inspector
General, Report No. 19-21-005-03-315 (June 16, 2021), available at:
https://www.oig.dol.gov/public/reports/oa/2021/19-21-005-03-315.pdf;
7. Alert Memorandum: Potentially Fraudulent Unemployment Insurance
Payments in High-Risk Areas Increased to $45.6 Billion,
Report No. 19-22-005-03-315 (September 21, 2022), available at:
https://www.oig.dol.gov/public/reports/oa/2022/19-22-005-03-315.pdf;
8. COVID-19: ETA and States Did Not Protect Pandemic-Related UI Funds
from Improper Payments Including Fraud or from Payment Delays,
Report No. 19-22-006-03-315 (September 30, 2022), available at:
https://www.oig.dol.gov/public/reports/oa/2022/19-22-006-03-315.pdf; and
9. The U.S. Department of Labor Did Not Meet the Requirements for
Compliance with the Payment Integrity Information Act for FY 2022,
Report No. 22-23-006-13-001 (June 9, 2023), available at:
https://www.oig.dol.gov/public/reports/oa/2023/22-23-006-13-001.pdf.
U.S. Department of Labor – Office of Inspector General
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APPENDIX B: AGENCY’S RESPONSE TO THE REPORT
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REPORT FRAUD, WASTE, OR ABUSE
TO THE DEPARTMENT OF LABOR
Online
https://www.oig.dol.gov/hotline.htm
Telephone
(800) 347-3756 or (202) 693-6999
Fax
(202) 693-7020
Address
Office of Inspector General
U.S. Department of Labor
200 Constitution Avenue NW
Room S-5506
Washington, DC 20210File and source
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