Special Report PE 21-14-648, WorkForce West Virginia Unemployment Claims Data — W. Va. Legislative Auditor
- Issuer
- West Virginia Legislative Auditor
- Document type
- Report
- Date
- 2021-12
West Virginia Legislative Auditor report PE 21-14-648 of December 2021 on WorkForce West Virginia unemployment claims data during the COVID-19 pandemic.
Full text
SPECIAL REPORT
WORKFORCE WEST VIRGINIA
UNEMPLOYMENT CLAIMS DATA
December 2021
PE 21-14-648
REPORT OVERVIEW
WorkForce West Virginia Paid Nearly $83 Million in
Fraudulent Unemployment Claims During the COVID-19
Pandemic
WEST VIRGINIA LEGISLATIVE AUDITOR
PERFORMANCE EVALUATION & RESEARCH DIVISION
JOINT COMMITTEE ON GOVERNMENT OPERATIONS
JOINT COMMITTEE ON GOVERNMENT ORGANIZATION
Senate
Mark Maynard, Chair
Chandler Swope, Vice-Chair
Mike Maroney
Patrick Martin
Eric Nelson
Randy Smith
David Stover
Dave Sypolt
Jack Woodrum
Owens Brown
Mike Caputo
Glenn Jeffries
Richard D. Lindsay II
Mike Woelfel
House of Delegates
Brandon Steele, Chair
Geoff Foster, Vice-Chair
Phillip W. Diserio, Minority Chair
Jim Barach, Minority Vice-Chair
Trenton Barnhart
Josh Booth
Roger Conley
Roy Cooper
Mark Dean
Don Forsht
Danny Hamrick
Josh Holstein
Dean Jeffries
Joe Jeffries
Shannon Kimes
Carl Martin
Margitta Mazzocchi
Charlie Reynolds
Doug Smith
Terri Funk Sypolt
Evan Worrell
Barbara Evans Fleischauer
Evan Hansen
Doug Skaff
Kayla Young
Building 1, Room W-314
State Capitol Complex
Charleston, West Virginia 25305
(304) 347-4890
WEST VIRGINIA LEGISLATIVE AUDITOR
PERFORMANCE EVALUATION & RESEARCH DIVISION
Senate
Mark Maynard, Chair
Chandler Swope
Dave Sypolt
Glenn Jeffries
Richard D. Lindsay II
House of Delegates
Unassigned
Unassigned
Unassigned
Unassigned
Unassigned
Agency/ Citizen Members
Vacant
Vacant
Vacant
Vacant
Vacant
Aaron Allred
Legislative Auditor
John Sylvia
Director
Jill Mooney
Research Manager
Christopher F. Carney
Senior Research Analyst
Performance Evaluation & Research Division | pg. 3
Special Report
CONTENTS
Executive Summary.......................................................................................................................................................................5
Issue 1: WorkForce West Virginia Paid Nearly $83 Million in Fraudulent Unemployment Claims
During the COVID-19 Pandemic............................................................................................................................7
List of Tables
Table 1: Regular Unemployment, PUA, and PEUC Claims CY 2019 and CY 2020..................................................8
Table 2: Fraudulent Regular Unemployment and PUA Number of Claims and Dollars Paid CY 2020.........11
Table 3: Examples of States’ Estimates of Fraudulent UI Benefits Paid Since March 2020................................12
Table 4: Percent of First-Time Regular UI Payments By Days to Payment January 2019 through
August 2021.................................................................................................................................................................21
Table 5: Average Number of First-Time Regular UI Payments By Days to Payment January
2019 through August 2021................................................................................................................................... 22
List of Figures
Figure 1: Monthly Regular Unemployment, PUA, and PEUC Claims Received by WorkForce September
2019 to September 2021..........................................................................................................................................9
Figure 2: Distribution Process of Unemployment Compensation Benefits............................................................18
Figure 3: Percent First-Time Regular UI Payments January 2019 through August 2021...................................20
List of Appendices
Appendix A: Transmittal Letter................................................................................................................................................23
Appendix B: Agency Response................................................................................................................................................25
pg. 4 | West Virginia Legislative Auditor
WorkForce West Virginia Unemployment Compensation Claims Data
Performance Evaluation & Research Division | pg. 5
Special Report
EXECUTIVE SUMMARY
Pursuant to West Virginia Code §4-2-5, the legislative auditor directed the Performance Evaluation
and Research Division to conduct an information report on the surge of fraudulent unemployment claims that
resulted from the COVID-19 pandemic, and that were paid by WorkForce West Virginia. The objective of this
report was to provide information on the unprecedented number of unemployment claims filed in response to
the COVID-19 pandemic, the amount paid in fraudulent claims, and the causes for many fraudulent claims
being paid.
Frequently Used Acronyms
CARES – Coronavirus Aid, Relief, and Economic Security Act 2020
FPUC – Federal Pandemic Unemployment Compensation Program
PEUC – Pandemic Emergency Unemployment Compensation Program
PUA – Pandemic Unemployment Assistance Program
OIG – U.S. Department of Labor’s Office of Inspector General
UI – Unemployment Insurance
USDOL – U.S. Department of Labor
WorkForce – WorkForce West Virginia
Report Highlights:
Issue 1: WorkForce West Virginia Paid Nearly $83 Million in Fraudulent Unemployment
Claims During the COVID-19 Pandemic
• The total number of unemployment claims processed by WorkForce as a result of the COVID-19
pandemic increased from 52,816 in CY 2019 (pre-pandemic) to 457,399 in CY 2020.
• WorkForce’s claims process was not designed for the unprecedented number of claims received, and
the allowance of self-certification of PUA claims.
• Consequently, WorkForce paid nearly $83 million in fraudulent unemployment claims during CY
2020.
• Unemployment insurance agencies throughout the country had similar experiences.
• WorkForce did not employ cross-matching mechanisms with other agencies for fraud detection/
prevention.
• WorkForce has implemented a fraud unit, a cross-match unit, and an investigations unit in addition to
developing partnerships with various state agencies to cross-match data and to identify “bad actors.”
pg. 6 | West Virginia Legislative Auditor
WorkForce West Virginia Unemployment Compensation Claims Data
Performance Evaluation & Research Division | pg. 7
Special Report
ISSUE 1
The CARES Act created the Pandem-
ic Unemployment Assistance (PUA)
program. This temporary program
provided up to 39 weeks of unemploy-
ment assistance to classes of workers
not normally eligible for regular unem-
ployment compensation, such as those
who were self-employed or worked
part-time.
WorkForce West Virginia Paid Nearly $83 Million in
Fraudulent Unemployment Claims During the COVID-19
Pandemic
As of November 13, 2021, West Virginia received almost $1.8
billion from the nearly $700 billion in federal Coronavirus Aid, Relief,
and Economic Security (CARES) Act 2020 funding for unemployment
assistance that was in response to the large number of individuals unable
to work as a result of the COVID-19 pandemic, and the need to reduce
the spread. The CARES Act created the Pandemic Unemployment
Assistance (PUA) program. This temporary program provided up to 39
weeks of unemployment assistance to classes of workers not normally
eligible for regular unemployment compensation, such as those who
were self-employed or worked part-time. In addition, PUA allowed
eligibility for people if they were not considered able and available to
work for reasons related to the COVID-19 pandemic, without the typical
verifications required for regular unemployment benefits. Specifically,
CARES originally allowed self-certification of employment as sufficient
for eligibility. This meant that self-employed people applying for PUA
could self-certify their employment or attest that they were able and
available to work but unemployed due to the COVID-19 pandemic
simply by checking a box on the unemployment application.
The CARES Act also included the Federal Pandemic
Unemployment Compensation (FPUC) program that allowed people
receiving regular unemployment or PUA benefits to have their weekly
benefit amount increased by $600. The initial FPUC program ended on
July 31, 2020. However, the program was first extended as a result of the
Continued Assistance for Unemployed Workers act of 2020 on December
27, 2020. The extended program paid eligible applicants an extra $300
benefit per week instead of the original $600. The program was extended
once again by the American Rescue Plan Act of 2021 in March of 2021
which ended on June 19, 2021 by executive order from the governor.1
Additionally,
the
Pandemic
Emergency
Unemployment
Compensation (PEUC) program allowed people who had exhausted
their regular unemployment benefits to claim benefits for an additional
13 weeks. The PEUC program was also extended by the Continued
Assistance for Unemployed Workers act of 2020 and the American
Rescue Plan Act of 2021 which ended on June 19, 2021. According to
the U.S. Department of Labor’s (USDOL) Office of Inspector General
(OIG), as of January 2, 2021, federal funding to states for the PUA,
1 West Virginia Governor Executive Order No. 12-21.
According to the U.S. Department of
Labor’s (USDOL) Office of Inspector
General (OIG), as of January 2, 2021,
federal funding to states for the PUA,
FPUC, and PEUC programs totaled
$392 billion.
pg. 8 | West Virginia Legislative Auditor
WorkForce West Virginia Unemployment Compensation Claims Data
As a result of the COVID-19 pandemic,
regular unemployment claims in West
Virginia increased from 52,816 in CY
2019 to 244,448 in CY 2020.
FPUC, and PEUC programs totaled $392 billion.2
The Number of Unemployment Claims Increased
Significantly as a Result of the COVID-19 Pandemic
Table 1 shows West Virginia’s total number of regular
unemployment claims, PUA, and PEUC claims submitted in calendar
years (CY) 2019 and 2020. As a result of the COVID-19 pandemic,
regular unemployment claims in West Virginia increased from 52,816
in CY 2019 to 244,448 in CY 2020. In addition, another 212,951
claims were filed for PUA and PEUC claims in CY 2020 as a result of
the COVID-19 pandemic. This large increase in claims overwhelmed
the WorkForce staff and the agency’s capability to properly review and
process the claims.
Table 1
Regular Unemployment, PUA, and PEUC Claims
CY 2019 and CY 2020
CY 2019
CY 2020
Regular Unemployment Claims
52,816
244,448
PUA Claims
N/A
179,351
PEUC Claims*
N/A
33,600
Total
52,816
457,399
Source: WorkForce West Virginia. Unaudited by PERD.
*The PEUC program provides an additional 13 weeks to regular unemployment
benefits..
Figure 1 shows monthly unemployment claims data for regular
unemployment claims, PUA, and PEUC claims received by WorkForce
from September 2019 through September 2021. Figure 1 illustrates
how significant the increase in regular unemployment claims was at the
onset of the COVID-19 pandemic. This increase was precipitated by
a state-of-emergency declaration, and later a stay-at-home order issued
by the governor in March 2020 that resulted in a decline in economic
activity in various industries, which led to an unprecedented number
of unemployment claims as many workers were being laid off or
unemployed. For example, the average number of regular unemployment
claims that were filed from September 2019 to February 2020 was 5,550
claims per month. However, in March 2020, initial claims for regular
unemployment skyrocketed to 65,537, and further increased to 78,692
in April 2020. Also, in April 2020, the federal government instituted
2U.S. Department of Labor Office of Inspector General May 28, 2021 report
COVID-19: States Struggled to Implement CARES Act Unemployment Insurance
Programs. Report number: 19-21-004-03-315, summary page.
The average number of regular unem-
ployment claims that were filed from
September 2019 to February 2020 was
5,550 claims per month. However, in
March 2020, initial claims for regular
unemployment skyrocketed to 65,537,
and further increased to 78,692 in
April 2020.
Performance Evaluation & Research Division | pg. 9
Special Report
The agency did not have sufficient ad-
ministrative capacity, technology, fraud
prevention,
and
improper-payment
detection to properly process the large
volume of claims from both unemploy-
ment programs.
Pandemic Unemployment Assistance which added 14,239 initial claims.
April 2020 was the apex of initial unemployment claims with a total of
92,945 claims. Following April 2020, initial unemployment claims began
to drop and most of the claims filed were for PUA and PEUC. According
to the USDOL, the unemployment rate for West Virginia increased from
5.3 percent in March 2020 to a high of 15.6 percent in April 2020. In
comparison, the unemployment rate for the rest of the U.S. increased
from 4.4 percent in March 2020 to a high of 14.8 percent in April 2020.
Nearly $83 Million Was Paid in Fraudulent Unemployment
Claims Because WorkForce’s Claims Process Was Not
Designed for the Unprecedented Number of Claims and
the Self-Certification of the PUA
As Figure 1 indicates, WorkForce was faced with an
unprecedented number of unemployment claims consisting of two distinct
unemployment insurance programs: 1) Regular Unemployment, and 2)
Pandemic Unemployment Assistance, which was new to WorkForce. The
agency did not have sufficient administrative capacity, technology, fraud
prevention, and improper-payment detection to properly process the large
volume of claims from both unemployment programs. Other states also
experienced similar fraudulent activity in their unemployment insurance
programs. Prior to the COVID-19 pandemic, WorkForce reviewed regular
unemployment claims manually. This manual review process could not
keep up with the volume of claims. Also, WorkForce’s claims process
did not have an automated “fraud unit” for regular unemployment claims,
pg. 10 | West Virginia Legislative Auditor
WorkForce West Virginia Unemployment Compensation Claims Data
and fraud prevention was a manual and mostly reactive process due to a
relatively low level of ID theft fraud activity. Moreover, WorkForce’s
manual claims process was not designed to process PUA claims which
were unique in that they allowed self-certification of employment, and the
US Department of Labor discouraged placing stops on claimants that self-
certified their employment. The agency indicated that it implemented the
PUA program in 10 days. In addition, WorkForce was under the directive
of the USDOL to pay claims as quickly as possible.
Soon after WorkForce had implemented its PUA program, it
began to identify a high level of fraud as unemployment claims were
being paid. WorkForce stated:
Automated fraud detection and prevention controls began
to be implemented in early spring 2020…. With the
development of the new system to accept and pay PUA
claims, security measures were not in place when initial
payments were issued. This was before the level of fraud
was clear and the US Department of Labor (USDOL) had
discouraged placing stops on claimants that had self-
certified….
…. State unemployment benefit fraud prevention
was challenging due to the limitations of the technology
used to process claims and the overwhelming volume of
claims. To deliver better service to claimants the state
employed an “auto-entry” policy which allowed claims
filed to be entered into the system immediately. After auto-
entry was initiated, staff continued to view claims, but
again could not keep up with the volume. Social Security
Verification was and remains a part of the claimant
verification process, but was somewhat challenged at the
time…. Its effectiveness was inhibited because most of the
fraud claims filed had accurate information with SSN’s
matching names, birth dates, etc. which made them more
difficult to identify.
…. Stops were placed on State Unemployment
benefit claims from the on-set of the pandemic but… if
the claimant self-certified in PUA we were directed by the
DOL to not stop payment… once it was the level of fraud
was clear, WFWV did begin to place stops on claims that
were identified as suspicious.
Once WorkForce realized the level of fraud that was taking place,
it established security measures in an effort to try to stop the fraudulent
activity. WorkForce implemented its “fraud unit” along with automated
fraud detection and prevention controls in the spring of 2020. Eventually,
WorkForce’s
manual
claims
pro-
cess was not designed to process PUA
claims which were unique in that they
allowed self-certification of employ-
ment, and the US Department of Labor
discouraged placing stops on claimants
that self-certified their employment.
Once WorkForce realized the level of
fraud that was taking place, it estab-
lished security measures in an effort to
try to stop the fraudulent activity.
Performance Evaluation & Research Division | pg. 11
Special Report
the USDOL and many state Unemployment Insurance programs became
aware of the extent of fraud and added documentation requirements for
claimants self-certifying.
According to WorkForce, nearly $83 million in fraudulent
unemployment claims was paid in CY 2020 (see Table 2), with the
large majority coming from the pandemic-related programs, PUA and
FPUC. PUA represents benefits individuals received based on previous
income reported. According to WorkForce, the regular PUA benefits
could not be more than the State’s maximum weekly benefit rate for
regular unemployment compensation, which is $424 in West Virginia.
The minimum weekly PUA payment was limited at $158. However,
the FPUC represents the extra $600 per week benefit claimants received
in addition to their regular unemployment or PUA benefit. The $600
FPUC payments initially began April 4, 2020 and ended July 25, 2020.
The difference in amounts is a result of the $600 FPUC payments being
higher than the regular unemployment benefit or regular PUA benefit
given the number of claims received. Nearly $82 million related to the
federal pandemic assistance funds were paid in CY 2020 for fraudulent
claims for individuals who self-certified their own employment.
Table 2
Fraudulent Regular Unemployment and PUA
Number of Claims and Dollars Paid
CY 2020
Number of
Fraudulent
Claims
Dollar Amount
Paid
Regular Unemployment
10,533
$797,645
Regular Pandemic Unemployment Assistance
(PUA) & Federal Pandemic Unemployment
Compensation (FPUC)
12,441
(PUA) $23,042,322
(FPUC) $58,882,220
Total
22,974
$82,722,187
Source: WorkForce West Virginia. Unaudited by PERD.
Other States Also Experienced Similar Fraudulent Activity
in Their Unemployment Insurance Programs
The increase of fraudulent unemployment claims activity related
to the COVID-19 pandemic and the surge of claims occurred in every
state across the country, not just in West Virginia. According to the OIG,
According to WorkForce, nearly $83
million in fraudulent unemployment
claims was paid in CY 2020 (see Table
2), with the large majority coming from
the pandemic-related programs, PUA
and FPUC.
pg. 12 | West Virginia Legislative Auditor
WorkForce West Virginia Unemployment Compensation Claims Data
According to the OIG, the USDOL and
states struggled to properly and timely
implement the three key CARES Act UI
programs (PUA, FPUC, and PEUC)
primarily because states’ information
technology systems were not modern-
ized, staffing resources were insuffi-
cient to manage the increased number
of new claims, and according to state
officials, guidance from the USDOL
was untimely and unclear.
the USDOL and states struggled to properly and timely implement the
three key CARES Act UI programs (PUA, FPUC, and PEUC) primarily
because states’ information technology systems were not modernized,
staffing resources were insufficient to manage the increased number of
new claims, and according to state officials, guidance from the USDOL
was untimely and unclear.3 Many states did not perform required and
recommended improper payment detection, 40 percent of states did not
perform required cross-matches, and 38 percent did not perform required
payment recovery activities.4 Furthermore, 42 percent of states did not
report CARES Act UI program overpayments to USDOL as required.
States that did report overpayments, understated the total amount by
an estimated 89 percent.5 As a result, as of January 2, 2021, the OIG
estimated at least $39.2 billion in improper payments, including fraud,
were at risk of not being detected and recovered.6 However, in an October
6, 2021 updated letter, the OIG indicated that the total could be as high at
$87.3 billion.7
Table 3 shows examples of several states with the estimated
amounts it paid in fraudulent unemployment benefits since March of
2020.8 The examples indicate that across the country, state UI programs
were not prepared to handle the large surge of unemployment claims that
resulted from the COVID-19 pandemic and were vulnerable to fraud.
Table 3
Examples of States’ Estimates of Fraudulent
UI Benefits Paid Since March 2020
State
Estimate Amount Paid in
Fraudulent UI Benefits
California
$11-$29 Billion
New York
$1 Billion
Washington
$600 Million
Maryland
$501 Million
Ohio
$477 Million
West Virginia*
$82.7 Million
Source: U.S. Department of Labor, Ohio Department of Job and
Family Services, and WorkForce West Virginia.
*For CY 2020, as of April 29, 2021.
3Ibid., summary page.
4Ibid., summary page.
5Ibid., summary page.
6Ibid., summary page.
7U.S. Department of Labor, Office of Inspector General October 6, 2021 update
letter: DOL-OIG Oversight of the Unemployment Insurance Program, 2.
8U.S. Department of Labor Office of Inspector General February 22, 2021
Alert Memorandum: The Employment and Training Administration Needs to Ensure
State Workforce Agencies (SWA) Implement Effective Unemployment Insurance
Program Fraud Controls for High Risk Areas. Report number: 19-21-002-03-315, 2.
As of January 2, 2021, the OIG esti-
mated at least $39.2 billion in improp-
er payments, including fraud, were at
risk of not being detected and recov-
ered. However, in an October 6, 2021
updated letter, the OIG indicated that
the total could be as high at $87.3bil-
lion.
Performance Evaluation & Research Division | pg. 13
Special Report
According to the OIG, it identified
four areas where potential fraudulent
beneftis were paid. These areas includ-
ed: Multi-State Claimants, Social Se-
curity Numbers of Deceased Individu-
als, Federal Prisoners, and Suspicious
Email Accounts.
According to the OIG, it identified four areas where potential fraudulent
benefits were paid. These areas included:
1. Multi-State Claimants – totaling $3.5 billion in UI benefits paid;
2. Social Security Numbers of Deceased Individuals – totaling
$58.7 million in UI benefits paid;
3. Federal Prisoners – totaling $98.3 million in UI benefits paid; and
4. Suspicious Email Accounts – totaling $2 billion in UI benefits
paid.9
This information presented from the OIG was presented in an alert memo
in February 2021 and acknowledges that the information is only a subset
of the potentially fraudulent UI activities from March 2020 through
October 2020. The OIG acknowledges that the actual amount of potential
fraud is much larger.
Regarding multi-state claimants, claims were being paid to
individuals who filed in multiple states. The CARES Act required that
anyone who became unemployed due to COVID-19 related reasons could
only file for UI benefits in one state. The OIG identified one instance
where a claimant used a social security number to file a claim in 40 states
and received a total of $222,532 in UI benefits from 29 states.10
In relation to UI benefits being paid to incarcerated individuals,
the California State Auditor estimated that approximately $810 million
in UI benefits were paid to names of incarcerated individuals. This
occurred because the California Employment Development Department
had not developed the capacity to match data between its claims system
and the data from state and local corrections facilities.11
States Did Not Conduct Required and Recommended
Cross-matches to Detect and Recover Improper Payments
for CARES Act Unemployment Insurance Programs
According to the OIG, the federal Employment and Training
Administration, within the US Department of Labor, required states to
perform certain Benefit Payment Control activities, along with other
recommended activities to detect and recover improper payments for
CARES Act unemployment insurance programs. The following three
cross-matches were required for the PUA and PEUC programs (in the
same manner as for the regular UI program). According to a survey of
50 states conducted by the OIG, 20 of the 50 states (40 percent) that
9Ibid., 3.
10Ibid., 3.
11Auditor of the State of California Employment Development Department
January 2021 report Significant Weaknesses in EDD’s Approach to Fraud Prevention
Have Led to Billions of Dollars in Improper Benefit Payments. Report 2020-628.2, 1-2.
According to a survey of 50 states con-
ducted by the OIG, 20 of the 50 states
(40 percent) that responded did not per-
form all the required Benefit Payment
Control cross-matches.
pg. 14 | West Virginia Legislative Auditor
WorkForce West Virginia Unemployment Compensation Claims Data
The OIG determined that 44 of the 50
states that provided information indi-
cated that they did not perform all of
the recommended Benefit Payment
Control cross-matches.
responded did not perform all the required Benefit Payment Control
cross-matches.12 These Benefit Payment Control cross-matches are as
follows:
• National Directory of New Hires Cross-match – Cross-matches
against employer-reported “new hires,” including wage
information, against UI benefit payment records to identify
claimants who have failed to report earnings and therefore, may
have been overpaid UI benefits;
• Quarterly Wage Records Cross-match – Compares state agency
benefit payment records with wage records created from quarterly
reports submitted by employers to determine if benefits were
overpaid due to failure to report earnings; and
• Systematic Alien Verification for Entitlement – Automated and
manual procedures by which states obtain information about
an individual’s immigration status that will allow the state to
determine his/her eligibility for unemployment compensation.13
In addition, the OIG determined that 44 of the 50 states that provided
information indicated that they did not perform all of the recommended
Benefit Payment Control cross-matches. The recommended cross-
matches include:
• State Directory of New Hires Cross-match;
• Social Security Administration Cross-match;
• Interstate Benefits Cross-match;
• State Identification Inquiry and IB8606 enhancements made
to the Interstate Connection network cross-match to prevent
concurrent claim filing in multiple states;
• State Information Data Exchange System;
• Identity Verification;
• Incarceration Cross-match; and
• UI Integrity Center’s Integrity Data Hub tools, including the
Suspicious Actor Repository, Suspicious E-Mail Domains,
Multi-State Cross-match, Foreign Internet Protocol Address
Detection, and Fraud Alert application.14
Since the occurrence of fraudulent unemployment claims, WorkForce
indicated that it has begun utilizing recommended systems such as
the National Association of State Workforce Agencies (NASWA), the
Integrity Data Hub, and the CATCH intelligence data science system.
12U.S. Department of Labor Office of Inspector General May 28, 2021 report
COVID-19: States Struggled to Implement CARES Act Unemployment Insurance
Programs, 9.
13Ibid., 8-9.
14Ibid., 25.
Since the occurrence of fraudulent
unemployment
claims,
WorkForce
indicated that it has begun utilizing
recommended systems such as the Na-
tional Association of State Workforce
Agencies (NASWA), the Integrity Data
Hub, and the CATCH intelligence data
science system.
Performance Evaluation & Research Division | pg. 15
Special Report
According to the Employment and
Training Administration, West Virginia
was to receive $1,020,600 to assist with
the PUA program and $194,400 for the
PEUC program.
Additionally, on September 1, 2020, the Employment and
Training Administration sent out a news release announcing $100
million in funding to support state efforts to combat fraud and recover
improper payments in the UI program, including those programs created
under the CARES Act. The purpose of these funds was for states to
enhance their PUA and PEUC fraud prevention efforts and to work with
the Employment
and Training Administration and the Unemployment Insurance Integrity
Center to use these resources to address fraud aggressively in these
programs. According to the Employment and Training Administration,
West Virginia was to receive $1,020,600 to assist with the PUA program
and $194,400 for the PEUC program.15
The Joint Committee on Government and Finance Was
Targeted by Unemployment Fraudsters
The Joint Committee on Government and Finance (Joint
Committee) received 22 fraudulent unemployment claims filed in the
names of current and former employees, and in names not associated with
the agency. Three of the claims were filed in the name of the legislative
auditor, one was filed in the name of the legislative auditor’s current
receptionist, and one was filed in the name of the Post Audit Division
director. These claims represent 16 percent of the Joint Committee staff.
These claims were filed as early as July 2020 through May 2021, each
claiming unemployment status during the pandemic months of 2020.
In one example, a current Joint Committee employee who had a
fraudulent unemployment claim filed in his name, received a UI benefit
debit card in the mail after unsuccessful attempts to notify WorkForce of
the fraudulent claim. The employee contacted WorkForce by telephone
but was unable to speak to someone or leave a voicemail message.
Eventually, the Legislative Services Division contacted WorkForce on
behalf of the employee to return the UI debit card. The Legislative
Services Division received emails from WorkForce to resolve the
fraudulent claims, and WorkForce acknowledged that it was “inundated”
with fraudulent claims. The significant number of Joint Committee staff
receiving fraudulent claims filed in their names emphasizes the need for
a cross-matching procedure for WorkForce to identify current employees
of state agencies.
15U.S. Department of Labor Employment and Training Administration
September 1, 2020 news release: U.S. Department of Labor Provides $100 Million to
States to Combat Unemployment Insurance Fraud.
The Joint Committee on Government
and Finance (Joint Committee) re-
ceived 22 fraudulent unemployment
claims filed in the names of current and
former employees, and in names not as-
sociated with the agency.
pg. 16 | West Virginia Legislative Auditor
WorkForce West Virginia Unemployment Compensation Claims Data
Since the large occurrence of fraud-
ulent unemployment claims paid,
WorkForce indicated that it has de-
veloped partnerships with the Division
of Corrections, the Division of Motor
Vehicles, the Attorney General’s Office,
State Police, and Homeland Security to
cross-match data and to identify “bad
actors.
WorkForce
Has
Also
Developed
Cross-matching
Partnerships with West Virginia State Agencies
As previously stated, WorkForce did not have an automated
fraud detection/prevention system prior to the COVID-19 pandemic.
WorkForce did not employ cross-match mechanisms with other state
agencies such as the Division of Corrections or the State Auditor’s
Office. There were no partnerships with the following state agencies that
could have possibly helped with cross-matching information to identify
fraudulent claims:
•
State Auditor’s Office – In order to see if state employees
remain employed, and to cross-match other state agencies that
do not utilize the West Virginia Our Advanced Solution with
Integrated Systems (OASIS) such as the Parkways Authority
and institutions of higher education;
•
Division of Corrections – In order to cross-match WorkForce
records against incarceration records to determine if
individuals have active claims while incarcerated;
•
Division of Motor Vehicles – To access to DMV records for
WorkForce investigators and fraud team members to help
investigate fraudulent unemployment claims; and
•
State Law Enforcement Agencies – Such as the Attorney
General, Homeland Security, and State Police in order to
identify “bad actors” and assist with law enforcement.
Since the large occurrence of fraudulent unemployment claims
paid, WorkForce indicated that it has developed partnerships with the
Division of Corrections, the Division of Motor Vehicles, the Attorney
General’s Office, State Police, and Homeland Security to cross-match
data and to identify “bad actors.” In addition, the agency has implemented
other measures to help it detect and deter future payments of fraudulent
unemployment claims. A few examples of these preventive measures
include the following:
• The Fraud Unit – Identifies, prevents, and investigates
identity theft fraud claims;
• The Cross-match Unit – Gathers relevant information
and when possible, issues decisions for “New Hire” and
“Quarterly Crossmatch” cases; and
• The Investigations Unit – Investigates claims wherein
normal fact-finding efforts are not appropriate especially
when there is potential criminal activity. It has the power
to subpoena and investigate claimants or employers.
Performance Evaluation & Research Division | pg. 17
Special Report
The PUA program is 100 percent fed-
eral dollars, and no state dollars are
affected by this program. The nearly
$800,000 paid for fraudulent regular
unemployment claims in CY 2020 were
paid out of the State Trust Fund.
According to WorkForce, state employ-
ers are not negatively affected by fraud-
ulent unemployment claims submitted
against their account. However, since
the fraudulent charges came out of the
State Trust Fund, it has lost those mon-
ies for future economic downturns.
The
State
Unemployment
Insurance
Trust
Fund
Was Impacted by Nearly $800 Thousand for Regular
Unemployment Fraudulent Claims
The PUA program is 100 percent federal dollars, and no state
dollars are affected by this program. The nearly $800,000 paid for
fraudulent regular unemployment claims in CY 2020 were paid out of
the State Trust Fund. According to WorkForce, if an employer’s account
was charged for a fraudulent claim, that account will be credited for
the charged amount during the next quarter. Ultimately, according to
WorkForce, state employers are not negatively affected by fraudulent
unemployment claims submitted against their account. However, since
the fraudulent charges came out of the State Trust Fund, it has lost
those monies for future economic downturns.
WorkForce is a stand-alone agency that is responsible for
orchestrating the review and processing of unemployment claims in West
Virginia. No receipts and/or payments used for unemployment claims go
through any other state agency that could possibly conduct some form of
cross-match in order to detect fraudulent unemployment claims.
According to WorkForce, the agency has two sources of revenue
to pay unemployment compensation benefits. The first are federal funds,
used to pay CARES Act benefits such as PUA and FPUC. WorkForce
management computes an estimate of current cash needs weekly by
summarizing administrative expenditures. It then electronically draws
down the funds through the federal Payment Management System, in
addition to the calculation of the amount of program expenditures
compiled during the week.
The second source of revenue received is employer payroll
tax contributions from the UI trust fund. These contributions consist
of two types of revenue, the Federal Unemployment Tax Act (FUTA)
funds and the State Unemployment Tax Authority (SUTA) funds. These
contributions are specific employer assessments which must be paid on a
quarterly basis. Figure 2 is a flow-chart of how revenue for unemployment
compensation benefits is sourced from the claimant’s employer to the
individual claimant.
pg. 18 | West Virginia Legislative Auditor
WorkForce West Virginia Unemployment Compensation Claims Data
Each employer collects and deposits
the contributions in a clearing account
at Truist bank and when cleared, the
funds are immediately transferred to a
trust fund account in the U.S. Treasury
to the credit of WorkForce. The funds
are then drawn down from the trust
fund to pay claimants’ benefits elec-
tronically via the ASAP system.
Funds from FUTA are acquired from a nationwide payroll tax
that is designed to help states pay unemployment benefits to individuals
whose work contracts have been terminated. The funds are collected
by the federal government which mandates what to do with the funds.
The federal government sets aside the money for the state in the federal
treasury as part of the state’s federal unemployment trust fund. The state
then draws down the amounts needed electronically via the Automated
Standard Application for Payment (ASAP) system.
There are two components to the SUTA funds. The first part holds
all state unemployment taxes collected from employers. State and federal
law restrict these receipts to be used only for payment of unemployment
benefits. Each employer collects and deposits the contributions in
a clearing account at Truist bank and when cleared, the funds are
immediately transferred to a trust fund account in the U.S. Treasury to
the credit of WorkForce. The funds are then drawn down from the trust
fund to pay claimants’ benefits electronically via the ASAP system. The
second part of SUTA funds consists of interest collected from delinquent
employers, where money is deposited into a clearing account at Truist
bank and is transferred to the State Treasurer after the end of each month.
This money belongs to the State and can be used by WorkForce at the
Commissioner’s discretion. Ultimately, this information is significant
WorkForce is a stand-alone agency
that is responsible for orchestrating the
review and processing of unemploy-
ment claims in West Virginia.
Performance Evaluation & Research Division | pg. 19
Special Report
Ultimately, this information is signifi-
cant because it indicates that the funds
that are processed by WorkForce for
unemployment claims do not pass-
through other state agencies which
could possibly cross-match claimant
information to help deter payment of
fraudulent claims.
because it indicates that the funds that are processed by WorkForce for
unemployment claims do not pass-through other state agencies which
could possibly cross-match claimant information to help deter payment
of fraudulent claims.
In regard to the funds that were paid for fraudulent claims,
WorkForce stated that it has issued numerous demand letters for
recoupment of fraudulent claims payments and is in various stages of the
recoupment process. According to WorkForce, banks across the country
are working to disentangle which state the recouped fraud dollars belong
to as every state has been significantly affected by fraudulent activity.
As of April 29, 2021, WorkForce indicated it has verified $121,986 as
recouped. It expects another $3 million to $4 million to be returned in
2021.
Some Unemployment Claimants Experienced a Greater
Than Normal Time-Lag in Receiving First-Time UI
Payments
As a result of the COVID-19 pandemic and the surge in
unemployment claims, some claimants experienced a greater than normal
time-lag when receiving first-time regular unemployment payments.
Figure 3 illustrates the percentage of claims processed by the number of
days it took for WorkForce to distribute the initial payment for regular
unemployment claims from January 2019 through August 2021. It
further shows that at the initial time period of the COVID-19 pandemic,
there was an increase in the average number of days it took to process
and distribute the first payment for unemployment claims to claimants.
Prior to the pandemic, the time it took WorkForce to process regular
unemployment payments was fairly timely. From January 2019 through
March 2020, WorkForce processed initial regular unemployment claim
payments in 14 days or less, 88.5 percent of the time. In May 2020, that
average dropped to 53 percent. Later, in August 2020, 29 percent of first
regular unemployment payments for the month took more than 70 days
to be processed. This lag in processing payments was the result of the
overwhelming numbers of unemployment claims being received during
the COVID-19 pandemic. According to a U.S. Department of Labor
benchmark, states are expected to make a minimum of 87 percent of all
regular unemployment first payments within 14 days.
From January 2019 through March
2020, WorkForce processed initial
regular unemployment claim pay-
ments in 14 days or less, 88.5 per-
cent of the time. In May 2020,
that average dropped to 53 percent.
pg. 20 | West Virginia Legislative Auditor
WorkForce West Virginia Unemployment Compensation Claims Data
It should be noted that during the time period when there was a lag
in the amount of time that some claimants had their first unemployment
claim processed and distributed (between April 2020 and December
2020), WorkForce managed to maintain some efficiency by processing
first payments in 14 days or less for 61.5 percent of claimants. The
problem is that although WorkForce managed to process a large portion
of payments in an appropriate timeframe, the agency may have been
unknowingly processing fraudulent claims.
Table 4 illustrates the percent of first-time regular unemployment
payments and the number of days to payment for the months of the
pre-pandemic period to the months during the pandemic. Prior to the
pandemic, 64.4 percent of first-time regular unemployment payments
were processed in 7 days or less, and only 0.2 percent of first payments
took longer than 70 days to process. However, during the peak months
of the pandemic (April 2020 through December 2020), only 41.8 percent
of claimants had their first payment processed in 7 days or less, and 14.6
percent of claimants had their payments processed and distributed in 70
days or more.
Performance Evaluation & Research Division | pg. 21
Special Report
This information shows that Work-
Force staff were overwhelmed by the
large spike in claims they had to review
and process during the pandemic.
Table 4
Percent of First-Time Regular UI Payments
By Days to Payment
January 2019 through August 2021
Pre-Pandemic
Pandemic
Days to
Payment
Jan 2019 –
Mar 2020
Apr 2020 –
Dec 2020
Jan 2021 –
Aug 2021
<= 7 Days
64.4%
41.8%
48.2%
8-14 Days
24.1%
19.7%
20.7%
15-21 Days
7.4%
8.0%
8.9%
22-70 Days
3.9%
16.0%
11.5%
> 70 Days
0.2%
14.6%
10.7%
Source: U.S. Department of Labor.
Table 5 shows a breakdown of the average number of first-time
payments for regular unemployment claims made in West Virginia
during certain time periods of the COVID-19 pandemic and the amount
of days needed to process payment for claimants from claim to payment.
Table 5 indicates that during the pre-pandemic months from January
2019 to March 2020, WorkForce processed an average of 1,974 first-
time payments for regular unemployment claims in 7 days or less, and
only an average of 6 payments took 70 or more days to process during
those months. However, during the peak months of the pandemic (April
2020 through December 2020), the average number of first-time regular
unemployment payments processed by WorkForce in 7 days or less
increased to 4,948, and the average number of payments processed
after 70 days increased to an average of 491 payments for these months.
This information shows that WorkForce staff were overwhelmed by
the large spike in claims they had to review and process during the
pandemic.
pg. 22 | West Virginia Legislative Auditor
WorkForce West Virginia Unemployment Compensation Claims Data
Table 5
Average Number of First-Time Regular UI Payments
By Days to Payment
January 2019 through August 2021
Pre-Pandemic
Pandemic
Days to
Payment
Jan 2019 –
Mar 2020
Apr 2020 –
Dec 2020
Jan 2021 –
Aug 2021
<= 7 Days
1,974
4,948
1,404
8-14 Days
761
4,108
625
15-21 Days
221
1,365
267
22-70 Days
114
1,710
325
> 70 Days
6
491
293
Source: U.S. Department of Labor.
Conclusion
WorkForce is learning, along with other states, from its experiences
with the COVID-19 pandemic, and is developing proactive processes
for addressing suspected fraud activity. The agency is developing
and implementing procedures to enhance its fraud detection such as
cross-matching, investigation units, and partnerships with NASWA
and state agencies. These procedures should hinder future fraudulent
unemployment payments.
Performance Evaluation & Research Division | pg. 23
Special Report
Appendix A
Transmittal Letter
pg. 24 | West Virginia Legislative Auditor
WorkForce West Virginia Unemployment Compensation Claims Data
Performance Evaluation & Research Division | pg. 25
Special Report
Appendix B
Agency Response
pg. 26 | West Virginia Legislative Auditor
WorkForce West Virginia Unemployment Compensation Claims Data
WEST VIRGINIA LEGISLATIVE AUDITOR
PERFORMANCE EVALUATION & RESEARCH DIVISION
Building 1, Room W-314, State Capitol Complex, Charleston, West Virginia 25305
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