Waste, Fraud, and Abuse Go Viral: Inspectors General on Curing the Disease

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U.S. Department of Labor
Office of Inspector General
Congressional Testimony

Testimony before the
U.S. House of Representatives Committee on Oversight and Accountability
Subcommittee on Government Operations and the Federal Workforce

Hearing Title:
 “Waste, Fraud, and Abuse Go Viral:
Inspectors General on Curing the Disease”

Testimony of Larry D. Turner
Inspector General
Office of Inspector General
U.S. Department of Labor

Number 19-23-004-03-315

March 9, 2023

U.S. Department of Labor – Office of Inspector General

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Good afternoon, Chairman Sessions, Ranking Member Mfume, and distinguished
members of the Committee. Thank you for the opportunity to testify on the important
work of the U.S. Department of Labor (DOL or Department) Office of Inspector General
(OIG). Although the OIG is responsible for overseeing all DOL programs and
operations, I will focus my testimony today on the OIG’s oversight of the unemployment
insurance (UI) program during the COVID-19 pandemic.

The OIG has remained committed to meeting the challenges created by the COVID-19
pandemic and to assisting DOL and Congress in improving the efficiency and integrity
of the UI program. As my testimony will show, strengthening the UI program to prevent
fraud before it occurs and to detect it when it does are key objectives to ensure that
unemployed workers expeditiously receive much needed benefits while safeguarding
tax dollars directed toward that goal. Recovering improper payments creates challenges
for all involved. Strengthening programs to prevent improper payments in the first place
is critical for program integrity and good stewardship of taxpayer funding.

Unemployment insurance is generally administered by states with oversight from DOL’s
Employment and Training Administration (ETA). The OIG is an independent agency
within DOL that serves the American people, DOL, and Congress by providing objective
oversight of Departmental programs, including the UI program. The views expressed
herein are based on the independent findings and recommendations of the OIG’s work
and are not intended to reflect DOL positions.

Overview of the Unemployment Insurance Program

Enacted more than 80 years ago, the UI program is the Department’s largest
income-maintenance program. A joint federal-state program, unemployment insurance
is the first economic line of defense against the collective impact of unemployment and
acts as a safety-net for individuals who lose their jobs through no fault of their own. The
UI program requires states to make weekly benefit payments in a timely manner,
providing needed assistance to unemployed workers while ensuring claimants meet
eligibility requirements. It is equally important that the program has sufficient controls in
place to quickly determine that benefits are or were paid to the right person in the
correct amount. Each state workforce agency0F1 (SWA or state):

• administers a separate UI program under its jurisdiction’s laws, but follows
uniform guidelines established by federal law;
• establishes requirements for eligibility, benefit amounts, and the length of time
that benefits can be paid; and

1 This testimony uses “state” or “SWA” to refer to the administrative body that administers the UI program
within the state, district, or territory. For the 50 states, as well as the U.S. Virgin Islands, Puerto Rico, and
the District of Columbia, that administrative body is a SWA. There are, therefore, 53 SWAs. The
Coronavirus Aid, Relief, and Economic Security Act also provided certain UI benefits to American Samoa,
the Commonwealth of the Northern Mariana Islands, the Federated States of Micronesia, Guam, the
Marshall Islands, and the Republic of Palau, provided the territory signs an agreement with the
Department.

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• manages the personnel and system resources to administer their respective
programs.

In normal circumstances, UI benefits are generally funded by state employer taxes with
administrative costs funded by the federal government. Extensions and expansions of
coverage and benefits, such as those provided by the Coronavirus Aid, Relief, and
Economic Security (CARES) Act and subsequent legislation, are also normally funded
by the federal government.

ETA is the federal agency responsible for providing program direction and oversight.
The OIG conducts independent oversight of the UI program through audits to
strengthen the integrity and efficiency of the program and through criminal
investigations to detect and deter large-scale fraud. The OIG’s federal criminal
investigations are time- and resource-intensive and one of the last lines of defense in
safeguarding the UI program from fraud.

OIG Significant Concerns

The OIG has repeatedly reported significant concerns with DOL and states’ ability to
deploy program benefits expeditiously and efficiently while ensuring integrity and
adequate oversight. We have been and remain particularly concerned about
deployment of UI benefits in response to emergencies including natural disasters and
economic downturns. The OIG has reiterated these concerns regarding the economic
downturn created by the pandemic and the hundreds of billions of dollars allocated to
the UI program.

Less than a month after the CARES Act passed, we published an advisory report1F2
outlining areas of concern that ETA and the states should consider as they implemented
the CARES Act UI provisions. Our identification of these areas represents years of work
relating to DOL’s UI program, including the response to past disasters. One of these
areas was state preparedness: specifically, the issues of staffing and system
capabilities. Our audit work has confirmed these issues persisted into the COVID-19
pandemic.2F3

Deploying Benefits Expeditiously and Efficiently

Rapid deployment of CARES Act funding was critical in helping workers in need. Staff at
ETA and states struggled during the COVID-19 pandemic as SWAs worked to ensure

2 Advisory Report, CARES ACT: Initial Areas of Concern Regarding Implementation of Unemployment
Insurance Provisions, Report No. 19-20-001-03-315 (April 21, 2020), available at:
https://www.oig.dol.gov/public/reports/oa/2020/19-20-001-03-315.pdf
3 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

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timely and accurate UI benefits in a time of national emergency. Anticipating and
addressing the increased risk that came with the expanded funding was also vital to
meeting the intent of the CARES Act. As the OIG’s prior audit work has shown, quickly
deploying funds can result in shortcomings in the effective and efficient implementation
of stimulus programs. For example, a 2011 audit report3F4 found states took over a year
to spend most of the American Reinvestment and Recovery Act of 2009 (Recovery Act)
funding available for emergency staffing and at least 40 percent of funding for this
purpose was unspent after 15 months.

In addition, a separate audit on the Recovery Act4F5 found $1.3 billion of the $7 billion that
DOL provided to states for UI modernization, including information technology (IT)
modernization, would likely not have been spent before the period of availability expired.
To access these funds, states had to meet certain modernization criteria; once
accessed, the funds could be spent for several purposes including to modernize IT
systems. Of the funds spent from the $7 billion, states did not always take advantage of
the opportunity to modernize their IT systems.

To implement the new UI programs authorized by the CARES Act, states needed
sufficient staffing and system resources to manage the extraordinary increases in the
number of claims and payments. Our pandemic audit work has confirmed that ETA and
states continued to face challenges in these areas as they endeavored to implement the
new temporary UI programs, including Pandemic Unemployment Assistance (PUA),
Pandemic Emergency Unemployment Compensation (PEUC), and Federal Pandemic
Unemployment Compensation (FPUC) (see Figure 1).

Figure 1: Three Key Pandemic-Related UI Programs

Source: CARES Act and related extensions

We also issued audit reports that advised ETA to establish methods to detect and
recover improper payments, including fraudulent payments, and reported on the
pandemic program that posed the greatest risk to the UI system: PUA. PUA’s expanded

4 Recovery Act: DOL Could Have Better Monitored the Use of Re-employment Services Funds to Adhere
to Standards for Transparency and Accountability, Report No. 18-11-005-03-315 (March 31, 2011),
available at: https://www.oig.dol.gov/public/reports/oa/2011/18-11-005-03-315.pdf
5 Recovery Act: More Than $1.3 Billion in Unemployment Insurance Modernization Incentive Payments
Are Unlikely to Be Claimed by States, Report No. 18-10-012-03-315 (September 30, 2010), available at:
https://www.oig.dol.gov/public/reports/oa/2010/18-10-012-03-315.pdf

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coverage, for a population of claimants who were traditionally ineligible to receive UI
benefits,5F6 presented significant challenges to states as they designed and implemented
processes to determine initial and continued program eligibility. Further, we found the
risk of improper payments including fraud was even higher under PUA because
claimants could self-certify their eligibility for benefits.

Our subsequent reports identified continued programmatic weaknesses that led to
workers unemployed through no fault of their own suffering lengthy delays in receiving
benefits. For example, the OIG had audited the Disaster Unemployment Assistance
(DUA) program in 2020 and found the Department had not established adequate
controls to ensure benefits were paid timely.6F7 Further, states without modernized IT
systems faced additional difficulty in promptly implementing the CARES Act programs.
For example, for the PEUC program, we identified that it took 49 states, on average,
50 days to implement the program.7F8 However, states with modernized information
technology were able to implement the PEUC program 15 days faster. Similarly,
modernized states implemented the PUA program 8 days faster.

We also found that—from April 1, 2020, to March 31, 2021—only 5 of the 53 SWAs
(less than 10 percent) were able to timely pay benefits, including the FPUC supplement,
to regular UI claimants. As a result, during the year following the passage of the CARES
Act, more than six million Americans waited a month or more for CARES Act
UI benefits. Furthermore, states are still challenged in paying claimants timely. For the
month of December 2022, only 22 percent of states were paying regular UI claimants
timely versus 75 percent before the pandemic started.

Moreover, states’ efforts to expeditiously and efficiently provide benefits to claimants
resulted in billions in improper payments. In May 2021, ETA provided guidance to states
on waiving the recovery of overpayments when the claimant was without fault and if the
repayment would be contrary to equity and good conscience. This guidance also
outlined limited circumstances when the states could “blanket waive” the recovery of
overpayments. However, we are concerned that states may unintentionally waive
fraudulent payments. As of January 22, 2023, states reported waiving $4.7 billion in
pandemic-related overpayments. The OIG has planned work to assess the effects of the
guidance on waivers including blanket waivers.

6 The new PUA program extended unemployment benefits to self-employed, independent contractors,
those with limited work history, and other individuals not traditionally eligible for unemployment benefits
who were unable to work as a direct result of COVID-19.
7 ETA Should Do More to Assist Vulnerable States Prepare for Disaster Unemployment Assistance
Program Implementation, Report No. 04-20-002-03-315 (September 29, 2020), available at:
https://www.oig.dol.gov/public/reports/oa/2020/04-20-002-03-315.pdf
8 Also, the 12 states we selected for in-depth analysis were generally unable to demonstrate they met the
payment promptness standard ETA established for regular UI payments, which is to pay 87 percent of
claimants within 14 or 21 days.

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History of Improper Payments, including Fraud

For more than 20 years, the OIG has reported on the Department’s
challenges to measure, report, and reduce improper payments in the
UI program, which has experienced some of the highest improper
payment rates across the federal government. The reported improper
payment rate estimate for the regular UI program has been above
10 percent for 15 of the last 19 years. In the last 2 years, ETA has
estimated an improper payment rate of 18.71 percent and
21.52 percent, respectively. Further, ETA estimated a fraud rate of
8.57 for program year 2021, or a 170 percent increase over the prior
year’s fraud rate.8F9

The UI program requires states to make weekly benefit payments
while ensuring claimants meet eligibility requirements. A state may
determine a payment is improper after a claimant receives benefits
based on new information that was unavailable when the SWA approved the benefit
payment or as a result of the requirement that claimants be provided with due process
prior to stopping payment of benefits. The leading causes of improper payments have
historically been:

• Claimants Do Not Meet Work Search Requirements9F10 – Claimants who fail to
demonstrate they meet state requirements for work search;
• Benefit Year Earnings – Claimants who continue to claim benefits after they
return to work or who misreport earnings during a week in which benefits are
claimed;
• Employers Do Not Timely Report Employees’ Separation – Employers or their
third-party administrators who fail to provide timely and adequate information
about why individuals separated from their employment; and
• Fraud – Claims based on fraudulent schemes, such as those perpetrated during
the pandemic.10F11

9 ETA estimated the fraud rate as part of their Benefit Accuracy Measurement system for the period
July 1, 2020, through June 30, 2021. The Benefit Accuracy Measurement system is designed to
determine the accuracy of paid and denied claims in three major UI programs: regular State UI,
Unemployment Compensation for Federal Employees, and Unemployment Compensation for
Ex-Servicemembers.
10 The Middle Class Tax Relief and Job Creation Act of 2012 requires that individuals receiving
UI benefits must be able to work, available to work, and actively seeking work as a condition of eligibility
for regular compensation for any week. Accordingly, states generally require that unemployed workers
demonstrate they were actively seeking work. Work search overpayments occur when states pay
UI claimants who do not demonstrate that they were actively seeking work.
11 ETA has included fraud as an element of the leading causes rather than as a separate cause. From
July 2016 to March 2020, the other three causes resulted in over $9 billion in improper payments. Of this
total, more than $3 billion was attributable to fraud. Since the pandemic started, fraud has significantly
increased.

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A Perfect Storm

Following the start of the pandemic in the United States in early 2020, unemployment
compensation claims rose exponentially to historically unprecedented levels. Prior to the
pandemic, numbers of UI claims were historically low. On March 14, 2020, the
Department reported 282,000 initial unemployment claims. Within 2 to 3 weeks, initial
claims rose to 10 times pre-pandemic levels, far higher than state systems were
designed to handle.11F12 Within 5 months, through August 15, 2020, the Department
reported 57.4 million initial claims, the largest increase since the Department began
tracking UI data in 1967.

The CARES Act provided significant funding to the UI program, which resulted in
hundreds of billions of dollars in additional payments. New UI programs under the
CARES Act meant more workers qualified.12F13 Further, unemployed workers received a
supplement per week in addition to their regular benefit amount and individuals who
exhausted their regular unemployment benefits were provided additional weeks of
unemployment compensation. Also, certain UI claims could be backdated to the
beginning of the eligibility period. With the legislative extensions, claimants could
receive up to 79 weeks of pandemic-related UI payments.

In June 2020, the OIG provided a member briefing13F14 and a statement for the record14F15 to
Congress highlighting challenges DOL and states faced in administering and
overseeing the UI program as well as the substantially increased fraud risk. The
expanded coverage offered under the PUA program posed significant challenges to
states as they implemented processes to determine initial and continued program
eligibility for participants. The reliance solely on claimant self-certifications without
evidence of eligibility and wages during the program’s first 9 months rendered the PUA
program extremely susceptible to improper payments, including fraud. In
March 2022 before the U.S. Senate Committee on Homeland Security and
Governmental Affairs and in February 2023 before the U.S. House Committee on Ways

12 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
13 The PUA program covered workers not typically covered by UI who could self-certify that they were
able to and available for work but unemployed due to COVID-19-related reasons.
14 “Subcommittee on Government Operations Briefing with the Inspector General for the Department of
Labor,” Member Briefing, Opening Statement of Scott S. Dahl, Inspector General, U.S. Department of
Labor; House Committee on Oversight and Reform; Subcommittee on Government Operations
(June 1, 2020), available at: https://www.oig.dol.gov/public/testimony/20200601.pdf
15 “Unemployment Insurance During COVID-19: The CARES Act and the Role of Unemployment
Insurance During the Pandemic,” Hearing, Statement for the Record of Scott S. Dahl, Inspector General,
U.S. Department of Labor; Senate Committee on Finance (June 9, 2020), available at:
https://www.oig.dol.gov/public/testimony/20200609.pdf

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and Means, the OIG provided oral and written testimony that spoke to the continuation
of many of these concerns and challenges.15F16

As the OIG reported, the unprecedented infusion of federal funds into the UI program
gave individuals and organized criminal groups a high-value target to exploit. That,
combined with easily attainable stolen personally identifiable information and continuing
UI program weaknesses identified by the OIG over the last several years, allowed
criminals to defraud the system. Because many states were not prepared to process the
extraordinary volume of new UI claims and struggled to implement the new UI
programs, some internal controls that had been traditionally used or recommended for
the processing of UI claims were not initially performed.

This created multiple high-reward targets where an individual could make a fraudulent
claim with relatively low risk of being caught. For example, as time went on, one
fraudster could have been issued several UI debit cards, with tens of thousands of
dollars on each card. In fact, in an audit, we found 1 claim that was filed from a
3-bedroom house shared the same physical address as 90 other claims and used the
same email address as 145 other claims.16F17 In total, the likely fraudsters received
$1,569,762 in unemployment benefits. In the same audit, we found that, from
March 28, 2020, to September 30, 2020, in 4 states, potentially fraudulent claims were
paid 60.5 percent of the time.

Estimating the overall improper payment rate for the pandemic UI programs is critical for
the efficient operation of the program. ETA and the states, under their program
operating responsibilities, must determine the improper payment rate, including the
fraud rate, for pandemic UI programs. In August 2020, we recommended that ETA
estimate the improper payment rate for pandemic UI programs. In December 2021,
consistent with our recommendation, ETA reported an improper payment rate of
18.71 percent for 2021, which ETA applied to two of the three key pandemic UI
programs, PEUC and FPUC. Additionally, in December 2022, ETA reported an
improper payment rate of 21.52 percent, which it also applied to PEUC and FPUC.17F18

16 “Pandemic Response and Accountability: Reducing Fraud and Expanding Access to COVID-19 Relief
through Effective Oversight,” Hearing, Statement for the Record of Larry D. Turner, Inspector General,
U.S. Department of Labor; Senate Committee on Homeland Security and Governmental Affairs
(March 17, 2022), available at: https://www.oig.dol.gov/public/testimony/20220317.pdf; and “The Greatest
Theft of American Tax Dollars: Unchecked Unemployment Fraud,” Hearing, Statement for the Record of
Larry D. Turner, Inspector General, U.S. Department of Labor; House Committee on Ways and Means
(February 8, 2023), available at: https://www.oig.dol.gov/public/testimony/02082023.pdf.
17 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/testimony/02082023.pdf
18 ETA’s reported improper payment rate estimate of 21.52 percent does not include the PUA program.
However, it is the most current improper payment rate from ETA. Furthermore, PUA had control
weaknesses that may have facilitated comparable or greater improper payments. Therefore, applying
ETA’s rate to all of the approximately $888 billion in UI payments for the pandemic period including PUA
would equate to at least $191 billion in improper payments.

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We previously reported that, applying the 18.71 percent to an estimated $872.5 billion in
federal pandemic UI funding, at least $163 billion in pandemic UI benefits could have
been paid improperly, with a significant portion attributable to fraud. In our
February 2023 testimony, we reported updated information, with two primary changes:
(1) ETA released its annual improper payment rate estimate for fiscal year (FY) 2022
and (2) ETA has recently provided a total for pandemic UI spending.18F19 While that
expenditure information is likely to be updated, these changes enabled us to report on
actual expenditures rather than on estimated funding.

With those updates, more than $888 billion in total federal and state UI benefits were
paid for benefit weeks during the UI pandemic period.19F20,
20F21 Applying the estimated
21.52 percent improper payment rate to the approximate $888 billion in pandemic UI
expenditures, at least $191 billion in pandemic UI payments could have been improper
payments, with a significant portion attributable to fraud. Further, for program year 2021,
ETA estimated a fraud rate of 8.57 percent, which indicates over $76 billion was likely
paid to fraudsters.

Based on our audit and investigative work, the improper payment rate for pandemic UI
programs was likely higher than 21.52 percent. For example, ETA’s reported improper
payment rates have not included estimates for the PUA program. ETA stated it would
report the estimated improper payment rate for PUA in 2022. However, the Office of
Management and Budget granted the Department an extension to report on PUA in
FY 2023. To date, the Department has not yet reported the PUA improper payment rate.

As previously mentioned, PUA had control weaknesses that may have facilitated
comparable or greater improper payments. The reliance solely on claimant
self-certifications without evidence of eligibility and wages during PUA’s first 9 months
rendered the program extremely susceptible to improper payments including fraud.
Notably, in the first 6 months after the CARES Act passed, we found 4 states paid
$1 out of $5 in PUA benefits to likely fraudsters.21F22 Subsequent to our work identifying

19 According to ETA, the data provided reflects CARES Act UI program activity through January 23, 2023,
with the exception of the Temporary Full Federal Funding of the First Week of Compensable Regular
Unemployment for States with No Waiting Week program, which is through December 31, 2022; data
provided regarding the regular UI, Unemployment Compensation for Federal Employees, and
Unemployment Compensation for Ex-Servicemembers programs reflect the monthly totals from
April 2020 through September 2021.
20 With the exception of PUA, for which claims could be backdated to January 27, 2020, we define the UI
pandemic period as March 27, 2020, through September 6, 2021. We also note that, according to ETA, it
cannot provide final total costs of the programs because states are still processing claims that were for
weeks of unemployment prior to expiration of the programs.
21 The Government Accountability Office published a relevant report in December 2022 that cited
approximately $878 billion in UI payments for the period reviewed. The expenditure information we have
provided in this testimony contains more recent updates than were available to the Government
Accountability Office when it published its report, which is available at:
https://www.gao.gov/products/gao-23-105523.
22 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

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the fraud risks, Congress took action to require supporting documentation to improve
states’ abilities to ensure proper claimant eligibility and to mitigate fraud. However, a
significant amount of UI benefit money had already been paid improperly.

For example, despite ETA providing states guidance on areas of improper payments as
early as May 2020, control issues occurred in some states with PUA forms.22F23 ETA
notified one state in June 2020 that its form did not include the required questions
confirming that claimants are able and available to work. However, by then, that state
had paid approximately $4.6 billion in PUA benefits, including FPUC. Similarly, in July
2020, ETA notified another state that its PUA monetary determination form did not have
a procedure in place for re-determining the claimant’s weekly benefit if the claimant did
not provide proof of earnings or provided insufficient proof. That state responded that
the problem would be addressed by the end of August 2020. However, by the end of
August, that state had paid approximately $25.4 billion in PUA benefits, including FPUC.

When the OIG identifies anti-fraud measures that may help the program, we share them
with the Department and SWAs as appropriate. For example, in alert memoranda
issued in February 2021,23F24 in June 2021,24F25 and in September 2022,25F26 our investigators,
auditors, and data scientists collaboratively identified $45.6 billion of potentially
fraudulent UI benefits paid in four high-risk areas, to individuals with Social Security
numbers: (1) filed in multiple states, (2) of deceased persons, (3) of federal inmates,
and (4) used to file for UI claims with suspicious email accounts (see Table).

23 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
24 Alert Memorandum: The Employment and Training Administration Needs to Ensure State Workforce
Agencies 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
25 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
26 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

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Table: Potential Fraud in Four High-Risk Areas, March 2020-April 2022

High-Risk Area
Total Number
of Claimants*
Total Potential Fraud
Reported through April 2022
Multistate Claimants
2,011,191
$28,967,047,154
Deceased Persons
205,494
$139,483,136
Federal Prisoners**
46,985
$267,382,013
Suspicious Emails
2,281,136
$16,265,578,304
Totals***
4,544,806
$45,639,490,607
*Claimants can represent more than one claim.
**Federal prisoner data was only available for analysis for the period March 2020 through
October 2020.
***Totals do not include duplicates that were identified in one or more areas.
Source: OIG analysis of data from SWAs, the U.S. Department of Justice’s Bureau of
Prisons, and the U.S. Social Security Administration

We shared our methodology and underlying data26F27 with ETA for further dissemination to
the SWAs, and we recommended they establish effective controls to mitigate fraud and
other improper payments to ineligible claimants. We are currently examining whether
states took effective measures to address the four high-risk areas.

In its December 2022 report,27F28 the Government Accountability Office (GAO) included
these findings in support of the determination that substantial levels of fraud and
potential fraud occurred during the pandemic. GAO noted that the Department has not
yet developed an antifraud strategy or addressed the most significant fraud risks in the
program. GAO also reported that all six of its October 2021 recommendations to ETA
for UI fraud risk assessment remain open. GAO is currently attempting to determine an
estimate of fraud in the UI program, having reported a potential minimum of $60 billion
in pandemic-related fraudulent UI payments.

OIG Pandemic Investigative Work

The volume of UI investigative matters currently under review is unprecedented in the
OIG’s history. Prior to the pandemic, the OIG opened approximately 100 UI

27 Data provided to DOL for further dissemination to the SWAs included data related to more than
3 million suspicious claimants associated with over $16 billion that the OIG identified in our alert
memorandum dated June 16, 2021. The over $16 billion did not include about $915 million in potential
fraud that was identified under more than one area. As soon as is practical, the OIG will share further
data related to additional suspicious claimants identified in a subsequent alert memorandum with DOL so
that it can disseminate this information to the SWAs. The methodology has not changed.
28 GAO, Unemployment Insurance: Data Indicate Substantial Levels of Fraud during the Pandemic; DOL
Should Implement an Antifraud Strategy, Report No. GAO-23-105523 (December 22, 2022), available at:
https://www.gao.gov/products/gao-23-105523

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investigative matters annually. Since April 1, 2020, the OIG has opened over
198,000 investigative matters concerning UI fraud. That is an increase of more than
1,000 times in the volume of UI work that we are facing. UI investigations now account
for approximately 96 percent of the OIG investigative case inventory, compared to
approximately 11 percent prior to the pandemic.

In response to the extraordinary increase in oversight demands, the OIG hired
additional criminal investigators; increased the caseload of investigators already
onboard; deployed federal and contract staff to review DOL and states’ efforts; and
strengthened our data analytics program. In addition, we took several other actions to
augment our efforts, including the following:

• initiated the development of a National UI Fraud Task Force,28F29 alongside the
U.S. Department of Justice (DOJ);
• collaborated with DOJ on the strategic assignment of 12 term-appointed
assistant United States attorneys assigned solely to prosecute UI fraud;
• established a multi-disciplinary Pandemic Rapid Response Team within the OIG;
• appointed a National UI Fraud Coordinator to manage our national investigative
response to UI fraud;
• appointed seven Regional UI Fraud Coordinators to partner with SWAs and
federal, state, and local law enforcement on UI fraud matters in their geographic
areas of responsibility;
• leveraged resources from the Council of the Inspectors General on Integrity and
Efficiency, Pandemic Response Accountability Committee (PRAC);
• collaborated with state auditors to help develop their audit strategies for the
CARES Act UI programs;
• joined the DOJ COVID-19 Fraud Enforcement Task Force;29F30
• implemented an extensive outreach and education program targeted to SWAs,
the Department, financial institutions and their associations, law enforcement
agencies, and the public to inform and raise awareness regarding fraud trends,
best practices, red flags, and more;30F31 and

29 More information on the National Unemployment Insurance Fraud Task Force is available at:
https://www.justice.gov/coronavirus/national-unemployment-insurance-fraud-task-force.
30 DOJ Office of Public Affairs, “Attorney General Announces Task Force to Combat COVID-19 Fraud,”
press release (May 17, 2021), available at:
https://www.justice.gov/opa/pr/attorney-general-announces-task-force-combat-covid-19-fraud
31 The OIG has recently issued or assisted in issuing the following alerts: UI fraud consumer protection
guide, UI fraud investigations guide, UI fraud alert for state/local law enforcement, UI text message
phishing alert, UI fraud and phishing alert, UI fraud and identity theft alert, and UI detection and mitigation
alert for financial institutions. These are available at:
https://www.oig.dol.gov/OIG_Pandemic_Response_Portal.htm.

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• joined DOJ’s Pandemic Fraud Strike Force Teams initiative.31F32

As the primary federal law enforcement
agency responsible for providing
oversight of the UI program, the OIG has
vigorously pursued COVID-19
pandemic‑related UI fraud. In fact, we
announced in September 2022 that
OIG investigations had resulted in more
than 1,000 individuals being charged
with crimes involving UI fraud since
March 2020.32F33 This number has risen.

As of January 2023, our pandemic
investigations have resulted in upwards
of 700 search warrants executed and
over 1,200 individuals charged with
crimes related to UI fraud. These
charges resulted in more than:
500 convictions; 11,000 months of
incarceration; and $905 million in
investigative monetary results. We have
also referred over 23,000 fraud matters
that do not meet federal prosecution
guidelines back to the states for further
action.

In one recent OIG investigation, 11 members and associates of the Brooklyn-based
Woo Gang were charged with a multi-million-dollar pandemic UI fraud scheme.33F34 In

32 The OIG joined the DOJ and other federal law enforcement partners as participants on the DOJ’s new
COVID-19 Strike Force Teams initiative, announced on September 14, 2022. These Strike Force teams
will operate out of U.S. Attorney’s Offices in the Southern District of Florida, the District of Maryland, and
a joint effort between the Central and Eastern Districts of California. They will use dedicated special
agents from the OIG to focus on significant fraud schemes with an international nexus. DOJ, “Department
Announces COVID-19 Fraud Strike Force Teams,” press release (September 14, 2022), available at:
https://www.justice.gov/opa/pr/justice-department-announces-covid-19-fraud-strike-force-teams
33 “Labor Watchdog’s Pandemic Work Results in More Than 1,000 Individuals Charged with UI Fraud and
$45.6 Billion Identified in Potentially Fraudulent Pandemic UI Benefits,” press release
(September 22, 2022), available at: https://www.oig.dol.gov/public/Press%20Releases/DOL-
OIG%20Pandemic%20Work%20Results%20in%20More%20Than%201000%20Individuals%20Charged
%20with%20UI%20Fraud.pdf. For more details about OIG investigations, please visit:
https://www.oig.dol.gov/OIG_Pandemic_Response_Portal.htm.
34 DOJ, U.S. Attorney’s Office, Eastern District of New York, “11 Members and Associates of the
Brooklyn-Based Woo Gang Charged with Multi-Million Dollar COVID Unemployment Insurance Fraud,”
press release, (February 17, 2022), available at:
https://www.oig.dol.gov/public/Press%20Releases/11_Members_and_Associates_of_the_Brooklyn-
Based_Woo_Gang_Charged_with_Multi-Million_Dollar_COVID.pdf
During the execution of a UI fraud search warrant,
OIG agents recovered multiple firearms, UI debit
cards, and notebooks containing personally
identifiable information.

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another recent OIG investigation, a former California Employment Development
Department employee was sentenced to more than 5 years in prison for fraudulently
obtaining nearly $4.3 million in pandemic relief UI funds.34F35

In another OIG investigation, a Nigerian state official was sentenced to 5 years in prison
for stealing U.S. disaster aid, including approximately $500,000 in pandemic-related
unemployment benefits. The official stole the personal identifying information of more
than 20,000 Americans to submit more than $2 million in claims for federally funded
disaster relief benefits and fraudulent tax returns.35F36

Working with Domestic and International Law Enforcement Partners

Early in the pandemic, the OIG worked with the DOJ to create the National UI Fraud
Task Force, a nine-agency federal task force focused on law enforcement intelligence
sharing, deconfliction, joint national and regional messaging, and the effective use of
investigative and prosecutorial resources. The National UI Fraud Task Force has also
worked closely with partners at the International Organized Crime Intelligence and
Operations Center (IOC-2) to develop a deconfliction process to coordinate investigative
information across federal law enforcement agencies. Through data analytics and a
leads generation process, the National UI Fraud Task Force and IOC-2 partner
agencies have identified significant fraud committed against the UI program by domestic
and international criminal organizations. Many of these include street-level criminal
organizations with ties to illegal guns and drugs. These investigations are ongoing and
actively being investigated through the National UI Fraud Task Force, the COVID-19
Fraud Enforcement Task Force, and the COVID-19 Strike Force Teams initiative.

The OIG has been very engaged on DOJ’s COVID-19 Fraud Enforcement Task Force.
We have representation on its subcommittees involving communications, forfeiture,
corporations and large business fraud, and data, and we co-chair the task force’s
criminal enterprise subcommittee. The OIG also joined the DOJ Strike Force Teams
initiative.

The OIG has also participated in other initiatives. For example, in 2020 and 2021, the
OIG supported DOJ’s annual Money Mule Initiative,36F37 which aimed to raise awareness
about and suppress money mule activity. Money mules are people who, at someone

35 DOJ, U. S. Attorney’s Office, Central District of California, “One-Time EDD Employee Sentenced to
More Than 5 Years in Prison for Fraudulently Obtaining Nearly $4.3 Million in COVID Relief Funds,” press
release (February 4, 2022), available at: https://www.oig.dol.gov/public/Press%20Releases/One-
Time_EDD_Employee_Sentenced_to_More_Than_5_Years_in_Prison_for_Fraudulently_Obtaining_Near
ly.pdf
36 DOJ, U.S. Attorney’s Office, Western District of Washington, “Nigerian state official sentenced to
5 years in prison for stealing U.S. disaster aid and taxpayer refunds,” press release
(September 26, 2022), available at:
https://www.oig.dol.gov/public/Press%20Releases/Nigerian_state_official_sentenced_5_years_stealing_d
isaster_aid_USAO%20WD-WA_09262022.pdf
37 More information about DOJ’s Money Mule Initiative is available at:
https://www.justice.gov/civil/consumer-protection-branch/money-mule-initiative.

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else’s direction, receive and move money obtained from victims of fraud. The OIG
conducted extensive internal and external outreach regarding money mules and
identified and targeted money mules in coordination with DOJ and other partner
agencies.

In addition, the OIG issued alerts to financial institutions about UI fraud both on its own
and jointly with its partners, such as the U.S. Secret Service (Secret Service), Financial
Crimes Enforcement Network (FinCEN), and the National UI Fraud Task Force. One
such joint OIG/Secret Service alert37F38 served as a framework for the recovery of millions
of dollars of fraudulent UI funds being held by financial institutions. Later, in 2021, the
OIG authored a National UI Fraud Task Force alert issued through FinCEN to financial
institutions requesting they identify funds they froze due to suspicion of fraud. The OIG
created a process with DOJ and the Secret Service to collect that data and work with
those financial institutions to return fraudulent funds to SWAs. The OIG and its law
enforcement partners are working with hundreds of financial institutions in response to
our request.

The PRAC has also played a pivotal role in amplifying the ability of OIGs to share
information and conduct internal and external outreach to stakeholders that have been
impacted by pandemic fraud. For example, the OIG worked with the PRAC on social
media tool kits related to money mule activity and erroneous 1099-G forms that were
issued to victims of UI fraud. The OIG has also worked with the PRAC, DOJ, and the
Secret Service to create a web-based survey where financial institutions can more
broadly report UI and other types of pandemic fraud. This information is being collected
by the PRAC, analyzed by its partners, and, if appropriate, sent to field personnel for
further action.

The OIG, through its membership in IOC-2, has also been engaged with several allied
national police agencies to strategize about pandemic-related fraud and how to best
establish practices to share information. The issue of pandemic fraud has not only been
an issue for the United States, but it has also negatively impacted our foreign partners’
pandemic programs. We have conducted outreach and education related to pandemic
fraud, including UI fraud, with our Five Eyes partner countries as participants on the
International Public Sector Fraud Forum.38F39

The OIG, IOC-2, and our federal law enforcement partners have identified numerous
instances of international organized criminal groups engaged in UI fraud. We will

38 Secret Service and OIG, “Detection and Mitigation of Unemployment Insurance Fraud Guidance for
Financial Institutions,” July 6, 2020, available at:
https://www.neach.org/Portals/0/USSS-DOL%20OIG%20UI%20Advisory%207_6_2020.pdf
39 Five Eyes is an intelligence alliance. The Five Eyes countries include Australia, Canada, New Zealand,
the United Kingdom and the United States. The International Public Sector Fraud Forum consists of
representatives from organizations from the Five Eyes countries, whose collective aim is to share best
and leading practices in fraud management and control across public borders. International Public Sector
Fraud Forum guidance is available at:
https://www.gov.uk/government/publications/international-public-sector-fraud-forum-guidance.

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continue to work with our domestic and international law enforcement partners on these
matters.

OIG Pandemic Oversight Work

In April 2020, shortly after CARES Act enactment, we published our Pandemic
Response Oversight Plan39F40 detailing how the OIG would conduct its pandemic
oversight, with a significant focus on the UI program. We designed our four-phased plan
to provide recommendations to DOL to address current and emerging vulnerabilities
with the pandemic response and to prevent similar vulnerabilities from hampering
preparedness for future emergencies (see Figure 2).

Figure 2: The OIG’s Four-Phased Design for Pandemic Oversight

Source: OIG Pandemic Response Oversight Plan

Phases 1 and 2, which are complete, focused on DOL’s plans, guidance, and initial
implementation of administration and oversight activities. Phase 3 audit work, assessing
program results and emerging issues, is ongoing. Our Phase 4 work plans include
summarizing our pandemic response oversight work and reporting on lessons learned
related to UI, worker safety and health, and employment and training. The results of our
4-phased pandemic response oversight plan will include recommendations for DOL to
strengthen and enhance programs prior to the start of emergencies. We have published
two plan updates, most recently on March 21, 2022, with another planned for FY 2023.

40 Pandemic Response Oversight Plan (updated March 21, 2022), available at:
https://www.oig.dol.gov/public/oaprojects/Updated%20Pandemic%20Response%20Oversight%20Plan%
202022%20for%20Publication.pdf

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At the start of the pandemic, we examined past audits including those related to the
Recovery Act and the DUA program,40F41 and we assessed comparable lessons learned.
As a result, in April 2020, we issued the previously noted advisory report41F42 identifying
six initial areas of concern for ETA and the states to consider while implementing
CARES Act UI provisions: (1) state preparedness (specifically the issues of staffing and
system capabilities), (2) initial eligibility determination, (3) benefit amount, (4) return to
work, (5) improper payment detection and recovery, and (6) program monitoring. Our
identification of these areas represents at least 16 years of work relating to DOL’s UI
program, including the response to past disasters. The advisory report outlined years of
weaknesses and recommendations identified by the OIG to strengthen the UI program.
Many of these issues came to fruition. DOL and states must take lessons learned during
the COVID-19 pandemic to correct additional weaknesses identified prior to the next
disaster.

We have issued several subsequent reports, including alert memoranda addressing
urgent concerns, involving the UI program, such as the following:

• In May 2020, we issued an alert memorandum42F43 describing our concerns
regarding claimant self-certification in the PUA program. In our view, reliance on
such self-certifications rendered the PUA program highly vulnerable to improper
payments including fraud. Subsequent to our work, Congress took action to
require supporting documentation to improve states’ abilities to ensure proper
claimant eligibility and to mitigate fraud through the Consolidated Appropriations
Act, 2021.

• In August 2020, we reported43F44 states did not use existing tools effectively to
combat fraud and other improper payments. We also stated ETA should work
with the OIG to obtain access to state claimant data that could be used to identify

41 Examples include: Recovery Act: DOL Could Have Better Monitored the Use of Re-employment
Services Funds to Adhere to Standards for Transparency and Accountability,
Report No. 18-11-005-03-315 (March 31, 2011), available at:
https://www.oig.dol.gov/public/reports/oa/2011/18-11-005-03-315.pdf; Recovery Act: States Challenged in
Detecting and Reducing Unemployment Insurance Improper Payments, Report No. 18-16-005-03-315
(August 2, 2016), available at: https://www.oig.dol.gov/public/reports/oa/2016/18-16-005-03-315.pdf; and
Audit of Florida Disaster Unemployment Assistance Grant Number 1359 - DR (March 26, 2004),
Report No. 04-04-004-03-315 (March 26, 2004), available at:
https://www.oig.dol.gov/public/reports/oa/2004/04-04-004-03-315.pdf.
42 Advisory Report: CARES Act: Initial Areas of Concern Regarding Implementation of Unemployment
Insurance Provisions, Report No. 19-20-001-03-315 (April 21, 2020), available at:
https://www.oig.dol.gov/public/reports/oa/2020/19-20-001-03-315.pdf
43 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
44 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

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and disrupt fraudulent schemes that threaten the integrity of UI programs,
including those under the CARES Act.

• In May 2021, we reported44F45 that DOL and states struggled to implement the
three pandemic UI programs that posed the greatest risk for fraud, waste, and
abuse: PUA, PEUC, and FPUC. Specifically, DOL’s guidance and oversight did
not ensure states: implemented the programs and paid benefits promptly,
performed required and recommended improper payment detection and recovery
activities, or reported accurate and complete program activities. This occurred
primarily because states’ IT systems were not modernized, staffing resources
were insufficient to manage the increased number of new claims, and, according
to state officials, ETA’s guidance was untimely and unclear.

• In November 2021, we issued45F46 the Department a qualified opinion, for the first
time in 25 years, on its consolidated financial statements and reported one
material weakness related to pandemic-related UI funding. There were two
primary causes for this issue: (1) the Department being unable to support
$47.3 billion it estimated for UI claims in appeal or unprocessed as of
September 30, 2021, and (2) unreliable reporting of $4.4 billion in UI benefit
overpayments due to certain states’ non-reporting of UI overpayment activity.

• In July 2022, we reported46F47 that the Department did not meet the requirements
for compliance with the Payment Integrity Information Act (PIIA) for FY 2021.
PIIA requires federal agencies to identify programs susceptible to significant
improper payments, estimate the improper payments for those programs, and
report on actions to reduce the improper payments in those programs. While
DOL met three of the six compliance requirements for UI programs, we found
DOL did not meet the other three requirements: it did not publish all improper
payment estimates, did not demonstrate improvement from the improper target
rate published in FY 2020, and did not report an improper payment rate of less
than 10 percent.

• In August 2022, we issued an alert memorandum47F48 describing our concerns
regarding states either not submitting required CARES Act UI program reports to

45 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
46 FY 2021 Independent Auditor's Report on the DOL Financial Statements, Report No. 22-22-003-13-001
(November 19, 2021), available at: https://www.oig.dol.gov/public/reports/oa/2022/22-22-003-13-001.pdf
47 The U.S. Department of Labor Did Not Meet the Requirements for Compliance with the Payment
Integrity Information Act for FY 2021, Report No. 22-22-007-13-001 (July 1, 2022), available at:
https://www.oig.dol.gov/public/reports/oa/2022/22-22-007-13-001.pdf
48 Alert Memorandum: 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), available at:
https://www.oig.dol.gov/public/reports/oa/2022/19-22-004-03-315.pdf

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ETA or reporting zero activity. We found the reporting to be deficient for the eight
reports we examined. For the PUA program, which was highly susceptible to
improper payments including fraud, seven states reported zero overpayments for
all months during the entire program period of March 2020 through
September 2021. Without accurate state performance information, Congress and
ETA are not able to: fully assess state activities, mitigate the risk of
overpayments including fraud, identify program weaknesses, or establish lessons
learned that may be leveraged to improve states’ performance under similar,
future temporary programs.

• As of September 2022, we have issued three alert memoranda48F49 that identified a
total of $45.6 billion in potentially fraudulent UI benefits paid from
March 2020 through April 2022 in the four specific high-risk areas previously
mentioned, to individuals with Social Security numbers: (1) filed in multiple
states, (2) of deceased persons, (3) of federal prisoners, and (4) used to file UI
claims with suspicious email accounts. We previously recommended in our
June 2021 alert memorandum that ETA amend 20 Code of Federal Regulations
Part 603 and update its guidance to provide the OIG with access to SWA UI data
for all IG engagements authorized under the Inspector General Act of 1978, as
amended (IG Act). In September 2022, we recommended ETA implement
immediate measures to ensure ongoing OIG access to UI claims data for audit
and investigative purposes and expedite regulatory updates to require ongoing
disclosures of UI information to the OIG for audits and investigations of federal
programs.

• In September 2022, we reported49F50 ETA and states did not protect
pandemic-related UI funds from historic levels of improper payments including
fraud nor from payment delays. We attributed this to four causes: lack of eligibility
testing, untimely oversight, PUA self-certification, and the 3-month suspension of
a primary oversight tool. Additionally, DOL’s interpretation of its regulations on
data access hindered the OIG’s timely and complete access to UI claims data to
assist in detecting and deterring fraud. We estimated that, in the initial 6 months
after the CARES Act passed, 4 states paid $30.4 billion in PUA and FPUC

49 (1) 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;
(2) 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; and
(3) 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
50 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

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benefits improperly (42.4 percent) including $9.9 billion paid to likely fraudsters
(13.8 percent). Further, based on our analysis of ETA’s timeliness reports, at
least 6.2 million American workers nationwide waited a month or more for
pandemic-related UI benefits during the year after the CARES Act passed.

• In December 2022, for the second straight year, we issued50F51 the Department a
qualified opinion on its consolidated financial statements and reported one
material weakness related to pandemic-related UI funding. There were two
primary causes for this issue: (1) the Department was unable to support
$7.9 billion it estimated in remaining pandemic-related UI claims in appeal or
unprocessed as of September 30, 2022, and (2) the Department was unable to
support the $3.5 billion it estimated in remaining pandemic-related UI benefit
overpayment receivables.

OIG Recommendations

The OIG has made several recommendations to DOL and Congress to improve the
efficiency and integrity of the UI program. While action has been taken to resolve some
recommendations, further action is needed to close them. Summaries of key
recommendations that remain open follow. Additionally, we have highlighted three
high-priority recommendations for Congress at the end of the section.

OIG Recommendations to DOL

OIG Access to Claims and Wage Data
• Implement immediate measures to ensure ongoing OIG access to UI claims data
for all audit and investigative purposes
• Expedite regulatory updates to require ongoing disclosures of UI information to
the OIG for audits and investigations of federal programs

Staffing and Systems for Prompt Payments during Emergencies
• Continue to work with states to develop, operate, and maintain a modular set of
technological capabilities (i.e., staffing and replacing legacy IT systems) to
modernize the delivery of UI benefits that is sufficient to manage and process
sudden spikes in claims volume during emergencies or high unemployment
• Conduct a study to assess: the technological needs of the UI programs to
determine the capabilities that need to be upgraded or replaced, the features
necessary to effectively respond to rapid changes in the volume of claims in
times of emergency or high unemployment, the capabilities needed to ensure
effective and equitable delivery of benefits, and the capabilities to minimize
fraudulent activities

51 FY 2022 Independent Auditor's Report on the DOL Financial Statements, Report No. 22-23-002-13-001
(December 13, 2022), available at: https://www.oig.dol.gov/public/reports/oa/2023/22-23-002-13-001.pdf

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• Develop standards for providing clear and reasonable timeframes to implement
temporary programs to establish expectations for prompt benefit payments to
claimants

Controls for Improper Payments
• Establish effective controls, in collaboration with SWAs, to mitigate fraud and
other improper payments to potentially ineligible claimants, including multistate
claimants, claimants who used Social Security numbers of deceased persons
and federal prisoners, and claimants with suspicious email accounts
• Include CARES Act UI transactions in the Benefit Accuracy Measurement
(BAM)51F52 system or develop an alternative methodology to reliably estimate
improper payments for those programs
• For DOL financial statements, design and implement controls to ensure
management’s reviews of [UI program] estimates are performed at a sufficient
level of detail and adequate documentation is maintained to assess the
reasonableness of the estimates

Guidance and Assistance to States
• Assist states with claims, overpayment, and fraud reporting to create clear and
accurate information, and then use the overpayment and fraud reporting to
prioritize and assist states with fraud detection and recovery
• Examine the effectiveness of the BAM system contact verification process to
ensure it reflects the current methods claimants use to seek work

Coordination with Congress
• Work with Congress to establish legislation requiring SWAs to cross-match in
high-risk areas, including to individuals with Social Security numbers: filed in
multiple states, of deceased persons, of federal prisoners, and with suspicious
email accounts

OIG Recommendations to Congress

In addition, Congress should consider legislative proposals included in prior DOL
budget requests and pass legislation to improve UI program integrity. The DOL
proposals included the following:

• require SWAs to cross-match UI claims against the National Directory of New
Hires;
• require SWAs to cross-match UI claims with the U.S. Social Security
Administration’s prisoner database and other repositories of prisoner information;

52 BAM 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. The
BAM data are an estimate of the total improper payments in the UI program, in each state and the nation
as a whole, based on a statistically valid examination of a sample of paid and denied claims.

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• allow SWAs to retain 5 percent of UI overpayment recoveries for program
integrity purposes; and
• require SWAs to use UI penalty and interest collections solely for UI
administration.

These legislative proposals are consistent with previous OIG findings and
recommendations to improve the UI program.

The OIG has also recommended that Congress ensure DOL and the OIG have ongoing,
timely, and complete access to UI claimant data and wage records for our respective
oversight responsibilities. In addition, in our November 2022 Semiannual Report to
Congress, the OIG recommended that Congress extend the statute of limitations for
fraud involving pandemic‑related UI programs, and authorize OIG participation in asset
forfeiture funds to combat UI fraud and other crimes.

Highlighted High-Priority Recommendations for Congress

• Extend the statute of limitations for fraud involving pandemic-related UI programs
• Ensure the OIG has ongoing, timely, and complete access to UI claimant data
and wage records
• Ensure effective payment integrity controls to reduce improper payments in all UI
programs including temporary ones, such as broader requirements for mandatory
cross-matching

DOL’s Progress

The Department has emphasized the progress it has made in addressing challenges
with the UI program. According to DOL, it has instituted efforts to focus on program
integrity when implementing the pandemic-related UI programs. These efforts include
establishing agreements with states to comply with all applicable requirements to
receive funds, issuing operating guidance, and providing technical assistance to SWAs
individually and through webinars. DOL has included requirements for SWAs to focus
on program integrity in its guidance relevant to UI funds. In addition, DOL has reinforced
the need for SWAs to actively work with the OIG to address fraud in the UI program. As
previously mentioned, GAO recently reported that DOL has yet to develop an antifraud
strategy to ensure it addresses the most significant fraud risks facing the UI system.52F53

The Department has facilitated the OIG’s access to UI data but only for benefit weeks
covered by CARES Act programs and related extensions. In addition, ETA has required
grant recipients to share state UI data with the OIG as a condition of the fraud
prevention grants offered under the American Rescue Plan Act of 2021 (ARPA), which
will provide such access through December 31, 2023. However, three states did not

53 GAO, Unemployment Insurance: Data Indicate Substantial Levels of Fraud during the Pandemic; DOL
Should Implement an Antifraud Strategy, Report No. GAO-23-105523 (December 22, 2022), available at:
https://www.gao.gov/products/gao-23-105523

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receive the grants; therefore, the data provided to the OIG will be incomplete. The OIG
needs access to all UI program data to effectively do its job.

On August 31, 2021, the Department announced the establishment of the Office of
Unemployment Insurance Modernization to work with state and federal partners to
modernize and reform the UI system.53F54 According to DOL, the Office of Unemployment
Insurance Modernization will provide oversight and management of the $2 billion
allotted to UI initiatives by ARPA to prevent and detect fraud, promote equitable access,
ensure timely benefit payments, and reduce backlogs.

The Department also noted it has announced grant opportunities to states, including
funds for pilot states to engage community-based organizations to help workers learn
about UI benefits and related services and to support state agencies in delivering timely
benefits to workers. DOL stated it has also made progress on implementing further
grant opportunities, such as for: fraud prevention, promoting equitable access to UI
programs, the Tiger Teams initiative to consult with states in improving UI systems and
processes, and the opportunity to participate in its UI IT Modernization Project -Claimant
Experience Pilot.54F55

OIG Challenges Overseeing the UI Program

The OIG’s three biggest challenges overseeing the UI program are in the areas of data
access, resource limitations, and the statute of limitations related to UI fraud.

Data Access

The OIG’s lack of ongoing, timely, and complete access to UI claimant data and wage
records from SWAs remains a significant challenge. This deficiency directly and
adversely impedes the OIG’s ability to provide independent oversight and combat fraud,
waste, and abuse to help DOL reduce improper payments in its programs, including
regular and temporary UI programs.

The power and use of data and predictive analytics enables the OIG to continuously
monitor DOL programs and operations to detect and investigate fraud. Continuous
monitoring serves as a deterrent to fraud, allows the OIG to promptly discover areas of
weakness, and assists DOL management to timely correct problems. However, the
OIG’s ability to proactively detect UI fraud through our audit and investigative activities
continues to be impacted by these data concerns.

Prior to August 2021, DOL required SWAs to disclose UI data only for specific fraud
investigations. DOL asserted it lacked the authority to require SWAs to provide UI data

54 For information about the strategic vision outlined in August 2021 UI modernization plans, a fact sheet
is available at: https://oui.doleta.gov/unemploy/pdf/FactSheet_UImodernization.pdf.
55 For more details, Training and Employment Notice No. 16-21 is available at:
https://www.dol.gov/sites/dolgov/files/ETA/advisories/TEN/2021/TEN_16-21.pdf.

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to the OIG for audits. As a result, the OIG was forced to take the unprecedented step of
using Inspector General subpoenas to obtain this critical data. DOL’s interpretation of its
regulations hindered the OIG’s ongoing, timely, and complete access to state UI claims
data to assist in detecting and deterring large-scale fraud.

Specifically, DOL continues to interpret regulations55F56 as prohibiting ETA from requiring
SWAs to provide UI data to the OIG for all audit and investigative purposes, except
those involving specific instances of suspected fraud. This interpretation and
subsequent guidance to SWAs contradict the IG Act, which authorizes mandatory OIG
access to DOL grantee information, including SWAs’ UI data.

In our June 2021 alert memorandum,56F57 we recommended that ETA amend its
regulations57F58 through the rulemaking process to reinforce that SWAs’ UI information
must be provided to the OIG for all IG engagements authorized under the IG Act,
including audits, evaluations, and investigations. To date, ETA has implemented only
temporary solutions. On August 3, 2021, ETA issued guidance58F59 requiring SWAs to
disclose UI data to the OIG for audits and investigations during the period
January 27, 2020, to September 6, 2021. ETA also awarded fraud prevention grants to
states conditioned on requiring OIG access to their UI data for investigative and audit
purposes through December 31, 2023.

However, ETA’s actions are not sufficient to resolve the OIG’s recommendations or
concerns. In response to our recommendations, ETA has taken limited actions to
support the OIG having access to UI data. For example, it published guidance that
reminded states of the OIG’s authority under the IG Act and strongly encouraged states
to comply with OIG requests. ETA also informed us it is considering comprehensive
updates to the relevant regulations. We met with ETA numerous times and requested a
written plan with projected timelines. ETA provided a plan to the OIG in July 2022. The
projected timeline creates a 14-month gap between when the grants requiring OIG
access end on December 31, 2023, and the publication of updated regulations
anticipated to be effective in February 2025. Unless the Department implements an
interim solution ensuring the OIG’s complete and timely access to UI program data and
information by the end of 2023, the Department’s regulations will renew impediments to
the OIG’s access experienced prior to and during the pandemic and may necessitate
additional subpoenas.

While the OIG and ETA agree that changing regulations requires notice and comment
rulemaking, an immediate and legally sound interim solution is available to ETA. In the
alert memorandum issued September 21, 2022, the OIG highlighted the Department’s
authority to amend its interpretation of its regulations without changing the regulations

56 20 Code of Federal Regulations Part 603
57 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 the
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
58 20 Code of Federal Regulations Part 603.5 and Part 603.6(a)
59 Unemployment Insurance Program Letter (UIPL) No. 04-17, Change 1

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themselves. ETA could immediately amend its interpretation of its regulations to be
consistent with the IG Act. Specifically, ETA can issue guidance to inform SWAs that
they must timely provide UI data to the OIG for audits and investigations consistent with
the IG Act. The historic levels of improper payments that the OIG has identified,
including potential fraud, supports the conclusion that the OIG’s continued access to
state UI data is imperative.

To aid in resolving this issue, we previously requested that Congress consider
legislative action to authorize DOL and the OIG to have unfettered access to UI
claimant data and wage records for our oversight responsibilities. Unfettered access to
states’ UI claimant data and wage records systems would further enable the OIG to
quickly identify large-scale fraud and expand its current efforts to share emerging fraud
trends with ETA and SWAs to strengthen the UI program and deter fraud before it
occurs. In addition, conducting data analytics from such access would further enable
our auditors to identify program weaknesses and recommend corrective actions that
would improve the timeliness of UI benefit payments and the integrity of the UI program.
To underscore this point, based on the data obtained by the OIG, our auditors,
investigators, and data scientists in our Office of Audit and Office of Investigations
worked collaboratively to identify $45.6 billion of dollars in potential UI fraud59F60 paid in
the four specific high-risk areas, such as to multistate claimants and deceased persons.

Resource Limitations

The OIG greatly appreciates that Congress appropriated a total of $38.5 million in
supplemental funding during the pandemic to fund the OIG’s oversight of expanded
DOL programs and operations. However, most of this funding will be fully expended by
the first or second quarter of FY 2024. In addition, the OIG’s FY 2021 and
FY 2022 appropriations remained flat and the FY 2023 appropriation was $11 million
less than requested. As a result, the OIG is currently in the process of reducing its
workforce through attrition. This includes reducing our investigative capacity by
approximately 20 percent by the end of FY 2023. Similarly, from an oversight
perspective, the OIG has had to cancel 10 audits related to pandemic oversight that
were planned for FY 2023. These reductions in the OIG’s investigative and audit
capacity are of great concern given the issues discussed in this testimony.

Today, the OIG has 111 field agents to investigate approximately 2,000 investigative
matters currently assigned to our field offices, an average of 18 investigative matters
per agent. The ideal caseload per agent is between 5 and 10 open investigative
matters, which ensures that the matter can proceed efficiently through the investigative
and prosecutorial processes. It is important to note that the OIG is still reviewing
approximately 162,000 open UI fraud complaints received throughout the pandemic and
continues to receive between 100 to 300 new UI fraud complaints each week.

60 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

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In addition, based on past oversight experience of federal UI disaster aid, the OIG
expects to be actively investigating UI fraud relating to the pandemic for several years.
The OIG will likely be conducting these investigations through at least
September 2026 when the statute of limitations for most pandemic-related violations will
have expired. In many cases, the statute of limitations will expire sooner than that. We
simply do not have the resources to review the 162,000 open UI fraud complaints and to
conduct investigations of each instance of suspected fraud before the statute of
limitations expires.

Similarly, the OIG has less than 100 auditors to oversee DOL programs that cost
taxpayers billions of dollars each year. The OIG intended to use its remaining ARPA
funds to conduct additional oversight work using contractors and to support that work
using contract data analysts and scientists. However, the OIG is now forced to use the
remaining ARPA funds to fund salaries and benefits of employees brought on board
during the pandemic to assist with the oversight of pandemic-related programs and
operations. This will result in fewer audits and recommendations for improvement of
pandemic-related programs and operations.

Finally, although the OIG has focused the majority of its audit and investigative
resources on UI benefit programs, the OIG has extensive responsibilities covering other
high-risk DOL programs that continue to warrant significant oversight, including:

• other worker benefit programs, such as workers’ compensation;
• worker safety and health, including occupational and miner safety and health and
workplace rights;
• employment and training programs, including grants and the Job Corps program;
• statistics, legal and international programs, and contracting;
• information technology and data analytics;
• financial management and single audits; and
• other DOL operations and programs.

Areas of significant concern include managing medical benefits such as opioids,
maintaining the integrity of Foreign Labor Certification programs, protecting the security
of employee benefit plan assets, ensuring the solvency of the Black Lung Disability
Trust Fund, and improving the Job Corps’ procurement process. It is a crucial time for
the OIG to help DOL ensure programmatic strength to review the effectiveness,
efficiency, economy, and integrity of DOL programs and operations.

Over the past 10 fiscal years, on average, every dollar invested in the OIG resulted in a
return on investment of nearly 75 dollars to the federal government and American
taxpayers. Over this period, the OIG identified more than $69 billion including
questioned costs and funds recommended to be put to better use. The OIG offers an
important investment for U.S. taxpayers, particularly in times of resource constraint.

The President’s recent proposal to: (1) provide the DOL OIG with an additional $100
million to hire investigators to pursue fraud in the UI programs; (2) increase the statute

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of limitations to 10 years for fraud against the pandemic UI programs; and (3) ensure
the OIG can easily access multistate UI program data to detect fraud would allow the
OIG to continue and expand on its efforts to combat fraud in the UI programs. However,
the OIG would need to have immediate access to these funds to reverse its current
course of reducing its anti-fraud efforts in the UI programs due to lack of sufficient
resources. It will take between 6 and 12 months to once again begin to increase OIG
staffing levels and reinstate oversight contracts focused on UI programs. Moreover,
states’ efforts to expeditiously and efficiently provide benefits to claimants resulted in
billions in improper payments.

Statute of Limitations

We are concerned that, unless Congress acts to extend the statute of limitations for
fraud associated with pandemic‑related UI programs, many groups and individuals that
have defrauded the UI program may escape justice. Even with the OIG’s tireless efforts,
the current statute of limitations associated with UI fraud means federal law
enforcement may still fall short in fully investigating and prosecuting the most egregious
cases of UI fraud, especially given the volume and complexity of UI fraud matters we
are tasked to investigate. Currently, the statute of limitations for many of these cases
will expire in 2025 as the statutes most often used to prosecute UI fraud have 5-year
limitations.

Pandemic-related UI fraud referrals that we receive often include complex schemes
involving criminal enterprises and bad actors who use sophisticated techniques to
maintain their anonymity. For instance, in a recent pandemic-related UI fraud
investigation into the theft of over $4 million in UI benefits from a SWA, conspirators
orchestrated a scheme to file UI claims using stolen identities, which were often
associated with elderly citizens.60F61 The conspirators then opened bank accounts using
the stolen identities for the sole purpose of having fraudulent UI proceeds deposited into
them. They withdrew the fraudulent proceeds and purchased money orders made out to
themselves and to an online vehicle auction company. The conspirators then laundered
the UI funds by using the money orders to purchase salvaged automobiles in the United
States and ship them to Nigeria. They also facilitated the transfer of conspiracy
proceeds to overseas bank accounts in Nigeria. This complex fraud investigation
spanned both domestic and foreign jurisdictions. The defendants have been convicted
of conspiracy to commit wire fraud.

Criminal investigations like this one require significant resources and time. Although the
OIG is currently returning to pre-pandemic staffing levels due to limited resources, we
had temporarily leveraged resources from Congress to hire more criminal investigators
and significantly expand the number of staff reviewing UI fraud matters. We have also
leveraged additional federal resources by partnering with DOJ and other federal law

61 DOJ, U.S. Attorney’s Office, Northern District of Alabama, “Georgia Resident Pleads Guilty to
COVID-19 Unemployment Fraud Targeting Several States,” press release (June 8, 2022), available at:
https://www.justice.gov/usao-ndal/pr/georgia-resident-pleads-guilty-covid-19-unemployment-fraud-
targeting-several-states

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enforcement agencies. While these investigative resources have helped us address the
incredible volume of UI fraud matters, the OIG anticipates identifying and investigating
pandemic-related UI fraud until the statute of limitations expires, which, absent
congressional action, will start to expire in early 2025.

In August 2022, an extension of the statute of limitations was implemented for crimes
involving the U.S. Small Business Administration’s Paycheck Protection Program and
Economic Injury Disaster Loan program.61F62 Congress should likewise consider extending
the statute of limitations for existing laws when pandemic-related UI programs are
defrauded. The expansion of the statute of limitations would provide investigators and
prosecutors time to effectively and efficiently pursue and hold accountable those who
defrauded the UI program and victimized the American people during the pandemic.

OIG Ongoing and Planned Work

The OIG’s efforts to strengthen and protect the UI program continue. In addition to
working with our law enforcement partners to combat fraud in the program, we will be
issuing additional audit reports covering critical areas of concern and opportunities for
improvement in the UI program. Planned and in-progress62F63 Phase 3 audit work
includes:

• ETA’s efforts to ensure UI program integrity;*
• DOL’s oversight of emergency UI administrative transfers to states;*
• ETA and state efforts to detect and recover overpayments;*
• adequacy of state IT resources;*
• adequacy of state staffing resources;*
• effectiveness of programs for nontraditional claimants;*
• effectiveness of the Temporary Full Federal Funding program;*
• effectiveness of the Short-Time Compensation program;*
• effectiveness of the Mixed Earners Unemployment Compensation program;*
• effectiveness of the Emergency Unemployment Relief for State and Local
Governmental Entities, Certain Nonprofit Organizations, and
Federally-Recognized Indian Tribes program;*
• PRAC Case Study Project on federal pandemic response funds in select
geographic areas;*
• concerns over use of third-party identity verification contractors;*
• ETA and states’ efforts to address multistate claimants;*
• ETA and states’ efforts to address claimants using the Social Security numbers
of deceased persons;*
• ETA and states’ efforts to address claimants using the Social Security numbers
of federal prisoners;*
• ETA and states’ efforts to address claimants with suspicious email accounts;*

62 The White House, “Bills Signed: H.R. 7334 and H.R. 7352,” (August 5, 2022), available at:
https://www.whitehouse.gov/briefing-room/legislation/2022/08/05/bills-signed-h-r-7334-and-h-r-7352/
63 Audits in progress are marked with an asterisk (*).

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• concerns over data warehousing and analytics to prevent UI fraud;*
• DOL and states’ oversight of UI claimants return to work;
• ARPA Equity Grants;
• impact of waivers on UI overpayments, fraud investigations, and recoveries; and
• mandatory audit of DOL’s FY 2022 Compliance with the Payment Integrity
Information Act of 2019.63F64

Conclusion

Mr. Chairman, the OIG recognizes the importance of providing much-needed benefits to
the American people in a time of crisis and remains committed to providing vigilant
oversight of the UI program. As I discussed today, keeping fraud out of the UI program
through preventative efforts and controls and quickly rooting it out when it occurs are
requisite undertakings to ensure that unemployed workers receive much needed
benefits without delay while protecting tax dollars directed towards sustaining the UI
system. We will continue to work closely with Congress, DOL, and our law enforcement
partners to keep these important benefits available for workers in need.

Beyond our UI work, the OIG’s pandemic oversight continues to involve a substantial
focus on other essential programs operated by DOL, including worker safety and health
and employment and job training programs. We also continue oversight over numerous
other areas including: combatting threats to the integrity of foreign labor certification
programs, addressing the opioid crisis by fighting fraud against the Federal Employees’
Compensation Act program, and overseeing the efficiency and integrity of other
important DOL programs and operations.

Thank you for the opportunity to testify at today’s hearing. I would also like to take a
moment to thank the dedicated employees of the OIG, who continue to work tirelessly in
support of the agency and our essential oversight mission.

I would be pleased to answer any questions you or the other members of the
Committee may have.

64 A large portion of this annual audit focuses on UI.

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