Unemployment Insurance: Estimated Amount of Fraud During Pandemic Likely Between $100 Billion and $135 Billion (GAO)

Summary

GAO-23-106696, Unemployment Insurance: Estimated Amount of Fraud During Pandemic Likely Between $100 Billion and $135 Billion, published Sep 12, 2023. GAO estimates that fraud accounted for 11-15% of the total amount of unemployment insurance benefits paid during the pandemic. States reported finding about $55.8 billion in total overpayments, $5.3 billion of which were fraudulent, and recovering about $6.8 billion total. DOL expressed concerns about the methodology and stated the estimate was likely overstated; GAO disagrees. Since 2018, GAO has made 26 related recommendations to DOL, and 16 are not yet fully implemented.

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# GAO-23-106696 — Unemployment Insurance: Estimated Amount of Fraud During Pandemic Likely Between $100 Billion and $135 Billion

Published: Sep 12, 2023. Publicly Released: Sep 12, 2023.

## Fast Facts
GAO estimates that fraud accounted for 11-15% of the total amount of unemployment insurance benefits paid during the pandemic. DOL provided funding to states to help prevent, detect, and investigate fraud and recover fraudulent payments. States reported finding about $55.8 billion in total overpayments — $5.3 billion of which were fraudulent. States reported recovering about $6.8 billion total, including $1.2 billion in fraudulent payments. Since 2018, GAO has made 26 related recommendations to DOL; 16 not yet fully implemented.

## What GAO Found
Based on statistical sampling and imputation techniques, GAO estimates that the amount of fraud in unemployment insurance (UI) programs during the COVID-19 pandemic was likely between $100 billion and $135 billion — about 11 percent and 15 percent, respectively, of the total amount of UI benefits paid during the pandemic. The estimate covers April 2020 (first full month of payments from all UI programs) to May 2023 (end of the public health emergency), across all 53 states participating in regular and temporary UI programs. The full extent of UI fraud during the pandemic will likely never be known with certainty. DOL expressed concerns about GAO's fraud estimation methodology and stated the resulting estimate was likely overstated; GAO disagrees, citing (1) a 95-percent confidence interval accounting for sample design and size, and (2) multiple data sources and validity checks.

As of July 2023, DOL reported allocating grants totaling about $1.4 billion to states for initiatives including fraud prevention, detection, investigation, and recovery.

As of May 1, 2023, states reported identifying about $55.8 billion in fraudulent and nonfraudulent UI overpayments and recoveries of about $6.8 billion from March 2020 through March 2023. During this period, states reported identifying fraudulent UI overpayments totaling $5.3 billion and recoveries of $1.2 billion. DOL rules do not allow states to waive fraudulent overpayments.

## Why GAO Did This Study
The UI system has faced long-standing challenges with program integrity, which worsened during the pandemic. Congress created new temporary UI programs; unprecedented demand and the need to quickly implement new programs increased fraud risk. GAO added the UI system to its High Risk List in June 2022. GAO reviewed DOL data, selected and reviewed a sample of payments, matched samples to other federal databases, developed an econometric model on claims and economic conditions, and interviewed officials from 14 states.

## Recommendations
Since 2018, GAO has made 26 recommendations to DOL to improve the UI system; DOL has not yet fully implemented 16.

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