The nonpartisan Government Accountability Office (GAO) released a lengthy report on Monday titled “Unemployment Insurance: Data Indicate Substantial Levels of Fraud during the Pandemic; DOL Should Implement an Antifraud Strategy.” Despite coming nearly three years after pandemic unemployment benefits were created, and over a year after they ended, the report offers readers far more detail about what we don’t know about the full extent of unemployment benefit fraud during the pandemic than what we do know. 

Here are some highlights of the new GAO report.

1. Fraudulent benefit claims surged during the pandemic:

In October 2021, we found that fraudulent and potentially fraudulent activity in the UI program increased substantially after implementation of the pandemic UI programs, relative to the amount of such activity in the regular UI program before the pandemic. (pages 9-10)

2. The reasons for the surge include the availability of increased federal benefits (especially $600-per-week and later $300-per-week bonuses) and expanded eligibility under the federal Pandemic Unemployment Assistance (PUA) program, which created a large target for criminals to attack:

The increased amount of benefits awarded and the PUA program’s initial reliance on self-certification, as discussed below, gave criminals incentive and opportunities to commit fraud. . . . In addition, DOL officials stated that the UI programs during the pandemic were a key target for fraud because fraudsters could receive a large amount of money in one payment. (page 10)

3. The design of the PUA program made it especially vulnerable to abuse:

The DOL OIG reported in October 2020 that the PUA program in particular was at high risk for fraud due to its unique program rules and eligibility requirements. Specifically, the CARES Act allowed PUA applicants to self-certify their eligibility and did not require them to provide any documentation of self-employment or prior income. . . . In addition, 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. (page 11)

4. But despite PUA’s longstanding and widely known vulnerability, a key reason for the continuing uncertainty about overall unemployment benefit losses is the absence of information about PUA improper payments:

On July 14, 2022, DOL announced its plan to estimate the rate of improper payments for PUA and to report a statistically valid national improper payment rate by fall 2022. However, in its fiscal year 2022 reporting on paymentaccuracy.gov, DOL stated that in October 2022, the Office of Management and Budget (OMB) requested that DOL conduct further analysis of the outcomes recorded through the PUA case review process. . . . Therefore, according to DOL, OMB allowed additional time to conduct this analysis and report on PUA outcomes in fiscal year 2023. (page 26)

5. The bottom line is that even though pandemic unemployment benefits were created almost three years ago, and expired well over a year ago, we currently don’t have reliable official estimates of the total amount these programs lost to fraud and abuse:

Existing fraud and fraud-related measures do not reliably indicate the extent of fraud, due to the various concerns regarding false positives and false negatives described above. (page 22)

Due to the lack of consistent and reliable estimates that cover all UI payments during the pandemic, it is not currently possible to combine existing estimates and measures to make meaningful statements about the extent of fraud in UI programs during the pandemic. (page 29)

In March 2022, the Department of Labor Inspector General (IG) testified that during the pandemic “at least” $163 billion “could have been paid improperly, with a significant portion attributable to fraud.” GAO noted on page 24 of its new report that the IG’s estimate “was based on the regular UI program and has limitations regarding validity, accuracy, and completeness.” Outside experts, striving for completeness and including estimated PUA losses, have projected total misspending to be as high as $400 billion.

Many economists expect a new recession will begin sometime this year, and for decades Congress has created new federal unemployment benefit programs in response to recession. Those facts, coupled with this latest GAO report, cast doubt on whether Americans will have a full official accounting of the fraud and abuse inflicted during the last recession before additional benefits are demanded in the next one.

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