PROVIDENCE, R.I. (WPRI) – Rhode Island paid out more than $98 million of fraudulent unemployment claims during the first 16 months of the pandemic, but the state’s top auditor suspects the overall total includes at least another $550 million in fake claims.
The latest fraud numbers for the state’s unemployment insurance program were released Tuesday by Auditor General Dennis Hoyle, providing a revised estimate of suspected fraudulent claims between March 2020 and July 2021 that now totals over a half-billion dollars.
The report also highlighted how quickly the confirmed fraud has increased, as the $98 million paid out during that same time totaled 40% more than the $70 million state officials estimated in December.
“Controls over the processing of unemployment insurance claims were ineffective to sufficiently prevent fraudulent unemployment insurance benefit payments,” Hoyle wrote in an annual audit of federally funded state programs known as the Single Audit Report.
Rhode Island is hardly alone. The Washington Post earlier this year published an investigation showing at least $163 billion in fraud targeting federal aid initiatives during the pandemic.
In Rhode Island, the state report concluded that the R.I. Department of Labor and Training used “outdated technology” during the surge of pandemic-related applications. Hoyle noted the DLT shifted to a new cloud-based provider as demand soared, but “the primary claims processing functions were still performed by the legacy system.”
In an effort to pay out unemployment benefits as quickly as possible, DLT dropped the usual guardrails during the pandemic, and Hoyle said in some instances the safety nets were lowered too much.
“In December 2020, the federal government required adherence to the documentation of income provisions for self-employed individuals,” Hoyle wrote. “However, most claimants did not provide the required documentation and benefits continued.”
Hoyle also found that while DLT was able to recover some money paid out due to overpayment or fraud, the state has not yet paid back the federal government any amount from those recovered funds.
“The impact of successful collections and claw back of fraudulent benefits was not appropriately reflected on the financial statements of the Employment Security Fund or on federal reports,” Hoyle wrote. “The federal grantor has not been credited for their share of recoveries.”
The state had paid out more than $3.7 billion in total unemployment benefits between the start of the pandemic and last December, according to state officials. About $2.3 billion was distributed during the fiscal year that ended June 30, 2021, which was the focus of the auditor general’s report.
While enhanced federal funding covered a significant share of the additional unemployment benefits paid out during the pandemic, the state still saw a major drain on its unemployment trust fund. Lawmakers put an extra $100 million of state money into the trust fund last month to reduce the burden on employers, who would otherwise be taxed to fill the hole.
Hoyle said internal controls over the Pandemic Unemployment Assistance program — another jobless program created during the pandemic — were also ineffective.
In a statement, DLT Director Matt Weldon — who took over as leader of the agency partway through the pandemic, in February 2021 — said the agency “takes seriously” balancing the responsibility of halting benefits going to fake claims, while ensuring legitimate claims go to people who need them.
“Over the past two years, we have made significant updates to our unemployment insurance system to prevent criminals from fraudulently obtaining benefits,” Weldon said. “Most recently, we launched a secure, cloud-based portal to improve the claimant experience while implementing additional security features.”
In his report, Hoyle recommended the agency should continue to tighten its controls and identify fraudulent claims, implement a strategic plan to modernize the UI benefit system, and repay the federal government with any recovered funds.
Weldon said his agency is working with “law enforcement, the federal government, and other states to hone our processes and exchange best practices.”