To meet the heightened demand for unemployment insurance during the pandemic, the Ohio Department of Jobs and Family Services (ODJFS) made $477 million in fraudulent claims and $3.3 billion in overpayments, according to an audit released last week.
State Auditor Keith Faber investigated unemployment claims processed between March 1, 2020, through February 28, 2021. He found that relaxed identity controls and an antiquated IT platform resulted in fraudulent claims and overpayments.
Ordinarily, to collect benefits, individuals must be able to work and actively seek work while claiming benefits and providing evidence to the fact. However, the Federal government allowed states to suspend the work search requirements, and Ohio Gov. Mike DeWine signed an executive order waiving the work search requirement for all unemployed workers. Additionally, the “waiting period” was waived to process claims more expediently.
“The department did not have the staff or technology resources to adequately deal with this drastic increase in claim activity and the addition of new Federal unemployment funding. [And its] legacy system, was unable to handle the increased volume of claimants due to its age and functionality,” the report noted. The Ohio Job Insurance (OJI), the state’s unemployment legacy system, has been in place since 2004.
Opportunistic criminals recognized the opportunity presented by the unprecedented increase in unemployment claim activity, the relaxed eligibility, and employment and earnings verification requirements associated with the new expansion of benefits. The report noted an even larger spike in non-fraudulent overpayments, rising from about 2 percent to more than 23 percent of the department’s overall payouts in the fiscal year 2021.
Specifically, the ODJFS wrongfully issued payments to more than 141,000 deceased, as well as more than 85,000 incarcerated individuals. The audit also found that many people were overpaid because they filled out paperwork incorrectly, and due to the backlog, often detected mistakes several months after payments.
Under department policies, the ODJFS attempts to collect overpayments by “sending an appealable overpayment determination to claimants.” However, those with non-fraud overpayments may be eligible for a waiver if the overpayment was not their fault.
The report laid out 10 recommendations for the department to improve the operations related to Unemployment Insurance. Among the 10 recommendations are identifying “internal and external” recommendations fraud risks, strengthening claims controls and better-coordinating claims across the department’s legacy systems, and for the state to continue replacing OJI with a system “more responsive to customer needs.”
The Federal government has provided state and local governments with general relief and IT modernization funds. Specifically, the U.S. Labor Department gave an additional $240 million to help states modernize their unemployment systems.