NY Comptroller examining unemployment fraud

In February 2021, the New York State Department of Labor under Governor Andrew Cuomo issued a press release praising the launch of a new anti-identity theft software program called “ID.me.” At the beginning of the pandemic, New York State has more than 6.4 billion Dollars in fraudulent unemployment benefits prevented…”

Fast forward to November 2022.

A long-awaited audit of the Department of Labor’s unemployment insurance program by the Office of the New York State Comptroller found that an estimated $11 billion was lost, mostly to identity theft. It was also reported that ID.me was implemented months too late to uncover the majority of identity theft related to unemployment insurance (UI).

In addition, the comptroller’s review found that the Department of Labor (DOL) was unable to provide supporting documentation to show that it had in fact prevented the fraudulent claims it had alleged.

From the press release of the Court of Auditors:

DOL was unable to provide evidence of the more than $36 billion in fraudulent claims that the Commissioner of Labor allegedly prevented. It also failed to explain to examiners why the estimated number of fraud cases for traditional UI claims more than tripled in SFY 2020-21, nor was it willing to provide examiners with data that would enable them to do so to conduct their own independent analysis to assess the level of fraudulent claims.”

None of this should have happened, said comptroller Tom DiNapoli.

“Basically, we found that … the state Department of Labor, because it had failed to heed previous warnings about how outdated its system for administering unemployment benefits was, was sparing the system from the effects of the COVID shutdown, the huge surge in claims for Unemployment, overwhelmed was benefits, and we found that by our estimate, $11 billion … was lost to fraud, primarily to identity theft,” DiNapoli said capital tonight.

There were two of these “forewarnings”.

According to the audit, the Audit Office informed DOL in 2010 that its unemployment insurance system was outdated. In 2015, DOL again warned of the same problems in an official audit.

In hindsight, it’s 20/20, but a reasonable question is why didn’t the Paterson or Cuomo governments, along with the federal government, address issues with the state’s unemployment insurance system when they were first informed about it? Or if they were notified a second time?

“The really frustrating part of that is, I think [the fraud] could have been avoided,” DiNapoli said.

In a letter to the Comptroller’s Office in response to the audit, Susan Filburn, DOL Assistant Commissioner for Employment Security, wrote that the audit “did not detail all of the actions taken by DOL staff or provide adequate context for the stress the agency was under.” …”

The deputy commissioner noted that call volume at DOL call centers had increased 13,480% during the pandemic and that the department was able to pay out over $105 billion in unemployment benefits over 24 months.

Here is DOL’s official statement:

“The COVID-19 pandemic has put an unprecedented strain on unemployment insurance systems across the country. Despite this challenge, our system has acted as a vital lifeline for nearly five million New Yorkers. The New York State Department of Labor is already making changes to improve the system and reflect the results of the test.”

According to DiNapoli, the Labor Department has accepted the Comptroller’s review’s recommendations and is currently working to update its unemployment insurance system.

The Department of Labor confirms that it is pushing this update forward.

“We are in the middle of a four-year modernization plan that will improve the overall experience for UI beneficiaries and reduce fraud. We’re stepping up our fraud investigations and providing data on UI benefits on a new, public dashboard. NYSDOL remains committed to protecting our UI system while ensuring all qualified New Yorkers have access to benefits.”

New York employers arguably suffered the most from the widespread fraud. The tremendous hardship during the pandemic forced the state to borrow money from the federal government to support unemployment claims. But the state has to pay back the money with interest. New York state employers are looking for the money.

capital tonight sent an email to DOL, in part asking whether employers would get some of that money back if the ministry were able to recover the funds. While DOL replied via email capital tonightit didn’t answer that specific question.