State auditor report finds $3.8 billion in unemployment fraud, overpayments
COLUMBUS, Ohio (WTVG) - New figures paint a stark picture of unemployment fraud and overpayments by the Ohio Department of Job and Family Services during the COVID-19 pandemic.
According to data released by Auditor of State Keith Faber’s Office, more than $475 million was paid to criminals and another $3.3 billion in overpayments were made. According to the auditor’s office, that amounts to $673 for every Ohioan in the labor force.
The report places the blame on changes to federal requirements, a failure of ODJFS to properly act, and a lack of controls leading to vulnerabilities in a dated system.
“The system was simply not built or prepared for the mass amount of claims and applicants that came with the pandemic,” the report stated.
The auditor’s office said benefit payments were below $900 million for the three fiscal years prior to the pandemic, a number that grew to $9.4 billion in 2020 and $14.2 billion in 2021.
Twenty-six percent of all unemployment payments for the fiscal year ended in June 2021 were potentially paid on overpayments or to fraud accounts.
There were nearly 86,000 potential instances where the payment was sent to a name that was also in the incarceration file; 142,000 potential instances where the payment was sent to a name that was reported deceased the week before the benefits were requested; 356 potential instances where abnormal names were used, such as “Adidas,” “Dummy,” “Guess,” and “Demon.” There were nearly 9,000 potential instances where an individual was paid more than $35,000.
“It’s appalling that Ohioans in need were victimized not only by a pandemic that ravaged our economy but by criminals who took advantage of a system that was outdated, overwhelmed, and ill-prepared for the onslaught of unemployment claims caused by COVID,” Faber said.
Current ODJFS Director Matt Damschroeder noted the unprecedented numbers of claims and cases his department faced during the fiscal years in question. Ohio’s unemployment rate increased from 4.7% in February 2020 to a peak of 17.4% just two months later.
In the week ending on March 14, the department handled approximately 7,000 unemployment claims to 471,000 initial claims two weeks later. The 4 million traditional unemployment claims filed since March 15, 2020, are higher than the previous nine years combined.
“The audit confirms the unprecedented surge in claims and accompanying fraud caused by the pandemic, and the recommendations align with the work already underway in addressing the issues we faced,” Damschroder said.
“We continue to implement new strategies to improve the timing of claims processing and safeguarding federal and state taxpayer money. With the help of a public-private sector partnership established by Governor (Mike) DeWine, we have put a number of enhancements in place related to security and fraud detection.”
Since March, ODJFS implemented measures to address several of the recommendations in the report, including a suite of cybersecurity fraud prevention solutions, new investigative tools to detect fraud, implementation of cyber fraud defense reviews, and continued development of a new unemployment system.
“Much work remains, but we are confident in the improvements we have already made and look forward to utilizing the findings in the audit to inform the future work being planned,” Damschroder said. “I’m proud of the hard work, ingenuity, and adaptability of ODJFS employees, contractors, and private-sector partners, who have spent the last 18 months working to meet these unprecedented challenges.”
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