Nearly a year after Illinois lawmakers requested an audit by the Illinois Department of Employment Security of fraudulent unemployment claims and a tabulation of losses during the pandemic, nothing has come forth.
The losses are undoubtedly horrendous. National total losses from unemployment fraud and mistakes during the pandemic were estimated by the U.S. Labor Department back in March 2021 to be $63 billion and counting.
That makes it potentially the biggest financial scam in U.S. history, as we explained then.
Illinois’ share is unknown, but “if the amount tracks with national estimates, it could involve billions of dollars,” as the Chicago Tribune reported at the time.
Some other states are also dragging their feet on quantifying losses, but now the U.S. Labor Department is taking the heat off. It recently issued new guidance that more broadly excuses states from an obligation to recover improper payments and send the money back to the Treasury Department. “The department created new blanket waivers that excuse states from tracking down the money in entire categories of cases, like those in which people were paid unemployment despite saying they were not available to work,” as reported by Route Fifty.
Some Congressional Republicans have howled, saying the Labor Department lets states “off the hook for due diligence and fact-finding for large volumes of suspicious unemployment claims potentially involving billions of fraudulently obtained taxpayer dollars.” A Labor Department spokesperson responded by saying the department created the blanket waivers in response to states’ requests for more flexibility. “We were trying to eliminate some of the administrative complexity for states,” she said.
One consequence of the mess in Illinois’ unemployment system is that it received a qualified opinion from its independent auditor on its most recent financial statements, which is highly unusual. In his report, Illinois State Auditor Frank Mautino highlighted, “The system processing these claims had material weaknesses in the design and operation of internal control and we were unable to obtain sufficient appropriate audit evidence to determine or verify by alternative means whether accrued claims and certain other paid claims met eligibility requirements.”
“The auditor’s report suggests that Illinois outsourced its claims processing system which had material weaknesses,” wrote Truth in Accounting. “It is virtually unheard of for corporations to receive a qualified opinion as it can threaten the company’s value,” they added.
Honest unemployment claimants had nightmarish experiences collecting their money, as was widely reported throughout the pandemic in Illinois. Fraudsters, not so much, though we may never know the full scope of their success.
Let’s hope Illinois lawmakers keep pressing for an honest audit because the federal government apparently won’t be of much help.