SPRINGFIELD – Identity thieves walked off with $2.8 billion in unemployment insurance and lockdown relief in 18 months, according to state auditor Frank Mautino.
A performance audit Mautino released on July 26 stated the economic security department overpaid another $2.4 billion due to hacking and fictitious employers.
The audit stated that identity theft is not recoverable “because it cannot be collected from the real owner of the identity or social security number.”
It added that the department stopped or recovered $361 million in lockdown payments and $150 million in regular unemployment payments.
Republican State Senator Jason Plummer of Edwardsville released a statement that, “When we warned there was over a billion in improper payments, the administration laughed.”
He wrote that early in the pandemic, Republicans sounded the alarm about the need to do things properly and prioritize those most in need.
“Once it became clear that there would be significant fraud, they downplayed the issue and fought to avoid common sense transparency,” he wrote.
“Scammers and fraudsters feasted on Illinois because of this administration’s incompetence and carelessness,” he added.
“Meanwhile, many people who were lawfully entitled to benefits did not receive them in their greatest time of need,” Plummer continued.
“Illinois once again sets a new dismal standard as other states point to us as the example of how to not run government,” he concluded.
Republican State Senator Erica Harriss of Edwardsville released a statement that the audit’s findings were extremely alarming and frightening for state residents.
“Fraudulent claims were made, fraudsters were paid, and now taxpayers are on the hook for this unemployment disaster. Our residents deserve better,” she wrote.
Republican State Senator Eric Schmitt of Cahokia Heights released a statement that the economic security department needs urgent reforms.
“The Pritzker Administration’s mismanagement and lack of transparency have led to severe consequences for taxpayers and job creators," he wrote.
"These funds should have been spent on the unemployed, not on fraudulent actors,” he added.
The audit stated that the amount of overpayment would increase as investigations continue.
In February 2020, 39,916 persons applied for unemployment insurance in Illinois.
In March 2020, 432,420 applied.
The department’s website and its internal system crashed as a result.
According to Mautino’s audit, decisions were made to decrease or eliminate delays and prioritize paying as soon as possible.
The department suspended routine cross matching of identity because it took time and constricted the process.
The audit stated the department’s defenses against fraud could not handle the increase in claims.
“Claims were sometimes filed and paid within a matter of days and then fraudulent activity was subsequently detected.” it stated.
The department contracted with Deloitte consulting firm to staff a call center for $12,736,700.
The department didn’t take bids because Gov. J.B. Pritzker suspended competitive bidding.
Then in April 2020, 517,948 persons applied for unemployment insurance.
In May 2020, Congress authorized a pandemic unemployment fund mostly for contractors and self employed persons who didn’t qualify for unemployment insurance.
Payments covered claims back to Jan. 27, 2020.
Claimants could apply only after the department denied them unemployment insurance.
The lockdown verification procedures didn’t copy the procedures for unemployment insurance.
Instead the department contracted to pay Deloitte $9,490,000 for verification software.
The audit stated that for the first ten weeks Deloitte didn’t check the internal payment system to verify that the department denied unemployment insurance.
In the first 30 days, the department paid $10,000 or more to 158,084 lockdown claimants.
Nine payments exceeded $40,000 and 51 others exceeded $35,000.
The audit stated, “These are not necessarily fraudulent payments.”
“However, given the increased risk of identity theft and the size of these payments, it would be a good practice to take additional measures to ensure that these payments are issued to eligible claimants,” it continued.
It stated that throughout the audit period, March 2020 through August 2021, the department didn’t make any referrals to the attorney general.
Contracts the department originally signed with Deloitte for $22,226,700 resulted in expenditures of $103,925,878 as of Jan. 31.
A $3,990,313 verification contract with Insight Global resulted in expenditures of $51,613,787.
Mautino recommended development of a recession plan for future reference in times of rapidly increasing claim volumes.
He recommended research on available fraud prevention tools.
He recommended controls or holds on payments exceeding a determined amount.
He also recommended identifying and recouping inappropriate benefits.
Lastly, he recommended targeting payments to deceased and incarcerated applicants.
The audit noted that in unemployment insurance and lockdown relief combined, 3,448 incarcerated individuals received 92,811 payments totaling about $40 million.
Further, 481 deceased individuals received 10,527 payments totaling about $6 million.