Fraud in the Pandemic Unemployment Assistance Program

A recent US Department of Labor Inspector General (IG) report shows how easy it may have been for unscrupulous individuals to unlawfully benefit from the federal Pandemic Unemployment Assistance (PUA) program, which was created by the CARES Act. The PUA is one of several programs that the CARES Act created to temporarily expand unemployment benefits for workers affected by the COVID-19 pandemic. In establishing the PUA program, Congress allowed applicants to self-certify that they are unemployed because of a COVID-19 related reason. If approved, qualified recipients can claim up to 39 weeks of PUA.

The IG’s October 21 report, “Covid-19: States Cite Vulnerabilities in Detecting Fraud While Complying with the CARES Act UI Program Self-Certification Requirement,” cited the PUA self-certification requirement as a top fraud vulnerability based on responses received from state agencies responsible for implementing the program. States also identified systems issues and inadequate fraud screening tools as top concerns. Amplifying PUA’s self-certification vulnerability is the fact that the CARES Act actually prohibits states from requiring claimants to submit evidence of prior earnings or income to determine their eligibility for these unemployment benefits. As the IG’s report notes, “the Department [of Labor]’s Solicitor’s Office asserts that states have no authority to require claimants to provide documentation of wages earned or income verification. The OIG believes state’s reliance on self-certifications alone to ensure eligibility for PUA will lead to increased improper payments and fraud.”

PUA fraud is rampant in many states. For example, Arizona reported nearly 2.7 million unemployment claims from the beginning of the pandemic through August, even though there are only 3.4 million working Arizonans; more than one million of these PUA claims were ultimately flagged as potentially fraudulent. Additionally, Colorado reported that it had processed 62,498 filings from July 18 to August 25, roughly 48,000 of which were found to be fraudulent. In July, Maryland uncovered a massive criminal enterprise with more than 47,500 fraudulent unemployment claims totaling over $501 million.

However, the IG report also acknowledged that states have procedures in place that require self-certifying PUA claimants to acknowledge that making fraudulent representations could lead to prosecution. While most states appear to be taking steps to detect and deter suspected fraudulent claims, many still face resource shortages and technological barriers that lessen their ability to better detect and deter fraud. Guidance has been provided to address some of these challenges, but states allege that the guidance is often too late and requires additional clarification.

The temporary PUA program is authorized through December, meaning Congress must make important decisions about its continued operation in the coming weeks. The Department of Labor IG’s report can be found here.