The Way Forward on Unemployment: Stop Criminals from Diverting Billions Away from Unemployed American Workers

House Democrats ignore fraud in pandemic unemployment program
November 16, 2020 — Blog    — Coronavirus Bulletin   

Since March, Pandemic Unemployment Assistance, or PUA, has gone from a well-intentioned federally funded unemployment relief program for non-traditional workers, into a $64 billion entitlement program and an easy target for fraud and abuse.

Multiple reports from states, the Department of Justice, the Secret Service, and Department of Labor’s Office of Inspector General (OIG) have found widespread fraud and abuse resulting in billions being diverted. Even Senate Democrats have raised red flags about reports of organized fraud.

Through the CARES Act, Congress intended to create a temporary unemployment program to provide relief to workers who do not pay into state unemployment trust funds, such as self-employed and independent contractors (i.e., gig workers and Uber drivers), and others who typically do not meet state eligibility requirements. Unlike state unemployment, which is funded through payroll taxes on businesses, PUA is federally funded. The program expires December 31st.

Last year, DOL estimated that approximately 3.2% of improper payments in the Unemployment Insurance (UI) program were due to fraud. Applying a similar analysis to PUA could mean more than $2.4 billion has potentially been wasted due to fraud. The amount is likely far higher.

This should not come as a surprise. State efforts to combat cybercriminals have been hamstrung by lax program rules. Applicants are allowed to self-certify eligibility by checking a box and not required to submit documentation of prior earnings or employment. This has made it easy for criminal organizations, including a Nigerian crime ring, an American rapper, prison inmates, and identity thieves to submit false applications.

In HEROES 2, House Democrats called for an extension of PUA and included “Clarifications and Improvements to Pandemic Unemployment Assistance.” Yet, their bill includes no new program integrity measures. In fact, their proposed improvements include adding “hold harmless” provisions for PUA claimants who fail to re-certify benefits once a week (a standard expectation for all other unemployment recipients) and providing new authority to waive collection of overpayments. The bill disregards warnings from multiple federal law enforcement agencies and fails to recognize the challenges states are facing.

Here’s how we’d fix it:

Republicans can address this problem by applying our long track record of shining a spotlight on government waste, fraud, and abuse. Simple identity verification and guardrails can stop the hemorrhaging of PUA dollars otherwise intended for legitimate workers.

These include:

  • Require new applicants to provide documentation within 21 days to substantiate prior employment or self-employment, and require existing claimants to provide documentation within 90 days;
  • Clarify that only those who have lost their principal source of income are eligible for the program;
  • Require weekly re-certifications and work search reporting; and
  • Ensure states have automated systems in place that verify an applicants’ identity before authorizing pandemic unemployment benefits.

Senate Finance Republicans included similar program integrity provisions in the “American Workers, Families, and Employers Assistance Act” as part of the HEALS Act.