Fraudulent unemployment payments doled out during COVID up to $135B: watchdog

The amount of fraudulent unemployment payments doled out during the pandemic was likely between $100 billion and $135 billion, accounting for up to 15% of the total benefits issued between April 2020 through May 2023, according to a government watchdog. 

The study doubles the original Government Accountability Office’s estimate provided to the House Ways and Means Committee in February. 

And the actual level of fraud could be even higher, despite more than a billion dollars allocated to states by the Biden administration for unemployment fraud prevention, detection, investigation and recovery. 

“The full extent of [unemployment] fraud during the pandemic will likely never be known with certainty,” the GAO said in a report released Tuesday.

States have reported recovering only about $6.8 billion in pandemic-era unemployment overpayments, including $1.2 billion in fraudulent payments – or less than 1% of the staggering potential fraud total estimated by GAO. 

“The unprecedented demand for [unemployment] benefits and the urgency with which states implemented the new programs during the pandemic increased the risk of improper payments, including, but not limited to, those due to fraud,” the report notes. 

The March 2020 CARES Act beefed-up unemployment benefits with federal dollars, providing the jobless with an additional $600 in weekly benefits – later reduced to $300 – for as long as 79 weeks. 

“From April 1, 2020, through May 31, 2023, expenditures across the [unemployment] system totaled approximately $900 billion, according to Department of Labor (DOL) data,” the GAO found. 

The study was conducted in response to a request from Sen. Mike Crapo (R- Idaho) and Rep. Jason Smith (R-Mo.).

“These shocking estimates continue to grow, and, as GAO notes, we may never know the full scope and scale of fraudulent pandemic payments,” Crapo, the ranking member on the Senate Finance Committee, said in a statement.   

“Unfortunately, the Administration’s efforts to address over one hundred billion dollars in fraud in the [unemployment] program have fallen woefully short. Congress should pass the Protecting Taxpayers and Victims of Unemployment Fraud Act to recoup stolen funds for victims and prevent similar large-scale theft from happening in the future,” he added. 

Smith, the chairman of the House Ways and Means Committee, called the estimated fraud “the greatest theft of taxpayer dollars in American history” and demanded that Senate Democrats  “take immediate action” to combat it. 

“I am extremely alarmed by these findings and even more convinced that immediate action is needed to recover as much taxpayer dollars as possible,” Smith said Tuesday.

“Unemployment fraud punishes workers and families by taking resources away from law abiding Americans who deserve assistance and puts those resources directly in the pockets of criminals. The unfortunate reality is that every day President Biden spends ignoring this problem, the chances of recovering stolen tax dollars on behalf of these fraud victims grow less.”

The GAO notes that the Biden administration’s Department of Labor “expressed concerns” with the study’s methodology “and stated that the resulting estimate was likely overstated.” 

GAO said that it “disagrees” with the Labor Department’s assessment of the study.