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Illinois takes a big hit on COVID-related unemployment fraud

Illinois has paid out $23 billion in unemployment benefits as part of its Pandemic Unemployment Assistance (PUA) program, but there are concerns about degree of fraud in those payments. While officials acknowledged that $15 million may have been paid to fraudsters, the state may have lost as much as $1 billion, one tech exec said.

When the state’s auditor general released an audit of Illinois Department of Employment Security  (IDES) for fiscal year 2020 in July, the report showed the PUA program sent benefits to the deceased and to children, as well as to people using multiple Social Security numbers, those filing several claims and those who filed claims while they were still working.

The IG said some fraud is always expected in new programs, but since there was “no database of earnings and wages supporting this program, there are unique and pervasive opportunities for fraud.” Additionally, the PUA system did not have a process to report problems with claims or the ability to create let people know they had received excess payments.

The report recommended IDES “implement controls to ensure individuals are eligible to receive benefits prior to payment” and ensure staff are trained on the requirements for benefits eligibility.

In its response to the audit, IDES said it "has already been working to make improvements to the program that address the recommendations based on the department’s own internal reviews."

Among the improvements were checks on claimants with dates of birth prior to 1940, addition of an identity element notification tool to detect if the characteristics of the individual appear in multiple locations. Other changes to the program involved flagging questionable claims identified during the identity verification process and creating and posting an issue and providing notice to claimants who have been overpaid.

“The failure to have an identity fraud solution, which they still don’t have today, would have cost the state maybe a million bucks,” said Haywood Talcove, the CEO of LexisNexis Risk Solutions Government Group. “They would have saved over $1 billion,” he told the Center Square.

With the Delta variant gaining traction, states must shore up their systems against further fraud, he said, because scammers won’t stop at unemployment benefits.

“It is really going to take his leadership to get in there and really get this thing cleaned out, or they are going to continue to squander public funds,” Talcove said.

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