Unemployment Insurance Fraud: Background and Recent Data

Unemployment Insurance Fraud: Background and Recent Data

INSIGHTi

Unemployment Insurance Fraud: Background
and Recent Data
February 24, 2023
This Insight provides background and recent data on fraud within the federal-state Unemployment
Insurance (UI) system. Program integrity issues have long been of concern for the permanent-law UI
programs. The improper payment estimate for the UI system has been above 10% for 15 of the past 19
years. The Office of Management and Budget continues to designate UI as a “high-priority” program (i.e.,
a program with estimated improper payments of more than $100 million a year) within the U.S.
Department of Labor (DOL). The temporary, COVID-19 UI benefits created in response to the pandemic
exacerbated program integrity concerns related to improper payments and fraud. For an overview of this
issue, see CRS In Focus IF12243, Unemployment Insurance Program Integrity: Recent Developments.
Defining UI Fraud
An improper payment is any payment that should not have been made or was made in an incorrect
amount under statutory, administrative, or other legally applicable requirements, including any payment
to an ineligible recipient. Improper payments include both overpayments and
underpayments. UI overpayments are identified when a state determines that the individual received a
payment, or a portion of a payment, to which the individual is not entitled.
Fraud is a subset of overpayments and is defined under each state’s Unemployment Compensation (UC)
laws. Thus, what constitutes fraud varies from state to state. In general, fraud involves a knowing and
willful act or concealment of material facts to obtain or increase benefits. Fraud determinations often
include identifying a pattern of action or the claimant’s certification of erroneous information under the
penalty of perjury. Regular, state UC benefits do not employ one federal definition of fraud, yet several of
the COVID-19 UI benefits did include statutory language related to fraud.
Two types of UI fraud have been prevalent with regard to the COVID-19 UI benefits, as explained in
DOL program guidance to states: (1) eligibility fraud, which occurs when UI benefits are received by
unqualified individuals based on intentionally false information, and (2) identity fraud, which occurs
when someone utilizes identifying information of another person to receive UI benefits illegally.
Congressional Research Service
https://crsreports.congress.gov
IN12117
CRS INSIGHT
Prepared for Members and
Committees of Congress

Congressional Research Service
2
UI Fraud Data
Under 20 C.F.R §650.1(b), state UC laws must provide an opportunity for a fair hearing for all individuals
whose claims for unemployment benefits are denied. As a result, states may not identify fraud
immediately. Additional investigation by relevant law enforcement agencies may also be necessary to
establish fraud. Thus, the full scope of UI fraud may not be known for some time.
With those caveats in mind, a December 2022 GAO report identifies two types of available data on UI
fraud: (1) measures, which are “counts of detected activities” and (2) estimates, which are “projections or
inferences based on measures, assumptions, or analytical techniques.” In this report, GAO states:
Federal and state entities have produced several fraud and fraud-related measures and estimates of
UI fraud during the pandemic. These measures and estimates reflect a variety of characteristics and
potential indicators of fraud. While each type of measure and estimate has strengths and limitations,
as described below, none completely and reliably indicates the extent of fraud in UI programs during
the pandemic.
Recent UI Fraud Measures
Recent UI fraud measures include state UI agency reports to DOL of fraudulent payments from all UI
programs (at least $4.3 billion from April 2020-June 2022, according to GAO). This measure is not a final
total, and will increase as states identify fraudulent payments. DOL-Office of Inspector General (OIG)
has also reported the number of UI benefit cases flagged as being potentially fraudulent (cited by GAO as
being $45.6 billion from March 2020-April 2022). This number includes cases that will ultimately be
determined not to involve fraud, but is also likely to increase with additional investigations. DOL-OIG
has highlighted the unprecedented nature of its current investigative workload with regard to UI fraud:
Prior to the pandemic, the OIG opened approximately 100 UI investigative matters annually. Since
April 1, 2020, the OIG has opened over 190,000 investigative matters concerning UI fraud. That is
an increase of more than 1,000 times in the volume of UI work that we are facing. UI investigations
now account for approximately 96 percent of the OIG investigative case inventory, compared to
approximately 11 percent prior to the pandemic.
Recent UI Fraud Estimates
DOL produces estimates of UI fraud, which are currently limited to regular, state UC programs (roughly
$8.5 billion for the July 2020-June 2021 period, as cited by GAO). DOL-OIG is another source of UI
fraud estimates, but has not yet produced estimates for all COVID-19 UI programs in all states. Auditors
in many states have also released state-specific estimates of UI fraud. These estimates vary significantly
in scope and methodology—and thus, cannot be aggregated to produce a national estimate.
Recently, GAO estimated the lower bound of UI fraud at $60 billion, acknowledging that the actual
amount of UI fraud during the COVID-19 pandemic may be substantially higher. This estimate is
expected to increase over time with additional investigation and data reporting. UI overpayments
comprise a larger category than fraud and include overpayments not caused by fraud. Thus, DOL-OIG’s
most recent estimate of UI improper payments made in response to the COVID-19 pandemic—at least
$191 billion (out of $888 billion in total UI benefit payments, estimated using an improper payment rate
of 21.52% for fiscal year 2022)—provides additional context on the scope of UI program integrity
concerns.
Congressional Interest in UI Fraud
In 2023, Congress has held several hearings that addressed UI fraud:

Congressional Research Service
3
 on February 1, 2023, the House Committee on Oversight and Accountability held a
hearing “Rampant Waste of Taxpayer Dollars in COVID Relief Programs,” and
 on February 8, 2023, House Committee on Ways and Means held a hearing on “The
Greatest Theft of Taxpayer Dollars: Unchecked Unemployment Fraud.”
Legislation has been introduced in recent Congresses related UI program integrity and fraud—for
example, in the 117th Congress: S. 490/H.R. 1458, S. 1699 /H.R. 3268, S. 2742, S. 2898, S. 4507 /H.R.
8000, H.R. 723, H.R. 4190, H.R. 6224, and H.R. 8661.

Author Information

Katelin P. Isaacs
Julie M. Whittaker
Specialist in Income Security
Specialist in Income Security

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff
to congressional committees and Members of Congress. It operates solely at the behest of and under the direction of
Congress. Information in a CRS Report should not be relied upon for purposes other than public understanding of
information that has been provided by CRS to Members of Congress in connection with CRS’s institutional role.
CRS Reports, as a work of the United States Government, are not subject to copyright protection in the United
States. Any CRS Report may be reproduced and distributed in its entirety without permission from CRS. However,
as a CRS Report may include copyrighted images or material from a third party, you may need to obtain the
permission of the copyright holder if you wish to copy or otherwise use copyrighted material.

IN12117 · VERSION 1 · NEW