New York Comptroller in Unemployment Fraud Audit

In February 2021, the New York State Department of Labor under Governor Andrew Cuomo issued a press release praising the release of a new identity theft software program called “ID.me.” The caption read: “Since the beginning of the pandemic, New York State has prevented more than $6.4 billion in fraudulent unemployment benefits…”

Fast forward to November 2022.

A long-awaited audit of the Labor Department’s Unemployment Insurance Program by the New York State Comptroller found that approximately $11 billion was lost, primarily due to identity theft. He also reported that ID.me was rolled out months late to catch most UI-related identity theft.

In addition, the comptroller’s audit indicated that the Department of Labor (DOL) was unable to provide supporting documentation proving that it had effectively prevented the fraudulent claims it claimed to have.

From the Comptroller’s press release:

DOL was unable to provide supporting documentation on the more than $36 billion in fraudulent claims that the Labor Commissioner said he had prevented. He was also unable to explain to auditors why the estimated amount of fraud for traditional UI claims more than tripled during the 2020-21 fiscal year, nor was he willing to provide data to auditors that would allow them to conduct their own independent analysis to assess the number of fraudulent claims.”

None of this should have happened, Comptroller Tom DiNapoli said.

“Basically, we found that…the State Department of Labor, because they had not heeded previous warnings about how outdated their system for administering unemployment benefits was, the system was overwhelmed by the impact of the COVID shutdown, the huge increase in claims for unemployment benefits, and we found that in our estimate, $11 billion … was lost due to fraud, largely due to identity theft,” DiNapoli said capital tonight.

There were two such “advance warnings.”

According to the audit, the comptroller’s office informed the DOL in 2010 that its unemployment insurance system was out of date. In 2015, in an official audit, he again warned the DOL of the same problems.

While hindsight is 20/20, a reasonable question is, why didn’t the Paterson or Cuomo administrations, along with the federal government, address problems with the state’s unemployment insurance system when first notified? ? Or when they were notified a second time?

“The really frustrating part of this is that I think [the fraud] could have been prevented,” DiNapoli said.

In a letter to the comptroller’s office in response to the audit, DOL Assistant Commissioner for Workplace Safety Susan Filburn wrote that the audit “does not detail all actions taken by DOL personnel or provide adequate context for the stress that the agency was under…”

The deputy commissioner noted that call volume at DOL call centers had increased 13,480% during the pandemic and that the department was able to pay out more than $105 billion in unemployment funds over 24 months.

Here is the official DOL statement:

“The COVID-19 pandemic has placed an unprecedented amount of stress on unemployment insurance systems across the country. Despite this challenge, our system has served as a critical lifeline for nearly five million New Yorkers. The New York State Department of Labor is already implementing changes to improve the system and address the audit findings.”

According to Comptroller DiNapoli, the Labor Department has accepted the comptroller’s audit recommendations and is currently working to update its unemployment insurance system.

The Department of Labor confirms that it is moving forward with that update.

“We are in the middle of a four-year modernization plan that will improve the overall experience for UI beneficiaries and reduce fraud. We are intensifying our fraud investigations and have made UI benefit data available on a new public dashboard. NYSDOL remains committed to protecting our UI system and ensuring that all qualified New Yorkers have access to benefits.”

New York employers arguably suffered the most from widespread fraud. The enormous need during the pandemic forced the state to borrow money from the federal government to support unemployment claims. But the state has to pay that money back with interest. New York State employers are in a tight spot for money.

capital tonight sent an email to the DOL asking, in part, if employers would receive any of that money if the Department can recover the funds. While DOL responded by email to capital tonighthe did not answer that particular question.

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