The report from the Mississippi State Auditor showed an over 300% increase in known over-payments of unemployment benefits during the COVID-19 pandemic.
A new report was recently released by the Mississippi State Auditor citing historic rates of unemployment fraud.
The report by Auditor Shad White shows over $590 million in unemployment compensation was misspent in the state during the COVID-19 pandemic. The fraud shown in Mississippi is also being seen across the nation according to the U.S. Department of Justice which called it “unprecedented.”
“The pandemic response resulted in a historic amount of taxpayer money wasted. Some of this money is simply gone forever,” said Auditor White. “But my office is using the fraud as an opportunity to use new audit tools, like advanced data analytics that will hopefully pay dividends in the future.”
Unemployment claims in 2020 were $2.1 billion, a significant increase of 3,500% from 2019’s $59.6 million.
The Auditor’s office believes one reason the fraud and misspending increased is because the Mississippi Department of Employment Security (MDES) altered its fraud-prevention systems. MDES is responsible for administering unemployment benefit programs in the state.
The system change waived the need for social security number verification on claims approvals, while also waiving the one-week waiting period for claims, increasing the Weekly Earning Allowance from $40 to $200, and altering the requirement that applicants show separation from all employers.
In order to conduct the data audit, the Auditor’s office contracted with a data analytics firm and federal agencies to assist in the investigations. Over the course of the last two years, two arrests for fraud have been made. Those occurred in late 2022.
The report found that COVID-19 response programs resulted in a massive amount of tax dollars stollen, wasted or misspent. Unemployment benefits came to be one of the largest drivers of this misspending during the pandemic, the report outlines. The Inspector General of the United States Department of Labor estimates over $191 billion in unemployment compensation was lost, mainly to fraud.
The State Auditor estimates at least $590 million was misspent during fiscal year 2021 and fiscal year 2022 in the state of Mississippi alone. The Auditor’s staff is investigating and working to identify fraudulent unemployment claims.
In total, the federal government has spent at least $4.17 trillion in COVID relief efforts. That money has primarily gone to stimulus checks ($858 billion), business loan programs like the Paycheck Protection Program or PPP ($828 billion), and unemployment payments ($690 billion).
With the increase in unemployment claims, there was also an increase in errant payments to the tune of 300%. In fiscal year 2020, known over-payments went from $118 million to $473 million.
“The massive loss of money from Mississippi’s unemployment fund is partially the result of MDES bypassing or altering their own internal controls which were designed to prevent money from being misspent or stolen. MDES made payments to people who never lost any income or wages, whose identity was stolen, or who were actually incarcerated. Some payments were even made to international criminals,” the report stated.
In order to recover or resolve these over-payment issues due to fraud, the Auditor’s office is exploring solutions that have not previously been utilized in Mississippi in hopes of recovering the taxpayer money and holding people accountable.
State Senator Jeremy England, who previously served as Vice Chair of Economic and Workforce Development in the Senate, said during his time in the position, he held multiple hearings on unemployment benefit over-payments and was in close contact with MDES.
In reviewing the report, England said he was happy to see the Auditor’s office doing a deeper dive. However, he believes it is unfair to point fingers at the agency due to the unprecedented times.
Senator England said that MDES was the agency “hit the hardest” in 2020 with major increases to claims because of mandated shutdowns. In order to handle the surge, MDES opened new call centers which were mostly staffed by volunteers that were repurposed employees from businesses.
“With the shutdowns, the state faced a sudden surge of unemployment claims and MDES took on the biggest role of dealing with that surge. It would be unfair to point the finger at that agency now, considering what they were dealing with at the time,” said England.
Senator England said he personally helped multiple individuals across the state get in touch with MDES to receive assistance during the shutdowns. He recalls that those newly unemployed individuals were struggling to feed their families and pay their bills as a result of the pandemic.
England said many of the claims made during 2020 were done so by hardworking Mississippians who he believes would prefer to be working instead of requesting unemployment. He said the numbers at face value do not tell the whole story without proper context.
“I hope his [State Auditor] office is able to identify individuals that intended to defraud the state of money at a time when it was needed most, and I hope we see demands and prosecutions against the most egregious fraudsters very soon,” said England.