Home News Ohio Unemployment Audit Discovers Massive $3.8 Billion in Unemployment Fraud and Overpayments

Ohio Unemployment Audit Discovers Massive $3.8 Billion in Unemployment Fraud and Overpayments

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OHIO – A State Audit of Ohio’s unemployment system shows a lack of controls led to vulnerabilities in the system allowing for over $475 million to be paid to criminals while another $3.3 billion in overpayments were made. 

This public interest audit was launched after ODJFS initially failed to disclose the risk and magnitude of ongoing fraud within the unemployment system. 

“It’s appalling that Ohioans in need were victimized not only by a pandemic that ravaged our economy, but by criminals who took advantage of a system that was outdated, overwhelmed and ill-prepared for the onslaught of unemployment claims caused by COVID,” said Auditor Keith Faber. “The fact that the Department neglected to acknowledge it’s failures until hundreds of millions of dollars in fraud and overpayments had been made, potentially delaying assistance from eligible and deserving Ohioans is more than disappointing. Fortunately, upon his appointment Director Damschroder demanded transparency and efficiency and pursued the necessary assistance to address the weaknesses in the system and pursue the necessary procedures to protect Ohio’s unemployment dollars,” said Ohio Auditor Keith Faber.

Additional details were released:

  • 26% of all unemployment payments for the fiscal year ended June 2021 were potentially paid as overpayments or to fraud accounts. Before 2020, fraud and overpayments were around 3.5% of total payouts.
  • Benefit payments were below $900 million for the three fiscal years prior to the pandemic; after the pandemic, benefits rose to $9.4 billion in 2020 and $14.2 billion in 2021.
  • With over $3.8 billion identified in fraud and overpayments, that equates to over $673 for every Ohioan in the labor force. Governor DeWine and the General Assembly utilized ARP funds to reimburse the federal government for the cost of this program.
  • Using the data auditors obtained, they performed a series of 12 data analysis queries utilizing Ohio Job Insurance (OJI) and the Unemployment Framework for Automated Claim & Tax Services (uFACTS) benefit claims paid data significant results included payments made to deceased individuals, and incarcerated individuals, SSNs associated with four or more bank accounts, unique bank account and routing number combinations associated with multiple individuals, and addresses associated with five or more individuals.
  • 85,944 potential instances where the payment was sent to a name that was also in the incarceration file
  • 141,617 potential instances where the payment was sent to a name that was reported deceased a week before the benefits were requested
  • 356 potential instances where abnormal names were used such as “Adidas” (54 instances), “Dummy” (150 instances), “Guess” (41 instances), and “Demon” (26 instances)
  • 8,703 potential instances where an individual was paid more than $35,000

The Main issues that lead to the failures of the system:

Dated System: The system was simply not built or prepared for the mass amount of claims and applicants that came with the pandemic.

Failure of Early Action and Prevention: Fraud was discussed with Department officials several times during the 2020 financial audit, yet on May 27, 2020 and again on February 10, 2021, the now former Director testified in front of both the Ohio House of Representatives’ Ways and Means Committee and Finance Committee, respectively, that she was aware of the unemployment fraud committed at the recipient level due to the spike in claims filed during the COVID-19 pandemic. This is contradictory to what was stated as part of the 2020 financial audit. However, in our interviews as part of this audit, Department officials indicated the 2020 audit responses were interpreted to only identifying internal/employee-related fraud within ODJFS at the county and state levels, not fraud committed by recipients.

Lack of Controls: The uFACTS system processed approximately $8.1 billion in pandemic unemployment for the Pandemic Unemployment Assistance, Federal Pandemic Unemployment Compensation, and the Lost Wage Supplemental Payment Assistance programs. The Department did not establish procedures to determine whether the service organization had sufficient controls in place and if they were operating effectively.

Relaxing of Verification Requirements: The Department did not send a Request to Employer for Separation Information Form to the employer. At the beginning of the pandemic, when the Governor issued the stay at home order and businesses closed, the Department made a management decision to allow claimants to file using a special COVID-19 designated mass layoff number to expedite the claim filing process. This resulted in the Department processing claims without obtaining the claimant’s unemployment eligibility from the employer.