The state of Illinois wrongfully handed out billions of dollars in unemployment tax money during the COVID-19 pandemic, with tens of millions going to people who were either dead or in prison, according to a recently disclosed audit.
On July 27, the Illinois auditor general released a report detailing $5.2 billion in “overpayments” from the state agency responsible for distributing unemployment benefits between fiscal years 2020 and 2022. This paper is the most comprehensive analysis to date of the widespread fraud and overpayments that took place in Illinois during the pandemic.
During the COVID-19 pandemic, the Illinois Department of Employment Security (IDES) overpaid by around $3.2 billion in federal Pandemic Unemployment Assistance (PUA) and about $2 billion in ordinary unemployment insurance.
The total amount of identity theft is estimated at $2.8 billion, with little hope of recovery because the money cannot be retrieved from the victim. An audit revealed that just $520 million had been recouped out of a total of $5.2 billion.
Due to the nature of the way the funding was dispersed, the state changed some of its requirements, effectively loosening the rules, which allowed for greater opportunity for exploitation.
“Several of IDES' defenses against fraud could not handle the exponential increase in claims,” according to the audit. “Beginning in March 2020, IDES suspended some routine identity cross-matches performed on all regular UI [unemployment insurance] claims filed because the cross-matches required time to run and constricted the processing system severely.
“These cross-matches were temporarily suspended and/or processed offline. This allowed IDES to better handle the increase in claims processing traffic; however, this left the unemployment programs more susceptible to fraud.”
Included in the state’s misdistribution of funds were millions of dollars in ordinary unemployment insurance and the PUA program to persons who were either deceased or in jail paid out by IDES.
Auditors determined that a total of 92,811 payments worth $40.5 million were made to 3,448 inmates, while 10,527 payments worth $6 million were sent to 481 persons who had already passed away.
Elected Officials’ Response
Illinois state Sen. Chapin Rose released a statement about the audit, saying that during the pandemic, it “quickly became clear to myself and countless others on both sides of the aisle in the General Assembly that the taxpayers were being robbed blind by what was happening at IDES.”Mr. Rose also asserted that Illinois Gov. J.B. Pritzker “ignored” warnings and told himself and his colleagues that the situation was under control.
“This audit has made it crystal clear that the administration’s management of the unemployment system during COVID was an unmitigated disaster of historic proportions,” Mr. Rose said.
“More than $5 billion was paid out improperly, and only about a tenth of that was recovered ... It’s clear that the agency failed to follow its own safety protocols, and, according to the audit, is apparently still refusing to follow common-sense guidance from the feds.”
Other COVID-19 Expenditure Questions
The state of Oklahoma also reportedly misspent millions in COVID-19 funds, according to Oklahoma State Auditor and Inspector Cindy Byrd.The audit report uncovered 82 instances of questionable federal costs totaling $29.3 million, referring to expenditures that did not align with grant objectives.
“The Committee on Oversight and Accountability is investigating recent reports of misallocated COVID-19 relief funds intended to help low-income hospitals. Instead of helping hospitals most in need, nearly $17 billion of COVID-19 relief funds went to hospitals with reported profits of more than $53 billion, while $35 billion went to hospitals that reported a loss of almost $130 billion,” the lawmakers wrote.
