Criminals inflicted unprecedented fraud on taxpayer benefits during the pandemic, and some of the most abused programs were those that provided temporary federal unemployment benefits. As we documented in a January 2024 report (Pandemic Unemployment Fraud in Context: Causes, Costs, and Solutions), official government tallies of improper payments and fraud stretch toward $200 billion, while unofficial estimates compiled by private experts range up to an astonishing $400 billion. This for a program that in a typical non-recessionary year pays around $30 billion in benefits to unemployed workers. 

Multiple factors contributed to those astonishing losses:

• The design of federal programs hurriedly created at the start of the pandemic left the door wide open for abuse. One program, called Pandemic Unemployment Assistance, featured extraordinarily ill-advised policies like allowing claimants to self-certify their identity, prior earnings, and even basic eligibility.
• Unprecedented benefit expansions—especially $600-per-week Pandemic Unemployment Compensation supplements initially added to all unemployment checks—created a far richer target for criminals than ever before.
• And outdated and overwhelmed administrative systems proved incapable of keeping up with a massive surge in demand for claims, including from criminals bent on defrauding the system.

Everyone from small-time crooks to criminal organizations based in Russia and China exploited those and other loopholes in what one expert dubbed “the Super Bowl of fraud.”

In our January 2024 report, we detailed some of the legislative and programmatic responses policymakers should pursue, including:

• Requiring identity verification before future benefits are paid;
• Barring self-certification of eligibility for benefits;
• Ensuring benefits do not exceed wages;
• Requiring data matching with lists of incarcerated, deceased, overseas, working, and other ineligible individuals, and to prevent paying claims simultaneously in multiple states;
• Empowering the Department of Labor (DOL) Inspector General to prevent abuse;
• Simplifying the user experience;
• Strengthening the connection between benefits and payroll taxes;
• Addressing concerns about adequacy of administrative funding;
• Providing new fraud-specific funding and incentives to states; and
• Maintaining a proper balance between federal and states roles.

Other responses to pandemic rip offs involve the even more basic plumbing of this system, including the data it collects and how those data are used to evaluate system functioning, efficiency, and readiness for surges in claims—and to prevent future fraud attacks.

In a new follow-on report released today (Measuring What Matters: Context and Recommendations to Improve Reporting on Unemployment Insurance), we review the Unemployment Insurance (UI) system’s current data and performance management practices, including features designed to inform policymakers and the public about deficiencies in system administration.

Our new report finds that today’s program integrity reporting structure is overly focused on established overpayments without equivalent attention to fraud prevention or resilience measures. Although this focus might have been previously warranted, the pandemic fraud experience leaves little doubt that this narrow reporting structure is inadequate for the threats facing state agencies now and going forward.

We argue that DOL should modify its current data reporting requirements to improve transparency and understanding of system performance, particularly around anti-fraud reporting. All UI stakeholders want a resilient and sustainable unemployment insurance system, and that end state is hard to identify without better and clearer data. Lastly, we propose that DOL also develop a detailed scorecard to better understand system performance, rate states on relative anti-fraud preparedness, and improve system performance in the future.

These are the mundane chores of good government. But without attention to such basic building blocks, policymakers can’t know if state UI systems are prepared for future shocks—and whether providing expanding federal assistance will, as lawmakers intend, reach citizens in need or instead be siphoned off by domestic fraudsters and international criminal organizations.