Louisiana sent over $405M in unemployment benefits to people not eligible to receive it

Nearly 100,000 people received $405.3 million in unemployment benefits to which they were not entitled and the numbers are probably much larger, the Louisiana Legislative Auditor’s Office reported Monday.

It’s a finding that the Louisiana Workforce Commission, the agency called LWC that handles benefits for workers laid from their jobs, does not dispute. The commission stated it would continue to seek repayments from those individuals who may have been mistakenly overpaid because of delays in reporting the unemployed person’s salary and work history.

But fraud is at the root of a significant amount of the overpayments, says the agency’s leader.

“The additional $600 in Federal Pandemic Unemployment Compensation (FPUC) added to unemployment benefits through the CARES Act, then the additional $300 of Lost Wage Assistance (LWA) and then FPUC reinstated at $300 with the Continued Assistance Act that was extended with the American Rescue Plan, greatly incentivized countless criminal enterprises and bad actors to take advantage of already overwhelmed state workforce agencies nationwide,” wrote Ava Dejoie, secretary of the Louisiana Workforce Commission, in response to the audit findings. 

“In the last 14 months, the LWC has processed almost one million applications, stopped two large-scale fraud attempts, and reported numerous fraud and identity theft issues to law enforcement, while also processing nine different types of UI (unemployment insurance), each with their own unique rules and requirements,” Dejoie said in a press release.

Since March of last year, the Workforce Commission has paid over $8 billion in unemployment insurance benefits to almost one million people – over $1 billion dollars in since the start of 2021.

The significant increase in the number of applicants due to the COVID-19 pandemic, coupled with legislative action that gave employers additional time to submit their wage reports hampered the commission’s ability to timely verify that the income self-reported by individuals on their applications was accurate, she said.

“We are weeks away from implementing a new identity verification system, which will greatly reduce the strain that these identity theft/scheme frauds have placed on our resources and will help us to shift more attention back to other types of fraud cases,” she added.

The number individuals reported in the auditor’s analysis is underestimated, said Chris Magee, the office’s performance audit data analytics manager. The $405.3 million of improper payments is but a fraction of what it could be.

Auditors identified 97,585 people who received benefits despite being employed for all three months of a quarter. But the unemployment insurance data provided by the Louisiana Workforce Commission to the state auditor ends in mid-August 2020, according to the report. That means it doesn’t include information about a potential surge of suspected fraudulent claims discovered in mid-November.

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Because of the mountain of paperwork created by the pandemic, the Workforce Commission could only provide paperwork for applications until August 15. Claims of fraud began increasing in November.

“The pandemic conditions combined with the sheer influx of applications, up 2,000%, led to that situation, so much paperwork, so many requirements, so much to process led to a backlog,” Magee said, adding that the commission was working to gather later documentation, which would allow auditors to revisit the issue in a future report.

Dozens of residents across the state have shared experiences of getting letters for unemployment benefits and even debit cards sent to their homes addressed to individuals they don’t know for benefits they never requested.

Louisiana Workforce Commission previously asserted that even if individuals got letters or debit cards, it doesn’t mean benefits were improperly distributed and even if so the money can be clawed back.

Payment on more than 30,000 claims filed over a two week period in November were halted for review by the Louisiana Workforce Commission and reviewed for validity.

There were 43,618 new unemployment claims filed for the week ending Nov. 14, compared to only 10,000 one week before. There were another 39,500 new Pandemic Unemployment Assistance claims filed that same week, roughly three times the number of applications one week before.

The number of applicants for unemployment benefits skyrocketed during the COVID-19 pandemic, which led to businesses losing income as result of stay at home and social distancing orders. A total of $6.87 billion in payments were made to 694,391 individuals from March 28, 2020 through December 31. Louisiana’s seasonally adjusted unemployment rate grew from 5.2% in February 2020 to 13.1% in April 2020, and the total number of unemployment claims increased by more than 2,000%, from 16,798 on February 29, 2020, to 366,798 on April 25, 2020. (Dejoie says the unemployment in April 2020 was 12.7%.)

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“Our commitment and tenacity will not cease,” Dejoie said. “We have seen an incredible amount of need during the COVID-19 Pandemic, and our number one priority from the beginning has been making sure that the people who are eligible for benefits receive them. We know that things like unreported PPP wages, vacation and sick time have been consistent issues. That being said, the most important thing for us has been making sure that people have a roof over their heads and food on their tables.”

The U.S. Department of Labor tracks state unemployment office accuracy each year. The improper payment rate before the pandemic began was between 3.6% in Georgia and 30.5% in Michigan, according to U.S. Department of Labor data collected between April 2019 and March 2020. The U.S. average was 8.8% over that 12-month span. Before the pandemic, the improper payment rate during the same time frame for Louisiana was 9.8% or $122.5 million. 

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