Advocacy News – March 29, 2022
The U.S. Department of Labor (DOL) is sending one of its specialized “Tiger Teams” to Michigan and a half dozen states, to help shore up the state’s unemployment insurance (UI) system.
The initiative, which was launched in August, is aimed at uncovering issues with the UI system after an estimated $163 billion in benefits were defrauded from state programs and UI benefits were slow to be processed during the COVID-19 pandemic. DOL’s work focuses on simplifying instructions and system prompts, bettering translation, disability access, addressing bottlenecks and improving data.
Michigan’s Unemployment Insurance Agency (UIA) has been plagued with issues since the start of pandemic. A Deloitte audit and follow-up audit found the UIA paid an estimated $8.4 to $8.51 billion in potentially fraudulent unemployment insurance (UI) claims from March 1, 2020, to Sept. 30, 2021. Of that amount, $2.7 to $2.8 billion was paid to claims involving likely imposter fraud (i.e., claims involving stolen identities) and an estimated $5.6 to $5.7 billion was paid to claims involving likely intentional misrepresentation fraud (e.g., claims involving false statements or documents). Although the bulk of payments were federally funded, it is estimated that 2.9 percent of the fraudulent payments came from the employer-financed UI Trust Fund.
A March of 2022 audit by the Michigan Office of the Auditor General (OAG) found the UIA failed to obtain background checks, confidentiality agreements and other-necessary documentation for temporary workers hired during the COVID pandemic. They also found the UIA did not immediately eliminate access for temporary workers and did not strengthen its oversight of database usage after one temporary worker was charged with committing fraud worth $3.8 million.
The DOL’s Tiger Teams are being funded by a provision in the federal American Rescue Plan Act (ARPA) that provides $2 billion in funding to DOL to prevent and detect fraud, promote equitable access, ensure timely payment of benefits and reduce backlogs. ARPA Fraud Grants totaling $140 million will be awarded to states for fraud prevention measures, including identification verification subscription costs, establishing and expanding data analytics and implementing cybersecurity defense strategies. At this time, it appears Michigan is eligible to receive approximately $5.2 million – but much of that funding has strings attached.
The Michigan Chamber is pleased that Michigan is getting much-needed help and expertise to clean up the UIA and remains hopeful this effort will expedite their ability to address ongoing problem. We are encouraged that Michigan UIA leaders will be able to tap into best practices that will allow it to improve the system and the program.
Overall, though, we will continue to advocate for common-sense solutions to the program, including doubling down on efforts to require and verify work search, detect fraud and overpayments and continue to advocate for a deposit to the 100 percent employer-financed Trust Fund (the fund that pays benefits to the unemployed), so the cost of fraud is not passed onto Michigan employers.
Please contact Wendy Block with questions at firstname.lastname@example.org.