In 2020, under Governor Andrew Cuomo, New York State lost $11 billion to outright fraud and overpayments Comptroller Tom DiNapoli said on Nov. 15 following an audit.
DiNapoli says that fraudsters made off with the money as jobless claims soared during the height of the COVID-19 pandemic.
“There was a good intent to get as much money out the door — but the problem was that it made the system even more susceptible to fraud, particularly with regard to identity theft,” he said.
The fraud was indirectly encouraged by the feds after changes were made to unemployment eligibility rules in March 2020 that allowed people to self-certify their employment info amid record-high applications, the audit concluded.
“For example, the CARES Act allowed claimants under these temporary programs to self-certify their eligibility and wages and required states to make immediate eligibility determinations,” the audit says referring to legislation implemented by then-President Donald Trump as the pandemic raged in New York in March 2020.
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The extent of the fraud remains a mystery after the first year of the pandemic due to the state Labor Department withholding key data substantiating whether it prevented as much fraud as it claimed to the comptroller.
“We generally find that in many agencies, the responsiveness and ultimately the transparency is not where it should be,” DiNapoli said Tuesday, according to the NY Post. DiNapoli said that months-long delays in getting responses from the Department of Labor hindered his progress while preparing the audit.
Between April 1, 2020 and March 31, 2021 the state spent around $76.3 billion on unemployment payments following a spike in claims of 3,140 percent from the year before, the audit revealed.
Jobless claims soared following the implementation of public safety measures which shut down much of the state’s economy, resulting in unemployment fraud increasing to more than 17.59 percent of total applications compared to just 4.51 percent two years prior, the audit found.
In May 2020, Melissa DeRosa, secretary to then-Gov. Cuomo said, “We’re literally building the plane, while we’re trying to fly it” after a range of problems with the state unemployment system were revealed at the time.
The audit argues that the massive fraud was enabled in part by the state’s antiquated unemployment system which was ill-prepared to manage the fallout of the pandemic.
“Department officials did not heed warnings as far back as 2010 that the UI system was out of date and, consequently, difficult to maintain and that it lacked the agility necessary to adjust to new laws and the scalability to handle workload surges,” the audit argued.
The audit’s recommendations include a call for the Department of Labor to significantly increase its efforts to identify fraudsters while improving its IT and financial transparency.
The audit was met with immediate criticism as state leaders, including recently elected Gov. Kathy Hochul, seeks to have the feds shoulder the remaining costs of pandemic unemployment costs driven by lockdowns.
Justin Wilcox, the executive director of the advocacy group Upstate United, said in a statement following the release of the audit, “It’s worth noting that’s a larger sum than the $7.7 billion that New York owes the federal government for covering unemployment insurance claims during the pandemic,” adding that, “This stunning incompetence demands immediate accountability and action.”
DiNapoli recommends that New Yorkers take notice of the audit and its recommendations and push the Governor’s administration to implement much-needed updates to the states unemployment system or risk losing billions more in the future.
“It’s public money. Some of it is state. Some of it’s federal — and we need to be sure that taxpayer money is not being spent inappropriately,” DiNapoli said.
