COLUMBUS, Ohio – An antiquated IT system pushed into overdrive when businesses were ordered shut down at the start of the COVID-19 pandemic helped fuel as much as $3.8 billion in unemployment overpayments and $475 million in criminal fraud activity at the Ohio Department of Job and Family Services (ODJFS).
Ohio Auditor Keith Faber on Thursday released the full audit following an investigation launched after the department’s previous management initially failed to disclose risk factors and the magnitude of fraud in the unemployment system as the number of Ohioans filing claims quickly rose to record levels.
“It is appalling that Ohioans in need were victimized not only by a pandemic that ravaged our economy, but by criminals who took advantage of a system that was outdated, overwhelmed and ill-prepared for the onslaught of unemployment claims caused by COVID,” Faber wrote in a news release.
He added, “The fact that the Department neglected to acknowledge its failure until hundreds of millions of dollars in fraud and overpayments had been made, potentially delaying assistance from eligible and deserving Ohioans is more than disappointing.”
The audit found:
- 141,617 potential instances of payments sent to a name reported as deceased a week before the payment;
- 85,944 potential instances of payments sent to a name also listed in an incarceration file; and
- 8,706 instances where abnormal names such as “Adidas” (54 instances); “Dummy” (150 instances); “Guess” (41 instances) and “Demon” (26 instances).
By the numbers, the audit found 26 percent of all unemployment payments for the fiscal year ended June 30, 2021, were potentially paid as overpayments or to fraudulent accounts. Prior to 2020, the unemployment fund experienced fraud and overpayments of 3.5 percent of total payouts.
Benefits paid from the fund soared from under $900 million for each of the three years prior to the pandemic, soaring to $9.4 billion in fiscal 2020 and $14.2 billion in 2021.
In terms of causes, the report cited a lack of internal controls in processing $8.1 billion in pandemic unemployment applications for the Pandemic Unemployment Assistance, Federal Pandemic Unemployment Compensation and the Lost Wage Supplemental Payment Assistance programs.
The audit found the department made a management decision to relax verification of claims from employers as required after Governor Mike DeWine issued a stay-at-home order for non-essential businesses in a bid to expedite claims.
The audit also focused on an outdated IT system not built for the massive number of claims getting processed in the wake of the shutting down of many sectors of the economy.
Indeed, ODJFS’s reaction to the audit showed unemployment spiked from 4.7 percent in February to a peak of 17.4 percent in April ODJFS processed from 7,000 initial claims the week ended March 14 to 471.000 initial claims two weeks later.
In total, ODJFS has paid out $23.8 billion during the pandemic to more than 2.4 million claimants.
Finger pointing, problem solving
Former congressman Jim Renacci, a challenger to DeWine for the GOP gubernatorial nomination in the May 2022 primary, quickly seized on the report’s findings.
“The buck stops with Mike DeWine as billions of taxpayer dollars were mismanaged by inept or corrupt individuals in his administration,” Renacci said in a statement sent to the media. “Even as the alarm bells were sounding, DeWine sat idly by as fraudsters were taking advantage of Ohioans in their most vulnerable moment.”
DeWine’s press secretary did not respond to a request from The Ohio Star about the report or the opportunity to react to Renacci’s comments.
A news release from the ODJFS said the department has already implemented solutions for problems identified in the recent audit.
“We continue to implement new strategies to improve the timing of claims processing and safeguarding federal and state taxpayer money,” said Matt Damschroder, who replaced outgoing director Kim Henderson seven months ago.
“With the help of a public-private sector partnership established by Governor DeWine, we have put a number of enhancements in place related to security and fraud detection,” Damschroder said in the release.
Those efforts include the installation of a “robust suite” of cybersecurity fraud security systems; new fraud investigation tools and claim verification techniques; and ongoing development of new technology to enhance claim processing.
Faber acknowledged those improvements in his department’s news release.
“Fortunately, upon his appointment Director Damschroder demanded transparency and efficiency and pursued the necessary assistance to address the weaknesses in the system,” Faber said, “and pursue the necessary procedures to protect Ohio’s unemployment dollars.”
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