Illinois’ COVID unemployment crisis: $5.2B in overpayments to deceased and imprisoned

An audit released by the Illi­nois audi­tor gen­er­al expos­es a dis­turb­ing mis­man­age­ment of funds at IDES, lead­ing to $5.2 bil­lion in fraud­u­lent or exces­sive unem­ploy­ment pay­ments from fis­cal year 2020 to fis­cal year 2022.

The pan­dem­ic-induced unem­ploy­ment surge left IDES over­whelmed and unpre­pared to address the unprece­dent­ed demand for unem­ploy­ment insur­ance. The report reveals that IDES lacked a con­crete plan to han­dle the reces­sion and poten­tial surges in claims, lead­ing the agency to loosen cer­tain safe­ty mea­sures to accom­mo­date the inflow of appli­ca­tions. Unfor­tu­nate­ly, this opened the flood­gates to increased fraud­u­lent activities.

The fed­er­al gov­ern­men­t’s imple­men­ta­tion of the Pan­dem­ic Unem­ploy­ment Assis­tance (PUA) pro­gram played a sig­nif­i­cant role in exac­er­bat­ing the sit­u­a­tion in Illi­nois. With fed­er­al guid­ance often chang­ing, states, includ­ing Illi­nois, strug­gled to man­age the poor­ly designed and brand-new unem­ploy­ment insur­ance pro­gram. The absence of rou­tine and nec­es­sary cross-match­ing iden­ti­ty con­trols in the fed­er­al pro­gram fur­ther facil­i­tat­ed over­pay­ments and fraud.

Of the $5.2 bil­lion in over­pay­ments, approx­i­mate­ly $2 bil­lion was over­paid for reg­u­lar unem­ploy­ment insur­ance, while an alarm­ing $3.2 bil­lion was dis­bursed for the PUA pro­gram. A stag­ger­ing $2.8 bil­lion of this sum was attrib­uted to iden­ti­ty theft, which remains unre­cov­er­able as the funds can­not be col­lect­ed from the vic­tims of iden­ti­ty theft.

Most shock­ing­ly, the audit revealed that tens of mil­lions of dol­lars were sent to incar­cer­at­ed indi­vid­u­als and even deceased ben­e­fi­cia­ries. This includ­ed 3,448 incar­cer­at­ed indi­vid­u­als who received $40.5 mil­lion in pay­ments and 481 deceased indi­vid­u­als who received $6 mil­lion in pay­ments. The true extent of the fraud may be even greater, as audi­tors are still work­ing to account for all the fraud­u­lent payments.

Law­mak­ers are now call­ing for account­abil­i­ty regard­ing IDES’s han­dling of unem­ploy­ment pay­ments dur­ing the pan­dem­ic. IDES part­ly blamed the Trump admin­is­tra­tion’s imple­men­ta­tion of the PUA pro­gram, which lacked nec­es­sary iden­ti­ty con­trols, exac­er­bat­ing over­pay­ments and fraud recov­ery efforts nation­wide. How­ev­er, audi­tors found that IDES fur­ther delayed imple­ment­ing fraud pre­ven­tion tools rec­om­mend­ed by the U.S. Labor Depart­ment, rais­ing con­cerns about the agen­cy’s actions.

The audit’s find­ings have led to sev­er­al rec­om­men­da­tions to improve IDES’s oper­a­tions. One key rec­om­men­da­tion is to devel­op a com­pre­hen­sive plan that incor­po­rates lessons learned dur­ing the pan­dem­ic to bet­ter pre­pare for future peri­ods of height­ened unem­ploy­ment claims. Such plan­ning is cru­cial to ensure that the agency can respond effec­tive­ly to any poten­tial future eco­nom­ic crises.