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.