Audit finds New York lost $11 billion to unemployment fraud in 2020

New York let scammers get away with at least $11 billion in taxpayer money as jobless claims soared during the height of the COVID-19 pandemic — aided by relaxed eligibility rules and an already crumbling state unemployment system, Comptroller Tom DiNapoli indicted Tuesday .

The $11 billion was lost in 2020 under the government at the time. Andrew Cuomo charged with outright fraud and overpayments, according to DiNapoli’s probe into the mess. But he warned that despite the staggering theft in the first year of the pandemic and the lockdowns, billions more in fraud are likely to be uncovered.

“There was good intention in getting that much money out the door – but the problem was that it made the system even more vulnerable to fraud, particularly in terms of identity theft,” the auditor said.

It didn’t help that federal agencies made changes to unemployment eligibility rules in March 2020 that allowed people to self-certify their employment information despite record-high job application spikes, according to the damning scrutiny.

“For example, the CARES Act allowed applicants under these temporary programs to self-certify their eligibility and wages and required states to make immediate determinations of eligibility,” reads the review of laws passed by the then-President Donald Trump signed when COVID hit New York in March 2020.

Relaxed regulations during COVID allowed for increased fraud.
The $11 billion was lost in 2020 under the government at the time. Andrew Cuomo, on outright fraud and overpayments.
Stephen Yang

It remains unclear just how much unemployment fraud and waste has cost the state after the first year of the pandemic, especially as the state Department of Labor is withholding key data proving whether it prevented as much fraud as it claimed DiNapoli did.

“We generally find that in many agencies, responsiveness and ultimately transparency is not where it should be,” DiNapoli said Tuesday while noting months of delays in receiving responses from the Labor Department during preparation for the exam.

The state spent about $76.3 billion on unemployment benefits between April 1, 2020 and March 31, 2021 after claims soared 3,140% year over year, according to the audit.

Jobless claims rose after public safety measures shut down much of the economy, and suspected jobless claims rose to more than 17.59% of total claims, compared with just 4.51% two years earlier, the audit found.

DiNapoli said it was a sign New York State needed to tighten its regulations.
Thomas DiNapoli said it was likely billions more in fraud would be uncovered during the audit.
William C. Lopez/New York Post

“We’re literally building the airplane as we try to fly it,” said Melissa DeRosa, secretary of the government at the time. Andrew Cuomo, claimed to reporters in May 2020 after a series of troubles with the state’s unemployment system.

That surge came after Cuomo’s State Department of Labor stalled on an overhaul of a unemployment system that was ill-prepared for the historically high pandemic caseload, considering it relies on “outdated” Cold War-era technology.

“As early as 2010, ministry officials ignored warnings that the UI system
was outdated, difficult to maintain and lacked agility
necessary to adapt to new laws and the scalability to handle spikes in workloads,” DiNapoli’s audit reads.

The recommendations include calls for the department to accelerate its efforts to prosecute fraudsters while improving its IT and financial transparency.

Claims increased by over 3000% during this period.
The state spent approximately $76.3 billion on unemployment benefits between April 1, 2020 and March 31, 2021.
Getty Images

The scrutiny prompted immediate criticism amid continued efforts by state leaders, including Gov. Kathy Hochul, who retained Labor Commissioner Roberta Reardon after Cuomo’s shamed resignation last year, to get the Feds to pay the remaining costs of those caused by the pandemic Unemployment costs to absorb public health closures.

“It’s worth noting that this is a larger sum than the $7.7 billion New York owes the federal government to cover for unemployment insurance claims during the pandemic,” said Justin Wilcox, the executive director of advocacy group Upstate United, in one Statement after publication of the “damn” report.

“This staggering incompetence requires immediate accountability and action,” he added.

Officials from the Department of Labor and the Hochul bureau on Tuesday did not respond to requests for comment on the report.

DiNapoli said New Yorkers should take note of the audit and its recommendations that the Hochul administration is pushing for much-needed updates to the state’s unemployment system or risk losing billions more dollars in the future.

“It’s public money. Part of it is state. Some of that is federal — and we need to be sure taxpayers’ money isn’t being improperly spent,” he said. Audit finds New York lost $11 billion to unemployment fraud in 2020


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