GAO Designates Unemployment Insurance System as "High Risk"
Washington, D.C. (June 7, 2022) – The U.S. Government Accountability Office (GAO) has added the Unemployment Insurance (UI) system to its list of federal areas at “High Risk” for waste, fraud, abuse, and mismanagement, or in need of broad-based transformation. GAO is adding the system to the list now, in advance of a regular update scheduled for next year, to bring greater attention to the challenges facing UI and to help spur needed changes. GAO’s concerns are outlined in a new report being issued today, which describes critical weaknesses in how UI carries out its mission and also includes options panelists suggested for transforming the system.
“The widespread problems plaguing the Unemployment Insurance system are extremely troubling,” said Gene L. Dodaro, Comptroller General of the United States and the head of the GAO. “Not only is the system falling short in meeting the needs of workers and the broader economy, but the potential for huge financial losses could undermine public confidence in the stewardship of government funds. The Labor Department is considering a number of changes, but GAO is concerned that many long-standing problems may go unaddressed. By adding the Unemployment Insurance system to GAO’s High Risk List now, our hope is that Congress and agency officials will provide sustained leadership to act on our recommendations for turning the situation around.”
The UI system’s persistent difficulties in balancing effective service delivery and mitigating financial loss made it more difficult to successfully launch temporary programs to help unemployed workers during the COVID-19 pandemic. The unprecedented demand for assistance and the need to get the programs up and running quickly resulted in serious challenges for states and a greater risk of improper payments, including those due to fraud.
GAO and others have cited weaknesses in UI administration that have undermined states’ ability to effectively meet the needs of unemployed workers, including during economic downturns such as the one associated with the COVID-19 pandemic. Current program design and variation in how states run UI have contributed to a shrinking portion of unemployed workers receiving benefits and disparities in benefit distribution. During the pandemic, problems with customer service, timely claims processing, and the implementation of new programs became evident. GAO and the Department of Labor (DOL) Office of Inspector General have also noted the need to modernize state IT systems.
Over the years, DOL regularly reported billions of dollars in annual UI improper payments. The problem intensified during the pandemic, with estimated improper payments rising from approximately $8.0 billion in fiscal year 2020 (a 9.2 percent rate) to about $78.1 billion in fiscal year 2021 (an 18.9 percent rate). The total amount of UI improper payments is unknown due to incomplete reporting by DOL and the states, but fraud is a growing problem. The main cause for the increase in fraud during the pandemic was identity theft, according to DOL. From March 2020 through January 2022, hundreds of individuals either pled guilty to defrauding UI programs or had federal charges pending against them.
With the addition of the UI system, 38 programs and activities are currently on GAO’s High Risk List. There were 14 areas on the High Risk List when the program was launched in 1990. Since then, there have been 52 additions, 27 removals, 1 area that was separated out from an existing area, and 2 areas that were consolidated. GAO typically updates the list every two years near the start of each new Congress to help set oversight agendas. Congress and the executive branch have increasingly turned to GAO’s High Risk List for ideas on how to improve government services and save taxpayer dollars.
For more information, please contact Chuck Young, Managing Director of Public Affairs, at youngc1@gao.gov or (202) 512-4800.
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The Government Accountability Office, known as the investigative arm of Congress, is an independent, nonpartisan agency that exists to support Congress in meeting its constitutional responsibilities. GAO also works to improve the performance of the federal government and ensure its accountability to the American people. The agency examines the use of public funds; evaluates federal programs and policies; and provides analyses, recommendations, and other assistance to help Congress make informed oversight, policy, and funding decisions. GAO provides Congress with timely information that is objective, fact-based, nonideological, fair, and balanced. GAO's commitment to good government is reflected in its core values of accountability, integrity, and reliability.