New York Audit Shows State Lost $11 Billion To Unemployment Benefits Fraud

New York Audit Shows State Lost $11 Billion To Unemployment Benefits Fraud

An audit by the New York State Comptroller Thomas DiNapoli revealed how under former Governor Andrew Cuomo, New York lost approximately $11 billion to fraud. The audit covered the period between April 2020 and March 2022. The majority of the fraud was carried out via people making claims for unemployment benefits during the height of the COVID-19 pandemic, a period in which many people lost their jobs.

The fraud was carried out through claims to the Department of Labor for unemployment benefits. The fraudsters would make false applications while in other instances, applicants would receive more money than they were supposed to. The system, through which applications for benefits were made, was partially blamed for the losses made by the state. There had been previous calls made for the system to be changed and updated to make way for a more modern system. 

“The state Department of Labor’s antiquated UI system was ill-equipped to handle the challenges posed by the extraordinary demand caused by the pandemic for unemployment benefits and more lenient federal eligibility requirements,” DiNapoli said in a statement. “The agency resorted to stop-gap measures to paper over problems, and this proved to be costly to the state, businesses, and New Yorkers.” 

According to DiNapoli, calls for changes to the system have been made since 2010. “Department officials did not heed warnings as far back as 2010 that the UI system was out of date and, consequently, difficult to maintain and that it lacked the agility necessary to adjust to new laws and the scalability to handle workload surges,” DiNapoli’s audit says. 

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DiNapoli suggested that the fraud could be worse because the Department of Labour had not provided all the requested data. “We generally find that in many agencies, the responsiveness and ultimately the transparency is not where it should be,” DiNapoli said on Tuesday, November 16th. He said this while highlighting the fact that while preparing the audit, the Department of Labor had provided delayed responses when the necessary data was requested. 

New York State spent approximately $76.3 billion on unemployment benefits between April 1, 2020, and March 31, 2021. Because of the pandemic, everyone went into lockdown, putting many economic activities to a literal standstill. Claims for unemployment payments increased by 3,140% when compared to the previous year. As claims increased, so did fraud, which increased from 4.51% the previous year to 17.59%. 

The results of the audit have drawn criticism. Justin Wilcox, executive director of Upstate United, has called it a wakeup call for the state’s recently elected officials, including Governor Kathy Hochul. “It’s worth noting that’s a larger sum than the $7.7 billion that New York owes the federal government for covering unemployment insurance claims during the pandemic,” said Wilcox. “This stunning incompetence demands immediate accountability and action,” he added.   

The fraud has had a direct impact on the state’s finances. The federal government had to lend New York $9.3 billion for the state’s unemployment fund. DiNapoli called on the residents of New York to study the audit and hold the elected officials accountable. “It’s public money. Some of it is state. Some of its federal — and we need to be sure that taxpayer money is not being spent inappropriately,” he said.