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Comptroller: State's Outdated UI System Led to Fraud

An antiquated system for verifying employment status is to blame for New York State losing $11 billion to fraud through the Unemployment Insurance (UI) program in 2020 and 2021, according to an audit report from New York State Comptroller Thomas DiNapoli.

"The state Department of Labor’s (DOL) failure to replace its long-troubled Unemployment Insurance (UI) system and ad hoc workarounds to compensate for the old system weakened oversight and ultimately contributed to an estimated billions of dollars in improper payments during the COVID-19 pandemic," the report stated.

New York State saw an unprecedented amount of UI claims during the COVID pandemic. The audit showed from April 1, 2020, through March 31, 2021, DOL made 218.2 million traditional and temporary UI payments totaling over $76 billion, a 3,140% increase over the amount paid in the prior state fiscal year.

"The system lacked the resources necessary to adjust to new laws or handle workload surges," according to the report.

The comptroller's audit outlined recommendations for the state DOL that include:

  • Continuing the development of the replacement UI system and ensuring its timely implementation.

  • Collecting and analyzing data related to the identity verification process to ensure the correct balance between fraudulent identity detection and a streamlined process for those in need of UI benefits.

  • Follow up on the questionable claims identified by this audit to ensure adjustments have been made so they are paid from the proper funding source and overpayments are recovered, as warranted.

Unless the state uses funds to make the UI system whole from the fraudulent claims, employers will be on the hook for any claims paid with state money. Additionally, a fraudulent claim could impact a business' rating within the UI system and lead to increased future payments.


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