by Casey Harper
Years after passing federal COVID-19 relief and potentially losing hundreds of billions of taxpayer dollars, lawmakers are still unsure where that money went, how to get it back, and have apparently done little to prevent it from happening again.
A federal watchdog and other reports estimate that between $200 billion and half a trillion has been lost to waste, fraud and abuse in federal and state programs related to COVID-19.
“Insiders, including those who worked for state workforce agencies, conspired with organized crime factions and others to defraud state UI programs, and states did little to stop them,” said a report by the Republican-led House Oversight Committee released this week. “Some states even hired people convicted of identity theft to process UI applications.”
Examples like this and the scale of the lost funds were the subject of a House hearing this week, where lawmakers from both parties and experts grappled with the scale of the lost funds and what to do about it.
“The estimates of waste, fraud and abuse in COVID-related programs are just … mind-boggling,” Pete Sessions, chairman of the Subcommittee on Government Operations and the Federal Workforce, a Texas Republican, said at the hearing. “Half a trillion dollars. Maybe more. Much of it was lost to criminals and our enemies. Often using comically simple tactics.”
The most common tactic has been theft of unemployment benefits paid by the federal government during the pandemic.
According to a report by the Small Business Administration inspector general, the loss of taxpayer money amounted to at least $200 billion.
“We estimate that the SBA paid out more than $200 billion in potentially fraudulent COVID-19 EIDL loans, targeted EIDL advances, supplemental targeted advances, and PPP loans,” the report says. “This means that at least 17 percent of all COVID-19 EIDL and PPP funds were paid out to potentially fraudulent entities.”
Almost all of the “fraudsters” have so far escaped punishment for theft.
Congress approved $40 million for the Pandemic Response Accountability Committee, which is tasked with detecting and preventing fraud. That committee and other investigative efforts found that COVID-era fraud was rampant and that little was done to recover those funds.
This committee’s powers expire next year.
“Every dollar that goes to a fraudster doesn’t go to small businesses, to the unemployed, to others that Congress intended to help,” Michael Horowitz, chairman of the PRAC, said at an oversight hearing this week. “If we want to continue to fight improper payments and fraud, we should not allow this important anti-fraud tool to lapse.”
Horowitz also said at the hearing that there is “clearly insufficient” access to data for oversight purposes, such as access to the Social Security Administration’s death database to prevent payments from being sent to deceased people. He also pushed to expand his authority to facilitate other agencies.
Orice Williams Brown, chief operating officer at the U.S. Government Accountability Office, also testified at the hearing that federal agencies could do more to prevent this type of fraud. But federal agencies are not the only ones to blame.
The House of Representatives report released this week is called “Widespread Failures and Fraud in Unemployment Assistance Programs During the Pandemic,” and it shows that states mismanaged funds allocated by the federal government for unemployment insurance, sometimes with little oversight.
WITH report:
The U.S. Government Accountability Office (GAO) estimates that between 11 and 15 percent of all benefits paid during the pandemic were fraudulent, totaling between $100 and $135 billion. The Department of Labor (DOL) Office of Inspector General (OIG) estimates that at least $191 billion in UI payments during the pandemic may have been paid inappropriately, with a significant portion attributable to fraud. As of March 2023, states reported recovering just $6.8 billion in inappropriate payments.
The design of the Pandemic Unemployment Assistance (PUA) program led to massive fraud. In the first nine months of the program, claimants were not required to provide any proof of earnings or prior work, making the program vulnerable to fraud. The DOL reported that the PUA program had a total improper payment rate of 35.9 percent.
Both sides have lamented the loss of taxpayer money, but so far little has been done to prevent similar events in the future, even as Congress continues to pass multitrillion-dollar spending bills, often leaving lawmakers little time to consider them.
In 2023, lawmakers passed two bills that aim to raise how federal agencies report fraud and prevent people with prior financial crime convictions from receiving certain federal payments.
The House of Representatives report recommended stronger security measures, conducting checks against other relevant databases, increasing oversight and transparency, and providing more documentation from benefit recipients.
“If that’s not a call to action …” Sessions said at the hearing. “I just don’t know what is.”
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Reporter Casey Harper is in charge of the Washington bureau Central Square.
Photo “US Capitol” by Mark Fischer CC2.0
