California’s effort to fight unemployment fraud hurt many deserving recipients, report finds
California’s efforts to prevent unemployment insurance fraud have at times proven overly aggressive, resulting in thousands of people who could not get legitimate payments as they waited to have their identities verified, a new Legislative Analyst’s Office report says.
Since the potential exists for more such delays in the future, EDD needs to scale back its anti-fraud efforts, the nonpartisan office found.
The analysis took a deep look at EDD’s anti-fraud efforts during the COVID-19 pandemic.
An estimated $20 billion has been lost to fraudulent claims, according to EDD estimates. But all but $1.3 billion of that total involved claims from federally-funded programs that ended last year.
The rest came from the state’s regular unemployment insurance program, where potential claimants have been scrutinized far more rigorously than those who applied to the federal program.
“Given that relatively little fraud seems to have targeted the state’s regular UI program, new, additional layers of fraud prevention are not needed,” the office said in the report sent to the state Legislature this week. The budget subcommittee on administration plans a hearing Tuesday.
Because of the changes, the analyst said, moving ahead with additional fraud protection measures could very well make it more difficult for legitimate claimants to get their benefits in a timely manner.
EDD’s anti-fraud effort
EDD used Pondera, an investigation consulting firm owned by Thomson Reuters, to review about 10 million claims paid since the COVID-19 pandemic triggered an economic collapse in March 2020.
EDD and Pondera cited 1.1 million claims as suspicious, and about 600,000 proved to be legitimate. EDD had stopped payment of all the reviewed claims without telling the beneficiaries ahead of time.
The analyst’s office this week recommended the Legislature reject what it called “pandemic era anti-fraud contracts with Thomson Reuters” for such reviews.
It said “the state’s use of these programs adversely impacted the experience of several hundred thousand unemployed workers with legitimate claims,” adding that such security is “not likely to be useful now that automated identity verification is in place.”
Assemblyman Jim Patterson, R-Fresno, who has been active in seeking change at EDD, was not surprised at the findings.
“The EDD is more concerned with protecting itself. The result is they’ve treated hundred of thousands of Californians like they’re fraudulent with no proof to back it up.,” he said. “As a result, my office has been flooded with calls from people who are disabled and desperate.”
Dave Moran, a Thomson Reuters spokesman, said that EDD has asked the firm to review millions of claims.
“Of these claims, we identify a percentage of which require further investigation from EDD. But this process enables the vast majority of claimants to receive the support they need in a fast efficient manner,” he said.
Moran described the efforts as having two benefits.
“They enable those in need to get the support they deserve in a timely manner,” he said, because the system allows EDD to process thousands of claims in a very short period of time with a high degree of confidence.
He said the system also helps identify claims that need further investigation, such as those from someone who is incarcerated.
“To suggest that criminal fraud has stopped because the pandemic is waning is wishful. We are proud of the work we do with EDD to protect the integrity of their system and ensure that taxpayer dollars are going to those in need versus criminals,” Moran said.
Thomson Reuters is continuing to provide EDD with data on the suspected criminals to assist with different investigations and prosecutorial efforts.
EDD officials declined to comment on the analyst’s report.
Unemployment payments
The analyst said that even the $1.3 billion fraud estimate “likely is overstated.”
Here’s why, it explained: EDD counts a claim to the state program as fraudulent if someone does not confirm their identity after the agency sought more documentation or verification.
“Yet there are several reasons why workers with legitimate claims may not have followed up with EDD,” the analysis said.
Many people simply no longer qualified for benefits, so they saw no reason to confirm their identity.
“Other claimants may have given up in frustration after trying unsuccessfully to send requested documentation to EDD,” it said.
The analyst cited the recommendation of Gov. Gavin Newsom’s 2021 strike team, which made recommendations aimed at making EDD more efficient.
The team said fraud prevention “must be supported by data and evidence.” Any new or even existing anti-fraud measures should “include an analysis not only of their effectiveness, but also tradeoffs and unintended consequences of these practices, including adverse impact on the experience of all claimants.”
After that report was issued, EDD began using ID.me, a system where people provide a video or photo of themselves to verify their identity. ID.me was effective in helping reduce fraud in the federal program, the analysis said.
This story was originally published February 18, 2022 at 5:00 AM.
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