(The Center Square) – A lack of internal controls brought on by the pandemic led to unemployment checks being sent to prisoners and deceased people, according to an Arkansas Legislative audit report.
The Arkansas Division of Workforce Services was forced to relax internal controls that may have spotted some of the fraud as large numbers of people, some who had never filed for unemployment benefits before, flooded the system due to layoffs and shutdowns, according to DWS officials.
DWS was also responsible for distributing pandemic unemployment assistance, and sometimes the two systems did not communicate properly, according to the audit.
Nearly $273,000 was paid on behalf of 72 deceased individuals, according to the audit.
An investigation into prisoners illegally collecting unemployment benefits initially questioned nearly $4.8 million paid out to 528 incarcerated individuals. The final total was $96,952 in benefits paid out to 11 people, according to the audit.
In fiscal year 2021, 6,642 claims were identified as likely fraud. Of the $19.9 million, $16.3 million was federal money, and $3.6 million was state funds, according to the audit.
The lack of internal controls stopped during the pandemic created a fertile ground for identifying thieves who were not forced to wait a week before receiving benefits.
“By waiving the waiting week, the claimant could get paid the following week,” DWS said in the audit. “For example, a fraudster could file a claim on Friday, then receive payment on Sunday, removing the typical week that an employer had to respond.”
Some businesses were closed, and they did not respond in a timely manner to let DWS know a claim was fraudulent, DWS said in the audit.
“We have audit findings because of that and we have to go back and try to collect those benefits to, a lot of times, people who don’t even exist because it was fraudulent or they filed on someone else like many of us in this room were victims of that, including myself,” Dr. Charisse Childers, head of DWS, told the Arkansas Legislative Council this week.
Updated numbers on how much was recovered by DWS and what has yet to be collected are not known.
A spokesperson for DWS told The Center Square that updated information was not available “as fraud investigations are ongoing and the Division of Workforce Services is continuing to evaluate and quantify the impact of fraudulent claims.”
Additional staff members were added to the fraud unit, according to the audit.
Many of the problems that led to the fraud are fixed, according to DWS.
“In 2020 the work search requirement was reinstated,” DWS said in the audit. “In 2021, all claimants had to bring into the local office their ID before the claim would be opened for a regular unemployment claim. And the waiting week was reinstated January of 2021, which reinstated the number of days for the employer to respond and for staff to be able to work the notices before payment was issued.”
Unemployment fraud was not limited to Arkansas during the pandemic. The United States Department of Labor’s inspector general estimated about $163 billion in pandemic UI benefits “could have been paid improperly, with a significant portion attributable to fraud.”