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Audit finds New York lost $11 billion in unemployment fraud in 2020

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New York let fraudsters make off with at least $11 billion in taxpayer cash as jobless claims soared during the height of the COVID-19 pandemic — aided by loosened eligibility rules and an already crumbling state unemployment system, Comptroller Tom DiNapoli charged Tuesday.

The $11 billion was lost in 2020, under then-Gov. Andrew Cuomo, to outright fraud and overpayments, according to DiNapoli’s audit of the mess. But he warned that despite the stunning theft in the the first year of the pandemic and lockdowns, billions more in fraud is likely to be uncovered.

“There was a good intent to get as much money out the door — but the problem was that it made the system even more susceptible to fraud, particularly with regard to identity theft,” the comptroller said.

It hardly helped that the feds made changes to unemployment eligibility rules in March 2020 allowing people to self-certify their employment info amid record-high spikes in applications, according to the scathing audit.

“For example, the CARES Act allowed claimants under these temporary programs to self-certify their eligibility and wages and required states to make immediate eligibility determinations,” the audit says about legislation signed into law by then-President Donald Trump as COVID slammed New York in March 2020.

Relaxed regulations during COVID allowed for increased fraud.
The $11 billion was lost in 2020, under then-Gov. Andrew Cuomo, to outright fraud and overpayments.
Stephen Yang

It remains unclear just how much unemployment fraud and waste cost the state after the first year of the pandemic, especially with the state Labor Department holding out on key data substantiating whether it prevented as much fraud as it claimed to DiNapoli.

“We generally find that in many agencies, the responsiveness and ultimately the transparency is not where it should be,” DiNapoli said Tuesday, while noting months-long delays in getting responses from the Department of Labor while preparing the audit.

The state spent roughly $76.3 billion on unemployment payments between April 1, 2020 and March 31, 2021 after claims skyrocketed by 3,140% from the year before, according to the audit.

Jobless claims spiked after public safety measures shut down much of the economy, and suspected unemployment fraud increased to more than 17.59% of total applications compared to just 4.51% two years earlier, the audit found.

DiNapoli said this is a sign that New York state needs to tighten its regulations.
Thomas DiNapoli said it’s likely billions more in fraud will be uncovered throughout the audit.
William C. Lopez/New York Post

“We’re literally building the plane, while we’re trying to fly it,” Melissa DeRosa, secretary to then-Gov. Andrew Cuomo, claimed to reporters in May 2020 after a range of problems with the state unemployment system.

This surge came after the state Department of Labor dawdled under Cuomo on overhauling an unemployment system ill-prepared for the historically high pandemic caseload considering its reliance on “outmoded” Cold War-era tech.

“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.

Its recommendations include calls for the department to turbocharge its efforts to track down fraudsters while improving its IT and financial transparency.

Claims increased by over 3000% during this period.
The state spent roughly $76.3 billion on unemployment payments between April 1, 2020 and March 31, 2021.
Getty Images

The audit sparked immediate criticism in light of ongoing efforts by state leaders including Gov. Kathy Hochul – who kept Labor Commissioner Roberta Reardon in place after Cuomo resigned in disgrace last year — to have the feds pick up the remaining costs of pandemic unemployment costs driven by public health shutdowns.

“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,” Justin Wilcox, the executive director of the advocacy group Upstate United, said in a statement following the release of the “damning” report.

“This stunning incompetence demands immediate accountability and action,” he added.

Representatives of the Department of Labor and Hochul’s Office did not respond to requests for comment Tuesday about the report.

DiNapoli said New Yorkers ought to take notice of the audit and its recommendations that the Hochul administration push for much-needed updates to the state unemployment system or else risk losing billions more dollars in the future.

“It’s public money. Some of it is state. Some of it’s federal — and we need to be sure that taxpayer money is not being spent inappropriately,” he said.