Washington’s COVID-19 unemployment fraud is likely higher than first thought, a new report says

OLYMPIA – The amount of fraudulent unemployment payments across the state at the start of the COVID-19 pandemic is likely higher than the Employment Security Department originally thought, according to a report from the State Auditor’s Office.

The loss is likely higher than the more than $647 million the department identified last year and could be up to $1.1 billion, according to the audit released Tuesday. The extra amount is in “questionable payments” that were flagged for review but haven’t been investigated.

Washington was among states across the country that faced fraudulent attacks on unemployment claims made at the beginning of the COVID-19 pandemic. While some problems in Washington were caused by new provisions in emergency federal law that made claims more vulnerable to fraud, the Employment Security Department had its own vulnerabilities, according to the audit.

“There are fraud prevention techniques Washington’s program could have used to lessen the impact of these schemes, but the agency’s resources also were overcome by circumstances truly beyond its control,” State Auditor Pat McCarthy said in a statement.

In response to the report, the Employment Security Department said some of the data used in the audit is “flawed.” The “questionable payments” category contains many claims that were already found to be not fraudulent, and therefore should not be considered part of the estimated loss, according to the department.

“While there are aspects of the Accountability Audit that ESD agrees with, there are also deep flaws, numerous pieces of incorrect information and overall, a characterization of the total amount of possible imposter fraud paid in 2020 that is false,” the department wrote in response.

Of the money lost, the department says it has recovered about $370 million.

The report found the department lacked a proactive anti-fraud unit before the pandemic, and some fraud-prevention tools were not working in early 2020.

The report found the department continues to struggle to investigate suspected fraud and answer customer questions.

There was a backlog of 56,000 possible cases awaiting investigation at the end of last year, according to the report.

High volumes of claims have continued to delay the customer response and claim payment, according to one report. The number of customer calls has increased as claims have, “and the agency still struggles to respond to them.”

The average payment time between April and October 2020 was 22 days, but 13% of claims took longer than 49 days, according to the report.

The audit found most of the fraudulent claims could be attributed to “external bad actors.”

However, auditors also found people wrongfully claiming benefits and possible misappropriation by department employees . The Auditor’s Office is currently conducting an investigation into department employees misappropriating funds. A separate report will be issued when it is finished.

The report notes that the department has taken steps to expand its fraud program and address issues with customer service. It did not provide any formal recommendations.