Audit: Illinois unemployment agency made $5.2 billion in 'overpayments' during COVID-19

[July 27, 2023]  By Andrew Hensel | The Center Square

The Center Square) – Illinois lawmakers are calling for accountability into the state's handling of unemployment payments during the COVID-19 pandemic after an audit showed $5.2 billion was overpaid, including tens of millions to some who were incarcerated or deceased.

Unemployment spiked at the beginning of the COVID-19 pandemic in the spring of 2020 after Gov. J.B. Pritzker issued stay-at-home orders impacting the economy in an effort to slow the spread of the virus.

The Illinois Auditor General report published Wednesday shows billions of unemployment tax dollars were improperly paid out by the Illinois Department of Employment Security during that time. The audit looks at IDES from fiscal year 2020 to fiscal year 2022.

"Beginning in March 2020, IDES suspended some routine identity cross-matches performed on all regular UI claims filed because the cross-matches required time to run and constricted the processing system severely," one audit finding said. "These cross-matches were temporarily suspended and/or processed offline. This allowed IDES to better handle the increase in claims processing traffic; however, this left the unemployment programs more susceptible to fraud."

Previous reports from the auditor found at least $2 billion in fraudulent payments, but noted poor record keeping at the agency prevented inspectors from getting the full picture.

Wednesday's report shows the state made $5.2 billion in overpayments and made $46 million worth of payments to some who were incarcerated or deceased.

A statement from IDES to The Center Square puts some of the blame on the Trump administration and their implementation of a "poorly designed and brand new unemployment insurance program" for the state to manage.

"Because the federal program did not require the routine and necessary crossmatching identity controls incorporated within the state's regular unemployment insurance system, the likelihood that overpayments and fraud recovery efforts would be negatively impacted is unsurprising," the statement reads.

The auditor said IDES delayed implementing fraud prevention tools the U.S. Department of Labor suggested.

"IDES chose to not utilize the Integrity Data Hub tools because other IT-related projects were deemed to be of greater urgency during the pandemic," the auditor said. "IDES began utilizing the Integrity Data Hub tools in September 2021."

State Rep. Dan Caulkins, R-Decatur, told The Center Square he was shocked to hear the amount of money the agency lost.

"When I read this report, I am on fire. This is beyond comprehension," Caulkins said. "They ought to sue. They ought to be sued for not performing and honoring their contract. This is criminal."

Additionally, IDES entered into eight contracts during the audit period for services and software related to administering unemployment insurance totaling $226.4 million, according to the audit.

State Sen. Chapin Rose, R-Mahomet, said thousands of Illinoisans could not pay their bills on time or keep their businesses open due to the agency's handling of the funds.

"How do you think somebody who filled out all the forms, and did all the paperwork and never got one red cent from the state of Illinois when they needed it most, how do you think they will feel when they pick up the paper and find out that Pritzker lost billions of dollars," Rose told The Center Square. "Literally, this is not hyperbole; billions of dollars just gone missing."

Caulkins said this massive overpayment of taxpayer funds needs to now be looked at by law enforcement.

"I'd send the Illinois State Police, and I'd want to polygraph everyone that processed a claim," Caulkins said. "I want to know, did they knowingly process fraudulent claims."

The $46 million that was paid out to those incarcerated or dead could also be understated due to reporting issues by the agency.

Caulkins questioned the integrity of the agency.

"They are a corrupt organization. That is the only way I see it," Caulkins said. "I mean, they're sending money to people in prison, and I can't get hairdressers and people who Governor Pritzker shut down their business, and I can't get their claims processed."

State Rep. La Shawn Ford, D-Chicago, said that the state's entire system needs to be addressed.

"This news explains why so many eligible people struggled to receive their benefits to take care of themselves and their families," Ford said. "This audit shows that people took advantage of Illinois' outdated system and caused havoc and despair for so many people by taking taxpayers' money that they didn't earn."

The agency said they would "apply the audit recommendations, particularly those related to enhancing internal controls and oversight to existing processes and programs," to create a "foundation of best practices" for future programs.

Greg Bishop contributed to this report.