The Rundown with Kansas Legislative Division of Post Audit
Evaluating the Kansas Department of Labor’s Response to COVID-19 Unemployment Claims (Part 1) [February 2021]
Chapters
The Rundown with Kansas Legislative Division of Post Audit
Evaluating the Kansas Department of Labor’s Response to COVID-19 Unemployment Claims (Part 1) [February 2021]
Feb 26, 2021
Legislative Post Audit

The Kansas Department of Labor’s fraud detection process was not designed to detect the large-scale, nationwide fraud campaign that occurred during the COVID-19 pandemic.  The Regular Unemployment Insurance program is administered by the Kansas Department of Labor (KDOL) and gives financial aid to unemployed individuals. In 2020, the federal government created six temporary unemployment insurance programs to help individuals who lost their jobs due to COVID-19. There were two main types of unemployment fraud alleged nationally and in Kansas during the pandemic. Nationally, fraudsters targeted the new Pandemic Unemployment Assistance (PUA) program because of weaknesses in its application process. Many of KDOL’s existing processes were manual and not effective to identify PUA fraud. KDOL officials told us they are in the process of upgrading their fraud detection process to better identify PUA and other unemployment fraud. Fraudsters also targeted the state’s Regular Unemployment program beginning in late 2020. The state’s unemployment trust fund balance has declined 75% in one year. Of the roughly $2.6 billion in state and federal unemployment benefits paid in Kansas in 2020, we estimated about $600 million (24%) could have been fraudulent. However, our fraud estimate is subject to some key assumptions and limitations. As far as impacts, if not reported, Kansas employees could owe taxes on benefits they never filed or received because of fraudulent claims. Further, if not appealed, private and public employers could be financially responsible for fraudulent claims filed under the state’s Regular Unemployment program. KDOL has not yet started criminal investigations into the potentially fraudulent claims it identified during the pandemic.