US unemployment insurance system at ‘high risk’ for waste, fraud: GAO

The U.S. Government Accountability Office (GAO) warned on Tuesday that unemployment insurance systems were at “high risk” for fraud, waste and mismanagement. 

The unemployment insurance system, which is already scheduled to be updated next year, has “critical weaknesses” in terms of how it “carries out its mission and also includes options panelists suggested for transforming the system,” the office said.

The office also said that the recent “unprecedented demand” for unemployment assistance prompted a need for the systems to be enacted quickly, causing “serious challenges for states and a greater risk of improper payments, including those due to fraud.”

“The widespread problems plaguing the Unemployment Insurance system are extremely troubling,” Gene Dodaro, who heads the GAO, said in a statement on Tuesday.

“Not only is the system falling short in meeting the needs of workers and the broader economy, but the potential for huge financial losses could undermine public confidence in the stewardship of government funds,” Dodaro added.

Meanwhile, Sen. Ron Wyden (D-Ore.), who chairs the Senate Finance Committee, told The Washington Post that the GAO report confirms that the unemployment system is “broken.”

“While expanded jobless benefits saved millions of families from financial ruin during the pandemic, the GAO’s reports make clear the unemployment system is broken — both in terms of program administration and benefit policy,” Wyden said. 

“The historic action Congress took — expanding benefits and covering gig and part-time workers — papered over deep problems that need to be addressed before the next economic downturn,” he added. 

The office’s report comes after the Labor Department’s data last week showed that the U.S added 390,000 jobs and the unemployment rate held even at 3.6 percent in May despite high inflation.