Mississippi sent out $117 million in improper jobless benefits in fiscal year 2020, during the state’s unprecedented unemployment hike brought on by the COVID-19 pandemic, an audit released Tuesday revealed.
The faulty payments, which were only examined up to June 30, represent about 5.5% of the more than $2.1 billion unemployment benefits issued in Mississippi during the year. The prior year, when conditions were more stable and the labor office issued just $59.6 million, 3% of payments were improper.
The uptick in overpayments follows a national trend as states struggled to process and effectively vet the sharp influx in applications, though some other states fell prey to likely much larger schemes. California estimates fraud could represent as much as 27% of payments it issued.
“Nearly every state I’ve talked to around the country lost millions of dollars to fraud out of their unemployment funds. Mississippi was no exception,” State Auditor Shad White said in a press release Tuesday. “The federal government and state governments around the country do not need to repeat those mistakes the next time we have a recession. I hope this audit and those like it in other states are used to fix anti-fraud controls and prevent this kind of massive loss from happening in the future.”
The auditor said the Mississippi Department of Employment Security suspended or bypassed internal controls, as the federal government instructed and permitted, in order to administer the massive amounts of benefits many Mississippians needed to withstand the economic fallout of the pandemic.
The auditor said the state ended up making unemployment payments to people who never actually lost a job, were in jail or were otherwise ineligible for the benefits.
“This is not a commentary on whether or not it was a good or bad idea to push a lot of unemployment benefits out the door,” White said Tuesday. “Clearly during a pandemic and an economic recession, you’re gonna have a lot more people unemployed, so you’re gonna have to push more money out the door. But it is important to be aware of the downside and the tradeoffs that we make when a massive amount of money is spent in this way.”
White’s office was not able to say how much of the faulty payments could be attributed to sheer fraud schemes, such as identify theft, as opposed to individuals fudging the truth on their own applications — two very different scenarios. The auditor said the state’s unemployment office could not distinguish between those types of overpayments.
In order to root out fraud, the traditional unemployment insurance system contains an exhaustive list of questions claimants must answer and a process by which agency employees verify that the information is accurate, such as by contacting employers. But the process can also cause long delays for people with legitimate claims, who desperately need timely assistance to keep afloat after losing their jobs through no fault of their own.
“There is that trade off between safeguards (to prevent fraud) and speed (of processing claims), and I’m not sure we’ve achieved that balance very well,” White told Mississippi Today last year.
An initial federal $600 enhancement to weekly unemployment benefits beginning in April 2020 made the program more attractive than normal to potential applicants. The boost dropped to $300 last summer, and earlier this month Mississippi became one of the first states to drop the additional federal benefits. Ahead of the June 12 end date, about 87,000 Mississippians were collecting the extra federal income on top of the state’s average payout of about $200 per week.
The auditor said additional overpayments made after June 30, 2020, will appear in next year’s audit.
“This is kind of a teaser of what’s to come,” White said on Tuesday.