California’s Employment Department labeled ‘high risk’ by state auditor due to $20 billion lost to fraud.

California’s ‌Employment Department Listed as “High-Risk” Agency

California’s employment department, which provides job services and unemployment aid to⁢ thousands of Californians each year, has been listed as a “high-risk” agency, according to a state audit released Aug. 24.

The Employment Development Department ⁢(EDD) made the high-risk list because of its inadequate​ fraud ​prevention and claims services,⁢ and a high rate of overturned eligibility decisions in its unemployment⁤ insurance⁤ program, California⁣ State Auditor Grant Parks found.

“EDD is a ⁢high-risk agency because of its mismanagement ⁤of the [Unemployment Insurance] program,” Mr. Parks wrote in the report. “Specifically, EDD is unable to reliably estimate improper payments under the [Unemployment Insurance] program, thus ‌adversely affecting the State’s financial statements as well as impairing efforts to independently ​evaluate the efficacy of EDD’s‌ own fraud prevention‌ activities.”

The department needs to improve ⁤customer service for residents seeking unemployment insurance and take steps to ensure its ‍eligibility‍ decisions are‍ not frequently ‌overturned on appeal, Mr. Parks added.

Additionally, according to Mr. Parks, the employment ​department’s ‌mismanagement of its unemployment insurance program‍ has resulted in a ⁣“substantial risk⁣ of serious detriment” to the state and its residents.

In the⁣ report,‌ the state auditor also found the ⁢EDD had not ​taken‌ adequate steps ​to prevent improper denials of unemployment benefits, citing that about half of the appeals claimants filed between 2017 and 2022 were ‍overturned in their favor.

Also, the EDD’s customer service during the pandemic resulted in‍ millions of Californians waiting long periods of time‌ to get their benefits or get answers to questions about their‍ claims, and the department continues to struggle to pay​ claims‌ in a ⁤timely manner, the auditor reported.

Between January and‍ May this year, people called the department,⁤ on average,⁣ between⁤ three and eight times a week to try to get help on claims, Mr. Parks said.

The State ‍Auditor’s Office additionally recommended the EDD allow it ⁤to perform a⁣ high-risk⁢ audit of its systems to help identify fraudulent or improper claims ‌and ​develop⁣ recommendations.

The management⁣ of COVID-19 funds ​continues ‌to⁤ present a ⁣significant⁢ risk to California and its residents, according to Mr. Parks.

Only $2 Billion ​Recovered From Fraud

At least 14 state agencies have received pandemic funds since 2020 and the EDD was one of the largest recipients⁤ using a significant portion‌ to provide unemployment benefits.

However, during the COVID-19 pandemic crisis, the EDD reported massive fraud as unemployment⁣ claims ⁢skyrocketed. The⁤ agency estimated it paid out about $20 billion in unemployment ‍to domestic ⁣and international criminals, according to The Associated Press.

So far, only $2 billion in stolen⁢ funds has been recovered, an EDD spokesperson told The‌ Epoch Times in an email.

The ‌state reported funds stolen between March and September 2020 went ⁢to foreign crime ⁣organizations that filed unemployment claims with stolen ⁤identities and used “money mules” in the United States to pick ⁢up the debit cards sent⁣ out by the employment ‍department.

Additionally, hundreds ⁤of millions of‌ dollars​ in unemployment payments went to prison and jail inmates, many of whom weren’t held in⁢ California, according to a law enforcement task force ⁢ led by the state’s district attorneys.

Part of ⁢the ​problem arose because the department’s unemployment⁤ program did not block addresses that ⁤filed high numbers⁤ of ‍claims, and the EDD removed a safeguard⁤ preventing payment to those who had unconfirmed identities, according to the state audit.

The EDD, however, pointed out the department‍ took several actions to combat fraud when identity​ thieves attacked new federal benefit programs nationwide during‌ the pandemic, according to an EDD statement to​ The Epoch Times.

In October 2020, the‍ department implemented new identity verification‌ techniques, including ⁣the use ​of⁤ ID.me, a secure digital online identity network.

“These have all worked well ⁤for us,” the⁤ EDD’s spokesperson said.

The department’s⁣ director, Nancy Farias, additionally pushed back against its high-risk designation, saying the COVID-19 pandemic overwhelmed every state unemployment insurance system in the⁤ country and all were impacted by fraud.

The department‍ has made several significant changes‍ since then, ⁤however, and has implemented⁣ internal fraud prevention measures, stopping nearly $43.5 ⁤billion in fraudulent payments from being made, Ms. Farias wrote in ⁤a​ response letter.

“EDD has accomplished significant‌ advancements in fraud detection and⁤ prevention through transformative policy and program changes, ⁣new tools and technology, ‍and vital public-private partnerships,” ‍Ms.⁤ Farias ⁢wrote⁢ in​ the letter.

State Auditor Mr. Parks responded to the EDD’s statement, saying the department ​still cannot effectively measure the impact of steps it has taken to prevent fraud becau