Overpayment, identity fraud bite into NC jobless benefits during pandemic

Overall, since the pandemic hit the state last March, Gibson said, the state Division of Employment Security has sent out about $9 billion in benefits. The vast majority of those funds – more than $7 billion – has come from the federal government through seven different programs with varying requirements for eligibility.

That's compared to a total of $160 million in benefits paid out by the state in 2019.

"The number of programs we’re administering," Gibson told the Joint Unemployment Oversight committee, "has gone from one program 317 days ago to now nine programs."

About $45 million in overpayments were through the federal Pandemic Unemployment Compensation program, which allotted an additional $600 per week for jobless claimants.

Gibson also warned that a second federal program, the Pandemic Unemployment Assistance program, is "fraught with fraud." That program was funded through the Federal Emergency Management Agency, not through the traditional unemployment system, so it lacked many of the latter's safeguards against fraud.

The overpayments identified so far amount to less than 1 percent of the total funds, though Gibson and other agency leaders cautioned more will likely be detected in coming weeks.

"You have to understand, paying out benefits and getting them out quickly and timely is 180 degrees contradictory to trying to make sure those benefits are correct and not being fraudulent," he told lawmakers.

The majority of the overpayments, Gibson said, were due to unintentional applicant error, not fraud. However, identity fraud – people filing claims under someone else's name and Social Security number – has rung up a total of $8.8 million thus far.

Antwon Keith, operations director for DES, said the state hasn't traditionally seen much identity fraud in unemployment claims, but it's risen sharply this year. He said officials are working to make sure victims of identity fraud are held harmless by the agency.

Overall, Keith said, North Carolina fared much better than some other states, where he said "50 to 75 percent" of PUA claims were believed to be fraudulent.

"The federal government gave some very loose interpretations" of what claims were eligible for PUA when the program first began, he explained. "It essentially came down to, 'If you see it, then pay them.'"

Several lawmakers expressed support for prosecuting fraudsters, but said they were concerned that constituents were "being persecuted" by DES for recovery after receiving more money than they should have.

Sen. Jim Perry, R-Harnett, asked what percentage of the overpayments were "not due to somebody doing something wrong."

"That weighs on all of our hearts, that, through no fault of theirs, they received that check or those funds deposited, they fed the baby or paid the electric bill," Perry said, "and now there’s another round of despair."

He noted a provision in the latest relief package that gives states permission to waive recovery of overpaid federal funds in cases that don't involve fraud.

Gibson and Keith said they're aware of the new waiver power.

"We look at everything," Keith told Perry. "We do try to take into account the situation that you’re talking about."