State audit finds Colorado improperly paid up to $73 million in unemployment benefits, including to dead people

Colorado paid out up to $73 million in fraudulent unemployment benefits during the first year of the pandemic, and also failed to resolve the vast majority of customer complaints related to unemployment insurance fraud, a state audit found.

The Office of the State Auditor reported improper payments included $3.9 million to dead people, $5 million to incarcerated people who aren’t eligible to work and $102,000 to people under the age of 18.

Auditors wrote that unemployment fraud not only wastes taxpayer money, but that Colorado could also be forced to pay back the federal government for improper payments. And, the audit noted, these newly reported figures may paint an incomplete picture of the problem.

“(I)t might take years before (the state) has final statewide and nationwide totals for fraudulent payments,” the audit stated.

The report comes as unemployment claims have skyrocketed here and across the country since the coronavirus was first detected in March 2020. In a state of about 6 million people, some 852,000 Coloradans received unemployment payments totaling $6.9 billion last year, the state reports. And in 2021, through October, 577,000 Coloradans had received those payments, totaling $4.6 billion.

That has put significant strain on a system not at all used to such volume. One week’s worth of unemployment claims in April 2020, when unemployment reached 12% in the state, exceeded total claims in all of 2019.

On Monday the state legislature’s Audit Committee met to hear the findings of the new report, but opted to hold discussion in a confidential session closed off to the media and general public.

Colorado is not alone in reporting massive unemployment benefits fraud. Its $73 million problem is small compared to some other states’ reported fraudulent payments: $4.4 billion in Arizona, more than $600 million in Washington, $462 million in Ohio and $380 million in Kansas, according to the auditor’s report. California, with more than seven times the population of Colorado, this fall reported at least $20 billion in unemployment fraud.

Because of so much fraud, the Department of Labor and Employment placed holds on hundreds of thousands of unemployment insurance claims in order to investigate validity. In 266,000 instances in which someone whose claim was placed on hold request assistance, only 70,000 were ever resolved, the auditor reported. Among that subset, it took the department an average of seven weeks to reach resolution, though the auditor notes that wait times ranged as high as 333 days.

Fraud must be stopped, but efforts there should not force legitimate claimants to wait so long for relief, said Jenny Page, a state auditor who worked on the report.

“It’s important to protect taxpayer resources by having measures in place to prevent and detect fraudulent claims,” she said. “But it’s also important to have effective processes in place to assist those individuals whose legitimate claims may have been put on hold as a result of these same fraud prevention and detection measures.”

The audit recommended better quality control on complaints, stating, “As a state agency that serves the public, it is reasonable to expect that the Department would have complaint management processes that include consistent methods to track, investigate, and resolve complaints in a manner that ensures they do not reoccur.”

In a response to the audit, the Department of Labor and Employment accepted that recommendation and claimed that by March 2022 it plans to have a new system in effect “for tracking, investigating, and resolving all complaints timely (sic) and maintaining data about the resolutions.”

The department also said it is taking other steps to better track and analyze customer complaints.

This is a developing story and it will be updated.

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