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Evaluating the Kansas Department of Labor’s Response to COVID-19 Unemployment Claims (Part 2) [August 2021]

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Rapid program changes, historically high unemployment claims, and an ill-equipped computer processing system created delays in claims processing during the pandemic in Kansas. The Kansas Department of Labor (KDOL) administers the regular unemployment insurance program and gives financial aid to unemployed individuals. In 2020, the federal government created several temporary unemployment insurance programs to help individuals who lost their jobs due to COVID-19. Kansas and other states across the U.S. experienced claims processing delays during the pandemic.  KDOL relied on an outdated, piecemeal, and poorly maintained unemployment computer system during the pandemic.   Frequent changes to the state’s unemployment computer system during the pandemic created system errors and processing delays. During the pandemic, a surge in valid and fraudulent claims strained the state’s outdated and piecemeal unemployment system, leading to system failures and claim delays. Prior to the pandemic, KDOL had few staff to answer calls because of low unemployment rates and federal funding structures.   Despite additional staff, the number of calls answered did not improve significantly during the pandemic, potentially leading to additional claims delays.   States with modern unemployment computer systems appeared better equipped to handle the challenges of the pandemic. KDOL is in the process of modernizing its unemployment computer system. In January 2021 we released a preliminary fraud estimate with the intent of releasing an updated estimate in this report. For this audit, we used an advanced computer model to create a more precise estimate of unemployment fraud in Kansas.  We estimate about $700 million in potentially fraudulent payments were made in Kansas during the pandemic.   Of the estimated $700 million in fraudulent benefit payments, about half ($343 million) came from federal funds and half ($344 million) from state funds.  We estimate about $2 billion in potentially fraudulent payments were prevented in Kansas during the pandemic.  KDOL officials reported working with federal organizations and banks to identify and recover fraudulent payments.