Kansas labor officials speak out after state audit predicts $600M in unemployment fraud

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TOPEKA, Kan. (KSNT) — The Kansas Department of Labor is on the defense about how much money was paid out in fraudulent unemployment claims.

A top leader at the department spoke with Kansas’ Capitol Bureau on Thursday.

The state’s labor department said it’s standing by the claim that state auditors released “flawed” estimates of the amount paid out in fraudulent claims in 2020.

“The number that we provided is based on the claims data that we had in our system,” said KDOL Deputy Secretary Peter Brady. “Throughout this entire experience, the agency has repeatedly said we did not want to provide a fraud number unless we were confident we could do so accurately.”

For months, Kansas lawmakers have pressed the department for an estimate of the amount of money paid out in fraudulent claims.

The labor department released their estimate in a press release Tuesday, reporting about $290 million in fraudulent claims.

However, the Legislative Division of Post Audit, LPA, released Part 1 in a two-part series of their investigation the following day, estimating more than double that amount. State auditors are predicting a total of $600 million paid out last year.

In their press release Tuesday, the state’s labor department listed several issues with the methodology used by the LPA to achieve their estimates, reiterating those issues again on Thursday.

The LPA based their calculation on 157,000 fraudulent claims found within the department. However, KDOL noted not all of these claims were paid out. The department said the 157,000 claims account for those flagged as “potential fraud,” and that the department was able to stop payments for the majority of cases.

The state’s labor department said it’s confident the data it recorded from reviewing 1099 tax forms is accurate. According to the department, state auditors calculated data based on assumptions rather than solid information.

“It’s just a methodology question, and how each of the different numbers came about,” Brady said. “I will say that there’s another phase of the audit. We are continuing to work with LPA. They have our claims data as well, so we will continue to work on that and ensure that we get to the most accurate number.”

Unemployment fraud and identity theft have been a widespread issue nationwide since the coronavirus pandemic began. The department has highlighted the fact that the issue is not unique to Kansas.

The governor said she agrees with the state labor department’s numbers, and emphasized her intent to order an external audit to verify their information, when speaking with Kansas’ Capitol Bureau on Thursday.

“We have our own numbers, which were put together using the numbers and the information we have about the 10-99’s. I’m confident that those numbers are accurate.”

When state labor officials were asked how they verify whether people were unemployed before paying out the claims, they said they aren’t able to comment because of security concerns. However, they do allow employers and victims of identity theft or fraud to report suspicious activity on their fraud reporting website, which they said has been one of their best sources for verification.

The department has turned over 50,000 fake claims to federal investigators.

Brady said Thursday that taking action on this many fraudulent claims will require multiple federal partners to investigate, so they can recover the money that was lost.

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