To help states build systems to prevent and detect future fraud more effectively, the U.S. Department of Labor today announced the availability of up to $200 million in grants funded by the American Rescue Plan Act. This funding availability announcement is part of the broader historic investment of $2 billion in ARPA funding, $1.6 billion of which will have been made available to states by summer 2023.
Administered by the department’s Employment and Training Administration, the grants can be used to improve tools, services and investigations to verify applicants’ identity; evaluate and implement strategies to address emerging trends and new fraud schemes; and reduce improper payments. They may also be used by states to increase overpayment recovery, such as by accepting repayment through various methods including online debit or credit card options, and to protect victims of unemployment identity fraud.
The need to invest in the country’s unemployment insurance systems became dramatically clear during the pandemic as one million unemployed Americans filed initial claims every week for a year. The demand overwhelmed the nation’s 53 different systems, many of which were legacy systems long overdue for maintenance or replacement.
While the nation’s unemployment insurance systems served as a lifeline that provided critical benefits to more than 53 million workers and helped avoid a deeper national economic crisis, the systems were targeted by organized crime rings that quickly exploited vulnerable, chronically underfunded state systems to steal pandemic-related assistance fraudulently from unemployed workers.
This funding availability aligns with the Biden-Harris administration’s commitment to help states modernize their systems, improve fraud prevention and prosecution, and protect victims of identity fraud. It also coincides with recent efforts by the department and other federal agencies to combat unemployment identity fraud. These efforts include a dedicated unemployment identity fraud webpage that includes warning signs of unemployment identity fraud, how to report it, and other resources for workers victimized by it. In addition, the department is leading the effort to offer new and expanded public options to states for claimants to verify their identity using Login.gov, or in person through the U.S. Postal Service.
By June 2023, the department anticipates the availability of $1.6 billion in ARPA funds for states, including:
- $340 million in anti-fraud grants and identity fraud prevention, including $140 million in anti-fraud grants already available to states, and the $200 million investment announced today for strengthening identity verification and fraud prevention.
- $600 million to modernize vulnerable state IT systems, countering decades of underinvestment that led to significant fraud and payment errors. The grants will help states modernize their technology – such as moving to cloud-based infrastructure – that enables improved flexibility and performance, protects against fraud proactively, decreases erroneous payments and makes claims processing more efficient.
- $246 million for “Tiger Teams” to help states identify and employ fraud prevention solutions, claims risk scoring and increasing usage of the multi-state UI Integrity Data Hub operated by the National Association of State Workforce Agencies.
- $249 million in equity enhancements that improve payment accuracy, focusing on ways equity and program integrity can enable applicants to understand program requirements better and provide more accurate information, which will decrease improper payments.
Today’s funding also builds on previous grants awarded by the department, including $525 million funded by the CARES Act to focus on recovering overpayments and preventing and detecting fraud in pandemic-related unemployment programs.
In addition to grant funding, the department is providing direct assistance to modernize states’ unemployment insurance programs and safeguard them against fraud while ensuring equitable access to benefits. Its Office of Unemployment Insurance Modernization is leading and coordinating the department’s efforts to help states with strategic projects to further automate benefits processing; improve customer experience; develop claims status tracking tools; enhance usability of state systems on mobile devices; and simplify forms and web pages to comply with federal Plain Language standards.