ESD still hasn't fixed their fraud problems

After multiple fraud issues, including internal staff stealing taxpayer dollars, the Employment Security Department (ESD) is again coming under criticism from the State Auditors office for not having sufficient fraud protection measures and controls in place.

A new report, published December 6, 2021, by the State Auditor indicates that ESD’s “internal controls were inadequate to detect and prevent occupational misappropriation and safeguard public resources. We found the Department did not properly monitor and review claims to ensure benefit payments were legitimate and to avoid a loss of public funds.”

Despite being aware of the fraud since the summer, ESD still has not implemented sufficient fraud protection according to the report. The report continues to recommend,

Improve monitoring of employee activity, such as adding a secondary review of claimant benefit decisions and account changes.

Improve the fraud prevention portfolio to identify known or potentially illegitimate claims accurately and promptly, such as for people who are incarcerated or have no wage history.

Improve the identity verification processes to ensure claimants provide sufficient, valid proof of their identities.

Additionally, the Auditor recommends ESD seek recovery of the stolen funds and costs related to recovery, which apparently, as of December 6, has not occurred.

ESD would like you to think that the problems are due to COVID-19 claims overwhelming their computer systems. The reality is, however, that the many of problems existed before COVID-19 and have persisted for at least a year prior, despite $44 million dedicated by the legislature to specifically fix ESD’s computer systems.

Relaxation of the fraud review policies by ESD in order to reduce claims backlogs, likely contributed to the ongoing fraud that the agency is unable to detect or prevent sufficiently. As reported by Shift Washington and the Puget Sound Business Journal, the department has repeatedly changed the claim qualification criteria with little explanation to the public as to the reason why.

At the Washington Policy Center, we recognized these problems with ESD after the initial fraud earlier this year and have published numerous articles describing the changes needed for ESD to provide the services they are required to do in a secure, transparent and timely manner.

The Washington Policy Center has released a detailed Policy Brief summarizing the problems with ESD and solutions for those problems. Many of those recommendations match the Auditors findings in the latest report.

ESD officials need continue to provide the public with more transparency into its internal policies, improve fund balance reporting accuracy, data timeliness and data availability. ESD needs to improve authentication and fraud protections against scams and individual fraudulent claims and needs reform to employer taxation policy and trust fund use.

– Mark Harmsworth is the Director of Small Business Center for Washington Policy Center.