Audit Finds State May Have Paid $100 Million+ In Fraudulent Unemployment Claims

DENVER (CBS4) - The Colorado Department of Labor and Employment may have paid up to $103 million in fraudulent unemployment claims, according to a new state audit. Recently, CDLE confirmed it had paid $30 million in fraudulent claims.

The audit found the department paid $73 million in "likely or potentially" fraudulent claims. It's unclear whether the two figures overlap and by how much. The audit uncovered $5 million in fraudulent payments to people in prison; almost $4 million to deceased people; and more than $100,000 to people not old enough to work.

Daniel Chase, Chief of Staff for CDLE, admits the pandemic overwhelmed the state's unemployment insurance system.

"We received 5 years of claims in the course of a few months."

In 2019, he says, the department paid $380 million in claims. In 2020, it paid nearly $7 billion.

The audit found a rush to get money out the door is to blame, in part, for the increased fraud. An executive order by the governor required payments be processed in 10 days instead of the normal 4-6 weeks and Congress allowed some claimants to receive benefits without providing employment documentation.

"The goal was to get help to real people, and unfortunately criminals took advantage of that  opportunity and made hay," said Rep. Dafna Michaelson Jenet, Chair of the Legislative Audit Committee.

The audit also blamed an antiquated computer system for vulnerabilities. The department had planned to transition to a new system in April of last year, but after the surge in claims, worked on two systems until January of this year.

In addition to problems with claims, the audit found problems with customer service. It found the department received 11 million calls for help in April of last year, but 95% of the callers couldn't get through, and the department didn't document whether most complaints were even resolved.

The complaints it did track showed people waited seven weeks on average for help.

"Not having internal measures or controls on whether you cleared something, whether you addressed a complaint, those are the things that are total mismanagement," said Rep. Colin Larson, a member of the Audit Committee.

As a result of the increased claims, the state Unemployment Insurance Trust Fund went broke. It had $1 billion in 2019. As of October, the state has had to borrow just over $1 billion, and may have to pay back the fraudulent payments.

Chase says, "Know that we are working diligently to get those fixed and will not stop until we're there and we're not there and we know that."