Legislative audit pegs Kansas unemployment fraud at $600 million; KDOL says it’s bunk
Kansas Legislative auditors are estimating that fraudulent claims accounted for at least $600 million worth of unemployment payments since the COVID-19 pandemic started last year — twice the rate the state Department of Labor is acknowledging.
“Of the roughly $2.6 billion in state and federal unemployment benefits paid in Kansas in 2020, we estimated about $600 million (24%) could have been fraudulent,” said a report prepared by the Legislative Division of Post Audit and presented to a joint House/Senate committee on Wednesday.
In a response to the audit, the Department of Labor said that estimate is “flawed and should be withdrawn.” The department has acknowledged that widespread fraud did occur, but is estimating it at $290 million.
The audit covers 650,000 claims filed to state and federal programs from March through November. Of those, the Labor Department has identified 157,000 suspicious claims.
Overall, the claims represent $1.6 million in federal funding and $970 million in state funds.
Key members of the joint committee came away dissatisfied with the estimates, for varied reasons.
Rep. Kristey Williams, R-Augusta, chaired the meeting and said she thinks even the high-end estimate is too low.
“We learned that the Department of Labor is not acknowledging the extent of the fraud,” Williams said.
She said there are actually two types of fraud in play: entirely false claims where scammers used stolen identification information to file for benefits they weren’t owed, and “improper claims” where Kansans who were entitled to some benefits lied on their applications to get more money.
“If you add in the improper claims, then you can add another 14% to 15% on top of that (24%),” Williams said. “We know from the U.S. Department of Labor that 10% is what they’re calculating as a standard rate right now for improper claims, so I definitely think it’s higher than what they’re estimating.”
Rep. Tom Burroughs, D-Kansas City, left the hearing saying he was “embarrassed” by the Republicans’ harsh questioning of Deputy Labor Secretary Brett Flachsbarth, which he called a “witch hunt.”
“There are those in the Legislature who are trying to do their best to pin this on the governor when all they need to do is look in the mirror to see who was really the cause behind this problem,” Burroughs said.
He blames the high level of fraud on an outdated unemployment system that was undergoing upgrades that were halted by the Legislature and former Gov. Sam Brownback.
The audit was released amid intense legislative pressure and a fever pitch of frustrations by Kansans struggling to access benefits.
The agency has battled with record number of claims amid the pandemic and a 1970s era computer system which has struggled to handle the load.
Lawmakers are considering legislation to create an oversight committee for the agency and institute several reforms, including limiting the amount of time Kansans can receive benefits.
Sen. Rob Olson, an Olathe Republican, told the Associated Press he wanted to place the agency under the control of the Legislature rather than the governor.
Meanwhile, lawmakers have been bombarded with calls from constituents unable to access their benefits. A Wellington woman, Re’Nae Pherigo, is on the third day of a hunger strike outside the department’s Topeka office.
She’s pledged to drink nothing until she receives her benefits and eat nothing until she gets a sense that the situation is improving for other Kansans.
In a news conference with Acting Secretary Amber Shultz Monday, Kelly said she was doing everything in her power to improve the situation. However, she said, she’d been stymied by the actions of previous legislatures and administrations.
“Over the last decade the Kansas Department of labor has been under funded and under supported,” Kelly said.
Kelly announced Wednesday that she’ll order a separate outside audit by an independent third party to settle the ongoing dispute between lawmakers and her administration.
Republican lawmakers at Wednesday’s meeting pressed Flachsbarth for information on how Kansas stacks up against other states on unemployment fraud, although he said there’s insufficient information available to make a valid comparison.
“It is literally all over the map and many states are not going publicly with numbers,” Flachsbarth said. “I think if you want to amuse yourself, then Google ‘unemployment fraud’ and you will find any number of numbers, metrics, figures and percentages that are currently at play in all the different states.
“Any sort of assertion . . . that Kansas is somehow the only state or an outlier or No. 1 in fraud is categorically false and not supported by any publicly available data.”
Williams bristled at that.
“Deputy secretary, there are numbers in January that rank Kansas as No. 3 in the United States for the most claims filed,” she said. “If you just take that to the proportion (of the) number of working Kansans we have, you know that there’s a major problem.“
“The data will show itself. I guess we don’t have to argue about the anecdotal. It will reveal, the truth will be apparent.”
This story was originally published February 24, 2021 at 4:54 PM with the headline "Legislative audit pegs Kansas unemployment fraud at $600 million; KDOL says it’s bunk."
