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Fraud Prevention and Identification in the Unemployment Compensation Program

Fraud Prevention and Identification in the Unemployment Compensation Program

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Fraud Prevention and Identification in the Unemployment Compensation Program

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  1. Fraud Prevention and Identification in the Unemployment Compensation Program Hal Bergan, Administrator Unemployment Insurance Division Wisconsin Department of Workforce Development Legislative Council Special Committee on Public Assistance Program Integrity October 12, 2010

  2. Reducing Overpayments and Fraud • Wisconsin has had a major focus on these topics for many years. • Our UI program has an excellent record in detecting overpayments and collecting them. • The UI Division has significantly increased its program integrity efforts in response to the impact of the national recession on unemployment payments.

  3. Overpayments and Fraud • An overpayment occurs when a UI claimant receives a payment for which he or she is later determined to be ineligible. • Most overpayments are due to claimant error or misunderstanding. • Some overpayments result from the concealment of pertinent facts concerning eligibility. We define this as fraud.

  4. Overpayments and fraud, cont. • Many overpayments are small and handled routinely by reducing a subsequent benefit payment. • Other overpayments are larger and can be more time consuming to process. • When fraud is suspected, we investigate aggressively.

  5. Setting the context - 2009 • In a normal year the UI program pays out about $850 million in benefits, all of them state reserve fund dollars collected from employers. • In 2009 the program paid out $3.2 billion in benefits from employers and federal sources. The overall system was under tremendous pressure because of the national recession. • When benefits increase, overpayments increase. When overpayments increase, fraud increases.

  6. 2009 Overpayments State and Federal Combined • $33.4 million in non-fraud overpayments – 1.05% of total payments. • $23.9 million in recoveries • $17.7 million in fraud overpayments - .55% of total payments. • $7.1 million in fraud recoveries • One should not compare overpayments and recoveries on an annual basis. Recovery can take many months or years.

  7. Forfeitures • DWD assesses penalties for concealing information to fraudulently obtain benefits. Forfeiture amounts increase for repeat offenders. • Example: A claimant commits fraud and DWD assess a $1000 forfeiture. When the person again files for unemployment, payments are withheld and paid to the Reserve Fund until the $1000 obligation is met.

  8. Forfeiture data for 2009 • Forfeitures charged: $18.4 million • Forfeitures collected: $10.4 million • Important consideration: Some claimants with pending forfeitures do not file for benefits. There are savings, but they are difficult to quantify.

  9. Total amount returned to Reserve Fund in 2009 • Overpayment recoveries: $31 million (collection, offsets and assessments) • Forfeitures: $10.2 Million • Total: $41.2 • These amounts will increase in 2010.

  10. Overpayment Detection • The largest category of overpayments is discrepancies between a claimant’s reported wages and wages reported by the employer. • Our staff also discovers overpayments as they deal with claimants and adjudicate various issues in the course of their work.

  11. More on overpayments • The third largest category of overpayments is employer protests of benefit charges. • The fourth largest category is wage record crossmatch. This involves our staff matching the names of those who received benefits with those who have wages reported on our system.

  12. Crossmatches • We a number of crossmatch processes to identify overpayments and fraud: Wage record crossmatch State new hire crossmatch National new hire crossmatch Vital statistics (deceased claimants) Interstate benefits Inmate crossmatch

  13. Detection and collection • Detecting overpayments is rigorous, time consuming work; the main objective is recovery of overpayments. • Many overpayments are recovered through reducing subsequent UI benefit payments. In other cases, traditional collection methods are needed.

  14. Collection Methods • Interception of state tax refunds and lottery winnings • Court judgments including liens on private property (cars, boats, etc.) • Garnishment of wages • Voluntary wage assignment • Payment plans • Interception of federal tax refunds for fraud overpayments (working with IRS to implement)

  15. Staff additions • The increased volume of claims and overpayments due to the recession has placed strain on our resources. • Early this year we added eight project positions to our crossmatch staff, more than doubling its size and significantly increasing our ability to detect overpayments. • We are currently hiring three permanent staff and six additional project staff and to handle the increased volume of collection work. • We have added 5 fraud investigators to our program integrity section in Madison.

  16. Fraud Consultants • The UI Division has added four LTE consultants to assist us in pursuing fraud. • They are working specifically on prosecutions, organized fraud, corrections related, and worker misclassification. • They are all retired law enforcement personnel and are adding significantly to our capabilities.

  17. New Technology - SIDES • Some overpayments occur because information is incomplete or not timely at the time an initial claim is filed. • Wisconsin led the national effort to develop new technology to improve the timeliness and accuracy of information provided by employers. • SIDES –State Information Data Exchange System