ODJFS responds to Ohio Auditor report citing unemployment fraud, overpayments

COLUMBUS — Ohio Department of Job and Family Services Response:

ODJFS Director Matt Damschroder said, “I would like to thank State Auditor Keith Faber and his audit team for the thorough work in conducting their audit,” He continued by saying, “The audit confirms the unprecedented surge in claims and accompanying fraud caused by the pandemic, and the recommendations align with the work already underway in addressing the issues we faced.”

“Much work remains, but we are confident in the improvements we have already made and look forward to utilizing the findings in the audit to inform the future work being planned,” said Damschroder. “I’m proud of the hard work, ingenuity, and adaptability of ODJFS employees, contractors, and private-sector partners, who have spent the last 18 months working to meet these unprecedented challenges.”

Original Report:

The Ohio Auditor cited “failure of early action and prevention” as one of five main issues that lead to failures in Ohio’s unemployment system that led to over $475 million in fraudulent and another $3.3 billion in overpayments during the coronavirus pandemic.

The results of a 48-page audit were released by Ohio Auditor Keith Faber Thursday morning.

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“It’s appalling that Ohioans in need were victimized not only by a pandemic that ravaged our economy, but by criminals who took advantage of a system that was outdated, overwhelmed and ill-prepared for the onslaught of unemployment claims caused by COVID,” said Ohio Auditor Keith Faber. “The fact that the Department neglected to acknowledge it’s failures until hundreds of millions of dollars in fraud and overpayments had been made, potentially delaying assistance from eligible and deserving Ohioans is more than disappointing.”

On March 1, Ohio Gov. Mike DeWine announced now-former Director of the Ohio Department of Job and Family Services Kim Henderson would be relocating to North Carolina. Henderson remained in the director role until March 8, when Matt Damschroder took over as the interim director. Henderson stayed with the department as a senior advisor until the end of April.

The auditor’s office said fraud was discussed with its office several times during the 2020 financial audit, yet on May 27, 2020 and again on Feb. 10, 2021, Henderson testified that ”she was aware of the unemployment fraud committed at the recipient level due to the spike in claims filed during the COVID-19 pandemic,” the auditor’s office said.

“This is contradictory to what was stated as part of the 2020 financial audit. However, in our interviews as part of this audit, Department officials indicated the 2020 audit responses were interpreted to only identifying internal/employee-related fraud within ODJFS at the county and state levels, not fraud committed by recipients,” the Ohio Auditor’s Office said in a statement.

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According to the audit, auditors also said changes to the federal requirements and lack of controls led to vulnerabilities in the unemployment system.

The audit found that 26 percent of all unemployment payments for the fiscal year that ended in June were potentially paid as overpayments or to fraud accounts. Prior to 2020, fraud and overpayments were around 3.5 percent of payouts.

The state identified over $3.8 billion in fraud and overpayments through the state’s unemployment system, which equates to over $673 for every Ohioan in the labor force.

As part of the audit, auditors identified other main issues including a dated system that “was simply not built or prepared for the mass amount of claims and applicants that came with the pandemic.”

The audit also pointed out lack of controls and relaxing of verification requirements as other main issues that led to the unemployment problems.

The Auditor’s Office issued 10 recommendations to the Ohio Department of Job and Family Services at the conclusion of the audit including continued efforts to replace the state’s system with “a system more responsive to customer needs, expectations, and reduce maintenance and technology update costs.”

YOU CAN READ THE COMPLETE AUDIT HERE

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