Iowa wrongly paid out $129M in jobless aid

The state of Iowa paid out $129 million more last year than it should have in unemployment benefits -- or 64 times the overpayments made in 2017.

According to newly disclosed state data, 89 percent of the overpayments made last year were not the result of unemployment fraud, but of state decisions that were reversed on appeal or innocent mistakes made by Iowans seeking benefits.

The information on overpayments is reported each year by Iowa Workforce Development, the state agency that is responsible for handling most aspects of unemployment insurance. The most recent report is for fiscal 2022, which ended on June 30, 2022.

The department’s annual reports illustrate the full extent of the overpayment issue, with the percentages shown here based on the agency’s raw numbers, not rounded figures:

Total overpayments are up 6,086 percent since 2017: The total amount of unemployment-insurance overpayments was just over $2 million in 2017. In 2022, the total was $129.3 million, which represents an increase of 6,086 percent over the past five years. (In one year alone, the overpayments increased 103 percent, from $63.7 million in 2021 to $129.3 million in 2022.)

Non-fraud cases account for much of the increase: The overpayments due to error – and not attributed to fraud — increased 1,159 perent two years ago, from $4.7 million in 2020 to $59.7 million in 2021. In 2022, these non-fraud overpayments increased again, by 93 percent, to $115.5 million.

Fraud-related overpayments spiked last year: Overpayments resulting from fraud remained relatively flat in 2020 and 2021. Then, in 2022, fraud-related overpayments soared 242 percent from just over $4 million the previous year to $13.8 million.

Iowa’s recovery of money lost to fraud is down: In looking at the last three fiscal years, Iowa paid out a total of $203.6 million in unemployment benefits that it shouldn’t have. The total amount recovered by the state in those three years was only $33.4 million. In fact, Iowa’s recovery of money in cases of fraud actually dropped in 2022, from $4.6 million in each of the previous two years, to $2.7 million.

Department cites ‘Integrity Unit’

As it did in 2021, Iowa Workforce Development declined to make anyone on staff available for an interview about unemployment fraud and overpayments.

However, in its most recent annual report, the department indicated last year’s increase in overpayments was attributable to the agency’s use of “Integrity Unit” personnel to assist with the handling of unemployment claims when the COVID-19 pandemic caused claims for benefits to spike.

In addition, the agency provided a written statement in response to some of the questions raised by the Iowa Capital Dispatch.

In that statement, the department said its overpayments include a wide range of situations in which the agency has paid out unemployment benefits beyond the amount that people are legally entitled to receive.

Some of those overpayments are the result of fraud, such as someone using a stolen identity to file a claim or someone filing for benefits after they’ve landed a new job, the agency said.

But most of the overpayments are described by the agency as “non-fraud” – which, the agency says, are largely the result of payment approvals made by the state that are later reversed on appeal.

The department says some of those non-fraud cases involve individuals who mistakenly claimed benefits for a few weeks after beginning a new job, not realizing they became ineligible as soon as they were hired rather than when they received their first paycheck.

The department said last year’s “substantially larger” overpayments were due to the “continued investigation of pandemic-related claims in 2022.”

Reynolds calls state a ‘national leader’

In addition to tracking the overpayments made each year, the department tracks the collections made as the result of attempts to recover the money.

The agency’s data shows it has been more successful at recovering money paid out to Iowans in error than recovering money paid out to fraud.

Last year, for example, it recovered $2.7 million in fraud cases, which was down significantly from the $4.6 million recovered in fraud cases each of the previous two years.

But in the much larger category of non-fraud cases, Iowa recovered almost $15 million in 2022. That was four to five times the dollar amount collected in each of the previous two years.

The agency did not respond to questions about the challenges the agency has faced with regard to overpayments and collections, and what still needs to be done to minimize such payments and maximize recoveries.

“IWD will not disclose all the techniques and steps we take to detect and prevent fraudulent claims so that we do not make it easier for fraudsters to defeat our processes,” the agency said in its statement.

In 2021, Iowa Workforce Development declined to answer questions from the Capital Dispatch about unemployment overpayments, indicating it was legally obligated to produce only documents in response to public-records requests.

The Capital Dispatch then requested 11 weeks’ worth of emails and text messages from agency Director Beth Townsend, who had spoken publicly on the issue of fraud. The agency eventually stated that all of Townsend’s work-related texts had been deleted from her phone at some point after the request for access was received and said access to Townsend’s emails would cost $3,846.

The Iowa Public Information Board later concluded the department violated the state’s Open Records Law, but then dismissed the Capital Dispatch’s complaint. In doing so, the board cited the agency’s promise to update its policies on record retention.

In its statement this week, the agency said it had won national recognition for working with other states to protect the integrity of the unemployment-claims process.

“Iowa is once again a national leader when it comes to preserving the integrity, efficiency, and cost savings in our critical unemployment system,” Gov. Kim Reynolds said last April when the award was announced.

Townsend said at the time that the integrity of Iowa’s unemployment insurance system “is, and will always be, central to our mission of serving Iowans.”

This article first appeared in the Iowa Capital Dispatch.