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Inmates collect unemployment – Part of growing fraud problem

By   /   September 14, 2011  /   No Comments

By M.D. Kittle | Wisconsin Reporter

MADISON — Serve time, collect an unemployment check.

An audit of the Department of Workforce Development, or DWD, obtained by Wisconsin Reporter found 236 inmates received unemployment checks through August, with the overpayments costing Wisconsin taxpayers more than $325,000.

Prisoners collecting payments is just the tip of the iceberg, however, for an unemployment fraud problem that has ballooned in recent years with the spike in the number of jobless and extended benefits.

Andrea Reid, deputy administrator in DWD’s Unemployment Insurance Division, recently presented her findings to the governor’s Commission on Fraud, Waste and Abuse, a panel of lawmakers and others charged with ferreting out sources of government bloat.

Less than half of the overpayments, on average, to Wisconsin’s jail and prison system inmates involved fraud, Workforce Development spokesman John Dipko told Wisconsin Reporter Wednesday.

In some cases, Dipko said, an inmate’s friend or relative would report an unemployment claim for the prisoner.

While Dipko said the overpayment figures are significant to taxpayers, they represent a fraction of the $3.1 billion in unemployment benefits the division paid in 2010.

“We are continually looking at ways we can build upon (to) make improvements to the system to prevent overpayments in (the) first place, and to recover those as quickly as possible,” Dipko said.

Taxpayers are paying unemployment to county jail inmates permitted to leave lockup on work release programs. Like the unemployed on the outside, some county prisoners available and eligible for work are legally eligible for unemployment benefits, if they are actively seeking employment.

Dipko could not provide data on how many inmates legally collect unemployment.

Off the radar

Staff Sgt. Lance Willson, first-shift supervisor for the Outagamie County Jail, said unemployment insurance fraud hasn’t been an issue at the facility.

The jail’s classification clerk and employees with Volunteer and Offender Services work closely with offenders and the Division of Unemployment Insurance office, the 25-year corrections veteran said.

“If he’s in jail and not working, the benefits are stopped,” Willson said. “Do they catch them all? I’d like to say they do. But I’m not surprised it’s happening.”

The state Legislative Audit Bureau first looked at the issue of inmate unemployment fraud, tracking several cases in May 2010.

Launched in March, the DWD’s inmate data cross-match system monitors inmate information from the Social Security Administration, federal and state prisons, and county jails to determine whether an inmate is attempting to collect benefits while ineligible. An average of 90 to 100 names per month have turned up in the system, Dipko said.

It’s part of a bigger fraud problem that has hit the Unemployment Insurance Division in recent years.

Growing problem

The DWD audit found the amount of fraudulent overpayments has soared from $4.72 million in 2007 to $37.45 million in 2010, according to department figures.

Some $41.4 million more were recorded as overpayment errors.

The report also found:

  • Overpayment cases increased 130 percent between 2008 and 2010;
  • The average overpayment amount rose 61 percent, from $149 to $240.

Wisconsin’s unemployment system posted an improper payment rate of nearly 15 percent.

Improper payments include underpaying and overpaying, as well as not paying eligible claimants.

Unemployment Insurance staff accounted for about 9 percent of the errors, with claimants and employer errors accounting for the remainder, the audit found.

Dipko said the department has made unemployment insurance integrity a priority. The DWD has implemented a series of benefits recovery tools, going after inmate tax refunds and third-party property in a campaign that recovered $20 million last year. He acknowledges it takes years to recoup payments.

The fraud and waste commission is looking at a number of measures to drive the numbers down, and department officials say fraud cases are declining.

But some of the problems, DWD officials say, are the consequence of the sheer volume of unemployment insurance payments.

In 2009 and 2010, the agency paid out more than $3.2 billion and $3.1 billion respectively, up 243 percent from 2007. And average claim duration grew from 13 weeks to 19 weeks over the period.

“What I can tell you is Wisconsin faces challenges in ensuring program integrity like so many other states,” Dipko said.

In January, a new law requires a one-week waiting period for unemployment benefits, allowing the DWD staff additional time to verify the accuracy of claim information, Dipko said. It also is expected to save the system, some $45 million.

Suspect unemployment fraud? Contact the Division of Unemployment Insurance Fraud Unit hotline at 800-909-9472.

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