$11 billion in fraud demands change at Labor Department

December 20th, 2022

The following op-ed was originally published in the Albany Times Union on December 20, 2022.

State Comptroller Tom DiNapoli’s recent audit of the Department of Labor’s mismanagement of the Unemployment Insurance system found that at least $11 billion was lost due to fraudulent payments. This massive amount of fraud was aided by the department’s failure to heed prior warnings that it needed to update its information technology systems for processing unemployment claims. Those warnings were made as far back as 2010 and as recently as 2015.

What the comptroller’s audit makes clear is that the massive failures at the Department of Labor could have been avoided.

To fully understand and appreciate the magnitude of the department’s failures, it is important to look at the prior warnings it was provided.

In 2010, in the aftermath of the Great Recession, the National Association of State Workforce Agencies (NASWA), the Center for Employment Security Education and Research, and the Information Technology Support Center surveyed state agencies to determine the status of their Unemployment Insurance information technology systems. The results of the survey indicated that many states relied on outdated systems based on outmoded programming languages and that, as a result, states would face a number of challenges. Those challenges included higher costs, a limited number of workers proficient in older technologies, instability of systems during periods of high use, and technology issues that resulted in inefficiencies and data errors.

In 2015, the New York state comptroller reviewed the security and effectiveness of the Department of Labor’s Unemployment Insurance system and found, like NASWA’s 2010 report, that the agency needed to develop and implement a succession plan. Those recommendations included Assembler and COBOL program language training to ensure continuity of DOL operations and services. As the comptroller stated, “The pool of individuals who are proficient in Assembler and PL/1 is small. To ensure the Department’s mainframe operates without interruption due to this diminishing resource, it is essential that ITS have a succession plan in place to address impending constraints.”

Unfortunately, the Department of Labor ignored the warnings and recommendations of those reports. That inexcusable incompetence has led us to where we are today: $11 billion lost – a conservative estimate from DiNapoli – and zero accountability from the agency.

Unlike the Department of Labor, the comptroller’s office did its job. We are now left with serious questions as to why these failures happened, who will be held accountable, and what state leaders are prepared to do to help impacted employers.

That is why Upstate United called on the Legislature to hold hearings on this matter immediately. The Legislature has the statutory authority to compel the testimony and the production of documents. It can and should demand answers from Labor Commissioner Roberta Reardon and other state employees involved in this scandal.

Overburdened employers have shouldered the burden of the $11 billion in fraudulent claims and are still on the hook for New York’s remaining $7.8 billion Unemployment Insurance debt to Washington. They deserve answers, accountability and action. The Legislature must now fulfill its duty and use its authority to deliver results.

Justin Wilcox of Brighton is the executive director of Upstate United.