States get streamlined access to Treasury’s Do Not Pay system for unemployment

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The move comes as federal agencies have worked with states to combat the rise in jobless aid fraud following the pandemic.

The Departments of Labor and Treasury announced on Thursday that state unemployment agencies will now be able to access Treasury’s Do Not Pay system as they deliver jobless aid benefits. 

The Do Not Pay system is a no-cost service for government agencies to verify claim eligibility before issuing loans, benefits, vendor and grant payments. It’s meant to prevent fraud and improper payments. 

The move comes as Labor continues to work with states, which deliver jobless aid benefits, to respond to the spike in unemployment fraud during the pandemic, when states had to roll out new programs set up by Congress, often using legacy IT, while addressing rising numbers of fraudulent claims alongside waves of legitimate claimants seeking benefits. 

The Government Accountability Office estimated that up to $135 billion was sent out to fraudsters during the pandemic. 

Much of the fraud involved bad actors using identity theft to get benefits, oversight officials say. Other schemes involved filing fraudulent applicants across multiple states. One pandemic-era jobless aid program also initially relied only on self-certification of eligibility.

Now, the new data-sharing partnership will give states access to the Do Not Pay system via the UI Integrity Data Hub, an existing, multi-state data-matching system housed in the National Association of State Workforce Agencies that is meant to help states curb fraud.

States could access the system under a 2020 law that took effect shortly before the pandemic, according to a Labor spokesperson, but the new partnership is meant to streamline access for states and eliminate the need for each to set up a connection with the Treasury system.

Currently, all 53 state unemployment agencies use the Integrity Data Hub, they said.

Right now, the data hub includes the ability for states to get notified when a potentially fraudulent claim is submitted in multiple states, access a bank account verification service and more.

Beefing up the data that states have to tap into is a top anti-fraud priority, Labor says.

“To mitigate fraud risks and reduce improper payments, state unemployment agencies need access to the best controls,” said Assistant Secretary for Employment and Training José Javier Rodríguez in a statement.

Among the challenges the unemployment system faced during the pandemic was the uneven use of data matching systems within the UI Integrity Center’s Data Hub, according to a recent report from the Pandemic Response Accountability Committee. 

Labor can’t compel states to use the databases, according to the report, which notes that, “while states’ use of these various data matching tools increased during the pandemic, not all states are currently using them, according to DOL officials.” Although all the states are signed on to the Integrity Data Hub overall, their use of the various databases within it varies, the Labor Department spokesperson confirmed with Nextgov/FCW.

The Labor Department recently asked Congress to require states to cross-match against systems as designated by the Labor Secretary, currently the Integrity Data Hub, in its 2025 budget request.

Requiring cross-matching against a database about incarcerated individuals is another ask from the department, as some fraud schemes used the names of inmates to file claims, as the New York Times has reported.

For now, officials say that the addition of the Treasury Department system will help. 

“Getting money out the door quickly to support those in need doesn’t have to mean weakening controls and safeguards,” said Treasury’s Fiscal Assistant Secretary David Lebryk in a statement. “States will be better equipped to prevent and detect fraud and improper payments in their UI programs.”