We often hear “conservatives” advocate for small government as a means of saving money and reducing taxes. However, it doesn’t always work that way.
One recent example of the cost of small government occurred here in Ohio. Keith Faber, the Ohio Auditor of State conducted an audit of the Ohio Department of Jobs and Family Services. That is the department responsible for managing and paying unemployment insurance claims in Ohio. The audit covered the period from March 1, 2020 through February 28, 2021.
The auditor’s report states, “We have performed the procedures enumerated in this report to evaluate the Department’s fraud prevention efforts related to UI for the audit period and provide recommendations to management and those charged with governance in the interest of the public.”
The Executive Summary of the auditor’s report says, “The COVID-19 Pandemic presented the Department with many challenges and obstacles including a sharp increase in the volume of unemployment claims as well as the expansion of regular unemployment benefits by the federal government. The Department did not have the man- power or technology resources to adequately deal with this drastic increase in claim activity and the addition of new federal unemployment funding.” Emphasis mine.
The summary also includes statements regarding a service organization engaged to assist the department with the unprecedented volume generated due to covid-19 related unemployment. The department contracted with a service organization to process the pandemic unemployment
benefits and maintain key functions of the benefit claims process. “The Department did not establish procedures to determine whether the service organization had sufficient controls in place and if they were operating effectively, nor . . . “ Emphasis mine.
To summarize the summary, essentially the department charged with paying unemployment insurance during the covid-19 crisis had failed to invest in technology upgrades and the staffing needed to properly oversee the performance of an outside service organization.
What were the results of these “small government” savings? The audit report provides answers to that question.
“The Department reported approximately $477 million in fraudulent over payments and $3.3 billion in non–fraudulent over payments to the DOL between April 1, 2020 and June 30, 2021.” Emphasis mine.
An increase of the absolute level of over payments and fraud could be expected due to the significant increase in the unemployment insurance claims. The auditors also considered this in their report stating, “There was also a significant increase in both the fraud and non -fraud over payments. Fraud over payment were approximately 1.3% of benefits in the three prior years, but increased to 3.3% in 2021; non-fraud over payments were approximately 2.2% in prior years, rising to 23.1% in state fiscal year (SFY) 2021.”
Additionally, the auditors obtained data files from both the department and the outside service organization. Analysis of the data found, “Significant results included payments made to deceased individuals, and incarcerated individuals, SSNs associated with four or more bank accounts, unique bank account and routing number combinations associated with multiple individuals, and addresses associated with five or more individuals.” Emphasis mine. In other words, situations that one would expect reasonable fraud controls to identify and prevent payment of a claim until at least further review had been performed.
The auditors made 10 recommendations to the department to improve the operations of the Unemployment Insurance. The auditors did not fully assess the cost-benefit relationship of their analysis. However, my gut feeling is that the almost $4 Billion in over payments the “small government” savings resulted in, greatly exceeded the cost that would have been required to upgrade the technology and staffing to avoid those losses.
Why have we in Ohio not heard a hue and cry about this? I suspect that it is because the Republicans in control are loath to admit that their short sighted approach to government imposes significant costs on the citizens. Should you desire, you can read the full audit report here: AUDITOR'S REPORT ON UNEMPLOYMENT INSURANCE FRAUD.
Another example of costs imposed on citizens by Republican governance can be found in Florida where the unemployment insurance claim process is reportedly intended to frustrate applicants to the point where they just give up. Denying benefits to those who are qualified through willful obstruction is one way to keep costs, and the populace down. But I’ll let someone from Florida tell that tale.