The U.S. Department of Labor has announced its plan to allocate up to $200 million in grants to states to improve their unemployment insurance systems and prevent fraud. These grants are part of a broader investment of $2 billion in American Rescue Plan Act (ARPA) funding, with $1.6 billion expected to be available to states by summer 2023.
The grants will be administered by the department’s Employment and Training Administration and will enable states to enhance tools, services, and investigations related to identity verification for applicants. The funding will also support the development of strategies to address emerging fraud schemes, reduce improper payments, and improve overpayment recovery methods. Furthermore, the grants will help protect individuals affected by unemployment identity fraud.
The COVID-19 pandemic exposed the vulnerabilities of the nation’s unemployment insurance systems, which were overwhelmed by the high number of claims filed. Criminal organizations took advantage of these outdated and underfunded systems to fraudulently obtain pandemic-related assistance meant for unemployed workers.
By June 2023, the Department of Labor anticipates that $1.6 billion in ARPA funds will be available for states. This includes funds for anti-fraud grants and identity fraud prevention, modernizing state IT systems, specialized “Tiger Teams” to assist with fraud prevention, and equity enhancements focusing on payment accuracy and program integrity. These investments aim to address technological gaps, reduce fraudulent activity, minimize erroneous payments, and improve overall claims processing efficiency.
In addition to grant funding, the Department of Labor’s Office of Unemployment Insurance Modernization is leading strategic projects to automate benefits processing, improve the customer experience, develop claims tracking tools, optimize state systems for mobile devices, and simplify forms and web pages. These efforts align with federal Plain Language standards and seek to modernize state unemployment insurance programs, prevent fraud, and ensure equitable access to benefits.
With the funding provided by the American Rescue Plan Act, the Department of Labor aims to modernize systems, enhance fraud prevention measures, and safeguard victims of identity fraud. As further investments are planned, states will have the opportunity to fortify their unemployment insurance infrastructure and provide better support to those in need.
Learn more about how states may apply and use the funds under the most recent grant opportunity.