Audit says fraudsters took $600M in Kansas unemployment, labor department calls number 'flawed'

TOPEKA, Kan. (KSNT) - Fraudsters took double the amount of unemployment payments than the Kansas Department of Labor claimed, according to a new estimate Wednesday from the Kansas Division of Legislative Post Audit. However, KDOL said that the new $600 million estimate is "seriously flawed."

The Kansas Department of Labor originally reported an estimate that it sent out $290 million in fraudulent unemployment payments Tuesday. In a hearing, the LPA committee reported a new estimate $310 million higher than KDOL's, which saw an immediate response from the labor department.

"LPA's estimate of $600 million in potential fraud is seriously flawed, and should be withdrawn."

Kansas Department of Labor

KDOL gave KSNT News an analysis of the LPA's estimate:

• LPA started by taking the total 650,000 unemployment claims filed from March through November, then divided it by the 157,000 fraudulent claims KDOL identified for an estimated fraud rate of 24%.
• Then, LPA used that 24% rate on the total $2.6 billion in unemployment benefits paid to get an estimate of $600 million in fraudulent claims.

KDOL said this math to predict how much fraud the state saw ignores some exceptions:

• KDOL said not all of the 157,000 fraudulent claims saw payouts. The 157,000 claims KDOL reported were ones it flagged as potential fraud, and the agency stopped payments to "a majority of cases."
• KDOL also said LPA applying the 24% rate to the multiple unemployment programs available to Kansans means it ignores the different eligibility requirements for certain Kansans to file.

"Despite these factors, LPA provided estimates of potential state and federal fraud. LPA did not
use the data KDOL provided to develop an estimate rooted in more realistic data. For
example, LPA could have taken the list of claimants with fraudulent codes placed and crossreferenced that with the list of payments made, then provided a margin of error."

Kansas Department of Labor

The labor department also said there were factual errors in the audit, including that employers will not be charged for fraudulent claims, and that KDOL does not raise payroll taxes. Any increase in payroll taxes are a function of the fund balance and by operation of law, according to KDOL.

Watch the full audit hearing that led to the LPA's estimate of $600 million below: