In the latest shot across the Employment Security Departments (ESD) bow, the Washington State Auditors office has published a new, damming, investigation into ESDs security and fraud prevention capabilities.

The initial estimate for the unemployment fund losses due to the Nigerian scam last year, are believed to be upwards of $640 million taxpayer dollars. Now it appears that other fraud at the department may add another $500 million to that total.

This new finding by the auditor is unsurprising as ESD even couldn’t even detect fraudulent claims on ESD employees.

ESD would like you to think that the problems are due to COVID-19 claims overwhelming their computer systems. The reality is, however, that the many of problems existed before COVID-19 and have persisted for at least a year prior, despite $44 million dedicated by the legislature to specifically fix ESD’s computer systems.

Relaxation of the fraud review policies by ESD in order to reduce claims backlogs, likely contributed to the ongoing fraud that the agency is unable to detect, or prevent sufficiently. As reported by Shift Washington and the Puget Sound Business Journal, the department has repeatedly changed the claim qualification criteria with little explanation to the public as to the reason why.

At the Washington Policy Center, we recognized these problems with ESD after the initial fraud earlier this year and have published numerous articles describing the changes needed for ESD to provide the services they are required to do in a secure, transparent and timely manner.

Additionally, the Washington Policy Center has released a detailed Policy Brief summarizing the problems with ESD and solutions for those problems. Some of these problems have been addressed by legislative action this year.

ESD officials need to provide the public with more transparency into its internal policies, improve fund balance reporting accuracy, data timeliness and data availability. ESD needs to provide improved authentication and fraud protections against scams and individual fraudulent claims and needs reform to employer taxation policy and trust fund use.

In addition to ESD completing the current audits, regular bicameral legislative oversight of ESD is required.

For all of the Washington Policy Center recommendations, read the full Policy Brief here.