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Labor Department makes millions in grants available to states for unemployment insurance reform


The U.S. Department of Labor this week announced a series of actions to modernize and reform the unemployment insurance system. The American Rescue Plan Act provided $2 billion in funding that will be available to states as part of three major grant programs that seek to prevent and detect fraud, promote equitable access, ensure timely payment of benefits and reduce backlogs.

“The pandemic underscored the need for modernization of the 53 different systems that administer unemployment insurance benefits in the United States, and it exposed significant vulnerabilities in state technology to criminals looking for an opportunity,” U.S. Secretary of Labor Marty Walsh said in a press release. “The Biden-Harris administration and Congress provided the means to reform this critical safety net for future crises, and our department is committed to executing that mission in a way that leaves no community behind.”

Administered by the department’s Employment and Training Administration, ARPA Fraud Grants totaling $140 million will be awarded to states for fraud prevention measures, including identification verification subscription costs, establishing and expanding data analytics, and implementing cybersecurity defense strategies.

Another $260 million in Equity Grants will be awarded to improve claimant outreach and customer service processes, implement strategies to reduce backlog and improve access for lower-income claimants. These first-of-their-kind grants will provide funding for states to improve public awareness and service delivery as the department seeks to address potential racial and ethnic disparities in the administration and delivery of UI benefits in some states.

The department will also allocate $100 million in previously unobligated CARES Act funds to combat fraud and implement cybersecurity measures in the Pandemic Unemployment Assistance and Pandemic Emergency Unemployment Compensation programs beyond the expiration of benefits.

Jesse Dougherty, public information officer for Iowa Workforce Development, said in an emailed statement: “Iowa Workforce Development will be reviewing these funding opportunities by the U.S. Department of Labor to see if they would be a good fit with projects we currently are considering. Modernization of unemployment insurance remains a major priority for IWD, and we continually are working to improve our effectiveness at serving Iowans and fighting fraud.”

In May, an Iowa Workforce Development official said that the agency had fielded at least 37,000 fraudulent claims for unemployment benefits since the COVID-19 pandemic began, as reported by the Iowa Capital Dispatch.

A separate article by the Des Moines Register in May reported that Iowa has paid out approximately $30 million in fraudulent claims during the pandemic. Much of the fraud nationwide has involved organized crime rings that have targeted state workforce agencies with fraudulent claims since the start of the pandemic, according to the U.S. Department of Labor’s Office of Inspector General.

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