Fraud fight: State hopes $2 million in software leads to $50 million in savings

By NICK MCWHERTER
Capital News Service
LANSING- The Unemployment Insurance Agency (UIA) has recently updated its computer software in a crackdown on individuals who are fraudulently receiving unemployment benefits.
A new law signed by Gov. Rick Snyder in the spring required the UIA to implement new software that can identify claimants that are obtaining benefits fraudulently or by misrepresentation. The new software was put into place Sept. 1.
“The software is an evolving package. It was installed and is operational,” said Steve Arwood, deputy director of the UIA. “It sweeps our mainframe system on a continual basis and picks up any restitution payments owed the Unemployment Insurance Agency for intentional and unintentional misrepresentation.”
Arwood referred to unintentional misrepresentation as a “good faith mistake” that may have occurred in the processing of paper work and should not be classified as fraud. Approximately 325,000 people are currently claiming unemployment in Michigan.
“The system is working to pick up all of these outstanding files across our mainframe. There are approximately 85,000 of these,” Arwood said. “A system as large as the unemployment insurance system, where you have hundreds of millions of dollars in motion at all times, is subject to being abused by some.”
The updated software allows for regulation to be conducted much quicker and many more files can be cross-referenced.
“It cross checks the new hire database with new hire claims,” said Wendy Block, Director of Health Policy and Human Resources at the Michigan Chamber of Commerce. “A computer can go and work on these things at a much faster rate than manually sorting through them.”
The new computer software cost approximately $2 million but is estimated to save $50 million per year, according to Block.
Unemployment insurance benefits are funded entirely by employers across Michigan through a per employee payroll tax. Currently the fund has been diminished extensively, forcing the UIA to borrow money from the federal government. People obtaining fraudulent benefits play a key factor in the $3.1 billion deficit that Michigan owes the government.
“All of this has to be paid back. It is a loan from the fund,” said State Sen. Mike Kowall, R-White Lake. “As a small business person, I remember years ago back in the ‘80’s, when we depleted the fund here in Michigan, there was a surcharge put on all small businesses in order to pay this thing back. It is not by any way, matter or form free money. It is like a revolving fund.”
Dave Jessup, director of government relations at the Small Business Association of Michigan, said the software is needed. “Obviously the people who can’t find work need the unemployment assistance, but you don’t want to get into a situation where people are offered work and they turn it down, and still collect unemployment insurance.” Jessup said.
Jessup said that the unemployment insurance fund that the tax money goes into and benefits are subsequently paid out of has been diminished in order to pay out benefits to all claimants including the fraudulent ones.
“The general public should care because this is a 100 percent employer financed system and it is financed on a per employee basis, which is a payroll tax,” Jessup said. “When talking about creating jobs we need to look for solutions to make it more cost effective for our employers to hire people.”
He also said that the business community, along with the UIA and state legislators, are working to investigate ways to bring the insurance fund debt down.
“Not a handout, but a hand up,” Jessup said. “Hopefully the dollars get to the people that truly need it, and we can help curb payouts to people who are trying to defraud the system.”