Hearing on Ending Cash for Convicts and Other Ways to Improve the Integrity of the UI Program
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Hearing on Ending Cash for Convicts and Other Ways to Improve the Integrity of the UI Program _____________________________________
HEARING BEFORE THE SUBCOMMITTEE ON HUMAN RESOURCES OF THE COMMITTEE ON WAYS AND MEANS U.S. HOUSE OF REPRESENTATIVES ONE HUNDRED THIRTEENTH CONGRESS FIRST SESSION September 11, 2013 SERIAL 113-HR08 Printed for the use of the Committee on Ways and Means |
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COMMITTEE ON WAYS AND MEANS |
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SAM JOHNSON, Texas |
SANDER M. LEVIN, Michigan CHARLES B. RANGEL, New York JIM MCDERMOTT, Washington JOHN LEWIS, Georgia RICHARD E. NEAL, Massachusetts XAVIER BECERRA, California LLOYD DOGGETT, Texas MIKE THOMPSON, California JOHN B. LARSON, Connecticut EARL BLUMENAUER, Oregon RON KIND, Wisconsin BILL PASCRELL, JR., New Jersey JOSEPH CROWLEY, New York ALLYSON SCHWARTZ, Pennsylvania DANNY DAVIS, Illinois LINDA SÁNCHEZ, California |
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JENNIFER M. SAFAVIAN, Staff Director and General Counsel
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SUBCOMMITTEE ON HUMAN RESOURCES |
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TODD YOUNG, Indiana |
LLOYD DOGGETT, Texas JOHN LEWIS, Georgia JOSEPH CROWLEY, New York DANNY DAVIS, Illinois |
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CONTENTS
_____________________
Advisory of September 11, 2013 announcing the hearing
WITNESSES
Julia Hearthway
Secretary of Labor and Industry, Pennsylvania
Testimony
Scott Sanders
Commissioner, Department of Workforce Development, Indiana
Testimony
Doug Holmes
President, UWC – Strategic Services on Unemployment & Workers’ Compensation
Testimony
Valerie Melvin
Director, Information Management and Technology Resources Issues, Government Accountability Office (GAO)
Testimony
Sharon Dietrich
Managing Attorney, Community Legal Services
Testimony
Hearing on Ending Cash for Convicts and Other Ways to Improve the Integrity of the UI Program
U.S. House of Representatives,
Committee on Ways and Means,
Washington, D.C.
The subcommittee met, pursuant to notice, at 1:16 p.m.
in Room 1100 Longworth House Office Building, Hon. Dave
Reichert [chairman of the subcommittee] presiding.
[The advisory of the hearing follows:]
__________________________________________________________________
*Mr. Young. [Presiding] I call today’s hearing to order.
I am honored to stand in for Chairman Reichert in today’s
hearing. He has been called away to a briefing on Syria.
And I expect he is going to join us shortly.
But before I begin, I would ask that we take a moment to
remember a long-time Ways and Means Committee colleague, and
former chairman of this very subcommittee, Clay Shaw, who
passed away last night.
Clay’s legacy as a husband and father lives on through
his wife of 53 years, Emily, and his four children and 15
grandchildren. They are in our thoughts and prayers. Clay’s
legacy as a legislator is highlighted by the 1996 welfare
reform law, which he authored and shepherded through this
committee, the House, and ultimately, into law. This
landmark law helped, literally, millions of his fellow
citizens lead more fulfilling lives. Every time we work to
improve that legislation, we are advancing Clay’s vision for
a better America for all of its citizens.
We are privileged to carry on that legacy in this
institution on this committee and on this subcommittee, all
of which Clay loved and honored through his many years of
dedicated service.
I would like to yield to our ranking member,
Mr. Doggett, for further remarks related to the passing.
*Mr. Doggett. Well, thank you so much. I just want to ,
join in honoring Clay and his service, and extending our
condolences to his family. I had the good fortune to have
Clay as a Washington neighbor over here on D Street, a couple
blocks away. A good neighbor, a strong member of this
committee who cared deeply about the issues that we are
discussing here, and served honorably. And whenever we
disagreed, we could always agree in a spirit of congeniality
and collegiality. And it is a loss, and we join you in
asking for a brief moment of silence in his honor.
*Mr. Young. Why don’t we go ahead and, on his behalf,
have that moment of silence.
[A moment of silence is observed.]
*Mr. Young. Thank you. Today, of course, we also mark
the twelfth anniversary of 9/11. We remember the victims of
that tragic day and their families. We also remember those
who, in the years since, have sacrificed so much to protect
our country and our people. Please join me for another
moment of silence on this count, as well.
[A moment of silence is observed.]
*Mr. Young. Thank you. Today’s hearing is on ending
benefits for incarcerated individuals, and other ways to
improve the integrity of the unemployment insurance program.
I would like to begin by asking unanimous consent that
Chairman Reichert’s statement be submitted into the record.
*Mr. Young. Chairman Reichert, as a former sheriff, was
shocked to read headlines about individuals in jails
collecting unemployment benefits, what you might call Cash
for Cons. In New Jersey, there were 20,000 inmates who
collected over $24 million. In Illinois, another $2 million
was misspent this very same way. Millions more were wasted
in South Carolina, Tennessee, Texas, and Wisconsin. It is an
injustice that the tax dollars of law-abiding citizens are
paying for these benefit checks for people who have broken
the law, and simply should not qualify for these benefits.
That is why Chairman Reichert introduced H.R. 2826, the
Permanently Ending Receipts for Prisoners Act, also known as
the PERP Act. This bill does two things. First, it makes
clear that inmates are not allowed to collect UI benefits, in
case there is any doubt. Second, it instructs states to use
currently available prison data to ensure they are not paying
benefit checks to inmates.
I am one of several Members who have already cosponsored
this legislation, and I know Chairman Reichert would welcome
the support of anyone who agrees we should address this
issue.
This is only one aspect, one small aspect, of UI
improper payments, though. It reflects an obvious area where
we can and should make progress. We look forward to
receiving valuable feedback on this bill from our panel
today.
Today’s hearing is about a lot more than ending Cash for
Cons, though. We also want to identify other ways we can
improve the integrity of the overall UI program, so it can be
there for those who are deserving of help. That is a
billion-dollar question. Or, actually, a $58 billion
question. That is the total amount of the UI improper
payments over the last five years. That $58 billion in
improper payments is more than the total amount of state and
federal taxes collected last year to support all the
unemployment benefits paid across the country. That is a
huge number, and one that deserves serious attention.
Some of the problem involves fundamental mistakes, like
paying UI checks to prison inmates, because UI places so much
emphasis on getting checks out the door before verifying they
are going to the right person. Data systems exist that can
prevent these sorts of improper payments from being made in
the first place.
For example, involving prison inmates, deceased people,
people who have already returned to work, and even people
illegally applying from overseas.
Another part of the problem involves states trying to
recover improper UI payments after they occur. This
pay-and-chase approach is costly, time consuming, wasteful,
and there are other challenges associated with it since,
according to a recent report, only about half of annual
improper payments are expected to be recovered.
So, the far-better approach is to prevent improper
payments before they go out the door, and ensure we have
systems in place to do just that.
There are many reasons to prevent improper payments,
starting with how they are paid for. State UI benefits are
supported directly by payroll taxes on jobs, which already
have risen over 60 percent in the last 5 years, due to the
recent recession. In many states, UI payroll taxes are
expected to continue to rise into the future. These rising
taxes fall directly on jobs, further reducing new job
creation and hiring. That makes it especially important to
prevent improper payments wherever possible, and recover as
much of those that are made.
Joining us today to discuss all of these issues is a
seasoned panel of experts representing the views of various
states, including my home state of Indiana. Also businesses
and program experts. I look forward to hearing from our
witnesses today about how we can improve the integrity of the
UI program so it is there to serve those who need it to get
back on their feet.
Mr. Doggett, would you care to make an opening
statement?
*Mr. Doggett. Thank you very much. Unemployment
insurance provides critical assistance to workers who have
lost their jobs through no fault of their own, and are
actively looking for work. I don’t know how someone who is
involved in long-term incarceration can be actively looking
for work. And to the extent that there are individuals who
are incarcerated that are wrongfully receiving unemployment
benefits, we do need to do something about it. Indeed, my
question is why the Department of Labor has not already done
something about it. So I certainly join with you.
While we want to assure that ex-offenders don’t become
re-offenders, and there are major problems in our society
about the way we treat ex-offenders and integrating them back
in the labor force, I doubt that is the source of these
problems.
The additional issues concerning ensuring that this
system works as it is intended is important, not only to the
taxpayer, but it is important to the legitimate folks that
are out there that are counting on an unemployment check.
Just as with any other federal program in the employment or
social service area, we want to be sure these programs are
run efficiently and without fraud.
Over the last five years, this congress has taken a
number of steps to improve the integrity of our unemployment
system. In 2008, legislation was passed to permit an
individual’s tax return to be seized if they owe unemployment
compensation debt due to fraud. And this measure was
strengthened in 2010. More recently,
Congress has required employers to more accurately report new
hires, and it made employers liable when they are at fault
for overpayment.
Finally, we have required the states to recover 100
percent of any erroneous unemployment benefits by reducing
further unemployment payments. These are good steps. But,
as you indicated, Mr. Young, to the extent that we can
prevent these problems from occurring in the first place, we
don’t have to chase them down.
The unemployment rolls are much higher because of the
great recession. I believe that the studies that we will
hear about indicate that, as to overpayments, while we need
to get to them and prevent them, whatever the source, about a
fourth are due to fraud, and most of the remainder are due to
administrative errors by claimants and mistakes by employers
or unemployment agencies.
Second, a factor in this is that the Federal Government
has not adequately funded the administrative costs of the
unemployment system for many years, which has made it
somewhat more susceptible to errors. On the whole, though, I
agree fully with Mr. Young and Mr. Reichert in their
commitment to ensuring that any fraudulent payment or even
accidental waste of taxpayer dollars is avoided. And I look
forward to working with them, with our whole committee, to
help ensure that unemployment benefits are there for the many
who count on them, and that we eliminate fraud and waste at
every opportunity. Thank you.
*Mr. Young. Well, thank you, Mr. Doggett. And, without
objection, each Member will have the opportunity to submit a
written statement and have it included in the record at this
point.
I want to remind our witnesses to limit their oral
statements to five minutes. However, without objection, all
the written testimony will be made a part of the permanent
record.
On our panel this afternoon we will be hearing from
Julia Hearthway, Secretary of Labor and Industry,
Pennsylvania; Scott Sanders, Commissioner, Department of
Workforce Development, the great State of Indiana; Doug
Holmes, president, UWC, Strategic Services on Unemployment
and Workers’ Compensation; Valerie Melvin, director,
information management and technology resource issues,
Government Accountability Office; and Sharon Dietrich,
managing attorney, Community Legal Services.
I understand that Mr. Kelly would like to introduce our
first witness, who is from his home state of Pennsylvania.
*Mr. Kelly. Thank you, Chairman. It is really a
pleasure for me that the Secretary of Labor and Industry, Julie
Hearthway, is with us today. And she has done a marvelous
job in Pennsylvania. Let me just give you a little bit of
her background.
The secretary was unanimously confirmed by the
Pennsylvania Senate in 2011. She was recently
recognized by the National Federation of Unemployment
Compensation and Workers’ Compensation with its integrity
award. Now, this award is given to an individual who has
demonstrated a commitment to preserving the integrity of the
unemployment system.
She played a vital role in restructuring Pennsylvania’s
unemployment compensation system, restoring the fund to
solvency, and ensuring that benefits will be available for
years to come for those who need and deserve them.
The secretary also created the first-ever office of
integrity within the Pennsylvania Department of Labor and
Industry to combat fraud, waste, and abuse of Government
funds. Working with the Pennsylvania Unemployment and
Insurance Integrity Task Force and other state agencies, this
office has aggressively pursued its important mission.
Now, prior to her nomination, Secretary Hearthway spent
18 years in the attorney general’s insurance fraud section
after working as an assistant district attorney in a private
legal practice.
Madam Secretary, thank you so much for being here today.
And what you have done in Pennsylvania is absolutely
phenomenal. And I think there are 49 other states that can
learn from that. So thank you so much for being here.
STATEMENT OF JULIA HEARTHWAY, SECRETARY OF LABOR AND
INDUSTRY, PENNSYLVANIA
*Ms. Hearthway. Thank you, Congressman Kelly, for that
very kind introduction. Congressman Young, Ranking Member
Doggett, Congressman Davis, and to the subcommittee, thank
you very much for having me here today to talk about this
extremely important issue.
Governor Tom Corbett strongly believes that taxpayer
dollars must be managed with the utmost integrity, and that
appropriate safeguards must be in place so benefits go to the
individuals who are eligible and in need. We all understand
the value of providing a safety net to bridge the gap between
losing a job and finding gainful employment. However, when
cases arise where individuals fraudulently collect benefits
they are not entitled to, the public’s trust in that system
is jeopardized. When the public constantly hears of misuse
and mismanagement of tax dollars at all levels of government,
they become disheartened, cynical, and ultimately,
disengaged.
To combat the loss of confidence in the integrity of
Government programs, it is incumbent upon us, as stewards of
the taxpayer dollars, to ensure that safeguards are in place.
We cannot afford to leave the barn door wide open. All too
often government programs are rushed without appropriate or
effective checks and balances. This creates a system that is
ripe for fraud, waste, and abuse.
During my time as Secretary of Pennsylvania Department
of Labor and Industry, I have had both the privilege as well
as the challenge of working to combat fraud, waste, and abuse
in the unemployment compensation system. To that end, one of
my first acts when I took office was to establish the office
of integrity within the department. The bureau director of
that office, James Tillman, is here with us today.
This office has spearheaded each of the programs dealing
with fraud that I am going to elaborate on in my testimony
today. To date, in just a little over two years, these
efforts at addressing fraud has saved Pennsylvania citizens
and taxpayers an estimated over $100 million.
One of these programs was aimed at stopping the abuse of
prisoners collecting unemployment benefits. Under existing
technology, at minimal cost, we have been able to weed out
fraud through a cross-match system aimed at identifying
individuals incarcerated in the state and county prisons who
were either collecting benefits when they entered the prison,
or applied for benefits after they’d been incarcerated.
The system, administered by JNET, operates in real time
to stop payments whenever a claimant is identified as being
incarcerated. JNET’s integrated justice portal system
provides a common online environment for authorized users to
access public safety and criminal justice information. For
the first quarter of 2013 incarceration stops were placed on
more than 4,000 claims. Using that number, the average claim
amount in duration, we have made an estimate of over $100
million in just that time period.
JNET is just one of the successful integrity programs
underway. We have also blocked all foreign Internet provider
addresses from being able to be automatically used to apply
for benefits when one is out of the country. We have, to
date, annually saved 9.2 million with that step.
Additionally, we are working in partnership with the
United States Treasury to implement the TOP program. The TOP
program has been implemented starting in January of 2012 to
August of 2013. That stops the refund of any tax dollars
where we can intercept those funds for existing overpayments
that have been made. To date we have been able to collect
$26 million from that program.
We also implemented a three-month unemployment
compensation amnesty program, which we believe to be first of
its kind in the nation. The program goals were much like any
other tax amnesty programs. Over the course of 40-plus
years, labor and industry accumulated an exceptionally large
number of cases involving fraud overpayments due to
individuals and the non-payment of taxes due from employers.
More than 130,000 individual claimants and nearly 50,000
employers owed money to the state.
The office of integrity was looking for ways to recoup
those lost dollars, and we implemented the amnesty program
for that purpose. It began on June 1st and ended on August
31st.
We have implemented a number of other amnesty integrity
programs which we think will reap benefit to Pennsylvania
taxpayers in the future, but those are the highlights of what
we have done. And by far, the incarceration program has been
our most successful.
[The statement of Ms. Hearthway follows:]
*Mr. Young. Thank you very much, Secretary Hearthway.
At this point I would like to take a point of personal
privilege here and introduce my state’s own commissioner,
Commissioner Sanders.
Today I have a distinct privilege of introducing,
specifically, the commissioner of the Indiana Department of
Workforce Development, or, as we call it, DWD, in Indiana,
Scott Sanders. Commissioner Sanders was first appointed by
Governor Mitch Daniels in May 2012 and is currently a member
of the cabinet of Governor Mike Pence. He manages and
implements training and employment programs for Hoosiers,
collaborates on regional economic growth initiatives for
Indiana, and oversees the unemployment insurance system.
Commissioner Sanders brings many years of workforce
development and financial management skills to his role at
DWD. And prior to his appointment as commissioner, Scott
served as the deputy commissioner of systems information and
analysis, and was the agency’s CFO.
In his role as commissioner, Mr. Sanders’ zeal for
leading the agency and creating better outcomes for Hoosiers
has helped pave the way for not only better, but more
efficient service outputs, and also better quality and
integrity in Indiana’s overall workforce development system.
He has been a tremendous asset for the State of Indiana. And
I am honored to have him here today to testify in front of
this Human Resources Subcommittee to present his reforms and
accomplishments within the unemployment insurance system.
I yield back.
STATEMENT OF SCOTT SANDERS, COMMISSIONER, DEPARTMENT OF
WORKFORCE DEVELOPMENT, INDIANA
*Mr. Sanders. Thank you, Chairman Young, Ranking Member
Doggett, members of the subcommittee. Thank you for the
opportunity and honor to share with you some of the efforts
we have been making in Indiana regarding the issue of
unemployment insurance integrity, and specifically, actions
we have taken to increase our ability to detect and prosecute
UI fraud cases while helping unemployed Hoosiers return to
work. My name is Scott Sanders, and I serve as the
commissioner of the Indiana Department of Workforce
Development.
Indiana’s economy is beginning to recover from the
recent recession. However, our unemployment rate remains too
high, at 8.4 percent. Last week we had 60,000 individuals
collecting some form of UI benefits. As long as Hoosiers
rely on these benefits as a safety net against involuntary
unemployment, protecting that system from misuse and
corruption is a top priority of our department.
In 2012, roughly a third of Indiana’s estimated payments
made in error went to individuals who had returned to work
but continued to claim benefits to which they were not
entitled. Obviously, working harder on the front end of the
problem is a very important strategy, but also having plans
on the back end to detect, investigate, and prosecute the
fraud that has already occurred is needed, as well. Our
agency has targeted UI fraud as a priority over the past two
years. However, we had to overcome several challenges to
combat UI fraud.
First, the low number of actual fraud prosecutions.
Last year only 24 percent of the UI fraud cases that were
referred to county prosecutors had charges filed. This is
due to the complexities of the UI system and the limited
resources of prosecutors’ offices. UI fraud cases can be
very time-consuming and resource-intensive.
Another challenge we faced was the issue of venue. By
statute, generally all criminal actions are tried in the
county where the offense was committed. This creates a
challenge in determining which county the claim was actually
filed, since claimants file for benefits using Internet-based
online filing system. We determined that a partnership with
the Marion County prosecutor’s office was a solid solution.
The department issued a grant to the prosecutor’s office to
help fund a dedicated deputy prosecutor to specifically work
with our investigators on pursuing UI fraud cases. This
solved the problem of resources in the prosecutor’s office in
handling complex UI fraud cases. Additionally, it solved the
question of venue, since their office is located in
Indianapolis, where all UI claims are processed.
We have also launched a public awareness campaign by
publishing all UI fraud prosecutions on our website,
including the names and photos and specifics of those that
were convicted. We hope this creates an environment that
conveys a heightened certainty and severity of punishment for
fraudulent conduct.
Since the beginning of this year, when the partnership
started, the number of fraud cases filed by prosecutors has
increased by over 330 percent over the same period last year.
So far, nearly $450,000 in fraudulent benefits and penalties
have been ordered to be repaid, versus expenses totaling
$64,000 for the grant. This partnership is still in its
infancy, but already the returns are beyond original
expectations. And we believe it will reduce the amount of UI
fraud.
In addition, we have put some focus on the front end of
our cases. Earlier this year, we were able to pass a bill
through our state legislature that we refer to as Jobs for
Hoosiers. This provision allows the department to direct
recipients of UI benefits to receive re-employment and
eligibility assessment activities after they draw their
fourth week of benefit, similar to the federal program
required by Congress last year. The primary goal of this
program is to educate unemployed individuals on the services,
training, and assistance offered by our one-stop work-one
centers. But, most importantly, it gets Hoosiers back to
work as quickly as possible.
One valuable feature of this new law is that claimants
appearing at the work-one centers may need to provide proof
of identification. Fraudulent claimants typically have not
shown up to receive these services. And, subsequently, their
claim was placed on hold. This potential stopping of
benefits for individuals who are fraudulently claiming them
will have a critical reduction on the amount of fraud that
occurs.
In summary, protecting our UI system from misuse and
corruption is a top priority of our department. By
establishing this partnership with the Marion County
prosecutor’s office, we have realized the benefits that go
beyond the simple filing of more cases. We have fostered a
greater awareness, expertise, and prosecution of UI fraud,
increased the amount of fraudulent funds recovered, and have
created an environment to deter fraud. Additionally, by
adopting the Jobs for Hoosiers program, we will be able to
get unemployed individuals back to work more quickly, while
ensuring only those that are truly unemployed receive UI
benefits. All of these efforts are important steps in
improving UI program integrity.
Thank you for the opportunity to be with you today, and
for your interest in our UI integrity initiatives.
[The statement of Mr. Sanders follows:]
*Chairman Reichert. [Presiding] Mr. Sanders, thank you
so much for being here today, and thank you for your
testimony.
Mr. Holmes, you are recognized —
*Mr. Holmes. Thank you.
*Chairman Reichert. — for five minutes.
STATEMENT OF DOUG HOLMES, PRESIDENT, UWC, STRATEGIC SERVICES
ON UNEMPLOYMENT AND WORKERS’ COMPENSATION
*Mr. Holmes. Chairman Reichert, Ranking Member Doggett,
and members of the Subcommittee on Human Resources, thank you
for the opportunity to testify on the integrity of the
federal and state unemployment insurance system. I am Doug
Holmes, president of UWC Strategic Services on Unemployment
and Workers’ Compensation, UWC. We very much appreciate the
work of this subcommittee in the enactment of the integrity
measures in the Middle Class Tax Relief and Job Creation Act
of 2012, and the attention that you have given to the
integrity issues this year.
We support H.R. 2826, the Permanently Ending Receipt by
Prisoner’s Act. We favor legislation and policy that
addresses a number of key points, including; methods of
administration should seek to reduce employer administrative
burden while improving the efficiently and effectiveness in
the exchange of information needed for proper administration.
Two, employers and their representatives should be
actively engaged by USDOL and states in the design and
implementation of new systems.
Public and private databases should be more actively
used to avoid erroneous payments, and to identify fraud and
overpayment issues.
States should implement regular statements of charges to
employer accounts and use the full social security number in
the exchange of information.
New performance measures for UI integrity should be
developed based on return on investment to the unemployment
trust funds.
Additional targeted resources should be provided with
incentive funding to states with the best performance. Clear
direction should be provided to the states in defining the
federal requirement that states must not pay unemployment
compensation to individuals who have not been determined to
be able to work, available to work, and actively seeking
work.
The need for improved integrity became evident during
the great recession, and the lack of integrity in the system
led to dramatic increases in benefit payments, significantly
higher benefit payment errors, and doubling of employer
taxes. The speed of payment, as measured by the time lapse
standards developed by the U.S. Department of Labor, has been
emphasized for many years over the quality of decisions in
integrity of UI trust funds.
Four years after the end of the recession, state and
federal unemployment taxes in many states continue to
increase, and 18 states have outstanding unpaid Title XII
loans, totaling over $20 billion. Seven states have had to
resort to bonds and borrowing in the private market to repay
federal loans and interest, with employers paying the debt
service for the next seven years.
Some individuals who are claiming unemployment
compensation unduly limit their availability as long as they
continue to receive unemployment compensation. Individuals
must be registered for work. A mere statement by the
claimant that he or she is actively seeking work should not
be sufficient to meet the actively-seeking-work requirement.
Work search should be documented and independently verified.
If not, individuals should not be paid.
States should consider a variety of techniques to
identify fraud. Is the application or claim being filed
through a foreign IP address? Is the same IP address, phone
number, and/or address used to initiate multiple UI claims?
Are there multiple deposits of unemployment compensation into
the same or related bank account? Is there prior
verification of a legitimate employer account or accounts
against which benefits are to be charged?
The process that is used in most states in requesting
employers to verify wages continue to be, believe it or not,
paper requests. A solution is needed to this earnings
verification reporting that minimizes the general reporting
requirements while preserving the ability to exchange
information for effective prosecution of fraud.
In closing, permit me to emphasize that employers
recognize the important role of the unemployment insurance
safety net system. Employers are willing to provide funding
for the system. However, employers also have an expectation
of good stewardship of the funding they provide, and in the
integrity of the federal/state UI system. Thank you for the
opportunity to testify.
[The statement of Mr. Holmes follows:]
*Chairman Reichert. Mr. Holmes, thank you for your
testimony.
And, Ms. Melvin, you are recognized for five minutes.
STATEMENT OF VALERIE MELVIN, DIRECTOR, INFORMATION MANAGEMENT
AND TECHNOLOGY RESOURCES ISSUES, GOVERNMENT ACCOUNTABILITY
OFFICE
*Ms. Melvin. Good afternoon, Chairman Reichert, Ranking
Member Doggett, and members of the subcommittee. Thank you
for inviting me to today’s hearing. My testimony discusses
information technology systems supporting the unemployment
insurance program.
With oversight by the Department of Labor, state
workforce agencies rely heavily on information technology
systems to collect and process the taxes that fund the
program and to determine eligibility and administer benefits.
However, the majority of the states’ existing systems for
unemployment insurance operations were developed in the 1970s
and 1980s. And, although some agencies have performed
upgrades throughout the years, many systems are reported to
be outdated, costly, and difficult to support, and incapable
of efficiently handling workload demands.
In September 2012, we reported on 9 selected states’
efforts to modernize their unemployment insurance systems,
and the challenges that they faced in doing so. At your
request, my testimony today summarizes our findings regarding
those modernization efforts and the related challenges. Our
report noted that the selected states had made varying
progress in modernizing their systems supporting the
unemployment insurance programs.
Specifically, each of three states that were part of a
multi-state consortium established to pool resources for
developing joint systems were in the initial phases of
planning that included defining benefits — I am sorry,
business — needs and requirements. Two individual states
were in the development phase. That is, building the system
based on requirements. Two were in a mixed phase, where part
of the system was in development and part was in operations
and maintenance. And two states’ systems had been completed
and were in operations and maintenance.
The states reported that modernization efforts already
undertaken had, among other things, helped enhance their
unemployment insurance technology to support web-based
services with more modern databases, and replaced outdated
programming languages. Nevertheless, the states cited
numerous challenges to achieving their modernized
capabilities.
For example, all nine states said limited funding and/or
the increasing cost of unemployment insurance systems had
impacted their planning and execution of modernization
projects. Seven states cited a lack of staff in their
unemployment insurance offices with the expertise necessary
to manage IT modernization efforts. And six states said that
continuing to operate their legacy systems while
simultaneously implementing new systems had required them to
balance scarce staff resources between the two major efforts.
In addition, we noted separate and unique challenges for
states participating in the consortiums. These included
differences in state laws and business processes that
impacted efforts to design and develop a common system,
difficulty among states in reaching consensus on the best
approach for developing and modernizing systems, and
decision-making by consortium leadership that raised concerns
about the liability for outcomes that could negatively affect
member states.
At the time of our study, the nine states had begun to
address some of these challenges. They had also established
certain IT management controls that are essential to carrying
out successful modernization initiatives, such as
incorporating industry-accepted program management processes
and tools in their modernization efforts.
We noted in our report that a comprehensive assessment
of lessons learned from the modernization work could further
assist states’ efforts, and that the Department of Labor
could play a vital role in supporting and advising states.
Accordingly, we recommended that Labor perform a
comprehensive analysis of lessons learned, and distribute
this analysis to each state through an information-sharing
platform or repository.
In its response to our recommendations, Labor stated
that it was committed to sharing the lessons learned, and we
are continuing to follow up on the Department’s actions in
this regard.
Mr. Chairman, this concludes my oral statement. I would
be pleased to answer any questions that you or other members
of the subcommittee may have.
[The statement of Ms. Melvin follows:]
*Chairman Reichert. Thank you, Ms. Melvin.
Ms. Dietrich, you are recognized.
STATEMENT OF SHARON DIETRICH, MANAGING ATTORNEY, COMMUNITY
LEGAL SERVICES
*Ms. Dietrich. Thank you, Chairman Reichert, Ranking
Member Doggett, and members of the committee. My name is
Sharon Dietrich. I am a managing attorney with Community
Legal Services in Philadelphia. I have been a legal aid
lawyer for 26 years. During most of that time I have handled
unemployment compensation cases on behalf of claimants. And
during most of that time I have been the lead policy advocate
for the legal aid community in Pennsylvania on issues
involving unemployment insurance.
Let me start by saying that, although I am here to
represent the perspective of claimants, I, of course, agree
that fraud must not be tolerated. We can all agree on that.
And I certainly have no objection with the content of House
Bill 2826, that there be use of databases in order to make
sure that people who are incarcerated and are not available
for benefits are not getting them.
I would add, from my work in the area of helping people
with criminal records, that not all criminal databases are
necessarily infallible. I have seen issues around accuracy,
matching, updating. And I do hope that, as one of the
implementation goals here, making sure that the data is
verified is part of how the statute would be implemented.
When discussing program integrity, I think that some
context is important. And as Ranking Member Doggett
mentioned earlier, fewer than one in four overpayments is a
fault overpayment. Most overpayments in the unemployment
system are for reasons of non-fault, either because there was
agency error, employer error, or claimant error.
Secondly, I want to point out that dollars are lost from
the system on both sides. I understand from the amnesty
program that Pennsylvania ran earlier this summer that a good
deal of money was sought back from employers, as well as from
employees, that 356 million was sought from employees for
both fraud and non-fraud overpayments.
$274 million was
sought from employees who committed fraud, as opposed to $257
million being sought from employers for unpaid taxes. So,
clearly, money is leaking out of the system from the employer
side, as well.
And third, I would note that many workers are underpaid
unemployment benefits, or unpaid unemployment benefits.
Indeed, more are underpaid than are getting fault
overpayments. And I certainly agree with the idea that
correct payments must be made. But I would urge that we
consider making sure that people who are entitled to
unemployment get paid, as well as those who are not and who
are committing fraud.
Now, to meet this goal of making correct payments, I
urge Congress to look at the issue of adequate funding of the
state administrative programs, which is a topic that I think
that Secretary Hearthway and I can agree on. Certainly we
have a federal source of funding for these programs, the FUTA
funding source. But funding has been stagnant for a long
time, and the states are starting to hurt in their
administration of the UI programs, as a result of that.
The Pennsylvania experience over the last year has been
quite difficult, where there has been inadequate staff to
answer phones and perform other work, as a result of which
the Pennsylvania state legislature had to enact a measure to
supplement our federal funding so that we would have adequate
money to run our program effectively.
You may ask, “Why is adequate federal funding an issue
of program integrity?” Well, first of all, it allows the
states to do a better job in administering the program, so
that erroneous decisions can be avoided, and overpayments,
therefore, avoided. But I would also urge that, with more
staff, claimants have a better opportunity to make sure that
they understand what the system wants them to do. In many
cases, the difficult criteria of the program are simply not
understood by claimants. And if they are not able to speak
to staff, agency employees, because they are not available,
then, unfortunately, they may get into an overpayment
situation that they did not intend.
Finally, a couple of preventative measures I urge
consideration of. First of all, is better communications
with claimants. I think if the states were to look at their
notices, their technological interfaces, to make sure that
clear communications are happening with claimants, there
would be fewer overpayments. And secondly, we should
incentivize employers to engage on claims as soon as
possible.
In summary, I urge a holistic approach to program
integrity, and I thank you for your attention, and am happy
to answer questions. Thank you.
[The statement of Ms. Dietrich follows:]
*Chairman Reichert. Well, thank you all for your
testimony. And if you have testified before Congress, you
know that the next phase of our hearing today is the
question-and-answer phase. So we would like to get into that
for a moment.
But I would like to comment, first of all. I apologize,
Ms. Hearthway, for not being here for your testimony. I
appreciate the testimony of all the witnesses, and I just
want to make a quick comment on Ms. Dietrich’s remarks
regarding inaccurate law enforcement or criminal records. I
don’t know if the panel is aware of it, but I was in law
enforcement 33 years, starting from the deputy through the
end of my career as the sheriff in King County in Seattle,
Washington. I am very familiar with the fact that criminal
records are not accurate. I think it is very
poignant point to make here.
And the other point you that made, the whole
effort here is to make sure that those people who deserve the
assistance are paid the assistance. And I think that is
really what this panel has come together
and just some quick figures. In New Jersey,
20,000 inmates collected over $24 million. And I could give
you a list of some other states here, but the total cost of
abuse, in this system, loss of dollars that could go
to those folks that really need it, is $58 billion. That is
the total amount of UI improper payments over the last five
years.
So, we do have a lot of work and ground to cover. And I
am very pleased to hear that Mr. Doggett is supporting the
legislation, as are you, Ms. Dietrich, and I think other
members of the panel have been invited to also sign on to
this legislation. It is common sense.
Common sense brings me to the first question.
Ms. Hearthway, the steps that you have taken in Pennsylvania
with your office of integrity,
the word “remarkable” has been used. And
“remarkable,” I think it is just sort of a definition of what
common sense is, I guess, now, in today’s world. Because you
have taken some valuable and available information, and you
are actually putting it to use.
So, what lessons, from what you have done in
Pennsylvania, can we learn and apply to this piece of
legislation that we are considering?
*Ms. Hearthway. I think perhaps the most obvious is
that there are some simple solutions to some large problems.
You have to look for them, you have to be open to those
ideas.
We knew Pennsylvania has a JNET system that housed all
individuals who have been incarcerated. Obviously, we had a
database for everyone applying for unemployment. It was
really, in all honesty, a simple step, then, to marry those
two concepts. In doing so, we knew fraud existed. We knew
the scam of sitting in prison and collecting an unemployment
check existed. The sheer numbers were a little surprising to
us. It is the kind of information — and Representative
Kelly and I spoke about this briefly — that spreads pretty
quickly through the prison system. So, a few individuals
receive a check, a whole lot more know about it.
Marrying two systems, technology allowed us to stop
that process fairly quickly. Now, the technology was there
for us to do it, and it was not complicated. So I think the
first lesson is look at the fraud that is being
committed and look at your existing systems. There could be
a program to implement quickly to stop the bleeding.
*Chairman Reichert. So the bill points to the Social
Security Administration’s prisoner database, but there might
be other databases that could help states with this task,
too. What criteria should we use to evaluate various
prisoner databases, in ensuring that the UI benefits are not
paid to prisoners?
*Ms. Hearthway. When someone is entering prison, if you
marry up two identifiers, social security and date of birth
— it is not a massive database, it is a prisoner
database — that will pretty much ensure you have the
accurate person. We then match that with the social security
number and date of birth of any claimant applying for
unemployment. There is the opportunity, should a mistake
happen, for that individual to say, “No, I wasn’t
incarcerated,” and then further checks can occur. We have
not had that situation. We have been able to verify each one
of the stops has been because someone was in prison at the
time.
*Chairman Reichert. Thank you for your answers. And we
are going to go to three minutes a piece, because we have, I
have been told, some votes that may be called to interrupt
our day. So, Mr. Doggett is recognized.
*Mr. Doggett. Thanks to each of you for your testimony.
Secretary Hearthway, I was particularly interested in your
comment just now, that we can act fast and stop the bleeding,
and that states can act fast on this, as well.
Do you know if your counterparts in some of our other
states have followed your example on this?
*Ms. Hearthway. I know we have talked to a number of
other states, told them about our program. Not all states
have a similar or the same JNET-type system that we do. So
each state could run into slightly different problems. But
once you institute this, it is something that comes to a stop
pretty quickly.
I mentioned a moment ago the sort of word of mouth that
goes through a prison when there is a benefit like this. The
same word of mouth will go through the prison when it can’t
happen, because it would affect someone’s parole, perhaps
probation. This is a type of fix that can go a long way.
*Mr. Doggett. And, Ms. Dietrich, thank you for your
comments. I gather that, while there may be some policy
differences with the Secretary in Pennsylvania on some other
issues, this particular program that she is testifying about
today has not led to any negative consequences in your state.
*Ms. Dietrich. I have not personally seen any. I would
point out that this program has not been in effect for all
that long. So I feel it is a little premature to say that
from our perspective it has worked perfectly.
I think the issue that has most concerned me as I have
studied it is the question of whether people who are
incarcerated pending the posting of bail are running into any
difficulties after they are able to post bail and have made
themselves able and available for work again.
But, no, personally I have not seen any issues with
that —
*Mr. Doggett. And the accuracy of the systems, as you
discussed with the chair.
While we want to prevent even one dollar of fraud,
overall I think your testimony is that this problem of
prisoners getting payments to which they are not entitled is
a pretty small part of this.
*Ms. Dietrich. Oh, absolutely.
*Mr. Doggett. And as far as the integrity of the system
generally, maybe you might just expand on your testimony as
to where you think our focus needs to be.
*Ms. Dietrich. Well, I do think that preventative
measures are a great idea. And one thing that worries me
about the increased technological way that claims-handling is
being done these days in order to save money is that we have
lost the opportunity for unemployed people to talk to live
staff sometimes. And the result of that is that the sort of
isolated unemployed person is in a position where he or she
doesn’t necessarily know what the rules are.
My brother, for instance, was unemployed last year. He
was a laid-off school teacher. He has a master’s degree in
reading comprehension. And he was often confused to what the
rules are, and said to me that if he was confused, certainly
somebody with a much lesser level of education might be
confused.
So, I do think that, from the perspective of the
claimants, getting out better information, making available
good ways of getting answers to questions, looking at
interfaces to the computer systems, I commend Secretary
Hearthway for having taken very seriously feedback that we
gave the Department about ways that we thought the computer
— the online application was confusing, so that people
aren’t answering incorrectly because they don’t see the world
quite the same way that unemployment insurance administrators
do.
*Mr. Doggett. Thank you. Thank you, Mr. Chairman.
*Chairman Reichert. Thank you, Mr. Doggett. Mr. Young,
you are recognized for three minutes.
*Mr. Young. Thank you, Mr. Chairman. The General
Accountability Office’s report on this very topic, where you
studied IT modernization challenges for the states with
respect to their UI programs, one of the things I find quite
interesting is towards the end of your oral and written
testimony. You indicate that, number one, you recommended to
Labor to perform a comprehensive analysis of lessons learned,
and they agreed with that recommendation.
Secondarily, you recommended they distribute the
analysis to each state through an information-sharing
platform or repository. Say, a website. And they were
silent, for some reason, on that recommendation. Do you have
any thoughts about the manner, if you wish, do they intend to
share best practices, unsuccessful practices, or so forth,
absent a website?
*Ms. Melvin. It is my understanding that they are in
the process of compiling lessons learned. They have not
communicated back with us about how they would do that, other
than that they were putting that information together to
disseminate —
*Mr. Young. Okay.
*Ms. Melvin. — to the state officials.
*Mr. Young. I just think it is essential that we get
better in all areas of public policy at the state level through
talking more, and sharing best and worst practices. I understand
there are differences across populations and cultures and
sub-cultures and economies. But, nonetheless, we have to
formalize these things, as I see it. And hopefully, Labor
will be a willing and engaged partner in that regard on this
topic.
Commissioner Sanders, we have a great story to tell in
the State of Indiana. I am going to give you an opportunity
to expound upon it a little bit. But perhaps you could start
just by indicating what motivated you and DWD and the
administration more broadly to take up this initiative of
targeting UI fraud, and then maybe speak to where you go from
here.
*Mr. Sanders. Well, thank you, Congressman. I think it
gets back to really having unemployment insurance truly be a
safety net for those that are unemployed. And I think too
often we see the amount of waste, fraud, and abuse that goes
on in the system. And one of the challenges we had in
Indiana was getting local prosecutors to take up the drum and
march with it. And obviously, as the secretary mentioned,
word of mouth in unemployment insurance moves very quickly,
whether it is those that are incarcerated, or those that are
actually unemployed and that are gaming the system. So now
that we have been able to pick up the prosecution front in
Prosecutor Curry’s office, we have been able to really move
the ball forward.
I really think the piece, though, with Jobs for
Hoosiers, that will attack UI fraud, as well. It is similar
to the program that the Feds started in — last year, but
they brought individuals in at the 27th week. By that point,
it is too far out. We are going to bring those individuals
in the fourth week to verify that they are who they are, and
then also help them get re-employed.
*Mr. Young. Well, thank you so much for your good work.
To the extent — for all of you — we can help remove
obstacles for further reform and further improvement in these
programs and how they operate, please let us know. I yield
back.
*Chairman Reichert. Thank you, Mr. Young. Mr. Kelly,
you are recognized.
*Mr. Kelly. Thank you, Chairman. Just so we
understand — and, Secretary Hearthway, maybe you could help
us — the revenue that goes into unemployment insurance,
where does it come from?
*Ms. Hearthway. Employers, primarily. Now,
Pennsylvania —
*Mr. Kelly. Thank you. Employers.
*Ms. Hearthway. Yes.
*Mr. Kelly. All right. I happen to own a company. We
pay eight percent of everybody that works for us. And I
think they put in about 7 percent on their own. So I want
to make sure we understand this isn’t some benevolent monarch
showering these folks with some kind of a benefit. It comes
out of employers. It drives the cost of operation higher.
And you have to be very careful of that.
Pennsylvania, though — it may be early — you are
estimating savings of $100 million.
*Ms. Hearthway. Yes.
*Mr. Kelly. Well, in a time where 100 million means
absolutely nothing. That was, last minute, what we spent in
interest. I think it is incredibly important that everybody
understands everybody who deserves this funding should get
it. Those who don’t should not. And why do I say that?
Because it ruins the safety net for those who are deserving.
So I am all on board with you.
Let me ask you, though, to share the
information — because there are 49 other states that could
benefit from what you have done — is there a best business
practices exchange? How do we share that information? How
do we get it out to other people?
*Ms. Hearthway. It is an excellent question, and it is
something I wish that USDOL would work a little bit more on,
in pushing out this information. We have contacts of — we
reach out to our counterparts. But we do need a more easy,
systematic system where we can exchange more detailed
information. All of those using JNET, we can walk them
through almost a 10-step process of how to utilize this or a
system like JNET.
That is something that I think would help tremendously.
Perhaps a little bit more focus on that and a little bit
less, perhaps, on the ban of imports.
*Mr. Kelly. Okay. Mr. Sanders, you want to weigh in?
*Mr. Sanders. Yes, if I could. There is an agency, the
National Association of State Workforce Agencies, that our
agency belongs to. I believe the Secretary may, as well. In
the last year, they have actually set up a best practices
group for information technology. And it is something that
is picking up steam. So I think it is an area where we could
really get the word out fairly quickly on how we could take
this approach.
*Mr. Kelly. Well, thanks for what you are all doing. I
think the key to this, like in every program, it starts off
with one mission in mind, it grows, and it gets really — it
morphs into something different. We get the economy back on
track, we get people going back to work and making higher
wages, that automatically grows, it solves your insolvency
problem in Pennsylvania.
So, it is really not that difficult to figure out.
Maybe it is hard to talk about, but we know the goose that
lays the golden egg. It is the employer. It is the ability
for us to raise our economy, get it back on its feet, that is
going to help all these safety net programs that we have.
So, thank you all for what you do. You are incredibly
important to society. Thank you.
*Chairman Reichert. Thank you, Mr. Kelly. Mr. Davis,
you are recognized.
*Mr. Davis. Thank you very much, Mr. Chairman.
Secretary Hearthway, does one have to be in active pursuit of
work or a job to qualify for unemployment insurance?
*Ms. Hearthway. You have to be ready and available to
work in order to qualify for unemployment insurance.
*Mr. Davis. And individuals who are incarcerated,
they — on the applications they indicate that they are
available and ready to work?
*Ms. Hearthway. Yes. Pennsylvania actually has a
separate law that simply states if you are incarcerated you
are not eligible for unemployment. There is also the broader
law, that you must be able and available to work in order to
collect unemployment. So there are actually two provisions
in our state that would apply to that situation and legally
prevent someone from collecting.
*Mr. Davis. Ms. Melvin, you indicated that fraud occurs
because some of the agencies are using outdated computer
equipment and don’t have the accuracy of their data systems.
What would you think some of the barriers are as to why they
don’t have this equipment that they need?
*Ms. Melvin. We found that the states, first of all,
were in very mixed states of implementing modernized
capabilities, but they were facing a number of challenges,
and those challenges ranged from inconsistencies in the
funding that they received that they were relying on to
actually implement some of the capabilities. Often times
with information technology, modernization efforts, it can
take a long time for some programs to be designed and
actually executed. So the time frame for getting money
across the time that they would actually be doing that could
be problematic.
We also saw a lot of problems with the skills, the staff
skills that were involved. In many cases, the states
reported to us that they did not have the appropriate skills,
in terms of IT staff, who could actually carry out these
particular projects for them.
So there were a number of complicating factors that
impacted whether they, in fact, could get modernization
efforts in place.
*Mr. Davis. So in some instances inadequate funding and
inadequate skill is actually costing money, rather than
saving money.
*Ms. Melvin. Unfortunately, if you were trying to tie
it to the improper payments, that potentially could be a
factor.
*Mr. Davis. And finally, Ms. Dietrich, you mentioned
that some employers defraud the unemployment insurance system
by falsely claiming that individuals are independent
contractors.
*Ms. Dietrich. Yes.
*Mr. Davis. What difference does that make?
*Ms. Dietrich. Well, the difference is that if you are
an independent contractor, the employer is not going to pay
those taxes that have been discussed previously. And that
also leads to the underfunding of the system, resulting in
other employers having to pick up the slack.
*Mr. Davis. Thank you very much. Thank you,
Mr. Chairman.
*Chairman Reichert. Thank you, Mr. Davis. Mr. Renacci,
you are recognized for three minutes.
*Mr. Renacci. Thank you, Mr. Chairman, and I want to
thank Chairman Reichert for his introduction of H.R. 2826 and
for holding this hearing today, so we can better understand
the issues states are facing us when it comes to preventing UI
fraud. And I want to thank the witnesses for being here.
In my home state of Ohio, the UI administrators serve
approximately 225,000 active Ohio employers, and process 1
billion of tax revenues per year. Those tax revenues, as we
heard earlier, are coming from businesses. The UI program
has made 58 billion
in improper payments over the last 5 years. And as a small
business owner, I understand the impact these errors can have
on businesses. But I also understand the importance of the
safety net for individuals, who through no fault of their own,
have lost their job. And I think that is important. But we
must ensure, as Mr. Kelly said, that taxpayer dollars are
spent wisely, and not on individuals that do not qualify.
In the last 12 months I know the Ohio benefit payment
control division identified more than 34 billion in
fraudulent overpaid benefits. Mr. Sanders, you mentioned in
your testimony that the benefit payment control division in
your state encountered some challenges when investigating
fraud and improper payments. Can you expand a little on
those challenges?
*Mr. Sanders. Sure, absolutely. When our investigators
first believe there is somebody that is committing fraud, it
takes some time and process to then go out and investigate
those. In addition, we weren’t getting a lot of cooperation
from law enforcement agencies. Through our partnership now
with Marion County, it has the ability to pull in, whether it
is state police, the county sheriff, or even local
individuals to actually have that subpoena power and do those
investigations and pull that information in.
That was, I think, one of the biggest barriers that has
now been opened up for us to be able to investigate these
fraud cases.
*Mr. Renacci. And overall for the panel, the status of
UI error rates, do you think they are getting worse, better,
or generally unchanged?
*Mr. Sanders. I can speak for our state. I haven’t
studied the other states, but our state continues to improve.
Probably over the last year we have cut that number in half.
But we are still too high, personally. And I think we really
need to continue to improve that and drive that number down,
probably into the three to five percent range.
*Mr. Renacci. Any others?
*Ms. Hearthway. If I could just add, I mean,
Pennsylvania is improving slightly. But if I could make one
point here. The benefits error, BAM, program would not have
taken into account the prison cross-match that we just
instituted. They look at your processes and procedures and
see if you are following them, and they extrapolate your
error rate based on that.
We have a fairly solid estimate of $100 million, and
that would not show up, either as an error previously or as a
benefit now unless you happened upon a case that you knew
someone was incarcerated. It wouldn’t show those kinds of
numbers. And so, I think there is a portion of this that we
may be emphasizing form over some substance.
*Mr. Renacci. I am running out of time, and I yield
back.
*Chairman Reichert. Thank you. Mr. Griffin, you are
recognized for three minutes.
*Mr. Griffin. Thank you, Mr. Chairman. In my home
state of Arkansas I have got some of the most recent figures.
In 2012 it looks like we had about $46 million in improper
payments. And for a state with only three million people,
that is a lot of money.
I want to ask you, Mr. Sanders if you would tell me,
first of all, how are the prosecutors organized in Indiana?
In Arkansas, they are not under the attorney general, for
example. They are independently elected. And so, there is a
prosecutor coordinator that can help get those elected
officials on the same page with regard to the push to
prosecute fraud. But could you tell me a little
bit about how you got things moving in Indiana? And have you
gotten things moving on a statewide scale, or is it very
targeted?
*Mr. Sanders. That is the specific issue we had in
Indiana, as well, where each of our county prosecutors is
independently elected into the position.
First of all, I don’t think they have the staff or the
resources to go after unemployment insurance fraud, nor do
they have the expertise. It is such a unique field. And the
fact that we utilized where our computer server — where all
the claims are processed is based in Marion County — that
actually created the venue issue, which then gave the Marion
County prosecutor the ability to prosecute in every county in
the state. It is no different than, I think, under federal
law. We could charge those individuals with wire fraud
because we use the Internet to actually then make payments,
as well.
So that is really what was the lynch pin that then
opened up the gates. Now we also see our county prosecutors
wanting to jump in and help out. Obviously, it helps them,
as well. So I think that was really the key —
*Mr. Griffin. So that is Indianapolis, is that right?
*Mr. Sanders. And Marion County, yes.
*Mr. Griffin. Right. And so I represent all of Pulaski
County, which is Little Rock. And so you would be sort of an
analogous situation there, potentially.
Real quickly I want to ask you. You may be familiar
that in the federal system there is something called qui tam
actions, where people can report fraud and get
it — basically get a cut of it. Are there incentives in
Indiana to — for people to report fraud? And is there a way
for some of these prosecutors to get a cut of some of these
cases? Are there mechanisms like that that could help
sustain?
Because you mentioned the lack of resources. If you get
a system where people are getting a cut to report it, and
prosecutors are getting a cut to prosecute it, then you can
incentivize that behavior that is otherwise hard to
incentivize without money and resources and what have you.
Do you have any comment on that?
*Mr. Sanders. Yes, I would. In Indiana there,
obviously, is not an incentive to get a cut of what is
collected back. We do have an anonymous website. But the
piece that is unique, I believe — in most states there is
what is called the penalty and interest fund, which means if
you find someone that has committed fraud, you can not only
charge them with the return of the benefits that go back into
the trust fund, but you can also hit them with a penalty and
interest on top of that amount, so those funds can then be
turned back in to help prosecutors for whatever else you may
have going on.
*Mr. Griffin. Any — well, it looks like I am out of
time. So thank you.
*Chairman Reichert. Yes, sir, Mr. Griffin, you are out
of time.
I want to thank all of the panel for being here, and all
of our witnesses for being here today. We all recognize the
need to make corrections within the system. And I think that
we are all in agreement this is at least one small step, this
is a small piece of the pie, as was mentioned by Ms. Dietrich
and others. But it is an obvious area where we can make
progress.
And you have shared some information with us today, some
of the areas that we need to focus on, where we need help in
technology, information sharing, and lack of resources. Those
are things we can make progress on and we
can maybe have an impact on making sure that the money
our taxpayers put forward go to the people who really need
it. So thank you all for your time.
One last comment. If Members have additional questions
for the witnesses, they will submit them to you in writing.
And we would appreciate receiving your responses for the
record within two weeks. This committee stands adjourned.
[Whereupon, at 2:21 p.m., the subcommittee was
adjourned.]
Public Submissions For The Record