We’ve said it before and we’ll say it again: Unemployment overpayments are a HUGE problem for nonprofits still paying into the state unemployment insurance system. Nonprofits aren’t the only ones who now know they’re losing money due to poor governmental oversight.
On Monday, CNN Money published an in-depth review of government overpayments within the UI system and their findings. Although the findings do recognize the value of UI benefits to those receiving them properly, improper payments are simultaneously distressing for those who oversee limited budgets and work on shoestrings.
Digging through reports from the U.S. Department of Labor, the Campaign to Cut Waste, and individual state records, CNN found that an estimated $14 billion in benefits were paid out improperly during fiscal 2011. That’s more than 10 percent of all the jobless benefits paid out last year.
But some states did far worse than the national average. For instance, in Indiana, which has become known for bad spending habits, more UI payments made were made in error, or improperly, than were made correctly. Indiana actually made more improper payments than proper payments…to the tune of at least $1,743,109,894 over the last three years.
The blame doesn’t only fall on one or two states though. Unemployment Insurance has the second highest rate for improper payments of any federal program.
But, finally, something is being done. Sort of. A little bit.
The U.S. government and many states are trying to recoup their losses and avoid future overpayments.
CNN found that the majority of the UI benefits improperly collected go to check cashers who either aren’t actively searching for a job, were fired or quit voluntarily, and those who continue to file claims even after they’ve returned to work.
Although people do deliberately defraud the system and use fake documents or identities to collect benefits, the current focus is on establishing preventative methods to recover the money that has been lost.
The crackdown won’t help your nonprofit though.
Despite nearly half of all improper payments being deemed “recoverable,” the money will be returned to the federal government. There is no indication that the money will be returned to the employers who were overcharged, or that they’re tax rates will be positively affected by the discovery of errors.
Only a quarter of the estimated actual recoverable payments have been recovered so far. For the most part, when the government discovers someone was overpaid, it often issues a letter asking the claimant to return the extra funds. But the repayment can be waived in many states if the UI beneficiary can show that they’re in financial distress and didn’t actively intend for the error to occur.
For nonprofits, considering opting out of the state unemployment system is becoming more and more important as fraudulent claims and for-profit layoffs affect statewide tax rates. You can find out if opting out is right for you at http://www.chooseust.org/request-a-savings-quote/