Nevada auditors uncover fraud in jobless payments

CARSON CITY - A legislative audit released Thursday found that three Nevadans continued to receive unemployment benefits after their deaths and that 67 people in state prisons and local jails were paid during their periods of incarceration.

But representatives of the state Employment Security Division told a legislative committee that the fraud discovered by the audit was extremely low - seven one-hundredths of 1 percent. The fraud was discovered in January, a time in which 97,000 people in the state were receiving unemployment benefits.

State Sen. David Parks, D-Las Vegas, chairman of the legislative audit subcommittee, agreed the problem was small but noted prison inmates have plenty of time to "game" the system and share their ideas with other inmates.

Kelly Karch, deputy director of the employment division, said that seven people have been convicted of fraud and sent to prison in recent years for illegally acquiring state benefits and that 30 other cases are being pursued.

Those who are found to have taken funds fraudulently are required to make restitution, although in many cases that is difficult because "a lot of Nevadans don't have any funds," he said. Unemployed people are issued debit cards in which their benefits are placed.

The agency is working with the Social Security Administration, the Office of Vital Records, and federal, state and local jails to establish cross-check databases. Nevada employers also must inform the state of new hires. But Karch said jails, in particular, want to be paid if they provide help for his agency.

The Social Security database is particularly valuable because the federal agency must be notified when someone dies before it pays Social Security benefits. Because workers also pay Social Security taxes on their job earnings, the state can learn whether they are trying to obtain unemployment at the same time they are working.

Claimants who return to work often try to collect unemployment until they receive their first check from their new employer, Karch said. Payments, however, are supposed to stop the day they start a new job.

Nevada averaged an 11.6 percent fraud rate in 2011 for these type of improper payments, according to the U.S. Department of Labor, slightly more than the 10.6 percent national average.

While they must this repay this money, Karch said, they often don't realize they have done something wrong.

People in jail or prison also are not allowed to accept benefits because the law requires them to be able to work and to seek new jobs.

In addition, benefits do not continue after someone dies, although members of a dead person's family can spend any remaining funds legally obtained during the time the person was alive.

The audits found the three deceased people received payments of $40,417 after their deaths. Karch said that two family members have been prosecuted and that the third case is pending. In one of the cases, benefits were paid for 83 weeks after the person's death and totaled $33,000. Karch said a family member knew how the system worked and continued to receive the benefits.

Unemployed people are required to contact the division periodically by phone or computer to note their efforts to find jobs. Karch said the inmates who received benefits worked with people outside the prison.

Legislative auditors estimated the division has been bilked out of $5 million over the past three years by inmates. The 67 inmates who received improper payments discovered by the audit took more than $240,000.

Because the agency has a 30-year-old computer system, workers in many cases must cross-check jail records manually with the names of people receiving unemployment.

Newer computers could perform the checks instantly.

Contact Capital Bureau Chief Ed Vogel at evogel@reviewjournal.com or 775-687-3901.