Federal Watchdog Uncovers $382 Million in Fraudulent Unemployment Payments Since 2020

A federal investigation has uncovered nearly $400 million in improper unemployment benefits distributed since 2020, with a significant portion of the funds traced to just three U.S. states. The Department of Government Efficiency (DOGE), established to investigate waste and misuse in public spending, identified California, New York, and Massachusetts as the top contributors to the misdirected payments.

According to DOGE’s latest report, these three states accounted for approximately $305 million in fraudulent claims—more than 75% of the total amount uncovered. While the report did not specifically assign fault to any individual or agency, it noted that states with larger populations and more complex benefit systems were often more vulnerable to fraud, particularly during the peak of the COVID-19 pandemic.

A Closer Look at the Findings

One of the more serious revelations in the report involved unemployment benefits reaching individuals flagged by federal authorities. California, for instance, was noted for disbursing 68% of the benefits provided to individuals on a federal watchlist or with prior criminal convictions, although the report acknowledged that identity fraud and system overloads may have contributed to the errors.

DOGE, launched with a mission to streamline government spending, was created through an executive directive and set an ambitious goal: eliminate $2 trillion in waste across all federal agencies. Since its inception, the department has taken a close look at state and federal spending, especially in areas affected by emergency funding and rapid-response programs.

Labor Secretary Lori Chavez-DeRemer praised the department’s work, stating, “This discovery represents a critical step in holding individuals accountable and recovering taxpayer funds. We are committed to ensuring the integrity of public benefits programs.”

Unusual Spending and Other Red Flags

As DOGE officials prepared to transition leadership, a summary of notable audit findings was released, highlighting questionable spending in various sectors.

Among the most notable discoveries:

• Improper Contracts Abroad: A former official from Afghanistan reportedly received a U.S. government contract valued at over $130,000. The individual, previously linked to the Afghan government, had a controversial background. After the revelation, the contract was canceled and funds were frozen.

• Use of Relief Funds in Education: Several school districts were found to have used pandemic relief funding for purposes unrelated to student achievement or recovery. For example, one district in Utah used approximately $86,000 to cover hotel accommodations in Las Vegas during a conference. Another in California rented a professional sports stadium at a cost of nearly $400,000. DOGE’s report stated these expenses lacked clear evidence of direct educational impact.

• Youth Programming Abroad: In a separate initiative, $20 million in federal aid was granted to a nonprofit to support children’s educational programming in Iraq. While the project aimed to promote inclusion and early learning, watchdog officials questioned whether such international projects should take priority over domestic needs, especially during recovery periods.

• Misclassified Payments: According to a recent Government Accountability Office (GAO) report, more than $160 billion in improper payments were made by various federal departments in the last fiscal year. Programs under the Departments of Health and Human Services, Treasury, and Agriculture were identified as primary sources of error. The GAO noted, however, that this figure represented a decrease from the previous year, suggesting improvements in oversight.

Efficiency Initiatives and Next Steps

The Department of Government Efficiency has made recommendations to federal and state agencies for reducing fraud, improving system audits, and enhancing inter-agency communication. Additionally, DOGE has called for better safeguards around rapid disbursement programs and emergency funding mechanisms.

As the department’s current leadership prepares to step back from day-to-day oversight, officials stressed the importance of continuing efforts to track waste and recover misused funds.

While many of the identified issues occurred during a time of unprecedented public spending, the findings underline the importance of proactive monitoring, clear communication, and responsible budgeting in public programs.

DOGE is expected to deliver its final report under its current leadership by the end of the fiscal quarter. Future oversight efforts will likely continue in partnership with the Office of Management and Budget and various congressional committees focused on public accountability.