Unemployment benefits can be a critical lifeline for those who find themselves in hard times and without a paycheck. In fact, these benefits helped keep 3.2 million Americans out of poverty in 2010. That’s the good news. As with most things in life, there is room for improvement. According to today’s Fraud of the Day from CNN Money, the federal government and states overpaid an estimated $14 billion in unemployment benefits in 2011. (Oh relax; it’s just $14 billion.) How exactly did this happen?

According to the CNN report, the overpayments generally are made to three types of people: those who are not actually seeking a job, those who are fired or quit voluntarily and those who continue to file claims even though they’ve returned to work. (In case you’re wondering, if you’re ANY of those three, you are not eligible for benefits.) Many fraudsters, as regular Fraud of the Day readers know, use the stolen identities of illegal immigrants, prison inmates, and even the deceased (Who knew the zombie apocalypse would involve tax fraud?) to file bogus claims for unemployment compensation.

Sometimes people are simply trying to scam the system. The report cites an example of a man who was collecting unemployment benefits legally, until he was convicted of an unrelated charge and sentenced to prison. An inmate suggested that he continue collecting the benefits and he did just that – from inside prison. Then he was caught. Now that he’s been released from prison, he is working to repay the state the $14,000 he defrauded the system.

Overpayments. Fraud. Where are our tax dollars going, and more importantly, why don’t we know. Here’s my theory: it boils down to a need to improve the flow of information among federal, state and local government agencies. Of course, the information is only one part of the equation. These agencies must be able to analyze it as well. So here’s the question for the day: which do you think is costlier for the taxpayer – investing in public records and data analytics technology to find fraud and overpayments or continuing to lose money due to overpayments?

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