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Labor IG departs amid fraud dispute over jobless benefits

Scott Dahl warned of high risk of fraud in unemployment program but says that's not why he is leaving

Senate Labor Appropriations Chairman  Roy Blunt, R-Mo., urged a speedy replacement of Dahl.
Senate Labor Appropriations Chairman Roy Blunt, R-Mo., urged a speedy replacement of Dahl. (Bill Clark/CQ Roll Call)

The long-time inspector general of the Labor Department said he will retire as of June 21, leaving the office in search of new leadership as it ramps up a $26 million program to oversee the vastly increased unemployment benefits funded by coronavirus relief laws.

The challenge of monitoring billions in supplemental benefits was highlighted by a memorandum the Office of Inspector General sent last week questioning a department decision on documentation for the Pandemic Unemployment Assistance program, warning it opens the door to a “high risk of fraud.”

“We believe that reliance solely on claimant self-certifications without evidence of eligibility and wages renders the PUA program highly vulnerable to improper payments and fraud,” the OIG warned in a May 26 memorandum signed by agency audit chief Elliot P. Lewis.

The public release of a memo revealing a fundamental disagreement with department guidance to states suggests that the office intends to be aggressive.

The departing inspector general, former federal prosecutor Scott S. Dahl, emphasized in his Tuesday statement that any conflicts did not play a part in his retirement. Dahl was confirmed as the department’s inspector general in 2013 and doesn’t have a term limit.

“This decision has been long in the works and is for entirely personal reasons,” Dahl said in a statement. “I have not been told or asked to resign. For seven years, it has been my greatest professional honor to work with an outstanding team at the Office of Inspector General (OIG) on the extremely important work they do for the American public.”  

His comment comes after President Donald Trump demoted or dismissed five inspectors general. That included reassigning Glenn Fine, the Pentagon’s acting inspector general who had been designated to become chairman of a panel overseeing roughly $2 trillion in pandemic aid. Trump moved Fine to a position that made him ineligible for the panel role, and Fine resigned last week.

The Labor Department OIG issued a Pandemic Response Oversight Plan on April 15 that foresees work over four phases, with a heavy emphasis on helping the department to prevent fraud in the program.

Labor Secretary Eugene Scalia released a statement saluting Dahl for his long tenure as Labor’s chief oversight official.

“For seven years, Scott Dahl has helped improve the integrity and quality of the Department of Labor’s programs,” Scalia said. “The Department and the people it serves have benefited greatly from his contributions. We wish Scott and his family the very best in the future.”

Sen. Roy Blunt, R-Mo., the Senate Labor Appropriations Subcommittee chairman, urged a speedy replacement of Dahl. “Obviously the labor issues that result from the economic disruption create a lot of challenges for the department, and [they] need to get an IG in place as soon as they can,” he told reporters Wednesday.

Rep. Rosa DeLauro, D-Conn., also noted the urgency of filling the position. She is chairwoman of the House Appropriations Labor Subommittee.

“I think Inspector General Dahl served the Department honorably, and as I understand, he is leaving for personal reasons. Since his confirmation in 2013, he conducted robust oversight of the agency,” DeLauro said. “In particular, he helped the Department take steps to mitigate compounded drugs fraud and abuse in the worker compensation program, which he testified about before the Labor-HHS subcommittee in 2017. “

“To maintain the integrity and efficiency of the Department’s programs, it is critical the DOL OIG is not vacant for an extended period of time,” DeLauro said.

The roughly $2 trillion relief package enacted by Congress at the end of March vastly increased jobless benefits, largely with federal funding, and the OIG’s pandemic oversight focuses almost solely on monitoring Labor Department administration of the program.

One element of the plan focused on PUA provisions that make unemployment benefits available to the self-employed, gig workers and independent contractors, a part of the workforce not covered by most state unemployment programs.

Under the Disaster Unemployment Assistance program, the model for the PUA program, expanded benefits to the self-employed and similar classes of workers are made available immediately, but such workers most file proof of earnings within 21 days to continue receiving them.

The OIG said the same requirements should apply to PUA benefits, but the Labor Department Employment and Training Administration disagreed, providing guidance to states that workers who do not file additional proof of income should not be cut off.  

“Recognizing that ETA and the DOL Office of the Solicitor disagree with our assessment based upon their interpretation of the Act and underlying regulations — and given the UI program’s previously reported vulnerability to improper payments and the high risk of fraud — we suggest ETA seek additional guidance or clarification from Congress concerning whether a claimant is entitled to establish and continue to receive PUA payments without providing documentation at any point to support a WBA determination,” the OIG wrote.

The memorandum requested the department reply by June 2, but a spokesman didn’t say whether the department had complied. 

Jennifer Shutt contributed to this report.

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