The South Carolina Department of Employment and Workforce (SCDEW) immediately recognized the increased fraud risk presented by the federal pandemic programs. In an effort to deter this obvious fraud threat, SCDEW initially informed every applicant for federal pandemic benefits that they might be required to provide proof of their employment or self-employment at a future time. The USDOL, however, ordered SCDEW to remove this notification because, in the words of one USDOL representative, such a warning might deter a claimant from applying for federal pandemic benefits. USDOL subsequently issued guidance prohibiting states from requiring proof of employment or self-employment as an eligibility requirement to receive federal pandemic benefits. Therefore, all a fraudster had to do to receive federal benefits was simply tell a state they were unemployed as a result of the COVID-19 pandemic. SCDEW was prohibited from requiring that fraudster to prove that they were even employed, let alone that they were unemployed because of the pandemic. Many of the items identified as paid fraudulent claims were caused by SCDEW’s compliance with the USDOL guidelines. SCDEW complied with this guidance, even though it disagreed with USDOL’s highly technical parsing of federal law, and SCDEW advocated for Congress to amend the law to clearly establish commonsense fraud protections. While awaiting Congressional action, SCDEW implemented numerous fraud detection and prevention tools and strategies to minimize the potential fraud exacerbated by lax federal requirements. Unfortunately, Congress did not amend the law until late December 2020. As a result, eligibility determinations made by SCDEW prior to the law change followed the federal guidance for this pandemic funding; however, to meet federal and state expectations regarding the quick payment of federal pandemic benefits, the federal policies and procedures SCDEW was forced to adopt were not adequate to completely prevent fraudulent claims. SCDEW continues to review, monitor, and enhance eligibility processes and procedures to prevent and detect fraudulent claims. We also updated our internal controls to help mitigate future fraudulent claims. The COVID pandemic created unprecedented challenges for every state workforce agency due to the combination of historic claim volume, the availability of a staggering amount of federal money, and new programs with lax eligibility and verification requirements that had to be implemented quickly, despite often changing federal guidance. These factors created a perfect storm for sophisticated fraudsters to exploit. In response, SCDEW took numerous aggressive steps. In mid-2020, SCDEW required applicants to provide copies of their driver’s license or passport to prove their identity before receiving benefits. SCDEW also implemented identity verification questions through Lexis Nexis that every claimant had to pass before processing a claim. This was further enhanced in March 2021, when South Carolina was one of the first states to implement digital identity verification through ID.me. SCDEW also implemented reCAPTCHA to prevent against bot attacks, implemented new data sharing agreements, and increased the number of staff dedicated to investigating fraudulent claim activity to over fifty at the peak of the pandemic programs. SCDEW continuously reviews its fraud detection and prevention activities to stay ahead of emerging fraud schemes. Since the height of the pandemic, SCDEW has increased its data crossmatching, partnered with the State Law Enforcement Division to have a financial fraud investigator dedicated to unemployment insurance fraud, and made numerous enhancements to its computer systems to combat fraud and preserve the integrity of the unemployment insurance system. Per USDOL data, the agency had the twelfth lowest improper payment rate out of fifty-three programs during the year ending September 30, 2024. For more comprehensive explanation and response, please see August 26, 2024, letter attached from Paul Famolari, Assistant Executive Director of Unemployment Insurance. The Agency’s contact person responsible for the corrective action plan is Jacquelyn Carlen, CFO. The completion date of the corrective action plan was June 20, 2021, and is ongoing.