State agency exposes jobless Californians to identity theft and fraud, audit says
The state’s Employment Development Department has “continued to place Californians at risk of identity theft,” despite warnings last year that its policy of including Social Security numbers in mailings is dangerous, the state auditor found Thursday.
State Auditor Elaine Howle 20 months ago told the agency that manages the state’s unemployment insurance program that including Social Security numbers on certain mailings places people at risk. On Thursday, Howle painted a portrait of an agency that has made little if any progress in stemming the problem, and is engaging in practices that could be leading to fraud.
“EDD’s failure to change its business practices in a timely manner has unnecessarily put claimants at increased risk of identity theft,” the audit said.
EDD has been under siege from consumers and lawmakers this year, as unemployment claims surged to unprecedented levels, wait times for service increased and the agency furiously added staff and hours. A state strike force has been trying to improve its efficiency.
But the audit found that the spike in claims “has further revealed the dangers of EDD’s practices.”
“As millions more Californians filed unemployment benefit claims, the number of pieces of mail that EDD sent with Social Security numbers printed on them increased dramatically,” it found.
The agency told the auditor that it is “committed to protecting the confidentiality of our claimants’ information and protecting them and our programs from fraud.” It said one of its priorities is to replace claimants’ Social Security numbers from the most frequently used forms with another unique identifier.
“We acknowledge and appreciate the urgency of the auditor’s timeline, and although we are admittedly behind schedule, we continue to diligently work to protect the identities of those we serve,” EDD said.
‘Significant’ amount of undelivered EDD mail
The latest audit comes after reports that hundreds of EDD mailings, some with valuable debit cards, had been sent to the wrong homes and addressed to the wrong people — raising concerns about a massive fraud scheme.
The department has said it saw no link between Howle’s 2019 warnings about identity theft and the recent surge in suspicious activity.
But in the Thursday report, the auditor noted that, “We observed a significant amount of mail that was returned to EDD because it was undeliverable, including mail that individuals received erroneously and returned to EDD. Such mailings may be linked to attempts to fraudulently collect unemployment benefits.”
The auditor sampled a small amount of the returned mail and said it “found multiple examples of mailings containing full SSNs.”
The auditor had warned of trouble in its March 2019 report. It found that in fiscal 2018, EDD sent about 40 million pieces of mail to those involved in the unemployment and disability insurance benefit programs.
About one-third were a “continuing risk to claimants,” it said, as they had the full Social Security numbers. The auditor found “EDD had no short-term plan to remove the SSNs.”
The audit recommended that the department stop using the full number on mailings. EDD generally agreed, though since the coronavirus pandemic sent the economy reeling in March, and the number of applications exploded, EDD has “mailed a large volume of documents containing SSNs associated with these claims.”
The auditor had recommended making changes to three frequently used forms, and EDD said it was aiming to modernize its system, a project that would take more than five years.
The auditor offered interim solutions. It has made partial progress, but the Thursday report found that if EDD modified the three most common documents, it would have avoided sending full Social Security numbers to 34 million — or 90% — of the mailings it sent from March through mid-October.
This story was originally published November 20, 2020 at 5:00 AM with the headline "State agency exposes jobless Californians to identity theft and fraud, audit says."
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