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State audit finds EDD put millions at risk of identity theft

California State Auditor called out the Employment Development Department for mailing out 38 million social security numbers, after it had been warned to stop.

SACRAMENTO, Calif — New concerns about fraud and security at the Employment Development Department as the California State Auditor calls out the department for exposing millions of social security numbers.

In a scathing report, the Auditor accused EDD of putting millions of people at risk for identity theft, after it warned them about the issue last year. The audit found that the EDD has sent at least 38 million pieces of mail with people’s full social security numbers since the start of the pandemic.

“I think this is a clear message by one of the most trusted individuals in the state of California, who has now found a huge ticking time bomb of potential waste, fraud, abuse that is actually enabled by EDD,” Assemblymember Jim Patterson (R-Fresno) said.

State Auditor Elaine Howle wrote to the governor and state lawmakers, telling them "EDD must take swift action to end its potentially harmful practice and better safeguard the identities of the residents it serves."

Howle said her office had first warned EDD in March 2019 to stop mailing documents with social security numbers. Since then EDD has removed the numbers from some forms, but not the three most common ones. The audit states if EDD had followed the earlier recommendations, EDD “would have avoided sending full SSNs on nearly 34 million—or close to 90 percent—of the 38 million mailings it sent from March 2020 through mid-October 2020.”

The audit also shared pictures of piles of mail that has been returned to EDD, some of it containing social security numbers. We’ve heard from dozens of people who received letters in the mail addressed to other people. EDD believes many of those letters may be tied to fraud.

Credit: California State Auditor
Photos from the California State Auditor show piles of mail returned to EDD. (Photos taken Oct. 29, 2020)

We’ve also heard from dozens of people who have had their EDD debit card accounts frozen or money drained from them as part of fraud or fraud investigations.

Assemblymember Patterson said he’s heard from people “who had their account with thousands of dollars emptied by fraudsters who had social security numbers and who had addresses.”

The audit raised similar concerns, stating that EDD’s mailing practices expose social security numbers in several ways:

  • Mail with SSNs could be stolen
  • Mail with SSNs could be accidentally sent or delivered to incorrect addresses
  • Fraudulent claims could result in multiple mailings with SSNs to an incorrect address the perpetrator has selected

Assemblymember Patterson called on Governor Newsom to take quick action to address the concerns raised in the audit.

“Cleaning house is one thing. Making a plan is one thing,” Patterson said. “But when the cleaning of the house and the plan does not address the fundamental risk of waste, and fraud and identity theft, then this system is a rogue operation that you must now determine by your executive authority to fix and to change, now.”

Another concern raised by the audit relates to EDD’s timeline for removing social security numbers from documents. Last year, EDD had stated that a system upgrade would allow it to remove social security numbers from documents and replace it with a different unique identifier. However, as the audit states, a strike team from the Governor recommended a new approach for EDD and has put the system upgrade on hold.

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Following our initial reporting of the Audit, EDD responded to ABC10 with its plans:

  • EDD has met with the Auditor and acknowledged that they are behind schedule with the Auditor’s timeline and has provided the Auditor with its updated schedule.
  • EDD is on track to remove the Social Security Numbers of the top three forms by August of 2021. In addition to protecting customer information, EDD is also focused on improving the accessibility and ease-of-use of these forms. The pandemic and its effect on California workers has made the need for improved access to benefits more apparent than ever. As a result, EDD is making changes to these forms in order to make them easier to understand and complete so that all Californians have a clear path to access benefits they may be entitled to. 
  • Additionally, we will be removing social security numbers from all other forms that are used throughout EDD by January 2023, bringing the department in compliance with the recently signed bill regarding the use of Social Security numbers on mailed documents. 
  • The backlog of returned mail was a priority for EDD and we have put resources into sorting and processing that mail with an estimated completion date of November 25, 2020.

Meantime, the state auditor confirmed it is conducting an emergency audit of EDD and its response to the COVID-19 pandemic. That audit will look at how EDD managed its backlog of unemployment claims, call center complaints and the department’s technology.

The emergency audit is expected in early 2021.

WATCH MORE: Inmates scam EDD out of more than $250,000 in unemployment benefits