The Labor Department deployed a "strike team" to California to address federal findings of improper payments and alleged fraud within the state's unemployment insurance (UI) program.
California has been found to have a depleted UI trust fund, along with $21 billion in borrowed federal funds to keep the system running - which federal officials say has led state employers to pay higher UI taxes to repay the debt.
In a statement, the department cited an 83-page California State Auditor report that determined the state's UI system is high-risk, in part due to "inadequate fraud prevention and claimant service [in its employment development department (EDD)], as well as a high rate of overturned eligibility decisions in its Unemployment Insurance Program."
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"Financial issues and potential fraud in California's unemployment insurance program will be fully examined. The previous administration turned a blind eye toward failing Labor programs: This ends now," Labor Secretary Lori Chavez-DeRemer said.
"Immediately, we are engaging a specialized strike team to uncover any potential fraud or abuse and quickly moving to protect the American worker and taxpayers. I look forward to restoring the California UI program's integrity and financial health."
Chavez-DeRemer added that the "strike team" will include Labor Department specialists from both its national and regional offices.
The secretary also wrote a letter to the EDD, citing increasing improper payment rates, insufficient timeliness, data accuracy and quality concerns, and questions about participants' eligibility and the use of taxpayer funds.
California received about $290 billion in COVID relief, part of, part of which helped what the California Post described as "rapidly implementing expanded unemployment benefits."
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At least one California UI steward was convicted of using her position to file nearly $860,000 in fraudulent UI claims, while some civilians were convicted of creating nonexistent businesses to claim UI.
Just prior to the strike team's deployment, DOL Inspector General Anthony D'Esposito said he found nearly $1 billion in taxpayer funds "at risk" nationwide due to COVID-related UI fraud.
D'Esposito, a former NYPD officer and ex-congressman from Long Island, said in a statement that an analysis of 6.5 million prepaid debit cards used for COVID UI benefits still had $720 million loaded on them.
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"My office has warned that, absent swift action, U.S. taxpayers risk losing nearly a billion dollars in fraudulently obtained benefits," D'Esposito said in a statement.
"This is taxpayer money - and it demands immediate attention."
D'Esposito said fraud is not a victimless crime and that every misspent dollar is one that an actual needy family could use.
"When we root out fraud, we protect taxpayers and lower the real cost of living," he said.
Fox News Digital reached out to Newsom and the state Senate's top Republican for comment.
