Thursday, December 1, 2022

Auditor’s office says state ‘improperly’ paid out $166M in unemployment over five years

The North Carolina Division of Employment Security.

The state auditor issued a report Wednesday outlining N.C. Department of Commerce’s Division of Employment Security (DES) doled out millions in overpayments through the state’s unemployment system.

N.C. auditor Beth Wood said overpayments are happening because the division has not been properly tracking how people are looking for jobs. It also does not have a standardized system for determining how employees and employers ended relationships.

READ MORE: Unemployment down from last year, still recovering from pandemic

The report points to work search requirements, benefit year earnings and separation issues as the primary causes of overpayments. Graphs in the report show more than 50% of overpayments are caused by benefit earnings errors and almost 45% were due to separation issues, both above the national averages of 35% and 33%, respectively.

In total, DES sent $166 million above what was allowed by the feds from 2016 to 2021 and on average 17.6% of the total unemployment payments were sent to people who should not have received the money. 

The figure is well over the 10% of unemployment payments the U.S. Department of Labor allows to be made “improperly,” but there is no penalty for the division if it fails to meet that standard.

The Department of Labor sends in help to work with state unemployment agencies in order to get policies in line when not meeting the 10% limit.

Wood outlined two major areas DES needs to improve upon: One is making sure claimants follow the spirit of the work-seeking requirement by looking for jobs they are qualified for. The second is to create a standardized process for determining if an employee quit, was fired or fired for cause.

Someone qualifies for unemployment when fired. If a person quits of his or her own volition, or the company shows an employee was fired for an offense — such as stealing or harassment in the workplace — the person can be denied unemployment.

Wood claimed siding with the employer or the employee on how the relationship ended is essentially up to the DES staff member handling the case. The report indicated DES favored more employees over the employer, so payments were sent to people who did not qualify.

DES claims it provides staff with “extensive” training on contested cases based on standards set by the Department of Labor.

Currently, the department mandates unemployment applicants look for three jobs every week and submit paper worksheets to DES. It is creating a repository so people who apply for unemployment can enter their work search history online.

It “will evaluate how work search activities can be best reported” through the repository, though that project will not be completed until March of 2024.

DES responded to the auditor’s report and largely agreed with its findings. The state department is further reviewing its policies within the next six months.

Port City Daily asked DES for overpayment figures specific to New Hanover, Brunswick and Pender counties. Spokesperson Laura Leonard said those figures are “not available at a county level.” Overpayments are tracked statewide.

This was the second in a series of audits into DES procedures; Wood said her office has not determined how many more will be conducted.

In March, the office issued a report showing the division did not send out more than $400 million in payments in a timely manner during the Covid-19 pandemic.

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