Audit: State failed to issue $438M in COVID unemployment claims in timely manner

RALEIGH — North Carolina State Auditor Beth Wood’s office has issued a new audit report showing that the first COVID-related unemployment claims were not handled in a timely manner by the Department of Commerce’s Division of Employment Security (DES).

“DES did not issue first unemployment benefit payments timely during the period of January 1, 2020, through March 31, 2021,” the audit’s conclusion says. “As a result, $438 million of financial assistance was not received by unemployed North Carolinians during a time of tremendous need.”

The audit says the payments didn’t go out in a timely fashion because DES’ unemployment claim process isn’t designed that way and that the division’s management didn’t monitor how fast or slow the payments were going out.

Additionally, the audit says that DES was “not prepared for economic downturns that will inevitably occur.”

In its response to the audit, Commerce Secretary Machelle Baker Sanders did not disagree with the findings. Sanders said the department will review its systems and claims processes, per the audit’s recommendations. She also said DES will be developing a “post pandemic strategic plan” modeled on response policies for federally declared disasters but “expanded to include lessons learned from the COVID-19 pandemic.”

The findings in the audit cite federal requirements that at least 87% of first benefit payments are issued to regular unemployment insurance (UI) claimants within 14 days in states with a waiting week, which North Carolina has. During the pandemic that requirement was waived for the weeks between April 4, 2020, through Sept. 4, 2021, but the audit says the “requirement to ensure that at least 87% of first benefit payments were issued within 14/21 days was not waived.”

In matters of other consideration, the audit recommends that the state General Assembly should “consider enacting a law that requires state agencies to implement Enterprise Risk Management (ERM)” and implies that if DES had ERM policies in place, payments may have not been delayed.

The audit mentioned Gov. Roy Cooper’s statewide stay-at-home order, which went into effect on March 30, 2020, and extended through May 22 of the same year. That order is cited by the audit as cause of the large increase in the volume of claims filed.

“North Carolina’s statewide unemployment rate rose from 3.6% in February 2020 to 13.5% by April 2020,” the audit states, adding for context that unemployment rates were 11.4% in North Carolina during the Great Recession in 2009 and 2010.

Claims filed began to increase in March and April of 2020 and stayed at levels higher than that of 2009 and 2010.

“March 2020 through March 2021, DES reported that it received approximately 3.5 million unemployment assistance claims from approximately 1.5 million claimants,” reads the audit. “DES paid approximately $11.6 billion in unemployment insurance benefits from January 2020 through March 2021.”

Even before the pandemic put a strain on the system, North Carolina was already one of the worst performing states related to issuing unemployment payments in a timely fashion, according to the U.S. Department of Labor statistics. For the first quarter of 2020, the state had a timely payment rate of 67.2%, whereas the national average for that quarter was 86.5%.

As reported by North State Journal in 2020, between March 15 and early April, DES had seen an unprecedented surge in claims coming in at just under 389,000. The unemployment rate rose in all 100 North Carolina counties during April.

As of May 15, 2020, DES said, 528,511 claimants had received some payments totaling $1.9 billion for claims that were effective as of March 15, 2020. During that same month, unemployment claims in North Carolina passed 1 million.

Throughout the pandemic filing timeframe, those trying to file claims reported having to make numerous attempts to get a claim to go through, that the DES website kept crashing and other technical issues. The result was filers having to make multiple attempts to file over the course of several days or even weeks. Once claims were filed, claimants reported long lag times before any payments were received.

About A.P. Dillon 887 Articles
A.P. Dillon is a North State Journal reporter located near Raleigh, North Carolina. Find her on Twitter: @APDillon_