Audit finds $166 million in improper unemployment benefit payments

The Division of Employment Security mobile login is shown in this file photo.

RALEIGH — A new audit from the N.C. State Auditor’s Office details $166 million in improper unemployment insurance (UI) payments made between the beginning of April 2016 and the end of March 2021. 

According to the audit report, the Department of Commerce’s Division of Employment Security (DES) reported improper unemployment insurance payment rate averaged 18% during the period of April 1, 2016, through March 31, 2021. That exceeded the 10% federal improper payment rate allowed by the United States Department of Labor (USDOL).  

“As a result, DES paid approximately $166 million in improper payments over and above the federal improper payment limit during the same time period,” a summary of the audit report says. 

During that time period, DES paid approximately $2.2 billion in UI benefits. 

The audit report says DES exceeded the improper payment limit because it failed to implement USDOL recommendations to reduce improper payments that resulted from three areas; work search requirements, benefit year earnings, and separation information issues.  

These three types of errors made up 94% of all DES overpayments over the last five years 

North Carolina’s Unemployment Insurance program is “currently designated as “High-Rate/High Impact” by the USDOL due to its high improper payment rates,” according to the audit report. 

The state auditor’s report made several recommendations to remedy the overpayment situation, including the areas involving work search requirement errors, benefit year earnings errors, and separation issue errors. 

The audit report also recommended DES management should “implement USDOL recommendations, best practices, and strategies to limit DES’s improper payment rate to less than 10% of claims paid.” 

Department of Commerce Secretary Machelle Sanders agreed with the results of the audit as well as the recommendations for improvement included in the report. 

The time period covered by the audit report overlaps with pandemic-related federal UI payments. 

An audit report produced in March of this year reported that the first COVID-related unemployment claims were not handled in a timely manner by DES for the period of January 1, 2020, through March 31, 2021. 

“As a result, $438 million of financial assistance was not received by unemployed North Carolinians during a time of tremendous need,” the March audit report stated. 

In 2020, Gov. Roy Cooper selected former state legislator Pryor Gibson to replace Lockhart Taylor as the head of DES. In February 2021, Cooper made another change, appointing Sanders to lead the Commerce Department. 

About A.P. Dillon 792 Articles
A.P. Dillon is a North State Journal reporter located near Raleigh, North Carolina. Find her on Twitter: @APDillon_