Unemployment benefits problems had nine-year pattern before pandemic

(The Center Square) – The bottom line from North Carolina Auditor Beth Wood: “The biggest issue … was the lack of preparedness for what happened.”

Wood addressed the Oversight Committee in the House of Representatives on Wednesday to share insight on what went wrong as the state rushed to dole out $14 billion in unemployment benefits during the pandemic. Her analysis was from two audits her office performed in the aftermath.

“I would have expected (the Division of Employment Security) to be more ready than they were,” she said.

Wood and Antwon Keith, assistant secretary for the division, fielded dozens of questions from lawmakers Wednesday that mostly centered on two main issues: the accuracy and timeliness of unemployment payments, and actions the division has taken since the pandemic to improve.

Federal law requires 87% of first-time payments to be made to claimants within specific time guidelines of 14 or 21 days, and only about 60% met the threshold between April 4, 2020, and Sept. 4, 2021.

Of the $1.2 billion paid during the timeframe, $438 million or 36% of payments were late, with only two of eight programs meeting the federal requirement, a trend Wood said predated the pandemic by nine years.

Other data from the state auditor highlighted $166 million in improper payments beyond a federal limit of 10%. Improper payments over or under benefit amounts accounted for about 18% of payments between April 1, 2016, and March 31, 2021. The rate in 2020 was 15.3% and it was 15.8% in 2021, according to Wood.

“There’s no consequences on not fixing anything,” Wood said.

Keith noted the unprecedented 3.8 million claims paid during the pandemic that created similar struggles to meet the federal thresholds in many states, though he focused mostly on what the department has done since to prevent future issues.

Those efforts have included overhauling the state’s unemployment website, implementing a status update bar, enhanced claimant screens, banking verification and some improvements suggested by Wood and the U.S. Department of Labor.

“When it comes to the Department of Labor, we’ve implemented most of those recommendations” and the division is working on others, he said.

Keith also pointed to how the reforms have helped to prevent fraudulent payments. Changes led to 56,407 suspicious identity issues flagged in 2022 and 28,396 in 2023. The division prevented $264 million in fraudulent payments in 2021, and $142 million in 2022.

“We prevented $64 million from going out of the coffers this year,” he said.

A loss of 45% of the division’s employees in December 2022, accounting for “148 years of experience,” has complicated the work, he said, but the division is leveraging artificial intelligence with a chatbot and elements of the appeals process to “to help staff,” he said.

“We’re looking at ways to automate things,” he said.

Other topics involved $366 million in overpayments, and successful efforts to recover $65 million in fraud and non-fraud money, including more than $36 million in claimant payments.

While Keith could not provide a timeline for lawmakers on when the division may meet federal thresholds or implement all recommended reforms from the state auditor and the Department of Labor, Wood suggested a solution.

“HB471 is the answer,” the four-term Democrat said, which passed the chamber 113-0 in April and has idled in the Senate.

House Bill 471 would require state agencies to submit progress reports to the state auditor and General Assembly to ensure they implement audit recommendations and best practices.

If they don’t, Wood said, lawmakers could hold them accountable.

“It’s not going to naturally occur unless you gentlemen and ladies step in,” she said. “I think you’re going to have to legislatively mandate some of this.”