Unemployment Backlog Hinders Audit

Kentucky’s Office of Unemployment Insurance is unable to determine how much money it still owes the thousands of people waiting for their claims to be processed, according to Kentucky Auditor Mike Harmon.

Since March, thousands of Kentuckians have been laid off and furloughed because of the pandemic, which led to an unprecedented number of claims filed with Kentucky’s Office of Unemployment Insurance, and an enormous backlog of people waiting for their claims to be processed.

Now, the backlog may have prevented the state from conducting an accurate audit of the unemployment trust fund.

The findings are part of Harmon’s audit of the state’s Comprehensive Annual Financial Report, which lists all of Kentucky’s financial transactions and measures its financial condition for the fiscal year.

Harmon said when he asked the unemployment office how much it still owed in backpay, employees couldn’t answer confidently.

He said it ranged anywhere from several hundred million to $2 billion to back down. The number they finally settled on was $511 million.

Harmon said the wide range of numbers could create problems not only for those who are unemployed, but also for the General Assembly, which convenes in January and will need accurate information to draft the state’s budget for the next fiscal year.

If lawmakers don’t receive access to the correct numbers, it could create problems for the taxpayers.

In addition, Harmon’s office said the state eliminated “key internal controls” put in place to reduce the risk of improper payments in order to expedite payments during the pandemic. As a result, some claimants were paid without verification of eligibility, which created room for fraud.

According to Harmon’s report, as of June 30, the unemployment office owed at least $511.5 million based on claims filed before the end of the fiscal year and paid through November 17. The amount still owed in claims filed before June 30 could not be reasonably estimated due to system limitations and not being able to determine payment amounts of unprocessed claims.

The Office of the Auditor of Public Accounts plans to release more details on the specific issues auditors found within the Unemployment Insurance system in the coming months when it conducts the first volume of the Statewide Single Audit of Kentucky.
Source: WAVE