STATE AUDIT: Unemployment system overpaid people $166 million in benefits

RALEIGH, N.C. (WITN) - A state audit found the North Carolina Division of Employment Security overpaid people some $166 million during a five year period.

Auditor Beth Wood released the audit this morning.

The audit said from April 1, 2016 to March 31, 2021 the overpayments exceeded the federal overpayment rate of 10%. Wood said the state’s overpayment rate averaged 18% during that period. It says Employment Security failed to implement U.S. Labor Department recommendation to reduce overpayments.

Wood said the extra money paid in benefits is partly because Employment Security wasn’t doing enough to make the people receiving unemployment checks prove they were looking for work.

“What the Department of Labor, their integrity center, recommended, was that we require the claimants to show proof, not just certify or not just say that ‘I applied for three jobs a week,’ but to show the proof,” Wood explained. “Because what we’re finding is that people will apply for jobs they aren’t qualified for. They will apply for jobs with no idea that they could ever get that job, and so that doesn’t really meet the spirit of what the unemployment money’s are about.”

Wood’s report also pointed out concerns about how claims were evaluated.

“What the state of North Carolina has allowed is their staff to look at arguments between the employer and the employee. The employer says you quit voluntarily. And the employee will say, ‘no you let me go,’” Wood said. “And there’s no standardized process. And so this is all being left up to individuals, whether they’re trained properly or not.”

In response, Commerce Secretary Machelle Baker Sanders said they agree with the audit findings and that she is “pleased to report that many of the strategies recommended in the audit have already been implemented or are in the process of being implemented.”

The Division of Employment Security said it agrees with the audit’s findings and recommendations. To the finding about the overpayment, DES said it “remains committed to reducing fraud, waste and abuse in the unemployment benefits system”. It adds that they “will evaluate how work search activities can best be reported.”

Their full response can be found on page 26 of the report.

Wood said the employers pay the price for the people being overpaid. “This is all money that employers have to pay in based on the number of employees that you have, and so this is off the backs of the employer,” Wood said.

In terms of the consequences of overpaying this amount of money, there aren’t many. The governor or the General Assembly could step in somehow. For now, the Department of Labor will just continue to work with the Division of Employment Security to implement changes.

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