As the coronavirus pandemic forced businesses to close their doors and people to lose their jobs en masse around the country in early 2020, the Kentucky Office of Unemployment Insurance ignored emails and illegally auto-paid claimants the minimum weekly amount, according to a state audit published Tuesday.
Facing “external pressure” to fulfill historic levels of unemployment claims at the onset of the pandemic, the Kentucky unemployment office was incentivized to “override system controls” within the state’s unemployment application system that led to claimants being paid erroneously, both in the amount and the frequency of unemployment checks that they were eligible to receive, state auditor Mike Harmon wrote in the audit.
As a result, Harmon said, he’s unable to estimate how much the state either overpaid or underpaid Kentucky residents in 2020. According to the CARES Act, though, states are forbidden from waiving overpaid pandemic unemployment insurance, Harmon wrote, though Kentucky has requested help from the U.S. Department of Labor with its situation.
“While not all of these payments were improper, they were paid in a control environment highly conducive to improper or even fraudulent payments,” Harmon wrote in the report.
The Office of Unemployment Insurance erred initially in setting up an auto-pay system that sent any claimant a minimum insurance payment weekly, regardless of whether the claimant was eligible. Claimants weren’t able to certify that they were unemployed for a COVID-19-related reason, and the office did not reduce benefits for those who were actually working full-time or part-time while still receiving unemployment. On top of that, Harmon found, claimants didn’t have the opportunity to send any documentation that might have resulted in them receiving a higher unemployment payment.
More than 400,000 emails potentially containing questions or concerns from Kentuckians sent to the unemployment office between last March 19 and April 19 sit unread in an email inbox, Harmon’s office found.
The Kentucky Center for Investigative Reporting first obtained emails between the U.S. Department of Labor and the Kentucky Office of Unemployment Insurance in August showing that Kentucky violated federal law by likely underpaying some claimants, and in December, Harmon released a report confirming that the office “eliminated key internal controls” meant to reduce the likelihood of overpaying or underpaying claimants to expedite the delivery of those payments.
“In this particular case, the biggest concern is that they really did not know how much was still owed to claimants. We received multiple different numbers, it was kind of all over the board,” Harmon told the center in December. “The numbers ran everywhere from hundreds of millions to a couple billion [dollars].”
In response to the audit, Office of Unemployment Insurance issued a statement claiming it will “ensure foundational controls are in place” to maintain integrity and accuracy of future payments. It also cited the unprecedented requests for assistance brought on by the pandemic, including 1.6 million unemployment claims filed in less than a year.
But the auditor also found cause for concern within the office beyond payment accuracy. Twelve of the 25 findings in Harmon’s statewide audit related to the unemployment office, including a lack of technical documentation for the state’s unemployment application system, a lack of compliance with the state’s risk assessment and privacy policy and a failure to adhere to security and privacy policies put in place to protect the unemployment application system. The office also failed, the audit found, to properly report three security breaches that occurred in 2020.
To ensure security breaches are reported accurately in the future, too, the office wrote in its response, changes will be made over the next two months.
