A report released Tuesday by State Auditor Mike Harmon found numerous issues within Kentucky’s Unemployment Insurance System.
Overall, the report, known as the Statewide Single Audit of Kentucky, or SSWAK, had 25 findings, half of which dealt with the Office of Unemployment Insurance and the UI fund.
Due to the high volume of claims and new federal unemployment programs during the pandemic, the report found OUI leadership made decisions that violated federal law and sacrificed program integrity in an attempt to more quickly get payments to unemployed individuals.
One of these changes referred to as “Auto-Pay,” allowed UI benefits to be automatically paid without requiring claimants to report the weekly wage information needed to determine whether they were actually eligible for benefits. Seasoned OUI and Commonwealth Office of Technology expressed concerns about implementing Auto-Pay, according to the report, but it was implemented in spite of those concerns. Auto-Pay was in effect two weeks for traditional UI and eight weeks for PUA, and it contributed to causing many of the issues identified in the auditor’s findings.
The report notes that despite efforts to pay benefits more quickly, many claims still were not timely processed. As of Oct. 29, 2020, the claims backlog of unprocessed, initial jobless claims totaled approximately 80,000. Additionally, OUI had archived more than 400,000 emails the office received through its UI assistance email account that remained unread as of Nov. 9, 2020. These emails from claimants could include indications or problems for OUI to address, not to mention general questions from unemployed Kentuckians.
To illustrate the Auto-Pay issue, auditors selected a sample of 37 state employees who filed for and received UI benefits and discovered 16 state employees were paid unemployment benefits for the loss of part-time jobs, despite still being employed by the state.
Claimants are required to report any earnings during the week for which they are claiming benefits, and their full-time state wages would have made these employees ineligible for benefits. However, the adoption of the Auto-Pay policy eliminated the system control that asked claimants to report their weekly earnings, so the system did not take into account wages from their full-time state employment. The net overpayment in this sample was more than $116,000.
Furthermore, seven of the employees did not report wages earned from full-time employment even when the Auto-Pay period had ended despite having the ability to do so.
Another issue appearing in the report was data security. OUI failed to inform the Auditor of Public Accounts, along with other state agencies, of three data breaches that occurred in April and May 2020. State law requires agencies to notify APA and others within 72 hours of the occurrence.