State auditors said that North Carolina’s unemployment benefits office failed to provide $438 million in first payments to displaced employees in 2020 and early 2021, Monday after examining the agency’s performance during the epidemic.
The audit placed some of the responsibility for the delays in the claims procedure and insufficient supervision.
It is widely known that the Division of Employment Security failed to make timely payments in 2020.
The division received a record number of applications for standard unemployment benefits and those established by the federal and state governments in response to the lockdown and associated business restrictions. In April and May 2020, the state’s unemployment rate hit 13.5 percent.
The performance audit counts the number of initial benefits that were not given within 14 or 21 days of an individual submitting a claim for all of 2020 and the first quarter of 2021. State and federal funds are used to fund benefits, depending on the program.
The office of State Auditor Beth Wood discovered that just 60% of the 3.67 million first payments made across eight programs totaling $1.2 billion were issued within the federal government’s timeliness criteria.
And 32% of the first payments — totaling $342 million — were not made within 30 days.
The audit noted that the delays occurred in the wake of news stories about “unemployed persons who drained their savings, fell into debt, and was unable to pay their daily living expenditures.”
Early delays caused by the flood of claims contributed to Gov. Roy Cooper appointing former state Rep. Pryor Gibson as the division’s chairman.
Complaints about programs have typically lessened as benefit bottlenecks have been removed, temporary programs have ended, and applications have declined as the economy has improved.
Unemployment compensation totaled $11.6 billion during the 15 months examined. Lockdowns on the coronavirus began in March 2020. Despite the “extraordinary” increase of benefit claims during the epidemic, auditors concluded that the division was unprepared for “inevitable economic downturns.”
According to the audit, the division lacked a strategy or risk assessment that examined and addressed the requirements of a rapid economic downturn.
While the agency contracted for $261 million in outside services to handle the extended surge — nearly all of which was used to expand a call center to handle claims inquiries — auditors found that monitoring and oversight of the contractors’ work were inadequate and should be improved for future contracts.
To fulfill the federal government’s timeliness criterion, at least 87 percent of initial benefit payments must be made within 14 or 21 days.
The extended period is permitted in jurisdictions such as North Carolina, where claimants must wait one week before receiving their initial weekly compensation. However, in April 2020, that waiting week will be waived.
The audit found that North Carolina failed to satisfy this criterion before the epidemic, failing to do so annually since 2012 under both Democratic and Republican administrations.
And over that period, North Carolina’s percentage has regularly slipped below the national average. During the audit period, just two of the division’s eight benefit packages satisfied the criterion. Both of these programs began in the aftermath of the epidemic.
Commerce Secretary Machelle Sanders, whose department controls the Division of Employment Security, stated in a written response attached to the audit that she agreed with the audit’s findings and that the agency was striving to implement suggestions.
Beyond the surge in claims, the statement said that numerous external causes led to the delays.
They included the need for additional benefit fraud prevention measures, longer wait times to receive data from sources such as the Social Security Administration for processing claims, and required training, system modifications, and US Labor Department guidance for new benefit programs.
The division “will enhance benefit payment timeliness by leveraging technology and other technologies to monitor the claims process better and identify areas of potential delay,” the letter adds.
Additionally, the audit discussed what occurs when a North Carolina unemployment claim is denied by the state’s automated processing system, which it shares with Georgia and South Carolina.
According to the audit, the division must next personally examine the claim, which normally takes 40 to 110 days to complete.