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'Deeply concerning': Harmon details findings in state unemployment fund audit

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Posted at 11:57 AM, Feb 09, 2021
and last updated 2021-02-09 20:08:31-05

FRANKFORT, Ky. (LEX 18) — Auditor Mike Harmon on Tuesday released the first volume of the Statewide Single Audit of Kentucky, calling findings identified within the Office of Unemployment Insurance and Unemployment Insurance fund "deeply concerning to taxpayers and those who have filed for UI benefits."

In the findings, Harmon said OUI leadership made changes that violated federal law and "sacrificed program integrity" in an attempt to get payments to unemployed residents more quickly.

One of those 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. Harmon said OUI and Commonwealth Office of Technology staff expressed concerns about implementing auto-pay, but the system was implemented anyway. 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 findings.

Despite the decisions made by OUI officials in an attempt to pay benefits more quickly, many claims still were not timely processed. Harmon said his office found that OUI archived 400,000 emails it received from the public through its unemployment insurance assistance email portal, which remained unread as of Nov. 9.

Serving as a good illustration of the problems created by auto-pay, Harmon said his office found that among a sample of 37 state employees who filed for and received unemployment payments, 16 of them received UI benefits for the loss of part-time jobs while still working full-time for 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.

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.

Harmon said the majority of his office's findings came down to a common issue, which was the decision to remove controls that provided better oversight on the verification and payment of unemployment benefits.

“It breaks my heart to think of those Kentuckians included in the 400,000 unopened emails who so desperately wanted their voices heard and yet were ignored," Harmon said. "The systemic failure of leadership on all levels not only violated federal law, but also let down many who needed relief. It also leaves others facing the prospect of repaying the government for miscalculated payments they received in good faith.”

The first volume of the Statewide Single Audit of Kentucky for Fiscal Year 2020 contains 25 findings, half of them dealing with problems identified within OUI and the UI fund. The full report can be viewed here.