A new state audit says the Kentucky Office of Unemployment Insurance violated federal law and left hundreds of thousands of emails from Kentuckians unread in its rush to pay unemployment insurance benefits in the early days of the coronavirus pandemic.
KyCIR first reported that the unemployment insurance program had violated federal rules in August, and Kentucky’s public auditor Mike Harmon released an earlier report in December that found the state didn’t know how much money the state still had to pay out in unemployment benefits.
This new report is part of his office’s statewide audit, produced every year.
Harmon said the findings “should be deeply concerning to taxpayers and those who have filed for UI benefits.”
“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,” Harmon said in a statement.
The audit includes a response from the Office of Unemployment Insurance which states the audits findings “occurred in a short period of time during a once-in-a-century global pandemic.”
The office pointed to changes it said will help maintain control over the unemployment insurance payments in the future, such as moving the unemployment insurance program from the Education and Workforce Development Cabinet to the Labor Cabinet, and proactively seeking out guidance from the federal government and subject matter experts.
Labor Cabinet Chief Information Officer Holly Neal said in an emailed statement that most of the issues raised by the audit were addressed last year. "This pandemic and ensuing economic fallout have resulted in a flood of more than 1.6 million unemployment insurance claims filed in Kentucky in less than a year, with the state paying out more than $5.6 billion in benefits since March, but it is unacceptable that some Kentuckians who filed months ago have not been paid and that thousands of emails went unopened," Neal said.
The statewide audit included 25 findings, over half of which related to the Office of Unemployment Insurance office. Harmon’s office found the Commonwealth Office of Technology lacked a comprehensive list of machines and several departments, including the Department of Revenue, office of technology and the Finance and Administration cabinet weren’t complying with certain system security controls.
Chief among the problems at the unemployment insurance office was the decision by leadership to automatically pay benefits without requiring that claimants report weekly wage information that is typically used to determine eligibility.
As Harmon’s audit notes, the office was dealing with an unprecedented rush of claims when this decision was made. The “auto-pay” system got some benefits out the door faster, but caused problems down the line.
For example, Harmon’s office took a sample of 37 state employees who filed for and received UI benefits and found 16 of those employees were overpaid. They filed claims based on losing part-time work but were still employed full-time. If they had been required to report wages, they would have been ineligible for benefits.
Harmon’s office said these 16 employees were overpaid a total of $116,000 and that the automatic payment process also contributed to the state’s inability to determine how much money it owes in unpaid unemployment insurance benefits.
The audit also detailed three security breaches that the unemployment office failed to report to state agencies as required under law.
As unemployment claims skyrocketed and people reached out to the unemployment insurance office for help, the auditor’s report says the Office of Unemployment Insurance archived more than 400,000 emails sent to the unemployment insurance assistance email account without reading them.
UPDATE: This story has been updated to include a response from the Kentucky Labor Cabinet.
