Audit: UIA paid out $3.9 billion in ineligible payments

(The Center Square) – Nine months after the federal government warned Michigan’s Unemployment Insurance Agency (UIA) of improper benefit eligibility determinations and related overpayments, the agency continued to pay out ineligible people.

Overpayments to ineligible claimants totaled about $3.9 billion.

“Ultimately, UIA’s application and weekly certification processes allowed individuals without any prior attachment to the workforce and who may have been unemployed for reasons unrelated to COVID-19 to be paid (Pandemic Unemployment Assistance) and associated (Pandemic Unemployment Compensation) and (Lost Wages Assistance) program benefits improperly,” Auditor General Doug Ringler wrote.

That’s one of two main findings in a report released Thursday that found the UIA was not effective at establishing federally compliant eligibility criteria for Pandemic Unemployment Assistance (PUA).

Ringler also found that a “variety of actions and inaction by UIA’s senior leadership” during the COVID-19 pandemic contributed to the invalid PUA application and certification processes and UIA’s failure to timely or appropriately address issues pointed out by the U.S Department of Labor (USDOL) and UIA staff.

The federal government warned the UIA twice about the lax PUA requirements before the agency’s mistake made nearly 700,000 people recertify. Despite a second warning as early as Jan. 6, 2021, the UIA still didn’t fix its mistakes.

Dustin Adams, the division chief for the USDOL’s Employment and Training Administration’s Region 5, warned then-Michigan Unemployment Insurance Agency Director Steve Gray and others that the Office of Inspector General had “significant interest” in PUA implementation. He requested states inform the federal government about their PUA implementation plans so it could correct any problems “before they become larger issues.”

However, on Nov. 5, 2020, Gray resigned and took with him a then-secret $85,872 severance deal and a confidentiality agreement amid months of record jobless claims.

And Michigan charged ahead anyway with unapproved criteria that required hundreds of thousands of Michiganders to recertify, many of whom received PUA that targeted self-employed, part-time, or gig-economy workers.

The saga of screwups started when Gov. Gretchen Whitmer shuttered much of the economy to slow the spread of COVID-19, tossing hundreds of thousands of people onto an ill-prepared unemployment system, with unemployment peaking at 23.6% in April 2020. The federal government creates stimulus programs to help these people. Still, the UIA screwed up the program, adding four eligibility criteria on PUA claim authorization and weekly benefit certifications not authorized in The Coronavirus Aid, Relief, and Economic Security (CARES) Act or other USDOL guidance. The report said the UIA admitted it was confused about PUA requirements, but:

Agency officials didn’t seek clarification from the USDOL.The UIA couldn’t explain its rationale for including eligibility criteria with no relationship to the CARES Act or other federal guidance at that time.UIA did not explain why it did not correct its improper eligibility criteria when USDOL first pointed out the problem in June 2020.The UIA posted a PUA fact sheet to the internet in April 2020 that correctly listed the statutory reasons from the CARES Act to describe who is eligible for PUA. That fact sheet correctly states eligibility requirements, but the UIA said the application creation process and the fact sheet creation happened independently and couldn’t explain why they didn’t match.

The UIA has paid out $39 billion in benefits since March 15, 2020, to 3.42 million claimants. It’s unclear how much of that was fraud. Ringler said the UIA likely won’t recover overpayments because they were the UIA’s fault, not claimants.

Julia Dale, the new UIA director, has promised to reform the embattled agency.

In a statement, Dale said the agency is “implementing program controls and processes based on the OAG’s audit and will continue to refine those processes as the agency moves forward with its priorities of establishing a level of care, expertise and training to ensure unmatched excellence in customer service; strengthening and maintaining stakeholder relationships; and taking important steps to seek, develop and retain top talent.”

Conservative groups criticized Gov. Gretchen Whitmer for not fixing her administration’s UIA when Michiganders needed it most.

“Today’s report confirms what hundreds of thousands of Michiganders already knew: Gretchen Whitmer’s UIA has unequivocally failed our state,” Michigan Rising Action Executive Director Eric Ventimiglia said in a statement. “As Whitmer was busy trying to build a national profile and ingratiating herself among the liberal elite in Washington, our unemployment system was imploding. It’s past time for Governor Whitmer to be held accountable for the many failures and scandals she oversaw at the UIA over the past two years.”

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