Md. Labor Department overpays unemployment claims, auditors find

money stacksThe Maryland Labor Department’s Division of Unemployment Insurance overpaid millions in benefits to people who were actually working and shelled out unemployment benefits to people who were dead or in prison. The division also certified job stimulus tax credits for employers hiring the unemployed for some workers who weren’t actually receiving unemployment benefits.

Those were among the findings of a report released yesterday by the Office of Legislative Audits. Interim Labor Secretary Scott Jensen said the department agreed with the auditors’ findings, and has made a series of changes to correct the problems. (The letter he signed in response to the report misspells his name “Jenson.”)

The report covered the two and half years from June 2008 to January 2011.

Last year, the division paid out $1.6 billion in unemployment benefits to 243,000 claimants, the money coming from state and federal unemployment insurance taxes paid by employers. Apparently overpayments are not uncommon as the department last year recorded cumulative receivables of $150 million it was trying to collect from the formerly unemployed, and it actually recovered $25 million in 2011 in overpayments.

Database checks not comprehensive enough

Auditors said some of the overpayments occurred because the database matches that  the department utilized were not comprehensive enough.

“While [the Division of Unemployment Insurance] matched claimants with the national database of newly hired employees, available wage information for all employees was excluded from the matches,” acting Legislative Auditor Thomas Barnickel told the chairmen of the Joint Audit Committee in a letter. “The use of national wage information would provide more comprehensive match results.”

The division also failed to match its claims payments with Social Security death records, with state incarceration records and with lists of state employees. “For example, for the period from January to June 2011, one claimant received $5,800 in benefits while also receiving wages from one State agency totaling approximately $9,700,” the report said.

The response from Secretary Jensen described in detail all the steps the department had taken to conform to the auditors’ recommendations.

On a positive note, Jensen pointed out that the auditors had no repeat findings from its regular audit three years before. Findings of the same problems in audit after audit have troubled legislators, and some have introduced bills to withhold funding from agencies with repeat findings.

“While we are pleased that the division had no repeat findings,” Jensen said, “the department understands that we still have work to do.”

The department has notified the comptroller to try to collect the tax credits employers received for workers who weren’t eligible.

–Len Lazarick