Michigan doled out $3.9 billion in improper unemployment payments, audit says

Jan. 13, 2022: Michigan unemployment fraud now at $8.5B. Legislators have more questions.

LANSING — Michigan paid out at least $3.9 billion in improper unemployment payments and most of the money likely won’t be recouped, a blockbuster state audit has found.

The Thursday report, published by the Office of the Auditor General, is the latest in a months-long debacle that has resulted in the resignation of two Unemployment Insurance Agency directors over their handling of payments during the COVID-19 pandemic.

The state’s unemployment system was overwhelmed in the early days of the pandemic, paying $39 billion to 3.5 million residents. 

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“Based on the limited data analysis we have been able to perform, it appears UIA improperly paid $3.9 billion to claimants now classified as ineligible,” the report said.

The money, which went to about 347,000 workers who are now deemed ineligible, will “likely not” be recouped, the audit found.

“The improper payments were UIA’s fault and not that of the claimants,” the report said.

The agency faced backlash this summer after using an old set of criteria for unemployment qualification, and warning over 648,000 claimants they may need to repay the benefits over the state’s mistake.

The state ended up granting claimants overpayment waivers.

The unusually harsh report by the Office of the Auditor General concluded that the state waited months to fix the problem

In June 2020, the U.S. Department of Labor told the UIA of “urgent” and “critical” issues related to the Pandemic Unemployment Assistance (PUA) certification.

UIA did not follow through changing the criteria until this March, despite suggesting it would do so in September 2020 and October 2020.

In a response to the audit, the state acknowledged “some errors were made” and said it was challenged and its “capacity (was) tested.”

“UIA had to implement multiple new federal programs based on a hastily drafted law that allowed claimants to self-attest to their own eligibility, contend with historic levels of claims filed, and defend against new highly sophisticated criminal efforts to commit fraud — all while transitioning its entire workforce to remote work,” the agency responded. 

UIA Director Julia Dale said in a statement 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.”

Dale was appointed by Gov. Gretchen Whitmer on Oct. 25. She’s the third UIA director in 11 months, following Steve Gray and interim director Liza Estlund Olson. Gray was hailed as a reformer and appointed by Whitmer to fix longstanding issues within the agency.

The embattled department has been at the center of controversy in Lansing. Republican lawmakers have held hearings, and proposed fixes to improve customer service at the agency. 

“This was a state mistake with their criteria, not a mistake made by claimants,” Rep. Steve Johnson, R-Wayland, the chair of the House Oversight Committee, said in a statement. “Worse yet, UIA continued down a path they were told was incorrect.”

Johnson said he hopes the agency can improve its system and his committee will continue to work with Dale to find solutions.