North Carolina's unemployment benefits office failed to distribute quickly enough $438 million in initial payments to displaced workers in 2020 and early 2021, state auditors said Monday while scrutinizing the agency's work during the pandemic. The audit in part blamed the claims process and poor monitoring for the delays.
It's well-known that the Division of Employment Security struggled in 2020 to get payments out the door promptly. The division saw a record number of applicants for traditional unemployment programs and those created by the federal and state government during the lockdown and related business restrictions. The state unemployment rate reached 13.5% in April and May 2020.
The performance audit quantifies those delays of initial benefits covering all of 2020 and the first quarter of 2021 that failed to be issued within 14 or 21 days of an individual's filing for claims. Benefit money comes from state and federal sources, depending on the program.
State Auditor Beth Wood's office found only 60% of the 3.67 million initial payments across eight programs valued at $1.2 billion were sent within the federal government's standards for timeliness. And 32% of the first payments — totaling $342 million — were not issued within 30 days, the report said.
The delays came amid news reports of “unemployed individuals who depleted their savings, went into debt and were unable to pay their daily living expenses,” the audit said. Early delays amid the onslaught of claims contributed to Gov. Roy Cooper replacing the division’s chief with former state Rep. Pryor Gibson. Program complaints have generally decreased as benefit logjams were loosened, temporary programs expired and applications fell as the economy recovered.
In all, $11.6 billion in unemployment benefits were issued during the 15-month period reviewed. Coronavirus lockdowns began in March 2020. Despite the “unprecedented" rise in benefit claims during the pandemic, the division wasn't “prepared for economic downturns that will inevitably occur,” auditors wrote.
The division did not have a plan or risk assessment that evaluated and addressed what a sudden economic downturn would require, according to the audit. While the agency entered into $261 million in outside contracts to handle the extended surge — nearly all of it going to build up a call center to handle claims questions — monitoring and oversight of the contractors' work was limited and needs to be improved for future contracts, auditors wrote.
To meet the federal government's timeliness standard, at least 87% of first benefit payments must be made within 14 or 21 days. The longer time period is allowed for states like North Carolina that require claim applicants to wait one week before receiving their initial weekly benefit. But that waiting week was waived in April 2020.
North Carolina struggled before the pandemic with meeting this standard, failing to reach it annually since 2012 under both Democratic and Republican administrations, according to the audit. And North Carolina's percentage consistently has fallen below the national average during that stretch. During the period covered by the audit, only two of the eight benefit programs the division was operating met the standard. Both of these program began during the pandemic.
In a formal response attached to the audit, Commerce Secretary Machelle Sanders, whose department oversees the Division of Employment Security, agreed with the audit's finding, and that the agency was attempting to carry out recommendations.
The response said several external factors contributed to the delays beyond the increase in claims. They included the need for additional benefit fraud prevention measures, longer waits to receive data from places like the Social Security Administration to process claims and required training, system alterations and U.S. Labor Department guidance for new benefit programs.
The division “will improve the timeliness of benefit payments by employing technology and other solutions to better monitor the claims process and assess where delays may occur,” the response reads.
The audit also mentioned what happens when a North Carolina unemployment claim fails to be approved through an automated processing system the state shares with Georgia and South Carolina. That claim then must be manually reviewed by the division, whose allotted timeframe to complete the review is typically 40 days and can reach 110 days, the audit said.