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State Audit Finds $70M-Plus in Unwarranted Unemployment Payouts

Because of errors and fraud, the state of Tennessee issued $73.4 million in overpayments to people drawing unemployment benefits over the past six years, according to a new audit report.

The problems threaten the integrity of the program, the comptroller’s office said in its report, released this week.

Auditors found poor systems for detecting fraud, backlogs in claims handling, and “automated approval of claims” without verifying that employees qualified. They also faulted workers at the Department of Labor and Workforce Development for not taking simple steps, like verifying the Social Security numbers of people drawing unemployment.

Auditors found the department had paid out $135,000 to people who were not eligible because they were gainfully employed by the state – or in some cases dead.

“The Commissioner should take immediate action to implement a strong system of internal controls over the claimant eligibility process for the (unemployment insurance) program. This control system should be designed to prevent and/or detect errors and fraud and mitigate the risk that (unemployment) benefits will be paid to ineligible claimants.”

The commissioner in question, Department of Labor and Workforce Development chief Karla Davis, resigned earlier this month, citing family reasons. The Haslam administration announced that Burns Phillips, a Finance and Administration official, would serve as acting commissioner.

Lt. Gov. Ron Ramsey, R-Blountville, said Thursday that he’d not yet seen the report but was not surprised auditors had uncovered problems at the labor department.

Ramsey has successfully pushed to tighten requirements on unemployment-insurance beneficiaries, and in the process has developed a bad impression of the labor department.

“To say that that department has been unresponsive and hard to work with would be an understatement,” Ramsey said. “You send email after email after email and get no response. We ask for statistic after statistic and get no response.”

Last year the Legislature toughened requirements on beneficiaries, like requiring them to keep a log of their efforts to find work. Some 400 people were kicked off the program in a random check of more than 6,100 claimants during the first seven weeks the law was in place, the Chattanooga Times Free Press reported in December.

Read the audit here.