South Carolina is still on the hook for $782 million in federal funds it borrowed to pay unemployment benefits, but a restructured Department of Employment and Workforce is on the path toward solvency, a new state audit report says.
The new agency also is doing a better job updating the General Assembly about the ongoing financial condition of the tattered Unemployment Insurance Trust Fund that captured lawmakers’ ire and led to major changes two years ago, the report released Tuesday found.
But, the Legislative Audit Council criticized the new agency, placed under the governor’s authority in 2010, on several fronts, including failure to regularly review clients’ eligibility to continue receiving payments.
The audit also flagged the agency for failing to properly cross check unemployment check recipients against working payrolls, which is a major means of detecting fraud and benefits overpayments, auditors said.
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“What we found was that for at least six years, when they ran that crossmatch, they were only using 20 percent of the UI database, so they were effectively not running the crossmatch against 80 percent of the people in the database, so they weren’t identifying and catching as much fraud and overpayment (as they could have),” said Perry K. Simpson, the Audit Council’s director.
“That went on, as best we can tell, for at least six years,” Simpson said. “We have a pretty high fraud and overpayment rate in this state, and this needs to be addressed. You should never pay benefits to people who are committing fraud or are undeserving of the benefit at all.”
The Department of Employment and Workforce, responding to the report, said many of the audit findings already have been addressed.
“A lot of the information that’s contained in the report has already been, No. 1, identified, and No. 2, rectified,” said DEW spokeswoman Adrienne Fairwell. “When those items that are identified in the report were brought to the department’s attention, we immediately took notice to go ahead and take care of what was in there.”
The department also could do better at informing lawmakers about ways to improve the trust fund even more, the report stated, and could provide stronger leadership to lawmakers on employment issues.
The audit is the first of three management reviews mandated by the 2010 law that restructured the agency. The other audits are due in 2013 and 2018.
Another area of concern raised by audit concerned budgetary funds raised by the new law restructuring the agency. The report said lawmakers should review procedure provided in the law.
If left unchanged, the contingency assessment – a .06 percent tax on employers used to pay DEW administrative operations – would effectively double to $14,000 by Jan. 1, 2015, officials said.
“We’re not sure how well-informed the General Assembly was that this would happen when they changed the law,” Simpson said.