A state audit of the Employment Security Commission found that the agency, which recently was renamed the Division of Employment Security, failed to implement programming changes to identify instances when it overpaid certain federal unemployment benefits.

The auditor’s office said the agency also failed to make such fixes in the two years before this latest audit, which is for the fiscal year that ended June 30. The overpayments were made as part of a program called Federal Additional Compensation that was included in the federal stimulus bill.

The program, which expired in December 2010, paid an additional $25 a week in unemployment benefits. The ESC estimates the overpayments amounted to $689,475, or .5 percent of the total Federal Additional Compensation payments the agency made.

Failure to fix the problem means the agency has made no attempts to recover the overpayments, which the audit notes is a requirement of the American Recovery and Reinvestment Act.

In its response to the audit, the agency said its staff has been using manual methods to recover a portion of those federal overpayments. The ESC said the necessary programming to identify the overpayments will be completed this month.

The delay was a result of other work taking priority over this particular problem, said Larry Parker, a spokesman for the Division of Employment Security. Since the FAC program had expired, the agency focused on making sure that unemployed workers were receiving benefits from active programs.

“Continuing to pay folks with all the changes to the programs that Congress had made took priority,” Parker said.

The explanation is similar to the one the ESC gave in 2010 when it was harshly criticized for trying to recoup $28 million in overpayments it mistakenly made to about 38,000 unemployed workers. In that case, the ESC said it delayed fixing a computer glitch because its workers were focused on implementing other benefit programs that affected more people.

The agency later reversed course and returned all the deductions it had made from longtime unemployed workers’ benefit checks.

The state auditor’s office made public its annual audit on Monday. Late last week, Lynn Holmes, who has led the ESC and now the Division of Employment Security since March 2010, announced that she was resigning effective April 15 to pursue new opportunities. Her replacement has not been named.

The ESC, in particular its information-technology department, has been criticized in previous annual audits for a range of lapses. In its 2010 audit, the agency was said to have paid $147 million in benefits out of the wrong account. Auditors also identified more than 4,000 instances in which ESC employees got inappropriate access to its computer systems.

The various problems led Holmes to have the IT department report directly to her – instead of to the agency’s chief operating officer – a change that was intended to bring more accountability to the department. Holmes has also said the rise in unemployment claims, and the increasing amount of the money the agency has been charged with distributing, has put a strain on its antiquated computer system, which dates back to the 1970s.

During the fiscal year that ended June 30, the ESC paid $4.4 billion in benefit payments, according to its latest audit. The audit identified 190 instances where individuals received duplicate unemployment payments. Those instances amounted to $42,626.

The ESC said in its response to the audit that corrective action was taken as of the end of last year to fix the problem.

Bracken: 919-829-4548