Hundreds of millions in NC unemployment benefits were delayed in 2020, audit finds
Nearly half a billion dollars in unemployment payments were late in reaching North Carolinians during much of the COVID-19 pandemic, a new state audit has found.
The News & Observer has reported on numerous problems within the state unemployment agency that were highlighted by record levels of jobless claims during the pandemic, including long waits to be approved, help systems that got clogged with the rush of new applicants and one of the nation’s worst websites for smartphone users.
But Monday’s audit is the first time that there has been a price tag on some of those issues. According to Auditor Beth Wood, a Democrat whose office released the report on the unemployment woes, they added up to $438 million in delayed payments.
The audit found the N.C. Department of Employment Security was unprepared for a large economic downturn like the one COVID-19 caused.
“As a result, $438 million of financial assistance was not received by unemployed North Carolinians during a time of great need,” Wood said in a news release announcing the audit.
The audit covers January 2020 through March 2021. Unemployment claims spiked in mid-March of 2020, when Democratic Gov. Roy Cooper issued an order shutting down restaurants, gyms, salons and other businesses that rely on close contact.
About two months later, in May 2020, following numerous highly publicized issues with the unemployment system, Cooper’s Commerce Department replaced the head of DES with Pryor Gibson — a former state lawmaker who remains in charge.
“Despite knowing another economic downturn was inevitable, DES did not have a plan or risk assessment that identified, evaluated, and addressed the risk that a sudden economic downturn could occur and significantly increase unemployment claims,” the audit states.
From the start of the shutdowns and until July of 2020, the state’s unemployment rate was consistently above the previous record of 11.5% set during the Great Recession just over a decade earlier, the audit notes. At times the state exceeded 13% unemployment.
In total, Monday’s audit found, hundreds of thousands of North Carolinians had to wait longer for help than they should have. People are typically eligible for unemployment benefits only if they have made at least a certain level of income in the past, at jobs that pay into the unemployment system. But when they lost those jobs and needed the benefits, Wood said, the state’s failure to act quickly meant that people needlessly struggled with bills.
Her audit notes that of the millions that were delayed, most of it — $342 million — took more than a month to reach people, which is “the length of a billing cycle in which personal bills such as mortgages, rent, utilities, etc. are typically due.”
In response to Wood’s audit, Commerce Department Secretary Machelle Sanders said they did not disagree with any of Wood’s findings and have been working on improvements.
“While the COVID-19 pandemic proved to be entirely unprecedented in terms of scope and scale, DES is committed to being more prepared for future economic disasters similar to the scope and scale of this event,” Sanders wrote in her formal response to Wood. “To that end, DES is developing a post-pandemic strategic plan that will be modeled on the agency’s plan for handling federally declared natural disasters and expanded to include lessons learned from the COVID-19 pandemic.”
NC’s long history of slow payments
Federal rules say that in a minimum of 87% of cases, unemployment benefits should start being paid within three weeks of someone first applying, if they qualify.
North Carolina failed to meet that goal on nearly every type of jobless benefit available during the pandemic, the audit shows:
- Regular state benefits were paid on time in 74% of cases.
- The main federal benefit, which started as $600 per week and was known as Federal Pandemic Unemployment Compensation (FPUC), was paid on time in 71% of cases.
- For a benefit called Pandemic Unemployment Assistance (PUA), the state was on time for just 11% of applicants. That was the federal relief available to people who didn’t qualify for state benefits — including gig economy workers, small business owners and other self-employed people or independent contractors.
It wasn’t just a pandemic issue, either. Wood’s audit notes that North Carolina has failed to hit the 87% benchmark every year for the last decade.
The state’s best year in that span was 2013, when 80% of claims were dealt with promptly. That same year, Republican lawmakers voted for massive cuts to the unemployment system, which brought the fund out of a deficit caused by the recession. Since then the rate of timely payments has plummeted, with just 52% of claims paid on time in 2019 (compared to a national average that year of 86%) before rising somewhat in that last two years. It was 70% in 2020 and 62% last year.
Wood suggested that the state legislature should pass a new law requiring state agencies to institute a process known as “enterprise risk management” or ERM — which she said would help cut down on poor planning and management that end up leading to wasted money, delays and other issues. It would’ve helped in this case, she said, as well as in the cases of other recent audits looking into problems at the Department of Transportation and at the state’s Medicaid office.
“Requiring state agencies to implement ERM could greatly reduce the number of ‘crises’ that NC state agencies experience,” the audit says. “Implementing ERM could also significantly reduce the delays and high costs that are so often a part of an agency’s crisis response and resource acquisition process.”
For more North Carolina government and politics news, listen to the Under the Dome politics podcast from The News & Observer and the NC Insider. You can find it at https://campsite.bio/underthedome or wherever you get your podcasts.
This story was originally published March 14, 2022 at 10:10 AM.
CORRECTION: A previous version of this article misstated the months the audit covered.
