(The Center Square) – The Washington Employment Security Department (ESD) mismanaged more than $601 million in unemployment payments last year, according to a new report by the Office of the Washington State Auditor.
“The Employment Security Department did not have adequate internal controls over and did not comply with requirements to ensure only eligible recipients received Unemployment Insurance benefits,” the report said.
The audit also found the ESD did not “conduct case reviews for the Benefit Accuracy Measurement program of the Unemployment Insurance program in a timely manner.”
Reached about this finding, an ESD spokesperson said the audit was old news.
“The audit report is referring to the imposter fraud attack on the unemployment system we experienced in Spring of 2020,” the spokesperson said. “Of the estimated $650 million stolen, we have received approximately $370 million. This theft was well covered over the past 16 months. I would refer you to our previous statements.”
One of those statements was in the report, where agencies have a chance to respond to the auditor’s findings.
“The amount lost to the targeted fraud attack is less than 8% of total benefits paid,” the ESD said. "Through aggressive recovery efforts, this loss has been reduced to 5% of total benefits paid during fiscal year 2020.”
The agency emphasized the unprecedented nature of COVID-19-related unemployment claims and insisted it had risen to the challenge, cleared a huge backlog and came up with safeguards that will work in the future.
“The data shows all of these and other controls implemented are proving to be effective as there has been a dramatic reduction in fraudulent claim attempts since June 2, 2020,” ESD wrote.
"Don’t thank ESD for the fraud reduction; thank the FBI," said Mark Harmsworth, former Republican legislator in the state assembly and current director of Washington Policy Center’s Small Business Center.
Faced with headlines about Nigerian scammers stealing millions, “the federal government stepped in and stopped a lot of it,” Harmsworth said.
Harmsworth argued the agency was incapable of dealing with a large surge in claims. To clear the backlog, he said, citing internal documents, ESD simply relaxed its standards, allowing fraudsters to flourish.
“We believe there’s more that’s not directly related to the Nigerian fraud,” he said, speculating the total sum of fraudulent claims was closer to $1 billion.
Harmsworth said he was in the Legislature when the state allocated money to improve its system to scale up in the event of a long-anticipated massive earthquake.
Unfortunately, “they set their systems up to be reactive, not proactive” and “didn’t build their system to be scalable,” Harmsworth said.
Going forward, workers who are paying into the system ought to be able to “authenticate yourself ahead of time” when they sign up for the job in the first place, he said.
Harmsworth said a system with such provisions in place would be much better at scaling up during future disruptions, while keeping the Nigerian scammers at bay.