LANSING, Mich. – Shortcomings in the Michigan Unemployment Insurance Agency Office caused $3.9 billion in overpayments during the processing 5.4 million unemployment claims amid the COVID-19 pandemic, according to a state audit released Thursday.
The agency's inaction and mishandling of procedures to ensure out-of-work Michigan residents could receive financial support during the pandemic led to 648,100 Michigan residents receiving letters this summer saying that they would have to reapply for eligibility, according to the audit. Of those claimants, 347,437 who had previously been marked as eligible for benefits were found ineligible for benefits.
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The state will likely not recoup that money, according to the audit, since the fault lies solely on the agency and not the claimants.
Republican lawmakers have criticized the agency and called for accountability, particularly concerned at the anxiety the letters caused Michigan residents and the agency's mishandling of funds.
Republican Rep. Steve Johnson, who chairs the state House Oversight committee, issued a statement on Thursday blaming Gov. Gretchen Whitmer's administration for confusing people navigating unemployment and her for implementing executive orders that shut down people's livelihoods during the pandemic.
“These findings provide concrete proof that a pivotal arm of Gov. Whitmer’s administration failed when people needed it most, this was a state mistake," Johnson said. “...rampant ineptitude and ineffectiveness at the agency led to weeks and months of hardship for a tremendous amount of people.”
Leadership at the unemployment agency has changed at times amid criticism for slow payouts and fraudulent claims. Former Director Steve Gray resigned in November 2020. He was replaced by acting Director Liza Estlund Olsen, who then was replaced by current Director Julia Dale.
The audit mentions Gray creating a presentation for an April 2020 meeting where the agency weighed “paying ASAP and establishing eligibility in parallel” or “establishing eligibility and delaying payments until eligibility is verified.” The presentation acknowledged the possibility of having to recoup claims paid in error, one slide saying, “we have a choice between speed and overpayment risk.”
The agency persistently used four eligibility criteria that were unauthorized by the U.S. Department of Labor. According to the audit, the state agency cited confusion over federal eligibility requirements, but did not reach out for clarification, despite being alerted by the Labor Department in June 2020 of “critical” issues over implementation.
Dale, who took over the agency in recent weeks, acknowledged the audit's findings in an email statement Thursday, saying the agency is working to implement the suggestions, but she maintained that the agency should still be proud of the work it has done.
"The work the UIA did this time supported millions of Michiganders by providing a temporary lifeline to pay for food, housing, prescriptions and other critical needs. So far, more than $39 billion has been paid out to nearly 3.5 million Michigan residents," Dale said. “But we should also be sure to learn from this experience so that we can do a better job of stopping fraud and paying legitimate claims in a timely fashion.”
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Anna Liz Nichols is a corps member for the Associated Press/Report for America Statehouse News Initiative. Report for America is a nonprofit national service program that places journalists in local newsrooms to report on undercovered issues.