by Scott McClallen
A fifth and final audit of the Michigan Unemployment Insurance Agency found the agency “undercounted fraud penalties by at least 49.4%” because it didn’t fix programming issues with the Michigan Integrated Data Automated System.
The audit from the Office of Auditor General Doug Ringler marked two “material conditions” – the most severe rating finding that the agency didn’t protect agency funds. The audit found that the UIA’s Investigations Division didn’t:
- Attempt to identify 70% of the individuals filing UC claims using others’ identities
- Attempt to recover 96.7% of related payments or assess fraud penalties
- Refer 90% of the fraudulent claims to law enforcement.
The UIA has a three-year window to address fraudulent payments so it could still take action on these claims.
The audit says the UIA might be able to assess an additional $840 million in fraud penalties.
From March 2020 to December 2022, the UIA paid $40 billion in compensation to 2.5 million people.
However, many people also scammed taxpayers and businesses that fund unemployment, counting more than 2,300 people who intentionally misrepresented themselves and at least 158 people who were charged with unemployment fraud.
One security expert estimates Michigan lost $11 billion to unemployment fraud.
The audit found the UIA gave $245M in potentially improper payments to “individuals who were incarcerated, deceased, or residing in long-term care facilities, UIA contract or LEO employees; or those above and below the typical working age.
“UIA did not identify and/ or took no action to assess the appropriateness of these payments. UIA paid at least $1.7 million to claimants even after determining they were incarcerated or deceased,” the audit says.
UIA media contact Nick Assendelft said that an agency-led crackdown brought charges against 162 fraudsters and 90 convictions that recovered more than $90 million.
The UIA says every pandemic-rooted issue raised by OAG had previously been addressed by the agency and has either been solved or will be resolved as soon as possible.
“We will continue to work cooperatively with the OAG, as we have for the last three years on these issues. We appreciate their partnership in reform,” UIA Director Julia Dale said in a statement. “Since the end of the global pandemic, and under new leadership at UIA, we have built an entirely new bureau and overhauled existing systems to fight fraud and provide better service for Michigan workers and businesses, and data proves that these efforts are paying off.”
House Republican Leader Matt Hall, R-Richland Township, said these problems followed two years after the pandemic started.
“Instead of repairing and reforming unemployment assistance, Gov. Whitmer and Democrats in the Legislature prefer to make unemployment a permanent entitlement and keep people out of work longer,” Hall said in a statement.
Since Democrats took a political trifecta, Hall says they haven’t focused on the right problems.
“They’ve introduced legislation to hand out even more money regardless of the unemployment rate, pay people to stay out of work longer, and increase burdens on job providers — rather than fixing the failing system and focusing on helping get breadwinners back on the job,” Hall said. “With a nonpartisan audit revealing even more mismanagement at Whitmer’s unemployment agency, cleaning up this mess should be a top priority for the bipartisan House of Representatives in 2024.”
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Scott McClallen is a staff writer covering Michigan and Minnesota for The Center Square. A graduate of Hillsdale College, his work has appeared on Forbes.com and FEE.org. Previously, he worked as a financial analyst at Pepsi. In 2021, he published a book on technology and privacy. He co-hosts the weekly Michigan in Focus podcast.
