KY Auditor Harmon: State doesn’t know how much it owes in unemployment insurance claims
Kentucky does not know the amount it owes for unresolved unemployment insurance clams, state Auditor Mike Harmon said Tuesday.
“The Office of Unemployment Insurance is unable to accurately determine the amount of claims still outstanding for the fiscal year that ended on June 30, and a large backlog of claims remain unresolved,” Harmon said in a release.
Harmon’s comment stemmed from his office’s annual report of the state’s financial transactions and the financial condition of the state at the end of the fiscal year.
Many thousands of unemployment insurance claims have gone unresolved during the coronavirus pandemic that began in March.
Beshear, a Democrat, primarily has blamed an antiquated system for the backlog of claims and has said he will ask the 2021 state legislature to improve it.
He said at his regular news conference on COVID-19 Tuesday that the state may finish this year with about $250 million in federal CARES money and much of it will go to pay the state loan for unemployment dollars and ways to help those who have been waiting for benefits far too long at no fault of their own.
Kevin Kinnaird, spokesman for the state Labor Cabinet, said in an email, “ The unprecedented number of unemployment claims caused by this pandemic, along with changing and inconsistent guidance from the U.S. Department of Labor, has created this issue in every state across America.
“Kentuckians can expect the governor’s next budget will include funding to upgrade the unemployment insurance system, to replace the more than 90 employees the General Assembly cut in previous budgets and reopen offices to help Kentucky workers when they need it most.”
He also said Harmon’s report fails to outline how the Office of Unemployment Insurance cooperated fully with the auditor to provide numbers, but Harmon did not accept them.
With the state audit, Harmon, a Republican, issued what he called “a qualified opinion” of the state’s unemployment insurance fund.
In a letter to Finance and Administration Secretary Holly M. Johnson, Harmon said, “The Kentucky Office of Unemployment Insurance had poor internal controls over benefit payments, which increased the risk of fraud and undetected material misstatements.”
He said during the last three months of fiscal year 2020, the office, in an effort to expedite unemployment benefit payments, “eliminated key internal controls that were in place to reduce the risk of improper payments.
“As a result, payments were paid to claimants without verification of eligibility.”
He also said “a significant backlog of unprocessed claims existed” at the end of the year.
“Management was unable to provide a reasonable or reliable estimate of the financial statement impact of this backlog of claims,” said Harmon. “Because of this, we were unable to obtain sufficient appropriate audit evidence to conclude that the accounts payable balance in the unemployment compensation fund was free of material misstatement.”
Harmon said the inability to provide reliable data on the amount of claims still owed adds to the challenge that faces the General Assembly as legislators return in January to craft a new budget.
“It is imperative for UI officials to address the problems that led to this issue, so that reliable data can be provided for the current fiscal year and going forward,” he said.
Harmon said his office will release more detail on specific issues its auditors found within the unemployment insurance system when it issues another statewide audit in coming months.
He said the state’s unemployment compensation fund has an $18 million deficit and its balance dropped by nearly $800 million in the 2020 fiscal year.
Kentucky has borrowed money from the federal government to pay the claims. That amounts to $350 million a month through next February.
This story was originally published December 22, 2020 at 2:58 PM.
