Payment errors add to challenges for state’s beleaguered unemployment system

    "Unemployment" by Philippe Lhote picturing a mural on an abandoned factory in Völklingen, Germany CC BY-NC-ND 2.0

    Faced with record numbers of claims and payouts and complaints of long-delayed decisions on whether some applicants qualified, the state unemployment compensation system overpaid some claims in late April while possibly underpaying others, according to a Wisconsin Legislative Audit Bureau report issued Wednesday.

    The payment mistakes took place over a two- to three-day period April 28-30, the report states, in the midst of a surge of filings as the COVID-19 pandemic led to record layoffs. The errors were blamed on a computer malfunction at the Department of Workforce Development. DWD reported the malfunction May 1 and conducted its own review, while the audit bureau followed up.

    The bureau found duplicate payments totaling $21.2 million, according to the report.

    DWD paid out the lion’s share of those, $19.6 million, by direct bank deposit on April 29 and recovered the funds on April 30, according to the report. Another $1.5 million was overpaid that day in debit card transactions to claimants, the auditors found, along with an estimated total of $101,300 in overpayments that were made April 28.

    The audit report states there might have been additional overpayments on other dates, and that DWD might have underpaid some people as well on April 30 as a side effect of its action to recoup the April 29 overpayments.  

    DWD wrote new procedures to verify the accuracy of payments before submitting them to the bank used for unemployment claim transactions, but the audit report recommends that the department expand the verification process to ensure it covers all payments made in one day.

    Over a 17-week period ending July 10, DWD has paid out $2.5 billion in unemployment insurance to about 426,000 state residents laid off after the COVID-19 pandemic led many employers in the state to curtail operations and reduce potential exposure of employees and customers to the virus. At the same time, the department had to expand to include three special federal programs, including Federal Pandemic Unemployment Compensation (FPUC) that paid out an additional $600 a week to people on unemployment, DWD Secretary Caleb Frostman stated in his response letter to the audit.

    When a recipient on April 30 reported a duplicate FPUC payment for the previous day, DWD found that 20,135 duplicate payments had been made because of a computer programming error, the agency recovered the funds, Frostman told the audit bureau.

    head shot of Caleb Frostman
    Caleb Frostman

    Frostman stated the department would follow through on the audit bureau’s recommendations for additional review of its procedures and payments, to be reported to Joint Legislative Audit Committee by Aug. 14.

    Those include paying people who were underpaid because of the DWD’s action April 30 to retrieve the overpaid funds. Frostman said the department paid corrected amounts totaling $89,760 to 52 people the week of July 6 and plans to automate the process to meet the Aug. 14 deadline. The department also is working on recovering additional overpayments, he told the auditors.

    In a joint statement, the Republican co-chairs of the audit committee criticized DWD for the errors while also noting continuing delays that thousands of claimants have experienced in the crush of unemployment filings since March.

    “Nothing short of a stack of faulty processes or outright mismanagement could have resulted in this heartbreaking backlog,” stated Rep. Samantha Kerkman (R-Salem Lakes), the Assembly co-chair.

    The State Senate co-chair, Sen. Robert Cowles (R-Green Bay), said the audit report Wednesday “is just part” of an ongoing audit bureau review of the state unemployment insurance program.

    Cowles acknowledged the DWD’s work to change procedures in response to the overpayment error. “However, there are still many outstanding concerns related to the UI [unemployment insurance] program,” he continued, “such as the timeliness of the adjudication process, benefit payment delays, and difficulties accessing the phone system, which will overshadow improvements made here.”

    Last week, in response to the delays in payment, Republican Assembly leaders suggested that Gov. Tony Evers use some of the state’s remaining allocation under the federal Coronavirus Aid, Relief and Economic Security (CARES) Act to make short-term loans to applicants who had been waiting while state officials determine if they are eligible for unemployment.

    On Tuesday, Evers told reporters that while his office was considering the idea, he viewed it skeptically and “as somewhat of a political stunt.”

    “I don’t quite know how we’re going to do it any faster using the CARES Act. It’s not as if we have a list of 300,000 people, and suddenly we’ll say ‘OK, we’ll make a guess whether you’re actually eligible and we’ll send out a bunch of money,” the governor said. “It is risky just to send money out with no understanding of the adjudication process at DWD.”

    Erik Gunn
    Senior Reporter Erik Gunn reports and writes on work and the economy, along with related subjects, for the Wisconsin Examiner. He spent 24 years as a freelance writer for Milwaukee Magazine, Isthmus, The Progressive, BNA Inc., and other publications, winning awards for investigative reporting, feature writing, beat coverage, business writing, and commentary. An East Coast native, he previously covered labor for The Milwaukee Journal after reporting for newspapers in upstate New York and northern Illinois. He's a graduate of Beloit College (English Comp.) and the Columbia School of Journalism. Off hours he is the Examiner's resident Springsteen and Jackson Browne fanboy and model railroad nerd.