The North Carolina Division of Employment Security (NCDES) overpaid more than $69 million in unemployment benefits in 2020, officials said.
The state agency has received an unprecedented number of claims because of the COVID-19 pandemic, increasing the potential for fraud, misrepresentation and errors, NCDES Assistant Secretary Pryor Gibson said.
“Not only did we have more money going into the regular [Unemployment Insurance] system,” Gibson told the Joint Legislative Oversight Committee on Unemployment Insurance on Tuesday. “We also had many more programs in place that constituted more overpayment scenarios.”
Since March 15, the NCDES has paid $9.6 billion in unemployment benefits from nine state and federal benefit programs, agency reports show. The NCDES issued $8 billion in state and federal benefits in 2020. In 2019, the agency paid $160 million in benefits, including $6.9 million in overpayments, reports show.
A majority of overpayments in 2020 were discovered in the last four months of the year. About $45 million was overpaid from the Federal Pandemic Unemployment Compensation (FPUC). The federal program provided jobless workers with an additional $600 a week.
Gibson said stress and a lack of familiarity with the process caused some workers to make errors on their applications. The law calls for the money to be repaid to the NCDES for accounting by the federal government.
The agency has been able to recoup some of the overpaid money by offsetting benefit payments and offering payment plans. The NCDES also can intercept federal or state tax refunds or seek legal action. About $20.5 million, or 29% of the $69 million in overpayments in 2020, have been recovered.
Committee Co-Chairperson Sen. Chuck Edwards, R-Henderson, condemned those who abused the system and empathized with those who received the overpayments in error. Many workers faced long wait times for the benefits while facing uncertainty amid business shutdowns and closures, he said.
Several oversight committee members received calls from constituents concerned about their ability to repay the misappropriated benefits.
“They found a check that they had been waiting on. They went and cashed that check, bought Christmas presents, paid their bills, and now there’s a level of concern,” Edwards said. “They’re being asked to return those funds in a variety of ways.”
It is unclear how much of the overpayments were a result of fraud. North Carolina had an unemployment fraud rate of about 3% in 2019, according to the U.S. Department of Labor.
Gibson said more than often, the NCDES can track down and recover money from cases of wage and earnings fraud. This type of fraud usually happens when a worker withholds financial information or makes false statements about their earnings, such as failing to report a new job or being rehired. Identity theft and imposter fraud, however, are more difficult to solve, which Gibson said is most often a result of a data breach.
Gov. Roy Cooper signed a bill in July allocating $2 million in coronavirus relief funds to fight unemployment fraud. The legislation also allowed the NCDES to contract the Government Data Analytics Center to increase cybersecurity and data monitoring. The U.S. Secret Service issued a warning in May 2020 about a possible attack on the state’s unemployment program by a Nigerian fraud ring.
Through the legislation, the agency has developed various alerting tools, new analytic rules and a fraud scoring model, officials said.
“I believe that it is the responsibility of everyone here to protect all of our taxpayers’ dollars, both federal and state,” Edwards said. “I believe that the folks that have committed fraud certainly need to be discovered, and we need to get those funds back for the taxpayers. This should be prosecuted to the full extent of the law.”
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