State Auditor: Maine Labor Department Erroneously Gave $100,000,000 in Jobless Benefits

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AUGUSTA – Due to “inadequate internal control procedures,” the Maine Department of Labor gave more than $100,000,000 in jobless benefits to Mainers who might not have been actively searching for a job, according to the 2012 report of the Maine State Auditor.

State Auditor Pola A. Buckley, a Democratic political appointee, delivered her bombshell report to Senate President Justin L. Alfond (D-Cumberland), House Speaker Mark W. Eves (D-North Berwick) and Republican Governor Paul R. LePage on March 28.

Maine State Auditor Pola Buckley
Maine State Auditor Pola Buckley

Buckley wrote in the audit, “Approximately $42 million in federally funded unemployment claims and $61 million in claims funded by Maine’s employers were paid to persons who might not have been actively searching for a job.”

The State Auditor’s report covers the fiscal year ended June 30, 2012 and is an annual requirement for Maine to receive roughly $3.2 billion in federal assistance.

If Maine is found to be out of compliance with federal law regarding unemployment benefits, taxpayers could be forced to reimburse the federal government for $42 million in inappropriately spent federal money.

“The potential effect would be to improperly reduce Maine’s Unemployment Fund held by the U.S. Treasury, and to cause an unemployment tax rate increase,” according to the audit.

Submitting a work search log is a legal condition of receiving unemployment benefits, but according to the State Auditor’s survey of cases, one-third of Maine’s benefit recipients did not submit work search records over a one year period. Although it is widely known in Maine that work search logs are frequently forged and often go unverified, these individuals did not even bother to pretend to search for work—yet still received benefits.

[RELATED: Maine DOL’s $6.5 Million Welfare Lottery Yields Few Winners…]

The audit lists this type of finding as “Material weakness / Material noncompliance / Questioned costs.”

The report defines a material weakness as follows: “A material weakness is a deficiency or combination of deficiencies such that there is a reasonable possibility that a material misstatement of the State’s financial statements would not be prevented, or detected and corrected on a timely basis.”

According to the audit, MDOL agrees with the finding. (Recommended: Hatchetgate: The Anatomy of a Hit Piece…)

The unemployment compensation program gave out $319 million in benefits for fiscal year 2012, including $183 million in employer funded payments and $136 million in federally funded benefit payments.

Calls placed to the Maine Attorney General’s office seeking comment were not immediately returned.

Julie D. Rabinowitz, director of communications for MDOL, said the State Auditor’s dollar figures are estimates based on a small sample of unemployment claims. She said the real amount of claims paid to individuals who did not submit work search reports is probably much lower, although MDOL could not immediately say how much lower.

“This data is based on a small sample and therefore this figure is an annualized extrapolation and not a real dollar figure,” said Rabinowitz.

Rabinowitz said that, prior to 2012, MDOL could not legally deny prospective claims based on a claimant’s failure to submit a work search report; however, recent statutory changes have given hearing officers the authority to do so.

S.E. Robinson
Maine Wire Reporter
srobinson@mainepolicy.org

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1 COMMENT

  1. You can’t say that. Baldacci let it happen. It just wasn’t investigated nor enforced because they couldn’t not pay the employee. But they could have charged people with fraud!

  2. No wonder LePage was screaming at hearing officers last week! You’ve got to blame someone! So he probably got wind (no, not that kind of wind) that this audit report was going to look bad.

    He could try blaming Baldacci – except that it wasn’t a requirement back then. He could blame…

    I guess he’s stuck with the glory – old blood and guts LePage! Take it like a trooper!

  3. HAHA WOW! Paul LePage was just criticized for demanding that they not be so liberal with the jobless benefits. Screamed at and called a bully, now that he appears to have been right to do so, you blame him for this? Matt, you’re ridiculous.

  4. This is a totally different issue from the governor’s meeting with the hearing officers. Their job is to listen to employers and employees who have different views about why the employee lost his or her job. This piece is about people who are on UI not noting where they looked for work. Totally different kinds of people handle those forms and the Blaine House meeting had nothing to do with this.

  5. $100 million out the door in one (fiscal) year. Anyone wondering what happened in previous fiscal years. Anyone believe it was limited to FY12? Where was the State Auditor during those years? Who was the State Auditor during those years?

  6. It’s completely amusing to see the liberals here attempting to blame LePage for this fiasco. Do you folks have any grasp on reality at all? It would appear not. For you LePage haters here answer this question, if you can: does the Governor preside over these hearings? Did he personally approve everyone of these claims? No, he didn’t! The gross incompetents at the Dept of Labor did and the Governor was completely correct to call them out for it!

  7. It was shameful the way the Lewistoon Sun Journal, Pingree People’s Herald and the Bangor Democrat News ran with the smoke screen story instead of looking for the facts.

  8. The governor is concened, as are many of us, with the high number of people collecting unemployment in Maine, many of whom appear to not be eligible. This is exactly the same issue.

  9. OK, people are concerned with that bigger issue. But this article has nothing to do with anything hearing officers do – and the hearing officers have very high scores from the federal government’s audits. They are audited quarterly and have a score of 95 out of 100 for 2012.

  10. Consider Amy Fried’s earlier comment; there are two parts to this discussion. First, how many claims were approved in favor of the employee; this is what the governor brought to the attention of the Unemployment Insurance appeals hearing officers in his meeting. Second, of those claims approved in favor of the employee, how many should not have been paid if the claimant was not following required procedures; that is the responsibility of the Maine Department of Labor.

    Does the number of approved claims by the Unemployment Insurance appeals hearing officers have an impact on the workload of the MDOL? Yes; with a common knee-jerk reaction being more work, more chance for a mistake. With that a common knee-jerk response is reduce the number of approved claims or increase MDOL staff. Neither is correct, because neither reaches down to root cause.

    While the dollar amount is staggering it is from an audit involving a sample set of claims. The more revealing questions this article should be raising is how many actual claims in that period, of those claims what is the median (not average) amount of the claim, what is the ranking from high to low with respect to greatest financial impact the types of claims, their geographic location, and industry.

    Next the article should be asking are processes in place with a check and balance that insures claimants are following required reporting procedures. If claimants are not following a process, why is the claim approved? If computer systems are used, do the computer systems align with the MDOL processes? Often computer systems become the scapegoat when it is the process that is flawed.

    Finally, are MDOL staff properly trained for their jobs, and retrained if a change occurs in the unemployment process? What is the number of claims by type a staff person is expected to process in a specific time period, such as a day or week? With that how does MDOL know when it has too many or too few staff? How is staff work validated for accuracy? During an annual review is the staff person required to meet a specific percentage of accuracy?

    Hopefully the articles author will dig down so all readers will have a better understanding of what is behind the $100 million and its level of accuracy.

  11. Oh, I’m sure auditing the DOL was Baldacci’s idea way back in 2004 but they simply never got the opportunity to do the audit because of all those obstructing Republicans… err…. or something like that… yeah, that’s it, RUN WITH IT! (that was sarcasm for any dim witted readers)

  12. I absolutely agree that what the state auditor found is a serious issue and training should be addressed.

    But what the hearing officers do doesn’t affect the quantity or quality of work of the people involved in the problem identified by the state auditor. That’s because what hearing officers do is later in the process and the vast majority of claims are not appealed by either party. By the way, the hearing officers’ work is audited by the federal government. Reporter Steve Mistler dug up their audit data and found that that system is working well. It’s not inconsistent and last year Maine hearing officers got 95 out of 100 points.

  13. Let me see if I understand you. If the governor questions the validity of how the DoL conducts business, he’s interfering. Right? So if he did not catch the fraudulent claims, he’s still responsible? You cannot have it both ways.

    This is not a day to day responsibility of the Office of Governor but is under the realm and oversight of the Dept. of Labor.

    Tell me again how LePage is personally responsible for individuals filing fraudulent claims… ?? Incredible. Party lines have nothing to do with this situation.

  14. Please note I’ve adjusted my original comment based on corrective feedback from Amy Fried.

    While the dollar amount is staggering it is from an audit involving a sample set of claims. The more revealing questions this article should be raising is how many actual claims in that period, of those claims what is the median (not average) amount of the claim, what is the ranking from high to low with respect to greatest financial impact the types of claims, their geographic location, and industry.

    Next the article should be asking are processes in place with a check and balance that insures claimants are following required reporting procedures. If claimants are not following a process, why is the claim approved? If computer systems are used, do the computer systems align with the MDOL processes? Often computer systems become the scapegoat when it is the process that is flawed.

    Finally, are MDOL staff properly trained for their jobs, and retrained if a change occurs in the unemployment process? What is the number of claims by type a staff person is expected to process in a specific time period, such as a day or week? With that how does MDOL know when it has too many or too few staff? How is staff work validated for accuracy? During an annual review is the staff person required to meet a specific percentage of accuracy?

    Hopefully the articles author will dig down so all readers will have a better understanding of what is behind the $100 million and its level of accuracy.

  15. At the end of the article it quotes director of communications for MDOL as saying that this information was figured out using only a small sample.
    So, these numbers aren’t real.
    That shows laziness in the report.
    Maybe an outside auditor needs to look at the entire system and all of the people who’ve received unemployment.

  16. It is also about top management not setting up, funding and running training programs to inform the lower clerical level folks of these vital changes.

    Management owns this and it falls in the (LePage appointed) Commissioner’s lap.

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