NC jobless fraud drops, but still costly

At a legislative oversight meeting Wednesday, officials with the Division of Employment Security told lawmakers that better data analytics, added layers of cross-checks and other process changes are helping to reduce the state's outlay for fraudulent or incorrect claims.

For example, division tax chief Ted Brinn said that, from 2011 to 2013, North Carolina paid nearly $2.7 million to people who claimed to have been laid off by a fictitious employer. With the  assistance of the state's Government Data Analytics Center, Brinn said the division has added extra cross-checks to verify that employers are real, saving the state an estimated $5.2 million so far.

"We believe that we have essentially halted this activity as of December 2013," he told the Joint Legislative Oversight Committee on Unemployment Insurance.

Analytics have also helped prevent a tax evasion practice known as "SUTA dumping." That's when an employer with a high unemployment tax rate due to past layoffs changes its name or ownership or employer number in order to get a new, lower tax rate.

Brinn said the improved system makes it easier to find those cases, and changes to federal law have helped the state crack down on them, saving an estimated $4.4 million.

Assistant Secretary of Commerce Dale Folwell said additional checks at the beginning of the process have helped the agency do a better job of making initial decisions on claims. But the state's overpayment rate, according to federal auditors, is still 14 percent.

That means that, of the $531 million the state paid in jobless claims from October 2013 to October 2014, more than $74 million went to claims the U.S. Department of Labor considers invalid or incomplete. 

Folwell said about half the cases flagged by federal auditors as overpayments simply lacked complete weekly information on the applicant's job search. If even one week's worth of search information is missing from the file, the claim is considered incorrectly paid.

"It's a problem in a lot of different states," he said.

However, he added, the newly implemented requirement that applicants come in for a face-to-face interview has had "a dramatic positive impact" on that problem over the past quarter.

Unemployment insurance director Antwon Keith told lawmakers that only 50 to 60 percent of applicants are showing up for the appointment, which is required within the first month of claims. He said a follow-up survey found that most of the no-shows found other work before their appointment date.

Sen. Bob Rucho, R-Mecklenburg, asked Folwell if the president's recent executive order on immigration would affect the agency's budget. 

Folwell said it would, but he predicted the state will still finish paying off its unemployment debt on schedule. State officials have said they hope to finish repaying the $2.5 billion borrowed from the federal government to pay jobless claims during the recession by next year.

"Obviously, we’re looking toward another finish line, and that’s building a surplus. I’m sure it’ll have some marginal impact on that," he told Rucho.