Audit: ESC paid benefits with state, not federal money

The state Employment Security Commission mistakenly paid $147 million in jobless benefits with state funds instead of federal money in the past two years, according to a state audit released Thursday.

The finding is the latest problem for the ESC, which last fall was roundly criticized for trying to dock the weekly benefits checks of thousands of unemployed people after overpaying benefits for months.

Federal inspectors discovered in December 2009 that a computer programming error resulted in benefits being paid from state funds, but the ESC didn't correct the problem until last May, according to the audit. It took the agency another four months to determine how much the mistake cost the state, the audit states.

"It was a glitch in their computer program that they had known about, again, for months and had not done anything to fix it," State Auditor Beth Wood said. "It is a huge concern."

ESC spokesman Larry Parker said the money was recovered last summer when the agency reconciled its 2009-10 fiscal year financial statements. He also noted the money involved came from the state Unemployment Insurance Trust Fund, not general state funds.

In the interim, however, the state had to borrow money to cover the shortfall in state funds, according to the audit.

The audit also urged the ESC tighten up access to its computer system, noting some staff members have access they shouldn't have to confidential information of people applying for benefits. Wood said the issue was raised in a previous audit but wasn't addressed.

"What both of those audits would lead you to believe is that there are not the correct checks and balances in place," she said. "It's hard to understand how it gets that far."

Similar computer errors led to an estimated $28 million in overpayments to about 38,000 people last year. The ESC started trying to recoup the money in September without warning, prompting an angry response from people receiving jobless benefits.

Gov. Beverly Perdue ordered the agency to stop docking people's benefits checks and to repay anyone who had lost money because of the move. Parker said Thursday that all of that money has been refunded.

Perdue also sent in a group of technology experts to help the ESC fix its computer problems, and Parker said that all of the issues have been resolved.

“The governor believes (the ESC) will fix any issues needed to continue their services to North Carolina citizens,” Perdue spokeswoman Chrissy Pearson said Thursday when asked if the governor still had confidence in ESC's leadership.

The ESC must repay the U.S. Department of Labor the $28 million in money mistakenly paid out, but it remains unclear whether a payment plan has been worked out.