Audit finds $52 million overpaid in Colorado unemployment insurance

Problem Solvers

DENVER (KDVR) — A state audit released Monday afternoon found the Colorado Department of Labor and Employment improperly paid out more than $52 million through a combination of overpayments to legitimate claimants and to scammers posing as unemployed Coloradans.

The audit looked at the expenditures of federal funds given to Colorado from July 1, 2019 through June 30, 2020.

Just last week, the Problem Solvers shared how countless claimants are still waiting for unemployment benefits they applied for months ago.

This audit doesn’t account for how many Coloradans are still waiting to be paid but the report mentioned that in February CDLE acknowledged it still needed to review 82,000 people who had filed claims prior to June 2020 … meaning all of those people had been waiting at least eight months for the state to determine if their claim was legitimate or fraudulent.

Before the pandemic, the department told auditors it normally adjudicated claims in 4-6 weeks. 

The new audit identified a failure to cross-match unemployment benefit amounts with employer-reported wage records, a backlog of claims yet to be adjudicated, neglecting to use the Treasury Offset Program to recover overpayments; an issue with a form by claimants resulting in overpayments and fraudulent claims that were paid by the department.

Since April, CDLE has been forcing all claimants to use ID.ME, an online verification system to confirm people are who they say they are in an effort to reduce fraud.

Due to the pandemic, Colorado paid out about $4.4 billion in unemployment benefits during the 2020 fiscal year, more than 15 times the annual benefits it normally pays.

Auditors found the department lacked a business plan and internal controls to handle the unprecedented amount of both fraud and legitimate unemployment claims.

CDLE told auditors it agreed with many of its recommendations but wouldn’t be able to implement some of them fully for another two years.

A spokesperson with CDLE sent this statement to FOX31:

“These findings did not provide the Unemployment Insurance Division with any information of which it was not already aware or has not already shared publicly. We take responsibility for responding to the unparalleled and impossible situation COVID-19 presented us with by getting payments out the door and already began implementing many of the State Auditor’s recommendations before the audit was even conducted. 

As we’ve shared previously, the pandemic had an unprecedented impact on state unemployment insurance (UI) programs across the country. UI programs were hit almost overnight by a tsunami of new unemployment claims — a 6000% increase from March 9 to March 23. Realizing the critical need to get jobless Coloradans immediate relief, Executive Order D2020-12 was issued on March 20, 2020 to ensure displaced workers received payments within ten days and help ‘shore up economic security, employment, community cohesion, and community recovery.’

We recognize that the Division was not prepared and did not have an appropriate disaster plan in place that would be relevant to the kind of immediate influx that happened when the world’s economy shut down in March of last year. As noted in the auditor’s report, we will be developing a disaster plan that will help future department leaders, staff, and technology manage potential events that may result in another significant increase in claims and demand for aid.”

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