Division of Employment Security (DES) Assistant Secretary Antwon Keith touted his agency’s efforts in correcting improper unemployment insurance payments and the timeliness of first-time payments in his testimony before the House Oversight and Reform Committee Wednesday. In response, State Auditor Beth Wood questioned that the recommendations from two audits by her office were being implemented.

Keith and Wood appeared before the committee to address those long-time problems and how the agency has worked to fix them.

“The thousands of North Carolinians laid off during the pandemic shutdown overwhelmed the system and brought new urgency to fixing those chronic flaws,” committee co-chair Rep. Jake Johnson (R-Polk) said. “Now that unemployment rates are again near three percent, it is a good time to improve the system.”

In the past, DES has complained that the federal improper payment rate relies on a small sample. “It needs to be re-evaluated,” Keith said but did not offer an alternative. Using the current methodology, however, North Carolina’s 16.67% improper payment rate is better than other southeastern states, Keith emphasized.

Reps. Allen Chesser (R-Nash) and Maria Cervania (D-Wake) pressed him on getting better estimates and better performance, regardless of the measure. Wood reinforced their point. “It’s not good enough for North Carolina,” she said. “We should be pushing to be better.”

Wood’s audit on improper payments found that DES had failed to prepare for the inevitable economic downturn or to implement recommendations from the U.S. Department of Labor. “The biggest issue we need to talk about was the lack of preparedness for what happened,” Wood said. “We don’t know when a disaster is going to happen, so I would have expected DES to be more ready than they were.”

Keith noted that 54,000 people filed for unemployment in one day in April 2020 due to Covid shutdowns. The agency also had to implement multiple new programs with little federal guidance and few guardrails. The federal Government Accountability Office reported in September that the laxest of these programs, Pandemic Unemployment Assistance, had up to $135 billion in outright fraudulent payments.

Another Auditor’s report on first-time payments found DES was slow with $438 million in benefit payments during the pandemic. Committee members and Wood herself emphasized that this was not simply a result of demand. Federal requirements state that 87 percent of these payments must be paid within 14-21 days. North Carolina has not met this standard since 2010.

Stressing that North Carolina should do better, Rep. John Torbett (R-Gaston) noted that the federal requirement is lacking. He asked, what if our payroll, bank account, or doctor’s diagnosis were only 87 percent accurate. “What about when you get in your car or truck, knowing that there’s an 87 percent chance it’s going to start and take you to where you need to go?” Torbett asked. “What about our schools? What if kids in our schools, we knew there was an only 87 percent right our kids would be educated?”

Wood faulted the heavy reliance on manual interventions that can take between 40 and 110 days to complete, far beyond the 21-day federal guideline. She tested the system herself and found a need for improvement in getting help. A claimant seeking help for to correct a mistake, such as a mistyped social security number, encountered a maze of options to select and information to give, only to end in a message that told callers the system was busy and to try again later.

Auditor Oversight

Members were interested in what it takes to merit a performance audit from the State Auditor. Wood responded, “We look at where there is a lot of money spend or impact [on the greatest number of North Carolina citizens].” She also commented on the importance of follow-up on her recommendation through legislative oversight committees. She noted that HB471 would put more onus on agencies to show they had taken steps to implement recommendations.

Members and Wood discussed the vulnerability of local governments and the options available to improve their financial oversight. Wood mentioned efforts by the recommended that these smaller towns and rural counties hire outside help, such as a CPA firm. Local government associations can provide assistance, she said.

In a surprise announcement closing the hearing, Auditor Wood said she would not seek reelection, but “that leaves us 14 months to kick some butt.”

Raleigh, NC — The House Oversight and Reform Committee has invited Division of Employment Security (DES) Assistant Secretary Antwon Keith and State Auditor Beth Wood to appear before the committee Wednesday, November 1, 2023, at 1 p.m. in the Legislative Building Auditorium.

The committee is following up on recommendations from the State Auditor and the U.S. Department of Labor to improve the accuracy and timeliness of unemployment payments. Committee members expect to learn about the progress DES has made and other steps the agency is taking to provide more timely and accurate payments.

“The pandemic highlighted flaws in the ability to make timely first-time payments and to ensure the right amount goes to the right person,” said co-chair Rep. Jake Johnson. “Federal pandemic unemployment benefits were particularly vulnerable to fraud and mistakes. North Carolinians need to know the unemployment system is fair, fast, and free of fraud.”

“It is good that both the State Auditor and the General Assembly can hold agencies accountable,” co-chair Rep. Harry Warren said. “I look forward to working with her to ensure broad and deep oversight on behalf of taxpayers.”

Assistant Secretary Keith and Auditor Wood have submitted presentations ahead of Wednesday’s hearing. Those can be found on the committee’s website.