California State Auditor Rates Unemployment Agency ‘High Risk’

The California State Auditor’s Office has slapped the omni-shambles Employment Development Department, California’s unemployment agency with a “high risk” rating, meaning that the “likelihood of waste, fraud, abuse, or mismanagement or the likelihood of impaired economy, efficiency, or effectiveness causing harm is so great that this likelihood constitutes a substantial risk of detriment to the State.”

And the sun sets in the west.

While the high risk could not possibly come as a shock to anyone who lives, well, anywhere, the Auditor’s report does peel back some of the layers to show the egregious level of incompetence at the EDD.

This is not the first time the Auditor has lambasted the EDD; in early 2021 the office issued a scathing report regarding fraud, security, and terrible client service.

This report, however, goes further.

The report states: “EDD is a high-risk agency because of its mismanagement of the UI program. Specifically, EDD is unable to reliably estimate improper payments under the UI program, thus adversely affecting the State’s financial statements as well as impairing efforts to independently evaluate the efficacy of EDD’s own fraud prevention activities.”

In other words, it can even figure out how much money it lost to pandemic unemployment benefit fraud.  The current estimate is about $40 billion dollars.

“EDD cannot effectively measure its progress at addressing potentially fraudulent payments because it is unable to accurately determine how many improper payments it has made,” the report states.

This is a problems for law enforcement as well, as not even knowing how many improper payments were made puts rather a crimp in the ability to try to find that money and get it back.

The report notes the EDD did not “block addresses used to file unusually high numbers of claims,” hence dozens if not hundreds of pre-loaded chipless debit cards containing up to about $13,000 each being sent to the same address.

An independent “federal program compliance” report issued in April noted the agency is poorly run that it issued an “adverse opinion” on the EDD’s following of federal guidelines and standards.  Adverse opinions in such governmental audits are very rare and means the EDD is out of compliance with federal requirements.

This from an agency that owes the very same federal government more than $18.4 billion dollars, in large part because it had to borrow from the feds to cover the pandemic fraud losses.  The EDD has continued borrowing – to the tune of about $18 million a day – from the feds to pay benefits to those currently unemployed.  It is not clear how the “adverse opinion” and/or the “high risk” designation could impact that situation.

What the audit did note is that the condition of the EDD could impact the state’s credit rating.  Currently, the state’s Standard and Poor’s rating is AA-, better than only 4 other states.

The audit also noted the agency has one of the highest claim appeal reversal rates in the nation, meaning it is not terribly good at figuring out if a person deserves benefits in the first place.

This audit comes just a couple of months after the state Legislative Analyst’s Office declared the EDD to be “structurally insolvent” and that the surcharge imposed in every California business to repay the feds will last for more than a dozen years – at least – and could total upwards of $1,500 per employee in the state.

In its formal response to the Auditor, the EDD tried to defend itself by spewing the same nonsense they tried to pedal to Congress earlier this year: every unemployment agency in the nation had a pandemic problem, we have new systems in place today, and most of the fraud came specifically from the federal “PUA” pandemic program (the Agency did not reply to a request for further comment.)

The first statement is true, though no other state failed as badly as California; the second statement is meaningless because the EDD didn’t have the systems in place when it needed them – and had known for months it needed them; and the third defense in simply a mathematically impossible lie.

The EDD even had the temerity to push back on the Auditor’s assertion that the agency’s client service is appalling and degrading – which it is.

The Agency countered the auditor by saying that “We agree customer satisfaction with the Unemployment Insurance claim process fell during the pandemic, however, we disagree it remains low.”

To prove it is no longer “low,” the agency said that “Sixty-Nine percent of customers surveyed in 2022 were completely or mostly satisfied with the application process, up from 67 percent in 2021.”

Seriously – here’s the link to the Auditor’s report.

And the legislature right now is thinking about having the EDD pay people on strike.

But former EDD chief Julie Su is now kinda sorta pretty much but maybe not permanently part of Joe Biden’s cabinet… She may have moved on to DC., but she still can’t count.