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UIA Director Says Fraud Has Been Addressed, House Republicans Disagree

April 30, 2024

Unemployment Insurance Agency (UIA) Director Julia Dale testified before a joint House panel Thursday that ending the UIA leadership revolving door, addressing staff fraud and implementing a new online system will all work hand in hand to help avoid a future crisis similar to that during the COVID-19 pandemic, but House Republican committee members feel the work is just getting started.

Dale testified Thursday before the joint House Labor and House Ethics and Oversight Committees, along with the Office of the Auditor General (OAG), on the OAG’s December 2023 report detailing UIA fraud during the COVID-19 pandemic. The 38-page audit was the final in a series of five ordered by the Legislature in 2020, and focused primarily on the agency’s fraud response from Jan. 1, 2020 through Dec. 31, 2022.

The committee hearing Thursday, which was held four months after the final audit was released to learn more about the UIA’s response, comes after House Republicans called on Speaker Joe Tate (D-Detroit) and the House Ethics and Oversight Committee to investigate the result of all five OAG reports.

During her testimony, Dale said the issues raised by the OAG in its series of audits are part of “a larger national problem exposed during the COVID-19 pandemic.

“The reality is, criminals took advantage of a bipartisan push to protect Americans from the very real and personal threat of financial disaster. They stole tens of billions of dollars from U.S. taxpayers and threatened one of this nation’s most vital safety nets, at a time when many Americans were struggling to put food on the table.”

In response, Dale said the UIA has taken lengthy measures to address fraud since March 2020 and ensure it isn’t repeated, including firing or “otherwise (separating) 23 UIA employees for violating policies involving potential overpayments,” adding that the agency has also implemented new ethics and security clearance policies for employees and made fingerprinting mandatory for new hires, something that “is not a norm for state employment.”

“And we are building a new computer system, one for workers and businesses that is easier to use, thus reducing errors and accidental instances of overpayment,” she said, as a result of OAG auditing that highlighted the UIA’s “antiquated computer system.”

Dale said the system is expected “to be online in a year,” with a cost of $78 million over a 10-year contract, which she said will finally put an end to a system that “not only failed workers during the crisis, but prior to the crisis had a 93% error rate in making false fraud findings.

“This means that we’re not only dealing with fighting fraud, but we’re fighting accusations of fraud prior to the pandemic in a system that had no basis in reality,” she said.

Dale also referenced the UIA’s $90 million in fraud penalties recovered, along with 62 individuals charged, 91 convicted and 71 sentenced in fraud cases.

But several House Republicans disagreed with the success of the UIA’s efforts thus far.

Ethics and Oversight Minority Vice Chair Tom Kunse (R-Clare) said when looking at the $5.6 billion in fraud estimated by vendor Deloitte, a $90 million return is only around 1.6 percent.

He asked, “How in the world can you be proud of that?”

When asked by Rep. Matt Koleszar (D-Plymouth) why Dale is confident the system would not be susceptible to the same fraud in the case of a similar crisis down the road, she also highlighted her end to the constant leadership turnover, 11 directors in as many years, that she said has already had a positive impact on the agency.

“With my consistent leadership, we have been able to tackle some major problems,” Dale said, adding that, “What we are doing is building muscle memory, accountability, ownership and systems and processes that are well documented in detail, so that people know what their responsibility is and what they need to do when things go wrong.”

Rep. Amos O’Neal (D-Saginaw) said he feels “very confident that we won’t be in the same place next year” and Dale said she hopes this will “end the conversation on the pandemic era.”

“The UIA is driving Michigan forward for both workers and employers,” she said. “Nobody is served if we continue to rehash the past and lose focus on the future.”

In response, Rep. Tom Kunse (R-Clare) said, “If I was the head of a bureaucracy that was run this poorly, I wouldn’t want to talk about it either. I mean, this has been a systematic, widespread failure.”

During the hearing, Rep. Mike Harris (R-Clarkston) said he has a “huge list of recent complaints from constituents about how horrible the system is, or how they can’t get through to a live person. UIA still continues to be one of the top complaints that we get in our offices, many of our offices.”

Dale said it’s an issue of staffing. While she is using around 70 limited-term staff to augment the UIA’s 33 full-time fraud investigation staff members right now, that funding will soon run out.

“Our customers have a high expectation, and they should,” she said. “The reality is, though, we have a limited amount of resources, and at some point, that federal grant money that I have, that I’m able to fund these additional staff with, is going to go.”

Elections and Ethics Chair Erin Byrnes (D-Dearborn) said the topic of funding for additional staff is an ongoing conversation that has to be taken department by department.

Dale said going forward, addressing the issue of staffing should be looked at like a partnership.

“In the day of Amazon, we all expect a certain level of customer service, and they should, but we also need to have the tools to be able to provide that level of customer service,” Dale said.

Kunse said when Dale spoke about customer service, “I’m glad I wasn’t drinking coffee, because I would have spit it up.”

He said the continued underlying issue with the department is a lack of accountability, honing in on the non-disclosure agreement (NDA) that was signed by previous UIA Director Steve Gray when he resigned in 2020, along with $85,872 he received as part of a separation agreement.

“You should be accountable for your actions, and the fact that we pay people to leave, so they don’t have to account for themselves, that’s embarrassing,” he said. “Accountability starts there.”

When talking about the need for more staff funding, Harris and Kunse suggested an accountability measure where a percentage of what the UIA can recoup in funding goes back toward the department’s staffing costs.

“We’re spending so much money on fraudulent payments. That would probably fund the UIA with every staff person that they need,” Harris said.

Kunse added, “Every dollar you recover can go to staffing. There’s your bonus. Go get it.”


Article courtesy MIRS News for SBAM’s Lansing Watchdog newsletter

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