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UIA Hired Embezzlers, Known Crooks During COVID

March 22, 2022

More than 5,500 Michigan Unemployment Insurance Agency (UIA) staff members were not given a criminal background check before they were brought on board, and according to an audit released Friday at least 71 had a history of financial crime.

Michigan’s UIA has been in and out of headlines since the start of the COVID-19 pandemic. The agency paid out $36.5 billion in unemployment insurance (UI) benefits and processed 5.2 million claims from March 2020 to June 2021. However, the arm of the state’s Department of Labor and Economic Opportunity (LEO) spent up to $8.5 billion “on potentially fraudulent claims” from March to October 2020.

Friday morning, the Office of the Auditor General (OAG) – the constitutionally-designed inspection arm of the Legislature – released a report that found the UIA:

  • Did not reflect on how many workers they were accepting, along with their hourly pay rates and specific job responsibilities, even after spending $130.7 million on three different staffing agencies through June 2021, $34.2 million on limited-term employees and $5 million on 16 Michigan Works! Agencies (MWAs).

By the end of July 2020, the UIA worker count reached 1,460 staff members, with hourly pay rates fluctuating from $26 to $150.

The UIA boosted its staff numbers from 754 in March 2020 to a peak total of 4,410 in April 2021; a nearly 485% increase. The increase came during an unprecedented time for the department. While the UIA typically sees 5,000 cases per week, the first two weeks of COVID had them seeing 127,000 to 303,000 new cases, respectively. That’s a 4,000% increase.

  • The UIA particularly allowed 80% of MWA contracted workers to operate between 12 to 126 days without completing a confidentiality agreement. Additionally, 69% of a 42 sample of staffing agency and MWA workers were not provided the mandated Social Security Administration training. Twelve individuals were already serving between 15 to 165 days before receiving the training.

More than 66% of the same sample did not receive data governance and Department of Treasury training.

  • The UIA did not ensure that criminal background checks were conducted on 5,508 staff members. Moreover, a sample of 169 workers found that 42% of employees were convicted of one or more misdemeanors and/or felonies for crimes like embezzlement, identity theft, armed robbery or other financial crimes.
  • Sixty-three of 139 department workers sampled by the OAG continued to have access to the Michigan Integrated Data Automated System – which is used to pay UI benefits – for an average of 32.6 days after exiting the agency.

“The continued access contributed to the $3.8 million UI fraud (a) former worker committed in mid-2020,” the report reads.

Senate Oversight Chair Ed McBroom (R-Waucedah Twp.) told MIRS it was “incredibly frustrating to see this report,” even though he was still assessing the primary material findings.

“We didn’t just forget to lock the back door of the house. We opened up the front door and turned on the porch light for fraud to happen,” McBroom said. “I have constituents calling all of the time – more today – who are still waiting to get their money or they’re being challenged with the money they got. We have to do something serious about all of this, and as soon as possible.”

He expressed the Legislature needs some additional proof and a clear understanding of how the array of mistakes occurred. Also, McBroom highlighted the Michigan executive branch needs to enter discussions with lawmakers and show an understanding “this problem runs deep, it runs decades long and we probably need to cut down to the bare-bones foundation of this.”

“If that means that the Governor needs to work with the Legislature to scrap the current department and start all over again – if that’s how far we have to go to do it, fine,” he said.

House Oversight Chair Steven Johnson (R-Wayland Twp.) told MIRS that he’s “become numb to hearing about audits that the UIA failed.”

“My staff told me about it, and I just said ‘Well, yeah, of course, that’s what we’re used to around here,'” Johnson said. “As far as where we go from here – the intention is to do a joint hearing with the Senate. We’re working on logistics for the timing of that. But we, the Legislature, can’t fix this. This is up to Gov. Gretchen Whitmer. This is entirely on her hands at this point.”

In response to the OAG, the UIA explained it has worked with professional agencies to make certain that background checks for all contract employees were completed.

It also underscored it was working with LEO to strengthen a background check policy and process distinct to the UIA’s needs, and that all arrangement agency workers must finish job training programs before kicking off duties.

A statement from UIA Director Julia Dale illustrated “the record level of claims coincided with the UIA’s continuous onboarding of new staffing resources and the implementation of many newly created and complex federal pandemic unemployment assistance programs.”

“As UIA worked quickly to increase the department’s capacity to address Michiganders’ needs, the execution was far from perfect,” Dale said. “The lessons learned and opportunities articulated by the audit serve as the platform to launch an improved Michigan Unemployment Insurance Agency.”

In-progress UIA actions include:

  • Developing “UIA specific policies” regarding fingerprinting and criminal background checks.
  • (Ensuring) consistency and adherence in the application of on and off-boarding policies and employees.
  • (Implementing) a new employee training management system that will apply to all staff from full-time to contract employees.
  • (Ensuring) all necessary confidentiality and data sharing agreements are executed in a timely fashion.
  • (Working) collaboratively with LEO Procurement Leadership to secure staffing contracts in a manner compliant with state and federal guidance.
  • (Adhere) to policy and procedures minimizing the risk of data exposure when using State of Michigan or third-party hardware.”
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