DEED Overpaid $3.2M in Fed. Unemployment Benefits

DEED Commissioner Mark Phillips agreed with the findings of Minnesota's Legislative auditor, citing complexity of the federal unemployment benefits program and lack of staff time as major reasons for the unresolved overpayments, and pledged to have the issue taken care of by September 11.

The Minnesota Department of Employment and Economic Development (DEED) overpaid as much as $3.2 million in federal unemployment benefits during the fiscal year that ended in June, according to a report released Friday by the Minnesota office of the Legislative auditor.

The overpaid funds were part of an additional unemployment benefit made available under the American Recovery and Reinvestment Act's Federal Additional Compensation (FAC) Program. The funds supplemented regular unemployment benefits with $25 weekly payments for unemployment benefit recipients.

The report indicates that DEED's computer system didn't identify and track $25 payments given to individuals for weeks when they weren't eligible for unemployment benefits.

According to the report, the federal government first alerted DEED officials to the overpayment in September 2009. DEED said that it would begin recovering the overpayments after it had reprogrammed its computer system in October 2009, but as of March 2011, the agency hadn't developed a process to identify or pursue the payments.

In a response letter submitted to the office of the Legislative auditor on April 4, DEED Commissioner Mark Phillips said that he agreed with the report's findings and offered an explanation as to how the overpayments occurred.

“The American Recovery and Reinvestment Act was enacted on February 17, 2009 and authorized the FAC payments effective February 22, 2009,” Phillips said in his letter. “As we were required to implement this program very quickly, our first focus was on getting the additional payments issued to [unemployment insurance] applicants.”

Additionally, Phillips said “the technical complexity of writing and accounting for FAC overpayments was much more challenging than originally anticipated.” He added that, “due to tremendous volume and benefit program complexity experienced during fiscal year 2010, staff sometimes fell behind” in identifying applicants who received more than the maximum allowable unemployment benefits.

In addition to the $3.2 million overpayment, DEED also overpaid five applicants a combined $19,660 in extended unemployment benefits funded by the stimulus bill, the Legislative auditor's report said. Those overpayments resulted from applicants receiving payments for more weeks than those they were eligible for under extended benefit programs.

The report said that DEED's unemployment system produced a report to identify the individuals who were overpaid, but the agency's employees didn't follow up to establish and track recovery of the funds.

The matter of the $3.2 million in overpayments will be resolved by September 11 and the $19,660 in extended unemployment benefits will be resolved by September 30, Phillips said in his letter.