Maryland audit finds potentially $344,000 in improper unemployment benefits

The deceased, prisoners and even some state workers improperly collected unemployment benefits potentially worth about $344,000, according to a recently released audit of Maryland's Division of Unemployment Insurance.

Auditors in the Department of Legislative Services said the overpayments occurred because the division failed to take full advantage of computer matching techniques to identify ineligible claimants.


"We work hard to stay ahead of technology," said Julie Ellen Squire, assistant secretary of the Division of Unemployment Insurance, adding that auditors made "great recommendations" that in some cases already have been implemented.

The division administers Maryland's unemployment benefits, a program that's funded by the federal government and taxes paid by employers. Last year, the program took in $1.82 billion, and paid out $1.61 billion to 243,000 jobless workers, according to auditors.


The division reported it recovered about $25.4 million in overpayments last year from individuals. Outstanding overpayments totaled $149.6 million at the end of December, compared with $85.4 million in June 2008.

Overpayments have grown along with an increase in claims and the expansion of federal benefits program in the weak job market, Squire said.

The maximum benefit for Maryland jobless workers as of early this year was $430 per week for 26 weeks, although a federal program allowed benefits to be extended another 21 weeks. To qualify for benefits, a Marylander must be unemployed, available to work and looking for a job.

But the audit, which covered the period from June 2008 through the end of January 2011, found that the division needs to do a better job of ferreting out ineligible claimants through better use of computerized screening.

For example, when auditors ran claimants through a more comprehensive screening, they found that 19 deceased people received benefits totaling $124,000 for as long as 37 weeks after their death. Thirty prisoners also collected benefits worth about $175,000.

And some workers received unemployment benefits while taking home a paycheck from the state, auditors said. One state worker, for instance, earned about $9,700 in wages while pocketing $5,800 in unemployment benefits.

Auditors also uncovered an error in the division's online application for a $5,000 Maryland tax credit that was available to employers hiring a worker who had collected benefits in the previous 12 months. The system was incorrectly programmed so that the credit was available even if the worker had merely applied for benefits.

Employers received the tax credit for 89 workers who didn't receive benefits — potentially $445,000 in improperly awarded credits, auditors said. The division corrected the error when alerted by auditors last year, and then notified employers and the state comptroller of the problem, auditors said.


Benefits are disbursed through a debit card program that the state offers through a bank. But auditors said the division didn't have adequate procedures to make sure the bank notified the state when claimants changed their address. Auditors discovered the division and bank had different addresses and ZIP codes for about 12,400 beneficiaries.

Incorrect addresses could lead to claimants not getting important tax information or replacement cards being sent to the wrong place, auditors said.

The division said it changed its policy late last year so beneficiaries must make address changes through the state rather than the bank.

Squire said the division already has adopted auditors' recommendations or is in the process of doing so. She also noted other efforts are under way to prevent and recover overpayments.

Maryland now works with the Internal Revenue Service to recover overpayments from tax refunds, and this year collected $16 million, Squire said.

And last week, the U.S. Department of Labor announced Maryland was one of 30 states that will receive a grant to improve the integrity of their programs. Maryland will use some of its $2 million grant for fraud prevention, Squire said.


Most overpayments are due to honest mistakes or claims that are paid and later reversed, Squire said.

"Thirty to 38 percent is fraud," she said.