California unemployment agency was unprepared for COVID claim surge, audit says
The state’s Employment Development Department, eager to get timely unemployment payments to Californians as claims surged, was unprepared for the crisis and used a system that was “compromising the integrity” of the insurance program, a state audit found Tuesday.
The agency has been aware of its systemic problems for at least 10 years, the audit said, and it’s unclear if it’s ready should a similar surge of claims happen again.
EDD has been hit by both long delays in processing claims as well as fraudulent claims.
The audit said that the agency had responded to last year’s explosion in claims “by suspending its determinations of eligibility for most claimants, thereby compromising the integrity of the unemployment insurance program.”
Labor officials have pointed to the federal government as one reason for its problems. EDD Director Rita Saenz told the auditor that “federal guidance for the PUA program provided insufficient support to states grappling with an unprecedented volume of claims.”
PUA is Pandemic Unemployment Assistance, the federally funded program created by Congress last spring to provide jobless benefits for people who traditionally do not qualify for payments, such as independent contractors. About $11 billion in fraudulent California PUA claims have been paid, state officials estimate.
“States have seen complex, coordinated and aggressive attacks by national and international criminals. Without coordinated assistance from the Trump administration, states were left to deal with this extraordinary influx of fraud on their own while also endeavoring to distribute benefits to people in desperate need,” Saenz said.
The audit described how, as the claims began to pile up in March, the agency “halted most of its work determining whether claimants were eligible for UI benefits.”
While this helped ease the backlog of claims and result in more timely payments to unemployed Californians, “it also compromised the integrity of the program and may hinder the ability of the department to conduct day-to-day operations in the future.”
EDD now faces a very large impending workload of eligibility certifications that threatens its ability to operate effectively,” the audit said.
The claim surge also meant problems in customer service. EDD’s automated systems could not keep up, and that meant the already-overwhelmed staff had to manually deal with many claims.
“As a result, hundreds of thousands of claimants waited longer than 21 days—EDD’s measure of how quickly it should process a claim—to receive their first benefit payments,” the audit said.
EDD has overhauled its systems for processing claims, and expects to clear the huge backlog of claims identified by the governor’s strike force in September by Wednesday.
There’s a new big backlog, but EDD says it’s mostly a temporary situation stemming from last month’s changes in federal benefits.
And, Saenz said, “The department has taken steps to increase efficiencies, expedite payment processes, and prevent fraud.”
The audit found that EDD “struggled to provide claimants assistance with their claims.”
As the claims surged, the agency’s call center answered less than 1% of the calls it received.
The agency increased staff and hours for the center, “but these staff were often unable to assist callers and only marginally improved the percentage of calls it answered,” the audit found.
The problems persist, the audit said.
“Despite knowing for years that it had problems with call center performance, EDD has not yet adopted best practices for managing the call center, leaving it ill prepared to assist Californians effectively.”
After all, the audit said, during the 2007-09 recession, “EDD experienced many problems similar to those we note in this report,” and has been aware of the call center problems for years.
“Nonetheless, in March 2020, EDD had no comprehensive plan for how it would respond if California experienced a recession and unemployment insurance claims increased correspondingly,” it said.
This story was originally published January 26, 2021 at 10:01 AM.
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