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Audit Says VEC Needs More Staff

May 11, 2011

By Tracy Kennedy
Capital News Service

RICHMOND — The state auditor of public accounts has found that the Virginia Employment Commission has been inadequately equipped to handle the increase in unemployment claims since the recession began.

The VEC’s Benefit Payment Control Unit, which is dedicated to “detecting and addressing overpayments,” has a staff of 10 employees who work with 12 investigators to determine which claims have been overpaid. As the number of unemployment claims increases, the unit’s caseload also rises.

“The unit’s workload has increased significantly over the last few years with the overall increases in activity,” according to a report issued in November by the state auditor, Walter Kucharski. “The unit has added four investigator positions, but they are still handling about twice the number of cases.”

The report said all unit members were required to work overtime in an attempt to meet the increased caseload.

By federal law, the VEC has two weeks after a claim is filed to assess its eligibility for unemployment benefits. Once the person begins receiving benefits, the VEC’s computer systems perform a “new hire reporting cross match” to detect any suspicious individuals.

If a case is flagged, the file is assigned a priority level, which determines the time frame the unit has to investigate the claim. If the unit doesn’t finish its investigation during that time frame, the case is considered delinquent.

As of September, 52 percent of the unit’s 21,000 cases were delinquent.

“Unit and staff investigators have had difficulty meeting the established timeframes for following up on cases due to the increased caseloads over the last several years,” Kucharski’s audit said.

According to the report, the understaffed unit’s performance also has been impacted by its antiquated equipment. “The Employment Commission’s primary systems are over 25 years old and limit management’s abilities to obtain timely information and react to changes in the environment.”

The VEC was responsible for $40,155,024 in overpayments of unemployment benefits in 2010.

“Non-fraud overpayments have increased in both account volume and amount during the recession and reflect the increased activities of the Employment Commission,” Kucharski’s study said. Administrative errors accounted for about 4 percent of overpayments; more half of those mistakes were caused by an “error in computing claim amount.”

The top reasons for overpayments were:

Claimants earning unreported wages. This accounted for 28 percent of the overpayments. “Sometimes this occurs because there is confusion over when benefits payments stop. Some claimants do not understand they are no longer eligible for unemployment benefits on the day they start a new job, not the day of their first paycheck,” the report said.

Claimants being ineligible because of the circumstances surrounding their termination. This accounted for 21 percent of the overpayments. For example, an employee who was fired for misconduct might say he or she was laid off instead.

The auditor said the causes hadn’t been determined for 32 percent of the overpayment cases.

While the VEC has the power to pursue repayment after an overpayment has been made, 32 percent of such overpayments in 2010 were uncollectible for a variety of reasons. They included individuals remaining unemployed and unable to repay, or the claimant beginning an appeals process that can block the VEC from collecting until the case is resolved.

The audit noted that the percentage recovered “has decreased over that last two years which could be due to increased workload and the number of cases for collection.”

Despite these numbers, the overall picture didn’t warrant a change in the way the VEC operates.

Overpayments made up 2.19 percent of the almost $1.9 billion in unemployment benefits paid by the VEC in 2010. That was up from 1.96 percent of the $1.1 billion in benefits paid in 2009. Overpayments represented 3.24 percent of the $435 million in unemployment benefits paid in 2008.

“While the amount of errors may represent a significant amount, the methods to eliminate or reduce the number of errors further could add significant costs and administrative time for the Employment Commission, claimants, and employers,” Kucharski’s report noted.

The auditor estimated that it would cost $63.2 million to upgrade the VEC’s 25-year-old computer systems. The state has $58.5 million on hand of federal and state funds, but some of that money must be used to repay a federal loan, and the state funds may not be available for the project.

Related story: Pay Back Money, VEC Tells Workers 



On the Web

To read the report “Review of Unemployment Benefit Overpayments” by Virginia’s state auditor of public accounts, visit