An audit of Kentucky’s unemployment insurance system raised multiple problems with the utilization and management of the Kentucky Office of Unemployment Insurance (OUI) and Unemployment Insurance (UI) fund. Auditor of Public Accounts Mike Harmon listed 25 “deeply concerning” findings. Multiple problems and delays in Kentucky’s unemployment system resulting from a spike in pandemic-related filings led to the study.

More than 162,000 Kentuckians filed a new unemployment claim within a two-week period in March. Many people report they still have not received a payment or resolution to their claim, and many more cannot get information from OUI on the status of their claim. The auditor’s report says the influx in filings and the creation of three new federal pandemic-related unemployment programs played key roles in creating OUI problems.

The auditor’s report included the following key findings:

• OUI leadership violated federal law and sacrificed integrity in an attempt to get payments out quickly. The office instituted an “auto pay” policy, despite seasoned staff speaking against such a change. “Auto pay” provided benefits to people without the required reporting of weekly wage information. The report says “auto pay” even resulted in a $116,000 overpayment to 16 state employees.
• OUI archived more than 400,000 unread emails sent to its assistance account. The archived emails included communications about problems filing, requests for information and information on a security breach.
• OUI management overrode important system controls. Because of the “auto pay” system, state auditors could not precisely estimate how much Kentuckians were overpaid or underpaid in unemployment benefits.
• OUI did not develop a reasonable and reliable estimate of unpaid claims.
• OUI had multiple issues with information security and data processing and did not perform mandated monthly system security checks.
• OUI did not inform the Auditor’s Office or other state agencies of three data breaches that occurred in April and May 2020. State law requires reporting such breaches within 72 hours.

“The majority of the findings involving OUI come back to one common issue, which is the decision to remove controls that provided better oversight on verification and payment of UI benefits,” said Auditor Harmon. “The systemic failure of leadership on all levels not only violated federal law but also let down many who needed relief. It also leaves others facing the prospect of repaying the government for miscalculated payments they received in good faith.”

You can review the full report, including responses from the various state agencies, here. The auditor will release a separate study in April of Kentucky’s compliance with federal grant requirements.