The Legislative Auditor has cited several concerns about the administration of the state's unemployment program during the early days of the coronavirus pandemic, including the allocation of federal jobless benefits, state worker overtime and the ability to securely process billions of federal tax dollars.
This is the third time in the past year the Louisiana Workforce Commission has come under the lens of the Louisiana Legislative Auditor. LWC retorts that it processes nine different types of unemployment benefits, all with different rules.
The auditor’s office asserts that LWC did not have sufficient internal controls to appropriately administer the federal unemployment program and fell short in several ways, which LWC’s leader rebuffs.
"It's easy to Monday morning quarterback, but we're still in the game paying benefits," LWC Secretary Ava Cates said in defense of the workforce agency. "Auditors offices across the country have made UI (unemployment insurance) the primary investigation of the year, but the totality of the circumstances is not being considered," she said.
The time the fiscal year audit covers — between July 1, 2019, and June 30, 2020 — overlaps the early onslaught of the coronavirus pandemic and lockdowns between March and June 2020 that put hundreds of thousands of Louisianans out of work. LWC handed out $3.7 billion in unemployment benefits to 575,000 individuals then.
"During the period in question, we could not use CARES (federal program funds). There were no extra food stamps and the $247 maximum (state) weekly (jobless) benefit was all that people had for living paycheck to paycheck," Cates said. "Since you base food stamps (on immediate past wages) you wouldn't even qualify during the first few weeks of the pandemic. We were a lifeline," Cates said.
The auditor's office conducted a random sample of 138 individuals paid $902,822 in benefits — flagging $261,063 which could be taken back as potentially identify theft or fraud and in some cases were even backdated related to child care deductions.
"These potential overpayments may have been avoided or reduced had LWC established adequate controls," according to the audit.
That means federal auditors could target the money to be returned from the state.
Cates also asserted that during the Trump administration when Congress passed the first coronavirus relief package, there was guidance that said state agencies like hers were "expressly forbidden from verifying income."
Since then, a second federal stimulus act was passed and had different requirements, including ways to verify unemployment benefit seekers. LWC was allocated federal funding from the Trump administration to fight fraud but it did not arrive until months later, federal records show.
The auditor also flagged $786,000 in overtime pay allocated to LWC employees, which was set aside for the program and the auditor said was misused.
During that time, unemployment claims jumped from 1,698 during the first week of March 2020 to 72,348 claims two weeks later, then 102,172 the first week of April.
"I called people to come to work (during the early pandemic) and said come in two hours. We could not use outside staff at that time," Cates said. "I stand by my decision."
LWC was told it was misallocating the bucket of money set aside as overtime, with some of the funds going to workers who had been put on special leave because their public-facing roles were no longer needed while state buildings were closed to help curb the spread of the pandemic.
"That leave was only supposed to be used by employees who would not work during the pandemic," said Ricky Rodriguez, assistant director for the Legislative Auditor's office.
"LWC was trying to incentivize (employees to come in to work during a pandemic) to get all these claims processed, but it was not in accordance with the Civil Service rules," he said.
"During this time period an LWC employee who actually worked 50 hours in a work week received 95 hours total compensation," according to the report. That includes 40 hours special leave, 40 hours at "straight time" overtime and 10 more hours at time and half overtime.
Some LWC workers recorded both special leave pay and overtime on the same day. LWC paid 33,560 hours of special leave totaling $786,000 in compensation to state workers, the report said.
There are also questions about the accuracy of the unemployment agency's financial reporting to the tune of tens of millions of dollars off for various accounts.
It's possible that the U.S. Department of Labor may seek to verify the state auditor's questions and determinations, possibly prompting either a claw back of funds or withholding future federal allocations for any funding deemed ineligible per federal rules.
"We are certainly not perfect but (it was) when other states were paying less than 10% of people who applied," Cates, the LWC Secretary said. "There are a lot of different nuances, to now be criticized for coming to the aid of state citizens, that’s the one that cuts the deepest.”