Friday morning the Washington State Auditor’s office released its comprehensive financial audit for the state and included in that audit was a scathing review of the Employment Security Department (ESD) and its handling of the Nigerian fraud scam among other failures that occurred earlier this year.

The annual audit is the part of several audits that will highlight the problems that ESD has struggled with this year that have been highlighted here at the Washington Policy Center and other local and national news outlets.

A press release from the auditor’s office detailed,

• The findings released today were part of the larger Comprehensive Annual Financial Report, or CAFR. The role of Auditor’s Office in the CAFR is to assess whether the state of Washington’s financial statements accurately reflect the state’s financial position in fiscal year 2020. Data used in the audit is as of June 30, 2020, the end of the fiscal year. Key figures include:
• The “known and suspected” fraud loss, as of June 30, 2020, was about $600 million. This sum covers more than 122,000 known or suspected fraudulent claims in fiscal year 2020.
• By that same time, the state had recovered $250 million, resulting in an estimated net loss of $350.9 million for fiscal year 2020.
• These amounts are almost certainly different today, as ESD’s recovery efforts are ongoing.
• ESD paid out more than $7.5 billion in Unemployment Insurance benefits to 926,815 people in fiscal year 2020. The vast majority of those payments happened after the pandemic began in March. (These figures include the fraud.)
• In fiscal year 2020, ESD issued 684 percent more in benefits funding (about eight times) to 390 percent more people (about five times) than in fiscal year 2019.

The audit also showed changes in ESD’s internal controls that made the program more vulnerable to fraud,

• The elimination in March of the “waiting week,” time ESD typically would use to verify eligibility for benefits. This decision was driven by federal incentives to distribute pandemic relief quickly as well as an executive order from the governor. As a result, benefits were paid before eligibility was verified.
• An automated process to detect claims that present a higher risk for identity theft was not working for much of the year. By the time it was repaired in May, a large number of fraudulent transactions had already occurred.

The unemployment system in Washington has been universally criticized this year for its inadequate management, lack of fraud prevention mechanisms, problems with transparency and inability to dispatch its primary function: paying the correct unemployment benefits to the right people in a timely fashion.

For a link to the Auditor’s findings, click here.