State audit confirms massive dysfunction at Employment Security Department, Wilson says

OLYMPIA – A new state performance audit says fraud losses at the Department of Employment Security could be nearly twice as big as previously reported, and Sen. Jeff Wilson, R-Longview, says it confirms suspicions of widespread dysfunction in Washington’s unemployment-insurance agency.

“We’ve been saying for months that Employment Security was poorly prepared for last year’s COVID economic shutdown,” Wilson said. “The state auditor’s report shows us why. The potential for fraud existed before COVID, and the agency failed to implement adequate controls. Last year’s record unemployment and an avalanche of fraudulent claims merely brought the problems to the surface.

“The volume of claims would have strained any agency no matter how well-run. But the report shows ESD has only itself to blame for the underlying problems. If it had given fraud prevention a higher priority, the agency would have been able to respond to the crisis much more efficiently – and thousands would not have been kept waiting for their unemployment checks.

“There’s just one thing missing from this report – an account of the pain, misery and anxiety this caused for tens of thousands of Washington residents. We heard plenty about that in the Legislature, from our constituents.”

Last year ESD was forced to slow claims processing and implement new controls after a Nigeria-based fraud scheme cost the state $646 million. Those who received payments in August waited an average of 70 days for their first check. The auditor’s office says the agency was unprepared to prevent widespread fraud and losses could run as high as $1.1 billion.

The report says prior to the pandemic, ESD lacked a robust anti-fraud unit and the tools necessary to respond to widespread impostor fraud. Some of the anti-fraud tools it did have were not functional.

The performance audit also says the agency continues to struggle, and that it has been able to handle only a small share of the calls it has received from Washington residents seeking information about their claims. Should another wave of claims materialize, it says “the agency’s ability to handle the volume of calls is of concern.”

Wilson said, “The real message of the auditor’s report is that the Legislature missed a big opportunity this year. We could have put the agency under a microscope, examined the adequacy of the fixes it has made, asked critical questions and determined what further reforms are necessary. I wish my colleagues in the majority party had been more interested in looking into problems at an agency under the governor’s control. With just 12 days left in the 2021 legislative session, I am sad to say I don’t think it is going to happen now.”