Michigan Unemployment Insurance Agency Director Julia Dale told lawmakers on Thursday “we can’t afford to have what happened in the past happen again.”

Her understatement before a joint legislative committee came in response to a December audit from the state’s Office of the Auditor General that found the agency’s efforts to recover at least $5.6 billion in likely fraudulent unemployment overpayments during the pandemic were severely lacking.

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A separate report from the Deloitte accounting firm estimated the UIA cost taxpayers $8.5 billion more than it should have between March 2020 and September 2021.

The December OAG report, the last in a series of five audits since 2020, uncovered $245.1 million in fraudulent payments to ineligible individuals who were dead, in prison or nursing homes, employed by the UIA, or did not otherwise qualify, including $1.7 million paid out after UIA officials became aware of the issues.

A review of a random sample of 25 determinations out of 3,200 totaling $16.9 million, and $5.6 million in penalties, found the UIA did not assess or incorrectly assessed 84% of the determinations, and undercalculated fraud penalties by 49%.

“Similarly, UIA had not yet addressed internal control deficiencies that precluded it from addressing potentially fraudulent pandemic unemployment assistance … overpayments previously estimated at … $5.6 billion, which if applying the 15% minimum monetary penalty would equate to an additional $840 million in penalties,” said Chad Munger, OAG auditor who supervised the December report.

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The OAG also found that out of about 19,000 claims with suspected imposter fraud totaling $106.3 million, the UIA did not attempt to identify the claimants in about 70% of the claims, and did not recover payments or assess penalties for 97% of claims sampled.

Other findings from the OAG found the UIA failed to guard taxpayers’ personal information, and hired identity thieves to process claims.

Gov. Gretchen Whitmer appointed Dale to take over the agency in October 2021, after the House demanded then director Estlund Olson resign. Olson followed Steve Gray, who resigned in November 2020 with an $86,000 payout from the state through an agreement that also included a confidentiality clause.

On Thursday, Dale glossed over the agency’s efforts to recover billions lost during the pandemic, and focused largely on efforts to reform the system for the future. To date, the UIA has recovered about $90 million of the $5.6 billion in likely fraudulent claims, with investigations resulting in 162 charged, 91 convicted, and 71 sentenced for fraud.

The agency has also fired 23 UIA staff and boosted its fraud division to 106 employees, she said.

Dale blamed the issues during the pandemic on a “faulty system” the UIA expects to replace in 2025, and suggested a “limited amount of resources” will continue to hamper the agency’s efforts to address issues the OAG exposed.

Democrats on the legislative committee, meanwhile, focused on highlighting the “unprecedented nature” of the situation, a lack of staffing at the UIA, and other excuses.

“I hope this will end the conversation on the pandemic era,” Dale said, suggesting “nobody is served if we continue to rehash the past and lose focus on the future.”

Republicans on the committee were unimpressed, noting the $90 million recovered equates to likely less than 3% of the total the UIA paid out to ineligible recipients.

“What Director Dale did today is no different than if a college football coach celebrated their team’s single field goal as a great victory after U of M blew them out 97-3,” said Clare Rep. Tom Knuse. “The UIA is a dumpster fire. I can’t speak for Democrat colleagues, but I’ve never seen a dumpster fire put itself out.”

Waterford Republican Rep. Mike Harris also highlighted ongoing complaints about the UIA from constituents, noting dismal reviews online that describe the agency as an “absolute joke.”

“Audit after audit has shed light on deep-rooted failures in the unemployment system, which removed safeguards, dropped background checks, mismanaged staffing and software, and doled out massive amounts of fraud,” Harris said. “Despite these repeated issues, the people of Michigan keep getting the same song-and-dance routine from those in charge. It’s time for real accountability and real reform. In the Legislature, we must conduct ongoing oversight, hold feet to the fire, and push for the serious changes that are necessary to fix our broken unemployment agency.”

Instead, Democrats who lead the committee suggested another hearing is unlikely.

“I’d entertain a proposal to allow the UIA to keep a portion of the money they recoup from ineligible recipients to help deal with staffing shortages,” Kunse said. “But that would require them to try and recoup some of the money first, and they’ve apparently given up on that. At this point the agency has lost every inkling of the public’s trust. No sane person would turn around and throw more money at an agency that just lost nearly $10 billion.”