Kentucky Auditor Mike Harmon has released the second part of the Statewide Single Audit of Kentucky for fiscal year 2020.
According to a news release, one finding in the audit will be referred to the Office of the Attorney General. Kentucky spent over $17.5 billion in cash and noncash awards received from the federal government in fiscal year 2020, which is an increase of $4.7 billion compared to federal funds spent by the Commonwealth during Fiscal Year 2019. The 2020 audit identifies $670.7 million in questioned costs, including the $665 million in unemployment insurance benefits paid out by the Commonwealth during 2020.
Auditor Harmon says the audit shows that the Office of Unemployment failed to ask key eligibility questions before issuing UI payments, saying the entire $665 million wasn’t necessarily wrongly paid, only that there were no controls in place to properly determine and certify claimants’ eligibility, which is a violation of federal law. At this point, auditors could not precisely determine the exact amount that was either overpaid or still owed to claimants.
The audit contains 21 findings, which include five repeat findings and five findings carried forward from the first part of audit for fiscal year 2020. All five of the findings carried forward from the audit deal with issues identified within Kentucky’s UI system, and the Office of Unemployment Insurance. Also identified in the audit were claims of 37 state employees who had filed for and received UI payments. Some of these employees filed for the loss of part-time jobs despite still being employed full-time by the Commonwealth. Additional reviews by auditors found that at least ten employees of the office, who had the ability to make changes in the system, had accessed their own UI claims within the system, despite knowing it was against policy to do so.
Auditor Harmon says, “Based on the issues we found with the UI system, my office is issuing an adverse opinion on Kentucky’s compliance with federal unemployment insurance program requirements. In common terms, an adverse opinion is the worst opinion that can be issued for an audit. It is extremely rare for an adverse opinion to be issued on an audit. As our previous report detailed, there was a systemic failure of leadership that sacrificed program integrity in the early weeks of the pandemic in an effort to pay claims more quickly. It is a case of good intentions leading to very bad results.”