The California state auditor Thursday released the second of two reports this week dissecting the failings of Californiaâs unemployment agency. The audit found the Employment Development Department could have prevented paying out $11 billion dollars and counting in fraudulent unemployment claims.Â
Too little, too late was the gist of the audit, which said EDD was warned by the U.S. Labor Department as far back as May that it needed to prepare for more than a billion dollars worth of potentially fake claims. In July, Bank of America told the agency it suspected more than 60,000 EDD accounts of being illegitimate. Even with these advance warnings, EDD didnât implement wide-reaching fraud detection technology until October.Â
To make matters worse, the audit asserts, EDD has yet to develop an effective system for reactivating legitimate accounts once theyâve been verified; does not appear to know the status of all the frozen accounts; and does not have a centralized tracking process for them.Â
The report also takes the department to task for not investigating the dollar amount of fraudulent claims until the state auditor asked for the figure.
The auditor suggests EDD establish a central until for fraud prevention and detection and a plan to assess the tools it is using to manage fraud by March, and it recommended the state Legislature make such an assessment a biannual requirement.Â
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