NC audits reveal unemployment benefit delays, $47M in fraud

Two new audits from the North Carolina Office of the State Auditor (NCOSA) found a 15-year pattern of delayed first-round unemployment benefit payments and more than $47 million in fraudulent benefit overpayments.

The first audit revealed that between July 1, 2024, and Nov. 30, 2025, the North Carolina Department of Commerce, Division of Employment Security (DES), which oversees unemployment benefits, were late in paying out 28% of initial unemployment benefit payments, totaling approximately $12.2 million. That amounts to 31,366 of 111,413 of first unemployment benefit payments not being made within the federally required 14-day standard, and over 13,500 first unemployment benefit payments were made after more than 35 days.

Auditors acknowledge that while the 28% untimely rate is an improvement over the 43% untimely rate reported in the 2024 audit, DES hasn’t met the federal timeliness rate for first-time unemployment benefit payments since 2011, and the state has consistently ranked among the untimeliest states, averaging 41^st overall since 2005.

“Losing a job can be a traumatic event that hurts entire families,” State Auditor Dave Boliek said in a press release. “Employers pay into our unemployment benefits safety net, and yet for 15 years, benefits haven’t gone out the door when they should. People who lose a job still have mortgages to pay and bills to finance. As the follow-up audit from the professional team at the State Auditor’s Office shows, slight improvements have been made, but it’s not fair for the government to continually shrug its shoulders at such a longstanding problem.”

Recommendations from NCOSA to DES include making an evaluation of its unemployment benefit claims process design a priority; making sure first payments are paid out accordingly; identify any delay patterns and implement corrective actions and being prepared to handle increased claim volumes by continuing to assess, monitor and update its Service Escalation Readiness Plan.

DES agreed with the recommendations and said it has already began discussing how to implement them.

$47 million in fraudulent unemployment payments

While there was a slight improvement shown in first-time benefit payments, the second audit found the rate of incorrectly paid out unemployment benefits in North Carolina has increased since the last audit released in 2022.

The payments either shouldn’t have been paid or were paid in an incorrect amount.

Auditors say that from April 1, 2021, through March 31, 2025, the state had an estimated improper payment rate of 22%, which is 4% higher than the 18% rate reported by NCOSA in 2022. North Carolina’s improper payment rate has routinely exceeded the 10% limit and the national average for the past nine years.

Overpayments reported by DES during that time period resulted in $168.8 million in established overpayments, $47.2 million categorized as fraud, and $121.6 million as non-fraud. Of these amounts, DES recovered approximately $49.1 million in total overpayments, or approximately 29%. Of that figure, $12.2 million were fraudulent payments.

Auditors did note, however, that fraud recovery has improved, comparing Fiscal Year 2022, the worst year from the time period. During that time, $26.4 million in fraud overpayments were made, with only $3.8 million being recovered.

Auditors said the primary causes of overpayments in North Carolina in the past have been errors with work search requirements, benefit year earnings, and separation determinations and referred to NCOSA’s September 2022 audit recommendation that DES require work search activities be reported within the weekly certification process to reduce work search requirement errors.

“Government waste comes in many forms, and in this case, it’s occurring through unemployment insurance,” Boliek said in the release. “Not only was there a higher rate of improper unemployment benefits, but there was also more than $47 million in fraud overpayments made during the scope of our audit. The North Carolina State Auditor’s Office will continue to serve as our state’s fiscal watchdog, assessing programs and sounding the public alarm to push for improvement. Ignoring problems for years and missing basic public expectation cannot continue to be tolerated.” 

DES applied for and received a federal grant in August 2022 to assist with an online work search repository, but implementation didn’t occur until December 2025. DES did not identify a specific root cause for the delayed implementation, according to auditors.

In short, full implementation of the work search repository was the only prior audit recommendation that wasn’t completed.

Auditors recommended that DES should continue to review and implement US Department of Labor recommended strategies and best practices, including targeted actions to address work search requirements, benefit year earnings, and separation issue errors.

They also recommended that DES should monitor the work search repository to ensure it is working as intended, and with its completion in December, DES should redirect efforts toward addressing the other causes of improper payments.

Finally, DES should monitor its Reemployment Services and Eligibility Assessment (RESEA), new hire crossmatching, weekly certification, and separation determination processes to ensure they are working as intended.

DES again agreed with the recommendations and said it has already began discussing how to implement them.

“NC audits reveal unemployment benefit delays, $47M in fraud” was originally published on www.carolinajournal.com.