State audit highlights unemployment fraud, other financial shortcomings in FY 2020

AN AUDIT OF THE STATE'S 2020 financial statements found a host of problems in the technology, staffing, and financial reporting and accounting practices across a host of state agencies. / PBN FILE PHOTO/NICOLE DOTZENROD

PROVIDENCE – The COVID-19 pandemic has laid bare long-standing problems in the technology, staffing and financial reporting and accounting practices across a host of state agencies, including the R.I. Department of Labor and Training through its unemployment claims process, according to a new report from the R.I. Office of the Auditor General.

In an April 16 letter to state lawmakers, R.I. Auditor General Dennis E. Hoyle detailed the 24 instances of financial misstatements, inaccuracies, or other examples of “significant deficiency” or “material weakness” based on an audit of state finances in fiscal 2020. The 67-page report also offered up a host of recommendations for how to correct these imbalances and develop policies that protect against future problems.

Among the problems the audit found was the lack of protections against unemployment fraud. The influx of unemployment claims prompted by the pandemic, combined with an incomplete technology update and a temporarily relaxed approval process to expedite payments, created a perfect storm for fraudsters to take advantage of the system. The DLT estimated $10 million in fraudulent claims were paid out between March and when the fiscal 2020 year ended on June 30.

While the agency was already in the midst of upgrading its technology to a cloud-based computing system, the auditor general recommended completing and enhancing those information technology upgrades, including how unemployment claims are processed and verified, to prevent future fraud.

- Advertisement -

In response to the findings, DLT noted that since the end of fiscal 2020, the agency has made progress on these recommendations, contracting with a cybersecurity firm for additional fraud detection, adding upfront “fraud stops” requiring identity verification prior to payment, and transitioning to new hardware and operating systems as of February.

Other shortcomings highlighted in the report included risk of financial inaccuracy and control or system problems within the state Medicaid program, investment activity, the R.I. Department of Transportation, the R.I. Convention Center Authority, and mobile and sports betting through the R.I. Lottery.

The audit also included recommendations for enhancing financial and operational policy through management in 19 other areas, including the Tobacco Settlement Financing Corp., R.I. Public Transit Authority and with regard to the state’s other post-employment benefit plans.

Additional findings through a “single audit report” in fiscal 2020 will be published later this year, according to Hoyle’s letter.

Nancy Lavin is a PBN staff writer. You may reach her at Lavin@PBN.com.

No posts to display