State Auditor responds to ESD’s claim that audit numbers are ‘inflated’

State Auditor Pat McCarthy is defending her office’s audits of the Employment Security after the department hit back at her numbers, calling them “deeply flawed.”

Released earlier this week, the audit reports stated that there could have been a potential $460 million paid to fraudulent unemployment claims last year, in addition to the nearly $650 million known to have gone out to scammers in the attack a year ago.

In a statement, the Employment Security Department called the 460-million figure “inflated,” noting that it included tens of thousands of claims that were found to be legitimate or that the department had already flagged as suspicious and stopped paying while they investigated. ESD told KIRO Radio in an email that $200 million worth of claims included in the auditor’s figure had already been resolved.

Auditor Pat McCarthy contended in an interview that the figure was based on the data they had received from ESD at the time of compiling the reports.

Audit released in December finds internal controls at ESD weren’t strong enough to prevent fraud

“What we can report on are the facts that we’ve been able to verify,” she said. “We allow entities to give their own point of view, and sometimes they disagree with what we put in our audits.”

The auditor added that ESD can always submit new information, which could see that number come down significantly.

“This is based on the information that we had, provided by the ESD, and that we were able to verify,” she said. “And they will have an opportunity to be able to provide that data, and it may lower that number.”

In the meantime, the Auditor’s Office continues to look into possible cases of internal misappropriation of funds at ESD.

“There are some concerns about — we have some cases — so we’re doing that investigation,” McCarthy said.

A full report on this will be released at a later date when the investigation is complete.

Last autumn, McCarthy wrote a letter to then-ESD Commissioner Suzi LeVine stating that the department was making the audit process more difficult through actions such as delaying the handover of certain pieces of information.

Now, however, McCarthy said things are going better.

“We have a working relationship,” she said. “We’re going to continue to audit the ESD, because our goal is just to be constructive here, and to be able to provide information.”

As the two agencies work together, improvements are continually being made to prevent fraud in the future. While the audit reports found that ESD’s lack of enough security measures made it vulnerable to last year’s attack, they also noted that ESD has been taking the auditor’s advice since then and making many improvements, such as building a robust anti-fraud office.

“By December 2020, ESD had already taken a number of steps to resolve many of the issues that it faced at the pandemic’s outset,” the performance audit report stated.

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