BALTIMORE — A newly released legislative audit reveals Maryland lost hundreds upon hundreds of millions due to overpayments in unemployment claims during the COVID-19 pandemic.
The audit estimates the State's accounting errors amounted to $807.4 million, an overwhelming majority of which came from federal CARES Act funds.
Initially the government tried clawing back the money, but a November 2021 lawsuit alleged the State failed to explain to residents why they were issuing repayment notices, while also refusing the option to appeal.
Litigation prompted the State to freeze collection efforts until around September 2023, at which time the three-year statute of limitations had expired for a number of potential overpayments that remained under review.
As result, auditors estimated about $760.7 million in unrecovered funds.
In an email to WMAR-2 News, the Maryland Department of Labor said they will continue to "pursue overpayments that are under five years old where a prior [overpayment] determination was made and notice was sent. New notices sent regarding these prior claims include information about the ability to appeal and request a waiver."
Some of the overpayments were attributed to Maryland's transition to the new BEACON application, which apparently created significant hold-ups.
Auditors blamed the Maryland Department of Labor's Division of Unemployment Insurance for not adjusting certain account balances that were transferred over to the BEACON system.
Additionally, there were 46,986 out-of-state unemployment claims worth $493.9 million that turned out to be fraudulent.
The department says they've since gotten that money back.
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Due to this mishap, however, some residents received overpayment notices despite never having received any funds, leaving about $3 million unaccounted for.
In response, the department said it's seeking further information to identify the discrepancy.
"The approximately $3 million discrepancy appears to be associated with accounts for which debit cards may have been cancelled due to potential UI or identity fraud concerns. At this time, DUI does not have sufficient information to fully reconstruct the decisions made during that period or to determine why the amount returned by the financial institution differs from expectations, without additional review of the March 2022 transactions. Given significant staff turnover over the past several years and limitations in historical documentation, further review is required to understand the circumstances surrounding the return of funds, the identified discrepancy, and the related financial records and decisions."
Then, there were those who double-dipped, where the State paid them unemployment despite still earning a work paycheck.
These findings were reportedly flagged in previous audits, yet went uncorrected.
That's not to mention the alleged lack of supervision within the agency, which in 2024 saw a pair of vendors plead guilty to aggravated identity theft for their roles in manipulating the BEACON system of $3.5 million in unemployment claims.
As WMAR-2 News recently reported, collections are again underway with Maryland residents receiving notices mandating they payback sometimes thousands of dollars.
The full audit can be reviewed below.
Editor's Note: This story has been revised to clarify the overpayments are not related to Maryland's State budget or structural deficits, as the overwhelming majority of these funds originated from federal CARES Act programs.
