LANSING - Michigan's Unemployment Insurance Agency still has not complied with several recommendations made in a state audit five years ago, Auditor General Doug Ringler said in a new report released Wednesday.
The report spells more trouble for the agency, which faces widespread public complaints, lawsuits and legislative scrutiny over false fraud allegations made against tens of thousands of benefit applicants whose wages and tax returns were wrongly seized. On Thursday, the state removed the director and announced a "top-to-bottom review" of the agency.
The new report released Wednesday addresses a different area -- the agency's handling of delinquent payments of State Unemployment Tax Act taxes, which largely funds short-term benefits paid to Michigan employees who lose their jobs.
In sum, the report shows that while the agency aggressively and falsely accused jobless claimants of fraud, it was lax in collecting unemployment taxes from employers and pursuing employers who improperly sought to evade unemployment taxes.
A January 2012 audit identified widespread problems with the way the agency tracks delinquent taxes and attempts to collect them, identifying four "material conditions" and making six corresponding recommendations. Wednesday's follow-up audit found that the agency had implemented some of the recommended improvements, but had only partially implemented others and in some cases had made no improvements.
Among the findings:
- Pursuing delinquent employers: Though better than in 2012, the agency still doesn't do a good job of contacting employers who are behind on their taxes. The report says the agency didn't pursue civil judgments against any of eight employers the auditor reviewed for which civil judgment work orders were generated. The agency didn't issue required notices to seven of 10 employers reviewed, and as of May 31, 2016, those seven employers had delinquent taxes totaling nearly $231,000.
- Mishandled liens: The agency continues to place property liens against delinquent employers in counties where those employers don't own any property. The report said that for five delinquent employers with liens for balances owing of greater than $50,000, filed after March 16, 2016, the agency did not verify that any of the employers owned property in the county, prior to filing the liens. Four of the 31 liens reviewed, or 31%, were filed in counties where the delinquent employers did not own property, the audit found.
- The report found that when the agency did file liens, it didn't make sure county offices recorded the liens in a timely manner. The auditor found the county offices recorded the 13,126 liens an average of 122 days after they were filed by the state agency.
- Misclassifying employees: The auditor found the agency still doesn't adequately handle the issue of misclassifying employees as independent contractors, to reduce tax, or employers not registering with the agency. In 2015, the agency analyzed IRS data to identify high-risk employers who may have misclassified employees, but the agency did not document its analysis of whether to pursue 50% of the employer leads the auditor reviewed. The agency also developed a list of high-risk industries for targeted field audits, but 70% of the targeted audits the auditor general reviewed were not associated with those high-risk industries.
- Tax dumping: The auditor found the agency does a better job of policing potential cases of what is known as "SUTA dumping," in which a business or portion of a business is transferred for the primary purpose of paying less State Unemployment Tax. However, a timeliness problem remains with assessing such cases and issuing notices, and the auditor found that the agency abandoned 18 potential SUTA dumping cases from January 2015 through May 2016, because the three-year statute of limitations had expired.
The agency said it agrees with the new findings and is working to correct the problems.
Sharon Moffett-Massey, who had been in charge of the agency since 2014, was "reassigned," but will remain in leadership at the Talent Investment Agency, which includes the UI Agency, according to Talent Investment Agency Director Wanda Stokes.
Bruce Noll, the TIA's legislative liaison, will oversee the UI Agency while a national search is conducted for Moffett-Massey's replacement, Stokes said in a news release.
Wednesday's report follows an April audit that found that despite the agency's claims of improvements, Michigan residents trying to collect unemployment insurance still couldn’t get through to representatives to talk about claims, according to an audit released Thursday.
The auditor general sampled calls placed to the agency center during two weeks in 2014 and found that close to 90% of the hundreds of thousands of calls were never answered.
The agency did not answer 234,901 of the 263,726 calls made to its call center during the weeks ending Aug. 22 and Sept. 22 in 2014, the report said.
Also, 29% of those placed on hold gave up before they were able to talk to someone.
"Claimants’ inability to reach UIA’s call center was a significant frustration echoed by many claimants,” the audit said.
The April audit identified several other weaknesses within the agency, including: instructional videos on the agency's website that didn't work; correspondence repeatedly sent to incorrect addresses, even when the mail had been returned as undeliverable and the correct address could be easily found; a failure to ensure employers posted notices informing workers they were eligible for unemployment insurance benefits and instructions on how to file a claim; and Not providing supporting information when telling claimants they had provided potentially false or misleading information.
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