Audit outlines Oregon Employment Department’s pandemic unemployment failures

Oregon’s unemployment insurance system experienced a litany of problems during the pandemic, a new audit from the Oregon Secretary of State has found, delaying crucial payments to thousands of workers who lost jobs.

“The goal of a safety net is for it to be there when you need it,” Secretary of State Shemia Fagan said in a press release accompanying the report. “This audit helps explain why Oregon’s unemployment insurance program failed when it was needed most and identifies actionable steps (the Oregon Employment Department) can take to make sure help is available the next time Oregonians need it.”

The audit highlights many breakdowns that were known to claimants and covered by the media. That includes the Employment Department’s antiquated and inflexible computer system, which was difficult to update when programs changed. Previous audits from the Secretary of State’s office, in 2012 and 2015, warned that the agency’s mainframe system, dating to the 1990s, was too rigid to handle complicated claims or rule changes, and relied too much on manual processes, leading to errors. The 2015 audit recommended that the Employment Department replace that legacy system — a modernization process that is only now underway.

The modernized unemployment system is expected to launch by spring of 2024.

Related: Read the full audit here

Audit recounts OED’s communications problems when jobless rates spiked

The new audit also points to problems in the Employment Department’s communication systems with both claimants and employers. In the spring of 2020, the agency’s phone lines were hopelessly jammed by the surge in calls from people seeking help getting benefits.

“OED reported receiving more than 20 million calls in April 2020 alone,” the audit states.

Claimants were put on hold for hours. They got relentless busy signals. Sometimes they were disconnected altogether. At the start of the pandemic, the agency didn’t have an online contact form for people who couldn’t get through by phone — a tool it later developed.

Blocked phone lines prevented people with limited English proficiency from reaching interpreters, as the audit notes and OPB reported, and online claims forms were initially offered only in English.

While critical in tone, the new audit is not blistering.

It notes the scale of job devastation the pandemic and related restrictions caused, as well as the pressure that put on the agency. “Oregon’s unemployment rate nearly quadrupled,” the report states, “going from 3.4% in February 2020 to 13.3% by April 2020.”

In 2020, 580,000 people received unemployment benefits — a staggering 600% increase from the year before.

“2020 was like an avalanche,” agency employee Jenifer Stepat says in the report.

The audit recognizes steps the Employment Department took to strengthen its systems, as well as the challenge of implementing brand-new federal benefits programs at a time of record-high unemployment claims. Auditors anticipate that many of the issues the report describes can or should be addressed in the agency’s long-awaited modernization.

Fagan, in comments to reporters Wednesday, acknowledged the unprecedented spike in jobless claims that hit the state in 2020. But she said the audit should be seen in a human context — of families waiting for too long to get much-needed benefits.

“We have to make sure that we provide these tools and these recommendations to both lawmakers and the agency to say, you know, I’ll be damned if Oregonians will ever experience this kind of pain again when a program that they have paid into their entire working lives doesn’t work at the time that they needed it the most,” Fagan said.

At times the audit damns with faint praise.

The report notes that Oregon seems to have paid out far less in fraudulent claims than some other states — roughly $24 million in 2020 or just 0.32% of claims paid that year. Washington, by contrast, paid out hundreds of millions of dollars in fraudulent claims in 2020.

Oregon’s success, the audit says, is partly due to fraud prevention practices and learning from the experiences of other states.

“And fraudsters targeting states with better computer systems that paid out claims faster,” it adds.

Auditors examine monthslong adjudication delays

Perhaps the audit’s most critical assessment involves adjudication, the detailed process for resolving eligibility issues with claims. Adjudication backlogs led to lengthy payment delays.

The agency had already struggled to meet federal timeliness guidelines for adjudicating claims prior to the pandemic. Those guidelines require state agencies to adjudicate at least 80% of claims within 21 calendar days.

But the pandemic made everything worse.

Auditors concluded that the time it took adjudicators to reach claimants by phone or letter could slow down the process.

“OED did not previously have a consistent caller ID for outbound calls, making it less likely people would answer adjudicator calls,” the report states, describing the phone tag that could ensue. The Employment Department did not ask people their preferred communication method or use texting, because many fraudsters use text messages to try to con people.

Likewise, the agency did not require even the largest employers to use an electronic system to respond to unemployment claims, and relied largely on the mail instead.

Some unemployment claims took months or even years to resolve, the audit says, because of inadequate controls in the agency’s outdated IT systems.

Auditors looked at more than 155,000 adjudication records from claims in 2019 and 2020. They found 900 adjudicated claims with missing or illogical dates. Tens of thousands of records were potential duplicates.

Auditors also found more than 1,000 claims that appeared to take a year or more to adjudicate. It was unclear to them how many claims truly stalled for that long and how many had errors in the date field.

The agency examined a small subset of those claims more closely. It confirmed that some had languished for two years before being finalized. Those claims had been sent to another unit for fraud detection.

Many of the adjudication data fields in the Employment Department’s system are manually entered, according to the audit. That includes the date an issue that may need investigation is detected, the date a decision is made on the claim, and the code describing that decision. The report says most manually entered fields in the current computer system don’t have drop-down lists of options, to reduce errors and typos.

What’s more, the audit found the agency had no formal procedures to ensure that claims flagged for adjudication didn’t fall through the cracks. It found no centralized repository for adjudicators to stay up to date as guidance changed for unemployment programs. Auditors say that increased the risk that adjudicators could make inconsistent decisions when allowing or denying benefits.

Recommendations to prepare for future spikes in unemployment

Auditors proposed seven recommendations, which the Employment Department agreed to. They include:

• Formalizing policies and procedures for oversight of claims that could need adjudication. Monitoring claims flagged for adjudication that haven’t been reviewed within a certain period of time.
• Incorporating controls in the modernized IT system to reduce data errors, identify old claims, allow claimants to communicate securely in their preferred method, allow secure document uploads and multilingual access, and provide help with claims.
• Exploring texting as an option for communicating with claimants.
• Consolidating the agency’s two unemployment websites into one.
• Establishing a central repository for adjudicator guidance.
• Studying the creation of an ombuds office to help people navigate unemployment claims.
• Researching agency data on potential inequities in the unemployment system.

In the Wednesday press conference presenting the audit, Fagan noted that the Employment Department isn’t the only institution that should consider how it can improve. Fagan served eight years in the Oregon Legislature before winning election as secretary of state.

“It is not a sexy topic to say, hey let’s solve this potential risk before it happens by investing in new (information technology) systems. But this shows how important it is and how important it is for lawmakers to act with urgency when there are big risks built in the IT systems,” Fagan said.

“So in terms of responsibility and blame, there’s enough to go around. But the bottom line is, this was real people and real families impacted and we don’t want that to ever get lost in kind of a shuffle of whose fault it was.”

Rob Manning contributed to this story.