- Associated Press - Wednesday, February 3, 2016

DES MOINES, Iowa (AP) - A state audit has revealed that Iowa Workforce Development paid more than $97,000 in unemployment benefits to people in the state who claimed to work for companies that didn’t exist in 2013 and 2014.

The agency also paid more than $66,000 to people not eligible for unemployment payments in other states, according to the audit released Friday. The improper payments are part of more than $909,000 the state lost over a three-year period for which the state auditor reviewed records.

Iowa Auditor Mary Mosiman said her office was notified in May 2013 by former IWD Director Teresa Wahlert that irregularities in unemployment payments were discovered and reported to the U.S. Department of Labor’s Inspector General and the Iowa Division of Criminal Investigation.

Mosiman’s office was asked by the Department of Labor to confirm the amount of loss to the state and in the process discovered the other payment deficiencies.

The $909,000 in lost state money includes $746,272 issued during the first quarter of 2014, primarily resulting from a telephone system malfunction that occurred on March 8, 2014, which resulted in an overpayment to unemployment claimants.

Mosiman said the audit found 20 fictitious company accounts. It’s unclear who set up the accounts. Mosiman said IWD removed some of the accounts from its computer systems leaving only limited information to investigate further.

No one has been charged. An Iowa Division of Criminal Investigation spokesman said the agency has not been asked by any county, state or federal agency to assist in an investigation.

The U.S. Labor Department did not immediately respond to a message.

The auditor’s report said employers conducting business in Iowa are required to register with the unemployment division of IWD using a standard form, however, no independent verification of the information reported by the employers is performed.

Mosiman said her auditors are working with IWD to implement and consistently follow procedures to “make sure this kind of situation doesn’t happen again.”

The issues occurred under the direction of Wahlert, who was appointed by Gov. Terry Branstad in 2010 and retired in January 2015 after facing criticism over her management of the agency. The Department of Labor concluded that she had pressured judges to favor employers over workers in unemployment cases and some unemployment judges sued the agency for improper dismissal and other allegations.

Current Iowa Workforce Development Director Beth Townsend said the agency is focused on making sure internal mistakes don’t result in overpayment of unemployment benefits and is striving to reduce the number of fraudulent claims paid. The agency has a new data analytics tool to help identify fraud more rapidly and has updated its claims intake system to protect against fraud, she said.

“At IWD, we are constantly striving to improve our efforts to prevent and detect fraudulent claims while at the same time, not interfering with Iowans’ legitimate unemployment claims,” she said in a statement.

Reforms last year helped the agency collect more than $9.5 million in overpayments. Of that amount, $6 million was considered fraudulent overpayments and $957,140 was administrative penalties assessed to the fraudulent claims, she said.

Mosiman said when the opportunity for fraud is present in government programs there will be attempts to take advantage of the vulnerabilities.

“We need to be prepared for that contingency and be aware of what we can do to make sure that we catch it, detect it and are able to correct it,” she said.

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