After billions in fraud payouts, Michigan unemployment agency declares new day

• Official defends Michigan Unemployment Insurance Agency after audits revealed billions of dollars in fraudulent claims
• Director Julia Dale says agency is ‘driving toward lasting change’
• House Republicans aren’t ready to move on and say more oversight is needed to ensure the agency doesn’t repeat its mistakes

LANSING — The Michigan Unemployment Insurance Agency has made key improvements since paying out billions of dollars in fraudulent claims during the COVID-19 pandemic, its director said Thursday. 

The UIA is moving away from “quick fixes” and is “driving toward lasting change” through technology and personnel improvements, Director Julia Dale said in testimony before a joint meeting of the state House Labor and Ethics and Oversight committees.

“I hope this will end the conversation on the pandemic era,” Dale said while presenting to lawmakers, adding that “nobody is served if we continue to rehash the past and lose focus on the future.”

The hearing marked a rare instance of the Democrat-led Legislature discussing government missteps under Gov. Gretchen Whitmer’s administration, but Republicans claimed the majority party went too easy on Dale, who took over the agency in late 2021. 

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The hearing focused on a state audit released in December 2023 showing that the UIA did not do enough to identify and investigate potential fraud, instead paying out over $245 million to ineligible claimants — including dead people — between January 2020 and October 2022. 

It was the final of five audits from the Office of Auditor General regarding the UIA’s handling of the pandemic, which highlighted various agency gaffes when handling unemployment claims from not guarding personal taxpayer information to hiring identity thieves to process claims during the pandemic. 

A separate third-party audit from the Deloitte accounting firm estimated that from March 2020 through September 2021 cumulative UIA missteps cost the state an estimated $8.5 billion. 

But since then, the agency has made a number of improvements, Dale said, including a new system to process claims that is coming online in 2025, firing or moving 23 employees for “violating policies involving potential implications” and growing the unemployment trust fund to $2.3 billion to ensure solvency.

House Republicans said they did not buy Dale’s rosy outlook and want more accountability from the UIA to prove that what happened during the COVID-19 pandemic can’t happen again.

“If I was the head of the bureaucracy that was run this poorly, I wouldn’t want to talk about it either,” said state Rep. Tom Kunse, R-Clare.

Panning the hearing as embarrassing, Kunse zeroed in on an estimated $5.6 billion the Deloitte report estimated was paid out to “claims involving likely intentional misrepresentation fraud.”

“She comes in and she’s proud that she got back $90 million,” said Kunse, who sits on both House committees.  “That’s 1.6%. How in the world can you be proud of that?”

Dale is the UIA’s third director since the pandemic began. Whitmer appointed her in October 2021 to lead the embattled agency, which was struggling to funnel money for lost wages to 2.4 million Michigan residents who had lost jobs after COVID-19 led to business closures and mass layoffs. 

In years past, Democrats and agency officials alike have said a lack of adequate staffing and outdated technology played a role in why fraud continued to slip through the UIA’s security measures.

Labor committee member Rep. Mike Harris, R-Waterford Township, said fraud was a “systemic problem” in the UIA but told reporters he was hesitant to point fingers at any one individual.

But instead of giving the agency more money to hire additional staff, he suggested the UIA should get “a percentage of what money they can recoup” from fraudulent payments for personnel hires.

“Every dollar you recover can go to staffing,” Kunse added. “There’s your bonus. Go get it.” 

Democrats, however, appeared mostly satisfied with Dale’s testimony.

Rep. Erin Byrns, chair of the House Ethics and Oversight Committee, said she feels confident the UIA is doing its best to “use what has happened in recent years … to inform the present and the future.”

Byrnes, a Dearborn Democrat, said Dale specifically had done well with “acknowledging some of the challenges” the UIA faced amid the pandemic and worked toward “building up and building out a team that can manage the day-to-day intake” of the agency.

“We've got to make sure that the day-to-day is strong,” Byrnes said. “And that's the seemingly mundane work that doesn't grab headlines, but that's what empowers the department to do its work and to do it well.”