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“The Impact”: State Auditor and Acting Commissioner Weigh in on ESD Audits

Mike McClanahan profile by Mike McClanahan

Watch: “The Impact”: State Auditor and Acting Commissioner Weigh in on ESD Audits  

Guests: State Auditor Pat McCarthy (D) and Acting Employment Security Commissioner Cami Feek.

This month the Washington State Auditor’s Office  published the results of investigations into the handling of widespread benefits fraud and delays in processing legitimate payments as the state Employment Security Department was hammered with more claims than ever before.  

Among the conclusions reached by the State Auditor’s Office in the Fraud Investigation Report and Performance Audit:  

  • Like unemployment agencies across the nation ESD was overwhelmed by the volume of claims during the pandemic.
  • In the early months of the pandemic the agency was focused on paying claims quickly.
  • Looser employment verification requirements for federal payments, the vast amount of personal information available to cybercriminals, and waiving the typical one week waiting period likely increased the risk and/or dollar amount of fraud. 


  • Prior to mid-May 2020 high risk submissions were not scanned for identity theft until after claims may have been paid. “Prior to March 2020, this choice may not have had the same consequences. In accordance with state law, claimants were not paid during the first week of unemployment eligibility, which gave the Department time to run Discovery tools. However, when the governor authorized the Department to waive the one-week waiting period in March, many payments went out before the Discovery process ran.” 
  • ESD historically focused on claimant fraud, someone lying about their own benefits, not imposter fraud, using someone else’s identity to steal benefits. Fraud Investigation Report, pg. 10
  • In the early months of the pandemic ESD was contacted multiple times by state agencies, citizens and federal authorities to report false claims being filed on behalf of people who were still employed, but did not initially recognize the pattern of widespread imposter fraud that was occurring.
  • The United States Security Service issued a security alert on May 14th, 2020 about an imposter fraud targeting unemployment systems in WA and other states.
  • ESD’s pre-pandemic fraud detection and prevention portfolio was not capable of combating a large, sophisticated imposter fraud.”  Performance Audit, pg. 5
  • ESD took steps to restructure its fraud program which helped prevent additional theft, but also slowed the processing of claims.
  • Total losses to the unemployment insurance fund in 2020 likely exceed $647 million and could be as high as $1.1 Billion, factoring in $461 million in questionable payments as of December 31st, 2020.
  • Call hold times averaged 100 -140 minutes in March – April 2020. 
  •  Most calls in early and late 2020 were never answered. The number of calls exceeded the call center’s technical capacity. Performance Audit, pg.38
  • Web message response times averaged 60 days by late August.   
  • Between April and October 2020 the average payment time was 22 days at the height of pandemic, 8% took longer than 70 days.  Performance Audit, pg.31
  • ESD payment times were consistent with similarly situated states.
  • ESD has since taken steps to resolve many of the issues it faced at the start of the pandemic, but the agency is still struggling to meet customer service demand. 
  • The Department’s identity verification process may not be sufficient” Fraud Investigation Report, pg. 10

Employment Security Department Response: Two Audit Reports “Deeply Flawed” 

The Employment Security Department disputes some of the information in the audit reports and the characterization of potential losses. Agency leaders acknowledge  ESD was  overwhelmed by the historic increase in claims, but describe two of the recently released audits as “deeply flawed.” 

  • $1.1 Billion potential fraud claim misleading  
  • Estimated fraud totals $647 million, falls within range ESD has reported.
  • The SAO’s inclusion of “Questionable” claims in the Accountability Audit falsely and dramatically inflates the possible total imposter fraud.  ESD News Release, April 2021
  • “In one month, what the SAO deems as “Questionable” imposter fraud decreased by $236 million This is because the SAO is reporting claims flagged that need review but are ultimately found to not be imposter fraud. What hasn’t increased is the roughly $643 million in confirmed and probable fraud, a number that falls within the range the Department first reported and has been reaffirmed in this and other SAO reports.
  • $370 million has been recovered
  • False claims of a backlog of 56,000. Instead, there were 19,000 claims with new issues that were awaiting initial
    review – the rest had been investigated and determined and were therefore not part of a backlog.” ESD News Release, April 2021
  • “Also contrary to the SAO report, the Department has sufficient tools in place to analyze and manage potential fraud and losses, and has a robust monitoring system in place” Fraud Investigation Report, pg 14

State Auditor Pat McCarthy (D) defends their audits and their conclusions. 

 “Our motto and our goal is to trust, but to verify,” said McCarthy

In reference to the disputed total fraud including questionable payments from December 2020, McCarthy said,

These are claims that were flagged by the ESD for review, but not yet investigated. What we want the public to know is that this is the whole universe that we know to date, as of that date. For us not to tell the public that would be a disservice  to the integrity of the process. Now having said that, we will be back and we are going to do more audits of the State Employment Security Department and at that point they can provide that data to update that number and that number very well could go down. One could surmise it could go up, but I would venture to guess it very well might go down. But until we see the data and we verify that data, we can’t opine on whether it’s actual known misappropriations.”


As for why high risk claims weren’t being scanned for identity theft until after the payment process had begun, Acting ESD Commissioner Cami Feek responded,

“That came to light last spring, has been fixed and I think in the past with the volume and other factors it just didn’t play a significant role and so the department didn’t have a reason to really be overly concerned and it didn’t surface. And so when it did we fixed it immediately. There’s been a lot of changes we’ve made over this past year because as I think most agencies across the nation have seen, there’s just a lot of pieces of this business that this particular volume and criminal attack have brought to light and so it’s, we’ve welcomed that opportunity to improve and we’ve continued to do that throughout the crisis.”

 Asked whether scanning high risk claims for identity theft earlier would have prevented a significant amount of imposter fraud Feek responded,

“It was a minor component. We have every indication it would not have made a significant difference.”

Her message to anyone who didn’t get the money they were entitled to when they needed it to pay their bills or feed their kids for reasons that weren’t their fault, 

“I feel terribly. Our system, the UI system, was not equipped for this. ESD was not equipped for this. It has been hard on everyone and I, particularly you know my heart goes out to our claimants. We are trying and have done a lot. We’ve hired staff. We’ve changed processes. We have seen our wait times come down. We’ve improved and are, you know, processing more issues each month than are coming in and so we have made steady progress and we know it’s not enough. We know that it has left people behind and we feel terrible about that. It’s been hard on our claimants. It’s been hard on our teams. It’s been hard on the legislature and others who really heard from their constituents and we’re continuing to improve,” said Feek.  “Our volumes remain high. I think that’s the piece that people don’t really recognize, that even though the economic recovery has continued we still have volumes, weekly volumes, that are the same or more than the Great Recession. So while they’ve come down and we know that there are people that need our help and have been left behind, we’re getting better.” 


 (Note: Former Employment Security Commissioner Suzi LeVine oversaw the agency’s operations throughout 2020, but left the ESD on Feb. 1st, 2021 for a job with the Biden administration.)