Scathing audit faults poor management for Virginia’s unemployment insurance failures

By: - November 8, 2021 5:53 pm

Virginia’s state flag flies in Richmond. (Ned Oliver/ Virginia Mercury)

Virginia’s failure to deliver unemployment benefits in a timely manner left thousands of jobless Virginians waiting months for aid during the pandemic.

Now, a scathing audit says much of the blame lies with poor management coupled with limited oversight by Gov. Ralph Northam’s administration.

“It’s clear that additional oversight and assistance is needed,” Lauren Axselle, a legislative analyst with the General Assembly’s Joint Legislative Audit Review Commission, told lawmakers Monday, recommending the legislature expand its role rather than rely on the executive branch and the U.S. Department of Labor.

Throughout the pandemic, the Virginia Employment Commission, which administers the program, and Northam’s administration, which oversees the agency and appoints its leadership, downplayed widespread problems or blamed external factors outside their control.

Instead, the report —  based on extensive interviews with experts, agency staff and employees — describes a perfect storm of more than a decade of poor management colliding with an unprecedented pandemic.

A massive IT upgrade was eight years behind schedule. The agency was understaffed to meet even pre-pandemic workloads. The staff the agency did have was less effective because many were dedicated to tasks that modern computers long ago made obsolete, like mailing forms and letters and manual data entry.

“We are so heavily reliant on paper … We have paper in every nook and cranny,” the report quotes one unnamed employee saying.

That led state officials overseeing the program to conclude that they were being underfunded by the federal government at the same time as they were receiving more per-claim than most other states.

And in either case, the report says, management and administration officials took no serious steps to increase staffing until more than a year into the pandemic. And the report says Northam’s administration blocked some early steps explored by the agency.

In numbers: Virginia’s struggle to distribute unemployment benefits

Among other things, the report says Northam’s cabinet did not grant an early request to set aside state hiring requirements to fill positions faster. That meant, for example, that part-time employees the agency wanted to move quickly into full-time roles had to first reapply for the position. An effort to bring in state employees from other agencies to help was limited to a voluntary request that drew no takers, the report says.

The agency didn’t undertake serious steps to bring in outside help until more than a year into the pandemic, when hundreds of contract-adjudication staffers were finally hired. Meanwhile, the backlog of claims had grown to nearly 100,000.

“Given VEC’s critical role during severe increases in unemployment — and the operational challenges that arise from them — future secretaries of labor must effectively fulfill their role to ensure the agency is performing adequately,” the report states.

In some instances, it wasn’t clear that VEC leadership was aware of the extent of the problem, noting that monthly performance reports delivered to Commissioner Ellen Marie Hess did not “include information about UI claim quality or timeliness or call center responsiveness.”

The report also observes that a hands-off management style meant many departments, including the call centers where fewer than 3 percent of calls were actually being answered, were not subject to performance expectations or goals. The report notes the agency also has no internal performance goals for fraud investigations.

The auditors suggested future governors should take a more decisive, hands-on role. And they suggested the legislature create its own subcommittee dedicated to overseeing the program and making sure reforms are implemented.

Neither Hess nor Northam’s secretary of labor, Megan Healy, attended Monday’s presentation. Auditors told lawmakers that they had been advised not to participate due to pending litigation surrounding the long delays for benefits.

In statements and letters, Hess continued to defend the agency and did not address any potential management failings.

“I appreciate your recognition of the extremely dedicated public servants of the Virginia Employment Commission and the enormous volume of work that they produced in response to the COVID-19 pandemic,” Hess wrote.

Healy wrote in a two-paragraph letter that she looks forward to “collaborating on the implementation of your recommendations, the protection of Virginia’s workers, and the reform of this long-neglected but incredibly important system.”

In a statement, she thanked the legislature for the report and emphasized signs of improvement in recent months. “Call times are down to less than two minutes and adjudications are now back to pre-pandemic wait times. VEC’s new IT system will be live next week, and we will continue to work on the backlog of appeals.”

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Ned Oliver
Ned Oliver

Ned, a Lexington native, has been a fulltime journalist since 2008, beginning at The News-Gazette in Lexington, and including stints at the Berkshire Eagle, in Berkshire County, Mass., and the Times-Dispatch and Style Weekly in Richmond. He is a graduate of Bard College at Simon’s Rock, in Great Barrington, Mass. He was named Virginia's outstanding journalist for 2020 by the Virginia Press Association.