In recent months, there has been a resurgence of unemployment wage audits associated with 2020-2021 unemployment claims. From the re-issuance of audits from the Texas Workforce Commission to Florida indicating auditing of all COVID-19 claims beginning this month, states are taking measures to catch up and correct any overpayments.
While a spotlight has been put on wage audits in recent years due to the pandemic, they are not new to the unemployment process. Even before the pandemic, states routinely conducted audits.
With the current reporting period (July 2019 – June 2022) estimating a national improper payment rate of 21.52%, unemployment wage audits remain an essential component of maintaining the integrity of the unemployment benefit systems.
What are Wage Audits?
Wage audits play a crucial role in ensuring that individuals receive the correct amount of financial assistance while preventing fraudulent claims that could strain state resources.
As states strive to recover from the economic impact of the pandemic, conducting comprehensive wage audits has come back into focus and become a priority. These audits involve scrutinizing claimant income records, employment history, and other relevant details to ensure that unemployment benefits are allocated legitimately and accurately.
This review of claims and benefit payouts not only serves as a protective measure for state finances but also helps to identify and correct any errors that may have occurred during the initial processing of claims as well as any fraudulent claim activity.
While wage audit responses will not affect a separation decision, they are key to detecting improper payments and can result in a favorable impact on employer taxes should overpayment or fraudulent benefits be determined.
Types of Wage Audits
State unemployment agencies conduct audits by selecting a sample of unemployment claims filed to ensure compliance with state regulations and to protect against potential fraud. Several different types of audits are conducted, each with its unique purpose.
Benefit Accuracy Measurement (BAM) Audits
BAM audits are designed to prevent both error and fraud in the Unemployment Insurance Program. BAM audits are random audits from a “sample” group of claimants, selected each week to test the accuracy of the Unemployment Insurance benefits paid.
New Hire Audits
New hire audits are generated when the State Workforce Agency cross-matches unemployment payments against the National New Hire database. States are looking to see if benefits were still being paid after the claimant began working for their new employer.
Quarterly Wage Audits (Fraud/Improper Payments)
State Workforce Agencies conduct a quarterly crossmatch of unemployment payments made to earnings reported on employers’ quarterly contribution reports.
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The information contained in this article is not a substitute for legal advice or counsel and has been pulled from multiple sources. Some information was provided by our friend, Darby Gibson, Client Marketing & Insights Specialist, at Thomas & Company.
