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Audit: Michigan unemployment agency didn’t guard taxpayer info in pandemic

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Michigan’s unemployment office took steps to protect taxpayer information after audits found it failed to do background checks on employees and disable access for former employees. (Nagel Photography / Shutterstock.com)

The most recent audit of the Michigan Unemployment Insurance Agency’s performance during the COVID pandemic shows the fraud-plagued agency did not implement safeguards to protect residents’ tax information. 

The Office of the Auditor General’s third report also found UIA did not perform required background checks on 80 percent of the employees  sampled. Sixty percent of those employees were not required to receive Internal Revenue Service safeguard training, either.

The latest findings underline persistent dysfunction at the agency as the state’s unemployment rate peaked and millions of unemployed residents filed for benefits during the pandemic. Earlier reviews revealed the agency’s sloppy hiring practices, which resulted in sending out $8.5 billion in improper payments, as well as many good-faith applicants being unfairly accused of fraud.

Steps Michigan’s Unemployment Insurance Agency is taking since audit findings

The state’s Unemployment Insurance Agency said it is taking the following steps to address problems found by the state Office of the Auditor General, including the agency hiring workers without running criminal background checks and not disabling former employee’s access to taxpayer information.

  • In April, the UIA issued a new policy that requires a criminal history check on all employees who have access to residents’ private information.
  • All UIA employees with access to federal tax information will undergo IRS safeguard training.
  • The agency hired an analyst to track anyone with access to federal tax information and document who has completed training. 
  • The UIA is formalizing its quality control process requiring management to timely disable computer access for former employees. 
  • The agency will only grant specific employees access to its unemployment tax database.

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In the latest findings, state auditors also sampled 61 former employees who left the department and found the UIA did not disable the accounts of 42 of them. Those who did not have their account disabled could still access taxpayer’s information.

Thirty of those former employees still had access to state information and 41 of them still had devices that allowed them to remotely log into Michigan’s unemployment system.

In a statement to Bridge Michigan, UIA Director Julia Dale said the agency has made “significant operational changes” in the past six months but “after more than a decade of disinvestment” in the agency “there is still more work to do.”

Dale was appointed by Democratic Gov. Gretchen Whitmer in October and is the embattled agency’s third director since the pandemic began. 

“UIA is taking decisive steps to bolster our security practices that protect personal information about claimants and businesses,” Dale stated. 

Since the audits, Dale said the agency has instituted a criminal history check and fingerprinting policy for all employees who have access to taxpayer information. Dale also noted the agency is more effectively tracking required training for staff and timely removing user privileges of former employees. 

“With these changes, UIA has in place robust policies and practices that we are confident we will begin to restore the public’s confidence in our agency,” Dale said. 

Rep. Steven Johnson, R-Wayland, who presided over a joint Oversight Committee hearing about the second UIA audit on April 13, said the findings are concerning but not surprising. 

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“I don’t think anyone is shocked to see this and that is the biggest problem to me,” Johnson told Bridge on Tuesday. “They have failed so much that when failure is shown, no one is surprised and that’s a problem. It’s almost become expected of them.”

In March, the Auditor General found the UIA failed to make sure temporary staffing companies hired during the pandemic were liable for $3.8 million in fraud their employees committed. The agency also failed to conduct required background checks for 5,500 part-timers brought on to handle the crush of claims during the pandemic.

Some who were hired had misdemeanor or felony convictions for crimes including armed robbery, embezzlement and identity theft — and some of those workers were still employed at the time of the audit. 

Johnson said he plans on holding another oversight meeting with Sen. Ed McBroom, R-Vulcan, in the future. 

“We’re now in the process of asking for certain information and we’re prepared to subpoena certain individuals,” Johnson said. 

Johnson said the committee is still figuring out who to subpoena and deciding whether that would be the best course of action. 

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