State audit calls for more control over unemployment benefit procedures
Measures sparked by 2009 theft involving more than $43,000
A state audit released Friday revealed several Iowa Workforce Development unemployment claim procedures need to be strengthened to prevent another theft which occurred in 2009 when a former employee embezzled more than $43,oo0.
The state audit resulted out of the investigation by Iowa Workforce personnel in 2010 of improper disbursements issued by a former advisor, Linda Pippen, 43, of Fairfax, who was convicted in federal court of embezzlement from a program receiving federal funds and aggravated identity theft in December 2011. She was sentenced in 2012 to fours years in prison and ordered to pay $43,582 in restitution to Iowa Workforce Development.
The workforce investigation only pertained to Pippen's activity but after the auditor's office was notified in 2010, the auditor reviewed the entire unemployment application and payment process and procedures for changing information in a claim account. Problems found included missing direct deposit change forms and no independent verification of information submitted electronically such as whether a person worked that week and gross wages for the week.
Iowa State Auditor David Vault said in the report that $38,426 was deposited to re-loadable debit cards from Pippen redirecting claim payments for seven people, including her husband, who returned to work and was ineligible for benefits. Pippen accessed and changed bank routing and account numbers listed on the seven individuals' inactive accounts to direct payments to one of the three re-loadable debit cards she purchased and continued filing the weekly claims. None of the changes were supported by a direct deposit change form.
A notification of a change wasn't implemented by the office until June 2011, so these individuals weren't aware of any changes to their accounts, according to the report.
The other $5,157 was additional over payments issued to Pippen's husband who had a legitimate claim account but Pippen continued to file the weekly claims for her husband after he returned to his job. Pippen used multiple routing and account numbers, including her personal bank account and a pre-paid credit card issued by the state, to deposit the over payments.
Vaudt recommended the department strengthen internal control over unemployment claims, such as expanding existing verification procedures, improving segregation of duties, ensuring employees don't process changes to a friend's or family member's accounts and to ensure proper supporting documentation is obtained for changes made to routing numbers on accounts.
Workforce director Teresa Wahlert said in a statement the department agrees with the audit report.
"Procedures and processes used in the previous administration were not stringent enough to prevent a deceptive practice of fraud,” Wahlert said.
According to the department, Gov. Terry Branstad and Lt. Gov. Kim Reynolds has worked diligently with the department to ensure new safeguards are in place to protect the system. New procedures include mandatory written notification when changes are made to an existing account, enhanced audit procedures and centralization of unemployment processes which limits access of staff members.