State auditor blasts EDD for bungling California unemployment crisis

ByMichael Finney and Renee Koury KGO logo
Wednesday, January 27, 2021
State auditor blasts EDD for bungling unemployment crisis
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The California State Auditor's office released a scathing 78-page report outlining the mistakes the EDD made that allowed fraudsters to scam as much as $31 billion.

SACRAMENTO, Calif. (KGO) -- The California State Auditor issued a scathing report Tuesday on the EDD's disastrous response to a surge in unemployment claims during the pandemic. The report says the mistakes by the EDD opened the door to rampant fraud, forcing millions of workers to struggle for benefits. Not only that, millions may have to pay back benefits they got by mistake.

The report says EDD knew for 10 years it wasn't ready for a disaster - and when the pandemic hit, sure enough, the system buckled.

RELATED: Bank of America addresses freezing accounts, fraud in state assembly hearing

Millions of unemployed workers' plights are now crystallized in the state auditor's scathing report on the disaster at EDD when efficiency was needed most.

"The EDD has known for over a decade that they have these problems and they did not fix their operations," said State Assemblyman Jim Patterson (R - Fresno).

The auditor's report found EDD could not automatically process half the claims. Many required a manual review of items like ID verification.

WATCH: CA EDD admits paying as much as $31 billion in unemployment funds to criminals

It left hundreds of thousands of workers struggling for benefits - unable to reach anyone at the call center. It happened to Ima Holcomb in Calistoga.

"We are currently experiencing more calls than we can answer, and are unable to assist you at this time," she recalls hearing over the phone.

The report said less than one percent of workers reached an agent during the surge in claims.

RELATED: 'People need help': As many as 1 in every 3 EDD claims is fraudulent, security firm says

The audit said EDD started waiving eligibility checks to speed up the claims. That opened the door for rampant fraud. EDD admitted it has paid at least $11 billion dollars to fraudsters - but it's possible another $20 billion also was paid to scammers.

In total, that would mean more than a quarter of all claims were fraudulent.

Not only that, EDD may have paid legitimate workers too much money by not checking eligibility. Now, up to 2.4 million workers may have to pay money back to the government -- a hit many still don't know is coming.

"So the guilty got the money and the innocent are gonna have to pay. It's just a terrible outcome here," as Assemblyman Patterson put it.

EXCLUSIVE: Insiders say California EDD unemployment benefit scam was get-rich-quick scheme

The EDD responded, saying in part: "The EDD appreciates the auditor's review and acknowledgment of the immensity of challenges EDD has faced in the pandemic. We recognize the work that lies ahead."

The auditor will be releasing a second report on Thursday, focusing on how the EDD spent $40 billion dollars in federal unemployment funds - and how much of it went to fraudsters.

Read full report below:

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