Audit finds more than $47M in fraudulent unemployment payments in NC over 5-year period

RALEIGH, N.C. (WNCN) — More than $47 million in fraudulent unemployment payments went out the door in North Carolina over a five-year period, according to a new state audit that also flagged delays in getting benefits to claimants.

The State Auditor’s Office found the North Carolina Division of Employment Security distributed $47.2 million in fraudulent unemployment payments between 2021 and 2025.

“North Carolina had an abysmal rate of recovery and issuing payments that were not appropriate,” State Auditor Dave Boliek said. “Many of them were outright fraudulent.”

According to Boliek, NCDES has recovered about $12.2 million of those funds, but the rest is likely gone forever.

“Once you have a fraudulent transaction and [those funds] are out the door, timing is important to recovering those funds,” he said. “You need to get on it quick in order to get that money back. Otherwise, tracking those dollars down is virtually impossible at this point.”

NCDES Assistant Secretary Marc-Antoine Keith pushed back, saying they are working to recover the money, no matter how long it takes.

“We’re going to be recovering it this year, next year, five years from now,” he said. “We don’t have a timeline. This is not something that we just write off and say, ‘You’re good.’ We’re in the heart of it right now.”

NCDES officials also noted the fraud identified in the audit amounts to less than 1% of the more than $5 billion in unemployment benefits paid during the same period.

According to NCDES, roughly $40 million of the fraudulent payments happened during the COVID-19 pandemic when unemployment claims surged and the state was tasked with administering enhanced federal benefits of $600 per week.

Keith said the department received 1 million claims in just 10 weeks. By comparison, NCDES typically handles about 3,000 to 3,500 claims a week.

“The $600 put North Carolina at a higher profile for bad actors coming into the system,” he said. “We also were under tremendous pressure to get money out the door. Pay, pay, pay, pay, pay. That was the message from the federal government.”

Boliek questioned why it took the agency years to fully implement a federally funded fraud detection system. He said NCDES received a federal grant to strengthen fraud prevention efforts but did not fully deploy the system for three years.

“The pandemic is not an excuse for government’s failure to monitor the expenditure of taxpayer dollars,” he said.

Keith disputed that characterization, pointing to staffing shortages, competing priorities, and Hurricane Helene as reasons for the delay.

“The reality is that we only have so many hands,” he said. “As we got going with this process, then the hurricane came in.”

According to Keith, the fraud detection system was rolled out in phases between April and December 2024 rather than all at once.

The audit also identified problems with delayed payments. According to the report, 28% of initial unemployment payments went out after the federal 14-day benchmark.

“That’s just not acceptable,” Boliek said. “We’ve got to do better than that.

According to Boliek, delays can have serious consequences for families relying on unemployment benefits after losing a job.

“When you’re unemployed or you get laid off, that’s when your family is in a traumatic situation,” he said. “You need to be able to rely on the state to answer the call there and get your benefits to you.”

Keith acknowledged there is still room for improvement but said DES has made progress since the period covered by the audit.

“We’re not where we want to be, but we’re a heck of a lot closer than where we were,” Keith said.