North Carolina’s unemployment office is under the microscope after two new state audits found the Division of Employment Security improperly paid out $168.8 million in confirmed overpayments between April 1, 2021, and March 31, 2025, including $47.2 million that auditors labeled as fraud. The reviews pegged the improper payment rate at roughly 22% for that stretch and highlighted persistent delays in getting first checks out the door. Only a sliver of the fraudulent money has been clawed back so far, according to the reports.
The findings come from two performance audits delivered to lawmakers this week, according to The News & Observer. The auditor’s office confirmed that $168.8 million in overpayments were established from April 1, 2021, through March 31, 2025, with $47.2 million of that total appearing to be fraudulent. Investigators traced many of the problems to long-running breakdowns in work-search documentation and eligibility checks that started in the pandemic and stuck around afterward.
Local reporting notes that roughly $40 million of the fraud ties back to the early pandemic months when the extra $600 a week in federal benefits was flowing, and that DES has so far recovered only about $12.2 million, according to CBS17. Agency officials told local outlets the hunt for the rest will be a long game, with years of collection efforts, benefit offsets and other tools ahead. Auditors warned that, right now, the money recovered is only a small fraction of what they flagged as improper.
“Losing a job can be a traumatic event that hurts entire families,” State Auditor Dave Boliek wrote in a release that accompanied the audits, calling the scope of improper payments unacceptable, according to The News & Observer. Boliek’s office framed the new reports as follow ups to earlier audits and said DES still has not fully adopted prior recommendations meant to cut down on errors and fraud.
How the audits measured delays and errors
One of the performance reviews zeroed in on timeliness and found that a large share of first payments missed the federal 14 day benchmark, leaving many applicants waiting weeks for relief. Auditors detailed their sampling methods and calculations in the reports. The Office of the State Auditor’s November 2024 timeliness review likewise found late first payments and tallied about $7.8 million in first checks that were not issued on time during calendar year 2023, recommending stronger monitoring and a readiness plan for future surges. Read the timeliness report and its full tables and methodology from the Office of the State Auditor.
Federal scrutiny and political fallout
The audits landed just as federal officials signaled a tougher stance toward state unemployment systems, including letters from the U.S. Department of Labor that warn of stepped up enforcement and even the possibility of withholding administrative funding from states that do not fix widespread integrity problems, according to regional coverage. That extra federal heat raises the stakes for how quickly North Carolina can overhaul its technology and internal processes to spot fraud, stop bad payments and recover the money that went out the door.
DES response and next steps
The Department of Commerce and DES say they are in the middle of modernizing the system and point to recent gains in processing times, while acknowledging that recovery work is far from finished. Local coverage reports that DES has rolled out new tools and a central repository for work search records and is continuing to pursue collections, benefit offsets and other remedies to bring money back into state coffers, according to CBS17.
Legal and recovery options
Auditors and DES materials list a long menu of recovery options, including benefit offsets, tax refund intercepts, garnishments, civil lawsuits and criminal prosecution for fraudulent claims. Even so, the reports say DES has historically recovered only a fraction of established overpayments and needs better tracking plus a more aggressive recovery plan if it wants to improve those numbers. The auditor’s earlier performance review on improper unemployment payments lays out those recovery tools in detail and the gaps auditors found. That 2022 audit is available from the Office of the State Auditor.
State lawmakers and federal overseers are expected to push for faster fixes and tighter controls in the wake of the audits, and the Office of the State Auditor says it will keep up its oversight. Expect follow up hearings, status updates from DES and a long trail of recovery and modernization work over the coming months and years.
