‘Unprecedented challenge': Mass. delegation appeals to US labor officials on $2.5B error

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Citing a Baker administration "accounting error," members of the state's Congressional delegation called Tuesday on federal labor officials to work with the Healey administration on a solution to the "over withdrawal" of $2.5 billion in federal funds to pay unemployment benefits during the pandemic.

In a letter released Wednesday, nine delegation members asserted "many states have encountered issues" administering federal pandemic funds and blamed the Baker administration for a $2.5 billion "accounting error."



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"While UI claimants will not be affected by this issue, we urge you to work with the state government to find a solution that will allow Massachusetts to address the problem while minimizing the impact on hardworking people and small businesses in the Commonwealth," the lawmakers wrote.

The delegation members said states have encountered "issues" due to outdated infrastructure and efforts to prioritize disbursements in the face of rising need, and warned that as part of the debt ceiling crisis solution, House Republicans forced a $1 billion cut to unemployment insurance modernization efforts.

Citing an "unfortunate underinvestment in federal and state UI infrastructure" by the federal government, the lawmakers, led by Sens. Elizabeth Warren and Edward Markey, also wrote that "some states are taking steps to modernize their computer systems and invest in fraud prevention" and said Gov. Maura Healey's administration was involved in an Employment Modernization and Transformation Project to transform UI operations and systems.

They also explained to Brent Parton, acting assistant secretary in the U.S. Department of Labor, how an overdue fiscal 2022 state financial report on Friday, June 2 identified the "unprecedented challenge" posed by the $2.5 billion "over withdrawal."

Comptroller William McNamara's report identified how Massachusetts "inadvertently over withdrew roughly $2.5 billion from federal UI funding sources to pay claimants their benefits under the new UI programs."

"While the benefits were correctly calculated and disbursed to Massachusetts claimants, an internal accounting error resulted in certain UI benefit payments drawing on federal UI funds instead of the state UI trust fund," according to the letter. "In late 2021, the administration of former Governor Charlie Baker noticed the absence of a significant drop in the balance of the state trust fund -- surprising given the volume of unemployment benefits being paid out -- and contracted with accounting firm KPMG to conduct an independent assessment of the 'financial status of the Commonwealth's unemployment system and the UI Trust Fund balance.' Concerningly, KPMG's purportedly thorough audit did not reveal the existence of this anomaly, nor did the ACFRs for FY 2020 and 2021 audited by KPMG and accounting firm CliftonLarsenAllen, respectively."

"We understand the need to ensure accountability for federal dollars, while also ensuring that any resolution does not unnecessarily and negatively impact Massachusetts families and businesses," the lawmakers concluded in their letter.

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