A pair of new audits from the North Carolina Office of the State Auditor (OSA) highlight 15 years of late first round unemployment benefits being distributed, and that there was more than $47 million in unemployment benefit overpayments fraud.
Unemployment benefits are managed by the North Carolina Department of Commerce’s Division of Employment Security (DES). The Department of Commerce falls under the Office of the Governor. OSA conducted two follow-up audits on DES, both focusing on unemployment benefits.
One audit found that, during the period of July 1, 2024, through November 30, 2025, DES did not issue 28% of first unemployment benefit payments in a timely manner, resulting in late payments totaling approximately $12.2 million. Specifically, 31,366 of 111,413 first unemployment benefit payments were not made within the federally required 14-day standard. While the 28% untimely rate is an improvement from our 2024 audit, which found DES did not issue 43% of first unemployment benefit payments in a timely manner, DES has not met the federal timeliness standard for first unemployment benefit payments since 2011. North Carolina has consistently ranked among the most untimely states, averaging 41st overall since 2005.
“Losing a job can be a traumatic event that hurts entire families. Employers pay into our unemployment benefits safety net, and yet for 15 years benefits haven’t gone out the door when they should,” said State Auditor Dave Boliek. “People who lose a job still have mortgages to pay and bills to finance. As the follow-up audit from the professional team at the State Auditor’s Office shows, slight improvements have been made, but it’s not fair for the government to continually shrug its shoulders at such a longstanding problem.”
The other audit found the rate of improper unemployment benefits made in North Carolina has increased. Improper unemployment benefit payments are any payments that should not have been made or are made in an incorrect amount, including both underpayments and overpayments. The U.S. Department of Labor holds state programs to a 10% improper payment rate. OSA found that from April 1, 2021, through March 31, 2025, North Carolina had an estimated improper payment rate of 22%, which is four percentage points higher than the 18% rate reported by OSA in 2022. North Carolina’s improper payment rate has routinely exceeded the 10% limit and the national average for the past nine years.
OSA also evaluated the established overpayments made by DES, which are classified as fraud or non-fraud. Established overpayments made by DES from April 1, 2021, through March 31, 2025, were $168.8 million, with $47.2 million categorized as fraudulent. DES only recovered $12.2 million in fraud overpayments during that time. Fraud recovery has improved in recent years; however, for fiscal year 2022, the worst year from the time period examined, $26.4 million in fraud overpayments were delivered and only $3.8 million was reported as recovered.
“Government waste comes in many forms, and in this case, it’s occurring through unemployment insurance. Not only was there a higher rate of improper unemployment benefits, but there was also more than $47 million in fraud overpayments made during the scope of our audit,” added State Auditor Boliek. “The North Carolina State Auditor’s Office will continue to serve as our state's fiscal watchdog, assessing programs and sounding the public alarm to push for improvement. Ignoring problems for years and missing basic public expectation cannot continue to be tolerated.”
The primary causes of overpayments in North Carolina have historically been work search requirement errors, benefit year earnings errors, and separation determination errors. OSA’s September 2022 audit recommended that DES require work search activities be reported within the weekly certification process to reduce work search requirement errors. DES applied for and received a federal grant in August 2022 to assist with an online work search repository, but implementation didn’t occur until December 2025. DES did not identify a specific root cause for the delayed implementation.