NEWS

Iowa’s $434k unemployment mistake is forgiven

Jason Clayworth
jclayworth@dmreg.com

Unemployment payments mistakenly issued to 1,552 people by Iowa’s state government can officially be considered a gift.

The Iowa Workforce Development Board voted Friday to exclude the payments – almost $434,000 – in its efforts to rectify nearly $910,000 in fraud or erroneous payments identified in a state audit released this month.

The 2014 payments were made as a result of a faulty phone system.

Department officials initially told state lawmakers that the error was limited to about 85 people and involved less than $27,000. But the audit found the issue to be far more widespread.

The department generally seeks reimbursement for overpayments but in this case multiple Iowans were told in 2014 to keep the money under the advice of the agency’s former director Teresa Wahlert, state officials said Friday.

“She came before the (legislature’s) Oversight Committee and at very least she misrepresented what the department was doing and at worst she perjured herself in front of that committee,” said Sen. Bill Dotzler, D-Waterloo, the agency board member who proposed the state waive recollection efforts.

Wahlert retired in Jan. 2015 after it became apparent the Iowa Senate would not confirm her reappointment. An effort to reach her Friday afternoon was unsuccessful.

The people who tried to return the money in 2014 could argue that the state waived its recollection rights. The state didn’t keep a list of Iowans who tried to return the money so, theoretically, anyone could make that argument and the state might need to accept it, said Beth Townsend, Iowa Workforce Development's current director.

Seeking returns – possibly sending some to a collection service – would also create ill-will from hundreds of Iowans and fly in the face of a department that is trying to reestablish its public credibility and reputation, Townsend said.

“I would ask you to consider the effect of that on the good work that we’re doing now,” Townsend said.

Beth Townsend has said that while she has ordered an in-depth review of the audit of the Iowa Workforce Development’s financial mistake, in order to solve all the problems, she is also “trying to turn the page and move on.”

The audit found $723,246 erroneously paid in the first three months of 2014, mostly through the faulty phone system. Townsend and her staff provided information to the board Friday showing $433,866 was directly attributed to that system.

The overpayments did not result in a higher rate to businesses that pay into the unemployment system. Nonetheless, the board is asking the Legislature for permission to allocate interest earnings to make up for the $434,000 loss.

One Workforce board member voted against the proposal to waive recollection efforts, saying it runs contrary to the state’s typical effort to collect all overpayments.

“I just think we need to send the right message and do what we normally do,” said John Krogman, an employer representative from Connect-A-Dock in Atlantic and one of the board’s nine voting members.