As many as one in three Mainers on unemployment may not be eligible for benefits, yet they have continued to receive weekly checks from the state.

Four successive audits by the state auditor, including one released this month, have warned that the Department of Labor has failed to ensure that claimants are actively looking for work, a basic eligibility requirement for receiving an unemployment check. A third of those getting benefits failed to provide evidence that they have tried to find a job.

The lack of oversight, according to the state’s financial watchdog, may have led to improper payments of hundreds of millions of dollars between fiscal years 2011 and 2014, the latest year of the audits.

Neither the auditor nor the Department of Labor has been able to put a precise figure on the amount of the improper payments, in part because records often were not collected or reviewed. The average weekly unemployment check is $295, according to the Department of Labor.

In just 2012 and 2013, however, auditors questioned a total of $130 million in state-funded payments, based on a rate of improper payments that auditors estimated at 33 percent in 2012 and 46 percent in 2013.

“The current procedures in place do not, in our opinion, ensure substantial compliance with work search eligibility requirements,” Jacob Norton, an internal auditor with the state, recently said.

Gov. Paul LePage has known about the problem since at least 2011. In a radio address that October he warned that “claimants who aren’t doing the proper work search or who turn down suitable job offers can and will lose their unemployment benefits from this point forward.”

Requiring recipients of state benefits to search for work has since become a cornerstone of LePage’s welfare-to-work reforms.

Despite millions of dollars at stake and years of repeated warnings, a review of audit reports, working papers and interoffice memos reveals the problem isn’t going away.

The Department of Labor has responded to the auditor’s findings by overhauling its monitoring and enforcement procedures and increasing its efforts to help the unemployed find jobs. The new procedures, implemented in 2013, have been blessed by the federal government, which oversees the programs, and closely followed by the governor.

“Despite the progress, we understand that no system is perfect and there are certainly people who are not following the rules and are not conducting work searches and are not able and available to work,” said Adrienne Bennett, the governor’s spokeswoman.

But auditors aren’t satisfied.

“It’s a big number, and whether or not you’re complying with federal law, it deserves attention,” Norton said.

BUSINESS PAYS UNEMPLOYMENT TAX

The longstanding problem could have big consequences.

Unlike welfare or food stamps, which are heavily subsidized by federal funding, Maine’s unemployment insurance program is shouldered entirely by a tax levied on businesses. The annual cost of the benefit has ranged from $137 million to $200 million. (The federal government does pay for other unemployment benefits, exclusive of the state’s expense.)

The first hint of a problem cropped up in 2010 under then-Gov. John Baldacci, according to a review of audit reports. With the global economic crisis still simmering, Maine was spending up to $200 million in unemployment benefits, an amount that attracted the attention of auditors.

At the time, the Department of Labor collected work search logs compiled by unemployment claimants from every recipient, every fifth week.

Some states waived work search requirements during the crisis. Maine did not. With as many as 30,000 claims filed each week, the agency couldn’t keep up.

John Christie, former manager of the Department of Labor’s Augusta Career Center, recalls working the recession’s front lines.

“Every day my staff came to work hoping they could help somebody find work – they didn’t come in saying, ‘I need to get someone to fill out their work search log,’ ” Christie said. “It really just became about checking the box.”

The lack of vigilance wasn’t lost on claimants, auditors noted.

When then-state auditor Neria Douglass first identified the problem in the 2011 audit, the Department of Labor immediately agreed with the auditor’s assessment and promised changes. Of 60 claim files reviewed, 20 contained no record showing the claimant had searched for work.

In 2012, auditors pulled another random sample of claims, and, once again, one in three lacked proof of a work search.

This time, the auditor’s office also tabulated the cost of the problem.

“Approximately $42 million in federally funded unemployment claims and $61 million in claims funded by Maine’s employers were paid to persons who might not have been actively searching for a job and obtaining timely re-employment,” the report stated.

Laura Boyett, director of the department’s Bureau of Unemployment Compensation, questioned some of the auditor’s math, but agreed the old system of collecting – but not reviewing – every work search log had sent the “wrong message to the claimant population.”

Where the two departments didn’t agree then – or now – is on a workable solution.

“We’re locked in a disagreement with our State Auditor with regard to the federal statutory requirement around work search,” Boyett wrote in a Nov. 3, 2014, email to Gay Gilbert, of the U.S. Office of Unemployment Insurance. “The disagreement is growing more contentious and no amount of internal discussion seems to be able to get us to a place of mutual agreement – just the opposite.”

By then, the Department of Labor itself had scrapped its old system of collecting and was fully auditing 200 unemployment claims a week. The procedure, Boyett said, would send “a very different message … first, that work search is a requirement of receiving benefits, and second, that benefits will be denied if the claimant fails to comply.”

Gilbert, the federal program administrator, approved Maine’s approach in a letter to Boyett on Nov. 21. But Maine’s own auditors were less enthusiastic.

State internal auditor Norton wrote that the department’s data showed 52.5 percent of the 200 claimants audited per month in the first nine months of the new system had failed to produce adequate evidence of a work search – a worse percentage than the state auditor had reported.

BENEFIT NOT AN ENTITLEMENT

Department of Labor spokeswoman Julie Rabinowitz said the reason many claimants don’t do the required job search may be due to a misunderstanding.

She said many claimants, particularly seasonal workers who have long relied on state benefits during the winter, mistakenly feel they’re entitled to unemployment because they’ve paid into it, such as with Social Security. But it’s employers, not employees, who pay the unemployment taxes.

“This is an insurance program, not an entitlement program. You must satisfy certain requirements in order to get the benefits,” Rabinowitz said. “There’s a lot of confusion around that.”

Work search is one of the hardest requirements to enforce, department data show.

In 2014, unemployment officials reviewed 8,801 cases of potential work search eligibility problems, but denied benefits in only 650, or 7 percent, of the cases.

Many of Maine’s small employers simply don’t keep records of who called asking for a job, Boyett said.

She believes the abuse can be curtailed, but there will be a cost.

“I agree that we can strengthen it. But I’ve got very limited resources. Do I pull them off … things that I know we can definitely prove?”

The Maine Center for Public Interest Reporting is a nonpartisan, nonprofit news service based in Augusta. Email: pinetreewatchdog@gmail.com. Web: www.pinetreewatchdog.org.