Audit shows poor oversight in Labor & Industry

David Weissman
  • Audit: Labor and Industry received nearly $180 million 2013-2016 that was used with poor accounting.
  • The department will need an estimated $160 million to continue unemployment compensation services through 2020.
  • Nearly 500 employees were furloughed late last year after the state Senate refused to vote on a funding bill.

Just a day after Gov. Tom Wolf signed off on a bill authorizing $15 million for the Pennsylvania Department of Labor and Industry, a new audit revealed the department might have improperly spent nearly $180 million.

In this file photo, state Auditor General Eugene DePasquale meets with The York Dispatch editorial board at the Dispatch offices in West Manchester Township on Wednesday, Sept. 30, 2015. (Dawn J. Sagert -

State Auditor General Eugene DePasquale, during a Tuesday morning news conference, said the department did not have proper accounting measures in place with relation to the additional funds the Legislature granted for unemployment compensation services between 2013 and 2016.

DePasquale's office began its audit of the department's Service and Infrastructure Improvement Fund in January after GOP Senate leaders refused to vote last session on a bill authorizing an additional $57.5 million into that fund.

The fund had been created to improve the state's unemployment compensation system service and technology, but opponents of putting more money into the fund pointed out that the technology was still out of date.

Without the additional funds, the department closed three unemployment compensation centers and furloughed nearly 500 employees, leading to a drastic increase in call-wait times at the remaining five centers.

DePasquale said his audit found that more than 99 percent of callers received busy signals in the month following those furloughs.

"People have a right to be frustrated by what we found here," he said, noting that the poor accounting practices and oversight by upper-level management within the department jeopardized employees' jobs, citizens' benefits and future financial stability.

DePasquale did not rule out charges being filed against those responsible for the mismanagement and said he would be sending his report to the state Attorney General's Office.

"At the very least, this was very high levels of incompetence," he said.

Christopher Good, one of the furloughed workers who had been working in Harrisburg, said it's disheartening to hear that he might have lost a job he loved because management wasn't fulfilling its duties.

County residents needing to file for unemployment compensation are facing a long wait at CareerLink, Monday, Jan. 9, 2017. John A. Pavoncello photo

Good is still hoping to be called back after Wolf signed the bill Monday to authorize up to $15 million into the improvement fund.

The administration plans to use that money to reopen the unemployment compensation center in Altoona and bring back 200 employees for nine months, according to a release from Wolf's office. A spokesman from Wolf's office did not return requests for comment on the audit.

Next steps: DePasquale said the department, administration and General Assembly now need to work together to find a long-term funding solution, with the audit estimating the system will need nearly $160 million to continue operating through 2020.

That figure includes nearly $64 million to replace the department's outdated computer system, which still uses programming language created in the 1950s.

"To say this system is held together with bubble gum would be an insult to bubble gum," DePasquale said.

DePasquale added that his department's funding recommendations are contingent upon the department fixing its accounting and oversight shortcomings.

Without additional funding, he said, the department will be forced to close three additional service centers in 2017 and 2018 and eliminate telephone assistance to claimants.

Vindication? State Sen. Scott Wagner, R-Spring Garden Township, attended the news conference and asked some additional questions.

Wagner, who said he had led the charge against holding a vote on the funding bill last session, faced numerous protests — primarily from unions representing the affected workers — following the furloughs.

Union leaders pointed out that the audit would have been completed as part of the funding bill, but Wagner asked DePasquale on Tuesday whether the Senate made the right decision in preventing that vote.

DePasquale said he never wants to see employees lose their jobs, but he does believe establishing a long-term plan is preferable to continued stopgap funding.

Wagner also asked why the state doesn't use performance bonds when it contracts outside companies, and DePasquale said there should be, particularly with information technology contracts.

The state is currently suing IBM after paying the company nearly $170 million to modernize its unemployment compensation technology through a contract that began in 2006.

The state let the contract lapse in 2013 at the recommendation of an independent assessment, with the system still outdated.

Labor Secretary Kathy Manderino has said the department expects to sign a contract to complete the project with a new vendor in June.

— Reach David Weissman at or on Twitter at @DispatchDavid.