We can’t fool you guys. Of course it’s Deloitte! Hopefully Uncle D will do a bang-up job this time for the state of Michigan, unlike some of the other state unemployment benefits systems it has handled (or mishandled) like Florida, Illinois, Colorado, and California.
The Detroit Free Press reported on Nov. 15:
Michigan’s Unemployment Insurance Agency has selected Deloitte to replace its decade-old unemployment benefits system, which, over the last decade, has falsely accused thousands of Michigan residents of unemployment fraud and contributed to delays in getting benefits to claimants during the pandemic.
The new system, which will be called uFACTS, is expected to be fully operational in 2025 and cost an estimated $78 million over 10 years.
“This is an exciting time that sets the tone for a new direction,” UIA Director Julia Dale said on a call with reporters Tuesday. Dale said the new system will have an “intuitive, human-centered design” and will allow claimants to easily access the system from their phones.
You can understand Michigan’s excitement of possibly finally having a smoothly working unemployment benefits system, as the state recently had to pay out the ass to settle a class-action lawsuit from unemployment claimants who were wrongly accused of fraud, resulting in the seizure of their property without the right to be heard, according to the Detroit Free Press:
The state has long been trying to replace the system, which was implemented under Gov. Rick Snyder and found to have a 93% error rate in making false fraud findings between 2013 and 2015, affecting tens of thousands of Michigan workers.
Those falsely accused of fraud were subjected to quadruple penalties and collections techniques such as wage garnishment and seizure of income tax refunds. The state of Michigan last month reached a settlement in one of the class-action lawsuits against the agency for $20 million.
The state issued a request for proposal for a new unemployment insurance system earlier this year and received five bids, including a bid from the current vendor Fast Enterprises to update the system. The other four bids were to replace the system, the Detroit Free Press reported. The Michigan Unemployment Insurance Agency received five bids for initial five-year contracts ranging from $30.2 million to $70.1 million. Deloitte’s bid came in at $56.3 million, Nick Assendelft, a spokesperson for the agency, told the newspaper. No contract is in place yet as the state continues to negotiate the terms with Deloitte, but the funding has already been allocated for the new system.
This sound great and all for the state of Michigan, but the author of the article, Adrienne Roberts, did her homework and touched on Deloitte’s recent history of designing and building state unemployment benefit systems that have been plagued by problems, including fraud and security breaches:
Like many jobless systems throughout the country, the Deloitte system hasn’t had a perfect track record. During the pandemic, when federal jobless benefits for freelancers and contract workers became available, Deloitte upgraded several states’ current unemployment systems, or provided ones specifically to distribute the federal benefits. A Forbes investigation found these systems were marketed for their fraud detection abilities but still resulted in billions of dollars being distributed to fraudulent claims, a widespread problem that many states, including Michigan, were grappling with.
In Florida, Deloitte finished building the state’s unemployment benefits system, called CONNECT, in 2013, and the firm claimed it was “vastly outperforming the systems it replaced and processing claims more efficiently and accurately than ever before.” But when the coronavirus pandemic hit the U.S. and caused businesses of all sizes to freak out, Florida’s unemployment rate skyrocketed from 4.3% in March 2020 to 12.9% in April 2020. And as thousands of newly out-of-work Floridians were trying to file claims for unemployment benefits and receive payments during the pandemic, the website kept crashing.
A circuit court judge last year dismissed a potential class-action lawsuit against the state and Deloitte stemming from the problems with the CONNECT system. The judge said the plaintiffs—who sought damages and raised several arguments, including that the Florida Department of Economic Opportunity and Deloitte were negligent and breached a fiduciary duty—couldn’t overcome legal hurdles to pursue the case against the FDEO and Deloitte.
But the ABC affiliate in Tampa Bay reported in July 2021 that Florida had paid out $1.9 billion in fraudulent unemployment claims since the start of the pandemic.
As Forbes reported, in May 2020, a mistake by Deloitte led to personal information of as many as 240,000 unemployment insurance applicants in Colorado, Illinois, and Ohio leaking on government benefits websites. In Ohio, out-of-work independent contractors who applied for benefits under the Pandemic Unemployment Assistance program received an email in May 2020 from the Ohio Department of Job and Family Services that said:
Deloitte Consulting is currently under contract with the Ohio Department of Job and Family Services (ODJFS) to assist the state of Ohio in administering the Pandemic Unemployment Assistance (PUA) program. Deloitte discovered on May 15, 2020 that your name, Social Security number, and street address pertaining to your application for and receipt of unemployment compensation benefits inadvertently had the capability to be viewed by other unemployment claimants. Thereafter, Deloitte immediately began an investigation and upon discovering the exposure, Deloitte immediately took steps to stop further access to and exposure of your personal information.
At this time, there is no evidence or indication to believe that your personal information was improperly used; therefore, our actions, as well as the actions you may want to consider, are preventative.
As a precaution, you may want to monitor your credit by obtaining a copy of your credit report from one of the three national credit bureaus. Federal law entitles every individual to one free credit report per year from each of the three main bureaus.
Deloitte said at that time it would offer free credit monitoring services to all PUA applicants in Ohio for a year.
“We’re not real impressed with the job Deloitte did, candidly. We’re taking a look at that,” Ohio Auditor Keith Faber said. “I think what you’re going to hear from Deloitte is, ‘We were told to put in a system up fast. This is the system we could get you fast to comply with the federal guidelines. It didn’t have the level of security protocols that we would have liked.’ But my view and our view was, it lacked security protocols.”
In Illinois, nearly 32,500 PUA applicants had their personal information available for all to see for a brief time, according to IllinoisPolicy.org. A small business owner from downstate Illinois, who was on the unemployment site to receive assistance herself, noticed people’s exposed data on May 15, 2020, and contacted her local state representative, who then alerted the governor’s office. During his daily COVID-19 press briefing on May 18, Illinois Gov. JB Pritzker threw Deloitte under the bus, essentially saying because the firm built the state’s unemployment benefits portal, it was responsible for the data breach.
Illinois spent $14.3 million for a uFACTS setup and another $42.7 million to prop up attached call centers, according to government contract records. But the deployment was “inadequate” as it didn’t collect accurate data on PUA claims, according to state auditor Frank Mautino. He told Forbes, “We know that there was a large amount of fraud,” but it will have to wait until next year’s audit to get the requisite data to put a dollar amount on the criminal activity.
In Colorado, claimants’ personal information on that state’s PUA system was exposed for nearly two weeks in May 2020, according to the Colorado Sun. The newspaper reported that the Deloitte-built system mistakenly gave users privileged functions beyond the role of a regular claimant. It allowed users to search and potentially see another claimant’s “correspondence,” which could include a name and Social Security number.
Deloitte agreed to pay nearly $5 million last year to settle claims for 237,675 people in Illinois, Ohio, and Colorado who, between roughly May 18 and May 21, 2020, may have had their personal information exposed because of a security breach while seeking pandemic-related unemployment aid.
Lots of luck, Michigan. Hope everything with Deloitte works out for the best.
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