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California’s state auditor this week slammed the Employment Development Department (EDD) for its failure to help hundreds of thousands of unemployed residents throughout the COVID-19 pandemic while sending billions to inmates and scammers.

The report, released Tuesday, outlines the EDD’s inadequate handling of a surge in claims for unemployment insurance after the government ordered businesses to close and residents to stay home in response to the pandemic.

FILE: A person passes the office of the California Employment Development Department in Sacramento, Calif.  (AP)

"Millions of Californians were left unemployed and in critical need of assistance to replace some of the income on which they relied to pay for essentials such as housing and food," State Auditor Elaine Howle said.

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The surge of claims in March – and again in December amid further shutdowns – created a backlog of unresolved claims. Howle said the EDD "was unable to automatically process nearly half of the claims submitted online between March and September 2020."

The report found that the EDD dealt with the surge in claims by suspending certain eligibility requirements which inadvertently "removed a barrier to fraud." Now, as many as 1.7 million claimants who applied in good faith may have to repay the benefits they received if the EDD finds them "retroactively ineligible."

Howle said the state has "no clear plan" to address the backlog, saying it "represents a workload never before seen by the department."

"That could have significant consequences for claimants," the audit said.

Meanwhile, at least $11.4 billion in unemployment benefits have been mistakenly paid out to fraudulent cases since March, though some estimates range as high as $31 billion. The Los Angeles Times also reported last month as much as $400 million may have gone to inmates, some of whom are on death row.

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The state auditor noted that the EDD experience similar problems during the Great Recession of 2008 and 2009. But despite being aware of these deficiencies – particularly with its claim process and call center – it made "no comprehensive plan for how it would respond if California experience" another recession and a surge in unemployment claims.

"The 2020 claim surge was unprecedented and would have presented significant challenges no matter how prepared EDD was, but it failed to act comprehensively to prepare for downturns and to address known deficiencies," the state auditor said. "As a result, its areas of weakness became key deficiencies in its response to the claim surge, and these were a cause of serious frustration for unemployed Californians in need of assistance."

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Fox News has reached out to the EDD with a request for comment on the state audit but did not hear back by the time of publication.

Bradford Betz Fox News