Reform working at agency: Change tangible at employment department

COLUMBIA -- Seven months after state lawmakers adopted reforms for the cash-strapped Employment Security Commission, loans from the federal government have stopped and cases of fraud are being referred for prosecution.

The turnaround at the agency, now called the Department of Employment and Workforce, is going so well that officials expect to pay off nearly $900 million in loans by 2015.

"We're seeing a definite impact from the legislation and also just tightening up," DEW Director John Finan, a retired Air Force general, told The Greenville News.

Gov. Mark Sanford, a longtime proponent of changes at the agency, said the reforms and results so far show what can go wrong with an "independent island of government."

"I think you'll see transformative changes coming out of the Employment Security Commission, and you already are, based on the general's work," he said.

Financial and performance audits of ESC last year reported a multitude of problems, from the payout of $171 million to workers fired for misconduct to the failure to pay tax-withholding money taken from jobless benefits to the decision several years ago to stop referring fraud cases to prosecutors.

The most egregious issue for lawmakers, however, was the slow depletion of the agency's unemployment trust account, which became insolvent in 2008, requiring regular loans from the federal government.

Lawmakers complained they weren't warned of the impending dilemma, while ESC commissioners -- former lawmakers who supervised the agency -- said they had delivered warnings to select legislative leaders and produced reports that contained the financial facts.

Legislation passed this year reorganized the agency, placing its director in the governor's cabinet, removing the commissioners and clamping down on payments to fired workers.

The agency was ordered to resume referring fraud cases for prosecution and to get its financial house in order.

As part of that move, legislators restructured the unemployment premium rates paid by businesses to repay the federal loans and build solvency into the trust fund.

Finan, who once served as chief financial officer for the Air Force, said he moved swiftly to boost accountability and efficiency in the agency when he took over in May.

He removed the positions of assistant deputy director, reduced staffing by about 200 people and beefed up the agency's efforts at audit compliance, resulting in a clean audit, and created a position to oversee the agency's efforts at modernizing its technology.

Last year, officials said the agency's computer system was so old it couldn't communicate with other computers in state government. The agency recently obtained a $9 million grant from the federal government to improve its technology.

Officials also began talking to human resource associations and companies, he said, to ask them to promptly notify the agency of workers who quit, so they wouldn't be able to collect unemployment benefits.