Howard Fischer/Capitol Media Services

PHOENIX - Nearly one dollar out of every five paid out in state jobless benefits was given in error, according to a new audit of the state Department of Economic Security.

Auditor General Debbie Davenport said a sampling of cases handled by DES by her staffers found that 22 cents of every dollar in payments to those seeking unemployment compensation was given out in error. By contrast, the national average is closer to 9 percent.

If that sampling holds, it means that more than $85 million of the nearly $398 million in jobless benefits in the 2004 fiscal year were paid out in error.

She also said the overall accuracy of DES in determining eligibility for unemployment compensation is "significantly below'' both the standards set by the U.S. Department of Labor as well as the national average.

The result, said Davenport, is that some companies are probably paying more in jobless benefits than they should.

"Employers' state unemployment tax rates are determined, in part, based on the amount of benefits paid on claims filed by the employer's former employees,'' she noted.

Specifically, companies pay premiums equal to 0.5 percent to 5.4 percent of the first $7,000 of each worker's salary to DES. Companies with the lowest rate of employee turnover have the lowest premiums; those who fire or lay off a high percentage of their workers - the people eligible for jobless benefits - pay the highest rates.

Errors can occur on both sides of the ledger, Davenport said: Someone incorrectly denied benefits would be put, unfairly, into a position of financial hardship.

Davenport faulted the agency for lack of action.

"Although Arizona s overpayment error rate rose by 120 percent between 1999 and 2003, the (unemployment) division has not regularly analyzed the data to determine why overpayments occur and what can be done to reduce them,'' she reported.

Part of the problem, the audit says, is the state's heavy reliance on temporary and part-time workers. Those positions do not provide health insurance or other benefits, resulting in a high turnover of trained personnel - the people less likely to make errors. Davenport suggested DES turn some of those positions into permanent positions with fringe benefits.

DES Director David Berns said the agency already is implementing some of the recommendations.