Virginia Audit Finds $300 Million in Unemployment Overpayments Written Off, Recovery Rates Lagging
Virginia’s unemployment insurance program wrote off roughly $300 million in overpayments while recovering only about $6 million over a nine-quarter period, according to a new audit from the Virginia Office of the State Inspector General.
The audit, which reviewed Virginia Employment Commission (VEC) recovery reports from July 2023 through September 2025, found the state ranked 48th nationally in recovering unemployment overpayments based on U.S. Department of Labor data. Auditors also reported that Virginia met the federal benchmark for overpayment recovery in only three of the previous 12 quarters.
Audit Identifies Recoverable Funds and Collection Delays
The inspector general estimated that approximately $184 million in unemployment overpayment claims may still be recoverable, including some claims that may not have received collection attention.
The report also found that the VEC waived more than $123 million in overpayments between the quarter ending June 30, 2022, and September 2025. During the same period, the agency recovered approximately $12.2 million.
Auditors identified significant delays in restarting collection activity following appealed claims. According to the report, collection efforts were often resumed well beyond a 31-day benchmark used during the review, with an average delay of 391 days.
The inspector general estimated that implementing the report’s recommendations could potentially save Virginia approximately $125 million.
Recommendations Focus on Collection Tools
Among the recommendations were expanding repayment options, increasing the use of payment plans, and resuming participation in the Treasury Offset Program, which allows government agencies to intercept federal tax refunds to recover debts.
The VEC told The Center Square that many of the challenges stemmed from the unprecedented surge in unemployment claims during the COVID-19 pandemic.
According to the agency, unemployment insurance collection activity was suspended between June 2020 and August 2022. Fraud-related collections resumed in August 2022, while some non-fraud cases required individual review before collection efforts could restart.
The agency also noted that it has resumed participation in the Treasury Offset Program and has submitted approximately 10,000 overpayments for collection through the federal process.
In addition, the VEC reported recovering another $22 million in overpayments tied to federal pandemic unemployment programs between April 2021 and December 2025. Those recoveries were outside the scope of the audit’s primary review of Virginia’s unemployment insurance program.
Commissioner Melissa Smith said the agency is evaluating the audit findings while continuing modernization efforts.
“VEC is actively implementing improvements, modernizing technology, and strengthening processes designed to both recover overpayments appropriately and reduce the likelihood of future overpayments occurring in the first place,” Smith said.
