Virginia wrote off roughly $300 million in unemployment overpayments while recovering about $6 million over nine quarters, according to a new state audit of the Virginia Employment Commission.
The audit from the Office of the State Inspector General analyzed recovery reports from July 2023 through September 2025 and found Virginia ranked 48th out of 50 states in overall recovery rate according to U.S. Department of Labor data.
Auditors said employment commission met the federal benchmark recovery rate in only three of the previous 12 quarters.
The inspector general estimated roughly $184 million in overpayment claims may still be recoverable, including claims that may not have had collection activity.
The audit also found the employment commission waived more than $123 million in overpayments from the quarter ending June 30, 2022, through September 2025 while recovering about $12.2 million during the same period.
In another section of the audit, the inspector general reviewed appealed claims and found many collection efforts were restarted outside a 31-day benchmark used during the audit, with an average delay of 391 days.
Auditors estimated the state could potentially save about $125 million if recommendations in the report are fully implemented.
Those recommendations included expanding repayment options, increasing use of payment plans and resuming participation in the Treasury Offset Program, which allows interception of federal tax refunds for debt collection.
In a statement to The Center Square, the employment commission said the audit reflects challenges faced by unemployment systems nationwide during the pandemic, when claims sharply increased and federal guidance frequently changed.
“During the pandemic, VEC received and processed an over 1,200% increase in Unemployment Insurance claims and distributed over $2 billion in UI benefits to Virginians facing sudden job loss and economic uncertainty,” the agency told The Center Square.
The commission told The Center Square that collection activity on unemployment insurance overpayments was suspended between June 2020 and August 2022, with fraud-related collections resuming in August 2022.
The agency said some nonfraud claims were individually reviewed before collection efforts restarted and that some cases are still being reviewed.
The commission told The Center Square it has resumed participation in the Treasury Offset Program and submitted about 10,000 overpayments for collection through the federal process.
The employment commission also told The Center Square it recovered an additional $22 million tied to federal pandemic unemployment program overpayments between April 2021 and December 2025, which it said were outside the scope of the audit’s primary unemployment insurance review.
Commissioner Melissa Smith said the agency is implementing modernization efforts and reviewing the recommendations outlined in the audit.
“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.
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