ALBANY — Business advocates are calling on the state to return unemployment insurance rates to pre-pandemic levels after an audit determined fraud and lax oversight by the state Department of Labor led to $11 billion in losses for the fund that pays jobless benefits.

The National Federation of Independent Business, a group representing small business owners, argues the best response to the blockbuster audit from the office of state Comptroller Thomas DiNapoli would be for the state to refund businesses tens of millions of dollars in added charges businesses had to pay after the unemployment fund was depleted.

New York and other states experienced a surge in unemployment claims after the COVID-19 contagion triggered restrictions on businesses beginning in March 2020.

The state ended up borrowing nearly $10 billion from the federal government to meet its obligations for unemployment benefits.

The state has been building back the unemployment insurance fund by imposing higher costs for unemployment insurance on businesses and tacking on a fee this fall of $27.60 per employee.

Ashley Ranslow, NFIB state director, said New York small businesses with 10 employees, on average, have seen their unemployment insurance rates increase by a total of $4,000 for the years 2021 and 2022, and that is before the $27.60 per worker assessment is added into the calculation.

The average annual rate increase per employee came to about $200, though there are variables in those calculations for specific businesses, she noted.

“For a small business, that is a lot of money,” Ranslow said.

Her group has been trying to persuade lawmakers and the Hochul administration to replenish the unemployment insurance money soaked up through fraudulent claims approved by state labor bureaucrats by tapping into the federal American Rescue Plan funds the state received from the federal treasury.

She noted the DiNapoli report highlighted the fact that the full extent of the fraud could have exceeded $11 billion, but auditors were limited in their research by the labor agency’s failure to be fully cooperative with their inquiry.

Several Republican lawmakers as well as Assemblyman Billy Jones, D-Chateaugay Lake, have called for the state to pay the interest on its loan from the federal government to prevent employers from being saddled with that element of the additional costs from higher unemployment insurance assessments.

Ranslow contends it is fundamentally unfair for the state to force up costs on the employers when the Labor Department was warned in 2015 to improve its oversight of the unemployment insurance fund yet, according to the audit, did not address that request.

One of DiNapoli’s recommendations was that the state update its technology for processing unemployment claims. In addition to the massive fraud, the unemployment fund was swamped with claims, forcing thousands of applicants for benefits to wait months while their paperwork was reviewed.

Sen. Peter Oberacker, R-Otsego County, said he has framed legislation that would require a full forensic evaluation of the state’s information technology infrastructure, including the system for jobless benefits.

Some Republicans have said they were disappointed the audit was released one day after Election Day, timing that spared Gov. Kathy Hochul of embarrassment had voters been aware of the fraud before they went to the polls. The state labor commissioner is an appointee of former Gov. Andrew Cuomo and has been kept in place by Hochul.

A DiNapoli spokeswoman, Jennifer Freeman, said the audit was released when it was ready to be distributed.

“As we noted numerous times in the report, DOL (Department of Labor) was not cooperative with our staff and caused multiple delays in our efforts to complete this audit,” Freeman said in response to questions from CNHI. “Those trying to politicize the audit should spend their energies on fixing the problems we found and recovering improper payments.”

Asked whether the audit would be referred to a law enforcement agency, Freeman replied: “A specific referral was not made in regard to this audit. Auditors did not examine granular data or specific cases. As discussed in the audit, this information was not provided by the agency.”

Asked if the comptroller’s office will pursue followup actions on its own, Freeman replied: “When widespread problems are identified, our office generally conducts a follow up audit to determine if the state agency acted on our recommendations. Regarding recovering funds, it was one of the recommendations in the audit which DOL agreed with. Our office has also met with federal DOL (and) OIG (Office of the Inspector General) officials on the issues identified.”

In response to the audit, the Department of Labor said it is halfway through a modernization effort for its systems and is beefing up its fraud investigation resources.