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Although state officials have known about problems in the state's unemployment insurance program for more than a year, outside observers say it could take them at least two more to straighten things out.

The Department of Labor and Workforce Development says it already has begun to address mistakes raised in an audit of the program, some of them coming up for the second time. Those include improper payments to felons behind bars and the dead, as well as the difficulties unemployed Tennesseans have faced in applying for benefits. But the department's problems may not be fixed until 2016, when 4-decade-old mainframes are scheduled to be replaced with state-of-the-art computer systems.

RELATED: Tennessee paying unemployment benefits to felons behind bars

"That computer system has to be blown up and replaced," said Jim Brown, state director of the National Federation of Independent Business and a member of a six-organization advisory council appointed to provide outside feedback on the unemployment system. "Most of the problems are not going to be addressed on a macro level until they blow up that computer."

A state audit found the department mistakenly paid unemployment benefits to 84 inmates, including six who were held in state prisons. Payments also were made to three people who had died and 19 people employed by the state of Tennessee over a 12-month period that ended last summer.

Overall, auditors said the state is owed about $181 million, either because recipients were paid more than they should have been or the benefits never should have been paid in the first place.

Meanwhile, people who should have received unemployment payments faced difficulty applying through an automated telephone system that answered only 15 percent of all calls. The average applicant waited nearly an hour to be processed.

Such problems have dogged the system for several years, going back to the spike in unemployment claims during the 2007-09 recession. A previous audit, released a year ago, highlighted the situation.

Representatives for Gov. Bill Haslam's administration have acknowledged the problems, and they say steps are being taken to correct them. David Smith, a spokesman for the governor, stressed the long lag between the close of the audit and its publication, saying many of the problems mentioned in the document have been addressed.

"It is first important to recognize that the audit is based on a time period of about a year ago," Smith said in an email. "Since that time, a number of steps are already in place or in process to address a number of issues."

Many of those changes have come under a new commissioner, Burns Phillips. He replaced Haslam's first labor commissioner last spring, around the time the previous audit was published and at the end of the period the most recent audit covers.

"Commissioner Phillips, I do believe he's trying to turn things around," said Gary Moore, an advisory council member, president of the Tennessee chapter of the AFL-CIO and a former state lawmaker. "But I question, how long does it take to turn things around?"

Smith and other administration officials pointed to attempts to relieve stress on the phone system by putting more of the unemployment application process online. That and other changes have cut call volume in half, though some Tennesseans say delays persist.

They also say the department has taken back $23 million in erroneous payments over the last two years.

Other problems have been tougher to address. This summer, the department plans to roll out new software to flag potentially fraudulent claims, and it has pledged to check with the Department of Correction more frequently to find unemployment recipients who should not receive payments because they're behind bars.

But in its responses to auditors' findings, department managers persistently blamed computer systems that they called "antiquated" for mistaken payments. They said it will take them two years to roll out a replacement.

A contract for the new system has been awarded to a firm called Geographic Solutions. The system should reduce demands on telephone lines further by improving Internet filings and offering certification through an app.

The system also might make it easier to detect fraud, but even it won't stop overpayments entirely, officials say. Because unemployment payments begin automatically two weeks after an applicant's claim goes unchallenged by a former employer, some money continues to be paid out improperly to Tennesseans who commit fraud or who go to jail, find a new job or die — regardless of the computer system.

Bradley Jackson, vice president for government affairs at the Tennessee Chamber of Commerce and Industry, which also holds a seat on the advisory panel, praised recent improvements and agreed that outdated information technology lies at the root of much of the department's problems.

But Jackson said more needs to be done to rein in overpayments.

"A lot of work has been done, but there has got to be a better way," he said. "If we're going to pay this benefit, it's not a big ask that the fund is being managed as tightly as it can be."

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