The Michigan agency in charge of unemployment benefits doled out hundreds of millions of dollars to people who are potentially ineligible, including some who were in prison or dead, according to the findings of the Office of the Michigan Auditor General.

Even after determining people who filed claims were in prison or dead, the Unemployment Insurance Agency still paid them $1.7 million, the auditor found.

When fraud was identified by the agency's investigations unit, the agency undercalculated penalties by nearly 50% due to issues with its internal computer system, the auditor found. And while it still can pursue an additional $840 million in fraud penalties, the agency rarely attempted to identify fraudsters, recoup ill-gotten benefits or assess penalties in a few selected transactions reviewed by the auditor.

The findings, released Wednesday, are the latest in a series of reviews by the auditor of the beleaguered agency, which operates under the Department of Labor and Economic Opportunity.