Court filing

Audit Report — ETA Could Have Done More to Ensure States Had Sufficient Staffing to Deliver Timely Pandemic Unemployment Benefits

Filed November 22, 2024 in DOL OIG Unemployment Insurance; one of 15 filings from this case.

Record facts

Court	U.S. Department of Labor, Office of Inspector General (contracted to GenTech Associates, Inc.)
Filed	2024-11-22

Full text

REPORT TO THE
EMPLOYMENT AND TRAINING
ADMINISTRATION

COVID-19: ETA COULD HAVE
DONE MORE TO ENSURE STATES
HAD SUFFICIENT STAFFING TO
DELIVER TIMELY PANDEMIC
UNEMPLOYMENT BENEFITS

DATE ISSUED: NOVEMBER 22, 2024
REPORT NUMBER: 19-25-002-03-315
This report was prepared by GenTech Associates, Inc. under
contract with the U.S. Department of Labor, Office of Inspector
General.

U.S. Department of Labor
Assistant Inspector General for Audit

BRIEFLY…

COVID-19: ETA COULD HAVE DONE
MORE TO ENSURE STATES HAD
SUFFICIENT STAFFING TO DELIVER
TIMELY PANDEMIC
UNEMPLOYMENT BENEFITS

WHY WE DID THE AUDIT

On March 27, 2020, Congress passed
the Coronavirus Aid, Relief, and
Economic Security (CARES) Act, which
provided expanded unemployment
insurance (UI) benefits to workers
unable to work due to the COVID-19
pandemic. Section 2106 of the
CARES Act provided emergency hiring
flexibility and other temporary actions to
process unemployment claims quickly.

Our prior audit work found states’
staffing was a concern in implementing
emergency UI programs. Based on
these risks, we contracted with
GenTech Associates, Inc. (GenTech) to
answer the following question:

Did the Employment and Training
Administration (ETA) ensure states’
staffing supported the
implementation of UI programs
under the CARES Act and its
amendments?

To answer this question, GenTech
assessed ETA’s oversight, performed
in-depth testing of 6 OIG-selected
states, and surveyed an additional
47 state workforce agencies.

READ THE FULL REPORT

For more information, go to:
<https://www.oig.dol.gov/public/reports/
oa/2025/19-25-002-03-315.pdf>.
WHAT WE FOUND

GenTech found ETA took several actions toward ensuring states’
staffing supported the implementation of CARES Act UI programs.
However, more actions were needed to ensure staffing levels were
sufficient to afford timely benefits to eligible claimants. Specifically,
ETA:


provided states funding that could be used to improve staffing
levels, but did not measure the impact of that funding nor
determine the sufficiency of increased staffing levels in
implementing the new UI programs;

issued guidance for monitoring states’ staffing support, but did
not do so until October 2020, 6 months after Congress
passed the CARES Act;

monitored states’ UI program performance, but did not
recommend corrective actions to address states’ staffing
issues; and

allowed states the flexibility to reassign Benefit Accuracy
Measurement staff to claims processing, but did not evaluate
the resulting impairments to measuring improper payments.

These deficiencies occurred because ETA did not prioritize the
oversight of states’ staffing during the COVID-19 emergency.
Specifically, ETA: (1) did not establish a benefit payment timeliness
standard for CARES Act UI programs; (2) did not recognize the
need for urgency in issuing monitoring guidance for the temporary
programs; (3) allowed monitoring personnel the discretion to
classify staffing as an area of concern rather than a compliance
issue requiring corrective action; and (4) prioritized processing the
volume of UI claims over measuring the accuracy of UI payments,
specifically improper payments when suspending the Benefit
Accuracy Measurement system as a strategy to address states’
staffing needs.

WHAT WE RECOMMENDED

GenTech made four recommendations to ETA to improve its
oversight and support of states’ staffing needs during an emergency
event. ETA did not agree with the four recommendations; however,
ETA’s proposed corrective action met the intent of one
recommendation.

U.S. Department of Labor – Office of Inspector General

-i-
TABLE OF CONTENTS
INSPECTOR GENERAL’S REPORT .................................................................... 4
CONTRACTOR PERFORMANCE AUDIT REPORT ............................................ 7
RESULTS ............................................................................................................. 9
ETA Did Not Ensure States Had Sufficient Staffing to Deliver
Timely Unemployment Benefits during Emergency Events ...................... 10
CONCLUSION .................................................................................................... 22
RECOMMENDATIONS ....................................................................................... 23
Analysis of ETA’s Comments ................................................................... 23
EXHIBIT: DETAILS ON THE 6 STATES’ PERFORMANCE FOR ETA’S
87 PERCENT FIRST PAYMENT PROMPTNESS STANDARD.......................... 32
APPENDIX A: SCOPE AND METHODOLOGY .................................................. 38
APPENDIX B: ETA’S RESPONSE TO THE REPORT ....................................... 41

U.S. Department of Labor
Office of Inspector General

Washington DC 20210

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INSPECTOR GENERAL’S REPORT
José Javier Rodríguez
Assistant Secretary
for Employment and Training
U.S. Department of Labor
200 Constitution Ave. NW
Washington DC 20210

The U.S. Department of Labor Office of Inspector General contracted with the
independent certified public accounting firm of GenTech Associates, Inc.
(GenTech) to conduct a performance audit of the Employment and Training
Administration’s (ETA) oversight of states’ use of staffing to support the
implementation of unemployment insurance (UI) programs under the Coronavirus
Aid, Relief, and Economic Security (CARES) Act and its amendments.

The Office of Inspector General monitored GenTech’s work to ensure it met
professional standards and contractual requirements. GenTech’s independent
audit was conducted in accordance with generally accepted government auditing
standards.

GenTech was responsible for the auditors’ evaluations and the conclusions
expressed in the report while the Office of Inspector General was responsible for
reviewing GenTech’s report and supporting documentation.
Purpose
UI is a joint federal-state program that provides temporary benefits to eligible
workers who become unemployed through no fault of their own. ETA provides
federal oversight of the UI program. On March 27, 2020, Congress passed the
CARES Act, which provided expanded UI benefits to individuals who were
unable to work due to the COVID-19 pandemic. Section 2106 of the CARES Act
provided states with emergency hiring flexibilities limited to engaging temporary
staff, re-hiring retirees or former employees on a non-competitive basis, and
other temporary actions to process unemployment claims quickly.

We have long reported significant concerns with the Department and states’
ability to deploy UI benefits expeditiously and efficiently while ensuring integrity

U.S. Department of Labor – Office of Inspector General

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and adequate oversight. In our April 2020 UI advisory report,1 we outlined areas
of concern for ETA and states to consider while implementing CARES Act UI
provisions. One of those areas was state preparedness, which specifically
addressed concerns surrounding the sufficiency of states’ staffing levels to
administer emergency UI benefits. In a May 2021 follow-up report,2 we found
states struggled to implement the three key CARES Act UI programs—Pandemic
Unemployment Assistance, Pandemic Emergency Unemployment
Compensation, and Federal Pandemic Unemployment Compensation—partially
as a result of insufficient staffing.

Based on these risks, we contracted with GenTech to answer the following
question:

Did ETA ensure states’ staffing supported the implementation of
UI programs under the CARES Act and its amendments?

To answer this question, GenTech conducted a performance audit covering the
period from March 27, 2020, to September 6, 2021. Specifically, GenTech
reviewed and assessed ETA’s internal controls design for monitoring federal
grants, states’ staffing levels, administrative costs, and emergency UI program
implementation. GenTech performed in-depth analyses of the States of: Arizona,
Massachusetts, New York, North Carolina, Rhode Island, and Tennessee
(6 states).

We judgmentally selected these states based on a risk assessment that
considered: (1) Office of Inspector General investigative concerns; (2) the
quantity of additional staffing funded by the CARES Act and stratified into the
highest, middle, and lowest ranges; (3) the extent to which the states had not
been selected in previous Office of Inspector General audits; and (4) whether
states used a combination of new full-time equivalents, contractors, and staffing
agencies to carry out the UI program provisions under the CARES Act, as
amended. GenTech also surveyed the remaining 47 state workforce agencies.
Results
GenTech found ETA took several actions toward ensuring states’ staffing
supported the implementation of the CARES Act UI programs. However, more

1 Advisory Report, CARES Act: Initial Areas of Concern Regarding Implementation of
Unemployment Insurance Provisions, Report No. 19-20-001-03-315 (April 21, 2020),
https://www.oig.dol.gov/public/reports/oa/2020/19-20-001-03-315.pdf
2 COVID-19: States Struggled to Implement CARES Act Unemployment Insurance Programs,
Report No. 19-21-004-03-315 (May 28, 2021),
https://www.oig.dol.gov/public/reports/oa/2021/19-21-004-03-315.pdf

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actions were needed to ensure staffing levels were sufficient to afford timely
benefits to eligible claimants. Specifically, ETA:

 provided states funding that could be used to improve staffing levels, but
did not measure the impact of that funding nor determine the sufficiency of
increased staffing levels in implementing the new UI programs;
 issued guidance for monitoring states’ staffing support, but did not do so
until October 2020, 6 months after Congress passed the CARES Act;
 monitored states’ UI program performance, but did not recommend
corrective actions to address states’ staffing issues; and
 allowed states the flexibility to reassign Benefit Accuracy Measurement
staff to claims processing, but did not evaluate the resulting impairments
to measuring improper payments.

These deficiencies occurred because ETA did not prioritize the oversight of
states’ staffing during the COVID-19 emergency. Specifically, ETA: (1) did not
establish a benefit payment timeliness standard for CARES Act UI programs;
(2) did not recognize the need for urgency in issuing monitoring guidance for the
temporary programs, (3) allowed monitoring personnel the discretion to classify
staffing as an area of concern rather than a compliance issue requiring corrective
action; and (4) prioritized processing the volume of UI claims over measuring the
accuracy of UI payments, specifically improper payments, when suspending the
Benefit Accuracy Measurement system as a strategy to address states’ staffing
needs.

We appreciate the cooperation and courtesies ETA extended us during this audit.

Carolyn R. Hantz
Assistant Inspector General for Audit

3 The regular UI program includes: Unemployment Compensation, Unemployment Compensation
for Federal Employees, and Unemployment Compensation for Ex-Service Members.

U.S. Department of Labor – Office of Inspector General

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CONTRACTOR PERFORMANCE AUDIT REPORT

Independent Auditors’ Performance Audit Report on the Employment and
Training Administration’s Staffing Support for the Implementation of
Unemployment Insurance programs under the Coronavirus, Relief, and
Economic Security Act and its Amendments

José Javier Rodríguez
Assistant Secretary
for Employment and Training
200 Constitution Ave. NW
Washington DC 20210

We were engaged by the U.S. Department of Labor Office of Inspector General
(OIG) to conduct an independent performance audit of the state workforce
agencies’ (SWA)4 use of staffing to support unemployment insurance (UI)
programs under the provisions of the Coronavirus Aid Relief and Economic
Security (CARES) Act and its amendments from March 27, 2020, through
September 6, 2021.5

On March 27, 2020, Congress passed the CARES Act, which provided expanded
UI benefits to individuals who were unable to work due to the COVID-19
pandemic. The Employment and Training Administration (ETA) is responsible for
federal oversight of the states’ administration of UI programs, including three key
CARES Act UI programs: Pandemic Unemployment Assistance, Pandemic
Emergency Unemployment Compensation, and Federal Pandemic
Unemployment Compensation.

4 This report uses “state” or “SWA” to refer to the body that administers the UI program within the
state, district, or territory. For the 50 states, as well as the U.S. Virgin Islands, Puerto Rico, and
the District of Columbia, that administrative body is a SWA. There are, therefore, 53 SWAs.
5 The CARES Act expanded UI benefits through December 31, 2020. On December 27, 2020, the
Continued Assistance for Unemployed Workers Act of 2020 extended the CARES Act UI
programs through March 14, 2021. On March 11, 2021, the American Rescue Plan Act of 2021
further extended the CARES Act UI programs through September 6, 2021.

U.S. Department of Labor – Office of Inspector General

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We conducted the audit to answer the following question:

Did ETA ensure states’ staffing supported the implementation of
UI programs under the CARES Act and its amendments?

To answer this question, we conducted procedures at the ETA and state levels to
assess ETA’s monitoring of the sufficiency of states’ staffing levels. This included
reviewing UI claims workload, grant monitoring guidance, state agreements, and
administrative funding. We performed an in-depth analysis of Arizona,
Massachusetts, New York, North Carolina, Rhode Island, and Tennessee
(6 states), including an analysis of states’ staffing levels and timeliness for initial
payments. We surveyed the remaining 47 SWAs.
Administrative Grant Funding for States
Section 2106 of the CARES Act provided states with temporary, limited flexibility
to hire temporary staff, re-hire former staff, or take other steps to process
unemployment claims quickly.6 SWAs received $3.9 billion in
Fiscal Year (FY) 2020 and FY 2021 to fund administrative costs, including but not
limited to staffing. The administrative grants were available for all SWAs from
April 1, 2020, through June 30, 2022, except the California SWA, for which the
grant was available from April 1, 2020, through December 31, 2022. ETA officials
stated they did not have the authority nor was it within policy to direct grantee
expenditures.

According to ETA officials, prior to the pandemic, federal funds had been
historically insufficient to support states’ administrative activities. Although
administrative activities are supposed to be fully supported with federal funds,
ETA officials were aware states were using their own funding to support UI
program administration. From FY 2017 to FY 2019, according to the National
Association of State Workforce Agencies’ FY 2019 State Supplemental Survey
Report, approximately 52 SWAs used state funds ranging from $365.6 million to
$424.4 million to supplement federal grants for UI administrative costs.7

6 Section 2106 also allowed for states to hire contractors; however, for this audit, we did not
assess the states’ use of contractors.
7 Available at:
https://www.naswa.org/system/files/2022-12/naswastatesupplementalfundingsurveyfy2019.pdf

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including the three largest programs: Federal Pandemic Unemployment
Compensation, Pandemic Unemployment Assistance, and Pandemic Emergency
Unemployment Compensation. The largest increase in UI claims occurred
between quarters ending March 2020 and June 2020, when initial UI claims
increased from approximately 1.8 million to almost 5.3 million (199 percent) for
the 6 states (see Figure 1).

Figure 1: Total Number of Initial UI Claims for the 6 States,
Quarters Ending March 2020–September 2021

Source: U.S. Department of Labor Unemployment Insurance Weekly Claims Data8
RESULTS
We found ETA took several actions toward ensuring states’ staffing supported
the implementation of the CARES Act UI programs. However, more actions were
needed to ensure staffing levels were sufficient to afford timely benefits to eligible
claimants.

8 Available at: https://oui.doleta.gov/unemploy/claims.asp
1,767,540
5,292,014
1,877,170
1,499,213
1,524,444
888,937
556,818
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
JAN-MAR
2020
APR-JUN
2020
JUL-SEP
2020
OCT-DEC
2020
JAN-MAR
2021
APR-JUN
2021
JUL-SEP
2021
Initial UI Claims

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Specifically, ETA:

 provided states funding that could be used to improve staffing levels, but
did not measure the impact of that funding nor determine the sufficiency of
increased staffing levels in implementing the new UI programs;
 issued guidance for monitoring states’ staffing support, but did not do so
until October 2020, 6 months after Congress passed the CARES Act;
 monitored states’ UI program performance, but did not recommend
corrective actions to address states’ staffing issues; and
 allowed states the flexibility to reassign Benefit Accuracy Measurement
(BAM) staff to claims processing, but did not evaluate the resulting
impairments to measuring improper payments.

These deficiencies occurred because ETA did not prioritize the oversight of
states’ staffing during the COVID-19 emergency. Specifically, ETA: (1) did not
establish a benefit payment timeliness standard for CARES Act UI programs;
(2) did not recognize the need for urgency in issuing monitoring guidance for the
temporary programs; (3) allowed monitoring personnel the discretion to classify
staffing as an area of concern rather than a compliance issue requiring corrective
action; and (4) prioritized processing the volume of UI claims over measuring the
accuracy of UI payments, specifically improper payments. when suspending
BAM as a strategy to address states’ staffing needs.

As a result, from April 2020 through September 2021, the 6 states were only able
to pay 70 percent of initial claims (3.6 million of 5.2 million) within 21 days,
compared to the 87 percent standard ETA applies to regular UI.9 The quarterly
percentage of claims paid within 21 days ranged from 51 percent to 81 percent.
Furthermore, ETA’s suspension of BAM impaired ETA’s ability to assess the
integrity of new UI programs with respect to improper payments, including fraud.
ETA Did Not Ensure States Had Sufficient
Staffing to Deliver Timely Unemployment
Benefits during Emergency Events
As of April 10, 2020, the Office of Management and Budget required agencies to
prioritize expediency, defined as the rapid issuance of awards to meet crucial

9 The regular UI program includes: Unemployment Compensation, Unemployment Compensation
for Federal Employees, and Unemployment Compensation for Ex-Service Members.

U.S. Department of Labor – Office of Inspector General

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needs.10 In the OIG’s April 2020 UI advisory report,11 it highlighted the sufficiency
of states’ staffing to administer emergency UI benefits as an area of concern for
ETA and states to consider while implementing CARES Act UI provisions. In a
May 2021 follow-up report,12 the OIG found, from March 27, 2020, through
July 31, 2020, states struggled to implement CARES Act UI programs and pay
benefits promptly, partially because of insufficient staffing. Sufficiency of states’
staffing to support the timely delivery of UI benefits continued to be a challenge
for the rest of the extended CARES Act period through September 2021.

ETA provides federal oversight of the UI program, including its internal
control system. The Government Accountability Office’s Standards for Internal
Control in the Federal Government states the oversight body oversees
management’s design, implementation, and operation of the entity’s internal
control system.13 However, we found four deficiencies with ETA’s oversight of
states’ staffing support.

Specifically, ETA: (1) provided states funding that could be used to improve
staffing levels, but neither measured the impact of that funding nor determined
the sufficiency of states’ increased staffing levels in implementing the new UI
programs; (2) issued initial guidance for regional offices to monitor states’ staffing
needs for CARES Act UI programs, but not until October 2020, 6 months after
Congress passed the CARES Act and 4 months after the surge of pandemic UI
claims; (3) did not recommend corrective actions to address states’ staffing
issues when identified; and (4) allowed states to reassign BAM staff to claims
processing duties, which impaired ETA’s ability to assess the integrity of the new
UI programs with respect to improper payments, including fraud.
ETA Did Not Measure the Impact of Federal
Funding on Improving States’ Staffing nor
Determine the Sufficiency of Staffing Levels
From April 1, 2020, through September 30, 2021, ETA awarded grant funds to
the 6 states totaling $766.9 million to support administrative expenses of the
pandemic UI programs. However, ETA neither measured the impact of the

10 Office of Management and Budget Memorandum 20-21, Implementation Guidance for
Supplemental Funding Provided in Response to the Coronavirus Disease 2019 (April 10, 2020)
11 Advisory Report: CARES Act: Initial Areas of Concern Regarding Implementation of
Unemployment Insurance Provisions, Report No. 19-20-001-03-315 (April 21, 2020),
https://www.oig.dol.gov/public/reports/oa/2020/19-20-001-03-315.pdf
12 COVID-19: States Struggled to Implement CARES Act Unemployment Insurance Programs,
Report No. 19-21-004-03-315 (May 28, 2021),
https://www.oig.dol.gov/public/reports/oa/2021/19-21-004-03-315.pdf
13 GAO-14-704G, Standards for Internal Control in the Federal Government (September 2014)

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administrative grant funding it provided on improving staffing levels nor
determined the sufficiency of states’ increased staffing levels in implementing the
programs. The 6 states allocated $540.7 million of the administrative grant funds
to support staffing efforts (see Table 1).

Table 1: Administrative Grants Expenditures for the 6 States,
April 2020–September 2021
State
UI Grant Obligated
Funds
Staffing Costs
Percentage Used
for Staffing
Arizona
$154,049,022
$83,016,093
54%
Massachusetts
$94,489,965
$53,179,446
56%
New York
$339,902,173
$323,290,271
95%
North Carolina
$108,330,438
$47,573,615
44%
Rhode Island
$35,745,178
$13,430,770
38%
Tennessee
$34,429,493
$20,258,168
59%
Totals
$766,946,269
$540,748,362
Source: GenTech analysis of ETA’s funding and expenditure by state

The 6 states’ staffing levels increased from April 2020 through September 2021,
with the largest increase in average staffing levels occurring between April and
June 2020, just after the CARES Act passed. During this time, average state
staffing levels increased from 873 to 2,060 positions (236 percent). However, 5 of
the 6 states14 considered their staffing levels insufficient to process the volume of
initial UI claims despite receiving administrative grant funds to implement the
CARES Act UI programs.

Also, despite increases in staffing levels, 5 of the 6 states15 generally did not
meet ETA’s first payment promptness standard (see Exhibit). This ETA UI Core
Measures standard, used for measuring the timeliness of initial benefit payments,
established the acceptable level of performance as at least 87 percent of regular
UI payments being made within 14 or 21 days.16 However, ETA did not apply the

14 North Carolina responded its staffing levels were sufficient to implement CARES Act UI
programs while Arizona, Massachusetts, New York, North Carolina, and Tennessee responded
their staffing levels were insufficient.
15 Arizona, Massachusetts, New York, North Carolina, and Tennessee consistently did not meet
the 87 percent first payment promptness standard. Rhode Island was the only state that generally
met the standard. See Exhibit.
16 ETA requires states without a waiting week to pay 87 percent of claimants within 14 days and
states with a waiting week within 21 days after the week ending date of the first compensable
week in the benefit year.

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first payment promptness standard to episodic claims, or claims submitted under
temporary programs such as the CARES Act UI programs.

Absent a timeliness standard for the CARES Act programs, we used ETA’s first
payment promptness standard in our analysis to provide context for performance
of the 6 states during the pandemic. Our rationale for this is simple—there is no
greater need for prompt payment of unemployment benefits than during an
economic crisis. As such, a standard is needed to measure the states’
performance of delivering payments promptly during such emergencies.

Despite the increase in staffing levels, from quarters ending June 2020 through
September 2021, the 6 states were only able to pay 70 percent of initial UI claims
(3.6 million of 5.2 million) within 21 days, 17 percent less than ETA’s first
payment promptness standard. The quarterly percentage of initial claims paid
within 21 days ranged from 51 percent to 81 percent (see Figure 2).

Figure 2: The 6 States’ Staffing Levels and Initial UI Claim Payments
Compared to ETA’s First Payment Promptness Standard, Quarters Ending
March 2020–September 2021*

*ETA calculates initial payment promptness for each state monthly. However, for our testing of
the 6 states, we calculated first payment promptness quarterly.
Source: Analysis using staffing data from the 6 states and ETA - Benefits: Timeliness and
Quality Reports / All First Payment Timeliness17

17 Available at: https://oui.doleta.gov/unemploy/btq.asp
96%
72%
51%
64%
75%
81%
74%
30%
40%
50%
60%
70%
80%
90%
100%
5,000
6,000
7,000
8,000
9,000
10,000
11,000
12,000
JAN-MAR
2020
APR-JUN
2020
JUL-SEP
2020
OCT-DEC
2020
JAN-MAR
2021
APR-JUN
2021
JUL-SEP
2021
Percentage of Claims Paid
Number of Staff
Number of Staff
Quarterly Percentage of Initial Claims Paid within 21 Days
ETA's First Payment Promptness Standard (87 Percent Paid within 21 Days)

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ETA Did Not Establish a Benefit Payment Timeliness Standard for
CARES Act UI Programs
According to ETA’s response to a previous OIG report,18 most states had
challenges meeting the 87 percent standard for regular UI programs due to high
claims volume prior to the pandemic, let alone meeting such a performance
standard for the new CARES Act UI programs. Therefore, ETA did not establish
a benefit payment timeliness standard for CARES Act UI programs. We tested
ETA’s assertion by analyzing the 6 states’ initial payments for regular UI
programs before the pandemic. For quarters ending December 2019 through
March 2020, Arizona, New York, Rhode Island, and Tennessee all met ETA’s
first payment promptness standard (see Table 2).

Table 2: Pre-Pandemic Benefit Payment Timeliness for the 6 States,
Quarters Ending December 2019 and March 2020

State
Percentage of
Initial UI Claims
Paid within
21 Days,
Oct.-Dec. 2019
Percentage of
Initial UI Claims
Paid within
21 Days,
Jan.-Mar. 2020
Met 87% First
Payment
Promptness
Standard for Both
Quarters?
Arizona
89%
89%
Yes
New York
93%
93%
Yes
Rhode Island
95%
95%
Yes
Tennessee
95%
96%
Yes
Massachusetts
84%
95%
No
North Carolina
73%
82%
No
Source: GenTech’s analysis using data from ETA - Benefits: Timeliness and Quality Reports / All
First Payment Timeliness

Therefore, with 4 of the 6 states able to meet the standard, we did not find
supportable justification for ETA not establishing a benefit payment timeliness
standard for the CARES Act UI programs.

18 COVID-19: States Struggled to Implement CARES Act Unemployment Insurance Programs,
Report No. 19-21-004-03-315 (May 28, 2021),
https://www.oig.dol.gov/public/reports/oa/2021/19-21-004-03-315.pdf

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ETA Did Not Issue Guidance for Regional Offices to
Assess Risks and Monitor States’ Staffing until
6 Months after Congress Passed the CARES Act
On February 21, 2020, ETA established guidance in Employment and Training
Order 1-20 for oversight reviews of regular UI programs but did not provide timely
guidance for regional offices to assess risks and monitor the states’
administration of the CARES Act UI programs, including staffing support. The
CARES Act authorized the temporary emergency UI programs on
March 27, 2020. However, ETA did not issue the risk assessment and program
monitoring guidance in Employment and Training Order 1-2119 until
October 2, 2020, more than 6 months after the CARES Act passed.

We acknowledge the challenges faced with establishing guidance to monitor the
performance of swiftly rolled-out new temporary UI programs; however, 6 months
was too long. By the time ETA issued the guidance, the total initial UI claims for
the 6 states had already peaked at almost 5.3 million as of June 2020. Regional
offices needed monitoring guidance sooner to gather quality staffing
information from SWAs to allow ETA to make informed decisions and
evaluate the SWAs’ performance in delivering benefits. According to the
Government Accountability Office’s Standards for Internal Control in the Federal
Government, it is management’s responsibility to obtain data on a timely basis so
that they can be used for effective monitoring.
ETA Did Not Recognize the Need for Urgency in Issuing Monitoring
Guidance Specifically for CARES Act UI Programs
ETA officials stated, while Employment and Training Order 1-21 was very
important in ETA’s oversight of CARES Act programs, ETA was already engaged
in significant monitoring and oversight activities prior to its release. Thus, ETA did
not recognize the need for urgency in issuing such guidance. According to ETA
officials, ETA actively tracked states’ implementation of the programs and
identified issues and required corrective actions of states as early as May 2020.

In addition, in response to a previous OIG report,20 ETA officials stated, during
the period that the new CARES Act UI programs were initiated, ETA had to issue
guidance and provide technical assistance to states and states needed time to

19 Employment and Training Order 1-21 requires regional offices to conduct quarterly desk
reviews in the grant management system to assess potential risk for each states administration of
grants for programs including Pandemic Unemployment Assistance, Pandemic Emergency
Unemployment Compensation, and Federal Pandemic Unemployment Compensation.
20 COVID-19: ETA and States Did Not Protect Pandemic-Related UI Funds from Improper
Payments Including Fraud or from Payment Delays, Report No. 19-22-006-03-315
(September 30, 2022), https://www.oig.dol.gov/public/reports/oa/2022/19-22-006-03-315.pdf

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stand up these major new programs. ETA officials stated it was unrealistic to
expect ETA to immediately identify all issues with state operations. According to
ETA, initial oversight activity included gathering information on states’
implementation of the programs and, in May 2020, starting to provide states with
information on incidents where states did not properly implement the programs.
ETA officials asserted ETA was engaged with states throughout the pandemic,
calling out problems with states’ implementation and operation of the programs
and providing guidance and technical assistance to address problems as they
were identified.

ETA’s assertion that its monitoring activities were sufficient—absent specific
guidance on monitoring CARES Act UI programs—is questionable. If it
considered the monitoring activities performed before October 2020 sufficient,
ETA may not have determined it needed to later issue guidance specifically for
monitoring the CARES Act UI programs.
ETA Did Not Recommend Corrective Actions to
Address States’ Staffing Issues
ETA’s monitoring reviews are a core aspect of its state oversight framework for
regular UI. These reviews can lead to ETA providing states technical assistance
in identified areas of concern for non-compliance issues and recommending
corrective actions for compliance issues that lead to findings. However, for 5 of
the 6 states, ETA’s oversight did not result in technical assistance to states nor
recommendations for corrective actions related to staffing issues identified during
its monitoring reviews.

In annual State Quality Service Plans (SQSP)21 and quarterly desk reviews, the
6 states informed ETA of challenges with staffing shortages, insufficiently trained
staff, workload increases, and timeliness concerns associated with UI benefit
payments. However, ETA regional offices did not consider the states’ issues with
staffing as indicators of compliance concerns and therefore did not recommend
any corrective actions. Details regarding the five states’ staffing concerns and the
respective ETA regional office actions follow.
ETA Region 1 Office
ETA’s Region 1 office did not document any corrective actions to address the
following staffing-related concerns that the Massachusetts, New York, and
Rhode Island SWAs noted in their SQSPs:

21 The annual SQSP is the principal vehicle that state UI programs use to plan, record, and
manage improvement efforts. The SQSP serves as the programmatic plan portion of the grant
document through which states receive federal UI administrative funding.

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 Massachusetts SWA officials noted in their FY 2019-FY 2020 and
FY 2021 SQSPs the state did not meet the ETA first payment
performance standard due to the claimant versus staff ratio. The surge in
UI claims as a result of the COVID-19 pandemic had a dramatic impact on
the state’s ability to address workflow volume.

 New York SWA officials noted in their FY 2020 SQSP the state was
experiencing challenges with effectively administering the UI programs
due to FY 2020 federal budget shortfalls of $183 million for all states.
According to New York UI benefit officials, in FY 2020, states in the
aggregate received $567 million less than what states spent in FY 2019.
The New York SWA relied on administrative funding for staffing expenses.

 Rhode Island SWA officials noted in their FY 2021 SQSP that adjudication
staff (those traditionally assigned to BAM) were reassigned to assist in
processing claims. The state anticipated it would not meet the first
payment performance standard as a result of staffing resources and the
increase in workload as a result of the pandemic.

According to ETA Region 1 officials, corrective actions occur when ETA conducts
monitoring and makes a finding. A finding is a violation of legislation, regulation,
and/or departmental guidance. Regarding the three states under the oversight of
ETA’s Region 1 office (Massachusetts, New York, and Rhode Island), ETA
recommended no corrective actions.
ETA Region 3 Office
ETA’s Region 3 office did not document any recommended corrective actions to
address the staffing-related concerns the Tennessee SWA noted in its SQSPs.

In SQSPs for FY 2020 and FY 2021, the Director of Employer Accounts noted
the accounting office had a shortage of staff and inexperienced supervisors and
staff, which resulted in inaccurate billing statements. Further, the SWA’s director
noted the need to take a more active role in ensuring errors were resolved before
issuing monthly billing statements. In a June 30, 2020, desk review, Tennessee
SWA officials noted the state was experiencing significant delays due to a
shortage of staff and an unprecedented number of claims.

According to ETA’s Region 3 office, corrective action plans the Tennessee SWA
provided each quarter included progress updates regarding hiring, training, and
promoting staff. Also, Region 3 indicated it held regular meetings with the
Tennessee SWA to obtain program updates and discuss staffing. However,
Region 3 did not provide documentation to support this statement.

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ETA Region 6 Office
ETA’s Region 6 office did not document any corrective actions needed to
address the staffing-related concerns the Arizona SWA noted in its SQSPs.

In the FY 2020 SQSP, the Arizona SWA noted it did not meet ETA’s first
payment promptness performance standard due to loss of experienced staff. It
reported it had 34 adjudicators working a full caseload but needed 54.

We reviewed the SQSPs and quarterly desk reviews for FY 2020 and did not
identify any corrective actions recommended by Region 6 to address Arizona’s
staffing deficiencies. According to Region 6 officials, corrective action
recommendations and follow-up are required when matters of noncompliance are
identified. Accordingly, Region 6 officials did not identify staffing as a
noncompliance issue because ETA had not established performance metrics or
goals for the state’s administrative grant related to staffing.
ETA’s Guidance Allowed Reviewers Discretion to Classify Staffing as
an Area of Concern rather than a Compliance Indicator that Required
Corrective Action
ETA’s Core Monitoring Guide (August 2018)—a tool for an ETA reviewer to
assess grant recipients’ core activities—allowed reviewers discretion to classify
staffing as an area of concern rather than as a compliance indicator, excusing
reviewers from developing findings and recommending corrective actions.

Core activities assessed during these monitoring reviews included Service
Design and Delivery (Core Activity 1). The objective of Core Activity 1 is to
ensure the grant recipient has implemented service design and delivery activities
to accomplish all grant activities and goals. ETA reviewers use Designating
Personnel, Staff, and Hiring as an indicator of whether the objective of
Core Activity 1 is being met. Specifically, the grant recipient’s ability to have the
necessary staff to successfully conduct its administrative and operational duties
under the grant is an indicator the objective is being met. For Core Activity 1,
reviewers have the discretion to determine whether an indicator is either a
compliance indicator, effectiveness indicator, or both. Compliance indicators
must be met, and findings of noncompliance require condition, cause, criteria,
and corrective action. ETA’s Core Monitoring Guide does not require corrective
action for areas of concern but instead suggestions for improvements.

Program effectiveness is determined by the extent to which program objectives
are achieved and the positive changes they bring about in the target community
or sector. This encompasses various dimensions, including impact, efficiency,
relevance, sustainability, and adaptability. Although an effectiveness indicator

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may not be a compliance violation but rather an area of concern, it may have a
negative impact on the program or could lead to a finding in the future. For
example, insufficient staffing levels for 5 of the 6 states generally had a negative
impact on the timeliness of benefit delivery—almost 1.6 million claimants waited
longer than 21 days for their first UI payment. If ETA reviewers had developed a
finding and recommended corrective action to more timely address the states’
staffing needs, more claimants would likely have received benefit payments
sooner.
ETA Allowed States to Reassign BAM Staff to
Claims Processing, Impairing ETA’s Ability to
Assess Integrity of New UI Programs with Respect
to Improper Payments, Including Fraud
The primary objectives of ETA’s BAM program are to: assess the accuracy of UI
payments, assess improvements in program accuracy and integrity, and
encourage more efficient administration of the UI program. BAM provides the
basis for assessing the accuracy of UI payments, specifically the improper
payment rate. The improper payment rate is an estimate based on the results of
states’ representative samples of paid and denied claims for regular UI. ETA and
SWA staff also use BAM as a diagnostic tool to identify errors and their causes
and correct and track solutions to these problems.

According to ETA, upon the President declaring the COVID-19 outbreak as a
national emergency, many states started experiencing increased levels of claims.
As a result, states proactively requested flexibility to move all available staff,
including BAM personnel, to perform claims processing duties. On
March 18, 2020, with Office of Management and Budget approval, ETA issued
guidance allowing states, with written justification, to request temporary
suspension of BAM from April 1, 2020, through June 30, 2020. According to the
6 states’ justifications, they needed all available staff resources to process the
high level of initial UI claims during the peak of the pandemic. ETA approved the
requests to suspend accuracy processing in BAM for paid and denied claims.

Although ETA provided states operational flexibilities, including the suspension of
BAM to reassign staff from BAM program integrity duties to UI claims processing
duties, these actions were not sufficient to address the high volume of claims.
SWAs still struggled to pay UI benefits in a timely manner. During the BAM
suspension period for the quarter ending June 2020, we identified 4 of the
6 states—Arizona, New York, North Carolina, and Massachusetts—did not meet
ETA’s 87 percent first payment promptness standard. The percentages of initial
UI benefits paid within 21 days ranged from 59 to 86 percent. Rhode Island and

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Tennessee exceeded the standard by paying 95 percent and 88 percent of initial
UI benefits within 21 days (see Figure 3).

Figure 3: The 6 States’ Staffing Levels and Initial UI Claims Payments
Compared to ETA’s First Payment Promptness Standard during
BAM Suspension, Quarter Ending June 2020

Source: Analysis using staffing data from the 6 states and ETA - Benefits: Timeliness and
Quality Reports / All First Payment Timeliness
ETA’s Emergency Response Prioritized Processing Claims rather than
Assessing UI Program Integrity
ETA officials stated ETA identified the temporary suspension of BAM operations
as one of several strategies to address states’ needs for adequate staffing to
process the increase in claims.

When ETA decided to suspend BAM, its emergency response prioritized
processing UI claims rather than assessing UI program integrity. While ETA’s
interest in addressing the states’ needs to process the massive volume in claims
was commendable, ETA did not develop a business case analysis to justify that
suspending BAM would effectively assist states with managing the claims surge
81%
86%
59%
78%
95%
88%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-
1,000
2,000
3,000
4,000
5,000
6,000
Percentage of Claims Paid
Number of Staff
Number of Staff
Quarterly Percentage of Claims Paid within 21 Days
ETA's First Payment Promptness Standard (87 Percent Paid within 21 Days)

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while maintaining ETA’s ability to sufficiently assess the integrity of the new UI
programs.

According to ETA officials, in January and February 2020, the UI claims volume
was the lowest in decades and administrative funding was also historically low.
ETA officials stated an exponential increase in new claims from March 2020
through June 2020 created a large staffing deficit in states. According to ETA, the
largest incremental increase was 17.6 million claims. In addition, ETA officials
stated, based on BAM investigators’ knowledge and experience with fact-finding
and assessing states’ UI program compliance, BAM investigators were generally
able to seamlessly step into the claims processing role and adjudication roles to
support the SWAs during the pandemic. Although expeditious delivery of UI
benefits was critical during the claims surge, ETA’s assessments of the CARES
Act UI programs’ integrity were also necessary as the UI claims and risk of
fraudulent payments increased.

In December 2021, ETA reported a FY 2021 estimated improper payment rate of
18.9 percent,22 which was applied to Federal Pandemic Unemployment
Compensation. ETA was unable to calculate an estimated improper payment rate
for Pandemic Unemployment Assistance until August 2023; Ultimately, ETA
reported a FY 2023 improper payment rate of 35.9 percent.23 Further, for the
6 states, the OIG previously identified24 almost $3.2 billion in potentially
fraudulent Pandemic Unemployment Assistance and Federal Pandemic
Unemployment Compensation benefits paid to individuals with
Social Security numbers: (1) filed in multiple states, (2) of deceased persons, and
(3) used to file UI claims with suspicious email accounts (see Table 3).

22 This rate includes an overpayment rate of 17.9 percent, an underpayment rate of 0.8 percent,
and a 0.2 percent rate for benefits whose classification—whether valid, overpaid, or underpaid—
could not be determined.
23 This rate includes an overpayment rate of 17 percent, an underpayment rate of 1.5 percent,
and a 17.4 percent rate for benefits whose classification—whether valid, overpaid, or underpaid—
could not be determined.
24 COVID-19: Pandemic Unemployment Assistance for Non-Traditional Claimants Weakened by
Billions in Overpayments, Including Fraud, Report No. 19-23-015-03-315 (September 27, 2023),
https://www.oig.dol.gov/public/reports/oa/2023/19-23-014-03-315.pdf

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Table 3: OIG-Identified Potential Fraud for the 6 States,
April 2020–September 2021

State
Total PUA* and
FPUC** Benefits
OIG-Identified
Potentially
Fraudulent Benefits
Percentage of
Potentially
Fraudulent Benefits
Arizona
$7,970,139,262
$1,376,330,363
17.3%
Massachusetts
$9,463,400,031
$311,247,869
3.3%
New York
$36,959,767,657
$1,264,572,705
3.4%
North Carolina
$2,001,465,064
$80,275,568
4.0%
Rhode Island
$1,214,504,366
$93,440,983
7.7%
Tennessee
$792,679,589
$50,470,868
6.4%
Totals
$58,401,955,969
$3,176,338,356
*Pandemic Unemployment Assistance **Federal Pandemic Unemployment Compensation
Source: OIG analysis of claims data

As demonstrated by the magnitude of potentially fraudulent benefits paid in the
6 states, sufficient staffing resources to implement and protect the integrity of the
new UI programs with respect to improper payments, including fraud, was critical.
CONCLUSION
Through provisions of CARES Act Section 2106, Congress provided states with
temporary, limited flexibility to hire temporary staff, re-hire former staff, or take
other steps to process unemployment claims quickly during the pandemic. To
this end, ETA awarded $3.9 billion to SWAs in FY 2020 and FY 2021 to fund
administrative costs associated with the pandemic UI programs, including but not
limited to staffing. However, given the exponential increase in UI claims and
associated risks of improper payment, including fraud, coupled with OIG’s
long-standing concerns about state preparedness—specifically staffing—ETA
needed to do more.

ETA took several actions toward ensuring states’ staffing supported the
implementation of the CARES Act UI programs, but those actions were not
enough, resulting in the 6 states paying only 70 percent of initial UI claims
(3.6 million of 5.2 million claims) within 21 days. This is 17 percent less than
ETA’s first payment promptness standard.

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Striking a balance between ensuring states have sufficient staff to deliver the
necessary aid to people facing hardships while having measures in place to
assess UI program integrity against improper payments, including fraud, is a
challenge. Before the next disaster or mass unemployment event, ETA must be
prepared to do both without compromise or tradeoff.
RECOMMENDATIONS
We recommend the Assistant Secretary for Employment and Training:

1. Develop performance standards for prompt payment of UI benefits under
temporary UI programs using lessons learned from the pandemic.
2. Establish policy that requires officials to issue guidance timely for ETA
regional offices to monitor and measure the effectiveness of states’ use of
staffing to support the implementation of temporary UI programs.
3. Establish policy that requires states to develop corrective action plans to
address staffing insufficiencies that negatively impact permanent and
temporary UI programs, as identified by regional offices during monitoring
reviews.
4. Establish policy that requires ETA officials to develop a business case
analysis and supporting justification when considering suspension of any
UI program integrity functions.
Analysis of ETA’s Comments
In response to the draft of this report, ETA did not agree with our four
recommendations to improve ETA’s oversight and support of states’ staffing
needs during an emergency event. ETA also expressed concerns regarding the
findings of our report. We carefully reviewed ETA’s response in full; our report
was accurate as stated, thus the agency’s response did not result in any changes
material to our reported results or conclusions. Synopses of ETA’s comments on
our recommendations and findings along with our corresponding responses
follow:

 ETA disagreed with Recommendation 1 and stated it is extremely
challenging to develop standards for a program that does not exist and for
which the Department does not know its duration or the program's
requirements. ETA also stated the Department intends on capturing
lessons learned from the pandemic experience in the temporary programs
to help inform actions for similar future programs. ETA stated this

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approach allows the Department to be proactive in a more meaningful way
since it cannot speculate on requirements for any program(s) Congress
may authorize and appropriate funding for in the future. Last, ETA stated it
is not in a position to commit to developing performance standards for
temporary programs in the future.

o Although ETA disagreed with Recommendation 1, we determined
ETA’s proposed corrective action, to capture lessons learned
regarding staffing to help inform actions for similar future programs,
meets the intent of our recommendation.

 ETA disagreed with Recommendation 2. The agency stated the premise
for the recommendation was predicated on a lack of understanding of the
situation within which states and ETA were operating during the pandemic
and that the report did not consider the complexities. ETA stated it was
imperative to first issue guidance and technical assistance to states on
how to implement the new programs before developing monitoring
guidance for ETA’s Regional Offices. In addition to issuing guidance and
providing technical assistance, ETA stated it delivered timely monitoring
tools during the pandemic. Finally, ETA stated it did not have an
alternative approach to address the recommendation and suggested it be
excluded from the final report.

o We agree states needed guidance on how to implement new
programs. ETA’s efforts to develop implementation guidance for
newly authorized programs during an unprecedented pandemic is
commendable. In the draft report, we acknowledged the
challenging circumstances in which states and ETA were operating
during the pandemic:

Despite these circumstances, ETA had disbursed almost
$340 billion in pandemic-related UI benefits through those new

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programs from April through September 2020.25 Given the
magnitude of benefits disbursed and Office of Management and
Budget’s requirement for agencies to prioritize expediency, it was
critical to issue guidance for monitoring the performance of those
new programs in a more timely fashion. Our recommendation
remains.

ETA also provided a comment to the finding. The agency stated the draft
report fails to adequately acknowledge the reality of balancing the
establishment of new programs and monitoring compliance with such
programs. The agency stated programs must first be operational before
they can be monitored, and, in 2020, the UI system was intensely focused
on implementing and administering programs.

o We agree states need guidance on how to implement new
programs, but ETA regional offices also need timely guidance on
how to monitor the performance of those new programs.

 ETA disagreed with Recommendation 3 and suggested an alternative
approach. Specifically, it had proposed legislation in the Department’s
FY 2025 budget submission that would provide the Secretary of Labor
with new enforcement authority. Such authority, ETA stated, would create
a new remedy so the Secretary of Labor could require a state that fails to
meet performance measures or achieve minimum technology standards to
use a portion of its administrative grant to correct failing performance
and/or require the state to participate in technical assistance activities
offered by the Department.

ETA stated the Secretary currently has limited authority to require state UI
agencies to take actions to respond to poor performance and high
improper payment rates. Given ETA already pursued this matter through
the budget process, which can now only be addressed by Congressional
action, ETA requested that its action be considered sufficient to address
and close this recommendation.

o We disagree that ETA’s proposed corrective action meets the intent
of our recommendation. We commend ETA for proposing
legislation that grants the Secretary of Labor new enforcement
authority to require states to use a portion of its administrative grant
to correct failing performance. However, to remedy instances of

25 Total disbursements were downloaded on November 6, 2024, from:
https://oui.doleta.gov/unemploy/DataDownloads.asp. The $340 billion in disbursements included
FPUC-$273.6 billion, PEUC-$9.6 billion, and PUA-$56.7 billion.

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grant recipients’ failure to meet performance standards, such
performance standards must first be established and measured.
ETA did not convey how states’ staffing levels would be factored
into measuring program performance. Therefore, our
recommendation remains.

 ETA disagreed with Recommendation 4. The agency stated the premise
for the recommendation was predicated on a lack of understanding of the
situation within which states and ETA were operating during the pandemic
and a complete misunderstanding of the role of BAM.

ETA specified that allowing states to temporarily suspend BAM operations
for one quarter permitted states to repurpose BAM staff with high-level of
UI experience to help process the huge claims volume at the start of the
pandemic while new staff could be onboarded and trained. ETA stated this
action was one of the most logical and common sense actions that could
have been taken at the time and did not impact fraud prevention activities,
which are performed by Benefit Payment Control staff outside of a state’s
BAM operations.

The agency also stated it has already met the essence of the
recommendation by issuing very clear guidance in UIPLs 23-20 and
11-23,26 which required states to continue to use, operate, and maintain
the required integrity controls and the required overpayment recovery
activities at all times, including during times of mass unemployment
events, absent specific statutory authorization allowing suspension of such
controls or activities. Based on the issuance of the guidance, ETA
requested this recommendation be closed and excluded from the final
report.

o ETA’s issuance of UIPLs 23-20 and 11-23 does not meet the intent
of our recommendation. In the draft report, we did not imply ETA’s
suspension of BAM resulted in the suspension of integrity control
activities designed to detect or prevent fraud. Rather, we stated the

26 DOL, ETA, UIPL No. 23-20, Program Integrity for the Unemployment Insurance (UI) Program
and the UI Programs Authorized by the Coronavirus Aid, Relief, and Economic Security (CARES)
Act of 2020 - Federal Pandemic Unemployment Compensation (FPUC), Pandemic
Unemployment Assistance (PUA), and Pandemic Emergency Unemployment Compensation
(PEUC) Program (May 11, 2020), available at:
https://www.dol.gov/sites/dolgov/files/ETA/advisories/UIPL/2020/UIPL_23-20.pdf; and DOL, ETA
UIPL No. 11-23: Announcement of Grant Opportunities and National Identity (ID) Verification
Offering under the American Rescue Plan Act (ARPA) (July 13, 2023), available at:
https://www.dol.gov/agencies/eta/advisories/uipl-11-23

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action impaired ETA’s ability to assess the integrity of the new UI
programs with respect to the improper payments, including fraud.

The improper payment rate serves as an indicator for the
assessment of the accuracy and integrity of the UI program. ETA's
suspension of BAM also suspended the requirement for states to
submit representative samples of paid and denied claims for
regular UI, results of which are used to estimate the improper
payment rate. While the temporary CARES Act UI claims would be
excluded from the sample, the improper payment rate was applied
to all claims, including temporary programs, as an indicator of UI
program accuracy and integrity. Therefore, the recommendation
remains.

ETA also expressed two primary concerns regarding the draft report.

 ETA’s first concern was that the draft report did not offer actionable items
to improve the UI system nor recognize the constraints that were put on
the system during the pandemic. The agency stated, given the
unprecedented spike in UI claims by 3,000 percent in a relatively short
time period and the creation of several new and temporary
pandemic-related unemployment compensation programs under the
CARES Act, any level of staffing would have been insufficient to handle
this significant workload. Simply adjusting staffing levels alone would not
have been enough to address the unprecedented increase in workload.

Also, ETA stated, as noted in its responses to similar reports from the
oversight community, but not fully acknowledged in this draft report, that
states were dealing with the largest UI claims increase in the history of the
program, while also implementing and administering new temporary,
pandemic-related unemployment programs. ETA stated the draft report
recognized that, on April 10, 2020, the Office of Management and Budget
issued OMB Memorandum 20-21 requiring agencies to prioritize
expediency, which was defined as the rapid issuance of awards to meet
crucial needs. The agency stated it is important to reiterate the states’
remarkable accomplishments, despite challenging circumstances,
including helping to ensure nearly $880 billion of unemployment benefits
were provided to over 53 million workers. Furthermore, ETA opined that
states’ ability to provide benefit payments within 1 to 2 months on average
for new, temporary UI programs was an impressive achievement given the
extensive complex requirements and activities that were necessary for
implementation.

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o We disagree that the draft report did not offer actionable
recommendations to improve the UI system nor recognize the
constraints that were put on the system during the pandemic. In the
draft report, we acknowledged the states’ administrative funding
shortfalls exacerbated by the pandemic and the unprecedented
increase in UI claims:

The pandemic exacerbated the states’ previous
administrative funding shortfalls and had a profound
impact on the UI system, presenting states with
unprecedented challenges. According to ETA officials,
these challenges included managing an
unprecedented surge in claims volume, adapting to
remote work environments, and implementing new
temporary pandemic UI programs, including the three
largest programs: Federal Pandemic Unemployment
Compensation, Pandemic Unemployment Assistance,
and Pandemic Emergency Unemployment
Compensation. The largest increase in UI claims
occurred between quarters ending March 2020 and
June 2020, when initial UI claims increased from
approximately 1.8 million to almost 5.3 million (199
percent) for the 6 states.

In addition, we acknowledge ETA’s and states’ efforts to disburse
$888 billion in pandemic UI benefits under these challenging
circumstances; however, the OIG estimated that at least
$191 billion (22 percent) could have been paid improperly, with a
significant portion attributable to fraud. With acknowledgement of
these extenuating circumstances, our recommendations for
performance standards and policy were forward-looking and
actionable based on lessons learned from the unprecedented
pandemic.

 ETA’s second concern was about the validity and soundness of the
analysis. The agency stated there were numerous factual inaccuracies
throughout the report that created a false impression about the UI
program, noted as particularly problematic, considering the realities facing
states and ETA during the pandemic. ETA summarized this concern as
follows.

ETA stated the draft report failed to recognize the distinct roles of the
Department and Congress in supporting the UI program. ETA noted the
report included the fact that administrative activities are supposed to be

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fully supported with federal funds. However, ETA noted, it was aware
states were using their own state funding. ETA also stated the draft report
implied ETA failed to take action and did not acknowledge the Department
has asserted that funding provided by Congress has been insufficient to
support UI program administration.

o We disagree that the report failed to recognize roles. We included
in the draft report ETA’s assertion that federal funds had been
historically insufficient to support states’ administrative activities.
See draft report section titled, Administrative Grant Funding for
States.

According to ETA officials, prior to the pandemic,
federal funds had been historically insufficient to
support states’ administrative activities. Although
administrative activities are supposed to be fully
supported with federal funds, ETA officials were
aware states were using their own funding to support
UI program administration. From FY 2017 to FY 2019,
according to the National Association of State
Workforce Agencies’ FY 2019 State Supplemental
Survey Report, approximately 52 SWAs used state
funds ranging from $365.6 million to $424.4 million to
supplement federal grants for UI administrative cost.

ETA stated the draft report failed to adequately recognize the foundations
of a program operated through a federal-state partnership and added little
value to program performance during the pandemic by evaluating states
based on pre-pandemic performance standards.

o We disagree with ETA’s assertion. We did not evaluate the
performance of the temporary programs based on regular UI
performance standards. In the draft report, we stated we used
ETA’s first payment promptness standard in the analysis to provide
context for the need to measure performance during emergencies.

ETA stated the draft report noted that while Employment and Training
Order No. 01-21 addresses monitoring of PUA, PEUC, and FPUC, ETA
did not issue guidance with respect to monitoring states’ administration of
other CARES Act provisions that were identified in a footnote to the draft
report. ETA stated including this statement within the scope of the draft
report was inappropriate, as monitoring these additional provisions was
not part of the auditors’ scope or questions, and the OIG has conducted
separate audits on each of these other CARES Act provisions. Further,

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ETA stated most of these other pandemic-related provisions provided
federal reimbursements of payments under previously existing programs
and did not involve establishing new programs to administer.

o We acknowledge the additional four CARES Act provisions were
not part of our scope or questions. Therefore, we have removed the
following statement from the final report:

In addition, Employment and Training Order 1-21 was
limited to monitoring Pandemic Unemployment
Assistance, Pandemic Emergency Unemployment
Compensation, and Federal Pandemic
Unemployment Compensation. ETA did not issue
guidance for its regional offices to monitor states’
administration of the remaining four CARES Act UI
programs.

ETA stated the draft report attempted to answer a question about state
staffing that supported implementation of the temporary pandemic-related
unemployment compensation programs but ignores the hiring flexibility
afforded by Congress, allowing states to temporarily suspend the merit
staffing requirements set forth in the Social Security Act27–a major policy
change. This action allowed states to onboard “temporary staff, rehiring of
retirees or former employees on a non-competitive basis, and other
temporary actions to quickly process applications and claims.” The agency
stated the premise of the draft report was whether ETA ensured states’
staffing supported implementation of the temporary pandemic-related
unemployment compensation programs but offers no assessment of this
major policy change in the area of staffing.

o We disagree with ETA’s assertion. In the draft report, we discussed
CARES Act Section 2106, which authorized the temporary, limited
hiring flexibilities and other temporary actions to process UI claims
quickly. In doing so, we acknowledged ETA obtained Office of
Management and Budget approval to suspend BAM as part of the
other temporary actions authorized under Section 2106.

While ETA’s responses lacked a clear plan of action to fully address the
recommendations, the OIG looks forward to working with ETA to ensure the
intent of each recommendation is addressed. ETA’s response is included in its
entirety in Appendix B.

27 Section 303(a)(1), SSA (42 U.S.C. § 503(aa)(1))

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We appreciate the cooperation and courtesies that ETA extended us during this
audit.

Juan A. Lasanta Camacho
GenTech Director
GenTech Associates, Inc.
Zionsville, IN
November 22, 2024

Juan A. Lasanta Camacho

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EXHIBIT: DETAILS ON THE 6 STATES’ PERFORMANCE FOR
ETA’S 87 PERCENT FIRST PAYMENT PROMPTNESS STANDARD
Arizona
For quarters ending March 2020 through June 2021, Arizona staffing levels
increased from 238 to 1,141 full-time equivalents (FTE). Staffing levels
decreased to 1,049 FTEs in the quarter ending September 2021. Despite overall
increased staffing levels, for 6 quarters ending from June 2020 through
September 2021, Arizona was only able to pay 80 percent of initial UI claims
within 21 days, 7 percent less than ETA’s first payment promptness standard.

Also, for quarters ending June through December 2020, Arizona’s percentage of
initial UI claims paid within 21 days ranged from 57 to 84 percent. While Arizona
paid 95 percent of initial UI claims within 21 days for the quarter ending
March 2021, the state again fell below ETA’s standard from quarters ending
June through September 2021, with percentages ranging from 74 to 81 percent
(see Figure 4).

Figure 4: Arizona Staffing Levels and Initial UI Claim Payments Compared
to ETA’s First Payment Promptness Standard, Quarters Ending
March 2020–September 2021

Source: Analysis using staffing data from the 6 states and ETA - Benefits: Timeliness and
Quality Reports / All First Payment Timeliness

92%
81%
57%
84%
95%
81%
74%
0%
20%
40%
60%
80%
100%
-
200
400
600
800
1,000
1,200
JAN-MAR
2020
APR-JUN
2020
JUL-SEP
2020
OCT-DEC
2020
JAN-MAR
2021
APR-JUN
2021
JUL-SEP
2021
Percentage of Claims Paid
Number of Staff
Number of Staff
Quarterly Percentage of Initial Claims Paid within 21 Days
ETA's First Payment Promptness Standard (87 Percent Paid within 21 Days)

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Massachusetts
For quarters ending March through June 2020, Massachusetts staffing levels
increased from 910 to 2,981 FTEs. Staffing levels decreased to 1,218 FTEs from
quarters ending September 2020 through September 2021. Despite overall
increased staffing levels, for the 6 quarters ending from June 2020 through
September 2021, Massachusetts was only able to pay 78 percent of initial UI
claims within 21 days, 9 percent less than ETA’s first payment promptness
standard. For quarters ending June 2020 through September 2021,
Massachusetts’ percentage of initial UI benefits paid within 21 days continued to
decrease from 86 to 62 percent, generally trending downward (see Figure 5).

Figure 5: Massachusetts Staffing Levels and Initial UI Claims Payments
Compared to ETA’s First Payment Standard, Quarters Ending
March 2020–September 2021

Source: Analysis using staffing data from the 6 states and ETA - Benefits: Timeliness and
Quality Reports / All First Payment Timeliness

92%
86%
74%
71%
62%
65%
64%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
JAN-MAR
2020
APR-JUN
2020
JUL-SEP
2020
OCT-DEC
2020
JAN-MAR
2021
APR-JUN
2021
JUL-SEP
2021
Percentage of Claims Paid
Number of Staff
Number of Staff
Quarterly Percentage of Initial Claims Paid within 21 Days
ETA's First Payment Promptness Standard (87 Percent Paid within 21 Days)

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New York
For quarters ending March through September 2020, New York staffing levels
increased from 1,118 to 5,702 FTEs. Staffing levels decreased to 2,944 FTEs
from quarters ending December 2020 through September 2021. Despite overall
increased staffing levels, for the 6 quarters ending June 2020 through
September 2021, New York was only able to pay 65 percent of initial UI benefits
within 21 days, 22 percent less than ETA’s first payment promptness standard.
For quarters ending June 2020 through September 2021, New York’s percentage
of initial UI claims paid within 21 days ranged from 41 to 82 percent
(see Figure 6).

Figure 6: New York Staffing Levels and Initial UI Claims Payments
Compared to ETA’s First Payment Promptness Standard, Quarters Ending
March 2020–September 2021

Source: Analysis using staffing data from the 6 states and ETA - Benefits: Timeliness and
Quality Reports / All First Payment Timeliness

98%
59%
41%
54%
74%
82%
77%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-
1,000
2,000
3,000
4,000
5,000
6,000
JAN-MAR
2020
APR-JUN
2020
JUL-SEP
2020
OCT-DEC
2020
JAN-MAR
2021
APR-JUN
2021
JUL-SEP
2021
Percentage of Claims Paid
Number of Staff
Number of Staff
Quarterly Percentage of Initial Claims Paid within 21 Days
ETA's First Payment Promptness Standard (87 Percent Paid within 21 Days)

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North Carolina
For quarters ending March through June 2020, North Carolina staffing levels
increased from 2,385 to 2,475 FTEs. Staffing levels subsequently decreased to
844 FTEs for the 5 quarters from quarters ending September 2020 through
September 2021. Despite North Carolina responding that its staffing levels were
sufficient, the SWA was only able to pay 76 percent of initial UI claims within
21 days, 11 percent less than ETA’s first payment promptness standard. For
quarters ending June 2020 through September 2021, North Carolina’s
percentage of initial UI claims paid within 21 days ranged from 63 to 80 percent
(see Figure 7).

Figure 7: North Carolina Staffing Levels and Initial UI Claims Payments
Compared to ETA’s First Payment Promptness Standard, Quarters Ending
March 2020–September 2021

Source: Analysis using staffing data from the 6 states and ETA - Benefits: Timeliness and
Quality Reports / All First Payment Timeliness

86%
78%
63%
74%
70%
80%
80%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-
500
1,000
1,500
2,000
2,500
3,000
JAN-MAR
2020
APR-JUN
2020
JUL-SEP
2020
OCT-DEC
2020
JAN-MAR
2021
APR-JUN
2021
JUL-SEP
2021
Percentage of Claims Paid
Number of Staff
Number of Staff
Quarterly Percentage of Initial Claims Paid within 21 Days
ETA's First Payment Promptness Standard (87 Percent Paid within 21 Days)

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Tennessee
For quarters ending March 2020 through March 2021, Tennessee staffing levels
increased from 350 to 930 FTEs. Staffing levels decreased to 922 FTEs for the
quarter ending June 2021 and increased to 932 FTEs for the quarter ending
September 2021. Despite overall increased staffing levels, for the 6 quarters
ending June 2020 through September 2021, Tennessee was only able to pay
78 percent of initial UI claims within 21 days, 9 percent less ETA’s first payment
promptness standard. For the quarter ending June 2020, the state’s percentage
of initial UI claims paid within 21 days was 88 percent. For quarters ending
September 2020 through September 2021, Tennessee’s percentage of initial UI
claims paid within 21 days ranged from 42 to 67 percent (see Figure 8).

Figure 8: Tennessee Staffing Levels and Initial UI Claims Payments
Compared to ETA’s First Payment Promptness Standard, Quarters Ending
March 2020–September 2021

Source: Analysis using staffing data from the 6 6tates and ETA - Benefits: Timeliness and
Quality Reports / All First Payment Timeliness

98%
88%
42%
53%
52%
67%
58%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
-
100
200
300
400
500
600
700
800
900
1,000
JAN-MAR
2020
APR-JUN
2020
JUL-SEP
2020
OCT-DEC
2020
JAN-MAR
2021
APR-JUN
2021
JUL-SEP
2021
Percentage of Claims Paid
Number of Staff
Staffing Levels
Percentage Claims Paid Within 21 Days
ETA UI Performance Core Measure - First Payment Promptness Standard

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Rhode Island
For the quarters ending March 2020 through September 2021, Rhode Island
staffing levels decreased from 239 to 153 FTEs. However, the state paid
95 percent of initial UI claims within 21 days, which exceeded ETA’s 87 percent
first payment promptness standard. For the 5 quarters ending from
June 2020 through June 2021, Rhode Island’s percentage of initial UI claims paid
within 21 days ranged from 91 to 97 percent. For the quarter ending
September 2021, the state’s percentage of initial UI claims paid within 21 days
was 85 percent, which was the only quarter that Rhode Island fell below the
standard (see Figure 9).

Figure 9: Rhode Island Staffing Levels and Initial UI Claims Payments
Compared to ETA’s First Payment Promptness Standard, Quarters Ending
March 2020–September 2021

Source: Analysis using staffing data from the 6 states and ETA - Benefits: Timeliness and
Quality Reports / All First Payment Timeliness

99%
95%
91%
95%
97%
96%
85%
0%
20%
40%
60%
80%
100%
0
50
100
150
200
250
300
JAN-MAR
2020
APR-JUN
2020
JUL-SEP
2020
OCT-DEC
2020
JAN-MAR
2021
APR-JUN
2021
JUL-SEP
2021
Percentage of Claims Paid
Number of Staff
Number of Staff
Quarterly Percentage of Initial Claims Paid within 21 Days
ETA's First Payment Promptness Standard (87 Percent Paid within 21 Days)

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APPENDIX A: SCOPE AND METHODOLOGY
Scope
The audit covered ETA’s oversight of states’ staffing to support the
implementation of UI programs under the CARES Act and its amendments from
March 27, 2020, to September 6, 2021. To perform this audit, we reviewed
states’ staffing levels and UI claim workloads for CARES Act UI programs from
March 27, 2020, to September 6, 2021. We performed an in-depth analysis for
six states: Arizona, Massachusetts, New York, North Carolina, Rhode Island, and
Tennessee. We also surveyed the remaining 47 SWAs to gain an understanding
of staffing level capabilities during the COVID-19 pandemic.
Methodology
We conducted this performance audit in accordance with generally accepted
government auditing standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit objective.
We believe that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objective.

To accomplish our objective, we obtained an understanding of ETA’s process for
monitoring the sufficiency of SWAs’ staffing levels as related to the
implementation of CARES Act UI programs. We also reviewed federal laws and
regulations, reviewed ETA’s policies and procedures, interviewed key
management and support personnel at ETA, and analyzed and identified key
control processes for monitoring and reporting staffing sufficiency.

The OIG selected Arizona, Massachusetts, New York, North Carolina,
Rhode Island, and Tennessee for review based on a risk assessment that
considered: OIG investigative concerns; the quantity of additional staffing funded
by the CARES Act stratified into the highest, middle, and lowest ranges; the
extent to which the states had not been selected in previous OIG audits; and
whether states used a combination of new FTEs, contractors, and staffing
agencies.
Reliability Assessment
We did not rely on computer-processed data to conduct this audit. Therefore, we
did not assess its reliability.

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Internal Controls
In planning and performing our audit, we considered ETA’s internal controls
relevant to our audit objective by obtaining an understanding of those controls
and assessing control risks to achieve our objective. The objective of our audit
was not to provide assurance of internal controls; therefore, we did not express
an opinion on ETA’s internal controls. Our consideration of internal controls for
overseeing the administrative grants provided to the states by ETA would not
necessarily disclose all matters that might be significant deficiencies. Because of
the inherent limitations on internal controls, misstatements, or noncompliance
may occur and not be detected.
Criteria
 Coronavirus Aid, Relief, and Economic Security (CARES) Act,
Public Law 116-136 (March 27, 2020)
 Consolidated Appropriations Act, 2021, including Division N, Title II,
Subtitle A, the Continued Assistance for Unemployed Workers Act
of 2020 (December 27, 2020)
 American Rescue Plan Act of 2021, including Title IX, Subtitle A, Crisis
Support for Unemployed Workers, Public Law 117-2 (March 11, 2021)
 GAO-14-704G, Standards for Internal Control in the Federal Government
(September 2014)
 ETA Core Monitoring Guide (August 2018)
 Office of Management and Budget Memorandum 20-21, Implementation
Guidance for Supplemental Funding Provided in Response to the
Coronavirus Disease 2019 (April 10, 2020)
 Employment and Training Order No. 1-21, National and Regional
Office Responsibilities in Managing, Monitoring, and Overseeing State
Grants for the Unemployment Insurance (UI) Programs Created by the
Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020
(October 2, 2020)
Prior Relevant Coverage
During the last 4 years, the OIG has issued 6 reports of significant relevance to
the subject of this report, as follows:

1. Advisory Report, CARES Act: Initial Areas of Concern Regarding
Implementation of Unemployment Insurance Provisions,
Report No. 19-20-001-03-15 (April 21, 2020), available at:
https://www.oig.dol.gov/public/reports/oa/2020/19-20-001-03-315.pdf;

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2. COVID-19: States Struggled to Implement Cares Act Unemployment
Insurance Programs, Report No. 19-21-004-03-315 (May 28, 2021),
available at:
https://www.oig.dol.gov/public/reports/oa/2021/19-21-004-03-315.pdf;

3. Alert Memorandum: The Employment and Training Administration Needs
to Ensure State Workforce Agencies Report Activities Related to CARES
Act Unemployment Insurance Programs,
Report No. 19-22-004-03-315 (August 2, 2022), available at:
https://www.oig.dol.gov/public/reports/oa/2022/19-22-004-03-315.pdf;

4. Alert Memorandum: Potentially Fraudulent Unemployment Insurance
Payments in High-Risk Areas Increased to $45.6 Billion,
Report No. 19-22-005-03-315 (September 21, 2022), available at:
https:///www.oig.dol.gov/public/reports/oa/2022/19-22-005-03-315.pdf;

5. COVID-19: ETA and States Did Not Protect Pandemic-Related UI Funds
from Improper Payments Including Fraud or from Payment Delays,
Report No. 19-22-006-03-315 (September 30, 2022),
https://www.oig.dol.gov/public/reports/oa/2022/19-22-006-03-315.pdf; and

6. COVID-19: ETA Needs a Plan to Reconcile and Return to the
U.S. Treasury Nearly $5 Billion Unused by States for a Temporary
Unemployment Insurance Program,
Report No. 19-23-015-03-315 (September 28, 2023), available at:
https://www.oig.dol.gov/public/reports/oa/2023/19-23-015-03-315.pdf.

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APPENDIX B: ETA’S RESPONSE TO THE REPORT
ETA’s response to our report follows.

U.S. Department of Labor
Assistant Secretary for
Employment and Training
Washington, D.C. 20210
MEMORANDUM FOR:
CAROLYN R. HANTZ
Assistant Inspector General for Audit
FROM:
JOSÉ JAVIER RODRÍGUEZ
SUBJECT:
Response to Draft Report – COVID-19: ETA Could Have
Done More to Ensure States Had Sufficient Staffing to
Deliver Timely Pandemic Unemployment Benefits, Report
No. 19-XX-XXX-03-315
The U.S. Department of Labor's (Department) Employment and Training Administration (ETA)
appreciates the opportunity to respond to the above-referenced draft report. Below are the
Department’s observations on the draft report, followed by responses to the draft report’s
recommendations.
Overall, ETA believes that this report does not offer actionable items to improve the
Unemployment Insurance (UI) system, nor recognizes the constraints that were put on the system
during that time.
Given the unprecedented spike in UI claims by 3,000 percent in a relatively short time period
and the creation of several new and temporary pandemic-related unemployment compensation
(UC) programs set forth in the Coronavirus Aid, Relief, and Economic Security (CARES) Act in
March 2020, any level of staffing would have been insufficient to handle this significant
workload. Simply adjusting staffing levels alone would not have been enough to address the
unprecedented increase in workload.
As stated in ETA’s responses to similar reports from the oversight community, but not fully
acknowledged in this draft report, states were dealing with the largest increase in UI claims
volume in the history of the program, while also implementing and administering new
temporary, pandemic-related unemployment UC programs. The draft report recognizes that, on
April 10, 2020, the Office of Management and Budget (OMB) issued OMB Memorandum 20-21,
requiring agencies to prioritize expediency, which OMB defined as the rapid issuance of awards
to meet crucial needs. It is important to reiterate the states’ remarkable accomplishments, despite
challenging circumstances. States helped ensure that nearly $880 billion of unemployment
benefits were provided to over 53 million workers. Further, states’ ability to provide benefit

2
payments within one to two months on average for new, temporary UI programs 0F1 was an
impressive achievement given the extensive, complex requirements and activities that were
necessary for implementation. For comparison purposes, a swift rollout of a new government
benefit program – including the policy, product, and operations – would be 30 to 48 months. 1F2
States entered the pandemic after experiencing the lowest level of administrative funding in 50
years, impacting resources and staffing levels. Simply put, ongoing underinvestment in the UI
program put states at an incredible disadvantage in responding to the pandemic and its
subsequent workload impacts.

ETA was aware of the challenges for states in staffing up to meet the unexpected workloads, as
well as the impact of delayed benefits for families experiencing COVID-19 job loss and sought
to support states with the available tools. ETA provided technical assistance and flexibility,
where permitted by statute, to address the unprecedented conditions of the pandemic. For
example, the decision to suspend BAM during the summer of 2020 allowed states to put
experienced staff into claims processing. At this time, states were desperately short of
experienced staff. The forces that drove the declines in timeliness during this period defied easy
solutions or standard approaches.

As described below, ETA did not get any additional resources to assist states with these unique
challenges. As soon as the American Rescue Plan Act (ARPA) provided such funds in March
2021, ETA prioritized assistance to states to work through backlogs, especially through the Tiger
Team initiative, alongside combatting fraud and promoting equitable access. Access to such
resources would have enabled ETA to do more earlier in the CARES Act program period.

In recognition of the UI system’s challenges both before and during the pandemic, the U.S.
Government Accountability Office (GAO) placed the UI system on its High-Risk List 2F3 in June
2022,3F4 recommending that the Department develop and implement a plan to transform the UI
system. In response to GAO’s report, the Department published a plan to build a more resilient
UI program (i.e., UI Transformation Plan). 4F5 As the first action area identified, the plan
highlights the importance of adequately funding UI program administration and includes
proposed legislative reforms.

1 Office of Inspector General (OIG) Report Number 19-21-004-03-315, COVID-19: States Struggled to Implement
CARES Act Unemployment Insurance Programs, issued May 28, 2021,
https://www.oig.dol.gov/public/reports/oa/viewpdf.php?r=19-21-004-03-315&y=2021. The OIG’s final report notes
the average number of days states took on pages 3 and 4. ETA’s response to the OIG’s draft report (Appendix B)
describes the impressive achievement.
2 OIG Report Number 19-22-006-03-315, COVID-19: ETA and States Did Not Protect Pandemic-Related UI Funds
from Improper Payments Including Fraud or From Payment Delays, issued September 30, 2022,
https://www.oig.dol.gov/public/reports/oa/2022/19-22-006-03-315.pdf.
3 GAO High Risk List: https://www.gao.gov/high-risk-list.
4 GAO-22-105162, Unemployment Insurance: Transformation Needed to Address Program Design, Infrastructure,
and Integrity Risks, published June 2022, https://www.gao.gov/assets/gao-22-105162.pdf.
5 UI Transformation Plan, Building Resilience: A plan for transforming unemployment insurance, issued April
2024, https://oui.doleta.gov/unemploy/transformation_plan.asp.

3
Although not included in the draft report, ETA believes it important to note the UI program’s
forward momentum supported through recent one-time investments under ARPA. 5F6 The
Department invested over $780 million in ARPA-funded grants to states to prevent and detect
fraud, promote equitable access to UI benefits, and improve the timely payment of benefits.
States, with the support of the Department’s Tiger Team initiative, 6F7 have leveraged these grants
to make critical system changes, improve processes, and, where appropriate, hire and train new
employees.7F8 However, this one-time investment is not an adequate replacement for sustainable,
annual funding. Without legislative support and funding from Congress, the Department and
states will continue to be hamstrung with limited resources and be unable to truly build a resilient
UI program.

Based on review of the draft report, ETA has strong concerns about the validity and soundness of
the analysis. Throughout the draft report, there are numerous factual inaccuracies that create
false impressions about the UI program, which is particularly problematic, considering the
realities facing states and ETA during the pandemic. Below is a summary of these concerns.

The draft report fails to recognize the distinct roles of the Department and Congress in
supporting the UI program. The draft report indicates that “administrative activities are
supposed to be fully supported with federal funds,” but ETA was aware that states were
using their own state funding. 8F9 The draft report implies ETA failed to take action and
does not acknowledge that the Department has asserted that funding levels provided by
Congress have been insufficient to support UI program administration. The chart below
reflects the declining impact of state UI administrative funding over the past 30 years.

6 Congress allocated $2.0 billion to the Department with enactment of ARPA in March 2021. This amount was later
reduced to $1.0 billion with enactment of the Fiscal Responsibility Act in June 2023.
7 Using ARPA funds, the Department provided cross-functional teams of experts to partner with states and
recommend state-specific solutions that include activities such as workflow adjustments, process improvements,
technology updates, and communication revisions. Additional funds (included in the $780 million figure) were
provided to states to implement these recommendations. See Unemployment Insurance Program Letter (UIPL) No.
02-22, Grant Opportunity to Support States Following a Consultative Assessment for Fraud Detection and
Prevention, Promoting Equitable Access, and Ensuring the Timely Payment of Benefits, including Backlog
Reduction, for all Unemployment Compensation (UC) Programs, issued November 2, 2021,
https://www.dol.gov/agencies/eta/advisories/unemployment-insurance-program-letter-no-02-22.
8 The Department published a report detailing the use of this ARPA investment and highlighting specific state
projects included under these grants. See Insights and Successes: American Rescue Plan Act Investments in
Unemployment Insurance Modernization, published November 2023, https://www.dol.gov/agencies/eta/ui-
modernization/arpa-success-stories.
9 See discussion “Administrative Grant Funding for States” starting on page 9 of the draft report.

4
The draft report fails to adequately recognize the foundations of a program operated
through a federal-state partnership. The draft report’s analysis appears to advocate for
the Department to take a more aggressive stance by establishing a timeliness standard for
the temporary pandemic-related UC programs 9F10 and requiring states to perform staffing-
related corrective actions. 10F11
The Department disagrees with the characterization of these actions as available or
realistic solutions. Simply setting a performance measure is not an effective tool for
states to then achieve that measure during a crisis. The draft report quotes ETA as saying
that most states had challenges with timeliness due to the high claim volume and then
dismisses this statement by comparing states’ timeliness performance from a pre-
pandemic period of historically low claims (see Table 2 in the draft report). This
comparison fails to acknowledge the administrative lift required of ETA and the states in
the midst of a global pandemic. Evaluating states in comparison with pre-pandemic
performance standards adds little value to the discussion of performance during the
pandemic. States struggled with timeliness because of a confluence of factors resulting
from an unprecedented increase in workload, simultaneously implementing several new
programs, and ramping up staffing and information technology (IT) systems, while also
transitioning to largely remote operations – it is incorrect to report that states struggled
with timeliness because there were no measures established for these newly created
pandemic-related programs which had no precedence.
Table 1 of the draft report provides a summary of state grant obligations, and the
percentage used for staffing. This table and the surrounding discussion reflect the
variation in state administrative practices but does nothing to inform the discussion on
how such funds were used or could have been used effectively in lieu of additional
10 See discussion “ETA Did Not Establish a Benefit Payment Timeliness Standard for CARES Act UI Programs”
starting on page 14 of the draft report.
11 See discussion “ETA Did Not Recommend Corrective Actions to Address States’ Staffing Issues” starting on
page 17 of the draft report.

5
staffing (e.g., through updating/implementing IT systems, processes, and
communications). Further, the auditors cross-reference ETA’s response to a prior OIG
audit about challenges in providing timely benefit payments. 11F12 As of July 29, 2021, the
OIG resolved all four recommendations from this prior audit report. To date, two of
these four recommendations have been closed. This new draft report provides no
additional actionable insight on these previous findings to help improve the UI program
beyond reporting on information already covered in prior OIG audit reports.

With respect to corrective actions, requiring states to take corrective action to address
staffing levels is another example of the draft report ignoring ETA’s repeated assertions
regarding insufficient funding for UI program administration.

Given the appropriated level of funding from Congress in recent years, ETA has only
been able to provide states with about 50 percent of funding for earned above-base
funding based on states reported workload. It would have been unreasonable for ETA to
require states to hire more staff as a corrective action when ETA itself was not provided
with the means to fully fund states’ operations of the program. Also, as stated above,
without legislative support and funding from Congress, the Department and the states
will continue to be hamstrung with limited resources that restrain the ability to truly build
a resilient UI program.

Additionally, the draft report did not include the basis for the statement regarding
administrative grant periods of performance, as described on page 9 of the draft report. 12F13
As such, ETA is unable to validate the information.

The draft report fails to adequately acknowledge the reality of balancing the
establishment of new programs and monitoring compliance with such programs. The
draft report asserts that ETA did not adequately perform monitoring activities for
temporary, pandemic-related UC programs. 13F14 However, the analysis fails to consider
that the programs must first be operational before they can be monitored. In 2020, the UI
system across the country was intensely focused on implementing and administering
programs.

The CARES Act was enacted on March 27, 2020, and ETA published its initial guidance
on April 2, 2020. 14F15 Over the next eight days, ETA published additional guidance specific
to implementing each of the three key programs: Pandemic Unemployment Assistance

12 See footnote 18 on page 14 of the draft report.
13 Page 9 of the draft report includes: “SWAs received $3.9 billion in Fiscal Year (FY) 2020 and FY 2021 to fund
administrative costs, including but not limited to staffing. The administrative grants were available for all SWAs
from April 1, 2020, through June 30, 2022, except the California SWA, for which the grant was available from April
1, 2020, through December 31, 2022.”
14 See discussion “ETA Did Not Recognize the Need for Urgency in Issuing Monitoring Guidance Specifically for
CARES Act UI Programs” starting on page 16 of the draft report.
15 UIPL No. 14-20, Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 - Summary of Key
Unemployment Insurance (UI) Provisions and Guidance Regarding Temporary Emergency State Staffing
Flexibility, issued April 2, 2020, https://www.dol.gov/agencies/eta/advisories/unemployment-insurance-program-
letter-no-14-20.

6
(PUA),15F16 Pandemic Emergency Unemployment Compensation (PEUC), 16F17 and Federal
Pandemic Unemployment Compensation (FPUC). 17F18 As states implemented and began
administering the new programs, new and novel questions were raised and ETA
continued to be responsive in updating its guidance. Additional and significant changes
to the programs occurred in December 2020, with enactment of the Continued Assistance
for Unemployed Workers Act of 2020 (Continued Assistance Act) and in March 2021,
with the enactment of ARPA. These additional enactments required the creation of
additional updated guidance, changes to state systems and processes, and resources
across ETA and the states to implement.

The draft report notes that ETA issued guidance for monitoring states’ staffing support in
October 2020 and gives no appreciation to the fact that ETA engaged in extensive
oversight activities in the early months of the pandemic gathering information from states
and identifying areas where specific states improperly implemented elements of the new
programs. The draft report notes that if ETA considered monitoring activities performed
before this time to be sufficient, later guidance would not be necessary. This dismissive
statement fails to acknowledge the dynamic situation that ETA and the states were
operating in at this time, the many issues ETA needed to address in a short time and
assumes that publishing guidance means that prior activities were generally insufficient.
Between March and October 2020, ETA issued 25 guidance documents and hosted 16
webinars specific to states’ administration of the temporary pandemic-related UC
programs. ETA’s regional offices also provided significant technical assistance and
support as states established these new programs. All of these efforts sought to ensure
that states were supported in establishing and operating these new temporary programs.

The draft report also notes that while Employment and Training Order (ETO) No. 01-21
addresses monitoring of PUA, PEUC, and FPUC, ETA did not issue guidance with
respect to monitoring states’ administration of other CARES Act provisions that were
identified in a footnote to the draft report. 18F19 Including this statement within the scope of
the draft report is inappropriate, as monitoring these additional provisions was not part of
the auditors’ scope or questions, and the OIG has conducted separate audits on each of
these other CARES Act provisions. Further, most of these other pandemic-related
provisions provided federal reimbursements of payments under previously existing
programs and did not involve establishing new programs to administer.

It is important and relevant to note that much like the states, ETA entered the pandemic
with very low staffing levels and ETA was not provided additional funding to support

16 UIPL No. 16-20, Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 – Pandemic
Unemployment Assistance (PUA) Program Operating, Financial, and Reporting Instructions, issued April 5, 2020,
https://www.dol.gov/agencies/eta/advisories/unemployment-insurance-program-letter-no-16-20.
17 UIPL No. 17-20, Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 – Pandemic Emergency
Unemployment Compensation (PEUC) Program Operating, Financial, and Reporting Instructions, issued
April 10, 2020, https://www.dol.gov/agencies/eta/advisories/unemployment-insurance-program-letter-no-17-20.
18 UIPL No. 15-20, Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 – Federal Pandemic
Unemployment Compensation (FPUC) Program Operating, Financial, and Reporting Instructions, issued
April 4, 2020, https://www.dol.gov/agencies/eta/advisories/unemployment-insurance-program-letter-no-15-20.
19 See footnote 20 on page 16 of the draft report.

7
implementation or monitoring of the pandemic programs until enactment of ARPA in
March 2021. The creation of the guidance, the delivery of technical assistance to states,
and the initial monitoring and oversight related to these new pandemic UC programs
were all accomplished by the same level of staffing that ETA had prior to the pandemic.

Providing a one-quarter suspension of the Benefit Accuracy Measurement (BAM)
program was necessary for responding to the demands of the workload. The draft
report incorrectly asserts that ETA’s temporary suspension of the BAM program
impaired ETA’s ability to assess the integrity of the new UI programs. The narrative in
the draft report demonstrates an unfamiliarity with the purpose of the BAM program. 19F20
BAM is a quality control program that reviews a sample ranging from 360 regular UI
cases per year in the 10 states with the smallest UI workloads to 480 regular UI cases in
the remainder of the states each year after they have been processed to validate whether
the state took correct action in line with state law and policy. BAM only conducts
crossmatches or investigates potential fraud for this small sample of already-processed
claims. The results of these case samples are used to create an estimated improper
payment rate for the regular UI program. In addition, the BAM program does not sample
claims from episodic programs, such as the temporary pandemic-related UC programs. 20F21

The draft report claims that when ETA decided to suspend BAM, its emergency response
prioritized processing UI claims rather than assessing UI program integrity and that ETA
did not develop a sufficient business case. 21F22 ETA’s operational decision to suspend
BAM from April to June 2020 – implemented after consulting with and receiving OMB’s
support – was one of the few flexibilities available to help states with the huge influx of
claims and was frankly a matter of commonsense. 22F23 BAM staff are highly trained UI
program staff that could most reasonably transition to supporting claims intake and
whose expertise was urgently needed – rather than having such staff continue, during this
critical three-month period at the start of the pandemic, to sample and conduct
investigations of a limited number of claims after they had already been processed.
During this crisis, it was of paramount importance to get benefits out as quickly and
20 See discussion “ETA Allowed States to Reassign BAM Staff to Claims Processing, Impairing ETA’s Ability to
Assess Integrity of New UI Programs with Respect to Improper Payments, Including Fraud” starting on page 20 of
the draft report.
21 ETA later elected to apply the BAM estimates to program outlays for the PEUC and FPUC program. However,
due to the structural differences between the regular UI program and the PUA program, BAM estimates could not be
applied to PUA. ETA developed a separate methodology to estimate PUA improper payments. See the OIG Report
Number 19-20-008-03-315, COVID-19: More Can Be Done to Mitigate Risk to Unemployment Compensation
under the CARES Act, issued August 7, 2020, https://www.oig.dol.gov/public/reports/oa/2020/19-20-008-03-
315.pdf and see PUA Improper Payment Rate Report at:
https://oui.doleta.gov/unemploy/pdf/Pandemic_Unemployment_Assistance_Improper_Payment_Rate_Report.pdf.
22 See discussion “ETA’s Emergency Response Prioritized Processing Claims rather than Assessing UI Program
Integrity” starting on page 21 of the draft report.
23 ETA was fully transparent in this decision with the publication of UIPL No. 25-20, Benefit Accuracy
Measurement (BAM) Program Operations in Response to the Coronavirus Disease of 2019 (COVID-19) Pandemic,
issued June 15, 2020, https://www.dol.gov/agencies/eta/advisories/unemployment-insurance-program-letter-no-25-
20. This document was also reviewed by OMB prior to publication. ETA also provided communications to states
twice regarding operational flexibilities, both of which are publicly available at:
https://oui.doleta.gov/unemploy/pdf/pandemicflexibilities2.pdf and
https://oui.doleta.gov/unemploy/pdf/pandemicflexibilities_06122020.pdf.

8
accurately as possible. ETA considers this a meaningful and necessary operational
decision.

Further, the draft report appears to confuse BAM with staff performing integrity controls
and investigations, often referred to as Benefit Payment Control (BPC) in states’
operations. ETA did not suspend BPC activities, and in fact, issued several
communications, including guidance, 23F24 to states advising of the importance to continue
integrity activities.

The draft report attempts to answer a question about state staffing that supported
implementation of the temporary pandemic-related UC programs but ignores a major
flexibility afforded by Congress to support states’ implementation. Congress took the
unprecedented step of allowing states to temporarily suspend the merit staffing
requirement set forth in the Social Security Act 24F25 – a major policy change. This action
allowed states to onboard “temporary staff, rehiring of retirees or former employees on a
non-competitive basis, and other temporary actions to quickly process applications and
claims.”25F26
The premise of this draft report is whether ETA ensured that states’ staffing supported
implementation of the temporary pandemic-related UC programs. However, the draft
report ignores this flexibility afforded by Congress and offers no assessment of this major
policy change in the area of staffing. Instead, this flexibility is mentioned in a passing
footnote that the use of such flexibility is not within the scope of this analysis, with little
to no actional value on the topic of staffing. 26F27

Responses to the Recommendations

Please find below each of the recommendations contained in the draft report, followed by ETA’s
response to each of the recommendations.

Recommendation 1: Develop performance standards for prompt payment of UI benefits
under temporary UI programs using lessons learned from the pandemic.
ETA Response: ETA disagrees with this recommendation. It is extremely challenging to
develop standards for a program that does not exist and for which the Department does not know
its duration or the program’s requirements.

24 UIPL No. 23-20, Program Integrity for the Unemployment Insurance (UI) Program and the UI Programs
Authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 – Federal Pandemic
Unemployment Compensation (FPUC), Pandemic Unemployment Assistance (PUA), and Pandemic Emergency
Unemployment Compensation (PEUC) Programs, issued May 11, 2020,
https://www.dol.gov/agencies/eta/advisories/unemployment-insurance-program-letter-no-23-20.
25 See Section 303(a)(1), SSA (42 U.S.C. § 503( )(1)).
26 See Section 2106 of the CARES Act, as well as further amendments under Section 205 of the Continued
Assistance for Unemployed Workers Act of 2020 and Section 9015 of the American Rescue Plan Act.
27 See footnote 6 on page 9 of the draft report.

9
The Department intends to capture lessons learned from the pandemic experience in the
temporary programs to help inform actions for similar future programs. This approach allows
the Department to be proactive in a more meaningful way, since it cannot speculate on
requirements for any program(s) Congress may authorize and appropriate funding for in the
future. ETA is not in a position to commit to developing performance standards for temporary
programs in the future.
Recommendation 2: Establish policy that requires officials to issue guidance timely for
ETA regional offices to monitor and measure the effectiveness of states’ use of staffing to
support the implementation of temporary UI programs.
ETA Response: ETA disagrees with this recommendation. The premise for this
recommendation is predicated on a lack of understanding of the situation within which states and
ETA were operating during the pandemic. The draft report does not take into account the
complexities of an unprecedented pandemic. It was imperative that ETA first issue guidance and
technical assistance to states on how to implement these new programs before monitoring
guidance for ETA’s Regional Offices was developed. ETA delivered timely monitoring tools
during the pandemic in addition to issuing guidance and providing technical assistance regarding
temporary pandemic-related UC programs.
ETA does not have an alternative approach to address this recommendation and suggests this
recommendation be excluded from the final report.

Recommendation 3: Establish policy that requires states to develop corrective action plans
to address staffing insufficiencies that negatively impact permanent and temporary UI
programs, as identified by regional offices during monitoring reviews.
ETA Response: ETA disagrees with this recommendation. This recommendation is predicated
on a lack of understanding of the UI program and does not account for longstanding factors, such
as the insufficient funding for UI program administration.
As an alternative to this recommendation, ETA notes that it has been seeking legislation to
provide the Secretary of Labor (Secretary) with new enforcement authority. This proposal would
create a new remedy so that instead of withholding a state’s entire administrative grant for failing
to meet the performance measures or achieve minimum technology standards, the Secretary can
require a portion of the state’s administrative grant be used to correct failing performance and/or
have the state participate in required technical assistance activities offered by the Department.
Currently, the Secretary has very limited options to require state UI agencies to take actions to
respond to poor performance and high improper payment rates. This proposal is part of the UI
Integrity legislative package included in the Department’s Fiscal Year 2025 budget submission.

Given that ETA already pursued this matter through the budget process, which can now only be
addressed by Congressional action, ETA requests that this be considered sufficient action to
address and close this recommendation/this recommendation be excluded from the final report.

10
Recommendation 4: Establish policy that requires ETA officials to develop a business case
analysis and supporting justification when considering suspension of any UI program
integrity functions.
ETA Response: ETA disagrees with this recommendation. The premise for this
recommendation is predicated on a lack of understanding of the situation within which the states
and ETA were operating during the pandemic and a complete misunderstanding of the role of
BAM. Allowing states to temporarily suspend the BAM operations for one quarter permitted
states to repurpose BAM staff with a high-level of UI experience to help process the huge claims
volume at the start of the pandemic while new staff could be onboarded and trained. It was one
of the most logical and commonsense actions that could have been taken at the time. Such action
did not impact fraud prevention activities, which are performed by BPC staff outside of a state’s
BAM operations.
Moreover, ETA has already met the essence of this recommendation. ETA issued very clear
guidance that states must continue to use, operate, and maintain the required integrity controls
and the required overpayment recovery activities at all times, including during times of mass
unemployment events, absent specific statutory authorization allowing suspension of such
controls or activities.27F28 Based on the issuance of these UIPLs, ETA requests that this be
considered sufficient action to address and close this recommendation/this recommendation be
excluded from the final report.

28 See page 10, Section 4.b.ii of UIPL No. 11-23, Announcement of Grant Opportunities and National Identity (ID)
Verification Offering under the American Rescue Plan Act (ARPA), issued July 13, 2023,
https://www.dol.gov/agencies/eta/advisories/uipl-11-23. ETA also issued similar guidance early in the pandemic.
See UIPL No. 23-20, Program Integrity for the Unemployment Insurance (UI) Program and the UI Programs
Authorized by the Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020 - Federal Pandemic
Unemployment Compensation (FPUC), Pandemic Unemployment Assistance (PUA), and Pandemic Emergency
Unemployment Compensation (PEUC) Program, issued on May 11, 2020,
https://www.dol.gov/agencies/eta/advisories/unemployment-insurance-program-letter-no-23-
20#:~:text=Purpose.%20To%20remind%20states%20of%20program%20integrity%20functions%20required%20for
, pages 8-10.

REPORT FRAUD, WASTE, OR ABUSE
TO THE DEPARTMENT OF LABOR

Online
https://www.oig.dol.gov/hotline.htm

Telephone
(800) 347-3756 or (202) 693-6999

Fax
(202) 693-7020

Address
Office of Inspector General
U.S. Department of Labor
200 Constitution Avenue NW
Room S-5506
Washington DC 20210

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Audit Report — ETA Could Have Done More to Ensure States Had Sufficient Staffing to Deliver Timely Pandemic Unemployment Benefits

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