Court filing
Colorado State Auditor Report 2056P — UI Benefits Performance Audit (November 2021)
Filed November 15, 2021 in State Audits; one of 3 filings from this case.
Record facts
| Court | Colorado Office of the State Auditor (Kerri L. Hunter, State Auditor) |
|---|---|
| Filed | 2021-11-15 |
Full text
DEPARTMENT OF LABOR AND EMPLOYMENT
NOVEMBER 2021
UNEMPLOYMENT INSURANCE BENEFITS
PUBLIC REPORT
PERFORMANCE AUDIT
THE MISSION OF THE OFFICE OF THE STATE AUDITOR
IS TO IMPROVE GOVERNMENT
FOR THE PEOPLE OF COLORADO
Representative Dafna Michaelson Jenet
Senator Jim Smallwood
Chair
Vice Chair
Representative Rod Bockenfeld
Representative Dylan Roberts
Senator Julie Gonzales
Senator Robert Rodriguez
Representative Colin Larson
Senator Rob Woodward
Kerri L. Hunter
State Auditor
Michelle Colin
Deputy State Auditor
Jenny Page
Audit Managers
Kate Shiroff
Brian Bratton
Auditors
Ethan Greenberg
Riley Staples
AN ELECTRONIC VERSION OF THIS REPORT IS AVAILABLE AT
WWW.COLORADO.GOV/AUDITOR
A BOUND REPORT MAY BE OBTAINED BY CALLING THE
OFFICE OF THE STATE AUDITOR
303.869.2800
PLEASE REFER TO REPORT NUMBER 2056P WHEN REQUESTING THIS REPORT
LEGISLATIVE AUDIT COMMITTEE
OFFICE OF THE STATE AUDITOR
KERRI L. HUNTER, CPA
——
STATE AUDITOR
OFFICE OF THE STATE AUDITOR
1525 SHERMAN STREET
7TH FLOOR
DENVER, COLORADO
80203
303.869.2800
OFFICE
November 15, 2021
Members of the Legislative Audit Committee:
This report contains the results of a performance audit of unemployment
insurance benefits administered by the Department of Labor and
Employment. The audit was conducted pursuant to Section 2-3-103, C.R.S.,
which authorizes the State Auditor to conduct audits of all departments,
institutions, and agencies of state government, and Section 2-7-204(5),
C.R.S., which requires the State Auditor to annually conduct performance
audits of one or more specific programs or services in at least two
departments for purposes of the SMART Government Act. The report
presents our findings, conclusions, and recommendations, and the responses
of the Department of Labor and Employment.
Government Auditing Standards allow for information that is considered
sensitive in nature, such as detailed information related to unemployment
insurance benefits fraud, to be omitted, if the omission is disclosed because
of the potential damage that could be caused by the misuse of this
information. We consider the specific technical details of the Fraudulent
Unemployment Claims finding, and the related recommendation and
responses, to be sensitive in nature and not appropriate for public
disclosure. We have provided the details of this finding, recommendation,
and responses to management and to the Legislative Audit Committee in a
separate, confidential report. The finding with omitted information includes
a disclosure of the omission.
OF THE STATE AUDITOR
CONTENTS
Report Highlights
1
CHAPTER 1
OVERVIEW
3
Colorado’s Unemployment Insurance Program
4
Benefits Eligibility
5
Types of Benefits
6
Colorado’s Response to Pandemic Unemployment
8
Administration
11
Key Department IT Systems
12
Funding
13
Audit Purpose, Scope and Methodology
14
CHAPTER 2
UNEMPLOYMENT INSURANCE BENEFITS FRAUD
17
Fraudulent Unemployment Claims
28
RECOMMENDATION 1
40
Fraud Holds on Claims
43
RECOMMENDATION 2
50
CHAPTER 3
CUSTOMER SERVICE
53
Complaint Management
59
RECOMMENDATION 3
67
REPORT
FOR FURTHER INFORMATION ABOUT THIS REPORT, CONTACT THE OFFICE OF THE STATE AUDITOR
303.869.2800 - WWW.COLORADO.GOV/AUDITOR
HIGHLIGHTS
KEY FINDINGS
During the COVID-19 pandemic, unemployment in Colorado and nationwide
led to an increase in claims for benefits. For example, the Department received
1,100 percent more claims in Calendar Year 2020 than it received in Calendar
Year 2019.
The audit identified $73.1 million in likely or potentially fraudulent benefits
payments between March 1, 2020 and April 30, 2021, for 8,200 claims that each
had one or more attributes indicating fraud, including:
$3.87 million paid on behalf of 1,065 individuals who were deceased.
$5.04 million paid on behalf of 696 individuals who were incarcerated.
$101,630 paid to 18 claimants who did not appear eligible because they were
not of working age.
$18.5 million paid to 2,919 claimants who had suspicious bank account
information associated with their claims.
$45.78 million paid to 3,308 claimants whose claims had multiple indicators of
fraud, such as suspicious email, foreign internet protocol (IP), and/or mailing
addresses.
The Department had no evidence to show that it had resolved 196,066 out of
266,284 (73 percent) claimant requests for assistance with their fraud holds. The
Department took an average of 7 weeks to address issues raised in the 70,134
fraud hold assistance requests that it documented as resolved.
The Department lacks effective complaint management processes to track and
resolve problems that claimants report, resulting in complaints not being
resolved timely or at all. The Department did not track most complaints at the
beginning of the pandemic, and did not begin tracking complaints about
contracted call center staff until February 2021.
BACKGROUND
The
key
purposes
of
unemployment benefits are
to stabilize the economy
during periods of high
unemployment,
help
unemployed
Coloradans
maintain their purchasing
power,
and
support
workers who lose their jobs
[Section 8-70-102, C.R.S.].
The Department processes
claims for unemployment
benefits and pays benefits
to claimants.
In Calendar Year 2020,
about 852,000 Coloradans
received
unemployment
benefits payments totaling
$6.9
billion,
and
in
Calendar Year 2021, about
577,000
had
received
payments
totaling
$4.6
billion as of October 2021.
KEY RECOMMENDATIONS
Improve fraud detection, prevention, and investigation methods.
Investigate each claim that the audit identified as likely or potentially fraudulent, and refer them to prosecution and
recover inappropriate payments, as appropriate.
Implement processes to investigate and address claimants’ requests for assistance with benefits fraud holds in a
timely manner, and document resolutions to all requests for assistance.
Track, investigate, and resolve complaints from customers; analyze aggregate complaint data to identify ongoing
problems; and take corrective action to address the problems identified, as appropriate.
The Department of Labor and Employment agreed with the audit recommendations.
KEY CONCERN
The Department of Labor and Employment (Department) did not prevent about $73 million in payments on 8,200
likely fraudulent and potentially fraudulent unemployment insurance benefits (benefits) claims from March 2020
through April 2021, and did not track customer complaints or resolve them timely.
DEPARTMENT OF LABOR AND EMPLOYMENT
UNEMPLOYMENT INSURANCE BENEFITS
PERFORMANCE AUDIT, NOVEMBER 2021
8
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September 6, 2021. Individuals were eligible if they both claimed
regular benefits as a former traditional employee and also made more
than $5,000 in self-employment income in the year before the
pandemic. Because any individual eligible for regular benefits must
claim the regular benefits first, MEUC is meant to assist in making
up for lost self-employment income by providing $100 per week as a
supplement to the regular benefits. Colorado implemented MEUC in
August 2021 and claimants can apply retroactively for benefits back
to December 2020.
COLORADO'S RESPONSE TO PANDEMIC
UNEMPLOYMENT
As shown in EXHIBIT 1.2, the percentage of Colorado's workforce that
was unemployed during the pandemic increased significantly beginning
in March 2020, and peaked at 12.1 percent in April 2020.
14.0%
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
EXHIBIT 1.2. COLORADO UNEMPLOYMENT RATE
AS A PERCENT AGE OF THE WORKFORCE
JANUARY 2020 THROUGH SEPTEMBER 2021
2020
2021
SOURCE: Office of the State Auditor analysis of Department of Labor and Employment data on
unemployment rates.
Early in the pandemic, the federal government asked states to loosen
some requirements for unemployment benefits. In response, in March
10
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EXHIBIT 1.3. INITIAL CLAIMS FOR UNEMPLOYMENT
MARCH 2020 THROUGH SEPTEMBER 2021
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■State Initial Claims
■Federal Initial Claims
SOURCE: Office of the State Auditor analysis of Department of Labor and Employment data.
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EXHIBIT 1.4 shows the continued unemployment claims, or those that
followed the initial claims, from March 2020 through September 2021.
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
EXHIBIT 1.4. CONTINUED UNEMPLOYMENT CLAIMS
MARCH 2020 THROUGH SEPTEMBER 2021
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■State Continued Claims
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SOURCE: Office of the State Auditor analysis of Department of Labor and Employment data.
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CHAPTER 2
UNEMPLOYMENT
INSURANCE BENEFITS
FRAUD
The two main types of fraud related to unemployment insurance
benefits (unemployment benefits or benefits) are: (1) benefits
fraud, when an individual misrepresents their earnings or
employment to obtain benefits, and (2) identity fraud, when
someone uses a stolen identity to obtain benefits. According to
the Department of Labor and Employment (Department), there
were few unemployment insurance fraud cases in Colorado and
other states before the pandemic, and those cases were primarily
benefits fraud.
18
UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
During the COVID-19 pandemic (pandemic) that began in March 2020
and has continued during this audit, unemployment insurance fraud
cases have increased significantly nationwide, mostly through the
prevalence of identity fraud. For example, the United States Department
of Labor’s (USDOL) website notes that states have seen a surge in
identity fraud unemployment claims filed by organized crime and
criminals who purchase stolen personal identifying information on the
“dark web” and use the stolen information to apply for benefits
[USDOL website, August 2021]. In January 2021, USDOL’s Inspector
General estimated there will ultimately be $87 billion in improper
payments nationwide from the Coronavirus Aid, Relief, and Economic
Security (CARES) Act unemployment provisions, with a significant
portion attributable to fraud.
States have also reported unprecedented fraud related to unemployment
benefits during the pandemic. For example, in May 2021, Ohio
reported that it had paid $462 million in fraudulent claims; in August
2021, Kansas reported that it had paid $380 million in fraudulent
claims; in September 2021, Arizona reported that it had paid $4.4
billion in fraudulent claims; and for Calendar Year 2020, Washington
reported $647 million in payments due to unemployment fraud, of
which 99 percent was linked to identity fraud. In September 2021,
Colorado reported that it had identified and confirmed $28.9 million in
unemployment benefits fraud. The Department has also worked with
financial institutions to have them recover an additional $35 million
that will require further Department investigation before it can confirm
the payments as fraudulent. The Department has reported that it
continues to identify potential fraudulent claims and investigate them
to confirm fraud.
Government Auditing Standards allow for information that is
considered sensitive in nature such as detailed information related to
unemployment insurance benefits fraud to be issued through a separate
“classified or limited use” report because of the potential damage that
could be caused by the misuse of this information. We consider some
specific and technical aspects of this chapter along with the
recommendations and responses to be sensitive in nature and not
19
REPORT OF THE COLORADO STATE AUDITOR
appropriate for public disclosure. Therefore, some of the details of this
chapter, recommendations, and responses have been provided to the
Department in a separate, confidential report.
PANDEMIC POLICIES CREATED
OPPORTUNITY FOR FRAUD
Following the outbreak of COVID-19, state and federal changes in
unemployment insurance aimed to provide rapid assistance to
unemployed people and expand the eligibility for unemployment
insurance. However, these changes created fraud vulnerabilities in the
unemployment insurance system. Specifically:
USDOL GUIDANCE ENCOURAGED AND A GOVERNOR’S EXECUTIVE
ORDER REQUIRED EXPEDITED PAYMENT. At the beginning of the
pandemic, USDOL issued guidance to states encouraging them to pay
unemployment claims as quickly as possible to address the large
number of suddenly unemployed people. Similarly, Colorado’s
Governor issued Executive Order D-2020-012 on March 20, 2020,
instructing the Department to pay benefits within 10 days of
receiving a claim. Before the pandemic, the Department took 4 to 6
weeks to process claims before paying benefits, which allowed time
for Department staff to contact employers and verify claimant
employment and wages. To meet the new timeliness requirements,
from March 2020 through early August 2021, the Department did
not conduct employment and wage checks before paying benefits.
According to the Department, due to the volume of claims that it
received during the pandemic, it took up to several months after
payment for the Department to conduct employment and wage
verification on regular state unemployment claims (regular claims),
but it screened these claims for potential fraud and certain issues,
such as duplicate claims, before paying them.
Executive Order D-2021-125, issued by the Governor on August 6,
2021, discontinued the mandate to pay benefits within 10 days, and
since this date, the Department has returned to conducting
20
UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
employment and wage checks before paying claims. As of the end of
our audit in October 2021, the Department reported that it had
resolved more than 450,000 issues related to employment and wage
checks for claims in its backlog of claims that had been submitted
prior to August 6, 2021, and needed these checks. However, the
Department reported to us that it still has to resolve 90,000 of these
types of issues for paid claims submitted during the pandemic. The
Department reported that claims may have more than one issue, and
Department staff are tracking and resolving the issues related to
claims. Therefore, the Department cannot give us an estimate of the
amount of benefits that it paid on claims that have outstanding
issues.
DUEL IT SYSTEMS COMPLICATED FRAUD PREVENTION. Prior to the
start of the pandemic, the Department had planned to retire its legacy
IT system used to process unemployment claims, the Colorado
Unemployment Benefits System (CUBS), in April 2020, but did not
replace it entirely until January 2021. CUBS did not have the
functionality to conduct the advanced fraud analytics that are
currently in the new system, MyUI+, nor did CUBS have the
functionality to place automated holds on benefits payments due to
suspected fraud. From the beginning of the pandemic through early
January 2021, the Department continued processing and paying
regular claims using CUBS, and used its new system to process
federal Pandemic Unemployment Assistance (PUA) claims. The
Department only processed PUA claims in the new system because,
initially in the pandemic, PUA claims were the fraud target and the
significant increase in the number of claims filed disrupted the full
rollout of the new system. On January 10, 2021, the Department
began using the new system to process regular claims, as well.
SOME FEDERAL DIRECTIVES FOR PUA HINDERED FRAUD PREVENTION.
From March 2020 to December 2020, the CARES Act and federal
guidance for PUA required states to allow claimants to self-certify
that they were eligible to receive benefits. States could not require
PUA claimants to provide employment documentation. Although the
21
REPORT OF THE COLORADO STATE AUDITOR
federal intent of allowing self-certification was to provide benefits to
unemployed contract or other untraditional workers quickly, it made
PUA benefits a target for fraud. The USDOL Inspector General
published an alert in May 2020 warning that the self-certification
sufficiency “renders the PUA program highly vulnerable to improper
payments and fraud” [USDOL Inspector General Report 19-20-002-
03-315].
In addition, the CARES Act permitted claimants to backdate PUA
claims to their date of unemployment, as far back as January 27,
2020. In practice, this meant a claimant’s first payment could be
significantly larger than their weekly payments in the future. In June
2020, the Department noticed a trend in fraudulent PUA claims with
significant backdating and, as a result, began limiting backdating to
1 week. In order to comply with federal requirements, the
Department allowed claimants to contact the Department directly to
request backdating of more than 1 week. In December 2020,
Congress amended PUA requirements by both requiring PUA
claimants to submit documentation and limiting backdating.
DEPARTMENT FRAUD DETECTION AND
PREVENTION TOOLS
Between November 2015—more than 4 years prior to the start of the
pandemic—and October 2021, at the end of our audit test work, the
Department implemented a number of processes and systems to detect
and prevent unemployment benefits and claimant identity fraud, as
described below. The Department added many of these processes to
address the large increase in potentially fraudulent claims that it began
receiving during the pandemic.
FRAUD ANALYTICS OF CLAIM CHARACTERISTICS. In June 2020, the
Department was aware of about 10 indicators of a fraudulent claim,
such as the use of a fake Social Security number, and began working
with its contractor, Deloitte, to use MyUI+ to analyze PUA claims to
identify any that had characteristics matching at least one of the 10
22
UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
indicators. If a claim has one or more fraud indicators, the
Department’s system automatically stops all payments to the
claimant by placing a temporary program integrity hold, or fraud
hold, on the claimant’s benefits payments, so that Department staff
can determine whether the claim and claimant are legitimate. If the
Department determines that the claim and claimant are legitimate, it
releases the fraud hold and pays the claim. If the Department
determines that the claim and claimant are illegitimate, it will place
a permanent fraud hold on the claim and claimant. From June 2020
to January 2021, the Department did not analyze regular claims to
determine whether they had these indicators because regular claims
were processed in the Department’s legacy IT system, CUBS, which
did not have the functionality to analyze the claims for the indicators.
Regular claims were subject to other fraud prevention tools as
discussed below, but were not subject to the automatic fraud
indicators until January 2021.
According to the Department, since implementing the initial fraud
indicators, it has added new indicators and revised its indicators to
better identify potentially fraudulent claims. By January 2021, when
the Department began to process both regular and PUA claims using
the new system, MyUI+, the Department had about 50 fraud
indicators that it used to analyze all types of claims to identify fraud.
By August 2021, the Department had between 60 and 70 fraud
indicators. The Department applies the indicators to all active claims
nightly. From June 2020—when the Department began using fraud
indicators—to September 30, 2021, the Department placed fraud
holds on a total of 2,310,740 claims that had one or more fraud
indicators, and the Department had removed 600,140 of these holds
as of September 2021. The Department may remove a fraud hold if
the Department revises its indicator and releases claims in aggregate,
if the claimant verifies their identity through ID.me (see below), or if
the Department investigates the claim and determines it is legitimate.
If a claim no longer has any fraud indicators, the Department pays
the claim.
23
REPORT OF THE COLORADO STATE AUDITOR
In order for the Department to maintain confidentiality of the
specific fraud indicators that it monitors for unemployment benefits
payments, the Department would not provide specific information
on all of the fraud indicators to the audit team for review as part of
our audit.
ID.ME IDENTITY VERIFICATION. The Department began contracting
with the online portal ID.me in January 2021 to verify claimants’
identity. ID.me requires each claimant to pass a document
verification and biometrics screening before the Department will
begin paying the claimant benefits. To pass ID.me document
verification, each claimant must provide a combination of primary
identification documents, such as a driver’s license or state-issued ID,
and secondary identification documents, such as a utility bill or bank
statement. To pass ID.me biometric screening, each claimant must
take a live picture of themselves to verify that they are who they
purport to be, so that the Department can verify they are not a
fraudster taking a picture of someone else’s picture. Claimants whose
biometrics cannot be automatically verified by ID.me or who do not
have the necessary documents must video chat with an ID.me agent.
Because ID.me involves a “liveness” check, wherein a claimant must
submit a live selfie or video chat with an ID.me agent, ID.me helps
prevent a fraudster from stealing a claimant’s identity and using it to
obtain benefits fraudulently. The Department also relies on ID.me to
prevent a claimant from using a deceased person’s identity in order
to fraudulently claim benefits. Since implementing the use of ID.me
in January 2021 through September 30, 2021, ID.me has verified the
identities of 366,660 Colorado unemployment insurance claimants.
SOCIAL SECURITY NUMBER CHECKS. A claimant must have a valid
Social Security number to receive unemployment benefits. For
regular claims filed prior to the pandemic through January 2021, the
Department had the ability to search a claimant’s Social Security
number through an interface with the Social Security Administration
(SSA). The Department could use the search function for an
individual claimant, but not all claimants or claims in aggregate. For
24
UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
PUA claims processed from June 2020 through January 2021, the
Department utilized a third-party vendor, Experian, to validate
Social Security numbers because the SSA would not allow its system
to interface with both the Department’s CUBS and new system. Since
the Department was using both systems between March 2020 and
January 2021, the Department maintained its CUBS interface with
SSA’s system. The MyUI+ system, which was implemented in
January 2021, applies an automated Social Security number check
with the SSA to all claims.
DEATH RECORD MATCHES AND CHECKS. Since 2016, the Department
has contracted with Accurint, a third-party vendor that maintains a
database of death records drawn from the SSA Death Master File,
credit reporting agencies, and 15 individual states, to search its
database for a specific claimant when there is a question of whether
the claimant is legitimate.
Additionally, as noted previously, in April 2021, the Department
began requiring all claimants to complete an ID.me liveness check to
verify their identity through real-time photos and videos when
submitting their initial claim for benefits. This liveness requirement
prevents fraudsters from using deceased people’s information to
submit an initial claim for benefits.
INCARCERATION DATA MATCHES. Since November 2015, the
Department has contracted with a third-party vendor, Appriss, for
nationwide incarceration data, including federal, state, and local
incarcerations, but not Colorado Department of Corrections data.
Incarcerated claimants are not able and available to work, and
therefore, are ineligible to receive benefits. The Department sends
Appriss a file weekly with information from the claimants who had
been paid unemployment benefits in the preceding 4 weeks. Appriss
crossmatches the names of individuals receiving unemployment
benefits with names in the incarceration data and informs the
Department of any matches, which are investigated by Department
staff. From April 2012 to March 2020, the Department also
25
REPORT OF THE COLORADO STATE AUDITOR
contracted with On Point Technology, LLC, to provide Colorado
Department of Corrections data.
REVIEWS TO ENSURE CLAIMANTS ARE OF WORKING AGE. The
Department conducts confidential analytics to identify claimants
who are not of working age.
ONGOING FRAUD AWARENESS COMMUNICATION WITH CLAIMANTS.
Throughout the pandemic, the Department has communicated with
claimants about fraud, how to prevent it, and how to report it, such
as by sending emails to claimants, adding notes to claimants’ MyUI+
accounts that they view when logging into their account, and posting
information on the Department’s website and social media pages,
such as Facebook.
MULTI-FACTOR AUTHENTICATION. Each claimant creates an account
in MyUI+ in order to apply for unemployment benefits. In August
2021, the Department added multi-factor authentication to MyUI+
accounts, which requires each claimant to enter two passwords—an
account password and a one-time random code shared via text or an
authenticator app—before they can access their account. Multi-
factor authentication prevents a fraudster from accessing a legitimate
claimant’s unemployment claim and changing information in their
account without the claimant’s knowledge.
UNEMPLOYMENT INSURANCE INTERSTATE CONNECTION NETWORK.
For decades, the Department has participated in the Interstate
Connection Network (Network), which is funded by USDOL. The
Network provides telecommunications infrastructure to transfer
unemployment insurance data between states. States can request and
receive real-time data on claims or claimants with wages in another
state, among other information.
INTEGRITY DATA HUB. Between 2016 and 2017, the Department
began accessing the fraud prevention tools in the Integrity Data Hub
(Hub), a resource for states established by USDOL and operated by
26
UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
the National Association of State Workforce Agencies (NASWA).
The Hub operates fraud prevention tools that the Department uses
such as the Suspicious Actor Repository. This Repository
consolidates states’ information on characteristics of fraudulent and
suspicious claims, such as suspicious claimant Internet Protocol (IP),
email, and mailing addresses. The Repository sends the Department
alerts that it uses to inform its fraud indicators, and the Department
provides the Repository information on confirmed fraudulent cases
in Colorado.
Although the Department reported that, as of September 2021, it had
identified $29.8 million paid in fraudulent unemployment benefits, it
could not provide a breakdown of the number of claims or payments
identified as potentially fraudulent using each of the various checks,
data matches, and processes described above.
FRAUD INVESTIGATIONS
The Department has staff responsible for unemployment fraud
investigations that review claims with fraud indicators to determine
whether they are fraudulent. If the Department determines that a claim
is fraudulent, the Department may refer the perpetrator to the state
Attorney General, Colorado Bureau of Investigation, USDOL Inspector
General, or other authorities for further investigation or prosecution.
The Department reported to us in September 2021, that it has more
than 130 active criminal investigations about fraudulent unemployment
claims. Several of these investigations involve dozens or hundreds of
claims, and some involve claims in multiple states and, therefore, may
not be prosecuted in Colorado. The Department also told us in
September 2021, that the $35 million in suspected fraud that the
financial institutions have recovered will need to be investigated and
confirmed in accordance with USDOL requirements [UIPL 16-20].
Despite the numerous steps that the Department has taken to prevent
and detect fraudulent unemployment claims, our audit identified
potentially fraudulent claims that the Department did not identify, as
27
REPORT OF THE COLORADO STATE AUDITOR
well as improvements that the Department should make to better
mitigate and address the risk of fraud. Altogether, we identified
$73,123,710 in likely or potentially fraudulent claims that the
Department paid, which the Department did not identify as fraud prior
to our audit work. Unemployment benefits fraud is a high-risk area for
the State, which the Department will need to continue to combat using
additional fraud prevention controls. The remainder of this section
includes our findings and recommendations related to fraud detection
and prevention.
28
UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
FRAUDULENT
UNEMPLOYMENT
CLAIMS
From March 1, 2020, through April 30, 2021, the period of our review,
the Department received more than 4 million claims for unemployment
benefits. As of mid-May 2021, the Department had paid about 842,000
of the claims (21 percent), totaling almost $8.7 billion. According to the
Department, the remaining 3.2 million claims had not been paid at
that time because the Department was waiting on the claimant to
take a required action, the Department had confirmed that
they
were
fraudulent,
or
had
placed
fraud
holds
on
the
claims while further investigation occurred. EXHIBIT 2.1 groups
the 4 million claims into three status categories: (1) those for
which the Department had not identified any indication of fraud,
(2) those for which the Department had identified one or more
fraud indicators and had a fraud hold on the claim as of May
13, 2021, and (3) those that the Department had confirmed to be
fraudulent.
EXHIBIT 2.1. STATUS OF UNEMPLOYMENT BENEFITS CLAIMS
MARCH 1, 2020, THROUGH APRIL 30, 2021
(AS OF MID-MAY 2021)
STATUS PER
DEPARTMENT DATA
ALL CLAIMS SUBMITTED
(UNPAID AND PAID) 1
PAID CLAIMS
PAYMENTS
No Fraud Identified
2,367,180
(59 percent)
626,270
(74 percent)
$7,649,031,070
(88 percent)
Fraud Hold Awaiting
Investigation 2
1,619,090
(40 percent)
207,550
(25 percent)
$1,009,271,810
(11 percent)
Fraudulent claims confirmed
by Department investigation
47,650
(1 percent)
8,180
(1 percent)
$31,188,020
(1 percent)
TOTAL
4,033,920
842,000
(21 percent of all claims)
$8,689,490,900
SOURCE: Office of the State Auditor analysis of Department of Labor and Employment claims data, as of mid-May 2021.
1 Includes unpaid claims awaiting some type of action by a claimant, such as ID.me verification, before they can be paid.
2 The Department identified these claims as having one or more fraud indicators. For some of these claims, the Department identified
fraud indicators after partial payment was made such as because the claimant provided the Department new information that
triggered a fraud indicator or because the Department implemented a new indicator.
29
REPORT OF THE COLORADO STATE AUDITOR
WHAT WAS THE PURPOSE OF THE
AUDIT WORK, HOW WERE THE RESULTS
MEASURED, AND WHAT AUDIT WORK
WAS PERFORMED?
The purpose of the audit work was to identify potentially fraudulent
claims that the Department paid.
The Department has a responsibility to prevent and detect fraud based
on the following:
Unemployment insurance operates under a state-federal partnership,
so the Department must follow federal statute and USDOL guidance.
Following the passage of the CARES Act, in April 2020, the USDOL
Inspector General urged USDOL and state agencies, including the
Department, to have sufficient systems or methods to prevent
fraudulent unemployment insurance payments [USDOL Inspector
General Report 19-20-001-03-315, April 21, 2020]. Examples of
fraud prevention methods include comparing claims data with
incarceration records and checking whether claims are submitted
using foreign IP addresses [Unemployment Insurance Program Letter
23-20]. In May 2020, USDOL reminded states that the Social
Security Act requires all unemployment insurance benefits programs
to have “methods of administration to protect against improper
payments and fraud,” to receive federal funding [Unemployment
Insurance Program Letter 23-20].
According to USDOL, commonly known indicators of fraud for
unemployment claims include:
►Claimants listed in public records as deceased.
►Claims with fake or stolen Social Security numbers.
►Claimants listed in public records as incarcerated.
►Claimants who submit a claim using a foreign IP address or an IP
address associated with multiple claimants.
30
UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
►Claimants who file claims in many states using the same
identification.
According to Colorado statute, unemployment benefits can be denied
if the claim is fraudulent [Section 8-73-108(3)(d), C.R.S.].
Furthermore, the State Controller requires state agencies, including
the Department, to follow the U.S. Government Accountability
Office’s Green Book, which states, “Management should consider
the potential for fraud when identifying, analyzing, and responding
to risks” [Principle 8.01]. The Department’s Fiscal Years 2021 and
2022 Performance Plans had a goal to enhance unemployment
insurance system fraud identification processes to reduce improper
payments and fraud.
We contracted with the firm BKD, LLP, with expertise in fraud analytics
to help us identify approximately 25 indicators of unemployment claim
fraud. We then worked with our contractor to analyze the Department’s
data for the about 842,000 unemployment claims paid between March
1, 2020, and April 30, 2021 (the audit period), and focused on the
approximately 626,270 paid claims that the Department had not
identified as fraudulent to determine if any had indicators of fraud. The
audit team reviewed both the Department’s claims that had never had
a fraud hold and were paid, and those for which the Department placed
and removed a fraud hold at some point and had paid.
In order to identify fraudulent claims, we conducted and worked with
our contractor to conduct, the following audit work:
DEATH RECORD CHECKS.
INMATE CHECKS.
CLAIMANT AGE REVIEW.
MULTIPLE FRAUD INDICATORS REVIEW. Using the approximately 25
indicators of fraud that we identified with our contractor, we
31
REPORT OF THE COLORADO STATE AUDITOR
reviewed the Department’s paid claims data to identify claimants and
claims that are likely fraudulent.
BANK ACCOUNT REVIEW.
WHAT PROBLEMS WERE IDENTIFIED?
Overall, we identified 8,200 unduplicated claims totaling $73,123,710
in likely or potentially fraudulent payments between March 1, 2020,
and April 30, 2021; these claims involved 7,959 claimants.
THE LIKELY FRAUDULENT paid claims that we identified have one or
more attributes that indicate a high likelihood of being fraudulent
because there is no explanation for why a legitimate claimant would
have these characteristics, such as a deceased person’s Social Security
number.
THE POTENTIALLY FRAUDULENT paid claims that we identified were
submitted by claimants who had suspicious bank account numbers. We
considered these claims to be possibly fraudulent, instead of likely
fraudulent, because the claims had one characteristic that indicated that
they were fraudulent, but there are explanations for why a legitimate
claimant’s claims would have this characteristic.
We considered the total 8,200 claims and $73,123,710 in payments to
be “likely” and “potentially” fraudulent because an absolute conclusion
of fraud would require a Department investigation of each claim and
claimant.
LIKELY FRAUDULENT CLAIMS
The likely fraudulent claims that we identified are as follows:
$3.87 MILLION PAID TO 1,065 DECEASED CLAIMANTS. We identified
death record matches for 1,069 claims totaling $3,874,680 that had
been submitted by 1,065 claimants. The 1,069 claims we identified
32
UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
included some claimants who had been deceased for years before
receiving the benefits payments we reviewed, and other claimants
who died while receiving benefits payments, but kept receiving them.
As shown in EXHIBIT 2.2, the likely fraudulent payments of
unemployment benefits to deceased claimants were primarily for
PUA claims.
$5.04 MILLION PAID ON BEHALF OF 696 INCARCERATED CLAIMANTS.
We identified $5,043,410 for 709 claims paid to 696 claimants who
were listed as incarcerated in Colorado Department of Corrections’
records.
As shown in EXHIBIT 2.3, the likely fraudulent payments of
unemployment benefits on behalf of the incarcerated claimants who
we identified were primarily for PUA claims.
$488,785
$3,385,895
State regular and
federal extensions ¹
PUA ²
EXHIBIT 2.2. LIKELY FRAUDULENT PAYMENTS
TO DECEASED CLAIMANTS, BY PROGRAM TYPE
MARCH 2020 THROUGH APRIL 2021
SOURCE: Office of the State Auditor analysis of Department of Labor and Employment
claims data and Department of Public Health and Environment death record data.
1 Includes state regular claims and Pandemic Extended Unemployment Compensation. We
identified no state extended benefits payments made to claimants in this analysis.
2 Includes only payments for Pandemic Unemployment Assistance benefits.
33
REPORT OF THE COLORADO STATE AUDITOR
$101,630 PAID TO 18 CLAIMANTS WHO WERE LIKELY NOT OF
WORKING AGE TO BE ELIGIBLE.
POTENTIALLY FRAUDULENT CLAIMS
We also identified $18.5 million paid to 2,919 claimants who are
potentially fraudsters because they had suspicious bank account
information associated with their claims. These claims had one
characteristic that indicated that they were possibly fraudulent, but
there are explanations for why a legitimate claimant may have claims
with this characteristic.
The Department looked at a sample of 18 of the 2,919 claimants who
we identified as a result of our testwork. Department staff reviewed the
sample and reported that they determined that six of the 18 instances
were not fraud, and the remaining were fraud or were still under
investigation.
$1,199,990
$3,843,420
State regular and
federal extensions ¹
PUA ²
EXHIBIT 2.3. LIKELY FRAUDULENT PAYMENTS
TO INCARCERATED CLAIMANTS, BY PROGRAM TYPE
MARCH 2020 THROUGH APRIL 2021
SOURCE: Office of the State Auditor analysis of Department of Labor and Employment claims
data and Department of Corrections data.
1 Includes state regular claims, state extended benefits, and Pandemic Extended Unemployment
Compensation.
2 Includes only payments for Pandemic Unemployment Assistance benefits.
34
UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
CLAIMS WITH MULTIPLE INDICATORS
OF FRAUD
We also identified paid claims that had multiple indicators of fraud,
which makes them more likely to be fraudulent.
$52.7 MILLION PAID TO CLAIMANTS WITH MULTIPLE INDICATORS OF
FRAUD. We identified 4,171 claimants who were paid $52,682,870
for 4,354 claims that are likely fraudulent because these claims had
characteristics with multiple fraud indicators.
►CLAIMANTS WHO ARE CONNECTED TO AT LEAST 20 OTHER
CLAIMANTS. Among the 4,354 claims that we identified with
multiple indicators of fraud, 4,017 claims (92 percent) involved
claimants who are connected to at least 20 other claimants, based
on certain characteristics.
Included within these 4,354 claims are 869 claims, totaling
$6,920,540 in payments, that we had identified as likely or
potentially fraudulent through the application of other fraud
indicators that were discussed previously in this finding.
WHY DID THESE PROBLEMS OCCUR?
The likely and potentially fraudulent claims that the audit identified
were paid by the Department for a number of reasons, as described in
the following sections.
PAYMENTS TO DECEASED CLAIMANTS
The Department did not have sufficient internal controls and fraud
analytics in place to identify likely fraudulent claims paid on behalf of
deceased claimants, like those that we identified.
In addition, the Department did not require all claimants to complete a
liveness check through ID.me until April 2021. From January 2021 to
35
REPORT OF THE COLORADO STATE AUDITOR
April 2021, the Department only used ID.me for claimants who had a
fraud hold. In April 2021, the Department told all claimants to verify
their identities using ID.me, and thereafter, the Department has required
each claimant to verify their identity using ID.me before receiving
benefits for their initial claim.
PAYMENTS TO INCARCERATED CLAIMANTS
The Department did not have sufficient internal controls and fraud
analytics to identify likely fraudulent claims paid on behalf of
incarcerated claimants, like those that we identified.
In addition, the Department lacked incarceration checks on PUA claims.
The Department did not conduct any incarceration record checks for
PUA claims paid from the start of PUA in April 2020 through January
2021, unless the claimant had previously applied for regular benefits.
According to the Department, it did not conduct these checks because
the Department was attempting to process and pay PUA claims quickly,
and adding the Appriss check to the PUA claims process would have
delayed PUA implementation.
PAYMENTS TO CLAIMANTS WHO WERE NOT OF
WORKING AGE
The Department did not have sufficient internal controls and fraud
analytics to identify likely fraudulent claims paid on behalf of claimants
who were not of working age, like those that we identified.
PAYMENTS TO CLAIMANTS WITH SUSPICIOUS BANK
ACCOUNTS
The Department did not have sufficient internal controls and fraud
analytics to identify likely fraudulent claims paid on behalf of claimants
who have suspicious bank account information related to their claims,
like those that we identified.
36
UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
For the sample of 18 claimants that we identified and the Department
subsequently reviewed, Department staff reported the following
based on its review:
►For six claimants, the Department identified their claims as
potentially fraudulent before we received the data in April 2021,
investigated them, and determined they were not fraudulent.
►For 11 claimants, the Department identified their claims as
potentially fraudulent after April 30, 2021, when we received the
data.
►For one claimant, the Department did not identify the claim as
potentially fraudulent and reports that the claimant’s current bank
account is not suspicious.
PAYMENTS TO CLAIMANTS WITH MULTIPLE FRAUD
INDICATORS
We were unable to determine why the Department paid claims with
multiple fraud indicators. Without a full investigation of each claim we
identified as likely fraudulent, the Department cannot tell us why it did
not identify these claims as fraudulent or whether they are fraudulent.
WHY DO THESE PROBLEMS MATTER?
DEPARTMENT MAY HAVE TO PAY BACK FUNDS TO THE FEDERAL
GOVERNMENT. The Department has the responsibility to prevent and
detect fraud in unemployment benefits claims. According to federal law
and state statute, the Department must have procedures in place to deter
individuals from claiming unemployment benefits fraudulently [42 USC
503 (a)(1) and Section 8-72-109, C.R.S.]. If the USDOL determines that
the Department’s procedures are inadequate, it may have to repay the
federal government for the funds paid on fraudulent claims.
WASTE OF TAXPAYER FUNDS. We found an additional $61.7 million in
likely fraudulent benefits and $18.5 million in potentially fraudulent
37
REPORT OF THE COLORADO STATE AUDITOR
benefits. The Department told us that it might take years before it has
final statewide and nationwide totals for fraudulent payments. The
fraudulent payments we found are summarized in EXHIBIT 2.4.
EXHIBIT 2.4. LIKELY AND POTENTIAL FRAUDULENT UNEMPLOYMENT
BENEFIT PAYMENTS, IDENTIFIED BY AUDIT
MARCH 2020 THROUGH APRIL 2021
PROBLEM IDENTIFIED
NUMBER OF
PAID CLAIMS
DOLLAR
AMOUNT PAID
LIKELY FRAUDULENT CLAIMS
Claims paid to apparently deceased individuals
1,069
$3,874,680
Claims paid to apparently incarcerated individuals
709
$5,043,410
Claims paid to claimants not of working age
18
$101,630
Claims paid to claimants with multiple fraud
indicators
4,354
$52,682,870
TOTAL LIKELY FRAUD 1
6,150
$61,702,590
POTENTIALLY FRAUDULENT CLAIMS
Claims paid to claimants with suspicious bank
account information
2,967
$18,520,550
TOTAL POTENTIAL FRAUD 1
2,967
$18,520,550
TOTAL UNDUPLICATED LIKELY AND
POTENTIAL FRAUD IDENIFIED BY AUDIT
8,200
$73,123,710
SOURCE: Office of the State Auditor analysis of the Department of Labor and Employment’s claims data.
1 Totals include duplication among analyses.
When the Department pays fraudulent unemployment claims, public
funds are wasted. Colorado provides regular state benefit payments to
unemployed individuals using tax revenue that employers pay based on
employee wages, and provides federal benefits and extensions using
federal tax dollars. Colorado’s trust fund is called the Unemployment
Insurance Trust Fund (UITF). When the Department pays fraudulent
regular state unemployment claims, Colorado’s UITF is depleted
unnecessarily. As of October 29, 2021, Colorado’s UITF had a federal
loan for $1.01 billion to help cover its UITF deficit. As EXHIBIT 2.5
shows, Colorado’s UITF federal loan grew during the pandemic along
with the volume of continued unemployment claims.
38
UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
Furthermore, the UITF deficit can affect employers because statute
requires Colorado to add a surcharge to the base tax rate on wages paid
by employers when there is a UITF deficit [Section 8-76-102.5(7)(a),
C.R.S.]. Senate Bill 20-207 prevents these surcharges from taking effect
for Calendar Years 2021 and 2022, but a solvency surcharge may be
added in 2023.
All of the states, including Colorado, that had federal loans to cover
their UITF deficits as of July 2021, are shown in EXHIBIT 2.6.
$0
$200,000,000
$400,000,000
$600,000,000
$800,000,000
$1,000,000,000
$1,200,000,000
$0
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
$3,000,000,000
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
2020
2021
Loan Balance
Cumulative Regular State
Unemployment Payments
Cumulative Regular State Unemployment Payments
Loan Balance
EXHIBIT 2.5. COLORADO UNEMPLOYMENT INSURANCE
TRUST FUND LOAN BALANCE AND
CUMULATIVE REGULAR STATE UNEMPLOYMENT PAYMENTS
STARTING JUNE 2020 THROUGH OCTOBER 2021
SOURCE: Department of Labor and Employment’s chart data and U.S. Department of Treasury fiscal data.
39
REPORT OF THE COLORADO STATE AUDITOR
$0
$5
$10
$15
$20
$25
Billions
EXHIBIT 2.6. COMPARISON OF UNEMPLOYMENT INSURANCE TRUST FUND
FEDERAL LOANS FOR STATES WITH LOANS
(AS OF JULY 2021)
SOURCE: U.S. Department of Treasury and Labor data.
40
UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
RECOMMENDATION 1
The Department of Labor and Employment (Department) should
improve its detection and prevention of unemployment insurance fraud
by:
A Improving internal controls as recommended in the confidential
report.
i.
Improving
internal
controls
as
recommended
in
the
confidential report.
ii.
Improving
internal
controls
as
recommended
in
the
confidential report.
B Improving internal controls as recommended in the confidential
report.
i.
Improving internal controls as recommended in the confidential
report.
C Investigating each of the likely and potentially fraudulent claims that
the audit identified and referring them for prosecution and
collection, as appropriate.
D Improving internal controls and making necessary changes as
recommended in the confidential report.
E Ensuring that the Department enhances its fraud indicators by
employing any used by the audit that are not currently used by the
Department, to help identify likely and potentially fraudulent
claims.
F Improving internal controls as recommended in the confidential
report.
41
REPORT OF THE COLORADO STATE AUDITOR
RESPONSE
DEPARTMENT OF LABOR AND
EMPLOYMENT
A AGREE. IMPLEMENTATION DATE: JANUARY 2023.
The Division agrees with these recommendations and will improve
internal controls as recommended in the confidential report.
i.
AGREE. IMPLEMENTATION DATE: DECEMBER 2021.
The Division agrees with these recommendations and will
improve internal controls as recommended in the confidential
report.
ii.
AGREE. IMPLEMENTATION DATE: JANUARY 2023.
The Division agrees with these recommendations and will
improve internal controls as recommended in the confidential
report.
B AGREE. IMPLEMENTATION DATE: DECEMBER 2022.
The Division agrees with these recommendations and will improve
internal controls as recommended in the confidential report.
i.
AGREE. IMPLEMENTATION DATE: DECEMBER 2022.
The Division agrees with these recommendations and will
improve internal controls as recommended in the confidential
report.
C AGREE. IMPLEMENTATION DATE: DECEMBER 2021.
The Department will investigate each of the likely and potentially
fraudulent claims that the audit identified and refer them for
42
UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
prosecution and collection as appropriate. This effort is already
underway.
D AGREE. IMPLEMENTATION DATE: DECEMBER 2023.
The Division agrees with these recommendations and will improve
internal controls as recommended in the confidential report, in
addition to the current tools utilized by the Division.
E AGREE. IMPLEMENTATION DATE: DECEMBER 2021.
The Department will not comment on whether or not the fraud
indicators included in this audit are or are not currently included or
will or will not be implemented in our program in the future.
Unemployment Insurance (UI) programs across the country must
exercise extreme caution in identifying the specific types of fraud
indicators employed to not provide potential fraudsters with
information that may be used to perpetrate more fraud within
Colorado’s UI program and those of other states. Therefore, the
Department commits to continuing to work diligently internally and
with vendors to implement best practices to target all fraud activity
in our system and address evolving criminal schemes as they are
identified. The Department will include the audit findings and fraud
indicators in its consideration of future changes.
F AGREE. IMPLEMENTATION DATE: MARCH 2022.
The Division agrees with these recommendations and will improve
internal controls as recommended in the confidential report.
43
REPORT OF THE COLORADO STATE AUDITOR
FRAUD HOLDS ON
CLAIMS
When the Department identifies a claim with characteristics that are
indicators of fraud, it places a fraud hold (also known as a program
integrity hold) on the claimant’s unemployment benefits payments. For
each fraud hold, the Department has to determine if the claimant is
filing a legitimate or fraudulent claim. The steps that the Department
takes to resolve a fraud hold differ depending on the characteristics of
the claim that caused the Department to question its legitimacy in the
first place. The Department could also place a fraud hold on a claim if
the Department determines that someone had stolen another person’s
identity and used it to claim benefits, and then the person whose identity
was stolen also applies for benefits. In this situation, the Department
would place a fraud hold on both claims until it could conduct an
investigation to determine whether one, or none, of the claimants is
legitimate. As discussed earlier in the Chapter, if the Department
determines that someone has applied for benefits fraudulently, then the
Department places a permanent fraud hold on that individual’s claims
and payments, and refers the claimant to law enforcement. Between
March 2020 and April 2021, the Department put permanent fraud
holds on payments for 30,142 claimants.
When a claimant disagrees with the Department’s decision to place a
fraud hold on their claim, they can either call the Department or
complete an online form on the Department’s website to report that
they need assistance removing the hold. There is no limit to the number
of times a claimant may submit a request for assistance with a fraud
hold. According to the Department, in January 2021, when ID.me was
implemented, it began telling all claimants who reported an issue with
a fraud hold to verify their identity using ID.me before the hold could
be removed. When a claim has indicators of fraud that cannot be
resolved with ID.me identity verification, Department staff contact the
claimant via email and schedule a call back, investigate the issue, and
remove the hold if staff determine that the claimant is legitimate and the
44
UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
claim is not fraudulent. The Department must be careful not to disclose
the reason for specific fraud holds to individuals who request assistance
in case those individuals are fraudsters.
The Department maintains a database of information on requests for
assistance with fraud holds (database), which includes the claimant’s
identification number, date of request for assistance, and a unique
number identifying each request for assistance. According to
Department data, from July 20, 2020, through June 18, 2021, the
Department received 266,284 requests for assistance with fraud holds
from 154,216 claimants. The Department placed a total of 2,310,741
fraud holds on claims from June 2020 through September 2021.
HOW WERE THE RESULTS OF THE
AUDIT WORK MEASURED AND WHAT
WAS THE PURPOSE OF THE AUDIT
WORK?
Federal regulations and the USDOL require agencies that administer
unemployment benefits to pay claims promptly to help unemployed
individuals [U.S. Social Security Act Section 303(a)(1), and 20 CFR
640.3(a)]. Specifically, to receive administrative grants for its
unemployment insurance program, each state must provide “such
methods of administration … to ensure full payment of unemployment
compensation when due” and “when due” is defined as “with the
greatest promptness that is administratively feasible.” This means that
states must have methods to ensure that eligible claimants are paid
unemployment benefits promptly when determined eligible, and that
ineligible claimants are not paid. Additionally, in March 2020,
Colorado’s Governor issued an Executive Order directing the
Department to expedite unemployment benefits processing and
distribution of payments to ensure displaced workers, as a result of the
impacts of COVID-19, will begin receiving such payments within 10-
days of the receipt of the filing of their completed applications to the
45
REPORT OF THE COLORADO STATE AUDITOR
extent possible [Executive Order D-2020-012]; this requirement ended
August 6, 2021.
The USDOL also requires unemployment benefits agencies not to pay
or to stop paying fraudulent claims as soon as they are identified
[USDOL Unemployment Insurance Letter 04-01]. Therefore, the
Department has two competing priorities when it comes to paying
claimants—paying claims promptly and stopping fraud promptly.
These competing priorities mean that sometimes the Department puts
fraud holds on unemployment benefits payments to legitimate claimants
because the claims have one or more indicators of fraud. However, to
comply with requirements to pay benefits timely, the Department
should have processes to ensure that claimants who request assistance
with fraud holds are assisted timely so that payments on legitimate
claims are not delayed. As such, the purpose of the audit work was to
assess the Department’s response to claimants who requested assistance
with a fraud hold.
WHAT AUDIT WORK WAS PERFORMED,
WHAT PROBLEMS WERE IDENTIFIED,
AND WHY DO THEY MATTER?
We reviewed Department data for the 266,284 instances when a
claimant submitted a request for assistance about a fraud hold from July
20, 2020, through June 18, 2021. Overall, Department data showed
that most requests for assistance with fraud holds had not been resolved
as of June 2021, and those that were, were not resolved timely.
Specifically, we found that the Department did not document any
information to indicate that there was a resolution for 196,066 of the
266,284 requests for assistance with fraud holds (73 percent). Of the
70,218 requests for which the Department had some type of resolution
information documented in its database, such as a resolution date, a
note that a fraud hold was removed, or note that a permanent fraud
hold was in place due to confirmed fraud, only 40,568 had information
on how the request was resolved. EXHIBIT 2.7 summarizes the
46
UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
information that the Department documented regarding the resolution
of the requests for assistance with a fraud hold.
EXHIBIT 2.7. SUMMARY OF DEPARTMENT INFORMATION ON
RESOLUTIONS OF CLAIMAINT REQUESTS
FOR HELP WITH FRAUD HOLDS
JULY 20, 2020, THROUGH JUNE 18, 2021
RESOLUTION INFORMATION
DOCUMENTED BY DEPARTMENT
COUNT OF
REQUESTS FOR
ASSISTANCE
PERCENTAGE
OF REQUESTS
No resolution or resolution date was documented
196,066
73%
Resolution and resolution date were documented
40,568
15%
Only a resolution date was documented
29,608
11%
Only a resolution was documented
42
<1%
TOTAL
266,284
100%
SOURCE: Office of the State Auditor analysis of Department of Labor and Employment’s fraud holds data.
The Department told us that it believes that it resolved 192,865 of the
196,066 requests that did not have a documented resolution because
the Department had notified the claimants from these requests that they
needed to verify their identities with ID.me, and the Department’s
MyUI+ system automatically clears fraud holds after claimants pass
ID.me verification. However, the Department did not document in its
database a resolution or date of a resolution for any of the requests that
the Department believes it resolved, nor did it track that the fraud holds
were resolved in its database.
The Department documented both the date that a claimant requested
assistance with a fraud hold and the date it resolved the issue for only
70,134 of the 266,284 fraud hold requests (26 percent); therefore, we
could only determine how long it took the Department to resolve fraud
hold issues for these requests. According to Department data, it took an
average of 7 weeks (49 days) to resolve the issues for these requests, and
the range was 0 to 333 days. EXHIBIT 2.8 summarizes the information
the Department documented on the timeliness of resolving these
requests for assistance with fraud holds.
47
REPORT OF THE COLORADO STATE AUDITOR
EXHIBIT 2.8. SUMMARY OF FRAUD HOLD RESOLUTION
TIMEFRAMES REPORTED BY THE DEPARTMENT
JULY 20, 2020, THROUGH JUNE 18, 2021
RESOLUTION TIMEFRAME
DOCUMENTED BY DEPARTMENT
NUMBER OF
REQUESTS FOR
ASSISTANCE
PERCENTAGE
OF REQUESTS
Same Day Resolution
4,804
7%
1 to 7 Days
19,032
27%
8 to 30 Days
6,463
9%
31 to 60 Days
21,419
31%
61 to 120 Days
11,445
16%
121 to 180 Days
3,049
4%
181 to 210 Days
3,246
5%
210 Days+
676
1%
TOTAL
70,134
100%
SOURCE: Office of the State Auditor analysis of Department of Labor and Employment’s
fraud holds data.
When the Department does not resolve fraud holds or provide claimants
timely assistance with them, legitimate claimants do not receive
unemployment benefits. Additionally, when the Department does not
provide claimants timely assistance, the claimants contact the
Department more frequently and take up the limited Department
resources available to assist all claimants. Department data shows that
claimants with fraud holds frequently request assistance more than once
due to delays in having their request resolved. We identified almost
52,000 claimants with a fraud hold between July 2020 and June 2021,
who submitted a request for assistance more than once. For example,
one claimant with a fraud hold submitted 112 requests for assistance
over a 46-day period. According to Department data, this individual’s
hold was resolved 63 days, or two months, after they initially requested
help.
48
UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
WHY DID THIS PROBLEM OCCUR?
The Department has not established policies, procedures, or processes
to ensure fraud holds are resolved timely. For example, we found the
following:
LACK OF WRITTEN POLICIES, PROCEDURES, OR PROCESSES. The
Department does not have written policies, procedures, or processes
for providing claimants assistance, investigating fraud holds,
documenting how claimants have been assisted in having their holds
resolved, or when the resolution occurred. Documenting information
about when and how the claimant was helped for each request,
including duplicates, would allow the Department to identify who
has been assisted and when, who still needs to be helped, and whether
all requests have been resolved. For example, the Department has not
established a process for staff to review pending requests for
assistance to ensure that all claimants receive help with resolving
their fraud hold. In fact, the Department takes no action on repeat
requests for assistance beyond sending the claimant an email with a
link to complete ID.me repeatedly. The Department has also not set
benchmarks or provided its staff guidance on appropriate timeframes
for assessing requests for assistance with fraud holds, such as within
a certain number of days or weeks, to help ensure assistance is
provided timely.
LACK OF AUTOMATED TRACKING AND MONITORING TOOLS.
Department staff told us that the database it uses to track fraud holds
lacks the functionality needed to identify the resolutions of requests
for assistance. The Department stated that every time a claimant
requests help with a hold, the Department’s database links the
duplicate request to the initial request. However, when the
Department resolves the first reported request, the database only
updates that the initial request is resolved, and does not change the
status of duplicate requests submitted by the same claimant to reflect
that it has been resolved. As a result, the Department cannot easily
differentiate a new request for assistance on a fraud hold from a
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REPORT OF THE COLORADO STATE AUDITOR
duplicate request on a previously resolved request from the same
individual. In addition, the Department has not developed a process
to monitor whether requests for assistance with fraud holds have
been resolved. For example, the Department has no process to verify
that the claimants who are directed to ID.me to verify their identity
were able to resolve their fraud hold. The Department did not have
a report showing information on these requests for assistance until
the Department created a report during the audit at our request.
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UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
RECOMMENDATION 2
The Department of Labor and Employment (Department) should
ensure that it addresses claimants’ requests for assistance regarding
unemployment insurance benefits fraud holds in a timely manner by:
A Developing and implementing written policies and procedures for
providing claimants assistance and investigating fraud holds in a
timely manner, documenting the resolutions and timeliness of
resolutions, and monitoring the timeliness of Department assistance.
B Identifying and implementing an information technology solution,
or other method, to track and monitor duplicate requests for
assistance with fraud holds, and their resolutions.
RESPONSE
DEPARTMENT OF LABOR AND
EMPLOYMENT
A AGREE. IMPLEMENTATION DATE: MARCH 2022.
The Department agrees with this finding and will develop and
implement written policies and procedures for providing claimants
assistance by investigating fraud holds on time, including
documenting the manner and timeliness of resolutions of all requests
for assistance with holds and developing and implementing
timeliness benchmarks for providing assistance. These procedures
will be written and will go into effect by March 31, 2022.
B AGREE. IMPLEMENTATION DATE: MARCH 2022.
The Department will also identify and implement an information
technology solution or other methods, to track when duplicate
requests for assistance with fraud holds are resolved and monitor
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REPORT OF THE COLORADO STATE AUDITOR
requests to ensure they are resolved. This will be implemented by
March 31, 2022.
CHAPTER 3
CUSTOMER SERVICE
Due to the COVID-19 pandemic (pandemic), from March 2020
to April 2021, the Department of Labor and Employment
(Department) experienced an 1,100 percent increase in the
number of individuals submitting claims for unemployment
insurance benefits (unemployment benefits or benefits) compared
to Calendar Year 2019. Even as late as May 2021, the
Department was receiving 3 times the number of monthly
unemployment benefits claims as it did in 2019.
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UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
The Department has several methods of providing customer service to
individuals who need information on or assistance with unemployment
benefits. The Department uses information technology to provide
general information. For example, the Department provides a website
with information about how to apply for and claim unemployment
insurance benefits, and with answers to frequently asked questions; and
Department staff answer questions from the general public via social
media, such as on the Department’s Facebook page. Additionally, in
July 2020, the Department launched virtual assistant technology that
provides callers automated information about 90 frequently asked
questions or an opportunity to schedule a call back from a customer
service representative. As of October 2021, the virtual assistant can
answer 143 frequently asked questions. The Department plans to add
more frequently asked questions and virtual assistant functionality by
June 30, 2022, to better address callers’ questions.
The Department also provides customer service by phone for claimants
who have specific questions or concerns related to unemployment
benefits, and for individuals who want to personally speak with
someone. The Department has an internal call center through which
Department staff have traditionally answered inbound calls from
individuals who need help filing a claim for unemployment benefits or
who have a question or complaint. According to Department data, early
in the pandemic, around March 2020, calls to the Department’s internal
call center increased significantly due to a sharp rise in unemployment
in Colorado and new federal unemployment programs that temporarily
expanded unemployment eligibility. EXHIBIT 3.1 shows the increase in
calls related to unemployment benefits from January 2020, before the
pandemic, through April 2021. When calls to the Department peaked
in April 2020, each customer called the internal call center an average
of 55 times.
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REPORT OF THE COLORADO STATE AUDITOR
EXHIBIT 3.1. TOTAL INBOUND CALLS 1 AND
AVERAGE CALLS PER UNIQUE CALLER
JANUARY 2020 THROUGH APRIL 2021
SOURCE: Office of the State Auditor analysis of Department of Labor and Employment inbound call data.
1 Inbound calls include all calls answered, including when callers received a busy signal.
2 The Department did not have data on the average calls per caller for January and February 2020.
The Department reported to us that, in March 2020, it did not have
adequate staffing to process the increased number of unemployment
benefits applications and claims, or adequate phone lines and staff to
address the rapid increase in calls. The Department reports that it only
had about 65 staff members to answer calls in March 2020. To provide
additional phone lines and staff to answer calls, in April 2020, the
Department began contracting with a private call center company,
Conversion Calls, which operates using its own phone system, phone
lines, and staff.
EXHIBIT 3.2 shows the number of staff that Conversion Calls
(contracted staff) employed to answer calls on behalf of the Department
from April 2020 through April 2021.
0
10
20
30
40
50
60
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
Jan² Feb² Mar Apr May Jun
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr
2020
2021
Average Calls per Caller
Monthly Call Volume
Total Calls¹
Average Calls Per Caller
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UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
EXHIBIT 3.2. MONTHLY AVERAGE CONTRACT STAFFING FOR
UNEMPLOYMENT BENEFITS CONTRACTED CALL CENTER
APRIL 2020 THROUGH APRIL 2021
SOURCE: Office of the State Auditor analysis of data from the Department of Labor and Employment’s contracted
call center.
Conversion Calls handles simple customer service calls, such as helping
individuals complete and submit a claim for unemployment benefits.
However, these contracted staff refer more complex calls, such as about
a potentially fraudulent claim filed in their name, to Department
customer service staff to handle.
Despite contracting with a call center, at times during the pandemic the
Department has had difficulty addressing the volume of calls received.
As a result, more than 95 percent of inbound callers between April and
July 2020, did not have their call answered, were disconnected while in
the queue, or received a busy signal. EXHIBIT 3.3 shows the number of
calls that the Department and its contractor received from April 2020
through April 2021, including the percentage that were answered,
disconnected while waiting in the queue, or resulted in a busy signal for
the caller.
79
90
60
102
117
81
55
50
126
262
384
406
438
0
50
100
150
200
250
300
350
400
450
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
2020
2021
Number of Contratcor Staff
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REPORT OF THE COLOR
A
DO STA
T
E A
U
DITOR
EXHIBIT 3.3. UNEMPLOYMENT-RELATED INBOUND CALLS ANSWERED,
DISCONNECTED IN QUEUE, OR THAT RESULTED IN BUSY SIGNALS
APRIL 2020 THROUGH APRIL 2021
SOURCE: Office of the State Auditor analysis of data from the Department and its contracted call center.
The Department’s previous contract with Conversion Calls ended on
October 31, 2021. The Department told us that it continues to see call
volumes in excess of what it feels its current internal staff can handle,
despite having increased its internal call center staffing to 170. The
Department stated that it had planned to transition its call center
operations to a new in-house team, which would perform a similar role
to that which Conversion Calls performed during the pandemic.
However, the Department was unable to recruit adequate staffing to
establish this new team in time for the end of the contract with
Conversion Calls. As a result, the Department competitively bid a
contract for external call center services and signed a new contract with
Conversion Calls in October 2021.
As the Department has developed a plan to address ongoing call
volume, we do not have a recommendation related to how the
Department could better handle the unprecedented call volume it
received. However, we found that the Department needs to improve its
customer service and operations related to addressing complaints from
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Jan
Feb
Mar
Apr
2020
2021
Percent of Inbound Calls
Calls Answered
Disconnected
Busy Signal
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UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
customers, whether they are handled by a contractor or internally by
Department staff. The remainder of this section includes our finding
and recommendation related to complaint management.
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REPORT OF THE COLORADO STATE AUDITOR
COMPLAINT
MANAGEMENT
As the State agency responsible for helping people who have lost their
jobs by providing them temporary wage replacement through
unemployment benefits, the Department told us that it receives various
types of complaints from individuals who are seeking unemployment
benefits. For example, the Department receives complaints from
individuals who do not like the ID.me identification verification
process, have concerns about the dollar amount of benefits they receive
or the timing of their benefits, or have concerns about call center
customer service and wait times.
To submit a complaint related to unemployment benefits or related
processes, from July 2020 to May 2021, individuals could call the
Department’s call center contractor, Conversion Calls, and request a
call back from a Department or Conversion Calls’ staff member via a
virtual assistant; wait in the queue to speak with a Conversion Calls’
call center agent; or email the Department. During this timeframe, the
Department’s internal call center was not accepting any live inbound
calls. In February 2021, the Department added an online complaint
form on its website for individuals to submit a complaint specifically
about contracted call center staff. In May 2021, in addition to contract
staff answering inbound calls, the Department’s internal call center also
began answering inbound calls from customers, which could include
complaints.
According to Department staff, they handle complaints about
unemployment benefits internally as needed, and forward complaints
that specifically relate to call center staff behavior, such as staff
unprofessionalism, to Conversion Calls for resolution as the contractor
deems appropriate. According to the Department, Conversion Calls
reports the actions it takes on these complaints to the Department.
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UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
WHAT WAS THE PURPOSE OF THE
AUDIT WORK AND HOW WERE THE
RESULTS MEASURED?
The purpose of the audit work was to evaluate the Department’s
processes for managing all types of unemployment benefits-related
complaints from claimants and potential claimants based on the
following:
STATE AGENCIES THAT SERVE THE PUBLIC, SUCH AS THE DEPARTMENT,
SHOULD MONITOR AND RESOLVE COMPLAINTS. According to the
Department’s 2021 Performance Plan, it strives to provide the best
customer service, operating in the most efficient way possible. As a
state agency that serves the public, it is reasonable to expect that the
Department would have complaint management processes that
include consistent methods to track, investigate, and resolve
complaints in a manner that ensures they do not reoccur. According
to U.S. Executive Order 12862 on Customer Service Standards,
which applies to federal agencies, it is a best practice for government
agencies to provide services in a manner that seeks to meet customer
service standards, including making complaint reporting methods
easily accessible for those who may wish to file a complaint and
providing a means to address complaints. As an entity that uses
federal funds to administer its unemployment program and to
provide unemployment benefits, this is a best practice the
Department could benefit from applying to its own operations.
Additionally, according to the Department’s 2021 and 2022
Performance Plans, staff within its Division of Unemployment
Insurance (Division) are responsible for providing efficient
maintenance and retention of unemployment benefits related
correspondence, which would include complaints.
AS A BEST PRACTICE, MANAGEMENT SHOULD USE QUALITY COMPLAINT
DATA TO IMPROVE OPERATIONS. Complaint management is an
essential component of customer service because it can help the
Department gather valuable insight from claimants and help identify
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REPORT OF THE COLORADO STATE AUDITOR
changes needed to improve service delivery and operations, and
increase customer satisfaction. In Colorado, the State Controller
requires all state agencies to follow the U.S. Government
Accountability Office’s (GAO) Standards for Internal Control,
known as the Green Book, which requires management to “use
quality information to achieve the entities’ objectives” and “make
informed decisions and evaluate the entity’s performance in
achieving key objectives and addressing risks” [Section 13, GAO
Green Book]. Based on the Green Book guidance, we would expect
the Department to maintain and use complaint information to help
it identify operational risks and achieve its objectives related to
providing unemployment benefits. Additionally, according to the
National Performance Review Best in Business Study, it is a best
practice for government agencies to analyze and use data for
continuous improvement, because agencies “can’t improve what
[they] don’t measure” [Federal Benchmarking Consortium Study
Report, 1997]. For example, the Department can improve operations
by collecting data on complaints, analyzing common topics or
themes, and using the analysis to identify and address systemic
problems.
WHAT AUDIT WORK WAS PERFORMED,
WHAT PROBLEMS WERE IDENTIFIED,
AND WHY DO THESE PROBLEMS
MATTER?
Overall, we found that the Department does not have effective
complaint management processes that address the concerns of claimants
and potential claimants, including problems that they may experience
when applying for and receiving unemployment benefits. Specifically,
we found:
THE DEPARTMENT DOES NOT COLLECT OR MAINTAIN DATA ON ALL
COMPLAINTS RECEIVED. We requested Department data on all
complaints that both the Department and its call center contractor
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UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
had received from January 2020 through April 2021. The
Department reported to us that it did not have any data on the
complaints that it received that were unrelated to its contracted call
center, such as claimant complaints about their benefits, processes
for claiming benefits, or the Department’s staff and internal call
center. According to Department staff, the Department also does not
keep information on any complaints received through phone calls or
email.
Further, the Department did not have data on any complaints related
to its contracted call center that it received prior to February 22,
2021, and did not have any data on complaints that Conversion Calls
received directly. The Department only had data for the 4,864
complaints that it received through its online form for call center
complaints between February 22, 2021, and April 30, 2021, which
did not represent complete data for March and April 2021.
When the Department does not have data on all complaints, it does
not know the reason for or subject of the complaints, how many it
has received, or whether they have been addressed. For example, the
Department does not have complete information on the various
issues the public is facing when applying for unemployment benefits
or submitting claims for benefits, and cannot leverage that data to
resolve and prevent recurring issues.
THE DEPARTMENT TOOK NO ACTION TO RESOLVE MOST COMPLAINTS
THAT IT HAD TRACKED. We reviewed the only complaint data that the
Department had available—the data for the 4,864 complaints related
to its call center and received through the online form—and found
that the Department did not resolve, or require its contractor to
resolve, 3,977 of them (82 percent). Department staff told us that
nothing was done with most of the online form complaints because
they related to topics other than the contracted call center staff’s
behavior.
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REPORT OF THE COLORADO STATE AUDITOR
We analyzed the information that the Department had for these
3,977 unaddressed online complaints, which was a text narrative of
each complaint, and confirmed that they did not relate to contracted
call center staff behavior; many of them related to a variety of other
unemployment benefits and customer service issues that warranted
resolution. For example, 691 of the unaddressed online complaints
related to long hold times when claimants called for help with
submitting a claim, 561 related to claimants having trouble accessing
benefits, and 220 related to claimants’ calls getting disconnected
from calls with the Department or the contracted call center.
When the Department does not resolve complaints or require its
contractor to resolve complaints, it cannot ensure that the problems
are addressed in a manner that prevents reoccurrence. Some of the
complaints were from individuals who had submitted a claim for
unemployment benefits, but had not received the amount of benefits
that they thought they should have received. According to the
Department’s Fiscal Years 2021 and 2022 Performance Plans, the
Division should provide unemployment benefits in a fair, timely,
accurate, and efficient manner to the citizens of Colorado to stabilize
the workforce and minimize the impact of unemployment on the
state’s economy. Unresolved complaints about benefits could
ultimately affect not only the claimants, but the State’s economy
when individuals do not have funds available to purchase the goods
and services they need.
DEPARTMENT LACKS DATA ON ACTIONS TAKEN AND TIMELINESS OF
COMPLAINT RESOLUTION. Not only did the Department not
document actions taken to resolve all complaints unrelated to its
contracted call center, but the Department had no evidence that the
contractor took action to resolve 326 of the 887 (37 percent) online
complaints that the Department had tracked as resolved from
February 2021 to April 2021. Based on Department documentation,
the contractor reported to the Department that it resolved 561
complaints by coaching, monitoring, or firing the employee who was
the subject of the complaint.
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UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
In addition, we found that the Department tracked the timeliness of
the contractor’s actions to resolve complaints for only 28 of the 887
(3 percent) complaints that the contractor reported as having been
resolved. For these 28 complaints, we determined that the contractor
resolved them within 2 days of receipt.
When there is no evidence that most complaints are resolved timely
or at all, the Department cannot ensure that its contractor or staff
provide appropriate customer service, and delays in resolving
complaints reduce the Department’s ability to prevent the problems
from reoccurring.
THE DEPARTMENT DOES NOT UTILIZE COMPLAINT FEEDBACK TO MAKE
IMPROVEMENTS. We found that the Department does not analyze the
limited complaint data that it maintains to understand the feedback
that claimants and potential claimants are providing or the common
or ongoing problems that they may be experiencing. According to
Department staff, they feel they know the types of complaints that
individuals have about unemployment benefits, and have other
processes to identify problems such as by communicating with staff
and monitoring the functionality of systems, so the staff have not
analyzed or used information on customer complaints to identify and
make improvements.
When the Department does not analyze complaint data, it may be
slow to identify or fail to identify process problems that may only be
readily apparent from the claimant perspective. For example, 220 of
the unresolved complaints received through the online complaint
form referenced claimants being disconnected while waiting in the
call center queue. This included 44 complaints from individuals who
said they were on hold for over 2 hours and then were disconnected.
The Department told us that it thought most disconnected calls were
likely due to the individuals getting enough information on the pre-
recorded audio played during the hold time that they no longer
needed to stay on hold. However, the many complaints suggest that
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REPORT OF THE COLORADO STATE AUDITOR
the individuals did not choose to disconnect, and perhaps they were
disconnected by staff or the Department’s or Conversion Calls’
phone system.
In addition, if the Department had reviewed the limited complaint
data that it maintained, it might have identified one problem that we
identified by looking at the data. From the complaint data, we saw
that a few individuals said that they did not receive the callbacks
from Department or call center staff that they were promised, and as
a result, they called the call center multiple times. If the Department
had reviewed the online complaints and saw the issue with the
Department or call center staff not making requested callbacks, it
could have taken steps to address this problem, which may have
reduced the number of inbound calls. Based on the Department’s call
center data, we identified 40,133 individuals who called the call
center more than 100 times in a single day between March and July
2020, in an attempt to get help.
WHY DID THESE PROBLEMS OCCUR?
LACK OF COMPLAINT MANAGEMENT POLICIES AND PROCEDURES.
Neither prior to or during the pandemic has the Department had written
complaint management policies or procedures to track, investigate, and
resolve complaints related to unemployment benefits or the
Department’s internal call center; the Department only has an informal,
unwritten process to collect complaints about Conversion Calls’ staff
behavior and forward those complaints to the contractor. For example,
the Department has no policies or procedures to document or resolve
the complaints that it receives through phone calls and emails that are
unrelated to call center staff. In fact, one Department staff told us that
they stopped collecting complete information on complaint resolutions
from the online form in March 2021 when they became overwhelmed
by the number of complaints coming into the Department and they were
unclear whether the Department was planning to do anything with the
complaint data.
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UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
The Department also does not have any provisions in its contract with
Conversion Calls requiring the contractor to track or resolve the
complaints that Conversion Calls receives directly. To the extent that
the Department contracts with an entity for a call center function, in the
future, it should ensure that the contract with the entity requires the
contractor to track and maintain all complaint data and report the
information to the Department.
LACK OF PROCESS TO ANALYZE AND UTILIZE AGGREGATE COMPLAINT
DATA. The Department has not developed a process to analyze the types
of complaints received or complaint data in aggregate, and use that
information to improve its business processes. For example, the
Department could assign staff to analyze aggregate complaint data to
identify trends that indicate ongoing problems, such as with benefits
payments or claimants being disconnected from calls. These
Department staff could also provide regular updates on complaint
trends to management so that it can ensure that complaints are being
resolved timely, take corrective action when needed, and identify areas
for improvement that the Department may not identify without
reviewing feedback from claimants.
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REPORT OF THE COLORADO STATE AUDITOR
RECOMMENDATION 3
The Department of Labor and Employment (Department) should
improve the Division of Unemployment Insurance’s complaint
management by:
A Developing and implementing policies and procedures for tracking,
investigating, and resolving all complaints timely, and maintaining
data about the resolutions.
B Ensuring that any future contracts for call center services require the
contractor to maintain data on all complaints that the contracted
call center receives, and report the information to the Department.
C Analyzing aggregate complaint data periodically to identify
common complaints and ongoing problems, identify areas for
improvement, report the results to management, and take corrective
action as appropriate.
RESPONSE
DEPARTMENT OF LABOR AND
EMPLOYMENT
A AGREE. IMPLEMENTATION DATE: MARCH 2022.
The Department commits to developing and implementing policies and
procedures for tracking, investigating, and resolving all complaints timely and
maintaining data about the resolutions. We will target this to go into effect by
March 31, 2022.
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UNEMPLOYMENT INSURANCE BENEFITS, PERFORMANCE AUDIT– NOVEMBER 2021
B AGREE. IMPLEMENTATION DATE: OCTOBER 2021.
The Department commits to ensuring that any future contracts for
call center services require the contractor to track and maintain data
on all complaints that the contracted call center receives and provide
this information to the Department. The Department recently
awarded a call center contract in late October 2021, and this
language was included.
C AGREE. IMPLEMENTATION DATE: MARCH 2022.
The Department commits to developing and implementing a process
to analyze aggregate complaint data periodically to identify
common complaints and ongoing problems, identify areas for
improvement, report the results to management, and take corrective
action as appropriate. We will target this to go into effect by March
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