The U.S. Department of Labor Did Not Meet the Requirements for Compliance with the Payment Integrity Information Act

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Report No. 22-22-007-13-001 of the U.S. Department of Labor Office of Inspector General, The U.S. Department of Labor Did Not Meet the Requirements for Compliance with the Payment Integrity Information Act for FY 2021, issued July 01, 2022 as a report to the Office of the Chief Financial Officer. KPMG LLP's report was prepared under contract with the Office of Inspector General. The report states that KPMG concluded the Department met three of the requirements for compliance for the unemployment insurance (UI) program and all six requirements for the Federal Employees Compensation Act program. It states that KPMG determined Requirement 3 was not met for the UI program.

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“The U.S. Department of Labor Did Not Meet the Requirements for Compliance with the Payment Integrity Information Act.” Original at www.oig.dol.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/078-22-22-007-13-001-72b4dd7335/, SHA-256 8843b4c4e6c681e2790e36444e7617561be69e9bcdabad1d52231f7077013a4f.

Full text

REPORT TO THE OFFICE OF THE
CHIEF FINANCIAL OFFICER

THE U.S. DEPARTMENT OF LABOR
DID NOT MEET THE REQUIREMENTS
FOR COMPLIANCE WITH THE
PAYMENT INTEGRITY INFORMATION
ACT FOR FY 2021

KPMG LLP’s report included herein was prepared under contract
with the U.S. Department of Labor, Office of Inspector General, and
by acceptance, it becomes a report of the Office of Inspector
General.

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

DATE ISSUED: July 01, 2022
REPORT NUMBER: 22-22-007-13-001
U.S. Department of Labor – Office of Inspector General

TABLE OF CONTENTS

INSPECTOR GENERAL’S REPORT........................................................... 1

CONTRACTOR PERFORMANCE AUDIT REPORT ................................... 5

Background ....................................................................................... 9

Objectives, Scope and Methodology ............................................... 11

Results and Conclusions ................................................................ 13

Findings and Recommendations..................................................... 17

APPENDIX: AGENCY’S RESPONSE TO THE REPORT ......................... 22

-i-
U.S. Department of Labor Office of Inspector General
Washington, D.C. 20210

INSPECTOR GENERAL’S REPORT

July 1, 2022

Mr. Kevin Brown
Deputy Chief Financial Officer
U.S. Department of Labor
200 Constitution Ave, NW
Washington, DC 20210

The United States Department of Labor (DOL) Office of Inspector General (OIG)
contracted with the independent certified public accounting firm of KPMG LLP
(KPMG) to conduct a performance audit related to DOL’s compliance with the
Payment Integrity Information Act (PIIA) of 2019 for Fiscal Year (FY) 2021, which
was the year ended September 30, 2021.

The objective of KPMG’s performance audit was to evaluate DOL’s compliance
with the requirements of PIIA as defined in Title 31 of the United States Code
(U.S.C.), section 3351.2. This included determining whether DOL:

(1) Published improper payments information with the annual financial
statement of DOL for the most recent fiscal year, and posted on the
website of DOL that statement and any accompanying materials
required under guidance 1 of the Office of Management and Budget
(OMB);

(2) Conducted a program-specific risk assessment for each program or
activity that conforms with the requirements of section 3352(a) (if
required);

(3) Published improper payment estimates for all programs and
activities identified under section 3352(a) in the accompanying

1 OMB Circular A-123, Appendix C, Requirements for Payment Integrity Improvement

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materials to the annual financial statement (if required);

(4) Published programmatic corrective action plans prepared under
section 3352(d) that DOL may have in the accompanying materials
to the annual financial statement;

(5) Published improper payments reduction targets established under
section 3352(d) that DOL may have in the accompanying materials
to the financial statement for each program or activity assessed to
be at risk, and has demonstrated improvements and developed a
plan to meet the reduction targets; and

(6) Reported an improper payment rate of less than 10 percent for
each program and activity for which an estimate was published
under section 3352(c).

KPMG addressed this criteria in relation to DOL’s unemployment insurance (UI)
program and the Federal Employees Compensation Act (FECA) program. KPMG
concluded DOL met three of the requirements for compliance with PIIA for the UI
program and all six requirements for the FECA program, as shown in the table
below.

Table 1: OMB Compliance Status Table 2

Criteria Met?
Federal
Unemployment Employees’
OMB Compliance Criteria
Insurance Compensation
Act
Published payment integrity information with the
annual financial statement and in the accompanying
materials to the annual financial statement of the YES YES
agency for the most recent FY in accordance with
1
OMB guidance;
Posted the annual financial statement and
accompany materials required under guidance of YES YES
OMB on the agency website
Conducted improper payment risk assessments for
each program with annual outlays greater than YES YES
$10,000,000 at least once in the last three years
2 Adequately concluded whether the program is likely
to make Improper Payments (IP) and Unknown
YES YES
Payments (UP) above or below the statutory
threshold
Published IP and UP estimates for programs
susceptible to significant IPs and UPs in the
3 NO YES
accompanying materials to the annual financial
statement;

2 This table, which presents the specific details of each PIIA criteria, is required by OMB Circular

A-123, Appendix C, Requirements for Payment Integrity Improvement.

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Criteria Met?
Federal
Unemployment Employees’
OMB Compliance Criteria
Insurance Compensation
Act
Published corrective action plans for each program
for which an estimate above the statutory threshold
4 YES YES
was published in the accompanying materials to the
annual financial statement
Published an IP and UP reduction target for each
program for which an estimate above the statutory
YES YES
threshold was published in the accompanying
materials to the annual financial statement
5 Demonstrated improvements to payment integrity or
NO YES
reached a tolerable IP and UP rate
Developed a plan to meet the IP and UP reduction
target YES YES
Reported an IP and UP estimate of less than 10
percent for each program for which an estimate was
6 NO YES
published in the accompanying materials to the
annual financial statement

KPMG determined Requirement 3 was not met for the UI program. DOL reported
the Federal State Unemployment Insurance (SUI) program, which included
Federal Pandemic Unemployment Compensation (FPUC) payment activity, and
the Pandemic Emergency Unemployment Compensation (PEUC) program
collectively as one program—the unemployment insurance (UI) program—for
fiscal year (FY) 2021 with approval from OMB. DOL also utilized the improper
payment rate derived from the SUI program to calculate the improper payments
for the combined outlays of the UI program. However, this methodology did not
take into account that a portion of FPUC outlays were associated with Pandemic
Unemployment Assistance (PUA) claims rather than SUI claims. The impact of
including the portion of FPUC activity related to PUA claims could not be
determined because the PUA improper payment was not required to be reported
for FY 2021.

For Requirement 5, KPMG noted the UI program did not demonstrate
improvement from the improper payment target rate published in FY 2020, as the
overall improper payment rate increased from FY 2020. DOL reported an 18.71
percent improper payment rate and an unknown rate of 0.21 percent in FY 2021
for the UI program—compared to improper payment rate of 9.17 percent 3 in FY
2020. As the sum of these rates is above 10 percent, the UI program also did not
meet Requirement 6.

3 An unknown rate was not required to be reported for FY 2020.

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We appreciate the cooperation and courtesies the Office of the Chief Financial
Officer, Employment and Training Administration, and Office of Workers’
Compensation Programs extended KPMG and the OIG during this audit.

Carolyn R. Hantz
Assistant Inspector General for Audit

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CONTRACTOR PERFORMANCE AUDIT REPORT

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Secretary and Inspector General
U.S. Department of Labor

This report presents the results of our work conducted to address the
performance audit objective related to the United States Department of Labor’s
(DOL) compliance with the requirements contained in the Payment Integrity
Information Act of 2019 (hereinafter referred to as PIIA). Our work was primarily
performed during the period of December 17, 2021, through May 18, 2022, and
our scope period was for the fiscal year ended September 30, 2021.

We conducted this performance audit in accordance with Government Auditing
Standards issued by the Comptroller General of the United States, and the
American Institute of Certified Public Accountants’ (AICPA) Standards for
Consulting Services. Government Auditing 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 the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.

The objective of our audit was to evaluate DOL’s compliance with the
requirements of PIIA as defined in Title 31 of the United States Code (U.S.C.),
section 3351.2. This included determining whether DOL:

(2) Conducted a program-specific risk assessment for each program or
activity that conforms with the requirements of section 3352(a) (if
required);

(3) Published improper payment estimates for all programs and
activities identified under section 3352(a) in the accompanying
materials to the annual financial statement (if required);

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(4) Published programmatic corrective action plans prepared under
section 3352(d) that DOL may have in the accompanying materials
to the annual financial statement;

(6) Reported an improper payment rate of less than 10 percent for
each program and activity for which an estimate was published
under section 3352(c).

Based on the performance audit procedures conducted and the results obtained,
we have met our audit objective. Specifically, we evaluated DOL’s compliance
with PIIA and determined the following:

Table 2: PIIA Criteria

Criteria Met?
Federal
Unemployment Employees’
PIIA Criteria
Insurance Compensation
Act
Published improper payments information with
the annual financial statement of DOL for the
most recent fiscal year, and posted on the
1 YES YES
website of DOL that statement and any
accompanying materials required under
guidance of OMB
Conducted a program-specific risk assessment
2 for each program or activity that conforms with YES YES
the requirements of section 3352(a) (if required)
Published improper payment estimates for all
programs and activities identified under section
3 NO YES
3352(a) in the accompanying materials to the
annual financial statement (if required)
Published programmatic corrective action plans
prepared under section 3352(d) that DOL may
4 YES YES
have in the accompanying materials to the
annual financial statement

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Criteria Met?
Federal
Unemployment Employees’
PIIA Criteria
Insurance Compensation
Act
Published improper payments reduction targets
established under section 3352(d) that DOL
may have in the accompanying materials to the
5 financial statement for each program or activity NO YES
assessed to be at risk, and has demonstrated
improvements and developed a plan to meet the
reduction targets
Reported an improper payment rate of less than
10 percent for each program and activity for
6 NO YES
which an estimate was published under section
3352(c)

We noted, with approval from OMB, DOL reported the Federal State
Unemployment Insurance (SUI) program, which included the Federal Pandemic
Unemployment Compensation (FPUC) payment activity, and the Pandemic
Emergency Unemployment Compensation (PEUC) program collectively as one
program—the unemployment insurance (UI) program—for fiscal year (FY) 2021.
In reporting the improper payment information for the PEUC and FPUC outlays,
DOL utilized the improper payment rate obtained from its Benefit Accuracy
Measurement sampling methodology for the SUI program. However, as noted in
the Findings and Recommendations section of our report, this methodology did
not consider that a portion of FPUC outlays were associated with Pandemic
Unemployment Assistance (PUA) claims rather than SUI claims. The impact of
including the portion of FPUC activity related to PUA claims could not be
determined because the PUA improper payment information was not required to
be reported for FY 2021.

This performance audit did not constitute an audit of financial statements or an
attestation-level engagement as defined under Government Auditing Standards
or AICPA professional standards. KPMG cautions that projecting the results of
our evaluation to future periods is subject to the risk that controls may become
inadequate because of changes in conditions or because compliance with
controls may deteriorate. This report is intended solely for the use of the DOL
Secretary and Inspector General, Comptroller General of the United States,
OMB, and relevant congressional committees. It is not intended to be, and
should not be, relied upon by anyone other than these specified parties.

July 1, 2022

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BACKGROUND

The PIIA requires federal agencies to identify programs susceptible to significant
improper payments, estimate the improper payments for those programs, and
report on actions to reduce the improper payments in those programs. PIIA
repealed several previous improper payment statutes, including the Improper
Payments Information Act of 2002, as amended by the Improper Payments
Elimination and Recovery Act of 2010, and the Improper Payment Elimination
and Recovery Improvement Act of 2012. OMB is required to prescribe guidance
on implementation of the requirements under PIIA. OMB Circular No. A-123
Appendix C, Requirements for Payment Integrity Improvement, dated March 5,
2021, was the applicable OMB guidance in effect for FY 2021.

DOL established an agency-wide risk assessment process to assess its
programs with outlays over $10 million for susceptibility to significant improper
payments. Each year, DOL assesses one third of all its programs to ensure each
program is assessed at least once every three years. DOL’s policies define
significant improper payments as gross annual payments exceeding: (1) both
1.5 percent and $10 million of all program payments; or (2) $100 million
regardless of percentage of program payments, which complies with the relevant
OMB guidance 4.

Based on its risk assessment process, DOL reported four programs that were
susceptible to significant improper payments in FY 2021. The programs identified
were:

• the Federal State Unemployment Insurance (SUI) program, which
included Federal Pandemic Unemployment Compensation (FPUC)
outlays;
• the Pandemic Emergency Unemployment Compensation (PEUC)
program;
• the Pandemic Unemployment Assistance (PUA) program; and
• the Federal Employees’ Compensation Act (FECA) program.

In accordance with OMB guidance, improper payment information was not
required to be reported for the PEUC and PUA programs until FY 2022 because
they were not determined to be susceptible to significant improper payments5

4 OMB Circular A-123, Appendix C, Requirements for Payment Integrity Improvement
5 OMB Circular No. A-123 Appendix C, Part II.C.2: When an agency determines through the IP
[improper payment] risk assessment that the total annual IPs PLUS the UPs [unknown
payments] for the program are likely to be above the statutory threshold, the program will report
an IP and UP estimate in the FY following the FY in which the risk assessment determination
was made.

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until FY 2021; however, DOL elected to report information for the PEUC program
in combination with the SUI program for FY 2021.

We noted that the improper payment information for the SUI program, including
FPUC outlays, and the PEUC program were collectively reported as one program
(hereinafter referred to as the UI program) for FY 2021.

The programs for which improper payment information was reported in FY 2021
are described further below.

UI Program

The UI program (i.e., SUI, FPUC and PEUC) provides partial wage replacement
for eligible unemployed workers who become unemployed through no fault of
their own and meet certain other eligibility requirements. The state workforce
agencies (SWA) for each U.S. state, the District of Columbia, and certain U.S.
territories administer their own UI program under guidelines established by
federal statute.

The UI program year runs from July 1 through June 30. For the 2021 program
year, DOL reported total outlays of $413.0 6 billion, estimated improper payments
of $77.26 billion and unknown payments 7 of $864.6 million for the UI program. As
previously noted, DOL was not required to report any PUA improper payment
information for FY 2021. The PUA program outlays totaled $97.5 8 billion
(19 percent of total UI related outlays of $510.4 billion) for program year 2021.

The reported improper payment estimate for the UI program was developed from
the SUI program’s Benefit Accuracy Measurement (BAM) program. The BAM
program is a payment integrity assessment survey in which SWAs perform
quarterly audits on a sample of SUI benefit payments for every program year.
Each SWA is expected to review a sample of 360-480 claims every year,
resulting in approximately 24,000 audited claims for the annual survey. The
SWAs report their survey results in the BAM database, and this data is then
analyzed to determine the national improper payment rate and related causes for
the program year. The results of the analysis are then applied to total outlays and
reported as required. The sample sizes ranged from 72 to 520 claims for states,
resulting in approximately 22,430 claims for the program year 2021 analysis.

6 Source: DOL FY 2021 improper payment information reported on PaymentAccuracy.gov
7 OMB Circular No. A-123 Appendix C defines an unknown payment as: A payment that could be

either proper or improper, but the agency is unable to discern whether the payment was proper or
improper as a result of insufficient or lack of documentation.
8 Source: ETA data downloads: ETA 2112 reports for the period July 1, 2020 through June 30,

2021; data as of May 2, 2022.

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With approval from OMB, DOL reported the SUI program, including the FPUC
outlays, and the PEUC program collectively as one UI program for its FY 2021
improper payments reporting. To develop the gross improper payment amount
for the combined UI program, DOL used the SUI improper payment rate based
on its BAM sampling methodology, and applied it to the outlays for SUI, FPUC,
and PEUC.

FECA Program

The FECA program provides workers compensation coverage (i.e., wage-loss
compensation and payment for medical treatment) to federal and postal workers
for employment-related injuries and occupational diseases. DOL’s Division of
Federal Employees’ Compensation manages the FECA program. For the
2021 program year, the FECA program reported total outlays of $2.9 9 billion,
estimated improper payments of $79.219 million, and unknown payments of $2.5
million.

The improper payment estimate was developed from a random sample of
approximately 500 medical and 500 compensation payments from the FECA
program. The payments were assessed against the program’s criteria, and the
supporting documentation was maintained in the electronic case management
system. Results from the sample were then extrapolated over the entire
population to determine the improper payment rate.

OBJECTIVES, SCOPE, AND METHODOLOGY

The objective of our audit was to evaluate DOL’s compliance with the
requirements of PIIA as defined in Chapter 33 of Title 31, U.S.C. section 3351.2.
This included determining whether DOL:

(2) Conducted a program-specific risk assessment for each program or
activity that conforms with the requirements of section 3352(a) (if
required);

(3) Published improper payment estimates for all programs and activities
identified under section 3352(a) in the accompanying materials to the
annual financial statement (if required);
9 Source: DOL FY 2021 information reported on PaymentAccuracy.gov

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(4) Published programmatic corrective action plans prepared under
section 3352(d) that DOL may have in the accompanying materials to
the annual financial statement;

(5) Published improper payments reduction targets established under
section 3352(d) that DOL may have in the accompanying materials to
the financial statement for each program or activity assessed to be at
risk, and has demonstrated improvements and developed a plan to
meet the reduction targets; and

(6) Reported an improper payment rate of less than 10 percent for each
program and activity for which an estimate was published under
section 3352(c).

SCOPE AND METHODOLOGY

The scope of our performance audit was DOL’s FY 2021 improper payment
reporting data required under guidance of the OMB reported on
PaymentAccuracy.gov.

During our planning and testing phases, we conducted interviews, collected and
inspected auditee-provided documentation and evidence, and participated in
process and control walkthroughs with the programs identified as susceptible. A
summary of the procedures we performed is as follows:

• Obtained an understanding of DOL’s improper payments reporting
process and associated controls through inquiries with
management;
• Reviewed DOL’s policies and procedures over the PIIA reporting
process;
• Reviewed management’s agency-wide risk assessment for all
agency disbursements/programs;
• Reviewed applicable legislation and regulations, increases in
funding levels, or changes to the program-specific risk assessment
process for each program or activity;
• Reviewed the statistically-determined improper payments estimates
for each program deemed susceptible to improper payments and
the underlying sampling methodologies;
• Confirmed and reviewed a sample of SWA-submitted BAM claims
data
• Reviewed FECA benefit payments;
• Reviewed DOL’s corrective action plans as reported on the
PaymentAccuracy.gov website; and

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• Obtained any OMB waivers/exemptions for improper payments
reporting, as applicable.

In carrying out this methodology, we obtained sufficient, appropriate evidence to
provide a reasonable basis for our conclusions related to our audit objective.

RESULTS AND CONCLUSIONS

Based on our audit procedures performed, we determined DOL met three of the
six PIIA compliance requirements. See below for additional details of our results.

• Requirement 1 – Determine if DOL published improper payments
information with the annual financial statement of DOL for the most recent
fiscal year, and posted on the website of DOL that statement and any
accompanying materials required under guidance of OMB.

Yes. DOL published its annual financial statements in its Agency Financial
Report (AFR) for FY 2021 on November 19, 2021 and posted the AFR on its
public-facing website. 10 The AFR included a Payment Integrity section with a link
to PaymentAccuracy.gov for the accompanying materials required under
guidance of the OMB. The information presented in accompanying materials
agreed to the supporting documentation.

• Requirement 2 – Determine if DOL conducted a program-specific risk
assessment for each program or activity that conforms with the
requirements of section 3352(a).

Yes. DOL conducted a risk assessment based on the requirements in the
applicable guidance issued by OMB. DOL continued to identify the SUI and
FECA programs as susceptible to improper payments.

DOL assessed 17 other programs as part of its FY 2021 risk assessment. As a
result, the PEUC and PUA programs were assessed as susceptible to improper
payments. The remaining 15 programs were identified as not susceptible to
significant improper payments. We noted DOL assessed the FPUC outlays as a
part of the SUI program and not as a separate program because the only
eligibility requirement was to have an eligible claim for SUI, PUA, or PEUC. The
remaining DOL programs were not assessed in FY 2021 because they were
evaluated within the last 2 years and were assessed as not susceptible to
significant improper payments.

10 Agency Financial Reports are available at: https://www.dol.gov/agencies/ocfo/resources

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• Requirement 3 – Determine if DOL published improper payment estimates
for all programs and activities identified under section 3352(a) in the
accompanying materials to the annual financial statement.

No. DOL published an improper payment rate of 18.71 11 percent for the
UI program, which resulted in an estimated $77.2 billion in reported gross
improper payments. Additionally, DOL published an unknown payment rate of
0.21 percent, which resulted in estimated unknown payments of $865 million.
These estimates were based on a statistical estimation approach that met a 95
percent confidence level, plus or minus 3 percent.

Figure 1: UI Improper and Unknown Payments

Source: DOL FY 2021 information reported on
PaymentAccuracy.gov

Although not required under OMB guidance to report improper payment
information for the PEUC program until FY 2022, DOL elected to report PEUC
program outlays as part of the SUI program in FY 2021. Additionally, as
previously mentioned, the FPUC outlays were included with the SUI program.
Separate estimated improper payment rates were not calculated or published for
the FPUC or PEUC outlays—rather OMB approved DOL’s methodology of
applying the SUI improper payment rate (determined using SUI BAM
methodology) to the combined SUI, FPUC, and PEUC outlays for the calculation
of the estimated gross improper payment.

11 Source: DOL FY 2021 information reported on PaymentAccuracy.gov

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DOL’s justification for this approach was that FPUC and PEUC outlays had
similar eligibility requirements to the SUI program. However, we noted DOL did
not consider that a portion of FPUC outlays were based on PUA claims rather
than SUI claims. Since this impact was not assessed or quantified, we
determined DOL did not meet this criterion. See the Findings and
Recommendations section for additional details.

The FECA program did comply with this requirement. DOL published 12 an
improper payment rate of 2.70 percent for the FECA program, which resulted in
an estimated $79.21 million in gross improper payments. Additionally, DOL
reported an unknown payment rate of .08 percent, which resulted in estimated
unknown payments of $2.54 million. These estimates were based on a statistical
estimation approach that met a 95 percent confidence level, plus or minus 3
percent.
Figure 2: FECA Improper and Unknown Payments

Source: DOL FY 2021 information reported on
PaymentAccuracy.gov

• Requirement 4 – Determine if DOL published programmatic corrective
action plans prepared under section 3352(d) that DOL may have in the
accompanying materials to the annual financial statement.

Yes. DOL reported corrective actions for each of the reported root causes in the
accompanying materials posted to PaymentAccuracy.gov. Specifically, DOL
reported corrective actions related to the following UI root cause categories:

12 Source: DOL FY 2021 information reported on PaymentAccuracy.gov

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Inability to Access Data/Information needed and Failure to Access
Data/Information needed. In addition, DOL reported corrective actions related to
the following FECA root cause categories: Data/Information Does Not Exist and
Inability to Access Data/Information.

• Requirement 5 – Determine if DOL published improper payments
reduction targets established under section 3352(d) that DOL may have in
the accompanying materials to the financial statement for each program or
activity assessed to be at risk, and has demonstrated improvements and
developed a plan to meet the reduction targets.

No. DOL did publish a FY 2022 UI improper and unknown payment reduction
target in the FY 2021 OMB payment integrity data call of 17.00 percent.
However, DOL did not meet the established FY 2021 UI improper payment
reduction target rate of 9.00 percent that was published in the DOL FY 2020
OMB payment integrity data call. DOL also did not demonstrate improvement to
the UI improper payment rate from the actual rate in FY 2020. The UI improper
payment rate increased from 9.17 percent to 18.71 percent.

Figure 3: UI Target and Actual Improper Payment Rates by Fiscal Year

Source: DOL FY 2021 information reported on PaymentAccuracy.gov

DOL published a FY 2022 FECA improper and unknown payment reduction
target in the FY 2021 OMB payment integrity data call of 3.18 percent.
Additionally, DOL did meet the established FY 2021 FECA improper payment
reduction target of 3.10 percent.

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Figure 4: FECA Target and Actual Improper Payment Rates by Fiscal Year

Source: DOL FY 2021 information reported on PaymentAccuracy.gov

Lastly, DOL developed plans for meeting the reduction targets for both the UI
and FECA program for FY 2022.

• Requirement 6 – Determine if DOL reported an improper payment rate of
less than 10 percent for each program and activity for which an estimate
was published under section 3352(c).

No. The UI program did not meet the requirement as the estimated improper
payment rate for the program was 18.71 percent, and the unknown rate was 0.21
percent, for a combined total rate of 18.92 percent. The FECA program met the
requirement with an estimated improper payment rate of 2.70 percent and
unknown payment rate of 0.08 percent, for a combined total rate of 2.78 percent.

FINDINGS AND RECOMMENDATIONS

We identified two findings, which are presented below.

Finding No. 21-01: Continued improvements needed to meet certain required
PIIA thresholds

As noted in the Results and Conclusions section above, DOL reported a
combined improper and unknown payment rate of 18.92 percent for the DOL UI
program, which exceeded the 10.00 percent threshold established by PIIA.

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Additionally, the UI program did not meet its FY 2021 target IP rate of 9.00
percent, demonstrating no improvement in the rate. As a result, DOL was not in
compliance with Requirements 5 and 6 of the PIIA.

PIIA Section 3351.Definitons (2), Compliance, states:

The term “compliance” means that the agency –

(E.) …has demonstrated improvements and developed a plan
to meet the reduction targets

(F.) has reported an improper payment rate of less than 10
percent for each program and activity for which an estimate
was published under section 3352(c).

UI management indicated compliance with the payment "when due" provisions of
Section 303(a)(1) of the Social Security Act creates structural issues resulting in
the barriers that impeded their ability to maintain a gross improper payment rate
of less than 10 percent related to the inability to access the necessary date or
information, and the failure to verify UI claimants’ return to work status.

Finding No. 21-02: Improvements needed in the development of improper
payment estimates

As previously noted in the Results and Conclusions section, DOL reported both
the FPUC outlays and PEUC program within the FY 2021 SUI program improper
payment information submitted on PaymentAccuracy.gov. DOL management
stated the FPUC and PEUC programs had similar program requirements as the
SUI program, and therefore determined it was appropriate to utilize the improper
payment rate generated by the existing BAM methodology for those outlays.
However, this method did not adequately consider the following factors with
regards to the FPUC program:

• The FPUC provided an additional payment to those claimants who were
deemed eligible to receive benefits under the SUI or PUA programs. As
such, the outlays used to calculate the reported UI gross improper
payment amount included outlays based on claims related to the PUA
program. PUA-derived FPUC outlays should have been excluded from
the calculation.

• Claimants were eligible for the additional FPUC outlays if they received
any benefit amount from the SUI, PUA, or PEUC programs. Therefore,
any portion of the improper payment rate derived from claims that were
paid correctly, at least in part, (e.g., underpayments or payments

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incorrectly calculated) would still have been eligible for the FPUC
payment. The impact of these identified errors should have been
removed from the improper payment rate used for the FPUC outlays.

As a result, DOL was not in compliance with Requirement 3 of the PIIA.

PIIA Section 3352, Estimates of improper payments and reports on
actions to reduce improper payments (c), Estimation of Improper Payments (1)
Estimation, states:

the head of the relevant executive agency shall—

(A) produce a statistically valid estimate, or an estimate that is
otherwise appropriate using a methodology approved by the
Director of the Office of Management and Budget, of the
improper payments made under the program or activity

OMB Circular No. A-123, Appendix C, Requirements for Payment Integrity
Improvement, dated March 5, 2021, Part II.B.1, states:

The main purpose of an IP estimate is to reflect the annual
estimated known IPs made by the program.

OMB Circular No. A-123, Appendix C, Requirements for Payment Integrity
Improvement, dated March 5, 2021, Part II.B.2, states:

The program will be responsible for producing an IP and UP
estimate that is accurate and appropriate given program
characteristics and it will be the OIG’s responsibility to evaluate
whether the explanation provided by the program and the S&EMP
[sampling and estimation methodology plan] without point estimates
and confidence intervals around those estimates warrants
compliance during the annual OIG compliance review.

DOL indicated they had discussed this approach with OMB and obtained
approval. However, the discussions did not include sufficient specific information
about the approach.

Recommendations

We recommend the Principal Assistant Secretary of ETA:

1. Maintain the current focus on increasing technical assistance and
funding to states to improve the improper payment reduction

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strategies in order to reduce the improper payments estimate rate
below the 10 percent threshold, and demonstrate improvement on
the rate; and

2. Revise the methodology used to calculate the improper payment
information for the FPUC program.

PRIOR YEAR RECOMMENDATIONS

The following recommendation was included in the report titled The U.S.
Department of Labor Complied with the Payment Integrity Information Act for
FY 2020, but Reported Unemployment Insurance Information Did Not Represent
Total Program Year Expenses, which was issued by the OIG on August 6,
2021. 13 We followed up with management on the status of the recommendations.

• Maintain management’s current focus on increasing its technical
assistance and funding to states to improve the improper payment
reduction strategies in order to reduce the improper payments
estimate rate below the 10 percent threshold.

Status: This finding was reissued in the current year.

• We recommend that DOL management develop procedures to
ensure changes to its improper payment process are
communicated to OMB in a timely manner and those
communications are properly maintained for subsequent review
and inspection.

Status: Closed. DOL implemented a requirement for agencies to
report changes prior to the certification date.

We discussed the findings and recommendations with management and received
their response, which is included in the appendix of this report. Management’s
response states the improper payment rate would “logically result in an
overestimate of IP dollars in the UI program.” However, as noted in our report,
the impact of including the portion of FPUC activity related to PUA claims could
not be determined because the PUA improper payment information was not
required to be reported for FY 2021. In addition, management’s response cites

13 The U.S. Department of Labor Complied with The Payment Integrity Information Act for FY

2020, but Reported Unemployment Insurance Information Did Not Represent Total Program Year
Expenses, Report No. 22-21-007-13-001 (August 6, 2021), available at:
https://www.oig.dol.gov/public/reports/oa/2021/22-21-007-13-001.pdf

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the OIG Semiannual Report to Congress. 14 Although that OIG report stated the
reporting of an IP rate that included the pandemic programs was consistent with
their recommendation, it also noted the rate would likely be higher than the
reported 18.71 percent. Furthermore, the OIG did not assess the
appropriateness of the methodology used in calculating the IP rate.

14 DOL OIG Semiannual Report to Congress, Volume 87, Oct. 1, 2021 – March 31, 2022.

https://www.oig.dol.gov/public/semiannuals/87.pdf

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APPENDIX: AGENCY’S RESPONSE TO THE REPORT

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

Online
http://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
Washington, DC 20210

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