State Ui Capping Report

Summary

Pandemic Response Accountability Committee insights report, Key Insights: State Pandemic Unemployment Insurance Programs, dated December 16, 2021, drawing on 44 state audit reports and DOL OIG work. It identifies four cross-cutting insights: unemployment insurance workloads surged for states, the claims surge exploited internal control weaknesses, uncommon and varying fraud schemes grew as federal funding expanded, and state workforce agencies faced information technology problems. It notes the federal government made almost $716 billion in pandemic unemployment benefits available, and that DOL OIG estimated improper payments, including fraud, of at least $39.2 billion as of January 2021. State examples include a 2,000 percent rise in Louisiana claims and about 12.5 million calls to the Kansas call center in April 2020.

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Pandemic Response
Accountability Committee
KEY INSIGHTS:
STATE PANDEMIC
UNEMPLOYMENT
INSURANCE
PROGRAMS
December 16, 2021

States Faced Challenges Implementing Pandemic
Unemployment Insurance Programs
This insights report, based on work completed by state audit
offices coupled with work completed by the Department of
Labor (DOL) Office of Inspector General (OIG), provides
detailed information about the challenges faced by state
workforce agencies (SWAs) to provide pandemic
unemployment insurance benefits to individuals directly
impacted by the pandemic.
The Pandemic Response Accountability Committee (PRAC) is
responsible for conducting and coordinating oversight of
pandemic-related funds and preventing and detecting fraud.
To accomplish this, the PRAC has actively engaged with State
Auditors regarding the oversight of federal pandemic funds
provided to their state. The purpose of this insights report is
to provide a contextual understanding of the cross-cutting
challenges states faced within their unemployment insurance
(UI) programs as well as highlight the substantial work that
has been done by State Auditors to ensure their states’ UI
programs are functioning effectively. This report examines
four common insights from UI findings identified across 16
State Auditor Offices:
•
UI workloads surged for states.
This claims surge exploited internal control
weaknesses.
Uncommon and varying fraud schemes began to occur
as the amount of federal funding expanded.
SWAs experienced information technology system
challenges.
•
•
•
See Appendix B for a list of all 17 offices and the 44 reports
reviewed for this report. The work completed for this insights
report complies with the Council of the Inspectors General on
Integrity and Efficiency’s Quality Standards for Federal Offices
of Inspectors General, which require that the work adheres to
the professional standards of independence, due professional
care, and quality assurance to ensure the accuracy of the
information presented.
Federal Pandemic
Unemployment Compensation
Under the Federal Pandemic
Unemployment Compensation
(FPUC) benefits program, individuals
receiving state unemployment
benefits automatically received
additional benefits. The total
additional benefits varied in amount
and availability during the pandemic.
Pandemic Emergency
Unemployment Compensation
The Pandemic Emergency
Unemployment Compensation
(PEUC) authorized additional federal
UI benefits for individuals who
exhausted state and federal UI
benefits, and who were able,
available, and actively seeking work,
subject to COVID-19-related
flexibilities.
Pandemic Unemployment
Assistance
The CARES Act created Pandemic
Unemployment Assistance (PUA) as a
temporary program for individuals
not otherwise eligible for UI benefits
(e.g., self-employed, independent
contractors, and gig economy
workers). To be eligible, individuals
certified that they met program
requirements to qualify for the
assistance.
page 2

Background
As a result of the COVID-19 pandemic, workers
across the country experienced unprecedented
levels of unemployment. According to the
Bureau of Labor Statistics, by April 2020 the
unemployment rate reached its peak at roughly
15 percent—the highest rate observed since
data collection began in 1948. While the
unemployment rate has dropped significantly, it
remains higher than pre-pandemic levels. In
response, the federal government created three
unemployment programs through the
Coronavirus Aid, Relief, and Economic Security
(CARES) Act designed to support Americans
experiencing joblessness: the FPUC, PEUC, and
PUA programs (see side bar on the previous
page for a description of these programs).
These programs extended, expanded, or
increased UI benefits, such as allowing people
not typically eligible to access benefits,
including self-employed workers, independent
contractors, and gig workers.
Through these programs, the federal government
has made almost $716 billion in unemployment
benefits available to states. On behalf of the
federal government, SWAs have been tasked
with implementing these pandemic UI programs.
The SWAs experienced significant challenges to
effectively provide their states with these
benefits due to the large amount of federal
funding for unemployment programs and the
influx of unemployment claims which included an
increase in fraudulent activity committed by bad
actors.
State Highlight | New York
The New York State Auditor found that the
employment rate in the tourism industry dropped
by a third and the arts/entertainment industry
dropped by more than half during the pandemic.
Previous work completed by DOL OIG identified
that UI programs generally have an improper
payment rate of at least 10 percent. Based on
this rate, in its May 2021 report, DOL OIG
estimated the total amount of improper
payments, including fraud, was at least $39.2
billion as of January 2021. In addition, the top
pandemic challenges report, issued by the PRAC
in February 2021, identified specific challenges
related to Preventing and Detecting Fraud
Against Government Programs and Informing
and Protecting the Public from Pandemic-
Related Fraud, which encompass and highlight
challenges within the pandemic UI programs.
Reports issued by DOL OIG as well as by State
Auditor Offices have identified similar, or cross-
cutting, challenges faced by SWAs in
implementing these programs.
page 3

Key Insight: Unemployment Insurance Workload Surged for States
As a result of the COVID-19 pandemic and
businesses closing their doors, SWAs
experienced a surge in UI claims—sometimes
doubling and tripling the number of claims
almost overnight—that limited or delayed the
response capabilities of states. This increase in
claims was ultimately the catalyst for many of
the other challenges that SWAs faced and
continued to face during the pandemic. Several
State Auditors reported on the increase in UI
claims 1  and how these claims ultimately
impacted the service the SWAs could provide.
California’s State Auditor reported
that its SWA experienced a dramatic
increase in unemployment claims—
comparing it to the number of
claims received following the Great Recession of
2008 and 2009, with over 2.5 million more
unemployment claims during the first half of
2020 alone.
The Louisiana Legislative Auditor
found that the unemployment rate
grew almost 8 percent between
February 2020 and April 2020. Even
more notably, Louisiana saw a 2,000 percent
increase of unemployment claims on April 25,
2020, compared to what they experienced on
February 29, 2020.
The Kansas Legislative Post Auditor
found that Kansas’ unemployment
rate increased 9 percent as a result
of the pandemic, from just 3 percent
in January 2020 to 12 percent in April 2020.
Kansas’ SWA also experienced a more than
1,000 percent increase in the state’s regular
unemployment claims between February 2020
and April 2020. Further, during April 2020
alone, there were roughly 12.5 million telephone
calls to the Kansas SWA customer service call
center.
The Washington State Auditor
highlighted that one week in March
2020 generated over 180,000
claims. For context, the Auditor
reported that only four times in the entirety of
2019 did weekly claims reach more than
10,000.
The Colorado State Auditor found
that during Fiscal Year 2020 its SWA
paid out more than 15 times its
typical amount of annual
unemployment benefits to recipients which
totaled $2.9 billion in federal funds and
$1.5 billion from the state’s regular UI program.
The Oklahoma State Auditor found
that its SWA paid out $2.2 billion in
unemployment benefits in Fiscal
Year 2020, ten times more than in
Fiscal Year 2019.
Not only did these spikes in claims occur at the
beginning of the pandemic, but the number of
claims still remain above “normal levels” (see
Figure 1 on the next page for claims data for
select states during calendar year 2020).
1 SWAs process federal and state unemployment
insurance claims. Claims data and totals in the State
Auditor reports did not always distinguish between the
two programs and total claims. The PRAC attempted to
make a distinction between these two programs when it
could.
page 4

Figure 1: Select State UI Claims Data, January 2020 through December 2020
Source: PRAC presentation of DOL’s Employment and Training Administration data.
page 5

 For example, the Ohio State Auditor
found that, while prior to March
2020 the state met the DOL’s
benchmark (87 percent) from
processing claimant’s first UI payment within two
weeks, in May 2020 roughly half the state’s first
payments took between 22 and 70 days. By
October 2020 the processing of approximately
40 percent of first payments had taken more
than 70 days. Further, the influx in claims forced
the Ohio SWA to hire a large number of
temporary staff. The temporary staff lacked
specialized training, which made it difficult for
the Ohio SWA to effectively use them to quickly
deal with the backlog of claims that required
staff intervention during 2020. According to the
Ohio State Auditor, DOL data indicated that while
Ohio’s timeliness of claims processing in 2020
was initially in line with or behind peer states,
such as Florida, Georgia, and Massachusetts,

Challenge: Increase in Claims Negatively
Impacted Response Times
The significant increase in UI claims impacted
many SWAs’ ability to provide adequate
customer service and created serious delays for
individuals to receive benefits. 2
Ohio’s processing times continued to drop while
most peer states recovered.
Similarly, the California State
Auditor, in their January 2021
report, found hundreds of
thousands of claimants waited
more than 21 days to receive their benefits,
which is the SWA’s measure of how quickly it
should process a claim. This delay was caused
by the significant increase in claims and the
California SWA’s inability to automatically
process half of all UI applications between March
and September 2020. These applications
required additional manual review by SWA staff. 3
In another example, large increases
in unemployment applications
created a backlog for Louisiana’s
SWA given its requirement for staff
to analyze documentation from claimants and
employers before approving benefits. The
Louisiana Legislative Auditor noted that both
increases in employer responses regarding
claims and the number of employers who did not
submit documentation for individual claimants
slowed the SWA’s ability to process application
documentation.
Key Insight: Claims Surge Exploited Weak Internal Controls
States’ response times to process claims were
not the only area of UI impacted by the
pandemic-related claims surge. Internal controls
within SWAs’ unemployment programs were
often reduced to handle the influx or were simply
not effective enough to properly detect the high
levels of fraud occurring. Several State Auditors
identified that some internal controls in their
2  The 14-to-21-day standard requires states to ensure
87 percent of claimants receive their initial benefits
within 14 to 21 days after the end of the compensable
week. As result, the claims processing start date to
assess timeliness may be after the original submission
date for the claim.
SWA failed to detect fraudulent activity. These
failed controls ultimately impacted the states’
ability to ensure that UI funds went to those who
needed it instead of bad actors who fraudulently
applied for benefits. Specifically, State Auditors
found that the PUA eligibility requirements
decreased internal controls and that state-
specific control weaknesses for identity and
3  California’s SWA responded to the findings that they
have taken steps to increase efficiencies and to
expedite the payment process such as adopting a
workload management tool to help allocate resources
properly and manage any future backlog.
page 6

eligibility verification negatively impacted the
SWA’s ability to detect fraud.
Challenge: PUA Requirements Decreased
Controls
The federal PUA program provided
unemployment benefits to new classes of
workers who had not been previously eligible to
receive benefits such as self-employed workers
and gig workers. As outlined in the CARES Act,
the only requirement to be eligible for the
minimum benefits was that the applicant had to
self-certify they were eligible to receive the
benefits. In addition, based on DOL’s
interpretation of the CARES Act UI provisions, the
Employment and Training Administration
directed states to accept these self-certifications
to approve their unemployment benefits rather
than require a claimant to provide
documentation. As a result, the PUA program did
not include the typical verifications required for
regular unemployment benefits. This reduction in
controls to receive PUA benefits was a direct
cause of the widespread fraud seen across
states. 4
State Highlight | Washington
As of April 13, 2021, the Washington SWA had
approved $646.8 million of unemployment
benefits to bad actors or ineligible recipients.
Since that date, the Washington SWA has
recovered roughly $370 million in estimated
losses.
4  Under the Continued Assistance for Unemployed
Workers Act of 2020, Congress amended the
unemployment requirements on December 27, 2020,
which required claimants to provide documentation to
substantiate their employment or self-employment to be
eligible to receive PUA.
5  The Kansas SWA indicated that detecting the
widespread fraud would have still been a challenge
The Washington State Auditor found
that shortly after PUA funding
became available the number of
fraudulent and illegitimate claims
began to rise in the state. The Washington State
Auditor reported that PUA funding made it easier
for fraudulent unemployment claims to be
approved. They found that PUA fraud occurred
most commonly through schemes involving
claimants using other individual’s personally
identifiable information and individuals using
their own information but intentionally
misreporting information to receive benefits.
The Louisiana Legislative Auditor
reported that the lack of identity
requirements in the PUA exposed
the state, and other states, to
identity theft schemes. In addition, the Louisiana
Legislative Auditor sampled 138 of the 575,000
unemployment claimants in Louisiana between
March 14, 2020 and June 30, 2020 and found
that 27 percent of claimants within the sample
had inconsistent and/or missing information
which the Legislative Auditor identified as an
indicator of potentially fraudulent claims or
identity theft, or resulted in an improper
payment.
The Kansas Legislative Post Auditor
found that the structure of PUA
made it difficult for the state’s SWA
to use its existing process to
properly detect fraud. 5  The Kansas SWA largely
relied on a visual review of claims and public
assistance data to identify unemployment fraud,
but because the PUA requirements were
even if it had automated its processes. The Kansas SWA
reported that it prevented $2 billion in potentially
fraudulent payments d uring the pandemic and
estimates it may end up preventing around $20 billion
in potential fraudulent payments when considering the
maximum payout amounts.
page 7

structured differently, individuals could bypass
the Kansas SWA’s established processes for
identifying fraud.  In addition, the Kansas
Legislative Post Auditor estimated about $700
million in potentially fraudulent payments could
have been made in Kansas during the pandemic.
About half of those fraudulent payments ($343
million) came from federal funds, and half ($344
million) came from state funds.
Challenge: Identity Verification
The reduction of controls to more quickly
disburse unemployment funds led to states
experiencing an increase in fraud schemes
related to identity verification.
The California State Auditor found
that the California SWA, in an
attempt to balance the need for
providing prompt unemployment
payments with adequate fraud prevention,
removed a fraud prevention mechanism which
applied a stop payment alert on claims where
California SWA staff had identity concerns. This
removal occurred, because leadership believed
that there were other safeguards in place that
would be able to stop these fraudulent
payments. This belief was ultimately incorrect
and resulted in payments totaling more than
$1 billion to suspicious claimants. 6
The Washington State Auditor also
cited identity verification as a
significant issue for the state. The
State Auditor found that the largest
fraud scheme prevalent with the state’s
unemployment programs—in terms of both
6  The California SWA indicated it added more controls,
including the implementation of ID.me in October 2020
and data crossmatching efforts, such as crossmatching
inmate and patient records.
7  The Arizona SWA noted that, at the time of report
issuance, it had implemented one of the three
mandatory activities from the DOL for the federal UI
volume and dollar amount—was individuals who
used stolen personal information to fraudulently
apply for unemployment benefits. The
Washington State Auditor found a material
weakness in its state’s SWA because the regular
discovery process that identifies claims as high
risk for identity theft was not performed until
after the claims had already been paid. This
control weakness continued until May 14, 2020.
State Highlight | Colorado
The Colorado State Auditor identified $243,000
of federal unemployment funds were distributed
to claimants involving identity theft. For example,
the data showed one invalid social security
number 151 times, which was how the Colorado
SWA was tracking the benefits involving identity
theft.
A report from the Arizona Auditor
General found that the Arizona SWA
paid $1.6 billion in federal UI
benefits to individuals who used
stolen identities in Fiscal Year 2020. The
Auditor General concluded that this significant
disbursement of funds to fraudulent actors was
the result of the SWA misinterpreting the easing
of claimant eligibility requirements for federal UI
benefits. Specifically, the Arizona SWA believed it
needed to reduce identity verification and other
anti-fraud measures for federal UI benefits
despite mandatory and strongly recommended
guidance from the DOL regarding anti-theft and
fraud measures for the federal UI program. 7  The
Auditor General also found that while the Arizona
SWA implemented a new UI benefits system to
benefits programs and continues to work with its
vendors to implement the other two mandatory
activities. The Arizona SWA has also implemented seven
of the eight strongly recommended integrity functions in
the PUA program and all eight integrity functions in the
PUEC program.
page 8

handle the federal UI benefits, it did not initially
include any identity verification or anti-fraud
measures. However, according to the Arizona
SWA, it was able to ultimately prevent over
$75 billion in benefit payments to perpetrators
of identity theft through the development and
implementation of prevention and fraud
detection measures.

The Illinois State Auditor found that
the identities of over 4,500
claimants were not validated and
that the Illinois SWA had yet to
complete any action related to verifying these
identities. Claims with unverified identifies
totaled over $41 million for the state.
Challenge: Eligibility Verification
State Auditors also found that their SWAs were
not adequately equipped to address the eligibility
verifications issues related to unemployment
claims during the pandemic.
The Louisiana Legislative Auditor
found that the Louisiana SWA faced
difficulties in verifying an individual’s
eligibility for unemployment benefits.
Specifically, state legislation allowed for
additional time for employers to submit wage
reports for employees, and because the SWA’s
process of determining UI eligibility relies on
information provided by the employer, the SWA
claimed that the delay impacted its ability to
appropriately verify claimants’ eligibilities. As a
result of inadequate claimant eligibility
verification, the SWA paid out $45.7 million to
claimants who were not eligible to receive
benefits. 8  In a separate report, the Louisiana
8  At the time that this report was published, the
Louisiana SWA reported that it was weeks away from
implementing a new identity verification system that
would reduce the resource strain from identity theft
schemes/fraud and help shift more attention back to
other types of fraud cases such as eligibility verification.
Legislative Auditor also found that the
ineffectiveness of the SWA’s controls regarding
death data matching resulted in the
disbursement of over $1 million to individuals
after the date of their death. 9  The Legislative
Auditor stated that roughly a third of these funds
should have been prevented from being
disbursed through the SWA’s established
controls and over $120,000 could have been
prevented if the SWA increased the frequency of
its death data match process from its frequency
of once a month.
The Colorado State Auditor reported
that the Colorado SWA stopped
performing wage crossmatching due
to a delay in the implementation of
its new unemployment system. The Colorado
SWA indicated that it was not able to implement
its new system on time due to the need to stand
up new federal pandemic programs. The State
Auditor noted this impacted the SWA’s ability to
ensure that claimants were both eligible and
receiving the appropriate amount of benefits.
In its Qualified Opinion in its Single
Audit Act report for Fiscal Year
2020, the Ohio State Auditor found
that the Ohio SWA did not establish
sufficient procedures or controls to ensure that
pandemic unemployment benefits were paid to
only eligible claimants. The State Auditor
highlighted that this resulted in the  SWA’s
inability to detect, recover or report
overpayments and ineligible payments.
The Oklahoma State Auditor
highlighted that the SWA’s inability
to sufficiently prevent fraudulent
unemployment claims stemmed
9  The Louisiana SWA stated that roughly 58 percent of
the payments identified in this audit could not be
detected through a crossmatch process. The remaining
42 percent detected in the audit accounts for less than
0.006 percent of total payments processed by the SWA.
page 9

largely from the agency’s inability to physically
verify claimants’ identification due to social
distancing restrictions. In addition to these
highlighted control weaknesses, the Oklahoma
State Auditor found the Oklahoma SWA did not
consistently verify claimant information before
payments were disbursed.
The Michigan Auditor General found
that the eligibility criteria their SWA
established for PUA was not
authorized in the CARES Act nor by
DOL guidance which led to improper eligibility
determinations. Further, the SWA continued to
make improper eligibility determinations 9
months after DOL had notified the state of
deficiencies within their PUA application. In total,
data from Michigan’s SWA revealed that they
had provided $3.9 billion in overpayments to
ineligible claimants. Michigan’s Auditor General
emphasized that the SWA will likely be unable to
recover the overpayments as the SWA was at
fault, not the claimants.
Key Insight: Influx of Pandemic Funding Increased Fraud Scheme Variance
While many State Auditors found weaknesses in
their SWA’s internal controls to detect and
prevent fraud in their unemployment programs, a
number of State Auditors reported on other fraud
schemes that bad actors used to prey on UI
programs that may not have been as prevalent
prior to the pandemic. These reports highlight
the breadth of the fraud schemes occurring
across states and demonstrate the need for
continued focus on detecting and preventing
unique and complex fraud. These fraud schemes
included insider threats; incarcerated individuals
fraudulently accessing benefits; and complex,
multi-state fraud schemes.
Challenge: Insider Threats
In its Statewide Single Audit, the
Kentucky State Auditor found that
some state employees applied for
unemployment benefits while still
fully employed and that a number of these
claimants, because of their position, had the
ability to access their own claims and remove
10  The Kentucky SWA indicated that on August 16,
2020, the Kentucky Labor Cabinet took on oversight of
UI. The Cabinet planned to issue a security policy stating
that employees should not access case information

“holds” on their account in the Kentucky SWA’s
Information Management System. 10
Additionally, State Auditors from Washington and
Iowa both reported that bad actors were applying
for unemployment benefits using personal
identifiable information of state government
employees, and, for Iowa, even employees who
worked for their SWA. 11
Challenge: Fraud Involving Incarcerated
Individuals
State Auditors from California, Louisiana, and
Colorado uncovered instances of incarcerated
individuals obtaining UI on a large scale,
highlighting a unique challenge that added an
additional obstacle for SWAs to properly detect
and prevent fraudulent activity within their UI
programs.
California’s SWA estimated that
between January 2020 and
November 2020 it provided over
$800 million in unemployment
pertaining to their own claim, or those of a family
member or friend.
11  Washington’s SWA stated that fraud committed by
internal employees is not currently, nor has it ever been,
a systemic issue in the agency.
page 10

benefits to 45,000 claimants whose personal
information matched those of incarcerated
individuals. 12
The Louisiana Legislative Auditor
found that the Louisiana SWA’s data
match between unemployment
benefit information and
incarceration data was not functioning properly,
resulting in the distribution of $6.2 million in
state and federal UI payments to almost 1,200
incarcerated individuals, between January 2020
and November 2020. The report notes that while
the Louisiana SWA conducted weekly matches
against incarceration data, the issues occurred,
in part, due to a lack of employment data for
contract and gig workers.
The Colorado State Auditor found
that the Colorado SWA was not
crossmatching unemployment
claims with prison records, noting that as a
result the Colorado SWA was unable to ensure
that only eligible claimants are obtaining
benefits. (See side bar on the next page for
multi-state fraud case highlights.)
Challenge: Multi-state Fraud Schemes
In another fraud scheme identified at the federal
level, claimants filed for unemployment benefits

in multiple states. For example, DOL OIG found
that $3.5 billion in potentially fraudulent
unemployment claims were distributed to more
than 225,000 social security numbers used to
apply for unemployment in multiple states.
Further, the DOL OIG identified one case where a
single social security number was used to
apply for unemployment benefits in 40
different states, resulting in the disbursement
of funds from 29 of those states, totaling
$222,532.
Investigative efforts by federal and state law
enforcement have also highlighted sophisticated
multi-state fraud schemes that seek to exploit
pandemic UI benefits. (See side bar on the next
page for multi-state fraud case highlights.) DOL
OIG was able to identify multi-state fraud claims
because it collected UI data from all 50 states,
the District of Columbia, and three U.S.
territories. State workforce agencies that are a
part of the National Association of SWAs Integrity
Data Hub could have the ability to crossmatch UI
data with other states. But as of December
2020, just 32 of 54 SWAs used or partially used
the Integrity Data Hub. If a SWA does not have
access to another state’s UI data, it is limited in
its ability to perform multi-state analyses similar
to DOL OIG.
12  California’s SWA created a task force focused on
investigating fraud, holding people accountable, and
identifying resource needs. Work conducted by this task
force includes developing data sharing agreements
between the SWA and the California Departments of
Corrections and Rehabilitation and State Hospitals.
page 11

Multi-state UI Fraud Investigations
Western District of Washington
The Federal Bureau of Investigation (FBI) and
DOL OIG led a successful investigation
resulting in the indictment of a Nigerian
citizen who submitted at least 253
fraudulent UI applications using stolen
identities in 17 different states and obtained
roughly $300,000 in unemployment claims.
The same two agencies, in a separate case,
also arrested another Nigerian national who
used stolen identities to apply for
unemployment in seven different states.
Western District of North Carolina
The U.S. Postal Inspection Service and the
FBI investigated a North Carolina man who
fraudulently applied for more than $150,000
in unemployment benefits in North Carolina,
New Jersey, New York, and other states. The
man ultimately pled guilty to the charges.
Eastern District of Michigan
The DOL OIG, U.S. Postal Inspection Service,
and the Office of Inspector General at the
U.S. Postal Service conducted a successful
investigation which uncovered a Michigan
man’s attempts to fraudulently apply for
unemployment benefits using stolen
identities in Michigan, Pennsylvania, and
other states.
Key Insight: Information Technology (IT)
System Challenges to Providing
Unemployment Insurance
SWAs also faced challenges with the technology
systems used by claimants to apply for UI
benefits. As the number of UI claims and
corresponding fraud activity surged throughout
2020, states needed these critical technology
systems to work effectively. State Auditors, most
notably those in Florida, Oklahoma, Illinois, and
Kansas found that issues with technology
systems impacted the ability of their SWAs to
properly provide pandemic UI benefits to
residents. However, these were not the only
states susceptible to pandemic-related
challenges with their technological systems.
According to the National Association of State
Workforce Agencies over half of states were
relying on outdated unemployment computer
systems as of February 2021.
The Florida State Auditor found that
the Florida Department of Economic
Opportunity’s Reemployment
Assistance Claims and Benefits
Information (RA) System had unresolved
deficiencies that created issues in processing,
verifying, and distributing unemployment funds.
Specifically, with the mass influx of
unemployment claims, many RA System users
encountered technical errors that ultimately
hindered the ability to process claimant data. In
addition, the SWA did not have an established,
proactive approach to deal with these errors. T he
Florida State Auditor report further stated that
unimplemented recommendations to improve
the RA System from prior audits resulted in
inaccurate payments, overpayment charges, and
erroneous employer charges.
page 12

The Oklahoma State Auditor found
that the state’s UI claims system
was outdated and did not have the
ability to properly detect and prevent
fraudulent claims through automated edits. This
specific failure was one of the main reasons why
the SWA’s internal controls were not sufficient at
detecting fraudulent claims.
The Illinois State Auditor found that
the Illinois SWA failed to implement
broad IT controls for its PUA system,
such as conducting a review of
access rights to the system during the audit
period. The Illinois State Auditor concluded that
the lack of IT controls and the inability for the
Illinois SWA to provide a System and
Organization Controls report made the system
unreliable regarding claimant eligibility and
adherence to federal rules.
In its Statewide Single Audit, the
Oregon Secretary of State Audits
Division found that its SWA used a
variety of computer systems to
process and disburse UI claims, with the two
main systems developed in the 1990s. While
these systems functioned adequately, both were
inflexible and difficult to maintain. The state
started a process in 2018 to update its system
and planned to complete the replacement by
2024, but the COVID-19 pandemic exacerbated
system deficiencies. The Audit Division found
that this resulted in a significant backlog of
unemployment claims between March and June
2020. 13
The Kansas Legislative Post Auditor
found issues with IT system use by
the Kansas SWA. The Kansas
Legislative Post Auditor reported
that the Kansas SWA’s unemployment computer
system was designed around a mainframe
computer from the early 1970s with more
modern programs added to the system in later
years. As the result of an older system with
updates, new and old code must work together
in unison to process unemployment claims. The
Kansas Legislative Post Auditor found that this
increased the risk of system error. To implement
the new pandemic UI programs, the Kansas SWA
had to implement several changes as well as
add an entire new program for PUA to its
computer system. These events, combined with
the significant number of new claims, created
coding issues that in some cases denied eligible
claimants and created delays for claims
processing. Moreover, this problem aligns with
the DOL OIG’s finding that states with outdated
mainframes had issues with implementing the
new federal UI programs.
13  The Oregon Secretary of State Audits Division noted
that while a new system would have helped the SWA
better manage the influx in claims, no matter what
system was in place, the influx would have still taxed the
system.
page 13

Appendix A: Acronyms
CARES Act
Coronavirus Aid, Relief, and Economic Security Act
COVID-19
novel coronavirus 2019
DOL

Department of Labor
FBI

Federal Bureau of Investigation
FPUC
Federal Pandemic Unemployment Compensation
OIG

Office of Inspector General
IT

Information Technology
PEUC
Pandemic Emergency Unemployment Compensation
PRAC
Pandemic Response Accountability Committee
PUA

Pandemic Unemployment Assistance
SWA

State Workforce Agency
UI

Unemployment Insurance
RA
Florida Department of Economic Opportunity’s Reemployment Assistance Claims and
Benefits Information
page 14

Office

Report Title

Issuance Date
Arizona Auditor

General
Report on Internal Control and on Compliance Year Ended June 30,

2020

August 4, 2021

California State
Auditor

Significant Weaknesses in the Employment Development

Department’s Approach to Fraud Prevention Have Led to Billions of
Dollars in Improper Benefit Payments

January 28, 2021
Employment Development Department’s Poor Planning and

Ineffective Management Left It Unprepared to Assist Californians

Unemployed by COVID-19 Shutdowns

January 26, 2021

Colorado State
Auditor

Statewide Single Audit: Fiscal Year Ended June 30, 2020
June 8, 2021

Unemployment Insurance Benefits Public Report

December 6,

2021

Department of

Labor, Office of

Inspector General

COVID-19: States Struggled to Implement CARES Act Unemployment

Insurance Programs

May 28, 2021
Alert Memorandum: The Employment and Training Administration

Needs to Ensure State Workforce Agencies Implement Effective

Unemployment Insurance Program Fraud Controls for High-Risk Areas

February 22, 2021

COVID-19: States Cite Vulnerabilities in Detecting Fraud While

Complying with the Cares Act UI Program Self-Certification

Requirement

October 21, 2020

Alert Memorandum: The Pandemic Unemployment Assistance
Program Needs Proactive Measures to Detect and Prevent Improper
Payments and Fraud

May 26, 2020
Florida Auditor

General

Department of Economic Opportunity: Reemployment Assistance

Claims and Benefits Information System
March 2021

State of Florida Compliance and Internal Controls Over Financial

Report and Federal Awards, For the Fiscal Year Ended June 30, 2020
March 2021
Appendix B: Scope and Methodology
The purpose of this insights report is to identify key themes or common challenges identified during
oversight activities completed by the Department of Labor Office of Inspector General and the offices of
State Auditors for the following states: Arizona, California, Colorado, Florida, Illinois, Iowa, Kansas,
Kentucky, Louisiana, Michigan, Missouri, Ohio, Oklahoma, and Washington as well as the Office of the
Comptroller for the state of New York and the Oregon Secretary of State (which includes both of those
state’s audit function). The list of reports reviewed by the PRAC for inclusion in this insights report can
be found below. All the work completed for this insights report complies with the Council of the
Inspectors General on Integrity and Efficiency’s Quality Standards for Federal Offices of Inspectors
General, which require that the work adheres to the professional standards of independence, due
professional care, and quality assurance to ensure the accuracy of the information presented.
Table 1: Oversight Reports on Pandemic Unemployment Insurance Programs
page 15

Illinois Auditor

General
Summary Report Digest: Department of Employment Security

July 28, 2021

Iowa State
Auditor

“Auditor Sand Advises Governmental Entities to be Wary of Fake
Unemployment Claims”

November 2020
Kansas

Legislative Post
Auditor

Evaluating the Kansas Department of Labor’s Response to COVID-19

Unemployment Claims (Part 2)

August 2021
Evaluating the Kansas Department of Labor’s Response to COVID-19

Unemployment Claims (Part 1)
February 2021

Kentucky State
Auditor

Report of the Statewide Single Audit of the Commonwealth of
Kentucky Volume II
April 21, 2021
Louisiana

Legislative
Auditor

Improper Payments in the Unemployment Insurance Program:
Overpayments and Rule Violations
November 10,

2021

Improper Payments in the Unemployment Insurance Program:
Deceased Recipients

June 16, 2021
Financial Audit Services Management Letter
June 2, 2021

Improper Payments in the Unemployment Insurance Program:
Ineligible Incarcerated Recipients
April 28, 2021

Improper Payments in the Unemployment Insurance

Program: Ineligible Recipients Based on Income
March 31, 2021
Michigan Auditor

General

Establishing Pandemic Unemployment Assistance Eligibility Criteria:

Unemployment Insurance Agency, Department of Labor and Economic
Opportunity
November 18,

2021
Independent Auditors’ Report on Internal Control Over Financial
Reporting and on Compliance and Other Matters Based on an Audit of
Financial Statements Performed in Accordance with Government
Auditing Standards
March 10, 2021

Audited Financial Statements State of Michigan Department of Labor

and Economic Opportunity Unemployment Insurance Agency –
Unemployment Compensation Fund
March 10, 2021
Independent Auditors’ Report on Internal Control Over Financial
Reporting and on Compliance and Other Matters Based on an Audit of
Financial Statements Performed in Accordance with Government
Auditing Standards
March 10, 2021

Audited Financial Statements State of Michigan Department of Labor

and Economic Opportunity Unemployment Insurance Agency –
Contingent Fund
March 10, 2021

Single Audit Reporting Package State of Michigan Department of

Labor and Economic Opportunity Unemployment Insurance Agency –
Unemployment Compensation Fund
March 10, 2021

Single Audit Reporting Package State of Michigan Department of

Labor and Economic Opportunity Unemployment Insurance Agency –
Administration Fund
March 10, 2021
Office
Report Title
Issuance Date
page 16

Audited Financial Statements: State of Michigan Department of Labor
Economic Opportunity Unemployment Insurance Agency –
Administration Fund
March 10, 2021
Independent Auditors’ Report on Internal Control Over Financial
Reporting and on Compliance and Other Matters Based on an Audit of
Financial Statements Performed in Accordance with Government
Auditing Standards
March 10, 2021
Missouri State
Auditor
Federal Unemployment Funding for COVID-19 Response Through April
2021

July 2021
New York State
Comptroller

Unemployment Insurance Trust Fund: Challenges Ahead

September 2021

The Tourism Industry in New York City: Reigniting the Return

April 2021
Arts, Entertainment and Recreation in New York City: Recent Trends
and Impact of COVID-19

February 2021
Ohio State
Auditor

Ohio Department of Job and Family Services: Auditor’s Report on
Unemployment Insurance Fraud, For the Period March 1, 2020

through February 28, 2021

October 22, 2021
Ohio Department of Job and Family Services: Unemployment
Compensation Performance Audit
September 23,
2021
Auditor Questions State Financial Statement: Qualified Opinion

Included in State of Ohio Audit

March 25, 2021
Oklahoma State
Auditor

State of Oklahoma: Single Audit Report

July 15, 2021
Oregon Secretary

of State, Audits
Division

Fiscal Year 2020 Statewide Single Audit Report

April 2021
Washington State
Auditor

State of Washington Single Audit Report

May 2021
Application System Audit Report: Unemployment Tax and Benefits

System
April 26, 2021
Washington’s Unemployment Benefit Programs in 2020:

Understanding improper payments and service delays during the
COVID-19 pandemic
April 13, 2021

Fraud Investigation Report: Employment Security Department
April 13, 2021

State of Washington: Financial Statements Audit Report
December 18,
2020

Office
Report Title
Issuance Date
Note: Hyperlinks will open to a PDF.
page 17
Michigan
Auditor
General

  @COVID_Oversight
PRAC point of contact:
Brooke Holmes
Associate Director of Oversight and Accountability
Brooke.Holmes@cigie.gov
Visit our website at:
PandemicOversight.gov
Follow us on social media:
Report fraud, waste, abuse, or misconduct:
To report allegations of fraud, waste, abuse, or misconduct regarding pandemic
relief funds or programs, please go to the PRAC website at
PandemicOversight.gov.
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