Full text
REPORT TO THE EMPLOYMENT
AND TRAINING ADMINISTRATION
ETA DID NOT PROVIDE ADEQUATE
OVERSIGHT OF EMERGENCY
ADMINISTRATIVE GRANTS
DATE ISSUED: JULY 27, 2023
REPORT NUMBER: 19-23-006-03-315
U.S. Department of Labor
Office of Inspector General
Audit
BRIEFLY…
ETA DID NOT PROVIDE ADEQUATE
OVERSIGHT OF EMERGENCY
ADMINISTRATIVE GRANTS
July 27, 2023
WHY OIG CONDUCTED THE AUDIT
On March 18, 2020, Congress passed the
Families First Coronavirus Response Act
(FFCRA), which provided states with temporary
flexibility to modify their unemployment
compensation laws and additional
administrative funding to respond to the
economic downturn caused by the COVID-19
pandemic. Division D of the FFCRA, the
Emergency Unemployment Insurance
Stabilization and Access Act of 2020 (EUISAA),
authorized the Department of Labor (DOL) to
provide $1 billion in emergency administrative
grants to qualified states for the administration
of their unemployment insurance programs.
WHAT OIG DID
We conducted this performance audit to answer
the following question:
Did DOL provide adequate oversight of
emergency administrative grants authorized
under the Emergency Unemployment
Insurance Stabilization and Access Act of
2020?
To answer this question, we interviewed DOL’s
Employment and Training Administration (ETA)
officials about grant oversight, examined states’
evidence for meeting grant requirements, and
reviewed applicable statutes and audit reports.
READ THE FULL REPORT
https://www.oig.dol.gov/public/reports/oa/2023/
19-23-006-03-315.pdf
WHAT OIG FOUND
ETA did not provide adequate oversight of the
emergency administrative grants. Specifically,
ETA did not verify if states were qualified to
receive the grant funds and lacked assurance
states used the grant funds as intended.
According to ETA, this was due to the states’
urgent need to address the increase in
unemployment insurance claims caused by the
pandemic, its reliance on states’ self-
attestations of compliance with EUISAA
requirements, and its reliance on single audits
to monitor states use of the funds, which did not
disclose how grant funds are used.
ETA required states to maintain documentation
as evidence the requirements were met. Our
examination of documentation maintained by
five states revealed that one state did not
comply with all of the requirements to receive
the first allotment of grant funds, and the
remaining four states did not provide sufficient
documentation to demonstrate compliance with
EUISAA. Furthermore, ETA did not verify if an
additional nine states qualified. Therefore, ETA
authorized the transfer of over $136 million in
emergency administrative grant funds to
14 states that failed to demonstrate compliance
with EUISAA requirements.
We also found ETA could not demonstrate how
states used the emergency administrative grant
funds. ETA stated these funds were transferred
to the accounts of the states’ regular
administrative grant funds received yearly. ETA
applied the same monitoring activities to the
emergency grant funds as it did to the regular
administrative grant funds, which consist of
reliance on single audits conducted by
independent auditors. However, the single audit
reports did not disclose how the states used
either of the grant funds. Consequently,
$1 billion in taxpayer dollars were vulnerable to
misuse.
WHAT OIG RECOMMENDED
We made three recommendations to ETA to
improve the future administration of emergency
grants and address wasteful spending. ETA
agreed or partially agreed to the
recommendations.
U.S. Department of Labor – Office of Inspector General
-i-
TABLE OF CONTENTS
INSPECTOR GENERAL’S REPORT .................................................................... 1
RESULTS ............................................................................................................. 3
ETA Did Not Verify States Were Qualified to Receive Emergency
Administrative Grants ................................................................................. 5
ETA Could Not Demonstrate How States Used the Emergency
Administrative Grant Funds ........................................................................ 9
OIG’S RECOMMENDATIONS ............................................................................ 13
Summary of ETA’s Response .................................................................. 13
EXHIBIT 1: OIG’S ANALYSIS OF STATES’ DOCUMENTARY SUPPORT FOR
FIRST ALLOTMENT ........................................................................................... 15
EXHIBIT 2: ETA’S ANALYSIS OF DOCUMENTARY SUPPORT FOR FIRST
ALLOTMENT ...................................................................................................... 17
EXHIBIT 3: TOTAL FUNDS TRANSFERRED FROM ETA AND OIG
ANALYSES ......................................................................................................... 18
EXHIBIT 4: QUESTIONED COSTS .................................................................... 19
APPENDIX A: SCOPE AND METHODOLOGY .................................................. 20
APPENDIX B: AGENCY’S RESPONSE TO THE REPORT ............................... 22
APPENDIX C: ACKNOWLEDGEMENTS ........................................................... 25
U.S. Department of Labor
Office of Inspector General
Washington, DC 20210
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INSPECTOR GENERAL’S REPORT
Brent Parton
Acting Assistant Secretary
for Employment and Training
U.S. Department of Labor
200 Constitution Ave. NW
Washington, DC 20210
This report presents the results of the Office of Inspector General’s (OIG) audit of
the Department of Labor’s (DOL) oversight of emergency administrative grants
authorized by the Emergency Unemployment Insurance Stabilization and Access
Act of 2020 (EUISAA).1
The Families First Coronavirus Response Act (FFCRA) provided states with
temporary flexibility to modify their unemployment compensation laws and
additional administrative funding to respond to the economic downturn caused by
the COVID-19 pandemic.2 Division D of the FFCRA, EUISAA, authorized DOL to
distribute $1 billion in emergency administrative grants to each qualified state
“only for the administration of its unemployment compensation law, including by
taking such steps as may be necessary to ensure adequate resources in periods
of high demand.”3
The enactment of EUISAA within the FFCRA amended Section 903 of the Social
Security Act of 1935 (SSA), which outlines the requirements states must meet to
1 EUISAA is Division D of the Families First Coronavirus Response Act, Public Law 116-127
(March 18, 2020).
2 The term “states” includes 50 U.S. states, the District of Columbia, Puerto Rico, and the
U.S. Virgin Islands.
3 Section 4102 (a)(h)(4) of EUISAA (42 U.S. Code, Section 1103(h)(4))
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receive emergency administrative grants.4 According to Section 903 of the SSA,
for each state, the Secretary of Labor must certify to the Secretary of the
Treasury that the state has met the requirements to receive an emergency
administrative grant.5 Upon certification, the Secretary of the Treasury must
transfer the grant funds to the state’s account within the Unemployment Trust
Fund. Additionally, the SSA states, “[a]ny amount transferred to the account of a
State under this subsection may be used by such State only for the
administration of its unemployment compensation law, including by taking such
steps as may be necessary to ensure adequate resources in periods of high
demand.”6 Employment and Training Administration (ETA) officials stated all
states have received emergency administrative grants, which together totaled
$1 billion.
We conducted this performance audit to answer the following question:
Did DOL provide adequate oversight of emergency administrative
grants authorized under the Emergency Unemployment Insurance
Stabilization and Access Act of 2020?
ETA is responsible for providing guidance and oversight of the unemployment
insurance (UI) program administered by the states, and, during the pandemic,
ETA managed the process for providing emergency administrative grant funds to
states. Our audit examined steps taken by ETA to ensure states: (1) met the
requirements for receiving emergency administrative grants; and (2) used the
grant funds to administer their UI program. Based on the results of our audit
work, we determined DOL did not provide adequate oversight of emergency
administrative grants.
We conducted our audit fieldwork from July 20, 2021, through April 18, 2022.
ETA provided documentation submitted by the states to support compliance with
the requirements to receive emergency administrative grants, as well as the
findings from their examination of the submitted documentation. We examined
documentary support submitted by five states. We also interviewed ETA officials
to determine the steps taken to verify states met the requirements to receive
grants and used the grant funds for the administration of their UI programs.
Finally, we reviewed federal laws and regulations governing federal grants, ETA
policies applicable to emergency administrative grants, and selected single audit
reports.
4 Section 4102(a) of EUISAA (42 U.S. Code, Section 1103(h)(2) and (h)(3))
5 Section 4102(a) of EUISAA (42 U.S. Code, Section 1103(h)(1)(C))
6 Section 4102(a) of EUISAA (42 U.S. Code, Section 1103(h)(4))
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RESULTS
ETA did not provide adequate oversight of the emergency administrative grants.
Specifically, ETA did not verify if states were qualified for the grants before
transferring all grant funds to the states’ accounts. According to ETA, verification
did not occur because the states urgently needed to address the increase in UI
claims caused by the pandemic. Consequently, ETA relied on states’
self-attestations of compliance with EUISAA requirements to qualify them for the
grants. ETA also lacked assurance that states used the grant funds as intended
because they were administered with the states’ regular administrative grant
funds, which were monitored solely by single audits that did not disclose how
states used the funds.
On March 18, 2020, Congress enacted EUISAA, which mandated that qualified
states receive, in the first of two allotments, 50 percent of their share of the
$1 billion in emergency administrative grant funds within 60 days of enactment.
Therefore, by May 17, 2020, ETA had to determine if states were qualified to
receive emergency administrative grant funds. The following were among the
steps ETA took to qualify states for grant funds:
• provide states with instructions for implementing EUISAA;
• review each state’s grant application to ensure it included all of the
information required to receive grant funds; and
• send certification letters to the Secretary of the Treasury certifying
states were qualified to receive grant funds and to transfer the
emergency administrative grant funds to the states’ accounts within
the Unemployment Trust fund.7
EUISAA did not require states to provide documentation supporting compliance
with the requirements to receive an emergency administrative grant. Due to the
states’ urgent need to address the increase in UI claims caused by the
pandemic, ETA initially advised states to maintain documentation to support
compliance with the requirements of Unemployment Insurance Program Letter
(UIPL) No. 13-20,8 and required them to submit a completed Application for
Federal Assistance (SF-424) attesting requirements had been met to receive
grant funds. An SF-424 includes a statement indicating that certifying to any
false, fictitious, or fraudulent statement can result in criminal, civil, or
7 ETA emailed 12 certification letters to the Secretary of the Treasury on separate dates. Each
certification letter included multiple states ETA deemed qualified to receive grant funds.
8 On March 22, 2020, ETA issued UIPL 13-20 to the states, which includes the EUISAA
requirements for receiving each allotment.
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administrative penalties under the law.9 ETA received an SF-424 from each state
and then sent a letter to the Secretary of the Treasury certifying that each state
was qualified to receive grant funds. Therefore, ETA relied on states’
certifications that they complied with UIPL No. 13-20 via an SF-424 to qualify
states for grant funds.
Over 10 months after the deadline to transfer all of the funds to the states’
accounts, ETA required states to submit documentation to demonstrate they met
the requirements to receive grant funds.10 After examining documentation
submitted by five states, we determined the documentation did not demonstrate
they were qualified to receive the first allotment of grant funds; however, we
found no issues with the five states receiving the second allotment.11 ETA also
did not verify if an additional 9 states met the requirements to receive the first
allotment of grant funds. Over 18 months after the deadline for states to submit
supporting documentation, ETA was still unable to verify if the states met the
requirements. As such, DOL authorized the transfer of more than $136 million in
emergency administrative grant funds to the accounts of 14 states ETA certified
as qualified to receive grant funds—despite not having verified their
qualifications.
We also found ETA could not demonstrate how states used the emergency
administrative grant funds. Congress mandated states use the grant funds only
for the administration of their UI programs.12 ETA stated the grant funds were
used for the operation of the states’ UI programs, including staff costs, equipment
and information technology costs, and space and building operations, but could
not support this. In addition, ETA indicated that the emergency administrative
grants followed the same requirements for use as the administrative grants
awarded to states under regular UI program administration. As such, these
grants were subject to the same level of program monitoring. ETA relies on the
single audits performed by independent auditors to satisfy its monitoring of these
grants.13 However, the single audit reports do not disclose how the states used
the emergency or regular administrative grant funds.
Without verifying states met the requirements for emergency administrative
grants and monitoring the use of the grant funds, ETA could not provide
reasonable assurance states used the emergency administrative grants to
9 42 U.S. Code, Title 18, Section 1001
10 ETA issued UIPL No. 13-20, Change 2, requesting states submit supporting documentation.
This UIPL required states to submit supporting documentation by August 2, 2021, 306 days after
the deadline (September 30, 2020) to transfer all emergency administrative grant funds to the
accounts of qualified states.
11 There are distinct requirements for each allotment.
12 Section 4102(a) of EUISAA (42 U.S. Code, Section 1103(h)(4))
13 2 C.F.R. Section 200, Subpart F
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administer their UI programs. As a result, the $1 billion in emergency
administrative grants, funded by taxpayer dollars, was susceptible to misuse.
ETA DID NOT VERIFY STATES WERE
QUALIFIED TO RECEIVE EMERGENCY
ADMINISTRATIVE GRANTS
ETA did not verify if states complied with the requirements to receive emergency
administrative grants before certifying to the Secretary of the Treasury that they
were qualified to receive grant funds. Per an interview with ETA officials, they
qualified states for emergency administrative grant funds based on submission of
certified SF-424 applications attesting compliance with the requirements in order
to “get money to the states as quickly as possible so that they are in a better
position to respond to the volume of UI claims.” Further, ETA did not require
states to submit documentation supporting compliance with the requirements
until after the states received their total share of the $1 billion in emergency
administrative grant funds, which were transferred to the states’ accounts in the
Unemployment Trust Fund.
Each state’s share of the $1 billion in emergency administrative grants was
determined via a formula prescribed in the SSA.14 During Fiscal Year (FY) 2020,
each state received its share of the grant funding in two equal allotments.15 All of
the emergency administrative grant funds were required to be transferred to the
states’ individual accounts in the Unemployment Trust Fund during FY 2020.
EUISAA mandated the transfer of the first of two allotments to the account of
each qualified state within 60 days after enactment on March 18, 2020, which
was no later than May 17, 2020. ETA incorporated Section 903(h)(2) of the SSA
into UIPL No. 13-20, which was issued to the states on March 22, 2020, and
highlighted the requirements for receiving the first and second allotment. To
receive the first allotment, the states needed to meet the following three
requirements from the UIPL:
(A) The State requires employers to provide notification of the
availability of unemployment compensation to employees at the
time of separation from employment. Such notification may be
based on model language issued by the Secretary of Labor.
14 Section 4102(a) of EUISAA (42 U.S. Code, Section 1103(h)(1)(B))
15 Section 4102(a) of EUISAA (42 U.S. Code, Section 1103(a)(2)(B))
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(B) The State ensures that applications for unemployment
compensation, and assistance with the application process, are
accessible, to the extent practicable in at least two of the following:
in person, by phone, or online.
(C) The State notifies applicants when an application is received
and is being processed, and in any case in which an application is
unable to be processed, provides information about steps the
applicant can take to ensure the successful processing of the
application.
To receive and qualify for the second allotment, the UIPL first instructed states to
submit an application to receive the second allotment by September 15, 2020, in
order to transfer the grant funds by September 30, 2020, which marked the end
of FY 2020. To qualify for the second allotment, the UIPL required that states’
claims for UI benefits had to have increased by at least 10 percent over the same
quarter in the preceding calendar year.16 If a state’s claims so increased, the
states needed to meet two additional requirements:
(A) The State has expressed its commitment to maintain and
strengthen access to the unemployment compensation system,
including through initial and continued claims.
(B) The State has demonstrated steps it has taken or will take to
ease eligibility requirements and access to unemployment
compensation for claimants, including waiving work search
requirements and the waiting week, and non-charging employers
directly impacted by COVID-19 due to an illness in the workplace or
direction from a public health official to isolate or quarantine
workers.
Although EUISAA did not require states to provide documentation to support
compliance with the grant eligibility requirements, ETA, through UIPL No. 13-20,
advised states to “maintain any supporting documentation that serves as
evidence for meeting the requirements in this UIPL, and based on which the
funding is provided.”
UIPL No. 13-20 provided the information states needed to include in their request
for grant funds via the SF-424, including each state’s prescribed share of the
emergency administrative grant. To receive emergency administrative grant
funds, states were required to attest compliance with the requirements identified
16 Section 4102(a) of EUISAA (42 U.S. Code, Section 1103(h)(1)(C)(ii))
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in UIPL No. 13-20 by submitting a completed SF-424 application that included
one of the following pieces of information:
• State attests to meeting the requirements for the first allotment and
second allotment, as described in UIPL No. 13-20.
• State attests to meeting the requirements for the first allotment, as
described in UIPL No. 13-20.
• State attests to meeting the requirements for the second allotment,
as described in UIPL No. 13-20.
In addition, states needed to check the “I AGREE” box on the SF-424 application
to attest that the information provided was accurate. The application also
included a statement indicating that certifying to any false, fictitious, or fraudulent
statement could result in criminal, civil, or administrative penalties under the
law.17 Therefore, ETA relied on states’ attestations and certifications via an SF-
424 to qualify states for grant funds.
For each allotment, the SSA required the Secretary of Labor certify to the
Secretary of the Treasury that states complied with the requirements to receive
emergency administrative grant funds. ETA emailed certification letters signed by
ETA’s Assistant Secretary of Labor to the Secretary of the Treasury that listed
the state(s) qualified to receive grants and the amount of grant funds each state
should receive. The signed certification letters read:
I hereby certify to you, under Sections 903(h)(1)(C), subsections (i)
and (ii), SSA, that the following states qualify for the transfer of the
amounts listed below to their account in the Unemployment Trust
Fund from the Employment Security Administration Account.
[Emphasis Added]
Upon certification, the Secretary of the Treasury transferred the grant funds to
the states’ accounts within the Unemployment Trust Fund. ETA officials indicated
that all states received their prescribed share of the $1 billion in emergency
administrative grant funds by the transfer deadline of September 30, 2020.
However, ETA did not have evidence states complied with the requirements prior
to the transfer of grant funds to the states’ accounts because it did not require
17 42 U.S. Code, Title 18, Section 1001
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states to submit the evidence until August 2, 2021, which was over 10 months
after the September 30, 2020, transfer deadline.18
The OIG asked ETA officials why it took so long to request states to submit
supporting documentation. In response, ETA stated it requested states submit
supporting documentation “as quickly as possible” after providing states with
guidance and technical assistance to implement and address the challenges of
administering UI programs established under the Coronavirus Aid, Relief, and
Economic Security (CARES) Act. The CARES Act was enacted 9 days after
Congress authorized the emergency administrative grants,19 with subsequent
enactments that modified and extended the terms of the UI programs.20
We examined supporting documentation five states submitted to ETA as
evidence of their compliance with the requirements to receive both allotment of
emergency administrative grant funds. For the first allotment, we found the
documentary support for one state did not meet one of the requirements for
receiving grant funds (see Exhibit 1, Table 1), and the remaining four states
provided insufficient documentation to determine if they met the requirements for
receiving grant funds (see Exhibit 1, Table 2). Yet, ETA certified to the Secretary
of the Treasury these five states were qualified to receive the first allotment of
emergency administrative grant funds, totaling more than $79.9 million (see
Exhibit 1, Table 3).
For the second allotment, we determined that the five states met the three
requirements to receive the emergency administrative grant funds. Specifically,
we found that each state exceeded the requirement to apply for the second
allotment by at least 265 percent and met the remaining two requirements.
Therefore, these states were qualified to receive the second allotment of
emergency administrative grant funds, totaling more than $79.9 million.
On March 3, 2022, we asked ETA officials if, during their review of the states’
supporting documentation, they had identified states that did not meet the
18 On June 3, 2021, ETA issued UIPL No. 13-20, Change 2, requesting states submit supporting
documentation. This UIPL required states to submit supporting documentation by August 2, 2021,
306 days after the September 30, 2020, deadline for transferring all grants funds to states’
accounts.
19 On March 27, 2020, Congress enacted the following UI programs, 9 days after authorizing the
emergency administrative grants: Pandemic Unemployment Assistance, Federal Pandemic
Unemployment Compensation, and Pandemic Emergency Unemployment Compensation.
20 The enactments were the following: CARES Act, including Title II, Subtitle A, Relief for Workers
Affected by Coronavirus Act (Pub. L. 116-136); Protecting Nonprofits from Catastrophic Case
Flow Strain Act of 2020 (Protecting Nonprofits Act) (Pub. L. 116-151); Consolidated
Appropriations Act, 2021, including Division N, Title II, Subtitle A, the Continued Assistance for
Unemployed Workers Act of 2020 (Pub. L. 116-260); and American Rescue Plan Act of 2021,
including Title IX, Subtitle A, Crisis Support for Unemployed Workers (Pub. L. 117-2).
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requirements for receiving emergency administrative grant funds. As of
April 7, 2022, 690 days after the first allotment deadline, ETA had not verified
whether 11 states met the requirements to receive the first allotment of
emergency administrative grant funds. After an additional 295 days, on
February 6, 2023, ETA had only verified that 2 of the 11 states previously
identified were qualified to receive the grant funds. Therefore, ETA certified to the
Secretary of Treasury that nine states that did not demonstrate compliance with
the requirements were qualified to receive the first allotment, which together
totaled more than $56.3 million (see Exhibit 2).
In total, ETA qualified 14 states to receive more than $136 million in emergency
administrative grant funds, although the documentary support for one state did
not indicate it complied with the statutory requirements before receiving grant
funds, and the documentary support for the remaining 13 states was inadequate
to determine compliance with the requirements (see Exhibit 3). Under the
Inspector General Act of 1978, as amended, questioned costs include costs
questioned by the OIG because of a finding that, at the time of the audit, such
costs are not supported by adequate documentation.21 We are identifying the
$136 million as questioned costs (see Exhibit 4).
We recognize ETA focused on quickly distributing the emergency administrative
grant funds to the states with the intent to help states respond to the drastic
increase in UI claims during a pandemic. However, EUISAA gave ETA broad
authority over its implementation.22 Therefore, ETA could have done more to
ensure states’ compliance with the requirements to receive grant funds within a
more reasonable time period and ahead of additional administrative grant
expenditures.
ETA COULD NOT DEMONSTRATE HOW
STATES USED THE EMERGENCY
ADMINISTRATIVE GRANT FUNDS
ETA could not demonstrate if the states used the emergency administrative grant
funds “only for the administration of its unemployment compensation law.”23 The
emergency administrative grant funds were supplemental to the regular
administrative funding states received each year to administer the states’ UI
programs. ETA stated that it does not track the states’ use of emergency
administrative grant funds and that “these funds, being part of the administrative
21 5 U.S. Code, Section 405(a)(4)(B)
22 Section 4102(c) of EUISAA
23 Section 4102(a) of EUISAA (42 U.S. Code Section 1103(h)(4))
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funding provided to states, are subject to the single audit requirements and
ETA’s overall monitoring of UI administrative funding.” Per ETA, states may use
the administrative funds for the operation of their UI programs, including staff
costs, equipment and information technology costs, and space and building
operations. However, the single audit reports did not disclose how the funds were
used, and ETA did not provide evidence to otherwise support monitoring
activities that confirmed proper use of the funds. Because ETA did not sufficiently
monitor the states’ use of the grant funds, it cannot assure states spent grant
funds only for the administration of the UI program.
UIPL No. 13-20, Change 1, provided the reporting instructions for states
receiving emergency administrative grants. States needed to submit Form 2112
to ETA each month, reporting the deposit and withdrawal of emergency grant
funds.24 ETA posted daily on its website the Unemployment Trust Fund
transactions that included the deposits of emergency administrative grant funds
into each state’s account. In addition, the states were required to submit
Form 8403 to ETA by the first day of the second month after the month in which
the transaction occurred, summarizing emergency grant fund transactions into
and out of the Unemployment Trust Fund.25 However, neither the UIPL nor the
forms required states to disclose how they used the emergency administrative
grant funds.
We reviewed the single audit reports for the five states examined to determine
how they spent the emergency administrative grant funds. Only one of the five
states had a single audit report disclosing the amount of emergency
administrative grant funds spent, and that report did not disclose how states
spent the funds. Single audit reports for the remaining four states made no
mention of the emergency administrative grants; however, according to the
federal Unemployment Trust Fund report, the states withdrew their emergency
administrative grant funds. The emergency administrative grant funds spent were
not specifically identified as expenditures in the single audit reports.
This lack of disclosure regarding the use of emergency administrative grant funds
could have been avoided. The Office of Management and Budget (OMB)
prepares the Compliance Supplement, an audit guide, to assist auditors in
performing single audits. DOL is obligated to annually inform OMB of any
updates needed to the Compliance Supplement and to work with OMB to ensure
the Compliance Supplement focuses the independent auditor to test the
compliance requirements most likely to cause misuse of funds.26
24 States reported the information via ETA Form 2112, UI Financial Transaction Summary,
Unemployment Fund, dated May 2000.
25 ETA 8403 Summary of Financial Transactions - Title IX Funds, dated May 2000
26 2 C.F.R. 200.513(c)(4)
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If the Compliance Supplement is not sufficiently updated, and if a single audit
does not result in an audit finding that warrants sanctions, the single audit report
would not necessarily disclose vital information—in this case, how states used
the emergency administrative grant funds or if the funding was spent on
allowable costs.
The circumstances surrounding the provisions of emergency administrative
grants created a high risk of misuse. Specifically, ETA permitted the states to
self-certify their compliance with the requirements to receive grant funds. This
approach resulted in ETA’s inability to confirm, 553 days after states received the
emergency administrative grant funds, that 14 states were not qualified to receive
grant funds. ETA also relied on single audit reports—which did not disclose how
states used the funds—to monitor states’ use of the emergency administrative
grants. Given these circumstances, ETA should have informed OMB that the
Compliance Supplement needed to be updated to include specific procedures for
emergency administrative grant funds. These updates would have ensured the
independent auditors disclosed expenditures in the single audit reports and
helped ETA to ensure states used the funds as intended.
Government Auditing Standards states that auditors conducting single audits
may consider reporting matters of waste and abuse, if they become aware of
them.27 On October 4, 2021, during the course of our audit, Georgia’s Office of
the State Inspector General reported, via a letter to Georgia’s Office of the
Governor, findings from its review of questionable expenditures made by the
Georgia Department of Labor (GDOL), as documented in an audit report
completed by the Georgia Department of Administrative Services (DOAS).28
GDOL received approximately $32 million in emergency administrative grant
funds in April 2020.29
DOAS found GDOL spent $1.1 million to regularly purchase meals for employees
for nearly a 15-month period during the COVID-19 pandemic (from
March 1, 2020, to June 11, 2021). DOAS stated approximately $567,000
(52 percent) of this funding came from GDOL’s state funds appropriation, and the
remaining funds originated from a federal grant provided to GDOL each year by
the U.S. DOL for its UI program. The DOAS audit did not include an examination
of the federal grant expenditures to ensure compliance with federal guidelines or
the applicable grant requirements. Georgia’s Office of the State Inspector
General concluded that the vast majority of the $1.1 million in questionable
27 2018 Government Auditing Standards, Chapter 6: Standards for Financial Audits, Section 6.20
28 The State of Georgia was not one of the five states that we reviewed.
29 Unemployment Trust Fund Reports from TreasuryDirect.gov are available at:
https://www.treasurydirect.gov/govt/reports/tbp/account-
statement/report.html?account=000000000000511&date=04%2F2020&report=transactionStatem
ent.
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expenditures was waste30 and provided its findings to the single audit team for
consideration when auditing GDOL’s expenditures of federal funds during the
fiscal year ending June 30, 2021.
The single audit report for the State of Georgia disclosed that the state’s
accounting records revealed $516,722 in unallowable meal expenditures GDOL
made with federal award funds during the fiscal year ending June 30, 2021.31
Although the report stated GDOL’s expenditures met the Government Auditing
Standards’ definition of waste and abuse,32 the type of award from which the
expenditures were made was not disclosed. It was only through GDOL’s
response to the single audit report finding that we learned the federal funds were
emergency administrative grant funds. Furthermore, the report did not disclose
whether the state used the remaining $31.4 million in emergency grant funds, or,
if used, how the funds were spent. This single audit conducted in the State of
Georgia is one example of how these audits do not sufficiently examine and
report the types and use of federal funds in a way that would allow ETA to rely on
the reports as their primary oversight mechanism.
In our view, the emergency administrative grant funds distributed to the states
during the COVID-19 pandemic were vulnerable to misuse due to the following:
• ETA could not demonstrate states used the emergency
administrative grant funds only to operate UI programs,
• ETA did not perform sufficient monitoring and relied on annual single
audit reporting methodology to review this funding, and
• Single audit reports did not disclose how and/or if the emergency
administrative grant funds were used.
30 Per the audit report issued by Georgia’s Office of State Inspector General on October 4, 2021,
“waste” is defined as a reckless or grossly negligent act that causes state funds to be spent in a
manner that was not authorized or represents significant inefficiency and needless expense. Of
the total expenditures, $581,000 were state funds.
31 State of Georgia Single Audit Report Part II (May 26, 2022), available at:
https://sao.georgia.gov/document/document/state-georgia-fy21-single-audit-report-
prt2rkpdf/download
32 2018 Government Auditing Standards, Chapter 6: Standards for Financial Audits,
Sections 6.21 - 6.24
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OIG’S RECOMMENDATIONS
To address wasteful spending and improve the future administration of
emergency grants, we recommend the Acting Assistant Secretary for
Employment and Training:
1. Specify within its policy the information states must include in their
documentation to support compliance with the requirements to receive
grant funds prior to disbursement of the funds.
2. Propose to the Office of Management and Budget an amendment to the
annually updated Compliance Supplement for single audits to also
disclose if states used the emergency administrative grant funds in
accordance with applicable requirements in the single audit report.
3. Remedy the $136,353,567.50 in questioned costs.
SUMMARY OF ETA’S RESPONSE
ETA agreed or partially agreed to the three recommendations. In its response,
ETA reaffirmed that states’ self-attestations of compliance with EUISAA
requirements served as verification of states’ eligibility. As stated in this report,
we disagree because ETA could have done more to ensure states’ compliance
with the requirements to receive grant funds.
ETA agreed to the first recommendation and indicated that, for future special UI
funds, ETA will provide states with specific guidance that includes the documents
required to demonstrate compliance with the requirements for receiving the UI
funds.
ETA partially agreed to the second recommendation. ETA agreed to modify the
annually updated Compliance Supplement for single audits—but only to ensure
that special administrative funding is specifically referenced. ETA maintains that
single audits are sufficient to monitor the states’ use of administrative funds and
cited the finding from a past single audit that revealed misuse of administrative
funds as evidence supporting its position. However, as highlighted above, before
conducting the cited single audit, the auditor learned of the misuse of
administrative funds in an October 4, 2021, letter from the State of Georgia
Inspector General to the Georgia’s Office of the Governor. As a result, the auditor
performed additional tests to determine if the misuse qualified as waste and
abuse under the Government Auditing Standards and concluded that the
misused funds were a waste of emergency administrative grant funds. Moreover,
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according to the Government Auditing Standards, auditors may consider
addressing issues of waste and abuse if they are made aware of them.
Consequently, instances of fund misuse could potentially be overlooked if
auditors are not notified about them prior to or during a single audit.
ETA partially agreed to the third recommendation. ETA agreed with the findings
outlined in Exhibit 1 and Exhibit 2; however, ETA indicated that two of the states
listed in Exhibit 1, Table 2 (Alaska and Arkansas) met the requirements to
receive the first allotment. ETA provided documentation demonstrating that the
two states’ complied with the requirements; however, as indicated in Exhibit 1,
Table 2, we could not determine if they complied with all requirements prior to the
date they received their first allotment. Therefore, we maintain our conclusion
that we could not determine from an examination of the states’ supporting
documentation if the states complied with the requirements before receiving the
first allotment; consequently, the total of $5,051,500.50 in emergency
administrative grant funds transferred to the two states’ accounts is considered
questioned costs as defined by the Inspector General Act of 1978, as amended,
5 U.S.C. Section 405(a)(4)(B).
ETA’s response is included in its entirety in Appendix B.
___________
We appreciate the cooperation and courtesies ETA extended us during this audit.
OIG personnel who made major contributions to this report are listed in
Appendix C.
Carolyn R. Hantz
Assistant Inspector General for Audit
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EXHIBIT 1: OIG’S ANALYSIS OF STATES’ DOCUMENTARY
SUPPORT FOR FIRST ALLOTMENT
Table 1: State Not Eligible for First Allotment
State
Count State
SSA Requirement
Date Met
Requirement
Date
Funds
Received
Funds
Transferred
1
Alabama
Require employers to
provide notification of the
availability of unemployment
compensation to employees
at the time of separation
from employment
7/16/2020
4/3/2020
$6,365,768.50
Total Funds Transferred
$6,365,768.50
Source: Based on the states’ documentation provided by ETA to support compliance with SSA
requirements.
Table 2: States That the OIG Could Not Determine (CND) Met
the Requirement(s) for the First Allotment
State
Count
State
SSA Requirement
Date
Met
Requirement
Date
Funds
Received
Funds
Transferred
1
Alaska
Notify applicants of steps
necessary to ensure the
successful processing of
their application when it
cannot be processed
CND
4/3/2020
$1,045,067.50
2
Arkansas
Notify applicants when an
application is received and
is being processed
CND
4/23/2020
$4,006,433.00
3
Arizona
All Requirements
CND
4/15/2020
$9,572,375.00
4
California
All Requirements
CND
4/1/2020
$58,986,153.00
Total Funds Transferred
$73,610,028.50
Source: Based on the states’ documentation provided by ETA to support compliance with SSA
requirements
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Table 3: Total Funds Transferred for the Five States
the OIG Analyzed for First Allotment
Documentary Support Status
Funds Transferred
State with Unsupported Documentation
$6,365,768.50
States with Insufficient Documentation
$73,610,028.50
Total Funds Transferred
$79,975,797.00
Source: Based on the states’ documentation provided by ETA to support compliance
with SSA requirements
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EXHIBIT 2: ETA’S ANALYSIS OF DOCUMENTARY SUPPORT
FOR FIRST ALLOTMENT
Table 4: States That ETA Has Not Determined Qualified for First Allotment
State
Count
State
SSA Requirement Not Met
Date
Received
Funds
Funds
Transferred
1
Hawaii
Require employers to provide notification
of the availability of unemployment
compensation to employees at the time of
separation from employment
4/16/2020
$1,969,671.00
2
Idaho
Ensure applications for unemployment
compensation and assistance with the
application process are accessible
4/10/2020
$2,194,905.50
3
New Jersey
Require employers to provide notification
of the availability of unemployment
compensation to employees at the time of
separation from employment
4/3/2020
$14,753,474.50
4
New Mexico
Require employers to provide notification
of the availability of unemployment
compensation to employees at the time of
separation from employment
4/1/2020
$2,631,736.50
5
North
Dakota
Require employers to provide notification
of the availability of unemployment
compensation to employees at the time of
separation from employment
4/17/2020
$1,205,504.00
6
Oklahoma
Require employers to provide notification
of the availability of unemployment
compensation to employees at the time of
separation from employment
4/1/2020
$5,481,808.00
7
Tennessee
Require employers to provide notification
of the availability of unemployment
compensation to employees at the time of
separation from employment
4/1/2020
$9,830,922.00
8
Utah
Require employers to provide notification
of the availability of unemployment
compensation to employees at the time of
separation from employment
4/17/2020
$4,904,962.50
9
Virginia
Require employers to provide notification
of the availability of unemployment
compensation to employees at the time of
separation from employment
4/1/2020
$13,404,786.50
Total Funds Transferred
$56,377,770.50
Source: Results from ETA’s examination of the states’ documentation to support compliance with
the grant eligibility requirements outlined in the SSA.
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EXHIBIT 3: TOTAL FUNDS TRANSFERRED FROM ETA AND OIG
ANALYSES
Table 5: Total Funds Transferred to 14 States with
Qualification Statuses of Undetermined or Not Qualified
Determined Qualification Status
Funds Transferred
State with Unsupported Documentation
$6,365,768.50
States with Insufficient Documentation
$129,987,799.00
Total Funds Transferred
$136,353,567.50
Source: Results based on the OIG’s and ETA’s analysis of states’ supporting
documentation.
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EXHIBIT 4: QUESTIONED COSTS
Table 6: Questioned Emergency Administrative Grant Costs
Description of Questioned Costs
No. of States
Amount
Grant funds distributed to unqualified state
1
$6,365,768.50
Grant funds distributed to states with
inadequate supporting documentation
13
$129,987,799.00
Total Questioned Costs
$136,353,567.50
Under the Inspector General Act of 1978, as amended,33 questioned costs
include costs questioned by the OIG at the time of the audit because the costs
are not supported by adequate documentation.
The table shows the total questioned costs for the 14 states previously identified.
The documentary support submitted by 1 of the 14 states indicated it did not
meet the statutory requirements before receiving emergency administrative grant
funds, yet ETA certified the state was qualified to receive more than $6.3 million
in its first allotment of emergency administrative grant funds.34 The documentary
support for the remaining 13 states was inadequate to determine if they
warranted the receipt of grant funds, yet ETA certified these states were qualified
to receive more than $129.9 million in the first allotment of grant funds.35 As a
result, we are claiming more than $136.3 million in total questioned costs.
33 5 U.S. Code, Section 405(a)(4)(B)
34 Exhibit 1 (Table 1) provides information about the one state that provided documentary support
indicating it did not meet the statutory requirement before receiving grant funds.
35 Exhibit 1 (Table 2) and Exhibit 2 (Table 4) provide information about the 13 states that provided
inadequate documentary support to determine if they met the statutory requirements before
receiving grant funds.
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APPENDIX A: SCOPE AND METHODOLOGY
SCOPE
The audit covered ETA’s efforts to (1) ensure states were qualified to receive
emergency administrative grants between March 18, 2020, and
September 30, 2020, and (2) ensure states’ use of the grant funds were to
administer UI programs.
METHODOLOGY
We conducted this performance audit in accordance with generally accepted
government auditing standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions based on our audit objective.
We believe the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.
To accomplish our objective, we interviewed ETA officials responsible for
emergency administrative grant oversight and analyzed documentation provided
by five states to ETA as evidence of their compliance with the requirements to
receive emergency administrative grant funds. To select the states, we requested
ETA email documentation that all states submitted to support their compliance
with the requirements to receive emergency administrative grant funds. Alabama,
Alaska, Arizona, Arkansas, and California were the states whose supporting
documentation was attached to the first five emails selected for analysis. For the
first allotment, we assessed whether the five states complied with the
requirements before the allotment was deposited into their Unemployment Trust
Fund. Furthermore, we assessed whether the deposit was made by
May 17, 2020. For the second allotment, we assessed whether the five states
met the applicable eligibility requirements before the allotment was deposited into
their Unemployment Trust Fund. Finally, we reviewed ETA’s findings from their
review of supporting documentation submitted by all states.
CRITERIA
• 2 C.F.R. Section 200, Subpart F
• 2 C.F.R. Section 200, Appendix XI, Compliance Supplement, July 2021
• Coronavirus Aid, Relief, and Economic Security (CARES) Act (2020)
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• Division D of the Families First Coronavirus Response Act of 2020,
Emergency Unemployment Insurance Stabilization and Access Act of
2020
• ETA’s Unemployment Insurance Program Letter No. 13-20, dated
March 22, 2020
• ETA’s Unemployment Insurance Program Letter No. 13-20, Change 1,
dated May 4, 2020
• ETA’s Unemployment Insurance Program Letter No. 13-20, Change 2,
dated June 3, 2021
• GAO Government Auditing Standards, July 2018
• Inspector General Act of 1978, as amended
• Section 903(h) of the Social Security Act of 1935, 42 U.S. Code 1103(h)
INTERNAL CONTROLS
In planning and performing our audit, we considered ETA’s internal controls
relevant to our audit objective by obtaining an understanding of those controls
through interviews and reviews of policies and procedures. We assessed the
following internal control areas relevant to the audit objective: Control
Environment, Control Activities, Agency Risk Assessment, Information and
Communication, and Monitoring. Our consideration of internal controls relevant to
our audit objective would not necessarily disclose all matters that might be
significant deficiencies. Because of inherent limitations in internal controls, or
misstatements, noncompliance may occur and not be detected.
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APPENDIX B: AGENCY’S RESPONSE TO THE REPORT
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APPENDIX C: ACKNOWLEDGEMENTS
Key contributors to this report were:
Brittany Arias, Writer-Editor
Carolyn Cayode-Gorman, Associate Counsel
Michael Kostrzewa, Audit Director
Charmane Miller, Auditor-In-Charge
Zaunder Saucer, Audit Manager
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 Ave. NW
Room S-5506
Washington, DC 20210