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REPORT TO THE
EMPLOYMENT AND TRAINING
ADMINISTRATION
COVID-19: ETA’S OVERSIGHT OF
SHORT-TIME COMPENSATION DID NOT
DETECT $129.6 MILLION IN QUESTIONED
COSTS
DATE ISSUED: JUNE 26, 2024
REPORT NUMBER: 19-24-003-03-315
This report was prepared by Regis & Associates, P.C., under
contract to the U.S. Department of Labor, Office of Inspector
General, and by acceptance, it becomes a report of the Office of
Inspector General.
U.S. Department of Labor
Assistant Inspector General for Audit
1
BRIEFLY…
COVID-19: ETA’S OVERSIGHT OF
SHORT-TIME COMPENSATION DID
NOT DETECT $129.6 MILLION IN
QUESTIONED COSTS
WHY WE DID THE AUDIT
On March 27, 2020, Congress passed
the Coronavirus Aid, Relief, and
Economic Security (CARES) Act to
provide expanded unemployment
insurance (UI) benefits to workers
unable to work due to the COVID-19
pandemic. Section 2110 provided
grants to support the administration of
Short-Time Compensation (STC)
programs. Under Section 2108, the
STC program provided for 100 percent
federal reimbursement of STC benefits
to states that previously operated a
permanent or temporary program under
state law.
To address concerns about risks
associated with the disbursement of
federal funds during the pandemic, we
contracted with the independent
certified public accounting firm of Regis
& Associates, PC (Regis) to answer the
following question:
Did the Employment and Training
Administration (ETA) ensure states
met STC requirements and used the
related funds as intended by the
CARES Act and related subsequent
legislation?
READ THE FULL REPORT
For more information, go to:
http://www.oig.dol.gov/public/reports/oa
/2024/19-24-003-03-315.pdf
WHAT WE FOUND
Regis found only 5 of the 10 states selected for in-depth testing
received Section 2110 grants and used the funds to promote and
enroll employers in their STC programs and implement or improve
the administration of STC in their localities. Regis found no
compliance exceptions with those five states.
With respect to benefit reimbursements under Section 2108, Regis
found ETA did not ensure states met STC reimbursement
requirements or used the related funds as intended by the CARES
Act and related subsequent legislation. Specifically, of the 10 states
reviewed, Regis identified 7 states drew down federal
reimbursements that were questionable. Specifically, Regis
identified the following:
• Six states drew down $28.1 million in excessive federal
reimbursements. One of the six states drew down an
additional $100.1 million in reimbursements for payments
without verifying the eligibility of claimants’ employment status.
• One state drew down $1.4 million in reimbursements without
providing records to support their STC payments and
drawdowns.
The states’ noncompliance went undetected because ETA did not
assess risks and establish controls to sufficiently monitor states’
compliance with STC reimbursement requirements. ETA solely
relied upon the review of claims and payment activity reports, which
was insufficient in detecting the noncompliance issues found by
Regis.
Due to ETA’s insufficient monitoring of states’ reimbursements
under Section 2108, Regis identified the seven states were allowed
to draw down about $129.6 million in questioned costs. As a result
of Regis’ findings, four states have already returned $11.6 million
to ETA.
WHAT WE RECOMMENDED
Regis made three recommendations to ETA to improve oversight of
STC and similar future temporary UI programs. ETA agreed with
the recommendations.
U.S. Department of Labor – Office of Inspector General
-i-
TABLE OF CONTENTS
INSPECTOR GENERAL’S REPORT .................................................................... 1
CONTRACTOR PERFORMANCE AUDIT REPORT ............................................ 5
RESULTS ........................................................................................................... 10
ETA Did Not Provide Adequate Oversight of States’ Short-Time
Compensation Reimbursements .............................................................. 10
CONCLUSION .................................................................................................... 21
RECOMMENDATIONS ....................................................................................... 22
Analysis of Agency’s Comments .............................................................. 22
EXHIBIT 1: FUNDING MADE AVAILABLE TO 10 STATES UNDER THE CARES
ACT, SECTION 2110 .......................................................................................... 25
EXHIBIT 2: FUNDING MADE AVAILABLE TO 26 STATES UNDER THE CARES
ACT, SECTION 2108 .......................................................................................... 26
EXHIBIT 3: SECTION 2108 STC BENEFIT PAYMENTS AND FEDERAL FUNDS
DRAWDOWN FOR 10 STATES ......................................................................... 27
EXHIBIT 4: QUESTIONED COSTS .................................................................... 28
APPENDIX A: SCOPE AND METHODOLOGY .................................................. 29
APPENDIX B: AGENCY’S RESPONSE TO THE REPORT ............................... 34
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Office of Inspector General
Washington, DC 20210
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INSPECTOR GENERAL’S REPORT
José Javier Rodríguez
Assistant Secretary
for Employment and Training Administration
U.S. Department of Labor
200 Constitution Avenue NW
Washington, DC 20210
The U.S. Department of Labor (DOL) Office of Inspector General (OIG)
contracted with the independent certified public accounting firm of Regis &
Associates, PC (Regis) to conduct a performance audit of the Short-Time
Compensation (STC) program under the Coronavirus Aid, Relief, and Economic
Security (CARES) Act and related subsequent legislation.
The OIG monitored Regis’ work to ensure that it met professional standards and
contractual requirements. Regis’ independent audit was conducted in
accordance with generally accepted government auditing standards.
Regis was responsible for the auditors’ evaluation and the conclusions
expressed in the report, while the OIG was responsible for reviewing Regis’
report and supporting documentation.
PURPOSE
STC is a program under which an employer reduces the number of hours worked
by employees, rather than laying them off. Section 3306(v) of the Federal
Unemployment Tax Act1 states employees whose work weeks have been
reduced by at least 10 percent, and by not more than the percentage, if any, that
is determined by the state to be appropriate (but in no case more than
60 percent), are not disqualified from unemployment compensation.
Usually, STC benefits are paid from the states’ trust funds. States then charge
employers for STC benefit costs because employers participating in state STC
1 As amended by the Middle Class Tax Relief and Job Creation Act of 2012, including Title II,
Subtitle D, Short-Time Compensation Program, Public Law 112-96 (February 22, 2012)
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programs are directly causing the need for unemployment benefits by reducing
the hours their employees work. Traditionally, state laws provide for the financing
of unemployment compensation payments, including STC, in two ways:
(1) experience-rated state unemployment taxes and (2) for certain employers
only, reimbursement of benefit costs (payment in lieu of contributions)
attributable to service with the employer.
On March 27, 2020, the CARES Act was enacted to provide expanded
unemployment insurance benefits to workers who were unable to work due to the
COVID-19 pandemic. Section 2110 of the CARES Act provided grants to support
states when implementing and administering STC programs in their laws, as well
as when promoting and enrolling employers, which included outreach to
employers to promote the use of STC.
Section 2108 of the CARES Act temporarily provided 100 percent federal
reimbursement of STC payments to states with an STC provision in its state law,
whether the program was new or pre-existing. The DOL Employment and
Training Administration (ETA) provides federal oversight of the unemployment
insurance system, which includes the STC program.
Based on the risks associated with federal reimbursement of STC program costs
during the pandemic, we contracted with Regis to conduct a performance audit to
answer the following question:
Did ETA ensure states met STC program requirements and used
the related funds as intended by the CARES Act and related
subsequent legislation?
To answer this question, Regis conducted a performance audit that covered the
period of March 27, 2020, to September 6, 2021.2 Regis performed in-depth
testing and analyses on 10 states—Connecticut, Iowa, Maine, Michigan,
Missouri, Nebraska, Oregon, Pennsylvania, Washington, and Wisconsin. We
selected the states based on: (1) the number of states that paid STC claims,
stratified into the highest, middle, and lowest ranges, and (2) the extent to which
the states had not been selected in previous OIG audits. Regis surveyed3
42 state workforce agencies.
2 The CARES Act authorized federal reimbursement of STC benefit payments for weeks of
unemployment beginning on or after March 27, 2020, and ending December 31, 2020. The
Continued Assistance for Unemployed Workers Act of 2020 and the American Rescue Plan Act
of 2021 extended the STC program to include the weeks of unemployment ending on or before
September 6, 2021.
3 Regis distributed questionnaires for 42 state workforce agencies’ responses regarding
participation in the STC program and their experiences with implementation, administration,
compliance, and ETA oversight.
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Regis also reviewed procedures at the ETA and state levels to determine
compliance with program requirements under Section 2110 and Section 2108 of
the CARES Act. To determine compliance with Section 2110, Regis tested a
sample of grant expenditures incurred for allowability. Regis also reviewed
states’ STC Grant Quarterly Progress Reports for completeness and accuracy.
To determine Section 2108 compliance, Regis tested claimant data for eligibility
and reviewed benefit payments on the ETA 5159 Claims and Payment Activities
reports for completeness and accuracy. Those benefit payments records were
also reconciled to the federal expenditures recorded in the ETA 9130 Quarterly
Financial Reports and the state drawdowns reported in the Payment
Management System.4
RESULTS
Regis found only 5 of the 10 states selected for in-depth testing received
Section 2110 grants and used the funds to promote and enroll employers in their
STC programs and implement or improve the administration of STC in their
localities. Regis found no compliance exceptions with those five states. However,
with respect to the benefit reimbursements under Section 2108, Regis found ETA
did not ensure states met STC program reimbursement requirements or used the
related funds as intended under the CARES Act and related subsequent
legislation. Specifically, of the 10 states reviewed, Regis identified 7 states
(Pennsylvania, Maine, Wisconsin, Oregon, Connecticut, Iowa, and Michigan)
drew down federal reimbursements that were questionable.
The states’ noncompliance went undetected because ETA did not assess risk
and establish controls to sufficiently monitor states’ compliance with STC
reimbursement requirements. ETA solely relied upon ETA 5159 Claims and
Payment Activities reports to conduct its monitoring of the STC program and as
its method to ensure the reimbursement amount the states received aligned with
the STC benefit payments that the states reported. However, federal
reimbursements and STC benefit payments did not always align.
Regis found better ETA monitoring was needed to ensure states met STC
program reimbursement requirements and accessed federal funds for allowable
reimbursements, as intended under the provisions of Section 2108 of the CARES
Act. The lack of sufficient monitoring allowed states to draw down excessive
federal reimbursements and receive reimbursement for payments made to
4 The Payment Management System is an electronic, primarily self-service financial system,
which allows states to draw down federal funds made available by ETA in sub-accounts.
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potentially ineligible claimants and weeks of unemployment outside the eligibility
period.
In total, Regis identified $129.6 million in questioned costs.5 As a result of Regis’
audit work, four states have already returned $11.6 million in federal funds to
ETA.
We appreciate the cooperation and courtesies that ETA extended to Regis and
the OIG during this audit.
Carolyn R. Hantz
Assistant Inspector General for Audit
5 Questioned costs are costs: (A) resulting from an alleged violation of a law, regulation, contract,
grant, or other document or agreement governing the use of federal funds; (B) that are not
supported by adequate documentation (also known as an unsupported cost); or (C) that appear
unnecessary or unreasonable.
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CONTRACTOR PERFORMANCE AUDIT REPORT
MANAGEMENT CONSULTANTS &
CERTIFIED PUBLIC ACCOUNTANTS
Independent Auditors’ Performance Audit Report on
the Short-Time Compensation Program
José Javier Rodríguez
Assistant Secretary
for Employment and Training Administration
U.S. Department of Labor
200 Constitution Avenue NW
Washington, DC 20210
We were engaged by the U.S. Department of Labor (DOL) Office of Inspector
General (OIG) to conduct a performance audit of the Short-Time Compensation
(STC) program. The Employment and Training Administration (ETA) was
responsible for the oversight of state workforce agencies’ (SWA)6 compliance
with the provisions of the program under the Coronavirus Aid, Relief, and
Economic Security (CARES) Act and related subsequent legislation. 7
We conducted the audit to answer the following question:
Did ETA ensure states met STC program requirements and used
the related funds as intended by the CARES Act and related
subsequent legislation?
To answer this question, we conducted procedures to understand ETA’s and
states’ processes and controls, including information technology and information
system controls utilized in the implementation of the STC program. In addition,
6 This report uses “state” or “SWA” to refer to the administrative body that administers the UI
program within the state, district, or territory. For the 50 states, as well as the U.S. Virgin Islands,
Puerto Rico, and the District of Columbia, that administrative body is a SWA.
7 Under the CARES Act, weeks of unemployment beginning on or after March 27, 2020, and
ending on or before December 31, 2020, were eligible for reimbursement. On
December 27, 2020, the Continued Assistance for Unemployed Workers Act of 2020 extended
the STC program to include weeks of unemployment ending on or before March 14, 2021. On
March 11, 2021, the America Rescue Plan Act of 2021 extended the STC program to include
weeks of unemployment ending on or before September 6, 2021.
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we examined evidence supporting compliance with the CARES Act and related
subsequent legislation.
We also performed in-depth testing and analysis on 10 states: Connecticut, Iowa,
Maine, Michigan, Missouri, Nebraska, Oregon, Pennsylvania, Washington, and
Wisconsin. Of the 10 states, we projected the test results of 2 states (Wisconsin
and Pennsylvania) to the population of claims.8 We surveyed 42 SWAs, of which
25 SWAs responded. Eleven of these SWAs had active STC agreements and
received funding; therefore, we excluded responses from the 14 SWAs without
active STC agreements.
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. Our scope, methodology, and
criteria are detailed in Appendix A.
STC PROGRAM FUNDING UNDER SECTION 2110
AND SECTION 2108
On March 27, 2020, Congress passed the CARES Act to provide expanded
unemployment insurance (UI) benefits to workers unable to work due to the
COVID-19 pandemic. ETA was required to oversee numerous pandemic UI
programs, including the STC program.9
The STC program was established prior to the COVID-19 pandemic to mitigate
the effects of lowered economic activity during times when employers experience
a reduction in available work hours by preserving employees’ jobs and
employers’ trained workforces. Under the STC program, employers can reduce
employees’ work hours instead of laying them off, and those employees
experiencing a reduction in hours are allowed to collect a percentage of
unemployment compensation benefits to replace a portion of their lost wages.
Section 2110 of the CARES Act provided funds to support states’ implementation
and administration of their existing STC programs as well as enrollment of
employers, which included outreach to employers to promote the use of STC for
periods during the pandemic and beyond. ETA awarded a total of $18.7 million to
8 We identified issues with the population of STC claims for the remaining eight states, which
prevented projections.
9 According to Unemployment Insurance Program Letter 21-20, the STC program is also known
as “worksharing” or “shared work.”
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10 states with signed STC agreements under the provisions of Section 2110 of
the CARES Act (see Exhibit 1, Table 1). At the time of our testing, 5 of the
10 states were within our audit scope (Washington, Missouri, Maine,
Connecticut, and Oregon) and were awarded $7 million in funds.
Prior to March 27, 2020, STC benefits were paid from the states’ trust funds and
charged back to employers. However, in response to the pandemic,
Section 2108 of the CARES Act provided for 100 percent temporary federal
funding of STC payments to any state operating an STC program in its law. To
receive reimbursement, each qualifying state was required to enter into a new
agreement with ETA that described the responsibilities of the parties (see
Figure 1 for a step-by-step illustration of the certification and reimbursement
process).
ETA grant officers then established a separate sub-account in the Payment
Management System for states with STC agreements in place to draw down
federal funds as reimbursements of state STC benefits paid. ETA estimated the
funds made available to states based on the states’ STC benefit payouts
reported on monthly ETA 5159 Claims and Payment Activities reports (herein
referred to as ETA 5159 reports)10 for the most recent month and adjusted these
amounts for any excess or shortfall in prior months. States could then withdraw
funds from the Payment Management System, as needed, to cover state STC
benefit expenses.
10 The ETA 5159 report contains monthly information on claims activities as well as the number
and amount of benefit payments for the STC program.
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Figure 1: STC Section 2108 Certification and Reimbursement Process
Source: Information contained in ETA Unemployment Insurance Program Letter 21-20
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ETA made available funds totaling $1.3 billion to 26 states that signed STC
agreements under the provisions of Section 2108 of the CARES Act (see
Exhibit 2, Table 2). The STC agreements for the 10 states in our audit scope
provided for funding through June 30, 2022. Additionally, ETA granted Michigan’s
request to extend its grant agreement through September 30, 2022. For the
10 states, $580.4 million was made available for reimbursement, of which
$496 million (85 percent) was reimbursed to the states. As of June 15, 2023,
ETA had de-obligated the remaining funds.
CHALLENGES PRESENTED BY THE COVID-19
PANDEMIC
The pandemic had a profound impact on the UI program, presenting states with
unprecedented challenges. According to ETA officials, these challenges included
managing an unprecedented surge in claim volume, adapting to remote work
environments, and implementing several new temporary pandemic UI programs,
which included the three largest programs: Federal Pandemic Unemployment
Compensation, Pandemic Unemployment Assistance, and Pandemic Emergency
Unemployment Compensation. In addition, program officials stated that the
additional program administration funding that ETA received was not enough and
came too late to accomplish its oversight of all these new programs.
ETA officials stated that, for much of the pandemic and the life of these new
programs, Congress did not provide any new funding for ETA staffing. When the
American Rescue Plan Act of 2021 was enacted in March 2021, it extended the
temporary programs through September 6, 2021, and provided some temporary
funding for additional staffing in ETA. However, this funding came a year after the
onset of the pandemic and after the most critical time of administering new
temporary programs while states struggled to process the highest level of claims
in the history of the UI program.
In addition, the enacted levels of funding for program administration in workforce
security, which funds UI program staff in the Department’s national and regional
offices, declined significantly between Fiscal Year (FY) 2006 and FY 2021,
resulting in a reduction in staff. Specifically, in FY 2006, the UI program had
419 staff,11 far higher than the 169 staff employed by the program during the
pandemic in FY 2021.12 It was in this environment that ETA had the immense
11 FY 2008 Performance Budget: Employment and Training Administration Program
Administration, last accessed April, 19, 2024, available at:
https://www.dol.gov/sites/dolgov/files/general/budget/2008/CBJ-2008-V1-09.pdf
12 FY 2023 Congressional Budget Justification: Employment and Training Administration Program
Administration, last accessed April 19, 2024, available at:
https://www.dol.gov/sites/dolgov/files/general/budget/2023/CBJ-2023-V1-09.pdf
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responsibility of overseeing the many new, temporary UI programs while
continuing its oversight of prior existing responsibilities.
Our report focuses on the performance of ETA’s and states’ STC program
operations during the challenging times of the COVID-19 pandemic.
RESULTS
We found only 5 of the 10 states selected for in-depth testing received Section
2110 grants and used the funds to promote and enroll employers in their STC
programs and implement or improve the administration of STC in their localities.
We found no compliance exceptions with those five states.
With respect to benefit reimbursements under Section 2108, we found 7 of
10 states—Pennsylvania, Maine, Wisconsin, Oregon, Connecticut, Iowa, and
Michigan—did not comply with STC reimbursement requirements. Specifically,
we found, of the 10 states tested, 6 states drew down $28.1 million in excessive
federal reimbursements of STC benefit payments,13 which we identified as
questioned costs (see Exhibit 3, Table 3). One of these six states did not comply
with requirements to certify the employment status of claimants, resulting in
$100.1 million in questioned costs. Of the remaining four states tested, one did
not maintain any supporting records for labor hours worked or the reduction of
hours, resulting in an estimated $1.4 million in questioned costs. As a result of
states’ noncompliance, we identified $129.6 million in total questioned costs (see
Exhibit 4).
ETA DID NOT PROVIDE ADEQUATE
OVERSIGHT OF STATES’ SHORT-TIME
COMPENSATION REIMBURSEMENTS
ETA did not adequately monitor states to ensure they complied with STC
program reimbursement requirements under Section 2108 of the CARES Act.
According to ETA officials, ETA monitored the STC program by reviewing
ETA 5159 reports to ensure the amount of STC funding the states received
aligned with the amount of benefit payments reported by the states. However, we
determined ETA’s review of the STC reports was not sufficient as ETA did not
take measures to validate the accuracy of the federal reimbursements claimed by
13 The remaining four states tested paid $4.6 million in STC benefits that they were not
reimbursed with Section 2108 federal funds (see Exhibit 3, Table 4).
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the states. While the ETA 5159 report was a good tool for estimating funds
needed by states, it reported aggregate monthly payment totals without
consideration of whether the payments were eligible for reimbursement under
Section 2108 of the CARES Act.
We identified 7 of the 10 states (Michigan, Maine, Wisconsin, Oregon,
Pennsylvania, Connecticut, and Iowa) did not meet STC program reimbursement
requirements. Specifically, we found:
• one state drew down reimbursements for payments without
verifying the eligibility of claimants’ employment status,
• one state operated an information technology (IT) system that
improperly duplicated STC payments,
• one state drew down reimbursements for payments to claimants
whose reduced hours exceeded the STC threshold,
• two states could not provide records to support their STC payments
and drawdowns, and
• two states drew down reimbursements for STC payments that were
for weeks of unemployment outside of the program eligibility period.
We identified $129.6 million in questioned costs of which $100.1 million is
attributed to questionable reimbursements drawn down by Michigan. As a result
of our audit work, four states have already returned $11.6 million in federal funds
to ETA.
MICHIGAN SWA
The Michigan SWA paid $100.1 million in total STC benefits to claimants and
drew down $100.1 million in federal funds from the Payment Management
System as reimbursement. However, these reimbursements may have been
made for claimants who were employed on a seasonal, temporary, or intermittent
basis, which was unallowable according to ETA guidance.
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Michigan did not require employers to certify in their STC applications that the
employees met the STC employment status criteria for receiving federal
reimbursements under Section 2108. Specifically, the Michigan SWA did not
require employers to certify that the employees were not employed on a
seasonal, temporary, or intermittent basis. Unemployment Insurance Program
Letter (UIPL) No. 21-20 states that no reimbursement will be made for STC
benefit payments if the individual is employed by the employer on a seasonal,
temporary, or intermittent basis, as defined under state law or as defined by the
UIPL if state law does not include definitions of these terms. The SWA
communicated to employers, through public websites and
employer seminars, the STC eligibility guidelines and
requirements, including that seasonal, temporary, and
intermittent workers were not eligible for benefits.
However, ETA and the SWA could not provide
documentation supporting that the SWA verified
employers complied with this requirement. Therefore, we
identified $100.1 million in questioned costs.
In addition, we identified that Michigan drew down $46,527 in excessive federal
reimbursements. The SWA drew down funds for STC benefit weeks that were
not within the program eligibility period established by the CARES Act and
related subsequent legislation, which were weeks of unemployment beginning on
or after March 27, 2020, and ending on or before September 6, 2021. We
questioned these costs and requested the Michigan SWA to refund $46,527 to
ETA. On May 20, 2024, as a result of our audit, Michigan returned $46,546 to
ETA.
From April 2020 through September 2021, Michigan reported approximately
$100.7 million on its ETA 5159 reports, which did not align with the actual benefit
payments made or funds drawn down. ETA’s sole reliance on the ETA 5159
reports resulted in insufficient validation of the actual benefit payments eligible for
reimbursement. Because ETA did not perform monitoring reviews over the
SWA’s STC claimant eligibility verification processes, it did not identify eligibility
non-compliance.
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OREGON SWA
Claimant-level detail as of November 28, 2022, supported that the Oregon SWA
made STC benefit payments totaling only $107.9 million. However, the state
accessed a total of $110.4 million from the Payment Management System as
reimbursement for STC benefits paid. Therefore, as of November 28, 2022, the
SWA drew down federal funds for reimbursement totaling $2.5 million more than
it was eligible to receive. Based on updated STC payment data obtained on
April 12, 2024, Oregon drew down $15.8 million in questionable federal
reimbursements.
Despite Oregon’s initial claimant-level detail showing STC payments totaling
$107.9 million, the SWA had reported approximately $110.4 million in paid STC
benefits from April 2020 through September 2021 on its ETA 5159 reports.
According to SWA officials, the reported STC benefit payments were
subsequently reduced by $2.5 million in the state’s UI system as adjustments for
overpayments and reported on the ETA 227 Overpayment Detection and
Recovery Activity report.14 However, Oregon did not provide any support that
overpayments related to STC claims were established or recovered. Therefore,
we questioned the relationship between their asserted reduction in STC
payments and the reporting of overpayments on the ETA 227 reports.
Furthermore, the Oregon SWA could not provide transaction details to support
the assertion that it previously paid $110.4 million in STC payments.
According to Oregon SWA officials, they were unable to provide the
claimant-level detail to support the adjustments for overpayments because its
legacy UI system purged data after 5 months. The Code of Federal Regulations
states that financial records, supporting documents, statistical records, and all
other non-federal entity records pertinent to a federal award must be retained for
a period of 3 years from the date of submission of the final expenditure report.15
In accordance with UIPL 21-20, Attachment II, states’ STC agreements required
state agencies to maintain records pertaining to the administration of Section
2108 of the CARES Act, as well as make all records available for inspection,
examination, and audit by federal officials or employees, as DOL may designate
or as may be required by law. Oregon acknowledged the need to improve its
systems’ retention capability and plans to fully implement a modernized IT
system, with unlimited retention of claimant data, by March 2024.
14 The ETA 227 Overpayment Detection and Recovery Activity report provides information on
overpayments of intrastate and interstate claims under the state’s unemployment compensation
and under federal UI programs. ETA and state agencies need such information to monitor the
integrity of the benefit payment processes in the UI system.
15 2 C.F.R. § 200.334, Retention Requirements for Records
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During the audit, ETA and the Oregon SWA disagreed that the SWA could not
account for the $2.5 million difference between the payment amounts shown in
the initial claimant-level data and reported on the ETA 5159 reports. On
April 12, 2024, ETA provided Oregon’s revised total payment amounts without
supporting claimant level-data, which showed
$94.6 million in STC payments, a $13.3 million reduction
from the claimant level data provided on
November 28, 2022. Based on the $94.6 million in total
STC benefits to claimants and drawdowns of
$110.4 million from the Payment Management System, we
found Oregon drew down $15.8 million in excessive
federal reimbursements.
Without claimant-level transactions to support the STC payments reported on the
ETA 5159 and adjustments made within its UI system, we could not verify the
actual STC benefits paid and identified the lack of records as an indicator for
potential fraud. As a result, we questioned the unsupported amount of
$15.8 million. ETA’s monitoring of the ETA 5159 reports was not sufficient to
validate that actual benefit payments were accurately reported and eligible for
reimbursement.
MAINE SWA
The Maine SWA paid $7.7 million in total STC benefits to claimants, which was
reported on its ETA 5159 reports. However, Maine drew down almost
$15.5 million from the Payment Management System as reimbursement,
resulting in $7.8 million in excessive federal reimbursements.
As a result of our audit, Maine researched the STC payments and discovered a
discrepancy in its UI system which resulted in errors on the ETA 5159 reports.
Specifically, a portion of STC benefit payments was double counted, resulting in
overstatements on the ETA 5159 report. We concluded the SWA did not comply
with Section 2108 of the CARES Act, which established
that states should be reimbursed with federal funds in
amounts equal to 100 percent of STC benefits paid under
the provisions of the state law. Subsequently, as a result
of our audit work, Maine revised the ETA 5159 reports,
returned the $7.8 million to ETA, and adjusted the
difference within the Payment Management System.
ETA’s monitoring of the ETA 5159 reports was insufficient in validating the actual
benefit payments that were eligible for reimbursement. Without ETA monitoring
the validity and accuracy of benefit payments claimed for federal reimbursement,
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there was a risk that similar UI system accounting issues in other states went
undetected, resulting in excessive drawdowns of federal reimbursements.
WISCONSIN SWA
From April 2020 through September 2021, the Wisconsin SWA reported
approximately $16.7 million on its ETA 5159 reports. However, based on our
review of the claimant-level detail, Wisconsin made STC payments totaling
$21 million for eligible benefit weeks under the CARES Act.
During testing, we found benefits totaling $2,754, paid through 10 of the
61 sampled claims tested, should not have been included as STC claimant data
because the claimants’ hours were reduced by 100 percent. This exceeded the
60 percent workweek reduction threshold established by the Federal
Unemployment Tax Act. Therefore, the state was ineligible to receive federal
reimbursement under Section 2108 of the CARES Act for the 10 claims that
should have been paid with the state’s regular UI funding.
Based on the results of the sample testing, we found Wisconsin accessed federal
reimbursements totaling a projected $3.4 million—in federal reimbursements for
STC benefits paid through a total of 396,008 claims—that involved claimants
whose reduced workweek hours exceeded the 60 percent threshold.
This amount closely aligns with what the state determined, based on a detailed
review of its claims data in 2022. We requested the Wisconsin SWA review STC
claims data from April 2020 through September 2021 to determine the extent of
errors in the data. Due to limitations in the SWA’s antiquated systems, it had to
manually review and recharge regular UI and STC claims to ensure the claims
were paid by the appropriate program. On October 10, 2022, Wisconsin
completed its review of the claimant data and recharging process and
determined a total of $17.6 million in STC benefits were paid to claimants,
despite the state drawing down $20.9 million in federal reimbursements. As a
result, Wisconsin returned $3.3 million to ETA between January 6, 2023, and
October 25, 2023.
Due to the excessive funds, we determined the Wisconsin
SWA did not comply with Section 2108 of the CARES Act,
which established that states should be reimbursed with
federal funds in amounts equal to 100 percent of STC
benefits paid under the provisions of the state law. We,
therefore, identified the $3.3 million as questioned costs.
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ETA’s monitoring of the ETA 5159 reports was insufficient in validating the actual
benefit payments that were eligible for reimbursement. The absence of an ETA
monitoring review allowed the inclusion of regular UI payments in STC benefit
payments to go undetected, resulting in Wisconsin drawing down federal
reimbursements that it was not entitled to receive. This error may have occurred
in other states that were not tested by our audit.
PENNSYLVANIA SWA
The Pennsylvania SWA paid about $9.8 million in total STC benefits to claimants
and drew down $9.4 million from the Payment Management System, resulting in
$419,214 that was not reimbursed with federal funds. However, upon a review of
sampled claimant data, we projected Pennsylvania accessed $1.4 million in
federal reimbursements for claims for which it did not maintain any supporting
records for labor hours worked.
The Pennsylvania SWA paid STC benefits totaling $1,890,
through 11 of 78 claims selected for testing. However, the
SWA was unable to provide biweekly employer
certifications for these claimants, which show the number
of hours worked. Based on the results of our testing, we
projected that Pennsylvania paid $1.4 million in STC
benefits through a total of 80,187 claims that lacked
supporting records. We consider the $1.4 million to be questioned costs, as the
STC agreement with ETA required Pennsylvania to maintain records pertaining
to the administration of Section 2108 of the CARES Act.
From April 2020 through September 2021, Pennsylvania reported approximately
$9.9 million on the ETA 5159 reports, which did not align with the actual benefit
payments made and funds drawn down. ETA’s monitoring of the ETA 5159
reports was insufficient in identifying these non-compliances. Without ETA
performing monitoring reviews of the SWAs’ eligibility verification processes for
STC claimants and use of federal funds, similar non-compliances could go
undetected.
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CONNECTICUT SWA
The Connecticut SWA paid about $55.1 million in total STC benefits to claimants
during the period of review. However, the state drew down approximately
$55.9 million from the Payment Management System, resulting in $774,080 in
excessive federal reimbursements. The state drew down
funds for STC benefit weeks that were not within the
program eligibility period established by the CARES Act
and related subsequent legislation, which were weeks of
unemployment beginning on or after March 27, 2020, and
ending on or before September 6, 2021. We questioned
these costs and requested Connecticut refund $774,080
to ETA.
From April 2020 through September 2021, the Connecticut SWA reported
approximately $55.8 million on the ETA 5159 reports, which did not align with the
actual benefit payments made and funds drawn down. ETA’s monitoring of the
ETA 5159 reports was insufficient in validating states’ actual benefit payments
were within the STC program period and eligible for reimbursement.
IOWA SWA
The Iowa SWA paid about $9.7 million to claimants in total STC benefits.
However, we found the state drew down $10.1 million from the Payment
Management System, resulting in $448,283 in excessive federal
reimbursements. Iowa erroneously drew down funds for
benefit weeks after the STC benefit eligibility period
established by the CARES Act and related subsequent
legislation, which was the week of unemployment ending
on or before September 6, 2021. As a result of our
identification of these questioned costs, Iowa issued a
refund of $448,283 to ETA for the excess federal funds
received as reimbursement.
The Iowa SWA did not comply with its agreement with ETA, according to
UIPL 21-20, Attachment II, Section V (c), which states that no payments are to
be made to a SWA under an STC program for weeks of unemployment ending
after December 31, 2020, or a later date, if provided for in any subsequent
amendments to Section 2108 of the CARES Act. The Continued Assistance for
Unemployed Workers Act of 2020 and the American Rescue Plan Act of 2021
extended the STC program to include the weeks of unemployment ending on or
before September 6, 2021.
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From April 2020 through September 2021, Iowa reported approximately
$10.2 million on its ETA 5159 reports, which did not align with the total benefit
payments made or funds drawn down. ETA’s monitoring of the ETA 5159 reports
was insufficient in validating that states’ actual benefit payments were within the
STC program period and eligible for reimbursement.
Based on our review of the ETA 5159 reports and claimant level data, we found
Iowa, as well as the other six states we tested, did not report accurate STC
benefit payments. In a previous OIG report,16 the OIG emphasized the
importance of complete and accurate reporting of information for CARES Act UI
programs. In response to the report, ETA agreed with the OIG that complete and
accurate reporting is important to the administration and oversight of the
temporary UI programs created under the CARES Act and related subsequent
legislation.
ETA DID NOT ASSESS RISKS AND ESTABLISH
CONTROLS TO SUFFICIENTLY MONITOR STATES’
COMPLIANCE
ETA regional offices did not assess risks and establish controls to sufficiently
monitor states’ compliance with STC reimbursement requirements when the
funding source changed from the state to the federal government. Prior to the
pandemic, STC benefits were paid from the states’ trust funds and charged back
to employers. Under Section 2108 of the CARES Act and related subsequent
legislation, the federal government reimbursed the states for 100 percent of STC
benefits paid for weeks of unemployment from March 27, 2020, through
September 6, 2021. Since the risks were not identified and assessed, ETA did
not establish controls to sufficiently monitor states’ compliance with STC
reimbursement requirements. According to ETA officials, ETA did not have the
monitoring resources to perform a 100 percent verification of all claims. However,
sufficient monitoring does not require 100 percent verification of all claims. ETA
did not review any of the states’ draw downs, associated claims, and STC benefit
payments to verify if states were eligible for federal reimbursement.
ETA relied on the review of ETA 5159 reports, which was inadequate in detecting
the noncompliance issues. ETA used these reports to conduct its oversight of the
STC program and as its method to ensure the reimbursement amount the states
received aligned with the STC benefit payments the states reported. However,
ETA’s review of the ETA 5159 reports was insufficient to ensure the reported
16 Alert Memorandum: The Employment and Training Administration Needs to Ensure State
Workforce Agencies Report Activities Related to CARES Act Unemployment Insurance
Programs, Report No. 19-22-004-03-315 (August 2, 2022), available at:
https://www.oig.dol.gov/public/reports/oa/2022/19-22-004-03-315.pdf
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STC payments were eligible for federal reimbursement under Section 2108 of the
CARES Act. The ETA 5159 reports do not specify the dates of STC payments so
there was no way to determine if the payments were within eligible weeks of
unemployment beginning on or after March 27, 2020, and ending on or before
September 6, 2021.
ETA oversees the UI system including its internal control system. The
Government Accountability Office’s Standards for Internal Control in the Federal
Government states the oversight body’s responsibilities for the entity’s internal
control system17 include five components:
• The control environment provides discipline and structure, which
affect the overall quality of the internal control system.
• The risk assessment provides the basis for developing
appropriate risk responses.
• Control activities are the policies, procedures, techniques, and
mechanisms that enforce management’s directives to achieve the
entity’s objectives and address related risks.
• Information and communication involve the use of quality
information to achieve an entity’s objectives and access to reliable
internal and external communication.
• Monitoring is the scrutiny of management’s activities as well as the
evaluation and remediation of identified deficiencies.
See Figure 2 for more details on the five components of internal controls.
17 GAO-14-704G, Standards for Internal Control in the Federal Government (September 2014)
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Figure 2: Internal Control Structure
Source: Regis-generated graphic based on the Standards for Internal
Control in the Federal Government (GAO-14-704G)
None of the 10 states tested indicated that ETA had performed monitoring
reviews of their STC programs under the provisions of the CARES Act. In
addition, of the 11 SWAs with active STC agreements18 we surveyed, 6 of
7 responsive SWAs (86 percent) ultimately indicated that ETA did not perform
monitoring reviews of their STC programs.
ETA provided guidance to its national and regional office staff for performing
monitoring reviews and risk assessments for the major CARES Act UI programs,
including Pandemic Unemployment Assistance, Federal Pandemic
Unemployment Compensation, Pandemic Emergency Unemployment
18 We surveyed 42 SWAs and 25 responded. Of the 25 responding SWAs, 11 had active STC
agreements.
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Compensation, and Mixed Earners Unemployment Compensation.19 However,
ETA did not issue any guidance for regional offices to monitor states’
administration of the STC program under Section 2108 of the CARES Act.
If ETA regional offices were performing monitoring reviews of states’ STC
programs, they would have identified the Michigan SWA was in noncompliance
when the state did not require employers to certify, in their STC applications, that
the employees were not employed by them on a seasonal, temporary, or
intermittent basis.
In addition, ETA did not establish adequate procedures to validate whether the
STC benefit payments reported by SWAs on the ETA 9130 and ETA 5159
reports and drawn down from the Payment Management System were accurate
and reflected the actual STC benefits paid. In some cases, states (Maine,
Oregon, and Wisconsin) drew down funds based on faulty systems that reported
duplicate or recovered payments or STC payments that included regular UI
benefits. Other states’ (Connecticut and Iowa) UI systems reported benefit
payments for benefit weeks that were outside the scope of the CARES Act.
CONCLUSION
Congress, through provisions of Section 2110 of the CARES Act, provided states
with funding to promote and enroll employers in their STC programs and to
implement or improve the administration of STC in their localities. We found ETA
sufficiently monitored states’ compliance with Section 2110 provisions.
Section 2108 of the CARES Act provided needed relief to employees and
employers by delivering UI benefits to make up for reduced wages while
sustaining a trained workforce during a national crisis. ETA did not sufficiently
monitor states’ compliance with the provisions, which resulted in states drawing
down $129.6 million in questionable reimbursements. Without sufficient ETA
oversight, states that received federal reimbursement for STC unemployment
19 Employment and Training Order (ETO) No. 1-21, provided guidance related to the ETA national
and regional office responsibilities in managing, monitoring, and overseeing state grants for the
Pandemic Unemployment Assistance, Federal Pandemic Unemployment Compensation, and
Pandemic Emergency Unemployment Compensation programs. ETO No. 1-21, Change 1,
incorporated provisions enacted by the Continued Assistance for Unemployed Workers Act of
2020 and the American Rescue Plan Act of 2021 and provided specific guidance to ETA staff
about their responsibilities for managing, monitoring, and overseeing only the Pandemic
Unemployment Assistance, Federal Pandemic Unemployment Compensation, Pandemic
Emergency Unemployment Compensation, and Mixed Earners Unemployment Compensation
programs.
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benefit payments had limited incentives to comply with reimbursement
requirements.
RECOMMENDATIONS
We recommend the Assistant Secretary for Employment and Training:
1. Establish policies and procedures for monitoring, using lessons learned
from the Short-Time Compensation program during the pandemic, that
ensure states meet requirements for similar future temporary
unemployment insurance programs that provide federal reimbursements
to states.
2. Review states’ compliance with Short-Time Compensation (STC) eligibility
requirements and require all states with STC agreements to return federal
funds used for reimbursements of STC benefit payments for weeks of
unemployment beginning before March 27, 2020, and ending after
September 6, 2021, as well as for reimbursements that exceeded benefits
paid.
3. Monitor states administering unemployment insurance programs
subsidized with federal funds, including temporary programs such as
Short-Time Compensation, to ensure compliance with the 3-year records
retention requirements established in the Code of Federal Regulations
(2 C.F.R. § 200.334).
ANALYSIS OF AGENCY’S COMMENTS
In response to a draft of this report, ETA generally agreed with our conclusions
as well as our three recommendations to improve oversight of STC and similar
future temporary UI programs. ETA acknowledged the report correctly
highlighted ETA’s efforts and several changes beyond the Department’s control
that impacted ETA’s ability to monitor states’ use of funds covered by Section
2108 of the CARES Act. ETA stated, in addition to insufficient funding for federal
UI administration and oversight, funding for state UI administration is another
serious issue for the UI system. ETA asserted the draft report is part of growing
evidence to justify the need for Congressional action to increase funding for the
UI program.
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ETA asserted, to reach the auditors’ conclusion that $100.1 million in STC
reimbursements for Michigan is questioned cost, a huge leap would have to be
made to assume nearly all employees who were provided STC benefits in the
state were hired on a seasonal, temporary, or intermittent basis. As noted in the
report, ETA and the SWA could not provide documentation to support the SWA
verified that employers complied with the requirement and STC benefit payments
were eligible for reimbursement under Section 2108 of the CARES Act. While all
STC benefits may not have been ineligible for reimbursement, without supporting
documentation for the benefit payments, there is no way to make that
determination. Therefore, all of the $100.1 million in benefit payments remain
questioned costs.
Despite ETA’s assertion, ETA stated it will work with the state and determine the
validity of the potential questioned costs raised in the draft report. ETA’s
comments did not result in any changes to our report. Synopses of ETA’s
responses follow:
• For Recommendation 1, ETA concurred and plans to capture and
analyze lessons learned from the implementation of the pandemic-
related STC program, which will be used by ETA to provide
legislative technical assistance to Congress and develop monitoring
and oversight strategies for similar temporary emergency UI
programs enacted in the future.
• For Recommendation 2, ETA concurred and noted that work in this
area is already underway. ETA acknowledged the draft report
raised some issues that warrant further investigation by ETA.
However, ETA stated appropriate processes and determinations
must first be made before directing states to pay specific amounts.
• For Recommendation 3, ETA concurred and stated Employment
and Training Order (ETO) 1-21 established ETA’s monitoring
priorities for FY 2024, including a description of ETA’s methodology
for assessing risk and determining which UI programs to monitor
each year with available resources. This monitoring includes
reviewing a state’s record retention policies as described in
ETO No. 1-24, as appropriate. ETA stated its regional offices also
use the Core Monitoring Guide for its monitoring, which includes
reviewing for sufficient record retention, as outlined under
2 C.F.R. § 200.334.
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The agency’s response to the draft report is included in its entirety in Appendix B.
We appreciate the cooperation and courtesies ETA extended us during this audit.
Regis and Associates, PC
Washington, DC
June 26, 2024
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EXHIBIT 1: FUNDING MADE AVAILABLE TO 10 STATES UNDER
THE CARES ACT, SECTION 2110
Table 1: Funding Made Available to 10 States under Section 2110
State20
Amount
Connecticut
$1,187,842
District of Columbia
$431,513
Illinois
$4,187,442
Maine
$382,579
Missouri
$1,834,214
New York
$6,458,984
West Virginia
$438,002
Wyoming
$177,037
Oregon
$1,264,460
Washington
$2,366,077
Total
$18,728,150
Source: Data provided by ETA
20 Connecticut, Maine, Missouri, Oregon, and Washington were selected for in-depth testing.
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EXHIBIT 2: FUNDING MADE AVAILABLE TO 26 STATES
UNDER THE CARES ACT, SECTION 2108
Table 2: Funding Made Available to 26 States under Section 2108
State21
Amount
Arizona
$8,415,114
Arkansas
$5,967,324
California
$168,795,333
Colorado
$15,828,738
Connecticut
$56,598,435
District of Columbia
$4,397,504
Florida
$5,060,693
Iowa
$10,305,278
Kansas
$24,826,885
Maine
$15,735,618
Maryland
$7,290,210
Massachusetts
$66,179,555
Michigan
$105,854,689
Minnesota
$51,762,532
Missouri
$29,921,660
Nebraska
$7,386,433
New Hampshire
$5,018,747
New Jersey
$21,762,099
New York
$180,924,787
Ohio
$56,578,150
Oregon
$112,795,897
Pennsylvania
$10,073,972
Rhode Island
$23,767,910
Texas
$108,574,883
Washington
$136,698,120
Wisconsin
$94,989,274
Total
$1,335,509,840
Source: Data provided by ETA
21 Connecticut, Iowa, Maine, Michigan, Missouri, Nebraska, Oregon, Pennsylvania, Washington,
and Wisconsin were the 10 states selected for in-depth testing.
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EXHIBIT 3: SECTION 2108 STC BENEFIT PAYMENTS AND
FEDERAL FUNDS DRAWDOWN FOR 10 STATES
Table 3: STC Benefit Payments, Drawdowns, and Excessive
Reimbursements
State
STC Benefit Payments
for CARES Act Eligible
Benefit Weeks
STC 2108 Drawdowns
(Reimbursements)
Excessive
Reimbursements of
STC 2108 Funds
Oregon
$94,646,155
$110,420,125
$15,773,970
Maine
$7,672,989
$15,491,561
$7,818,572
Wisconsin
$17,651,163
$20,916,348
$3,265,185
Connecticut
$55,087,996
$55,862,076
$774,080
Iowa
$9,644,253
$10,092,536
$448,283
Michigan
$100,061,317
$100,107,844
$46,527
Total
$28,126,617
Source: Regis analysis based on data provided by selected states
Table 4: STC Benefit Payments, Drawdowns, and Unreimbursed Payments
State
STC Benefit Payments
for CARES Act Eligible
Benefit Weeks
STC 2108 Drawdowns
(Reimbursements)
Unreimbursed
STC Benefit
Payments
Washington22
$140,662,472
$136,694,365
$3,968,107
Pennsylvania
$9,768,771
$9,349,557
$419,214
Missouri
$30,105,961
$29,921,660
$184,301
Nebraska
$7,187,422
$7,187,080
$342
Total
$4,571,964
Source: Regis analysis based on data provided by selected states
22 Washington did not draw down approximately $4 million in federal funds due to ongoing
technical issues with its Unemployment Tax and Benefits system, which underreported STC
benefits paid on the ETA 5159 reports from April 2020 through September 2021. According to the
Washington SWA officials, the SWA notified ETA of the technical problems but was unable to
update its ETA 5159 reports before the expiration of the reimbursement funds on June 30, 2022.
According to ETA officials, Washington had not resolved its technical issue and submitted a
revised ETA 5159 report before the closeout period ended on January 1, 2023.
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EXHIBIT 4: QUESTIONED COSTS
Table 5: Questioned Costs23 for the Seven States Tested
States in STC Noncompliance
Amount24
Michigan
$100,107,844
Maine
$7,818,572
Wisconsin
$3,265,185
Oregon
$15,773,970
Pennsylvania25
$1,377,647
Connecticut
$774,080
Iowa
$448,283
Total Questioned Costs
$129,565,581
Source: Regis analysis of state claimant data
23 Questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation,
contract, grant, or other document or agreement governing the use of federal funds; (B) that are
not supported by adequate documentation (also known as an unsupported cost); or (C) that
appear unnecessary or unreasonable.
24 As a result of the audit, Maine, Wisconsin, and Iowa returned 100 percent of these questioned
costs to ETA. Therefore, ETA does not need to recover these states’ questioned costs. In
addition, Michigan returned $46,546 of the $100,107,844 in questioned costs to ETA. ETA needs
to evaluate the remaining $100,061,298 in questioned costs from Michigan.
25 We estimated $1.4 million in questioned costs for Pennsylvania based on the results of
in-depth testing that found the state was unable to provide employer biweekly certifications of
hours worked or the reduction of hours for 11 of 78 claimants who were paid STC benefits
totaling $1,890.
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APPENDIX A: SCOPE AND METHODOLOGY
SCOPE
The audit covered ETA’s efforts to ensure states met STC program
reimbursement requirements and used STC funds in accordance with the
provisions of the CARES Act and related subsequent legislation for weeks of
unemployment beginning on or after March 27, 2020, through weeks of
unemployment ending on or before September 6, 2021.
METHODOLOGY
We conducted this performance audit in accordance with generally accepted
government auditing standards. Those standards require that we plan and
perform the audit to obtain sufficient, appropriate evidence to provide a
reasonable basis for our findings and conclusions, based on our audit objective.
We believe that the evidence obtained provides a reasonable basis for our
findings and conclusions, based on our audit objective.
We reviewed federal and state regulations, policies, and procedures; conducted
state walk-throughs; and interviewed key management and staff at the ETA
national office and state workforce agencies.
We designed procedures to test the states’ grant expenditures compliance with
Section 2110 of the CARES Act and related program requirements outlined in the
grant agreements and ETA’s monitoring of the grants. In addition, we designed
audit procedures to test ETA’s and states’ efforts for implementing the STC
program under Section 2108 of the CARES Act, Continued Assistance for
Unemployed Workers Act of 2020, and the American Rescue Plan Act of 2021.
We tested and analyzed program implementation and administration, eligibility
determination, benefit payments, monitoring, and reporting.
SELECTION OF STATES
To perform our audit, we conducted an in-depth examination of 10 states that
signed STC agreements under Section 2108 of the CARES Act: Connecticut,
Iowa, Maine, Michigan, Missouri, Nebraska, Oregon, Pennsylvania, Washington,
and Wisconsin. Of these 10 states, 5 states (Connecticut, Maine, Missouri,
Oregon, and Washington) also signed agreements with DOL to receive STC
grants under Section 2110 of CARES Act.
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The OIG judgmentally26 selected the states based on the quantity of initial STC
claims stratified into the highest, middle, and lowest ranges; and the extent to
which the states had not been selected in previous OIG audits. In addition, we
sent surveys to 42 SWAs27 to determine which states participated in the STC
program and their experiences with implementation, administration, compliance,
and ETA oversight.
INTERNAL CONTROLS
We obtained an understanding of ETA’s and states’ internal controls, including
information technology and information systems, that were considered significant
to the audit objective and in planning and designing procedures to perform the
audit. We did not provide assurance on their internal controls. Therefore, we did
not express an opinion on ETA’s or states’ internal controls. Our consideration of
internal controls for compliance with the STC program reimbursement
requirements would not necessarily disclose all matters that might be significant
deficiencies.
SAMPLING
We used sampling in this audit to evaluate the states’ compliance with the
requirements of the CARES Act and related subsequent legislation. We applied
non-statistical sampling using an approach as prescribed in Government Auditing
Standards to select a sample judgmentally from grant expenditures and reports
submitted to ETA. We used this sample to verify compliance with Section 2110 of
the CARES Act.
We verified whether the STC grant expenditures were allowable under Section
2110 of the CARES Act as well as other program requirements; necessary and
reasonable; consistent with policies and procedures; treated consistently; and
documented adequately. Finally, we verified whether the states submitted the
required reports to ETA.
26 Judgmental sampling is a non-probability sampling technique in which the sample members
are chosen based on the auditor’s knowledge and judgment.
27 There were 43 remaining SWAs. However, we inadvertently omitted Colorado from the survey,
resulting in 42 SWAs being surveyed. Of the 42 surveyed SWAs, 25 SWAs responded. We
identified 11 of 25 responsive SWAs had active STC grant agreements and received funding.
Therefore, we excluded the responses from 14 SWAs that did not have active STC grant
agreements.
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To verify compliance with Section 2108 of the CARES Act, when possible,28 we
applied statistical sampling that included a sampling risk of 5 percent (which
equates to a 95 percent confidence level) and a tolerable rate of deviation
between 3 and 5 percent to select sample transactions from the claimant benefit
payments population for each of the 10 selected states using the Monetary Unit
Sampling process. The methodology factored the confidence level, tolerable rate
of deviation, and expected population deviation rate.
Testing involved re-calculating weekly STC benefits paid, then comparing them
to the actual benefit payments made to claimants.
To assess compliance with Section 2108 of the CARES Act, we also verified:
• states appropriately approved plans submitted by employers, and
the employers appropriately certified the eligibility of the employees
in their plans;
• whether either the employers or the employees certified weekly or
biweekly benefits, after initial enrollment;
• claimants were paid no more than 26 weeks of benefits; and
• whether the state submitted the required reports to ETA for
selected states.
DATA RELIABILITY
We conducted tests to determine the reliability of STC claimant and grant data
provided to us for review under Section 2110 and Section 2108 of the CARES
Act, respectively. To assess the reliability of the data, we performed procedures
to test for completeness, accuracy, consistency, and validity by performing the
following:
• For Section 2110 of the CARES Act grant funds, we matched the
funds received to the specific grant agreements. Grant
expenditures were corroborated to detailed general ledger reports
28 We identified issues with the population of STC claims for some states, which prevented
statistical sample testing. For example, some states provided populations of STC claims that also
included regular UI claims or claims associated with benefit weeks that were outside the CARES
Act eligible benefit weeks beginning on or after March 27, 2020, or ending on or before
September 6, 2021.
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and back-up documentation, as well as states’ STC Grant Quarterly
Progress Reports.
• For Section 2108 of the CARES Act benefit payments, we
compared claimant payment data provided (by state) to ETA
reports, which included ETA 5159 Claims and Payment Activities
Reports and ETA 9130 Quarterly Financial Reports. These reports
recorded quarterly drawdowns. We further corroborated the
amounts on the ETA 9130 reports to the amounts recorded in the
Payment Management System.
CRITERIA
• Federal Unemployment Tax Act as amended by the Middle Class Tax
Relief and Job Creation Act of 2012, including Title II, Subtitle D,
Short-Time Compensation Program, Public Law 112-96
(February 22, 2012)
• Coronavirus Aid, Relief, and Economic Security (CARES) Act, Public
Law 116-136 (March 27, 2020)
• Consolidated Appropriations Act, 2021, including Division N, Title II,
Subtitle A, the Continued Assistance for Unemployed Workers Act of
2020 (December 27, 2020)
• American Rescue Plan Act of 2021, including Title IX, Subtitle A, Crisis
Support for Unemployed Workers, Public Law 117-2 (March 11, 2021)
• 2 C.F.R. § 200.334, Retention Requirements for Records GAO-14-704G,
Standards for Internal Control in the Federal Government (September
2014)
• Unemployment Insurance Program Letter No. 21-20, Coronavirus Aid,
Relief, and Economic Security (CARES) Act of 2020 – Short-Time
Compensation (STC) Program Provisions and Guidance Regarding
100 Percent Federal Reimbursement of Certain State STC Payments
(May 3, 2020)
• Unemployment Insurance Program Letter No. 22-20, Coronavirus Aid,
Relief, and Economic Security (CARES) Act of 2020 – Short-Time
Compensation (STC) Program Grants (May 10, 2020)
• Unemployment Insurance Program Letter No. 22-20, Change 1, New End
Date of the Application Period for Coronavirus Aid, Relief, and Economic
Security (CARES) Act of 2020 Short-Time Compensation (STC) Program
Grants (July 19, 2023)
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PRIOR RELEVANT COVERAGE
During the last 4 years, the OIG has issued five reports of significant relevance to
the subject of this report. Those reports include the following:
1. CARES Act: Initial Areas of Concern Regarding Implementation of
Unemployment Insurance Provisions, Report No. 19-20-001-03-15
(April 21, 2020), available at:
https://www.oig.dol.gov/public/reports/oa/2020/19-20-001-03-315.pdf;
2. COVID-19: More Can Be Done to Mitigate Risk to Unemployment
Compensation under the CARES Act, Report No. 19-20-008-03-315
(August 7, 2020), available at:
https://www.oig.dol.gov/public/reports/oa/2020/19-20-008-03-315.pdf;
3. COVID-19: States Struggled to Implement Cares Act Unemployment
Insurance Programs, Report No. 19-21-004-03-315 (May 28, 2021),
available at:
https://www.oig.dol.gov/public/reports/oa/2021/19-21-004-03-315.pdf;
4. Alert Memorandum: The Employment and Training Administration Needs
to Ensure State Workforce Agencies Report Activities Related to CARES
Act Unemployment Insurance Programs, Report No. 19-22-004-03-315
(August 2, 2022), available at:
http://www.oig.dol.gov/public/reports/oa/2022/19-22-004-03-315.pdf; and
5. COVID-19: ETA Needs a Plan to Reconcile and Return to the U.S.
Treasury Nearly $5 Billion Unused by States for a Temporary
Unemployment Insurance Program, Report No. 19-23-015-03-315
(September 28, 2023), available at:
https://www.oig.dol.gov/public/reports/oa/2023/19-23-015-03-315.pdf.
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APPENDIX B: AGENCY’S RESPONSE TO THE REPORT
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REPORT FRAUD, WASTE, OR ABUSE
TO THE DEPARTMENT OF LABOR
Online
https://www.oig.dol.gov/hotline.htm
Telephone
(800) 347-3756 or (202) 693-6999
Fax
(202) 693-7020
Address
Office of Inspector General
U.S. Department of Labor
200 Constitution Avenue NW
Room S-5506
Washington, DC 20210