U.S. Department of Labor Office of Inspector General — Memorandum for Brent Parton (September 25, 2023)
Summary
U.S. Department of Labor Office of Inspector General alert memorandum, Report Number 19-23-012-03-315, dated September 25, 2023, from Assistant Inspector General for Audit Carolyn R. Hantz to Brent Parton of the Employment and Training Administration (ETA). It states that the OIG identified nearly $1.3 billion in potentially fraudulent unemployment insurance payments made during the pandemic in two high-risk age categories: Social Security numbers of children under the age of 14 and of persons 100 years of age or older. It states that the OIG previously identified more than $45.6 billion in potentially fraudulent payments in four other high-risk areas. The memorandum states that ETA does not have direct access to state unemployment insurance claims data.
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U.S. Department of Labor Office of Inspector General
Washington, DC 20210
September 25, 2023
MEMORANDUM FOR: BRENT PARTON
Principal Deputy Assistant Secretary
for Employment and Training
FROM: CAROLYN R. HANTZ
Assistant Inspector General
for Audit
SUBJECT: Alert Memorandum: ETA Needs to
Incorporate Data Analytics Capability to
Improve Oversight of the Unemployment
Insurance Program
Report Number: 19-23-012-03-315
The purpose of this memorandum is to alert the Employment and Training
Administration (ETA) to a concern the Office of Inspector General (OIG) has
determined needs immediate attention. The OIG has identified nearly $1.3 billion
in potentially fraudulent unemployment insurance (UI) payments made during the
pandemic in two high-risk age categories, to individuals with Social Security
numbers: (1) of children under the age of 14 and (2) of elderly persons 100 years
of age or older. The OIG previously identified more than $45.6 billion in
potentially fraudulent UI pandemic benefits paid in four other high-risk areas. 1
This memorandum builds on our previous work, identifying additional risk within
state UI claims data for agency action.
We are concerned ETA currently does not have direct access to state UI claims
data. Additionally, we are concerned ETA does not have the capability to analyze
said data, which would allow it to better identify fraud and other improper
payments, as well as other trends or emerging issues, such as timeliness or
equity.
1 Alert Memorandum: Potentially Fraudulent Unemployment Insurance Payments in High-Risk
Areas Increased to $45.6 Billion, Report No. 19-22-005-03-315, (September 21, 2022), available
at: https://www.oig.dol.gov/public/reports/oa/2022/19-22-005-03-315.pdf
Working for America’s Workforce
To provide relief to American citizens experiencing pandemic-related
employment issues and challenges, the Coronavirus Aid, Relief, and Economic
Security Act and subsequent legislation authorized seven new temporary UI
programs. 2 These temporary pandemic-related UI programs, coupled with the
state UI programs, paid $888 billion in benefits during the heightened period of
the COVID-19 pandemic—March 2020 through September 2021. This rapid
expansion and substantial increase in benefits significantly increased the risk for
fraud, waste, and abuse in UI programs.
For more than 20 years, the OIG has reported on the U.S. Department of Labor’s
(DOL) challenge to reduce improper payments in the UI program, which has
experienced some of the highest improper payment rates across the federal
government. In addition to the OIG’s prior work, the Government Accountability
Office (GAO), in its 2021 report on the federal response to the pandemic,
expressed concern about overpayments and potential fraud in the UI system. 3
GAO subsequently added the UI system to its “High Risk List” and recommended
that DOL develop a plan for transforming this system. 4 In 2023, GAO estimated
the pandemic related fraud rate for the UI programs was about 11 to 15 percent
for the period April 2020 to May 2023, and estimated up to $135 billion was lost
to fraud. 5 GAO also noted that the full extent of UI fraud during the pandemic will
likely never be known with certainty.
The improper payment rate estimate for the UI program, as reported to the Office
of Management and Budget, has been above 10 percent for 16 of the last
19 years (see Figure 1). 6 In 2021 and 2022, ETA estimated an improper payment
rate of 18.71 percent and 21.52 percent, respectively. Further, ETA estimated a
2 These new programs included the Pandemic Unemployment Assistance program, which
extended UI benefits to individuals not traditionally eligible; the Federal Pandemic Unemployment
Compensation program, which provided supplemental payments to individuals receiving
traditional and other eligible UI benefits; and the Pandemic Emergency Unemployment
Compensation program, which provided up to an additional 13 weeks of unemployment
compensation to individuals who exhausted their regular UI benefits.
3 GAO, COVID-19: Sustained Federal Action is Crucial as Pandemic Enters Its Second Year,
Report No. GAO-21-387 (March 31, 2021), available at: https://www.gao.gov/products/gao-21-
387
4 GAO, Unemployment Insurance: Transformation Needed to Address Program Design,
Infrastructure, and Integrity Risks, Report No. GAO-22-105162 (June 7, 2022), available at:
https://www.gao.gov/products/gao-22-105162
5 GAO, Unemployment Insurance: Estimated Amount of Fraud during Pandemic Likely Between
$100 Billion and $135 Billion, GAO-23-106696 (September 2023), available at:
https://www.gao.gov/assets/gao-23-106696.pdf
6 The improper payment reporting year is the 12-month period ending June 30 of the reporting
year.
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fraud rate of 8.57 for 2021—a 170 percent increase over the prior year’s fraud
rate of 3.17 percent. 7
Figure 1: UI Improper Payment Rates, 2004 – 2022 8
25%
20%
15%
10%
5%
0%
- Improper Payment Rate
Source: OIG analysis of improper payment data published by ETA
During our previous audit 9 of DOL’s response to the UI program’s expansion
under the Coronavirus Aid, Relief, and Economic Security Act, we performed
comprehensive data analyses on state UI claims data for March 2020 through
October 2020. Our analyses identified more than $5.4 billion of potentially
fraudulent UI pandemic benefits paid in four specific high-risk areas. The four
originally identified high-risk areas were benefits paid to individuals with Social
Security numbers: (1) filed in multiple states, (2) of deceased persons, (3) of
federal prisoners, and (4) used to file UI claims with suspicious email accounts. 10
7 ETA estimated the fraud rate as part of its Benefit Accuracy Measurement program for the
period July 1, 2020, through June 30, 2021. The Benefit Accuracy Measurement program is
designed to determine the accuracy of paid and denied claims in three major UI programs: state
UI, Unemployment Compensation for Federal Employees, and Unemployment Compensation for
Ex-Servicemembers.
8 The 2020 improper payment rate of 9.7 percent was calculated based on 9 months of data, from
July 2019 through March 2020, and was reflective of only 8 percent of total program year
expenses due to the exclusion of Coronavirus Aid, Relief, and Economic Security Act UI
expenditures and the fourth quarter of the program year. The collection of improper payment data
from April 2020 to June 2020 was suspended due to the pandemic.
9 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
10 Alert Memorandum: The Employment and Training Administration (ETA) Needs to Ensure
State Workforce Agencies (SWA) Implement Effective Unemployment Insurance Program Fraud
Controls for High Risk Areas, Report No. 19-21-002-03-315 (February 22, 2021), available at:
https://www.oig.dol.gov/public/reports/oa/2021/19-21-002-03-315.pdf
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Our subsequent analyses of those high-risk areas, using UI claims data through
April 2022, brought the cumulative total of potential fraud to more than
$45.6 billion. 11 We provided ETA with our underlying methodology as well as
specific claimant information, and ETA shared the information with states for
appropriate action. We are currently performing four separate audits to examine
the extent to which ETA and states have taken action on a sample of potentially
fraudulent claims in each of the four high-risk areas.
Since our earlier analyses, we have identified almost $1.3 billion in potentially
fraudulent UI pandemic benefits paid from March 2020 through April 2022 in two
additional high-risk areas. The two additional high-risk areas involve benefits paid
to individuals with Social Security numbers: (1) of children under the age of 14
and (2) of elderly persons 100 years of age or older (see Table 1). 12
Table 1: UI Pandemic Benefits Paid to High-Risk Age Groups,
March 2020 through April 2022
High-Risk Area Total Potential Fraud Identified
Under Age 14 $1,225,663,851
Age 100 or Older $66,541,872
Total $1,292,205,723
Source: OIG data analysis of state UI claims data
Although these could be legitimate claims, they merit additional oversight and
scrutiny as workers typically do not fall into these age categories. For example,
the Fair Labor Standards Act of 1938 sets a minimum age of 14 for employment
in non-agricultural occupations covered by the act, which effectively limits
employment for children under 14 to work that is exempt from the act, such as
delivering newspapers and acting.
In addition to the potential fraud risk inherent with children under 14 receiving UI
benefits, there is a risk and concern that these children could be victims of child
labor exploitation. Since 2018, DOL has seen a 69 percent increase in children
being employed illegally by companies. In Fiscal Year (FY) 2022, DOL found
835 companies it investigated had employed more than 3,800 children in
violation of labor laws. The OIG is planning to do audit work in this area—which
falls under the purview of DOL’s Wage and Hour Division—in the future.
11 Alert Memorandum: Potentially Fraudulent Unemployment Insurance Payments in High-Risk
Areas Increased to $45.6 Billion, Report No. 19-22-005-03-315 (September 21, 2022), available
at: https://www.oig.dol.gov/public/reports/oa/2022/19-22-005-03-315.pdf
12 To prevent double counting, these results do not include any claims identified in our analyses
of the four high-risk areas covered by our previous alert memoranda.
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Further, while there are no legal restrictions placed on elderly workers, it is rare
for individuals over the age of 100 to be in the workforce. The U.S. Bureau of
Labor Statistics reported the labor force participation rate for people age 75 and
older was 8.9 percent in 2020. 13
Our analysis identified four states that paid UI claims to 18 percent or more of
individuals aged 100 years or older from March 2020 to April 2022. 14 If
these claims were legitimate, this would indicate a remarkably large percentage
of centenarians were still working and eligible for UI benefits in these four
states—a trend that was not observed in other states. For example, the State of
Michigan paid claims to over 58 percent of its centenarian population during this
period, while other states with significantly larger centenarian populations paid
claims to less than 1 percent. Excluding the four outlier states with percentages
exceeding 18 percent, an average of only 1.2 percent of centenarians in the
remaining 46 states received UI pandemic benefits during this period (see
Figure 2).
Figure 2: Percentage of Persons 100 Years of Age or Older with UI
Pandemic Benefits Paid from March 2020 through April 2022
70%
58.5%
60%
50%
40%
30%
22.9% 21.1%
18.8%
20%
10%
1.2%
0%
Average State Michigan Rhode Island California Georgia
Percentage of Centenarians Receiving UI Benefits
Source: OIG data analysis of state UI claims data and 2020 U.S. Census data
13 Bureau of Labor Statistics, U.S. Department of Labor, The Economics Daily, “Number of people
75 and older in the labor force is expected to grow 96.5 percent by 2030” (November 4, 2021),
last accessed August 15, 2023, available at: https://www.bls.gov/opub/ted/2021/number-of-
people-75-and-older-in-the-labor-force-is-expected-to-grow-96-5-percent-by-2030.htm
14 For this comparison, we used state population data sourced from the 2020 U.S. Census. U.S.
Census Bureau, “Exploring Age Groups in the 2020 Census” (May 25, 2023), available at:
https://www.census.gov/library/visualizations/interactive/exploring-age-groups-in-the-2020-
census.html
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Due to the results of our analysis in these two high-risk areas, we remain
concerned about the amount of benefits paid in the aforementioned age groups.
Further, our latest analysis brings the cumulative total amount of potentially
fraudulent payments to more than $46.9 billion 15 in the six high-risk areas (see
Figure 3), 16 showing how effective and beneficial data analytics can be for
providing effective program oversight and combatting fraud.
Figure 3: Six High-Risk Areas for Potential UI Fraud Identified by the OIG
Source: OIG data analysis of state UI claims data
In “A Framework for Managing Fraud Risks for Federal Programs,” GAO
recommends using data analytic tools and techniques to prevent and detect
fraud. It states:
Data analytics activities can include a variety of techniques to
prevent and detect fraud. For example, data mining and
data-matching techniques can enable programs to identify potential
fraud or improper payments that have already been awarded, thus
assisting programs in recovering these dollars, while predictive
analytics can identify potential fraud before making payments. 17
15 Total amounts for these analyses do not include duplicates that were identified in one or more
areas.
16 Of the more than $46.9 billion total identified, the OIG had previously reported in prior OIG
reports that $45.6 billion in potential fraudulent payments had been identified within four high-risk
areas. This report identifies almost $1.3 billion in additional funds put to better use within two
additional high-risk areas that were not claimed in our prior reports. See Attachment II for detailed
information, including our calculation.
17 Appendix III in the GAO’s “A Framework for Managing Fraud Risks in Federal Programs,”
Report No. GAO-15-593SP (July 2015), available at: https://www.gao.gov/assets/gao-15-
593sp.pdf
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In addition, the Office of Management and Budget recommends that
federal agencies work closely with their data analysts to establish robust
analytics capabilities that allow an agency to identify potential improper
payments, including fraud, before they occur. Data analytics can include
analysis for trends, patterns, anomalies, and exceptions within data sets.
The Office of Management and Budget also provides an overview of
common data analytic techniques that federal agencies should consider to
reduce the risks of improper payments. 18
According to ETA, it has developed a preliminary draft of a UI Fraud Risk Profile
to align DOL’s ongoing fraud risk management activities with GAO’s Fraud Risk
Framework. ETA also issued guidance in April 2023 to communicate the
antifraud strategy for the UI program to the states. This guidance provides states
with information on both required and strongly recommended strategies, tools,
and services for UI fraud risk mitigation and improper payment reduction. 19
ETA’s FY 2023 Agency Management Plan states that improving overall program
integrity in the UI program is one of the agency’s top priorities. Strategy 3.2,
“Strengthen Program Integrity by Preventing and Detecting Fraud, and Reducing
Improper Payments,” indicates that ETA will continue to “promote UI program
integrity actively and aggressively by identifying and reducing fraud, waste, and
abuse in the program.” One of the activities for this strategy is to “invest in
technology and data analytics,” and specifically:
Invest in tools and strategies to help states verify [the] identity of UI
claimants, promote states’ use of these tools/strategies, and
perform data analytics to prevent and detect fraud, and reduce
investigations backlog. These tools and strategies will be balanced
to ensure equitable access and delivery of UI services.
Another activity identified in ETA’s FY 2023 Agency Management Plan is to work
with the UI Integrity Center “to promote the consistent use of the Integrity Data
Hub (IDH) by states to cross-match with all available datasets and promote the
UI Integrity Center’s Integrity Knowledge Exchange as a resource for program
integrity information, tools (including a data analytics tool), and promising
practices to states.”
18 Payment Integrity Alert: The Use of Automation and Data Analytics From the Office of
Management and Budget (OMB) Office of Federal Financial Management and the Pandemic
Response Accountability Committee (PRAC); posted by the CFO Council on July 21, 2021,
available at: https://www.pandemicoversight.gov/media/file/joint-payment-integrity-alert-use-
automation-and-data-analytics-omb-and-prac
19 Unemployment Insurance Program Letter No. 22-21, Change 2, available at:
https://www.dol.gov/agencies/eta/advisories/uipl-22-21-change-2
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The UI Integrity Center is a joint federal-state initiative funded by DOL and
operated by the National Association of State Workforce Agencies. 20 It serves as
a resource to assist states in their efforts to improve integrity in the UI program,
focusing particularly on the prevention, detection, and recovery of improper
payments including fraud. One of the services provided by the UI Integrity
Center, the IDH, is a multistate data system used for advanced data
cross-matching and analysis on submitted claims to help detect and prevent UI
fraud and improper payments.
While tools and resources like the IDH can improve program integrity and
increase detection and prevention of improper payments, including fraudulent
payments, there are significant limitations. First, while ETA encourages states to
use the tools available from the UI Integrity Center, ETA maintains that it lacks
the authority to require states to participate. To this end, the OIG previously
recommended in our first high-risk alert memo, 21 issued in February 2021, that
ETA work with Congress to establish legislation requiring state workforce
agencies to cross-match high-risk areas, including the four originally identified
areas. Consistent with our recommendation, in the FY 2024 President’s Budget,
ETA included a legislative proposal that would give DOL authority to require
states to perform cross-matches using the IDH. Additionally, states that
participate in the IDH have been inconsistent in their use of the tool and in the
level of claims data shared. For example, as of June 2023, although all 53 state
workforce agencies had IDH participation agreements in place, ETA reported
only 50 of the 53 state workforce agencies were participating in the IDH
multistate cross-matches.
We also found the IDH is limited in its effectiveness in identifying potential
improper payments and fraud. We recently reported that the IDH was not able to
identify the same amount of potentially improper multistate claims when
compared to the OIG’s analysis. 22 The IDH used a threshold that was higher than
what the OIG would use to flag improper multistate claims. However, even when
we used the IDH’s threshold, we found the IDH only identified 39.7 percent of
potential improper multistate claims using data from September 2020, when
compared to our analysis. This occurred because the states who participated did
not share complete data with the IDH on a consistent basis.
20 The National Association of State Workforce Agencies is the national organization representing
all of the state workforce agencies and whose mission is to enhance the state workforce
agencies’ abilities to accomplish their goals, statutory roles, and responsibilities.
21 Alert Memorandum: The Employment and Training Administration (ETA) Needs to Ensure
State Workforce Agencies (SWA) Implement Effective Unemployment Insurance Program Fraud
Controls for High Risk Areas, Report No. 19-21-002-03-315 (February 22, 2021), available at:
https://www.oig.dol.gov/public/reports/oa/2021/19-21-002-03-315.pdf
22 COVID-19 – ETA Can Improve its Oversight to Ensure Integrity over CARES Act UI Programs,
Report No. 19-23-011-03-315 (September 22, 2023), available at:
https://www.oig.dol.gov/public/reports/oa/2023/19-23-011-03-315.pdf
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Finally, even without these limitations, the tools and resources do not relieve ETA
from its program oversight responsibilities. ETA has recognized the critical
importance of data analytics in detecting and preventing improper payments,
including fraud, and improving program integrity. To this end, ETA has invested
in providing states with tools through the UI Integrity Center and encouraged
states to use data analytics to strengthen program integrity. However, ETA does
not have direct access to UI claims data, nor has it developed its own data
analytics capability at the federal level as part of its oversight of the UI program.
In its FY 2023 and FY 2024 Congressional Budget Requests for State
Unemployment Insurance and Employment Service Operations, ETA included a
legislative proposal to allow it to collect and store states’ UI claimant data. This
proposal would provide DOL “direct access to all claim and wage data used by
state agencies in administrating the state’s unemployment compensation
program solely for the purposes of Federal unemployment compensation
administration and to conduct research, evaluation, and performance
assessments of unemployment compensation programs and federally funded
employment-related programs.” 23 Therefore, ETA is aware of its need for access
to state UI claims data to provide proper oversight of the UI program.
ETA officials indicated the noted language in its Congressional Budget Requests
was included as a component of future UI reform, but it would require statutory
authority allowing access to the data, a new records management system, and
individual data sharing agreements with states. Because this would take a
significant increase in funding and years to plan and achieve, ETA indicated it is
focusing its energies and resources on improving integrity controls in the federal-
state partnership that reflect the current UI program, such as investing in
enhancements to, promoting increased states participation in, and conducting
evaluations of the IDH.
Although ETA has stated it needs additional authority to obtain access to state UI
claims data, current federal regulations provide such authority for purposes
described in this memorandum. Specifically, 20 C.F.R. § 603.6 (a) states that
“the Department of Labor interprets Section 303(a)(1), [Social Security Act of
1935], as requiring disclosure of all information necessary for the proper
administration of the [UI] program.” Additionally, 29 C.F.R. § 96.41 authorizes
DOL to obtain UI data from the states to evaluate and improve program integrity.
This regulation states that DOL “shall have access to any books,
documents…and records (manual and automated) of the entity receiving funds
23 FY 2023 Congressional Budget Justification for State Unemployment Insurance and
Employment Service Operations, available at:
https://www.dol.gov/sites/dolgov/files/general/budget/2023/CBJ-2023-V1-07.pdf; FY 2024
Congressional Budget Justification for State Unemployment Insurance and Employment Service
Operations, available at: https://www.dol.gov/sites/dolgov/files/general/budget/2024/CBJ-2024-
V1-07.pdf
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from DOL…for the purpose of making surveys, audits, examinations, excerpts,
and transcripts.”
Conclusion
Ready access to UI claims data from all states and territories would enable ETA
to ensure proper administration and provide sufficient oversight of the UI
program.
Further, in addition to the tools and resources it provides to the states for fraud
detection, such as the IDH, establishing a data analytics capability with a
dedicated team of data scientists at the federal level would allow ETA to monitor
and analyze UI claims data on an on-going basis. ETA would then be able to
identify high-risk areas across multiple states and quickly flag potentially
fraudulent claims that can be referred to the OIG and states for further action,
which could help prevent future losses to fraudsters. Likewise, incorporating a
data analytics capability into its program oversight function would improve ETA’s
ability to detect trends and emerging issues that could negatively impact the
timeliness or equity of UI payments—before the issues grow into critical
problems.
Ultimately, a data access and analytics capability would allow ETA management
to make better informed decisions about the UI program and help mitigate the
risk of improper payments including fraud, while also preparing ETA for future
emergency UI programs where hundreds of billions in federal dollars could be at
risk.
Recommendations
We recommend the Principal Deputy Assistant Secretary for Employment and
Training:
1. Obtain direct access to unemployment insurance claims data from all state
workforce agencies.
2. Create an integrity program that incorporates a data analytics capability
and regularly monitors state unemployment insurance claims data to
detect and prevent improper payments, including fraudulent payments,
and to identify trends and emerging issues that could negatively impact
the unemployment insurance program.
3. Establish effective controls, in collaboration with state workforce agencies,
to mitigate fraud and other improper payments to ineligible claimants in
high-risk age categories.
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Summary of ETA’s Response
On September 6, 2023, ETA provided us its formal response to the draft alert
memorandum and recommendations (see Attachment III). ETA agreed with
Recommendation 3 and stated it had already implemented controls to mitigate
fraud and improper payments to ineligible claimants in high-risk age categories.
However, ETA disagreed with Recommendations 1 and 2, stating that they are
not achievable at this time without significant new and ongoing appropriations.
For Recommendation 1, ETA stated that it lacks resources to develop a data
warehouse that would be required to implement this recommendation. For
Recommendation 2, ETA stated that developing a data analytics capability at the
federal level would duplicate DOL’s ongoing investment in the UI Integrity Center,
including the IDH. To address these two recommendations, ETA suggested an
alternative approach of working with the UI Integrity Center to improve IDH data
analytics capabilities to better identify fraud trends. This would include meeting
regularly with the UI Integrity Center to receive information about identified fraud
trends and to discuss efforts to mitigate fraud and reduce improper payments.
ETA raised two additional concerns with our alert memorandum, related to our
analyses of payments to elderly individuals 100 years of age or older and ETA’s
legal authority to access state UI claims data.
First, ETA indicated that one of the four outlier states we identified in our analysis
had manipulated the date of birth field in the process of creating “pseudo
records” for previously identified fraudulent claims. This was done in accordance
with ETA guidance to ensure victims of fraud were not unfairly prevented from
accessing benefits. According to ETA, 90 percent of the claims we identified for
this state were “pseudo records” and not actual payments to individuals
100 years of age or older. ETA also stated that “it advised the OIG of this
information and...is disappointed that the OIG did not include this context in the
draft alert memorandum....”
Second, ETA raised a concern that the alert memorandum exaggerates DOL’s
legal authority to obtain data from states. Specifically, ETA stated it can only
require the states to disclose claims information that is necessary for the proper
administration of the program, and it cannot require states to provide DOL
access to all claims data.
OIG Response to ETA Management Comments
For Recommendation 1, the OIG recognizes the resource concerns expressed
by ETA and acknowledges there may be other ways that ETA can initially obtain
direct access to state UI claims data. For example, with a more complete and
consistent data set, the data maintained by the UI Integrity Center could be a
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potential source for this data until such a time that ETA can allocate funding to
establish its own data warehouse.
For Recommendation 2, the OIG disagrees that developing a data analytics
capability at the federal level would be a duplicative effort. As we noted in our
memorandum, data analytics is an essential tool for program oversight—which is
ETA’s responsibility—that would allow ETA to improve its detection and
prevention of improper payments, including fraud, perpetrated across multiple
states, while also preparing ETA for future emergency UI programs where federal
money could be at risk.
In relation to ETA’s suggested alternative approach, while the suggested actions
would likely benefit the UI program, this approach appears to continue shifting
program oversight responsibilities to the states and the UI Integrity Center. We
noted in our memorandum that states are not required to participate in the IDH,
and those that do participate do so to varying degrees—which has limited the
IDH’s effectiveness. However, even if these limitations were resolved, it would
not relieve ETA from its program oversight responsibilities. As such, ETA’s
suggested alternative approach would not alone meet the intent of the OIG’s
recommendations.
In relation to the additional concern on our analysis of claims paid to claimants
100 years of age or older, the OIG acknowledged in our memorandum that these
claims could be legitimate but they required additional oversight and scrutiny.
ETA did not notify us that the claims data contained “pseudo records” with
altered dates of birth until it provided that information in its response to our draft
memorandum.
Additionally, ETA did not provide us with evidence to support its statement that
90 percent of the claims the OIG identified for this state were “pseudo records.” If
accurate, this state paid UI claims to 5.9 percent of its centenarians, which was
almost 5 times higher than the average of the 46 non-outlier states. The OIG
stands by our assertion that all claims paid in high-risk age categories require
additional oversight and scrutiny.
We further note that the UI program has experienced historic levels of improper
payments. The OIG has issued multiple alert memoranda identifying tens of
billions of dollars in potentially fraudulent UI payments identified through our use
of data analytics. In addition, GAO recently reported that up to $135 billion could
have been lost to UI fraud during the pandemic.
In relation to DOL’s legal authority to obtain data from states, the OIG did not
recommend ETA acquire unnecessary data but rather, we recommended ETA
obtain direct access to UI claims data from all states to improve the accuracy and
reliability of results when performing data analytics and oversight of the UI
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program. ETA should access data that is necessary for, and relevant to, program
administration and oversight.
We consider Recommendations 1 and 2 as open and unresolved. For
Recommendation 1, ETA should obtain access to the data, ideally developing its
own data warehouse; however, until ETA receives sufficient funding, it may be
able to obtain access via the UI Integrity Center. For Recommendation 2, ETA
should not rely totally on the UI Integrity Center for data analytics capability.
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Attachment I
UI Improper Payments Rates, 2004 – 2022
This table provides accessible data showing the reported improper payment rate
estimates for the UI program over the last 19 years, from 2004 to 2022. The
improper payment rate exceeded 10 percent in all years except 2008
(9.96 percent), 2013 (9.32 percent), and 2020 (9.17 percent). 24
Table 2: Accessible Data Table for
Figure 1 - UI Improper Payment Rates, 2004 – 2022
Year Improper Payment Rate
2004 10.34%
2005 10.13%
2006 10.90%
2007 10.30%
2008 9.96%
2009 10.30%
2010 11.20%
2011 12.00%
2012 11.42%
2013 9.32%
2014 11.58%
2015 10.73%
2016 11.65%
2017 12.50%
2018 13.05%
2019 10.61%
2020 9.17%
2021 18.71%
2022 21.52%
Source: OIG analysis of improper payment data
published by ETA
24 The actual improper payment rate for 2020 is likely higher than 10 percent, based on OIG
pandemic audit and investigative work. On August 6, 2021, we reported that the improper
payment rate of 9.17 percent for 2020 was calculated based on 9 months of data, from July 2019
through March 2020, and was reflective of only 8 percent of total program year expenses
($22.6 billion out of $281.8 billion) due to the exclusion of Coronavirus Aid, Relief, and Economic
Security Act UI expenditures and the fourth quarter of the program year. The collection of
improper payment data from April 2020 to June 2020 was suspended due to the pandemic. For
more information, see “The U.S. Department of Labor Complied with The Payment Integrity
Information Act for FY 2020, but Reported Unemployment Insurance Information Did Not
Represent Total Program Year Expenses,” Report No. 22-21-007-13-001 (August 6, 2021),
available at: https://www.oig.dol.gov/public/reports/oa/2021/22-21-007-13-001.pdf.
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Attachment II
Potential Funds for Better Use 25
Table 3: Total Net Funds for Better Use
Description Amount
Total Funds for Better Use $46,931,696,330
Funds for Better Use Claimed in
($45,639,490,607)
Prior OIG Alert Memoranda
Net Funds for Better Use $1,292,205,723
Source: OIG data analysis of state UI claims data
The table shows the total net funds for better use for the six high-risk areas
identified in this and previous alert memoranda. In this alert memorandum, we
identified $46.9 billion in total cumulative potential fraud for the period
March 2020 to April 2022. To prevent double counting, we subtracted the
$45.6 billion in potentially fraudulent payments identified in a previous 2022 alert
memorandum. 26 As a result, we are claiming nearly $1.3 billion as total net funds
for better use in this alert memorandum.
25 As defined by the Inspector General Act of 1978, as amended, “funds for better use” means
funds that could be used more efficiently or achieve greater program effectiveness if
management took certain actions. These actions include reduction in future outlays and
deobligation of funds from programs or operations.
26 Alert Memorandum: Potentially Fraudulent Unemployment Insurance Payments in High-Risk
Areas Increased to $45.6 Billion, Report No. 19-22-005-03-315, (September 21, 2022), available
at: https://www.oig.dol.gov/public/reports/oa/2022/19-22-005-03-315.pdf
-15-
Attachment III
U.S. Department of Labor Employment and Training Administration
200 Constitution Avenue, NW.
Washington, D.C. 20210
September 6, 2023
MEMORANDUM FOR: CAROLYN R. HAN TZ
Assistant Inspector General for Audit
FROM: BRENT PARTON ~
Principal Deputy Ass~ retary
SUBJECT: Response to Draft Alert Memorandum: ETA Needs to
lncmporate Data Analytics Capability lo Improve
Oversight of the Unemployment lm11rance Program,
Report Number: I9-23-xxx-03-3 I 5
The Department of Labor's (Department) Employment and Training Administration (ETA)
appreciates the opportunity to respond to the above-referenced draft ale1t memorandum from the
Department's Office of Inspector General (OlG).
Areas of Concerns with the OTG's Draft Alert Memorandum
As described below, ETA is fully committed to combatting fraud and improper payments and
welcomes the OlG's collaboration on this multi-faceted problem. However, throughout the
development of the draft alert memorandum, ETA repeatedly expressed concerns regarding the
OTG's proposed approach and provided extensive technical comments to promote development
of recommendations that are both actionable and meaningful. ETA is disappointed that much of
this input is not reflected in the draft alert memorandum. As a result, ETA notes the following
concerns regarding the content of the draft alert memorandum:
• Manv o(the claims identified in this draft alert memorandum were not payments to
i11dividua/s over JOO vears ofage, but rather ''pseudo record5 " ofpreviouslv idemi(ied
fi·a udulent claims. where the date of birth was changed sig11ifica11tlv to help the stale
idelllifv these records and prorect innocent victims {i'om having fi1t11re claims denied.
ln the draft alert memorandum, the OlG states: "Our analysis identified four states that
paid [Unemployment Insurance] claims to 18 percent or more of individuals aged 100
years or older from March 2020 to April 2022" and highlighted one state in particular
that paid claims to over 58 percent of its centenarian population. Given the seriousness
of the concerns identified in the draft alert memorandum, ETA's Regional Offi ce reached
out to the hi ghlighted state to get clarification on the OTG' s statement. The state in
question inforn1ed ET A that they had not paid 58 percent or more of individuals aged 100
years or older. Rather, thi s was the result of how the state ensured victims of fraud were
not unfairly prevented from accessing benefits.
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Attachment III
When a fraudulent claim is identified, states have a responsibility to ensure that a rightful
recipient is not held liable for amounts stolen by fraudulent actors and is not inhibited
from accessing benefits in the future. In alignment with the Depaitment's guidance,1
states often transfer the fraudulent claims infonnation to a "pseudo record" to prevent
automated systems from flagging future legitimate claims by the claimant. AccordiJ1g to
the state, approximately 90 percent of the records that the OIG reviewed were "pseudo
records." To make tliese known fraudulent "pseudo records" easier to identify, the state
intentionally used significantly older dates of birth. 'fltese "pseudo records" were created
to protect the rights of victims on claims that had already been detennined to be
fraudulent- they were not claims paid to individuals who are over JOO years old.
ETA advised t.he OIG of this infonnation and urged the OIG to seek clarification with the
state to ensure that !lie draft alert memorandum did not include erroneous claims or
mischaracterizations. ETA is disappointed that tl1e OIG did not include this contei..1 in
the draft alert memorandum and is concerned that this mischaracterization of the data
could result in sensationalism and unwarranted attention damaging tl1e public's trnst and
faith in existing institutions.
• The recommendations are not achievable without significant new and ongoing
appropriations. which make these recommendations dependent on Congressional action
and at high risk o( not being accomplished. To implement the first two reconunendations
in this draft alert memorandum, as written, would require an appropriation from Congress
to support the infrastructure, development, and hiring of necessary staff to oversee the
collection, secure storage, mid data analysis of a significant ai11ount of new data. ETA is
concerned that the agency lacks resources to develop a data warehott~e that would be
required to achieve this result. In addition, there would be a need for ongoing aiumal
funding to support tl1e maintenai1ce and operations of the data collection and to provide
the staffing to oversee and conduct the data analysis envisioned in these
recommendations. As recently as June 2023, the Fiscal Responsibility Act was .:nacted
which rescinded $1 billion in previously appropriated funds to support the
Unemployment Insurance (U I) programs. In light of this recent legislation, the
reconu11endations will be very difficult to implement.
• The draf/ alert memorandum exaggerates the Department 's legal aulhority lo obtain dala
fi-om states. The OlG's draft alert memorandum concludes that !lie Department has
authority under 20 C.F.R. 603.6(a) to require states to submit all claims data to ETA.
20 C.F.R. 603.6(a) requires "disclosure of all infonnation necessary for tl1e proper
administration of the (Unemployment Compensation) program." ETA can only require
the states to disclose all claims infomiation if Ille infonnation is necessary for the proper
administration of the program. 11,e OlG' s interpretation is a novel and very broad
1
See Section 4.b.v.C. ofUnemploymentJnsurance Program Letter (UlPL) No. 11-23, Almo101cement ofGrant
Opport11nities and National ldentity {ID) Verification Offering under the American Rescue Plan Act (AP!IA), issued
July 13, 2023, https:/lwww.dol.gov/agenc1es/eta'8dvisoricsluipl-11-~3 and Section 5 of lJTPL No. 16-21, Identity
Verification for Unemployment Ins11rance (Ul) Claims, issued April 13, 2021,
https;//www .do! govlagencies/eta/adnsories/unem plovm ent-msurance-program -letter-no- 16-2 l .
2
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Attachment III
interpretation of existing regulations. 1l1e Department has not interpreted 20 C.F.R.
603.6(a) to require states to provide the Department direct access to all claims data.
ETA is Committed to Combatting Fraud and Improper
Payments and Collaborating with the OIC
ETA recognizes the OIG's crucial role in helping to combat fraud, waste, and abuse within the
Ul programs. Additionally, ETA acknowledges the O IG's assessment regarding the significant
increase in fraudulent activity challenging state UI programs across the nation since the
beginning of the COVID-19 pandemic. ETA agrees that it has a shared responsibility with the
states lo continue to explore, research, and identify fraud trends, and provide states with
im1ovative tools, resources, strategies, and guidance, as warranted, to help states combat new
sophisticated fraud typologies and emerging schemes impacting the UI system.
S 11pporti11g Stmes thro11gh Mo11itori11g, Daw Analysis, mul Ted111ical Assi.mmce Efforts. ETA
is fully committed to combating fraud and preventing improper payments. ETA' s current UI
statistical programs, monitoring activities, data analysis, and dedicated integrity activities
provide ETA the ability to analyze root causes and trends and develop appropriate mitigation
strategies. 1l1e Benefit Accuracy Measurement (BA1v1) program is designed specifically to
identify the root cause(s) of improper payments, including fraud. ETA reviews quarterly BAM
data and produces state-level root cause infom1ation, as well as provides technical assistance to
states to reduce improper payments and monitors slates for BAM program compliance.
ETA's regional offices conduct ongoing monitoring of states ' UI program integrity, which
involves reviewing and approving the annual Stale Quality Service Plans (SQSP) and Integrity
Action Plans (!AP), including review of the SQSP Corrective Action Plan quarterly updates and
the IAP six-month update. In addition, ETA's regional offices complete quarterly risk
assessments regarding the integrity of states' UI programs and conduct vi11ual and in-person
monitoring of state UI processes and procedures. The regional offices work closely with states
on UI fraud and integrity matters, providing individual technical assista nce and facilitating
ongoing discussions amongst states to share challenges and best practices aimed at improving
program integrity and combatting UI fraud.
S 11pporti11g Swtes tllro11gll Collaboration with the Department's OJG. Fmthenuore, ETA
regularly coordinates and collaborates with the OIG 's Office of Investigations to stay abreast of
emerging fraud threats, streamline communication with states, and coordinate fraud prevention
and recovery efforts. For the past year, ETA 's regional offices have been hosting joint quarterly
regional calls with the OIG and states to improve conununication between states and the OIG at
a more localized regional level. TI1e calls provide a forum for stales and the OIG lo share
updates on in vestigation and prosecution effo11s; allow the states to hear from the OIG regarding
fraud trends and data analytic teclmiques; discuss recommendations and effective strategies for
responding to emerging fraud schemes; and provide opportunities for states to share UI fraud and
3
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Attachment III
integrity-related challenges and best practices. The Department has also advised states on
multiple occasions of the importance of s haring data with the Department's 010. 2
ETA has also taken actions to s uppo11 the 010 in having access to UI data in the interim until the
existing regulations can be revised. In Aug ust 2021, using autho rity provided under the
Coronavims Aid, Relief, and Economi c Security (CARES) Act, ETA issued g uidance to sta tes
requiring states to provide the OIG access to UI data for investigations and audits for weeks of
unemployment through the e,1.-piration date of the CARES Act programs. In addition, and
separate from the CA R.ES Act, the g uidance reiterated an ongoing requirement to disclose suc h
data to the OIG for fraud investi gations and rescinded prior guidance to make clear that such
disclosures do not require any writte n agreement between the state and the 010.
Also, in August 2021, ETA made available to stales an opportunity to seek fraud prevention
grants and conditioned these grants on states providing the OIG access to state Ul data. Fifty
states were awarded tl1ese grants which c urrently have a perfon11ance period through December
2023. On July 13, 2023, ETA issued new Am erican Rescue Plan Act (ARPA)-frn1ded grant
opportunities and conditioned the award of an y grants under these opportunities on states
providing the 010 access to state U I data through the li fe of the awarded grants, which will be in
effect at least through December 2025. 3
Finally, the Departme nt on July 25, 2023, issued a Request for lnfonna tion (RF!) in the Federal
Register regarding possible changes to tl1e UI Confidentially regulations set fortl1 at 20 C.F.R.
Part 603 and the states providing UI data to the Department's OIG for investigation and audit
purposes. See Federal Register on Julv 25, 2023 (88 FR 47829).
S11pporti11g States by Provicli11g" Nlltio11al lcle11tity (ID) VerifLC1Jtio11 Ojferi11g. The
Department is providing states with online and in-person oppo1tm1ities to strengthen ID
verification utilizing ARPA funds. Over the ne,1.t two years, the Department is making
govenunent-operated ID verification systems available to states, leveraging online services
tlu·ough the U.S. General Services Administration's Login.gov and in-person services through
the U.S. Postal Service. TI1e Department is covering transaction costs for ID verification for
participating states during this process.4
1 A few significant documents to date of such advisement UJPL No. 04-17, Change I, Requirement for States to
Refer Allegations ofUnemployment Compensation (UC) Fraud. Waste, Abuse, Mismanagement, or MisconducJ to
the Depar1ment ofLabor's (Deparlmenr) Office ofinspec1orGeneral's (DOL-OIG) and to Disclose Information
Related 10 the Coronavinis Aid. Reliej and Economic Security (CARES) Act to DOL-OIGforPurposes ofUC Fraud
Investigations and Audi!s, issued August 3, 2021, hm,s·//www.dol.gov/agencies/eta/advisorieslunemplovment-
insurancc-program-lett,-r-oo-04-17-change- l • Training and Employment Notice (TEN) No. 05-22, Authority of the
U.S. Department of Labor's (Department) Office of Inspector General (DOL-OIG) to Receive Confidential
Unemployment Compensation (UC) Data, issued September l 5, 2022,
https·/Mww do) govlagcncics/etaladyjsoricsl1raining-and-cmployment-notice-no-0'i-22: t.m'L No. 11-23,
Announcement ofGrant Opportunities and National Identity (1.D) Verification Offering under the American Rescue
Plan Act (APRA), issued July 13, 2023, https;//www.dol.gov/agencies/eta/aclvisoriesluipl-11-23.
' See UIPL No. l 1-23, Announcement ofGranl Oppor1101ities and Naliona/ Identity (JD) Verificalion Offering under
the American Rescue Plan Act (APRA), issued July 13, 2023, hnps:/lwww.dol.gov/agencies/eta/advisorie&luipl- l l-
l},
4
See UlPL No. 11-23, Anno1111cement ofGrant Opportunities and National !dentiiy (ID) Verification Offering 1111der
the American Rescue Plan Act (APRA). issued July 13, 2023, https;//www.dol.gov/agenc1es/etaladvisoriesluipl-l 1-
l}.
4
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Attachment III
Supporting St"tes through Impleme/lt{ltion of" N,dio,wl UI Fraud Risk Framework. TI1e
Department takes UI fraud and improper payments very seriously and continues to ensure UI
program integrity remains a lop agency priority. ETA develops, implements, and oversees
implementation of robust and dynamic fraud mitigation strategies to address emerging and
evolving fraud risks and is in the process or evaluating all of ETA 's integrity initiatives, tools,
and actions to ensure the Department's Ul fraud risk assessment processes are conducted in
alignment with the Government Accountably Office's (GAO) Fraud Risk Framework. As part of
the Department 's efforts lo align ongoing UI fraud risk management activities with the leading
prne,-tices in GAO's Fraud Risk Framework, ETA and the Deprutmenl's Office of the Chief
Financial Officer (OCFO) developed a UI Fraud Risk Profile and antifraud strategies for the UI
program. ETA has already started communi cating its UI anti fraud efforts lo state UI agencies
and other relevant stakeholders through guidance and will continue ensuring states are aware of
inherent fraud risks to the UI pr0!,>ram. In partnership, ETA and OCFO will regularly update the
UI Fraud Risk Profile and will work with state Ul agencies lo develop, document, and evaluate
state-specific antifraud strategies to infonn updates to an agile national UI antifraud framework.
Supporting St{ltes by Providing Tllrgeted Grant F111ulu1g to Combat F rll11d. In addition to
providing significant guidm1ce mid technical assistance to states, ETA has leveraged funding
provided by the CARES Act and ARPA to invest in state efforts to improve fraud prevention and
detection, strengthen ID verification, and recover overpayments. ETA made available to slates a
total of S765 million in gr.ult opportm1ities, of which $525 million was under the CARES Act
and $240 million was under ARPA, for these specific purposes.
Recognizing that the condition of state UI technologies contributed to state UI systems being
overwhelmed by the surge of claims al the start of the pandemic and being unable to more fully
protect against fraud while implementing temporary eidensions ofm1employment benefits to
additional populations, ETA is also providing approximately $200 million in direct grants to
help states adopt new strategies to modernize and rearchitect their UI progrmns. 5
Furthenuore, ETA is providing 36 states with customized consultative assessments thrnugh its
Tiger Team initiative m1d making reconunendations to improve systems and processes. About
two-thirds (approximately 200) of all Tiger Team recommendations to date either directly or
indirectly support progrruu integrity. 6 ETA has made nearly $115 million available to states to
support implementation of the resulting recommendations for preventing and detecting fraud,
promoting equitable access, reducing backlogs, and ensuring timely payment of benefits. 7
1l1e systematic challenges exposed by the pandemic evolved over decades and will lake years to
remedy, but the investments under the CARES Act and ARPA mark one of the most ambitious
efforts to date to drive transfonnation of the UI program.
'See UIPL No. 11-23, Announcement ofGrant Oppornmities and National ldentily {ID) Verification Offering under
the American Rescue Plan Act (APRA), issued July 13, 2023, https://www.dol.gov/a0 encieslelll/advisoriesluipl-11-
23.
"See TEN No. 24-22, New Unemployment lnrurance (UT) Tiger Team Promising Recommendations Resource
Pages Available on WorkforceGPS, issued April 17, 2023, https://www.dol.gov/agencies/eta/advisorieslten-24-22.
7 See UfPL No. 11-23, Announcement ofGrant Opportunities and National Identify OD) Verification Offering 1111der
the American Rescue Plan Act (APRA). issued July 13, 2023, https://www.dol.gov/agenc1esletaladvisoriesluipl-J 1-
~-
5
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Attachment III
Supporting St{ltes by M {/ki11g Services A 1•{li]{lb/e through the UJ Integrity Ce11ter. The
Department contiJmes to provide funding and support to the Ul Lntegrity Center, established in
2012, to enhance tools and develop new resources for states to use in combauing fraud and
reducing improper payments. This effort includes investing in datasets to enhance the UI
Integrity Ceuler's Integrity Data Hub (JOH), which began as only a Suspicious Actor Repository
(SAR) in December 2017, and has evolved over time to be a key fraud detection resource,
prov iding states with the ability to identify patterns of suspicious characteristics across UJ claims
that may be indicative of fraud and helping states prioritize investigations Lo reduce improper
payments.
11,e IDH bas grown rapidly in functionality since the onset of the pru1demic in l\farch 2020, and
two new datasets have been integrated into the IDH, including the Identity Verification (IDV)
solution in July 2020 and the Bank Account Verification (BAV) service in February 2022. IDH
Results Management enhancements have included improvements in flagging potential fraud and
sorting, filtering, and prioritizing IDH results to help states streiunline their investigative
resources.
111e Department consistently encourages greater state usage of and participation in the !DH as a
fraud prevention strategy and these effo1ts are gaining success. In March of 2020, only 34 states
had an IDH Participation Agreement, 2 .1 states were using the SAR, and three stales were using
the Multi-State Cross-lvlatch (MSCM). Currently all 53 stiues have a signed IDH Participation
Agreement, 52 states are using the SAR, 51 states are using the MSCM, 44 states are using the
IDV solution, and 38 states are using the BA V service. All lDH services are cost-free to the
states.
ETA acknowledges there is more to do to enhance these services and resources and to ensure
more states are consistently participating. 111e Department has proposed, in the President's
Fiscal Year 2024 budget, a UI program integrity legislative proposal that includes, among
several other items, providing the Depa.11ment with statutory authority to require states to
participate in the !DH and other payment control cross matches/systems. 8
Responses to the OIG Recommendations
As discussed above, ET A is concerned that the OJ G's reconunendations, as written, are not tl1e
optimal or immediate way to improve the UI system. While ETA has and continues to work
with states to implement recommendations made by the oversight community, suggested
alternative recommendations that ETA believes will be effective and can be implemented in a
more realistic timeframe are provided for consideration. Below are each of the OIG's
reconunendations contained in the draft alert. memoriu1dum, followed by ETA' s response to
address each of the OJG's recommendations.
8 See "UI Program lntegrily'" proposal beginning on page 24 of Fiscal l'ear 2024 Congressional BmigetJustification
for ETA 's State Unemployment Insurance and Employment Service Operations,
https;//www.dol govlsitesldolgov/fileslgeneral/budgeV2024/CBJ-2024-Vl --07.pdf.
6
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Attachment III
Recommendation 1: Obtain direct access to unemployment insurance cla.in1s data from all
State \Vo,-kforce Agencies.
Response: 111e Department does not agree with this reconunendation at this time.
It would involve a significant amount of new resources for ETA to implement, obtain, and
maintain direct access to UI claims data from all state workforce agencies. ETA does not have
the capability currently to gather, securely store, and analyze this :u11ounl of data. New
appropriations would be required that make sustainable investments in the U! program to
implement this recommendation.
Further, the Depar1ment has not interpreted 20 C.F.R. 603.6(a) to require states to provide the
Depaitment direct access to all claims data. 20 C.F.R. 603.6(a) requires "disclosure of all
infonnation necessary for the proper administration of the [Unemployment Compensation)
program." Adopting the OIG' s recommendation would be a novel and very broad interpretation
of existing regulations. ll1is would be a significant char1ge in how this regulation has been
interpreted since it was promulgated in 2006. The Depa,tment has recently issued a RFI to begin
the rulemaking process to amend 20 C.F.R. part 603 and is seeking public comment on
disclosures of confidential UC infonnation to the OIG.
ETA believes that many of the impacts desired from the OIG' s recommendations can be
achieved through an alternative approach. ETA sets out this alternative approach in response to
Recommendation 2 below.
Reeommend:ltion 2: C 1·eate :m integrity p1·ogram that incorporates :t dat:1 analytics
capability and regula rly monitors state unemployment i.nsumnce claims data to det.ect and
prevent in1prope1· paym ents, including fnmdulent payments, and to identify trends aml
eme1·ging issues that could negatively in1pact the UI program.
Response: ll1e Department does not agree with this reconunendation. This approach would
duplicate much of the Department's ongoing investment in the UI Integrity Center, including the
!DH. The draft alert memorandum examines claims activity from March 2020 through April
2022. As noted above, state participation in the IDH increased significantly over the course of
the pandemic. In l\farch of 2020, only 34 states had an !DH Participation Agreement, 21 states
were usiJ1g the SAR, and three states were using the MSCM. Currently all 53 states have a
signed !DH Participation Agreement, 52 states are using the SAR, 51 states are using the
MSCM, 44 states are using the IDV solution, and 38 states are using the BAV service.
As an alternative approach to achieving the essence of Recommendations l and 2, the
Department will leverage ongoing investments in the UI Integrity Center's !DH and work wiU1
the UI Integrity Center to improve !DH data analytics capabilities to better identify fraud trends.
ETA will meet at regular intervals with the UI Integrity Center to receive infonnation about
identified fraud trends ai1d to discuss effo11s to mitigate fraud and reduce improper payments.
111is approach leverages existing infrastrncture and investments to achieve comparable integrity-
enhancing results, instead of duplicating efforts and requiring states to send data to yet another
7
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Attachment III
entity. Further, this alternative approach to achieving the intent of these recommendations is
actionable and will have a meaningful impact.
In addition, the Department is committed to providing additional funding to support
enhancements to the IDH and for training to more effectively utilize the IDH. Additional !DH
enhancements would consist of expanding data collection 1md analytics to include employer data
and integrating additional ex-ternal data sources to improve fraud prevention and detection,
including data sharing with other Federal agencies. ·n,ese efforts, along with greater and more
consistent use by states, should improve the IDH' s detection rate as well.
Finally, the Department is committed to continuing its close collaboration with the 010,
including ensuring the OIO has necessary access to claims data. Details about ETA·s ongoing
actions supporting the OIO's access to state UI data are discussed on pages 3 and 4 above. Most
recently, the Department announced providing the 0 10 access to claims data as a condition for
ARPA-funded grants awarded under UIPL No. 11-23, 9 which will ex1end this expectation
through at least December 2025.
Recommendation 3: Establish effective cont.rols, in collaboration with State Workforce
Agencies, to mitigate fraud and othe1· imprope1· payments to ineligible clainrnnts in high-
risk age categories.
Response: 111e Department agrees with this recommendation and requests closure of this
recommendation since there are controls in place to miti gate fraud and improper payments to
ineligible claimants in high-risk age categories.
As noted above, ETA and OCFO completed the development of a UI Fraud Risk Profile to align
the Department's ongoing fraud risk management activities with the leading practices in OAO's
Fraud Risk Framework. Additionally, ETA recently published UIPL No. 11-23, 10 which unveils
a comprehens ive, strategic approach to deploying the remaining ARP A funds to improve the
future integrity of the UI system.
To specifically address claimants in high-risk age categories, ET A worked in partnership with
the UI Integrity Center to ensure claimants in higb-risk age categories are identified by the IDH
and are classified as high priority by the I.Dl'.!"S prioritization mi es. Any claims flagged by the
IDH as high-risk due to age will also be added to the IDH data file that identifies poteutial fraud,
waste, abuse, mismanagement, or misconduct and shared regularly with the OIO' s Office of
• UTPL No. 11-23, Anno11nceme11t ofGrant Opportunities and Nalio11al Identity (ID) Verification Offering under 0,e
American Resc11e Plan Act {APR.A), issued July 13, 2023, https://www.doJ.gov/agenc1es/eta/advisoriesluipl-l l -23.
•• UIPL No. 11-23, Anno101cement ofGrant Opportunities and National Identity (ID) Verification Offering under
the American Rescue Plan Act {APRA). issued July 13, 2023, https://www.dol.gov/agencies/e1aladvisonesluipl-l I-
~-
8
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Attachment III
Investigations. The OIG has also identified processes under which state workforce agencies
must share this iruonnation directly with the OJG_II
ll1e Department will continue to identify risks to the UI program. develop new and update
existing strategies to mitigate fraud as well as other improper payments, and evaluate the
effectiveness of our fraud risk management activities.
Further, the Department notes that the risk of potential fraud occurring using in.fonnation from
individuals within the identified age brackets was much higher during the temporary pandemi c
programs, which expired on September 6, 202 I, specifically Pandemic Unemployment
Assistance, which primarily relied on self-certification in assessing eligibility. 11,e regular UI
program has restrictions that provide benefits only to individuals in covered employment. Stale
workforce agencies contact employers and have access to employer wage records to verif.r prior
employment activities and earnings of claimants -- thus ensuring the person had covered
earnings regardless of age.
11
See Attachment I to UlPL No. 04- 17, Change I, Requirement for States to Refer Allegations of Unemployment
Compensation (UC) Fraud, Waste, Abuse, ,\,/ismanagement, or Misconduct to the Departmentofl.Abor's
(Department) Office ofInspector General's (DOL-OTG) and to Disclose lnfomralion Related to the Coronavirus
Aid, Relief, and Economic Securily (CARES) Act to DOL-OIGfor Purposes ofUC Fraud Investigations and Audits,
issued August 3, 2021, hnps://www.dol.gov/agenciesieta/advisories/unemployment-insurance-program-letter-no-04-
17-change-1.
9
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