GAO-23-105478: Unemployment Insurance: DOL Needs to Further Help States Overcome IT Modernization Challenges
Summary
GAO report GAO-23-105478, "Unemployment Insurance: DOL Needs to Further Help States Overcome IT Modernization Challenges," a report to congressional committees dated July 2023. It states that, according to DOL data, approximately $878 billion in benefits were paid across all UI programs from April 2020 to September 2022, and that state programs with legacy IT systems faced performance issues. GAO reviewed eight states: as of February 2023, six had modernization efforts underway to replace legacy systems that ranged from 7 to about 50 years old, and two had completed their efforts. The states reported successes such as improved system stability after moving to cloud computing, and challenges in staffing, contracting, management, financial and technical areas.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Cite this document
“GAO-23-105478: Unemployment Insurance: DOL Needs to Further Help States Overcome IT Modernization Challenges.”
Original at www.gao.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/gao-23-105478-unemployment-insurance-dol-needs-to-further-help-states-1ec091adbd/
, SHA-256 b23b154f13c564db64af8e4ba25a89a792ff0cc395571a54cc578ea709dbc674.Full text
United States Government Accountability Office
Report to Congressional Committees
UNEMPLOYMENT
July 2023
INSURANCE
DOL Needs to
Further Help States
Overcome IT
Modernization
Challenges
GAO-23-105478
July 2023
UNEMPLOYMENT INSURANCE
DOL Needs to Further Help States Overcome IT
Modernization Challenges
Highlights of GAO-23-105478, a report to
congressional committees
Why GAO Did This Study What GAO Found
In the wake of the COVID-19 The eight states in GAO’s study were in varying phases of modernizing their
pandemic, the nation experienced unemployment insurance (UI) IT systems, ranging from planning to operations
historic levels of job loss. According to and maintenance. As of February 2023, six of the eight states had modernization
DOL data, approximately $878 billion efforts underway, but not yet completed. According to officials from the six states,
in benefits were paid across all UI these efforts were expected to replace legacy UI systems that ranged from 7 to
programs from April 2020 to about 50 years old. The remaining two states completed modernization efforts in
September 2022. However, state UI 2018 and 2021 and were in the operations and maintenance phase. To support
programs with legacy IT systems faced their modernization efforts, the eight states rely extensively on contractors for
performance issues in processing the
system development and implementation, technical support, and identity
unprecedented number of UI claims.
verification.
Due to this challenge and others, GAO
added the overarching UI system to its The selected states reported several modernization successes. For example,
High-Risk List in June 2022. states reported improved system stability after migrating systems to cloud
GAO was asked to review UI IT computing solutions and a reduction in paper-based UI processes. However,
modernization issues. The specific states also identified modernization challenges in five areas: staffing, contracting,
objectives were to (1) provide the management, financial, and technical (see figure).
status of modernization efforts for
Eight States’ Unemployment Insurance IT System Modernization Challenge Areas
selected states, including the role of
contracting; (2) identify notable
modernization successes and
challenges; and (3) evaluate DOL’s
management activities in assisting
states and overseeing their efforts.
To do so, GAO analyzed
documentation and interviewed state
officials from a nongeneralizable
sample of eight states (selected based
on varying location and population
size, among other criteria). GAO also Regarding staffing, most states reported not having enough staff resources and
reviewed relevant DOL policies and not having staff with the necessary expertise to support their modernization
guidance documents and compared efforts. To help states address modernization challenges, the Department of
them to key management and Labor (DOL) initiated several efforts, such as sending teams of experts to states
oversight activities. In addition, GAO and conducting pilot tests of UI technology solutions for states.
interviewed department officials.
DOL has gaps in managing its efforts to assist states’ with UI IT modernization
What GAO Recommends and its oversight of states’ UI IT performance. Although DOL fully implemented
GAO is making three key contract management activities on its first pilot, the department did not fully
recommendations to DOL to address implement leading pilot design practices such as developing a data analysis plan
pilot design weaknesses, establish and ensuring stakeholder communication. Without fully implementing leading
standards for states’ UI IT pilot design practices, DOL likely cannot ensure its future pilots produce
performance, and then measure such information needed to make effective program and policy decisions. Regarding
performance. DOL agreed with one oversight, although DOL is responsible for overseeing the UI program to ensure
recommendation and partially agreed that the states are operating the program effectively and efficiently, it has not
with two. GAO continues to believe all measured states’ UI IT performance. Until DOL finalizes IT standards and
recommendations are warranted. measures state UI IT performance, the department will be limited in its ability to
View GAO-23-105478. For more information, monitor whether states’ UI systems are performing efficiently and effectively.
contact Carol C. Harris at (202) 512-4456 or
HarrisCC@gao.gov.
United States Government Accountability Office
Contents
Letter 1
Background 5
Selected States Vary in Their UI System Modernization Efforts
and Rely Extensively on Contractors 17
Selected States Reported Several Modernization Successes and
Challenges 24
DOL Has Gaps in Assisting and Overseeing States’
Modernizations 38
Conclusions 45
Recommendations for Executive Action 45
Agency Comments 46
Appendix I Objectives, Scope, and Methodology 48
Appendix II State Consortium Successes and Challenges 51
Appendix III Summaries of Eight Selected States’ Modernization Efforts 54
Appendix IV Comments from the Department of Labor 71
Appendix V GAO Contact and Staff Acknowledgments 74
Tables
Table 1: Overview of Selected States’ Unemployment Insurance
Modernization Efforts, as of February 2023 18
Table 2: Selected States’ Reported Unemployment Insurance (UI)
IT System Modernization Challenges 27
Table 3: Assessment of the Department of Labor’s (DOL) Actions
to Implement Leading Pilot Design Practices for the
Claimant Experience Pilot 41
Page i GAO-23-105478 Unemployment Insurance
Figures
Figure 1: Unemployment Insurance System Modernization
Timeline for Selected States (as of February 2023) 20
Figure 2: Contracting Roles and Responsibilities for
Unemployment Insurance (UI) IT Systems Modernization
for Selected States (as of February 2023) 22
Figure 3: Screenshot of the Department of Labor’s Unemployment
Insurance Modernization Website (as of May 2023) 37
Abbreviations
CARES Act Coronavirus Aid, Relief, and Economic Security Act
CMMI-ACQ Capability Maturity Model Integration® for Acquisition
DOL Department of Labor
ETA Employment and Training Administration
FAR Federal Acquisition Regulation
ITSC Information Technology Support Center
NASWA National Association of State Workforce Agencies
OIG Office of Inspector General
OUIM Office of Unemployment Insurance Modernization
SOURCE State of Ohio Unemployment Resource for Claimants
and Employers
UI unemployment insurance
UIPL Unemployment Insurance Program Letter
WyCAN Wyoming, Colorado, Arizona, and North Dakota
consortium
This is a work of the U.S. government and is not subject to copyright protection in the
United States. The published product may be reproduced and distributed in its entirety
without further permission from GAO. However, because this work may contain
copyrighted images or other material, permission from the copyright holder may be
necessary if you wish to reproduce this material separately.
Page ii GAO-23-105478 Unemployment Insurance
Letter
441 G St. N.W.
Washington, DC 20548
July 10, 2023
The Honorable Bernard Sanders
Chair
Committee on Health, Education, Labor, and Pensions
United States Senate
The Honorable Ron Wyden
Chairman
Committee on Finance
United States Senate
Overseen by the Department of Labor (DOL) and administered by the
states, the unemployment insurance (UI) program is a federal-state
partnership that provides temporary financial assistance to eligible
workers who become unemployed through no fault of their own. During
economic downturns, UI’s role in supporting workers and our overall
economy becomes more vital. Following the emergence of the COVID-19
pandemic in early 2020, and related public health measures taken to
contain and mitigate its transmission, the United States experienced
historic job losses. In turn, the UI program was expanded.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act,
enacted on March 27, 2020, created three new federally funded
temporary UI programs that expanded benefit eligibility, enhanced
benefits, and extended benefit duration. 1 The temporary programs
supplemented the existing UI program known as “regular” UI. 2 The
federal government directly funded the administration of, and benefits for,
the new pandemic-related UI programs and relied on state workforce
agencies to determine claimants’ eligibility, process claims, and issue
1Pub. L. No. 116-136, §§ 2102, 2104, 2107, 134 Stat. 281, 313-28. In addition, the
Consolidated Appropriations Act, 2021 created one additional temporary, supplemental UI
program—known as the Mixed Earner Unemployment Compensation program. Pub. L.
No. 116-260, div. N, tit. II, subtitle A, subchapter VI, § 261(a) 134 Stat. 1182, 1961.
2In this report, we refer to the UI program—excluding the temporary UI programs created
by the CARES Act and other legislation—as the regular UI program and the benefits paid
under the program as regular UI benefits. We refer to the temporary UI programs created
by the CARES Act and the Consolidated Appropriations Act, 2021 as pandemic UI
programs.
Page 1 GAO-23-105478 Unemployment Insurance
benefits to individuals. 3 Based on DOL data, compensation paid under
regular UI, Extended Benefits, 4 and pandemic UI programs from April
2020 through September 2022 totaled approximately $878 billion. 5
To administer their UI programs, states rely extensively on IT systems to
support benefit eligibility determinations, record claimant filing
information, calculate benefit amounts, and record taxes paid by
employers, among other functions. However, state IT systems faced
challenges in processing the unprecedented number of UI claims during
the pandemic. 6 In June 2020, we reported that state UI programs with
aging, or legacy, IT systems 7 that dated as far back as the 1970s had
reported system performance issues. 8 More recently, we and the DOL
Office of Inspector General (OIG) have also reported that states’ use of
legacy IT systems also contributed to the slower processing of UI
payments, the inability to detect and recover improper payments
3Fifty-three state workforce agencies administer UI programs across the 50 states, the
District of Columbia, Puerto Rico, and the U.S. Virgin Islands. For purposes of this report,
when we refer to states’ administration of the UI program, we include both states and
territories.
4The Extended Benefits program, which existed before the pandemic, provides up to an
additional 13 or 20 weeks of benefits when activated in states during periods of high
unemployment, according to DOL.
5This amount includes about $209 billion in expenditures under the regular UI and
Extended Benefits programs, and about $669 billion in expenditures under pandemic UI
programs, which expired on September 6, 2021. The expenditure amounts for the
temporary programs represent all compensation paid throughout the existence of the
programs. These programs were generally created at the end of March 2020 and expired
in September 2021, though some payments may have occurred after September 2021 for
weeks of unemployment prior to the programs’ expiration. We obtained April 2020 through
September 2022 expenditure amounts for the regular UI program, the Extended Benefits
program, and the pandemic UI programs on October 12, 2022, from DOL’s data
downloads website at https://oui.doleta.gov/unemploy/DataDownloads.asp.
6Initial claims for regular UI benefits nationwide reached a historic peak of more than 6
million per week in late March and early April 2020.
7The Modernizing Government Technology provisions of the National Defense
Authorization Act for Fiscal Year 2018 defines a legacy IT system as an IT system that is
outdated or obsolete. Pub. L. No. 115-91, § 1076(8), 131 Stat. 1283, 1587 (December 12,
2017) (40 U.S.C. 11301 note).
8GAO, Covid-19: Opportunities to Improve Federal Response and Recovery Efforts,
GAO-20-625 (Washington, D.C.: June 25, 2020).
Page 2 GAO-23-105478 Unemployment Insurance
(including from fraud), 9 and difficulties reporting UI program activities to
DOL, among other challenges. 10
The increased significance of UI during the pandemic not only drew
attention to states’ IT challenges, it also shined a spotlight on other
vulnerabilities in the overarching UI system, 11 including its susceptibility to
fraud, waste, abuse, and mismanagement. Based on findings from the
DOL OIG, our prior reports, and the urgent need to address persistent
issues in the UI system, we determined in June 2022 that the UI system
should be on our High-Risk List and made an out-of-cycle high-risk
designation. 12 Our high-risk designation was intended to help spur
progress in resolving persistent issues by drawing attention to such
issues and ways the federal government can lead efforts to find solutions.
We reported that such efforts include implementing our open
recommendations and those of the DOL OIG. As of July 2023, we had 19
recommendations that were not yet implemented. 13
You asked us to review states’ UI IT systems modernization issues. Our
specific objectives were to (1) provide the status of modernization efforts
9An improper payment is defined as any payment that should not have been made or that
was made in an incorrect amount (including overpayments and underpayments) under
statutory, contractual, administrative, or other legally applicable requirements. It includes,
but is not limited to, any payment to an ineligible recipient. See 31 U.S.C. § 3351(4). While
improper payments may be the result of errors, some may also be the result of fraudulent
activities.
10GAO, Unemployment Insurance: Transformation Needed to Address Program Design,
Infrastructure, and Integrity Risks, GAO-22-105162 (Washington, D.C.: June 7, 2022) and
Department of Labor, Office of Inspector General, COVID-19: States Struggled to
Implement CARES Act Unemployment Insurance Programs, Report No. 19-21-004-03-
315 (Washington, D.C.: May 28, 2021).
11The UI system includes UI programs that were established prior to the COVID-19
pandemic (including the regular UI program and Extended Benefits), the programs
established in response to the COVID-19 pandemic (such as Pandemic Unemployment
Assistance and Federal Pandemic Unemployment Compensation, among others), and the
state and federal administration needed to run the programs.
12GAO-22-105162. The High-Risk List highlights federal programs and operations that we
have determined are in need of transformation. The High-Risk List also names federal
programs and operations that are vulnerable to waste, fraud, abuse, and mismanagement.
We release a High-Risk series report every 2 years at the start of each new Congress. As
in this case, we sometimes make out-of-cycle designations to highlight urgent issues, help
ensure focused attention, and maximize the opportunity for the federal government to take
action.
13For a list of the 19 recommendations, see GAO-23-106586, appendix III.
Page 3 GAO-23-105478 Unemployment Insurance
for selected states, including the use of contractors for such efforts; (2)
identify notable modernization successes and challenges; and (3)
evaluate DOL’s management activities in assisting states with their
modernization efforts and whether it has provided effective oversight of
those efforts.
To address our first and second objectives, we selected and examined
the IT modernization efforts of eight states. 14 To make our state selection,
we first excluded states that were included in our other UI-related
reviews, as well as reviews being conducted by DOL’s OIG. 15 We then
selected the eight states on the basis of varying regional locations,
population size, modernization status, and timeliness of benefit payments
in the regular UI program. We also took into consideration states’
participation in DOL’s first effort to conduct a pilot test of UI technology
solutions—known as the claimant experience pilot—and its initiative to
send expert teams to states. Although our sample is non-generalizable,
these states offered insight and perspective of their experiences in
modernizing UI systems, including the role of contractors, successes, and
challenges.
To provide the status of modernization efforts for the selected states and
determine the role of contracting, we reviewed states’ documentation of
their modernization planning and development efforts, such as project
plans, status reports, and contracting documents (e.g., requests for
proposals). We also held discussions with officials from the selected
states’ UI agencies regarding the status of and plans for state UI
modernization efforts and the role of contracting in such efforts. We
assessed the reliability of the data related to the status of selected states’
modernization efforts, such as schedule estimates, and determined that
the data were sufficiently reliable for our purposes.
To identify notable modernization successes and challenges, we
reviewed the selected states’ UI modernization documentation, such as
lessons learned reports and presentations. We also interviewed relevant
UI officials from the states to identify additional modernization successes
14The eight states selected for our study were Arkansas, Delaware, Maine, Nevada, Ohio,
Pennsylvania, Tennessee, and Texas.
15The specific states and territory we excluded were Arizona, Florida, Massachusetts,
Michigan, Minnesota, Wyoming, California, Florida, Georgia, Kentucky, New Jersey,
Virginia, and the Virgin Islands.
Page 4 GAO-23-105478 Unemployment Insurance
and challenges reported by the officials, and discuss means for
addressing the challenges.
To address our third objective, we reviewed relevant DOL documentation,
such as project plans, strategies, and contracts. We then evaluated the
department’s claimant experience pilot against leading pilot design
practices from our prior work 16 and key contract management activities
from the Federal Acquisition Regulation, the Software Engineering
Institute, and our prior work. 17 To evaluate DOL’s oversight of states’
modernization efforts, we reviewed DOL’s policies, procedures, and
guidance, and compared the department’s efforts against leading
practices for measuring the performance of IT systems identified in our
prior work and by the Office of Management and Budget. 18 We also
interviewed DOL officials regarding the department’s management and
oversight efforts. Further details on our objectives, scope, and
methodology are provided in appendix I.
We conducted this performance audit from October 2021 to July 2023 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 objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
The federal government and states work together to administer UI
Background programs. Under this arrangement, states design and administer their
16GAO, Data Act: Section 5 Pilot Design Issues Need to Be Addressed to Meet Goal of
Reducing Recipient Reporting Burden, GAO-16-438 (Washington, D.C.: Apr. 19, 2016).
17Federal Acquisition Regulation (FAR) subpart 37.5—Management Oversight of Service
Contracts and Part 46—Quality Assurance (Note: as used in this report, the FAR is only
applicable to the Department of Labor and its acquisitions), Carnegie Mellon University’s
Software Engineering Institute, Capability Maturity Model Integration® for Acquisition,
Version 1.3 (CMMI-ACQ V 1.3) (Pittsburgh, Pa.: November 2010), and GAO, USDA
Systems Modernization: Management and Oversight Improvements Are Needed,
GAO-11-586 (Washington, D.C.: July 20, 2011).
18See GAO, Designing Evaluations: 2012 Revision (Supersedes PEMD-10.1.4),
GAO-12-208G (Washington, D.C.: Jan. 31, 2012); Executive Guide: Measuring
Performance and Demonstrating Results of Information Technology Investments,
GAO/AIMD-98-89 (Washington, D.C.: March 1998); and Executive Office of the President,
Office of Management and Budget, Circular A-11, Preparation, Submission, and Execution
of the Budget (August 2022).
Page 5 GAO-23-105478 Unemployment Insurance
own programs within federal parameters. These federal parameters set
forth broad provisions that determine worker eligibility for the program,
some benefits requirements, and aspects of program administration,
among other things. States have considerable flexibility to set benefit
amounts and their duration, and to establish eligibility requirements and
other program details. States also are to provide customer service and
address program integrity and improper payments in their UI programs.
Within the context of the federal-state partnership, DOL has general
responsibility for overseeing the UI program to ensure that the states are
operating the program properly and efficiently. 19 For example, DOL is
responsible for monitoring state operations and procedures, providing
technical assistance and training, and analyzing UI program data to
diagnose potential problems.
To oversee the program, the Office of Unemployment Insurance within
DOL’s Employment and Training Administration (ETA) and ETA offices in
six geographic regions are responsible for working with the states. The
regional offices are the states’ main points of contact with DOL and serve
as a link between the department and the states for providing technical
assistance and clarifying program policies, objectives, and priorities.
Moreover, the regional offices have primary responsibility for overseeing
the fiscal and management integrity of the UI program. This oversight
includes ensuring that states do not provide unemployment compensation
to ineligible recipients and ensuring that states detect these
overpayments when they do occur.
Regular UI benefits—those provided by state UI programs since before
the CARES Act was enacted—are funded primarily through state taxes
levied on employers. These benefits are intended to replace a portion of a
claimant’s previous employment earnings, according to DOL. 20
19See 42 U.S.C. § 502(a); see also 20 C.F.R. Parts 601 (Administrative Procedure) and
602 (Quality Control in the Federal-State Unemployment Insurance System).
20To be eligible for regular UI benefits, applicants must generally demonstrate workforce
attachment, be able and available to work, and be actively seeking work. 42 U.S.C. §
503(a)(12). Administration of the regular UI program is financed by a federal tax on
employers, under the Federal Unemployment Tax Act (codified at 26 U.S.C. § 3302).
Page 6 GAO-23-105478 Unemployment Insurance
The CARES Act created three federally funded temporary UI programs
that expanded benefit eligibility and enhanced benefit amounts. 21 These
programs were subsequently extended and amended by the
Consolidated Appropriations Act, 2021, as well as the American Rescue
Plan Act of 2021, and expired in September 2021. 22
1. Pandemic Unemployment Assistance authorized UI benefits for
individuals not otherwise eligible for UI benefits, such as self-
employed workers and independent contractors, who were unable or
unavailable to work because of specified COVID-19-related
reasons. 23
2. Federal Pandemic Unemployment Compensation generally
authorized an additional weekly benefit for individuals who were
eligible for weekly benefits under the permanent UI programs—e.g.,
regular UI—and the temporary CARES Act UI programs. 24
21Coronavirus Aid, Relief, and Economic Security (CARES) Act, Pub. L. No. 116-136, §§
2102, 2104, 2107, 134 Stat. 281, 313-28 (March 27, 2020). The CARES Act also
addressed other elements of the UI system. For example, the act in § 2108 authorized
certain flexibilities for states to hire additional staff and to participate in Short-Time
Compensation programs, which allow workers to work reduced hours while receiving
partial pay and partial UI benefits.
22Twenty-four states ended their participation in at least one of these programs before the
programs expired in September 2021.
23At the time of the program’s expiration in September 2021, Pandemic Unemployment
Assistance generally authorized up to 79 weeks of benefits. American Rescue Plan Act of
2021, Pub. L. No. 117-2, § 9011(a), (b), 135 Stat. 4, 118 (March 11, 2021); It was first
extended from December 31, 2020, to March 14, 2021. Consolidated Appropriations Act
of 2021, Pub. L. No. 116-260, div. N, tit. II, § 201(a), (b), 134 Stat. 1182, 1950-1951
(December 27, 2020); PUA was first authorized until December 31, 2020. Coronavirus
Aid, Relief, and Economic Security (CARES) Act, Pub. L. No. 116-136, § 2102, 134 Stat.
281, 313 (March 27, 2020).
24Federal Pandemic Unemployment Compensation generally authorized an additional
$600 benefit through July 2020 as well as an additional $300 benefit for weeks beginning
after December 26, 2020, through the end of the program. American Rescue Plan Act of
2021, Pub. L. No. 117-2, § 9013, 135 Stat. 4, 119; Consolidated Appropriations Act of
2021, Pub. L. No. 116-260, div. N, tit. II, § 203, 134 Stat. 1182, 1953; Coronavirus Aid,
Relief, and Economic Security (CARES) Act, Pub. L. No. 116-136, § 2104 Stat. 281, 318
(March 27, 2020).
Page 7 GAO-23-105478 Unemployment Insurance
3. Pandemic Emergency Unemployment Compensation generally
authorized additional weeks of UI benefits for those who had
exhausted their regular UI benefits. 25
In addition, the Consolidated Appropriations Act, 2021 created the Mixed
Earner Unemployment Compensation program. This program was
extended by the American Rescue Plan Act of 2021 and expired in
September 2021. 26 According to DOL, the Mixed Earner Unemployment
Compensation program was intended to cover regular UI claimants
whose benefits do not account for significant self-employment income
and who thus may have received a lower regular UI benefit than the
benefit they would have received had they been eligible for Pandemic
Unemployment Assistance. 27
To help states administer their regular UI programs, DOL’s UI State
Administration Program funds grants to states. 28 Generally, DOL has
used national projections of UI agencies’ workload related to the volume
of claims, as well as other factors, to develop the President’s budget
request for the UI State Administration Program. After funds are
appropriated, DOL uses a formula, and considers state workloads
25At the time of the program’s expiration, Pandemic Emergency Unemployment
Compensation generally authorized an additional 53 weeks of benefits for claimants who
were fully unemployed. American Rescue Plan Act of 2021, Pub. L. No. 117-2, § 9016(a),
(b), 135 Stat. 4, 119-120 (March 11, 2021); Consolidated Appropriations Act of 2021, Pub.
L. No. 116-260, div. N, tit. II, § 206(a), (b), 134 Stat. 1182, 1954 (December 27, 2020);
Coronavirus Aid, Relief, and Economic Security (CARES) Act, Pub. L. No. 116-136, §
2107, 134 Stat. 281, 323 (March 27, 2020).
26The Mixed Earner Unemployment Compensation program, which was voluntary for
states, authorized an additional $100 weekly benefit for certain UI claimants who received
at least $5,000 of self-employment income in the most recent tax year prior to their
application for UI benefits between December 27, 2020 and September 6, 2021. American
Rescue Plan Act of 2021, Pub. L. No. 117-2, § 9013(a), 135 Stat. 4, 119 (March 11,
2021); Consolidated Appropriations Act of 2021, Pub. L. No. 116-260, div. N, tit. II, §
261(a)(1), 134 Stat. 1182, 1961 (December 27, 2020).
27According to DOL, 51 states and territories elected to participate in the Mixed Earner
Unemployment Compensation program, with Idaho and South Dakota opting not to
participate. Twenty-three states terminated their participation in June or July 2021, and the
remaining 28 states and territories continued participating in the Mixed Earner
Unemployment Compensation program until it expired in September 2021. Maryland
intended to terminate participation but did not because of litigation at the state level,
according to DOL.
2842 U.S.C. § 502(a).
Page 8 GAO-23-105478 Unemployment Insurance
estimates and other information that states provide to the department, to
allocate funding to states.
Since funding is calculated, in part, on the basis of claims-related
workloads, the federal funding made available to states is generally
sensitive to changes in total claims, with more funding becoming available
when the number of claims increases and less when they decrease. Due,
in part, to reduced workloads as a result of low unemployment levels, this
funding declined steadily during the decade before the pandemic. From
fiscal years 2010 to 2019, funding available for state administration
declined from approximately $3.2 billion to approximately $2.5 billion, a
decline of about 21 percent. 29
DOL has also provided some additional administrative funding, when
available, to states to assist with various aspects of states’ UI programs,
including IT modernization. For example, in 2017, the department
awarded supplemental grants to support states’ UI IT modernization. 30
States may also use additional state funding to administer their UI
programs, including modernizing IT; however, according to DOL, not all
states do so. The CARES Act and other subsequent legislation included
provisions for funding states’ administration of the temporary UI
programs. 31
States’ UI IT Environment States rely extensively on IT to carry out their UI program functions.
Specifically, IT systems are used to administer the programs and to
support related administrative needs. For example, benefit systems are
used for:
• determining eligibility for benefits;
• recording claimant filing information, such as demographic
information, work history, and qualifying wage credits;
29After adjusting for inflation, this represents a decline of about 32 percent, using the
gross domestic product price index.
30See Department of Labor, Unemployment Insurance Program Letter 22-17,
Unemployment Insurance Supplemental Funding Opportunity for State Consortia to
Modernize Tax and Benefit Systems (Sept. 8, 2017).
31Coronavirus Aid, Relief, and Economic Security (CARES) Act, Pub. L. No. 116-136, §
2103, 134 Stat. 281, 317 (March 27, 2020); Consolidated Appropriations Act of 2021, Pub.
L. No. 116-260, div. H, tit. I, 134 Stat. 1182, 1551 (December 27, 2020); American Rescue
Plan Act of 2021, Pub. L. No. 117-2, § 9031a), 135 Stat. 4, 119-121 (March 11, 2021).
Page 9 GAO-23-105478 Unemployment Insurance
• determining updates as needed, such as changes in work-seeking
status; and
• calculating state-specific weekly and maximum benefit amounts.
In addition, tax systems are used for:
• online reporting and payment of employers’ tax and wage accounts;
• calculating tax, wage, and payment adjustments, as well as any
penalties and interest accrued;
• processing quarterly tax and wage amounts;
• determining and processing late payment penalties, interest, civil
penalties, or fees; and
• adjusting previously filed tax and wage reports as a result of a tax
audit, an amended report submitted by the employer, or an
erroneously keyed report.
States also use an appeals system to provide appellate and due process
rights to claimants and employers. An appeals system allows any party
(claimant or employer) who is dissatisfied with an adjudicator’s decision to
contest that decision. Appeals systems rely on IT to support virtual
hearings, document and manage case files, and records keeping.
Many states continue to rely on legacy IT systems developed in the
1970s and 1980s. Legacy systems run on outdated or unsupported
hardware and software that are expensive to maintain and may use older
programming languages such as the Common Business Oriented
Language. 32 According to the National Association of State Workforce
Agencies (NASWA), as of June 2023, 34 of the 53 states and territories
were still using legacy IT systems to support their UI benefits systems, tax
systems, or both. 33
GAO and Others Have We and the DOL OIG have reported on the risks and challenges that
Reported States’ Legacy legacy systems pose for state UI programs, which have led to, among
Systems Pose Challenges
32The Common Business Oriented Language, which was introduced in 1959, became the
first widely used, high-level programming language for business applications.
33NASWA represents all 50 state workforce agencies, the District of Columbia, and U.S.
territories.
Page 10 GAO-23-105478 Unemployment Insurance
other things, reduced efficiency and effectiveness. Examples of these
include:
• Prior to the COVID-19 pandemic, in May 2016, we reported that
legacy IT systems were a challenge for many states, according to our
survey. 34 Specifically, 29 of 48 states (60 percent) reported that their
IT systems had significant limitations, which had implications for the
ability of state programs to efficiently process UI claims and serve
claimants. 35 For example, state officials reported that outdated
systems led staff to have to check multiple systems for claims
information, which could lead to errors in processing claims that
significantly reduced the efficiency and effectiveness of the program.
Additionally, state officials told us that because claimants could not
check status updates and other information online, they needed to
rely on phone call centers, which also consumed significant staff
resources.
• In June 2020, we reported that the unprecedented number of UI
claims posed challenges for states’ capacity to process them. 36
Specifically, state UI programs faced challenges with legacy data
systems. According to DOL and representatives of state workforce
agencies, states with UI IT systems that dated as far back as the
1970s had reported system performance issues. We further noted that
relatively few states had load-tested their systems to handle large
volumes of claims, according to representatives of state workforce
agencies.
• In May 2021, the DOL OIG reported that states with legacy systems
started the Pandemic Emergency Unemployment Compensation
program 15 days slower than states with modernized systems, and
the Pandemic Unemployment Assistance program 8 days slower on
average. 37 Further, the OIG reported that legacy IT systems were a
primary hindrance to states’ ability to implement CARES Act UI
programs more effectively. Specifically, the OIG reported that officials
34GAO, Unemployment Insurance: States’ Customer Service Challenges and DOL’s
Related Assistance, GAO-16-430 (Washington, D.C.: May 12, 2016).
35We did not receive survey responses from UI programs in the District of Columbia, North
Carolina, and Vermont. Our review did not include UI programs in Puerto Rico and the
U.S. Virgin Islands.
36GAO-20-625.
37Department of Labor Office of Inspector General, Report No. 19-21-004-03-315.
Page 11 GAO-23-105478 Unemployment Insurance
from 17 of 50 states and territories (34 percent) stated their IT
systems were unable to implement provisions of the CARES Act, such
as those creating the Pandemic Unemployment Assistance
program. 38 The May 2021 report also identified legacy IT systems as
one of the causes of states’ inability to detect and recover improper UI
payments, including fraudulent payments. For example, state officials
reported that their IT systems did not have functionality for detecting
and recovering overpayments. The DOL OIG made four
recommendations to DOL, including to conduct a study to assess the
technological needs of UI programs. DOL agreed with the
recommendations but, as of May 2023, had not yet implemented
them.
Our prior work between 2012 and 2020 also identified challenges that
states faced in modernizing their legacy UI systems. 39 For example:
• In 2012, we reported that the nine selected states we reviewed were
facing various challenges in modernizing their legacy UI systems,
such as funding uncertainty, staffing limitations, and contractor
limitations. 40 Specifically, states reported that declining or inconsistent
federal and state funding for UI IT modernization led to difficulties in
project planning. In addition, states reported uncertainties surrounding
their ability to procure sufficient funding throughout the entirety of their
modernization efforts. We also found that state UI IT system
development can be hindered by a shortage of staff with technical and
project management expertise to manage IT modernization efforts. In
addition, regarding contractor limitations, the states reported
challenges related to using contractors for UI modernization efforts,
including having too few contractors for selection.
We recommended that DOL (1) comprehensively analyze and
document challenges and lessons learned, and (2) distribute lessons
learned to each state to share and foster ideas for effective
38Arkansas, Idaho, and Vermont were not included among the states.
39GAO-20-625; GAO-16-430; and GAO, Information Technology: Department of Labor
Could Further Facilitate Modernization of States’ Unemployment Insurance Systems,
GAO-12-957 (Washington, D.C.: Sept. 26, 2012).
40GAO, Information Technology: Department of Labor Could Further Facilitate
Modernization of States’ Unemployment Insurance Systems, GAO-12-957 (Washington,
D.C.: Sept. 26, 2012). The nine states reviewed were California, Colorado, Florida,
Indiana, Minnesota, Ohio, Tennessee, Vermont, and Virginia.
Page 12 GAO-23-105478 Unemployment Insurance
modernization of UI systems. The department implemented our two
recommendations.
• In 2016, we reported that the three states we selected for site visits
were facing challenges in modernizing their systems. 41 Officials in the
three states cited federal administrative funding constraints as the
primary challenge.
• In June 2020, we reported that states faced challenges in ensuring
sufficient system capacity to process the unprecedented number of UI
claims during the COVID-19 pandemic. 42 According to NASWA
officials, this challenge with claims processing was due to states not
sufficiently load testing their systems to handle large volumes of
claims prior to the pandemic.
In June 2022, we reported on the results of a stakeholder panel we
convened to identify specific options for transforming UI program,
including modernizing UI IT systems. 43 Stakeholder panelists identified
strategies to help improve UI system infrastructure, including options to
overcome challenges associated with modernizing IT systems. For
example, multiple panelists suggested that states should
• increase the focus on the user experience in state UI IT systems;
• ensure that staff have project and product management expertise; 44
41GAO-16-430. The three states we reviewed were California, New York, and Texas.
42GAO-20-625.
43See GAO-22-105162. The stakeholder panel included a 2-day virtual roundtable
composed of 16 stakeholder panelists whom we selected from government, the private
sector, public-private partnerships, and academia to discuss topics related to transforming
UI programs. We identified options for UI transformation, including those related to
improving UI system infrastructure, based on our analysis of the stakeholder panel
discussions. These options for transformation are not listed in any specific rank or order,
and their inclusion in this report, and our prior report, should not be interpreted as GAO
endorsing any of them. We did not assess how effective the potential transformation
options may be or the extent to which program design modifications, and federal financial
support would be needed to implement any given transformation option or combination of
transformation options. The options presented do not represent a consensus among
panelists but instead represent options presented by at least one panelist and then, in
most cases, discussion by the group as a whole.
44Product management is the practice of identifying customer requirements, prioritizing
those requirements, and interfacing with product owners to confirm alignment between the
software components and enterprise goals.
Page 13 GAO-23-105478 Unemployment Insurance
• use incremental or modular development and implementation
practices; 45 and
• establish well-defined modernization outcome goals.
Our report noted that long-standing challenges with UI administration and
states’ use of legacy systems pose significant risk to UI service delivery,
and challenges with program integrity (including improper payments)
increase the risk of significant financial losses. Accordingly, we
recommended that DOL develop and implement a plan for transforming
UI that meets our high-risk criteria for transformations. DOL agreed with
the recommendation. As of July 2023, the department had not yet
implemented it.
DOL’s Prior and Ongoing As mentioned earlier, DOL has general responsibility for overseeing the
Efforts to Assist States UI program to ensure that the states are operating their programs
effectively and efficiently. DOL has taken steps to assist states with their
with Modernization
IT modernization efforts, such as providing funding, when available, and
technical assistance. For example, between 2009 and 2017, the
department provided limited supplementary grants to support the
establishment of state consortiums, in which three or four states work
together to develop and share a common system. 46
45Incremental or modular development is where an investment may be broken down into
discrete projects, increments, or useful segments, each of which are undertaken to
develop and implement the products and capabilities that the larger investment must
deliver. Dividing investments into smaller parts helps to reduce investment risk, deliver
capabilities more rapidly, and permit easier adoption of newer and emerging technologies.
46For example, Department of Labor, Unemployment Insurance (UI) Supplemental
Funding Opportunity for Automated Integrity Related Systems: Including Systems to
Improve Services and/or Performance, UI Program Letter (UIPL) 31-09, Change 1
(Washington, D.C.: August 21, 2009) and Unemployment Insurance (UI) Supplemental
Funding Opportunity for Program Integrity and Performance and System Improvements,
UIPL 26-11, (Washington, D.C.: July 18, 2011). According to DOL, during this prior effort,
the department did not have sufficient funding to provide funding or technical assistance to
all states; therefore, it provided funding and technical assistance to some states in a
consortium environment to maximize the impact of the funds available.
Page 14 GAO-23-105478 Unemployment Insurance
DOL reported to Congress from 2015 to 2020 on the progress of the
consortium projects. 47 For example, in 2019, it reported that Mississippi—
a member of the ReEmployUSA Consortium—deployed state-specific UI
benefits and tax systems in a cloud environment in 2019. 48 However,
DOL also reported that the state consortium efforts faced a number of
challenges, including system quality issues and financial challenges,
among others. For example, in 2016, the Wyoming, Colorado, Arizona,
and North Dakota (WyCAN) Consortium reported that its biggest
challenge was that its contractor was unable to deliver a working,
modernized system to the consortium’s satisfaction, causing significant
delays and legal challenges. 49
As of February 2023, according to DOL, most of the remaining consortia
states have deployed their systems. Appendix II contains additional
details regarding state consortium successes and challenges.
As another method to assist states, DOL’s ETA provides states with
technical assistance on IT modernization by funding and overseeing the
Information Technology Support Center (ITSC), operated by NASWA. 50
According to ETA officials, ITSC supports state UI IT modernization
efforts by collecting and disseminating information, providing training,
maintaining a collection of software tools and components, and helping
states leverage the systems and products built by other states.
In 2015, ETA, in collaboration with ITSC, announced a new pre-
implementation planning checklist to assist state UI agencies in preparing
47In the explanatory statement that accompanied the Consolidated and Further Continuing
Appropriations Act, 2015 (Pub. L No. 113-235), which was published in the Congressional
Record of December 11, 2014 (p. H 9827), Congress expressed concern that automation
acquisition projects being carried out by state consortia to modernize their UI IT systems
were behind schedule. The explanatory statement directed DOL to submit to the House
and Senate Committees on Appropriations a report by April 1 of each fiscal year, until the
funds available to the consortia are expended or expire, the status of all project funds and
analysis of each project’s progress toward executing the acquisition plans.
48The ReEmployUSA consortium included Connecticut, Maine, Mississippi, Rhode Island,
and Oklahoma.
49The WyCAN Consortium later disbanded and Wyoming was the only state remaining
when it implemented its modernized integrated benefits, appeals, and tax system in 2019.
50ITSC was created in 1994 as a partnership between DOL and the Maryland Department
of Labor, Licensing, and Regulation to support state UI IT initiatives. DOL supports ITSC
through grants to the Maryland agency, and ITSC’s Steering Committee includes
representatives from ETA.
Page 15 GAO-23-105478 Unemployment Insurance
to launch modernized UI IT systems that support the administration of UI
benefits or tax operations, or both. 51 The pre-implementation checklist
denotes critical function areas that states must verify prior to launching a
new UI IT system, such as call center and customer service operations,
staff training on new system operations, customer help desk support, and
contractor support. Any state that is preparing to launch a new UI IT
system must certify that it has reviewed and accomplished, or has
developed an appropriate plan addressing, these categories in a report.
More recently, in August 2021, DOL announced plans to, among other
things, use $2 billion in funding, provided by the American Rescue Plan
Act of 2021, to further assist states with modernizing their IT systems,
detecting and preventing fraud, promoting equitable access, and assuring
the timely payment of UI benefits. 52 According to the act, such funds may
be used for federal administrative costs, system-wide infrastructure
investment and development, and to make grants to states or territories
administering UI programs. 53
Also in August 2021, DOL announced the establishment of the Office of
Unemployment Insurance Modernization (OUIM) within the Office of the
Secretary to provide strategic leadership as the department works with
state agencies and federal partners. 54 Using funding from the American
Rescue Plan Act of 2021, DOL’s OUIM initiated several efforts to assist
51DOL announced the pre-implementation checklist in 2015, subsequently began
requiring states to complete it in 2018, and released a reporting revision in 2020.
Department of Labor, Pre-Implementation Planning Checklist for State Unemployment
Insurance (UI) Information Technology (IT) Modernization Projects, Training and
Employment Notice 28-14 (Washington, D.C.: Mar. 27, 2015); ETA 9177 Report – Pre-
Implementation Planning Checklist Report for State Unemployment UI IT Modernization
Projects, UIPL 11-18 (Washington, D.C.: Aug. 17, 2018); and Employment and Training
Administration (ETA) 9177 Report - Pre-Implementation Planning Checklist Report for
State Unemployment Insurance (UI) Information Technology (IT) Modernization Projects –
Additional Updates to the ETA 9177 Report and Reporting Instructions, UIPL 11-18,
Change 1 (Washington, D.C.: July 16, 2020).
52Department of Labor, US Department of Labor Announces Funding to States to
Modernize Unemployment Insurance System, Combat Fraud, Address Equity
(Washington, D.C.: Aug. 11, 2021).
53American Rescue Plan Act of 2021, Pub. L. No. 117-2, § 9032, 135 Stat. 4, 121 (March
11, 2021) amending the CARES Act (Pub. L. No. 116-136) at § 2118.
54Department of Labor, Fact Sheet: Unemployment Insurance Modernization: American
Rescue Plan Act Funding for Timely, Accurate and Equitable Payment in Unemployment
Compensation Programs (Washington, D.C.: Aug. 11, 2021).
Page 16 GAO-23-105478 Unemployment Insurance
states with their IT modernization efforts, including providing funding in
the form of grant opportunities to, among other things, protect against
fraud and send teams of experts (referred to by DOL as tiger teams) to
states. DOL also announced that it had begun working with the U.S.
Digital Service to develop modular technology solutions that states may
adopt as part of ongoing modernization and improvement efforts. 55 These
efforts are discussed in more detail later in this report.
In June 2023, DOL reported that it is reviewing its plan to support UI IT
modernization in light of the reductions imposed by the Fiscal
Responsibility Act of 2023. 56
The eight states in our study are in varying phases 57 of modernizing their
Selected States Vary UI systems. Specifically, as of February 2023, six of the eight states had
in Their UI System modernization efforts underway, but not yet completed. Specifically,
Modernization Efforts • one state was in the requirements analysis phase during which, for
and Rely Extensively example, the business requirements are to be validated; and
on Contractors • five states were in a combination of phases that included planning,
analyzing system requirements, design, development, testing, and
operations and maintenance (also called a “mixed” phase, meaning a
portion of the system is in one phase of modernization—for example,
55The U.S. Digital Service, a component within OMB, was established by the President in
August 2014 and aims to improve the most important public-facing federal digital services.
According to DOL, the U.S. Digital Service’s involvement in the department’s efforts to
develop modular technology solutions ended in May 2022.
56In June 2023, the Fiscal Responsibility Act reduced DOL’s American Rescue Plan Act
funding by $1 billion. See Fiscal Responsibility Act of 2023, Pub. L. No. 118-5, § 24, 137
Stat. 10, 27 (June 3, 2023).
57As we previously reported in GAO-12-957, the phases of modernizing a system can be
sequential or overlapping and performed in an incremental manner. The phases include
(1) initiation, which identifies a business need that requires a technological solution; (2)
concept, when the IT governance organization approves the business needs statement;
(3) planning, which begins when the project has been formally approved and funded; (4)
requirements analysis, during which the business requirements are validated and further
analyzed and decomposed into functional and nonfunctional requirements; (5) design,
which develops detailed specifications that emphasize the physical solution to the end
user’s IT needs; (6) development, in which the system developer takes the detailed design
information and transforms it into machine executable form; (7) test, to determine whether
the business product developed or acquired is ready for implementation; (8)
implementation, in which the business product is moved from development status to
production status; and (9) operations and maintenance, in which the certified and
accredited business product operates in a full-scale production environment.
Page 17 GAO-23-105478 Unemployment Insurance
planning—but another portion is in a different phase—for example,
operations and maintenance).
According to officials from the six states, these efforts are expected to
replace legacy UI systems, including benefit, appeals, and tax systems,
that ranged from 7 to about 50 years old. 58 The six states reported
planned modernization timelines that range from 2 to 7 years, 59 and
estimated costs between $35 to $85 million. 60
The remaining two states completed modernization efforts in 2018 and
2021 and were in the operations and maintenance phase. Both states’
modernization efforts took approximately 6 years and cost $32 and $90
million, respectively.
Table 1 provides an overview of each state’s modernization effort—
specifically, the age of each state’s systems, modernization status and
phase, timeline, and costs. Following table 1 is a graphical depiction of
the modernization timelines of the selected states. Appendix III provides
additional details for each state’s modernization efforts.
Table 1: Overview of Selected States’ Unemployment Insurance Modernization Efforts, as of February 2023
System age, in years
State (approximately)a Status Phase Timelineb Cost (rounded)b, c
Arkansas 50 (benefits and In progress Mixed – planning and 2023 – 2025 $35 million
appeals) requirements analysis
11 (tax)
Delaware 35 (benefits, appeals, In progress Mixed – planning and 2022 – 2026 $49 to $85 million
and tax) requirements analysis
Maine 5 (benefits, appeals, Completed Operations and 2012 – 2018 $90 million
and tax) maintenance
Nevada 8-10 (benefits, appeals, In progress Requirements analysis 2021 – 2025 $72 million
and tax)
58According to DOL, modernization is a continual process aimed at addressing unmet
technological needs. For example, two states that completed UI system upgrades
approximately 7 years ago are in the process of modernizing again.
59As of February 2023, the estimated completion date for one state (Ohio) was not yet
determined.
60Modernization costs can vary based on a variety of factors, including the scope of the
modernization effort and the complexity of state systems, among others. As of February
2023, the total estimated costs for two states (Ohio and Tennessee) were not yet
determined.
Page 18 GAO-23-105478 Unemployment Insurance
System age, in years
State (approximately)a Status Phase Timelineb Cost (rounded)b, c
Ohio 20 (benefits and In progress Mixed – planning and 2018 – Not yet Total cost not yet
appeals) operations and determinedd determined; $36 million
2 (tax) maintenance for tax system
modernization
Pennsylvania 2 (benefits and Completed Operations and 2015 – 2021e $32 million
appeals) maintenance
12 (tax)
Tennessee 7 (benefits and In progress Mixed – requirements 2021 – 2025 Total cost not yet
appeals) analysis, design, and determined; $32 million
40 (tax) development for benefits and
appeals systems
modernization
Texas 35 (benefits, appeals, In progress Mixed – requirements 2018 – 2024 $76 million
and tax) analysis, design, and
testing
Source: GAO analysis of state information and interviews with state officials. | GAO-23-105478
a
State unemployment insurance benefits, appeals, and tax systems may be designed as standalone
systems, or as part of an integrated system.
b
For states that have a modernization status of ‘Completed,’ the modernization timelines and
modernization costs are actuals. For other states with a modernization status of ‘In progress,’ the
timelines and costs are estimated. States that have completed their projects have deployed their
systems and entered the operations and maintenance phase.
c
Modernization costs can vary based on a variety of factors, including the scope of the modernization
effort and the complexity of state systems, among other factors.
d
Ohio’s tax system modernization effort was initiated in 2018 and completed in 2021. As of February
2023, the state was in the planning stages of its benefits and appeals system modernization and had
not yet determined an anticipated completion date.
e
Pennsylvania’s 2015 to 2021 modernization effort focused on its benefits and appeals systems only.
Page 19 GAO-23-105478 Unemployment Insurance
Figure 1: Unemployment Insurance System Modernization Timeline for Selected States (as of February 2023)
Note: Timelines represent state efforts to modernize their unemployment insurance benefits, appeals,
and tax systems, unless otherwise noted.
a
Arkansas’ modernization effort is focused on its benefits and tax systems only.
b
Nevada previously completed a modernization of its benefits, appeals, and tax systems in 2015
c
Ohio’s tax system modernization effort was initiated in 2018 and completed in 2021. As of February
2023, the state was in the planning stages of its benefits and appeals system modernization and had
not yet determined an anticipated completion date.
d
Pennsylvania’s 2015 to 2021 modernization effort focused on its benefits and appeals systems only.
e
Tennessee previously completed a modernization of its benefits and appeals system in 2016.
Officials from the six states that were in the process of modernizing cited
a number of goals for their efforts. These included enhancing customer
experience, increasing efficiency, improving business processes, and
increasing flexibility to adapt to evolving federal and state requirements.
Additionally, officials noted the need to address system issues faced
during the COVID-19 pandemic. These issues included performance
issues, difficulty implementing the UI pandemic programs, and limited
system integration and automation that required additional time to
process claims.
Page 20 GAO-23-105478 Unemployment Insurance
Selected States Rely The eight states in our study rely extensively on contractors to support
Extensively on Contractors their modernization efforts. Specifically,
to Support Their • all eight states have contracted with, or are in the process of
Modernization Efforts contracting with, vendors to provide UI system development and
implementation, modernized system maintenance and support,
identity verification services, and program services (such as auditing);
• seven states have contracted with, or are in the process of contracting
with vendors, for UI modernization project management and
modernization technical support;
• four states use contractors to provide UI call center services, chatbot
services, 61 and fraud detection; and
• three states use contractors for customer relationship management.
Figure 2 provides the roles and responsibilities of contractors and how
many states use contractors for those services.
61A chatbot is a program that interacts directly in a free-form conversation with users via
natural language processing.
Page 21 GAO-23-105478 Unemployment Insurance
Figure 2: Contracting Roles and Responsibilities for Unemployment Insurance (UI) IT Systems Modernization for Selected
States (as of February 2023)
a
Indicates that the state plans to use a contractor for this role.
b
A chatbot is a program that interacts directly in a free-form conversation with users via natural
language processing.
The following information provides specific examples of the roles and
responsibilities of contractors pertaining to modernization efforts for the
selected states. Appendix III provides additional details about each state’s
use of contractors.
• UI system development and implementation: All eight of the
selected states reported that they had used, or were planning to use,
contractors for the development and implementation of their
modernized systems. For example, Texas contracted out its ongoing
effort to develop and implement a modernized UI tax, benefits, and
appeals system.
• Modernized UI system maintenance and support: All eight states
are using, or planning to use, contractors for continued maintenance
and support of their systems after the modernization projects are
complete. For example, Pennsylvania’s modernized benefits and
appeals system was developed, implemented, and is maintained by a
contractor.
Page 22 GAO-23-105478 Unemployment Insurance
• Identity verification: All eight states reported that they had
contracted out for identity verification services. For example, Maine
had a contract with NASWA to combat UI fraud through NASWA’s UI
Integrity Center Integrity Data Hub 62 and to provide identity verification
services.
• UI program services: All eight states reported that they use
contractors to support various aspects of their UI programs, including
claimant case management and auditing. For example, Nevada
officials said the state uses a contractor to provide an application that
allows them to carry out employer audits.
• Modernization project management: Seven states said that they
had used, or were planning to use, separate contractors specifically
for managing their UI modernization projects. For example,
Tennessee officials told us that the state used a contractor to perform
a needs assessment, develop a roadmap and strategy, and provide
procurement services for their modernization project. The officials
noted that Tennessee also plans to have the contractor provide
guidance during the state’s modernization project.
• Modernization technical support: Seven states told us they had
used, or were planning to use, contractors for additional technical
support for their modernization projects. Arkansas officials said they
had a contract with NASWA to develop their modernization request for
proposal and planned to use a contractor to provide technical support
for their modernization.
• Call center services: Four states reported that they contracted out,
or planned to contract out, their call centers to vendors. For example,
Tennessee officials stated that they had issued a proposal for a
vendor to provide services for their call center.
• Chatbot services: Four states reported that they use contractor-
provided chatbot services to interact with customers on their websites.
For example, Texas officials told us that a contractor is providing the
state’s chatbot services.
• Fraud detection: Four states said that they use contractor-provided
fraud detection services to help prevent fraud. For example, Ohio
officials said that the state uses multiple contractor products to detect
and combat fraud.
62The Integrity Data Hub is a centralized, multistate data system that the UI Integrity
Center operates in partnership with DOL, using DOL funding. The Integrity Data Hub is
intended to provide state workforce agencies with cross-matching capabilities to analyze
UI claims data to detect and prevent UI fraud and improper payments.
Page 23 GAO-23-105478 Unemployment Insurance
• Customer relationship management: Three states said that they
use contractor-provided customer relationship management software
to track interactions with claimants in order to address their needs in
an efficient manner. For example, Delaware officials noted that a
contractor manages their customer relationship software.
Selected states reported successes while in the process of modernizing.
Selected States Specifically, most states reported success in using the technical services
Reported Several provided by NASWA’s ITSC. In addition, several states noted success in
establishing collaborative relationships with contractors and obtaining
Modernization assistance from DOL during modernization.
Successes and
Using NASWA ITSC’s services for modernization assistance. Six
Challenges •
states reported success with using ITSC’s services during their
modernization efforts. Those states told us that the support center
provided assistance during the planning, requirements analysis, and
testing phases of their modernization efforts. For example, two states
received help to develop their requests for proposals because of
ITSC’s experience with other states’ modernization efforts. The
Administrator for the Employment Security Division from one of those
states said ITSC’s assistance enabled the state to write the proposal
to receive American Rescue Plan Act of 2021 funding before the
availability of funding expired. Without the support center’s help, the
state noted that it would not have been able to complete the proposal
within the allotted time.
As another example, a senior project manager on one state’s
modernization project told us that they coordinated with ITSC to
develop a questionnaire about other states’ modernization
experiences. The questionnaire was specifically intended to gather
information about other states’ experiences with contractors, requests
for proposals, and UI system modernization, in lieu of sending out a
request for information to contractors. The official said the state plans
to use that information to help officials make informed decisions about
their modernization projects.
Officials from another state reported that ITSC facilitated a partnership
of states who were contracting with the same vendor to share
successes and challenges. The officials described it as a peer-to-peer
group with the goal of connecting states to share best practices for
working with a particular contractor.
• Establishing collaborative contractor relationships. Three states
cited collaborative relationships with contractors as a success factor in
their modernization efforts. Specifically, one state noted that it focused
Page 24 GAO-23-105478 Unemployment Insurance
on sharing information, working in cohesion, and clearing obstacles
with the contractor to move the project forward. Another state noted
that it worked together with the contractor to achieve common goals
by devoting less time placing blame for mistakes and more time on
resolving problems.
• Obtaining modernization assistance from DOL. Two states told us
that DOL provided assistance during their modernization efforts. The
Assistant Director for UI from one state told us DOL connected the
assistant director with directors from other states in order to discuss
their modernization efforts. Another state said it is using DOL’s
expertise to analyze data in order to develop a baseline for ensuring
equitable access to UI benefits for all eligible workers.
States also reported successes after completing a portion of, or all, of
their modernization efforts. Notably, half of the states reported successes
from migrating UI applications and services to the cloud. In addition, two
states reported areas of success in implementing the pandemic UI
programs quickly and improving UI business processes.
• Obtaining benefits from migrating UI applications and services to
cloud computing solutions. Four states told us that their states
benefited from migrating UI applications and services to the cloud. For
example, officials from two states noted that migrating their call center
services to the cloud helped their states better manage the increase in
the call volume during the pandemic. Officials from another state told
us that having a modernized UI system hosted by a contractor in the
cloud enabled the state to have a stable and flexible system during
the pandemic. Another state said its cloud hosted system allowed it to
adapt to the increase in demand for system resources during the
pandemic.
• Implementing the pandemic UI programs quickly. Two states
reported success with having the ability to quickly implement new UI
programs and respond to the pandemic because their systems were
modernized. For example, officials from both states told us due to
modernization they were able to quickly make the changes needed to
their systems to implement the pandemic UI programs.
• Improving UI business processes. Two states told us they had
success in improving their UI business processes as a result of their
modernizations. For example, officials from both states said
modernization improved their business processes through automation
and elimination of paper-based processes.
Page 25 GAO-23-105478 Unemployment Insurance
Additional successes cited by officials after modernization at their
respective states included improved security with the implementation of
multifactor authentication; 63 better identity verification; and improved
customer service management with the implementation of software to
manage, respond to, and resolve customer’s requests.
States Have Reported Although the eight states in our study have taken, or are in the process of
Staffing, Contracting, taking, steps to modernize the IT systems supporting their UI programs,
they have faced challenges while doing so. Most states have identified
Management, Financial,
challenges related to areas such as limited staff resources, contracting for
and Technical Challenges modernization services, and management of the modernization effort.
Further, half of the selected states cited financial and technical
challenges. 64 Table 2 provides an overview of the reported challenges
and the number of states citing that challenge; the most common
challenges are discussed after the table.
63Multifactor authentication in computer networks involves using two or more factors to
ascertain authentication. Factors include something you know (password or personal
identification number), something you have (cryptographic identification device or token),
or something you are (biometric).
64In our earlier work, we heard similar comments from our stakeholder panelists,
specifically on state challenges related to funding, staffing, and contractor limitations. See
GAO-22-105162.
Page 26 GAO-23-105478 Unemployment Insurance
Table 2: Selected States’ Reported Unemployment Insurance (UI) IT System Modernization Challenges
Modernization challenges Number of states
Staffing 7 of 8
Limited staff resources to support modernization 7
Lack of staff with the necessary expertise 6
Contracting 6 of 8
Contractor did not dedicate enough staff resources, including those with UI experience 3
Alignment of goals with contractor 2
Coordination when using multiple contractors 2
Design of contractor’s system was not customer-centric 2
Issues with the quality of the system delivered by the contractor 2
Lack of contractor knowledge about state laws, requirements, and existing systems and
processes 2
Contractor schedule unrealistic 2
Contractor support to address system defects 2
Adapting the contractor’s software to a larger state required a lot of changes to be made 1
Contractor communication issues 1
Contractor related delays 1
Management 6 of 8
Legal requirements were difficult to implement 3
Difficult to change organizational culture and processes 2
Focusing on modernization while responding to the COVID-19 pandemic 2
Complexity of UI business rules 1
Governance of a shared system (consortium) 1
Lack of proper documentation on prior modernization efforts 1
Maintaining priority of modernization projects while supporting legacy system 1
Financial 4 of 8
Limited state funding for IT modernization 2
Increase in project cost and complexity as a result of implementing a contractor product in the
state data center 1
Lack of modernization funding from the Department of Labor, historically 1
COVID-19 pandemic resulted in additional cost for state modernization project 1
Significant ongoing costs for additional modifications for modernized system 1
Technical 4 of 8
Managing external stakeholders (e.g., interfaces, scheduling, technical requirements) 3
Testing the new system 1
Difficult to enhance legacy system due to instability 1
Page 27 GAO-23-105478 Unemployment Insurance
Modernization challenges Number of states
Changes to system requirements and goals (e.g., scope creep) 1
Determining system functionality when using a shared system 1
Training staff on the new system 1
Source: GAO analysis of state information and interviews with state officials. | GAO-23-105478
Staffing Seven states reported staffing as a challenge to modernization, including
ensuring that there are enough staff resources to support modernization
efforts and a lack of staff with the necessary expertise for the
modernization efforts.
• Limited staff resources to support modernization. Officials from
seven states noted challenges with not having enough staff to support
their modernization efforts. For example, officials from four states said
they did not have enough resources to run their UI programs and IT
systems while managing modernization efforts. Two states told us that
responding to the increase in workload from the pandemic while
working on the modernization of their UI systems was challenging.
The Director of the Bureau of Unemployment Compensation from
another state said taking staff away from supporting the UI program
and dedicating them to the modernization effort can be challenging for
a smaller state.
• Lack of staff with the necessary expertise. Officials from six states
told us that the number of technical staff and UI subject matter experts
available for modernization efforts was small. For example, officials
from two states said that, overall, there were not enough IT and UI
program subject matter experts and they were unable to ramp up staff
to support their modernization projects or make changes to their
current systems. Officials from two other states said staff who know
their legacy systems may retire and replacing them will be difficult. As
another example, officials from one state noted that their IT staff did
not have the security and cloud expertise to support the new UI IT
system, which is cloud based.
Contracting Six states reported challenges related to contracting during their UI
modernization projects, such as not having enough staff resources from
the contractor, issues with the alignment of modernization goals, and
coordinating when using multiple contractors, among other areas.
• Lack of dedicated contractor staff resources, including those
with UI experience. Officials from three states said their contractors
did not dedicate enough personnel with experience in the UI space
Page 28 GAO-23-105478 Unemployment Insurance
and in depth knowledge to the modernization projects. For example,
according to one state, it learned that the contractor’s staff was
working on multiple state UI system implementations at one time.
• Contractor goals and state goals were not aligned. Officials from
two states told us the contractors’ goals and the states’ goals for the
projects were not aligned. For example, officials from one state said
the modernization contractor was mostly focused on making minimal
changes to its software product and not on tailoring the product to the
state’s business processes.
• Coordination of project when using multiple contractors. Officials
from two states said that it was challenging to coordinate with multiple
contractors on the modernization projects. For example, according to
the Deputy Division Director for the UI Division for one state,
coordination between multiple state contractors (such as those
responsible for data center management and security) and the UI
modernization contractor added complexity to the modernization
project.
• Design of contractor system was not customer-centric. Officials
from two states told us that the design of the systems was not
customer-centric. For example, the Director of the Office of
Unemployment Compensation Service Centers for one state said that
it was clear that people with an IT background designed the UI
system, but they did not design it around how UI customers would
interact with the technology.
• Issues with the quality of the system delivered by the contractor.
Officials from two states told us they had issues with the quality of the
contractors’ deliverables and product. For example, one state said it
faced multiple rounds of edits and delays as a result of the low quality
of the contractor’s deliverables. The Assistant Deputy Director for UI
Operations from one state told us that the poor quality of the product
caused a high number of defects during user testing, which was one
factor that led to the extension of the project’s timeline by a year.
• Lack of contractor knowledge about state laws, requirements,
and existing systems and processes. Officials from two states told
us the contractors did not take the time to understand their laws and
state processes, requiring additional time for the projects. For
example, the Director of Unemployment Compensation Benefits
Policy for one state told us the project management contractor did not
take the time to familiarize itself with the state’s procurement rules
and laws, making it difficult to move forward with the project.
Page 29 GAO-23-105478 Unemployment Insurance
• Contractor’s projected schedule is unrealistic. Officials from two
states told us the contractors provided an aggressive schedule with
an unrealistic timeline for completing the modernization projects. For
example, the Deputy Division Director for one state told us that,
because the contractor’s modernization project schedule was
aggressive, it was easily disrupted by any minor changes that needed
to be made. Another state told us the estimated schedule for testing
did not factor in time needed to address defects and led to an
extension of the project timeline.
• Contractor support to address system defects. Officials from two
states told us they did not receive support from the modernization
contractors to fix deficiencies and design issues with the systems
once the warranty periods had expired. For example, one state said
the modernized benefits system had issues and a backlog of defects
that the contractor would not fix. The Assistant Administrator of UI
from another state told us that the maintenance and support provided
by the contractor covered modifying the system due to changes in the
law, but did not include fixes for all of the system defects.
Management Six states reported facing management challenges during their
modernization projects, including implementing state legal requirements,
changing organizational culture and processes, and focusing on
modernization while responding to the COVID-19 pandemic, among other
areas.
• Implementing legal requirements. Officials from three states said
state and federal legal requirements can make implementation of the
systems hard. For example, officials from two states said
implementing safeguards around federal tax information when a
contractor was responsible for hosting and supporting the UI system
can be difficult.
• Changing organizational culture and processes. Officials from two
states told us that making changes to the organizational culture and
processes was a challenge. For example, the Assistant Director of UI
for one state said staff and customers did not want to make changes
to the way things are currently done. Another state told us it faced
significant changes to its business processes as a result of the
modernized system and there were varying degrees of the willingness
of staff to adapt to those changes.
• Focusing on modernization while responding to the pandemic.
Officials from two states told us it was challenging to remain focused
on their modernization projects while responding to the pandemic. For
Page 30 GAO-23-105478 Unemployment Insurance
example, one state’s Deputy Division Director for UI told us that
starting the modernization project during the pandemic was difficult
because tax staff needed to help with handling the increase in
benefits claims.
Financial Four states reported facing financial challenges during their
modernization projects, including limited state funding for IT
modernization. Specifically, officials from two states told us they faced
challenges obtaining state funding for their entire modernization projects.
For example, according to the Director for the Division of UI from one
state, the state had obtained some funding to start the modernization but
did not have all the funds it needs to complete the project. The Assistant
Director of UI from another state told us that the state did not typically set
aside funding specifically for modernization and the funding it did receive
for modernization would not be enough to utilize an outside contractor. As
a result, the state planned to modernize portions of the system using
internal staff.
Technical Four states reported facing technical challenges during their
modernization projects, including managing external stakeholders.
Specifically, officials from three states told us it was challenging to
manage external stakeholder’s requirements, integration with external
systems, and interfaces with third parties during the modernization
projects. For example, one state said meeting the data requirements for
stakeholders whose systems were external to the modernized system
(e.g., state department of labor) consumed a lot of time. According to a
second state, due to the complexity of the state agency’s network,
understanding the integration points between all of the systems would
require coordination between the modernization contractor and the
agencies that are impacted. The Assistant Deputy Director for UI
Operations told us it was challenging to manage the scheduling timelines
and all of the interfaces with third parties (e.g., other state agencies)
during the modernization project.
DOL Initiated Several Using funding from the American Rescue Plan Act of 2021, DOL has
Efforts to Help States several ongoing efforts to assist states with their IT modernization efforts,
including providing funding in the form of grant opportunities to reduce
Address Challenges with
fraud, sending teams of experts to states, and developing modular
UI IT Modernization technology solutions.
• Providing funding to states to help reduce fraud, among other
things. During the pandemic, DOL provided grant opportunities to
states to improve UI systems and processes to support program
Page 31 GAO-23-105478 Unemployment Insurance
integrity, including improving cybersecurity. For example, in August
2021, DOL provided states with grant opportunities up to $140 million
in American Rescue Plan Act of 2021 funds, which states could use to
address fraud in UI programs and increase cybersecurity, among
other things. 65 Regarding improving cybersecurity, states can use
these grant funds to, for example, implement or enhance their
cybersecurity defenses for their UI websites and web applications.
We recently reported and testified on DOL’s efforts to address UI
fraud risks. 66 For example, in December 2022, we noted that,
although DOL had taken some recent steps to assist states, the
department had not yet developed an antifraud strategy based on
leading practices in GAO’s Fraud Risk Framework. 67 We
recommended that it do so. DOL partially agreed with our
recommendation and noted plans to address it. As of June 2023, the
department had not yet implemented our recommendation, but
reported that it is finalizing its fraud risk profile and will use it to better
inform its antifraud strategy and controls.
• Sending expert teams to states. DOL has provided multidisciplinary
expert teams (referred to as tiger teams) to analyze state UI systems
and process challenges, and work with states to identify areas to
enhance their existing efforts. 68 The expert teams develop customized
and actionable recommendations for states to implement using grant
funds. Specifically, using separate funding provided by the American
Rescue Plan Act of 2021, DOL provided grant opportunities totaling
up to $200 million to support states in improving UI systems and
65DOL, Grant Opportunity to Support States with Fraud Detection and Prevention,
Including Identity Verification and Overpayment Recovery Activities, in All Unemployment
Compensation (UC) Programs, UIPL 22-21 (Washington, D.C.: Aug. 11, 2021).
66GAO, Unemployment Insurance: DOL Needs to Address Substantial Pandemic UI Fraud
and Reduce Persistent Risks, GAO-23-106586 (Washington, D.C.: Feb. 8, 2023) and
Unemployment Insurance: Data Indicate Substantial Levels of Fraud during the Pandemic;
DOL Should Implement an Antifraud Strategy, GAO-23-105523 (Washington, D.C.: Dec.
22, 2022).
67GAO, A Framework for Managing Fraud Risks in Federal Programs, GAO-15-593SP
(Washington, D.C.: July 28, 2015).
68Each expert team is comprised of experts including a fraud specialist, equity/customer
experience specialist, UI program specialist, business intelligence analysts, computer
systems engineer/architect, and project manager. See Grant Opportunity to Support
States Following a Consultative Assessment for Fraud Detection and Prevention,
Promoting Equitable Access, and Ensuring the Timely Payment of Benefits, including
Backlog Reduction, for all Unemployment Compensation (UC) Programs, UIPL 2-22
(Washington, D.C.: Nov. 2, 2021).
Page 32 GAO-23-105478 Unemployment Insurance
processes to, among other things, better ensure the timely payment of
benefits and reduce workload backlogs. In addition to implementing
the expert teams’ recommendations, states may request permission
from DOL to use any excess funds from these grants to further
improve UI systems and processes, according to the department’s
guidance. 69
As of May 2023, 29 states had received 301 final recommendations
from expert teams after analyzing state UI systems and process
challenges, according to DOL. 70 Example areas of recommendations
include identifying technology solutions to:
• automate portions of states’ existing UI processes,
• convert handwritten text into digitized formats and automate
document processing and routing, and
• assist with fraud detection and prevention in areas such as identity
verification and cross-matching claim data with existing
databases.
As of June 2023, DOL noted that five additional states were in the
process of using expert team assistance, and 11 additional states had
expressed interest.
DOL’s national and regional offices are working with states on
implementing the expert teams’ recommendations, according to
department officials. For example, the department is providing
technical assistance and helping states determine how to prioritize the
recommendations based on the states’ needs. Further, it is offering, at
no cost to the states, technical and operational project execution
support to increase state capacity to implement the expert teams’
recommendations.
In addition, DOL officials told us that NASWA is offering project
management support to states that have received expert teams’
recommendations at no additional cost. In June 2022, DOL published
69UIPL No. 2-22.
70The 25 states are Alabama, Alaska, Arizona, Colorado, Connecticut, Delaware, Idaho,
Illinois, Indiana, Iowa, Kansas, Kentucky, Maryland, Michigan, Missouri, Nebraska,
Nevada, New Hampshire, Oregon, Pennsylvania, Rhode Island, Virginia, Washington,
Wisconsin, and Wyoming.
Page 33 GAO-23-105478 Unemployment Insurance
information on trends it identified during its first year of using expert
teams as a resource for all states. 71
• Developing modular technology solutions. As mentioned earlier, in
August 2021, DOL announced that it had partnered with the U.S.
Digital Service to develop modular technology solutions that states
could adopt as part of ongoing modernization and improvement
efforts. 72 In December 2021, DOL announced that it had selected
Arkansas and New Jersey to participate as “build and pilot” partners
for its first pilot project—known as the claimant experience pilot. 73
DOL also noted that the claimant experience pilot was the first of what
the department expected to be many UI IT modernization pilot
projects.
According to DOL documentation, the claimant experience pilot was
originally intended to test a centralized claimant intake service
developed and maintained by the department that would enable
claimants to apply for UI and verify their identities as part of a single
and cohesive digital experience. DOL noted that core functionality
was intended to include:
• user account creation,
• identity verification meeting using Login.gov, 74 and
• improved UI claim application form using plain language and
modern form design principles.
71Department of Labor, UI Modernization Tiger Team Cohort Trends, June 30, 2022,
https://oui.doleta.gov/unemploy/pdf/TigerTeamCohortTrendsJune_2022.pdf.
72Department of Labor, US Department of Labor Announces Funding to States to
Modernize Unemployment Insurance System, Combat Fraud, Address Equity
(Washington, D.C.: Aug. 11, 2021). According to DOL, the U.S. Digital Service’s
involvement in the department’s efforts to develop modular technology solutions ended in
May 2022.
73Department of Labor, Announcing Grant Awards Made to States Selected to Participate
in the Unemployment Insurance (UI) Information Technology (IT) Modernization Project -
Claimant Experience Pilot (Washington, D.C.: Dec. 2, 2021).
74Login.gov, which is a service provided by the General Service Administration in
collaboration with the U.S. Digital Service, is intended to provide a consolidated web portal
for agencies to use in securing government online interactions. Specifically, for agencies
that use Login.gov, the service acts as the publicly accessible website that verifies the
identities of individuals seeking access to a particular agency’s benefits or services.
Login.gov is intended to allow such individuals access to multiple government agency
programs securely and privately with one email address and password. For more
information, see GAO, Data Protection: Federal Agencies Need to Strengthen Online
Identity Verification Processes, GAO-19-288 (Washington, D.C.: May 17, 2019).
Page 34 GAO-23-105478 Unemployment Insurance
However, neither state chose to adopt the pilot as originally designed.
According to DOL, the states implemented the most valuable aspects
of the proposed solution given their specific needs and capabilities.
More specifically, when Arkansas launched its iteration of the pilot on
March 31, 2022, the state adopted Login.gov, but chose to not adopt
proposed plain language changes. According to Arkansas officials,
the state faced challenges ensuring that proposed changes to its UI
claim application would result in plain language that was both user
friendly and complied with applicable laws.
New Jersey, in contrast, chose not to test Login.gov. Instead, the
state adopted some aspects of the pilot claimant intake form, such as
the plain language changes, but not the form itself, and worked with
DOL to retrofit what it could to its current application. Although New
Jersey originally planned to implement DOL’s pilot intake form, in
February 2022, DOL and New Jersey made the decision to pivot its
implementation approach to focus primarily on plain language
changes. According to DOL, this was due to the following reasons:
• Although the proposed form was more user friendly, it could only
support a limited number of use cases and required more manual
intervention by New Jersey in order to process claims. As a result,
New Jersey did not consider the prototype viable for use by its
staff.
• The form would have required New Jersey to ingest claimant data
in new ways, which would require costly changes to its legacy
systems in order to accommodate. This further eroded the
perceived reward for New Jersey in participating in the pilot.
New Jersey subsequently launched its iteration of the pilot in April
2022. According to DOL officials, some of the changes that New
Jersey made from the pilot, such as making the application mobile
responsive, resulted in tangible benefits, such as reducing the time it
takes for claimants to file claims online by 40 minutes.
DOL officials noted that while testing the pilot, the department
observed that states face significant challenges to adopting modular
solutions. This was due to several factors, including the high cost of
change associated with legacy systems, being “locked into” using
certain contractors, and questions around the long-term funding and
sustainability of modular solutions. In testing with New Jersey and
Arkansas, officials stated that the department learned that state needs
and capabilities in this area can vary significantly, which makes
designing “one size fits all” solutions challenging and creates a barrier
to state adoption of modular technology.
Page 35 GAO-23-105478 Unemployment Insurance
As of February 2023, DOL officials stated that the department
considered the claimant experience pilot as essentially completed.
They noted that DOL is working to help states adopt some of the
supporting elements of the claimant experience pilot that were
successful in New Jersey and Arkansas. These include
• extending implementation support of Login.gov to additional
states;
• providing direct assistance on plain language to states such as
Montana and Rhode Island, as well as publishing reference UI
lexicon materials so they are available to all states; and
• providing IT assistance to implement mobile responsive form
design to states currently lacking a mobile-friendly claimant
experience.
In addition, to assist other states, DOL published examples from the
pilot to its website. 75 The website included information on, among
other things, technology and design practices to improve the UI
customer experience, as well as using clearer language to improve
communication about UI. See figure 3 for a screenshot of DOL’s
website on UI modernization.
75See https://www.dol.gov/agencies/eta/ui-modernization.
Page 36 GAO-23-105478 Unemployment Insurance
Figure 3: Screenshot of the Department of Labor’s Unemployment Insurance Modernization Website (as of May 2023)
Page 37 GAO-23-105478 Unemployment Insurance
Going forward, DOL officials stated that the department plans to continue
assisting states with addressing customer experience challenges by
focusing on helping them define what good UI customer experiences look
like. The officials added that this effort is expected to start with defining
the key capabilities, characteristics, and measures associated with
effective UI claimant portals, and then focus on supporting states to help
them improve in this area. The department also described plans for
additional pilots to help states leverage new technology solutions.
DOL has gaps in managing its efforts to assist states with UI IT
DOL Has Gaps in modernization and its oversight of states’ UI IT performance. Although
Assisting and DOL fully implemented key contract management activities on its claimant
experience pilot, the department did not fully implement leading pilot
Overseeing States’ design practices. Regarding oversight, although DOL is responsible for
Modernizations overseeing the UI program to ensure that the states are operating the
program effectively and efficiently, it has not established UI IT standards
or measured states’ performance.
DOL Fully Implemented Effective contract management ensures that contractor activities are
Key Contract Management performed in accordance with contractual requirements and that the
acquiring organization has sufficient visibility into the contractor’s
Activities for Its Claimant
performance to identify and respond to performance shortfalls. It also
Experience Pilot ensures that the roles of contractors are clearly defined, thus avoiding
confusion or duplication of effort in managing the tasks.
According to the Federal Acquisition Regulation, the Software
Engineering Institute, and our prior work, 76 effective processes to manage
and oversee contracts that support IT projects include:
• establishing and maintaining a plan for managing and overseeing the
contracts;
• assigning responsibility and authority for performing contract
management and oversight;
• identifying the contract work to be performed and the measures by
which a contractor’s performance will be assessed;
76Federal Acquisition Regulation (FAR) subpart 37.5—Management Oversight of Service
Contracts and Part 46—Quality Assurance, Carnegie Mellon University’s Software
Engineering Institute, Capability Maturity Model Integration® for Acquisition, Version 1.3
(CMMI-ACQ V 1.3) (Pittsburgh, Pa.: November 2010), and GAO, USDA Systems
Modernization: Management and Oversight Improvements Are Needed, GAO-11-586
(Washington, D.C.: July 20, 2011).
Page 38 GAO-23-105478 Unemployment Insurance
• conducting reviews with contractors to ensure cost and schedule
commitments are being met and risks are being managed; and
• establishing processes for verifying and accepting contract
deliverables.
DOL fully implemented all five contract management activities for the
claimant experience pilot. For example, DOL’s quality assurance
surveillance plan and its contract with the primary vendor identifies
personnel with responsibility and authority for performing contract
management and oversight, identifies the contract work to be performed
and performance measures, and establishes processes for verifying and
accepting contract deliverables. In addition, DOL met regularly with the
contractor for cost and schedule reviews and documented identified risks
in a risk register.
DOL Did Not Fully A well-developed and documented pilot program can help ensure that
Implement Leading Pilot agency assessments produce information needed to make effective
program and policy decisions. Such a process enhances the quality,
Design Practices for Its
credibility, and usefulness of evaluations in addition to helping to ensure
Claimant Experience Pilot that time and resources are used effectively. GAO has identified five
leading practices 77 that, taken together, form a framework for effective
pilot design:
• Establishing well-defined, appropriate, clear, and measurable
objectives. Such objectives should have specific statements of the
accomplishments necessary to meet the objectives. Clear and
measurable objectives can help ensure that appropriate evaluation
data are collected from the outset of pilot implementation so that data
will subsequently be available to measure performance against the
objectives. Broad study objectives should be translated into specific,
researchable questions that articulate what will be assessed.
• Clearly articulating an assessment methodology and data
gathering strategy. Key features of a clearly articulated methodology
include a strategy for comparing the pilot implementation and results
with other efforts, a clear plan that details the type and source of the
data necessary to evaluate the pilot, and methods for data collection
including the timing and frequency.
• Determining criteria or standards for identifying lessons about
the pilot to inform future decisions. The purpose of a pilot is
77GAO, Data Act: Section 5 Pilot Design Issues Need to Be Addressed to Meet Goal of
Reducing Recipient Reporting Burden, GAO-16-438 (Washington, D.C.: Apr. 19, 2016).
Page 39 GAO-23-105478 Unemployment Insurance
generally to inform a decision on whether and how to implement a
new approach in a broader context. Therefore, it is critically important
to consider how well the lessons learned from the pilot can be applied
in other, broader settings.
To assess scalability, criteria should relate to the similarity or
comparability of the pilot to the range of circumstances and population
expected in full implementation. The criteria or standards can be
based on lessons from past experiences or other related efforts
known to influence implementation and performance as well as on
literature reviews and stakeholder input, among other sources. The
criteria and standards should be observable and measurable events,
actions, or characteristics that provide evidence that the pilot
objectives have been met. Choosing well-regarded criteria against
which to make comparisons can lead to strong, defensible
conclusions.
• Developing a detailed data-analysis plan to track the pilot
program’s performance. A detailed data-analysis plan identifies who
will do the analysis as well as when and how data will be analyzed to
measure the pilot program’s implementation and performance. The
results will show the successes and challenges of the pilot, and in
turn, how the pilot can be incorporated into broader efforts. Some
elements of a detailed data-analysis plan include talking to users,
managers, and developers; evaluating the lessons learned to improve
procedures moving forward; and other appropriate measures.
• Ensuring appropriate two-way stakeholder communication and
input at all stages of the pilot project. Appropriate two-way
stakeholder communication and input should occur at all stages of the
pilot, including design, implementation, data gathering, and
assessment. Failure to effectively engage with stakeholders, and
understand and address their views can undermine or derail an
initiative. To that end, it is critical that agencies identify who the
relevant stakeholders are, and communicate early and often to
address their concerns and convey the initiative’s overarching
benefits.
DOL fully implemented one leading pilot design practice and partially
implemented the remaining four. See table 3 for an assessment of DOL’s
actions to implement leading practices for a pilot program’s design for the
claimant experience pilot.
Page 40 GAO-23-105478 Unemployment Insurance
Table 3: Assessment of the Department of Labor’s (DOL) Actions to Implement Leading Pilot Design Practices for the
Claimant Experience Pilot
Leading practice GAO assessment Assessment rationale
Establish well-defined, appropriate, DOL defined three clear objectives for the claimant experience pilot that
clear and measurable objectives
● each allowed for data to be collected and effectively measure the
adequacy of accomplishing these objectives. Each objective focused on
one specific, measurable task. The three objectives were: (1) develop a
modular, claimant-facing website that provides new claimants an improved
user experience; (2) improve the process for completing initial intake
questions; and (3) improve the process for identity proofing while keeping
equity, fraud prevention, and claim timeliness at the forefront.
Clearly articulate assessment DOL documented a plan for state selection to participate in the claimant
methodology and data gathering
◐ experience pilot, which resulted in two selected states—Arkansas and New
strategy that addresses all Jersey. In a separate draft planning document, DOL articulated areas
components of the pilot program where it could compare the pilot’s implementation and results with other
and includes key features of a efforts (e.g., comparing the results of the pilot with past performances from
sound plan other states not involved in the pilot). The draft plan also addressed the
type and source of data necessary to evaluate the pilot based on its
objectives (e.g., feedback from claimants about their experience and time
required for claimants to submit a new claim compared to the state’s
existing system).
However, the draft plan did not include methods for data gathering, such
as a survey. In addition, DOL did not finalize its draft plan or provide
evidence that it updated its assessment methodology as the scope of the
pilot changed.
Determine criteria or standards for DOL identified a set of draft metrics for determining the levels of success of
identifying lessons about the pilot
◐ the pilot (e.g., feedback from claimants about their experience and
to inform decisions about scalability timeliness for claimants to submit a new claim compared to existing
and whether, how, and when to system). The department subsequently used these draft metrics to help
integrate pilot activities into overall inform its decision making when identifying and documenting lessons
efforts learned. Using its lessons learned, DOL decided to pivot the New Jersey
pilot in a different direction more suited to what the state could accomplish.
More specifically, DOL shifted the New Jersey pilot to focus on making
language updates to improve the user experience of the state’s existing
claim intake website (versus implementing a new claimant intake service
developed and hosted by DOL).
However, DOL did not provide an updated set of finalized metrics to
determine the level of success of the pivoted approach and help to inform
decisions on the pilot’s scalability.
Develop a detailed data-analysis DOL determined that a generalized, detailed data-analysis plan for both
plan to track the pilot program’s
◐ pilot states was not feasible due to the diversity of the unemployment
implementation and performance insurance IT environments between the states. The department also noted
and evaluate the final results of the that Arkansas and New Jersey could only implement parts of the claimant
project and draw conclusion on experience pilot, as originally designed. DOL documented a draft data-
whether, how, and when to analysis plan for Arkansas that included, for example, plans to analyze
integrate pilot activities into overall data regarding the percentage of positive identity proofing, the average
efforts time in error queues, and calls to its call center regarding the pilot.
However, the department did not finalize its plan. In addition, DOL did not
provide a data-analysis plan for New Jersey. Instead, DOL provided
documentation detailing the reasons for the pivot in its implementation plan
for New Jersey.
Page 41 GAO-23-105478 Unemployment Insurance
Leading practice GAO assessment Assessment rationale
Ensure appropriate two-way DOL provided documentation that showed how the department would
stakeholder communication and
◐ conduct two-way stakeholder communication during pilot implementation
input at all stages of the pilot and data gathering (e.g., weekly interviews with DOL and the pilot states).
project, including design, DOL also provided email correspondence showing two-way stakeholder
implementation, data gathering, communication during pilot assessment of completed goals. Additionally,
and assessment DOL published results of the claimant experience pilot from New Jersey
and Arkansas on its website.
However, DOL did not provide documentation that demonstrated two-way
stakeholder communication during pilot conception and design for the
claimant experience pilot. In its lessons learned, DOL also identified
shortfalls in its early communication with stakeholders, including a need for
more conversations about pilot scope and timeline with states before
finalization, and the need to have agreements with states in place earlier in
the process.
Legend:
● DOL fully implemented all aspects associated with the leading practice.
◐ DOL implemented some, but not all, aspects associated with the leading practice.
○ DOL did not implement any aspects of the leading practice.
Source: GAO analysis of DOL documentation. | GAO-23-105478
The shortfalls in DOL’s implementation of the leading pilot design
practices were due, in part, to the department not fully ensuring that the
U.S. Digital Service’s documentation of the pilot was complete. DOL
officials stated that the U.S. Digital Service, as an early partner, primarily
led the work for the claimant experience pilot and was responsible for
developing the documentation and approach for the pilot. The officials
added that there were at least three iterations of the U.S. Digital Services
team during that time and that may have affected the fidelity of the
supporting documents. However, as the oversight entity, it was DOL’s
responsibility to ensure the documentation was complete.
After the U.S. Digital Service’s involvement in the pilot ended in May
2022, DOL restructured its pilot process to include, among other things,
additional steps for two-way stakeholder communication during pilot
conception and design. If implemented on future pilots, DOL’s plan for
additional stakeholder communication is an important step toward
implementing the leading activities for a pilot program’s design, as
discussed earlier. However, DOL’s updated pilot process does not
specifically address other leading practices that were not implemented,
such as establishing a data gathering strategy and ensuring that
documentation is continuously updated and finalized.
Until DOL updates its pilot processes and implements leading practices
for pilot program design for future pilot projects, it likely cannot ensure
that its pilots produce information needed to make effective program and
Page 42 GAO-23-105478 Unemployment Insurance
policy decisions. Further, DOL will likely be challenged in ensuring the
quality, credibility, and usefulness of its pilots, and that time and
resources are used effectively.
DOL Established Various Among other things, leading practices emphasize the importance of
Oversight Mechanisms, having performance standards or metrics to provide oversight, guide
decisions, and measure IT performance. 78 As mentioned earlier, DOL has
but Did Not Measure the
general responsibility for overseeing the UI program to ensure that the
Performance of State UI IT states are operating the program effectively and efficiently. For example,
Systems DOL is responsible for monitoring state operations and procedures,
providing technical assistance and training, as well as analyzing UI
program data to diagnose potential problems.
To provide oversight of state UI IT environments, DOL established
various oversight mechanisms:
• States that have received supplemental grants are to report
regularly on the progress of their projects. For example, as we
mentioned earlier, states that received grants for the consortia
modernization efforts reported on their progress to DOL, culminating
in the department’s annual reports to Congress between 2015 and
2020. As another example, states that received grants from DOL’s
August 2021 grant opportunity to help address fraud are to provide
quarterly reports to DOL with updates on progress and
implementation of each grant project. 79
• States undergoing IT modernization projects are to complete a
pre-implementation checklist before they deploy a newly
modernized system. As previously mentioned, the pre-
implementation checklist denotes critical function areas that states
78GAO, Designing Evaluations: 2012 Revision (Supersedes PEMD-10.1.4), GAO-12-208G
(Washington, D.C.: Jan. 31, 2012); Executive Guide: Measuring Performance and
Demonstrating Results of Information Technology Investments, GAO/AIMD-98-89
(Washington, D.C.: March 1998); Executive Office of the President, Office of Management
and Budget, Circular A-11, Preparation, Submission, and Execution of the Budget (August
2022). Metrics should be linked to strategic management processes and define what is
important to the organization, what it holds itself accountable for, how it defines success,
how it identifies early warning indicators of problems, and how it structures improvement
efforts. Organizations should determine, among other things, what metrics are appropriate
to measure the business value of IT, and what the baseline and target performance
should be.
79DOL, Grant Opportunity to Support States with Fraud Detection and Prevention,
Including Identity Verification and Overpayment Recovery Activities, in All Unemployment
Compensation (UC) Programs, UIPL 22-21 (Washington, D.C.: Aug. 11, 2021).
Page 43 GAO-23-105478 Unemployment Insurance
must verify prior to launching a new UI IT system, such as call center
and customer service operations, staff training on new system
operations, customer help desk support, and contractor support. Any
state that is preparing to launch a new UI IT system must certify that it
has reviewed and accomplished, or has developed an appropriate
plan addressing, these categories in a report.
• All states are required to submit state quality service plans
annually. State quality service plans serve as the performance
reporting and grant application documents through which states
receive administrative funding. The plans include a summary of state
performance on various measures related to operating the UI
program, such as first payment promptness, detection of
overpayments, average age of appeals, tax quality, and improper
payments. According to DOL, the department has the ability to issue
corrective action plans to states for any identified deficiencies. DOL
officials noted that deficiencies can be IT-related and, if states need to
make improvements, they must report progress in implementing their
corrective action plans to ETA on a quarterly basis.
However, as of June 2023, DOL had not yet defined standards to
measure states’ UI IT performance. In November 2022, the department
provided us with a draft of its UI modernization strategic plan that
included a sample set of preliminary standards. According to DOL, it
plans to define standards in areas such as improving the customer
experience and identity verification. However, the department did not
provide a specific time frame for the draft’s completion or completion of
the standards.
In addition, DOL had not measured states’ IT performance. For example,
it had not measured the number of states using cloud infrastructures to
support their UI systems. Measuring areas such as this is important
because it could help inform DOL of where gaps may exist in states’ IT
capabilities and where to commit additional resources. Although the
department’s state quality service plans include general UI performance
metrics, as previously discussed, these do not include reporting on
specific IT performance measures.
According to DOL officials, the department had not measured states’ UI
IT performance because it had not yet defined IT standards to measure
states against. As a result, DOL is currently limited in its ability to monitor
whether states’ UI IT systems are performing efficiently and effectively,
identify gaps in UI IT modernization, and ensure that resources are
properly allocated to address any gaps.
Page 44 GAO-23-105478 Unemployment Insurance
States faced unprecedented challenges during the COVID-19 pandemic
Conclusions in ensuring their IT systems could process a historically high number of UI
claims and that eligible individuals received the appropriate amount of
benefits. In undertaking modernization efforts, the states have reported
noteworthy successes. However, they also encountered significant
challenges. To help states overcome these challenges, DOL provided
grant funding, expert teams, and modular technology solutions.
However, DOL had gaps in implementing leading practices on its design
of its first modular technology solution, the claimant experience pilot.
Specifically, by not identifying its data gathering methodologies, finalizing
its data assessment plans, or demonstrating two-way communications
with key stakeholders during pilot conception and design, DOL did not
position itself to fully meet the goals of the pilot. Until DOL implements
these practices, the department will be hindered in its ability to ensure the
usefulness of future pilot projects. In addition, DOL also had gaps in its
oversight efforts as the department has not yet finalized a comprehensive
set of UI IT modernization standards and measured states’ IT
performance against the established standards. Until it does so, it will lack
a critical mechanism to measure whether states’ UI IT systems are
performing efficiently and effectively.
We are making three recommendations to DOL:
Recommendations for
Executive Action • The Secretary of the Department of Labor should direct the Office of
Unemployment Insurance Modernization and the Office of the Chief
Information Officer to update their processes for UI pilots to reflect
leading practices for pilot design, and implement the leading pilot
design practices that address the weaknesses that we identified on its
future pilots. (Recommendation 1)
• The Secretary of the Department of Labor should direct the Office of
Unemployment Insurance to define UI IT modernization standards for
states. (Recommendation 2)
• The Secretary of the Department of Labor should direct the Office of
Unemployment Insurance to measure states’ UI IT performance
against established standards. (Recommendation 3)
Page 45 GAO-23-105478 Unemployment Insurance
We provided a draft of this report to DOL for review and comment. In
Agency Comments written comments provided by DOL (reproduced in appendix IV), the
and Our Evaluation department concurred with one recommendation and partially concurred
with two. DOL also provided technical comments, which we incorporated
as appropriate.
DOL partially concurred with our first recommendation to update its
processes for UI pilots to reflect leading practices for pilot design, and
implement the leading pilot design practices that address the weaknesses
that we identified on its future pilots. The department noted that it agreed
with our points regarding the importance of using criteria to decide which
initiatives should be recommended for broader implementation. The
department also described its effort to analyze the results of the claimant
experience pilot in New Jersey. However, DOL stated that it did not fully
agree with our conclusion that it did not use a clearly articulated
assessment strategy for the pilot.
We acknowledge that DOL established a draft assessment plan that
articulated areas where it could compare the pilot’s implementation and
results with other efforts. The draft plan also addressed the type and
source of data necessary to evaluate the pilot based on its objectives.
However, DOL did not finalize its draft assessment plan or provide
evidence that it updated its assessment methodology as the scope of the
pilot changed. Such activities are important to better ensure that DOL’s
pilots are well developed and documented, and produce the information
needed to make effective program and policy decisions. Accordingly, we
continue to believe our recommendation is needed.
DOL partially concurred with our second recommendation to define UI IT
modernization standards for states. The department noted examples of its
existing approach to UI performance management, such as monitoring
the activities of grant-funded activities related to IT modernization to
ensure progress towards intended goals.
We acknowledge that DOL has established several oversight
mechanisms for the states. However, as stated in our report, DOL has not
yet defined UI IT performance standards. Such standards are needed for
DOL to be able to measure whether states’ UI IT systems are performing
efficiently and effectively, identify gaps in UI IT modernization, and ensure
that resources are properly allocated to address any gaps. As a result, we
continue to believe our recommendation is warranted.
Page 46 GAO-23-105478 Unemployment Insurance
DOL concurred with our third recommendation related to measuring
states’ UI IT performance. The department described planned actions in
line with the intent of our recommendation, such as exploring best
practice measurements for IT performance in state UI systems.
As agreed with your offices, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 14 days from the
report date. At that time, we will send copies to the appropriate
congressional committees, the Acting Secretary of Labor, and other
interested parties. In addition, the report will will be available at no charge
on the GAO website at https://www.gao.gov.
If you or your staff members have any questions about this report, please
contact Carol Harris at (202) 512-4456 or HarrisCC@gao.gov. Contact
points for our Offices of Congressional Relations and Public Affairs may
be found on the last page of this report. GAO staff who made major
contributions to this report are listed in appendix V.
Carol C. Harris
Director, Information Technology and Cybersecurity
Page 47 GAO-23-105478 Unemployment Insurance
Appendix I: Objectives, Scope, and
Appendix I: Objectives, Scope, and
Methodology
Methodology
Our objectives were to (1) provide the status of unemployment insurance
(UI) modernization efforts for selected states, including the use of
contractors for such efforts; (2) identify notable modernization successes
and challenges; and (3) evaluate the Department of Labor’s (DOL)
management activities in assisting states with their modernization efforts
and whether it has provided effective oversight of those efforts.
To address our first two objectives, we conducted in-depth interviews with
management and IT staff in eight state UI offices—Arkansas, Delaware,
Maine, Nevada, Ohio, Pennsylvania, Tennessee, and Texas. To make
our state selections, we first excluded states that were included in our
other UI-related reviews, as well as reviews being conducted by DOL’s
Office of the Inspector General. 1 We then selected eight states that
represent varying regional locations, population size, modernization
status, and timeliness of benefit payments in the regular UI program
(October through December 2021). Specifically, our selection of eight
states represents each of the six DOL regions; at least one small,
medium, large, and extra-large state; a mix of states in each of the major
phases of UI systems modernization, including planning, acquisition,
development, and completed; and varying rates of benefit payment
timeliness.
We also selected states based on their participation in DOL’s initiatives to
pilot modular technology solutions and send expert teams to states.
Although our sample is non-generalizable, these states offered insight
and perspectives of their experiences in modernizing UI systems,
including successes and challenges. In addition, we interviewed DOL
officials, reviewed state audit entities’ reports, and spoke to stakeholders
involved in modernization of states’ UI systems, such as officials from the
Information Technology Support Center (ITSC), 2 operated by the National
Association of State Workforce Agencies (NASWA). 3
1The specific states and territory we excluded were Arizona, Florida, Massachusetts,
Michigan, Minnesota, Wyoming, California, Florida, Georgia, Kentucky, New Jersey,
Virginia, and the Virgin Islands.
2ITSC was created in 1994 as a partnership between DOL and the Maryland Department
of Labor, Licensing, and Regulation to support state UI IT initiatives. DOL supports ITSC
through grants to the Maryland agency, and ITSC’s Steering Committee includes
representatives from Employment and Training Administration.
3NASWA represents all 50 state workforce agencies, the District of Columbia, and U.S.
territories.
Page 48 GAO-23-105478 Unemployment Insurance
Appendix I: Objectives, Scope, and
Methodology
To provide the status of modernization efforts for the selected states and
determine the role of contracting, we collected and reviewed the selected
states’ documentation of their modernization planning and development
efforts, such as project plans, status reports, and contracting documents
(e.g., requests for proposals). We also held discussions with officials from
the selected states’ UI agencies, including officials involved in planning
and managing the UI systems, regarding the status and plans for states’
UI modernization efforts and the role of contracting. To assess the
reliability of the data related to the status of selected states’
modernization efforts, such as project timelines, we reviewed related
state documentation (e.g., project plans and contracts), interviewed state
officials regarding the data, and confirmed the accuracy of the data in this
report with the officials. We determined that these data were sufficiently
reliable for the purposes of this report.
To identify notable modernization successes and challenges, we
reviewed the selected states’ UI modernization documentation, such as
lessons learned reports and presentations. We also interviewed relevant
UI officials from the states to identify additional modernization successes
and challenges reported by the officials, and discuss means for
addressing the challenges. We then analyzed the successes and
challenges reported by the selected state UI agencies to identify
similarities and summarized the information collected.
To address our third objective, we assessed DOL’s contract management
and pilot design activities. Specifically:
• To assess contract management, we reviewed DOL’s contract
management plan, delegation memorandum for contract
responsibilities, work statements that outline the contractor’s work and
acceptance criteria, base contracts and contract modifications, and
technical exhibits. We also interviewed department officials to gather
additional information. We then compared DOL’s efforts against key
contract management activities from Federal Acquisition Regulations,
the Software Engineering Institute, and our prior work 4 to determine
the extent to which the department implemented the activities.
4Federal Acquisition Regulation (FAR) subpart 37.5—Management Oversight of Service
Contracts and Part 46—Quality Assurance, Carnegie Mellon University’s Software
Engineering Institute, Capability Maturity Model Integration® for Acquisition, Version 1.3
(CMMI-ACQ V 1.3) (Pittsburgh, Pa.: November 2010) and GAO, USDA Systems
Modernization: Management and Oversight Improvements Are Needed, GAO-11-586
(Washington, D.C.: July 20, 2011).
Page 49 GAO-23-105478 Unemployment Insurance
Appendix I: Objectives, Scope, and
Methodology
• To assess the pilot design, we reviewed DOL documentation from its
first modular technology solutions pilot—known as the claimant
experience pilot. The documents we reviewed included project plans,
strategy documents, project update presentations, and processes for
designing and implementing pilots, among others. We also
interviewed DOL officials to gather additional information. We then
compared the department’s efforts against leading practices for pilot
design from our prior work 5 to determine the extent to which the
department implemented the activities.
For both areas above, we assessed an activity as fully implemented if the
evidence provided by DOL demonstrated all aspects of the activity. We
assessed an activity as partially implemented if the evidence
demonstrated some, but not all, aspects of the activity. Finally, we
assessed an activity as not implemented if the evidence did not
demonstrate any aspect of the activity, or if DOL did not provide evidence
for that activity.
To assess DOL’s oversight of states’ modernization efforts, we reviewed
the department’s policies, procedures, and guidance to identify the
mechanisms that it established for providing oversight of state UI IT
environments. We also interviewed DOL officials regarding the
department’s oversight efforts. We then compared DOL’s efforts to
leading practices for measuring the performance of IT systems identified
in our prior work and by the Office of Management and Budget. 6
We conducted this performance audit from October 2021 to July 2023 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 objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
5GAO, Data Act: Section 5 Pilot Design Issues Need to Be Addressed to Meet Goal of
Reducing Recipient Reporting Burden, GAO-16-438 (Washington, D.C.: Apr. 19, 2016).
6GAO, Designing Evaluations: 2012 Revision (Supersedes PEMD-10.1.4), GAO-12-208G
(Washington, D.C.: Jan. 31, 2012); Executive Guide: Measuring Performance and
Demonstrating Results of Information Technology Investments, GAO/AIMD-98-89
(Washington, D.C.: March 1998); and Executive Office of the President, Office of
Management and Budget, Circular A-11, Preparation, Submission, and Execution of the
Budget (August 2022).
Page 50 GAO-23-105478 Unemployment Insurance
Appendix II: State Consortium Successes
Appendix II: State Consortium Successes and
Challenges
and Challenges
Between 2009 and 2017, the Department of Labor (DOL) provided
supplementary grants to support the establishment of state consortiums,
in which three or four states work together to develop and share a
common system. 1 These efforts were intended to allow multiple states to
pool their resources and reduce risk in the pursuit of a single common
system that they can each use after applying state-specific programming
and configuration settings.
Between 2015 and 2020, DOL reported to Congress on the progress of
seven consortium projects. 2 Examples of successes reported by the
department include:
• As members of the ReEmployUSA Consortium, Mississippi and Maine
deployed state-specific unemployment insurance (UI) benefits and tax
systems in cloud environments between 2018 and 2019. 3
• Wyoming, as the remaining member of the WyCAN consortium, was
able to implement its modernized integrated benefits, appeals, and tax
system by May 2019. 4
• The Internet Unemployment System Consortium, which consisted of
Idaho, Vermont, and North Dakota as of 2019, developed a customer-
1For example, Department of Labor, Unemployment Insurance (UI) Supplemental Funding
Opportunity for Automated Integrity Related Systems: Including Systems to Improve
Services and/or Performance, UI Program Letter (UIPL) 31-09, Change 1 (Washington,
D.C.: Aug. 21, 2009) and Unemployment Insurance (UI) Supplemental Funding
Opportunity for Program Integrity and Performance and System Improvements, UIPL 26-
11, (Washington, D.C.: July 18, 2011).
2In the explanatory statement that accompanied the Consolidated and Further Continuing
Appropriations Act, 2015 (Pub. L No. 113-235), which was published in the Congressional
Record of December 11, 2014 (p. H 9827), Congress expressed concern that automation
acquisition projects being carried out by state consortia to modernize their UI IT systems
were behind schedule. The explanatory statement directed DOL to submit to the House
and Senate Committees on Appropriations a report by April 1 of each fiscal year, until the
funds available to the consortia were expended or expire, the status of all project funds
and analysis of each project’s progress toward executing the acquisition plans.
3The ReEmployUSA consortium included Connecticut, Maine, Mississippi, Rhode Island,
and Oklahoma.
4The WyCAN consortium was formed in 2009 with Arizona, Wyoming, Idaho, and North
Dakota. Idaho left in 2011 to manage its own modernization effort, and at about the same
time Colorado joined as the lead state. North Dakota left the consortium in 2015 due to
concerns that the contractor would not be able to produce an adequate system. In 2016,
Colorado withdrew to pursue a state specific solution and Arizona withdrew due to
leadership changes.
Page 51 GAO-23-105478 Unemployment Insurance
Appendix II: State Consortium Successes and
Challenges
friendly self-service portal for UI claimants. Additionally, the
consortium completed the development of its new employer audit
application, which is designed to provide tax field auditors with the
tools to perform a real-time audit on an employer account. The
consortium also upgraded a state-developed technology used to send
and receive wage and other information from other states, federal
agencies, and military branches. 5
• The Innovate UI Consortium member states, Missouri, Wyoming,
Mississippi, Connecticut, Rhode Island, and Maine, were using
variations of three modernized systems developed by the same
contractor. The consortium was formed in order to conduct three
feasibility studies to identify ways that states with a shared contractor
can minimize future development and maintenance costs. The
consortium had accomplished the goals of two of the studies and the
third study was ongoing as of 2020.
However, DOL also reported that state consortium efforts faced a number
of challenges, including system quality issues and financial challenges,
among others. For example:
• The WyCAN Consortium reported that its biggest challenge was that
its contractor was unable to deliver a working, modernized system to
the consortium’s satisfaction, causing significant project delays and
legal challenges. The consortium was unable to resolve the project
delays and discontinued the contractor’s work on the project in 2015.
The WyCAN Consortium paid a total of $16.7 million to the original
contractor.
• The Vermont, Maryland, and West Virginia Consortium, which formed
in 2011, experienced shortages with state staffing, issues with product
quality, and problems meeting scheduled milestones. West Virginia
struggled to provide dedicated staff for the project resulting in project
delays. The consortium also expressed concerns over the quality and
timeliness of deliverables received from the contractor. The
consortium established quality standards and milestones for the
project and worked with the contractor to achieve those goals. Even
though the contractor made efforts to improve product quality, the
issues continued. In early November 2019, Maryland worked with the
contractor to establish delivery milestones, but the state still faced
5The Internet Unemployment System Consortium upgraded the Idaho-developed
Interstate Connection Network Relay, which is used to send and receive wage and other
information from other states, federal agencies, and military branches.
Page 52 GAO-23-105478 Unemployment Insurance
Appendix II: State Consortium Successes and
Challenges
challenges with the contractor meeting the mutually agreed-upon
milestones.
• The New York and New Jersey Consortium was formed to modernize
the states’ UI IT systems by jointly developing business and technical
requirements and leveraging existing consortia products and
individual state best practices. The consortium was awarded $8
million in grant money by DOL in 2013 to develop business
requirements, define high-level system architecture, and a request for
proposal for a development contractor. In 2015, the estimated cost for
the new system was between $70 and $80 million. The consortium
was unable to obtain state or federal funding in subsequent years for
project development and, as a result, disbanded as of 2017.
• The Southeast Consortium for Unemployment Benefits Integration,
formed in 2009, faced challenges related to a reduced timeline for the
project, and state and contractor staffing. There were delays in
selecting the contractor due to the need to restructure the project’s
governance when the lead state left the consortium. 6 The consortium
faced additional project delays as a result of negotiations with the
contractor related to the project deliverables and schedule.
Consortium leadership and the contractor came to agreement on a
strategy to put the project back on schedule. The project also faced
state staffing challenges as the states struggled to provide staffing for
the project and ongoing UI program operations. In addition, the
staggered approach used to release the products put a significant
strain on the contractor’s staffing resources as they supported both
the development and post implementation phases of the project for
the three states. Project management teams from both the consortium
and contractor worked closely to monitor the situation.
As of February 2023, according to DOL, most of the remaining consortia
states had deployed their systems. For example, although Vermont and
West Virginia left their consortium, Maryland continued with development
of the new system and launched it in September 2020. In addition,
Connecticut joined the ReEmployUSA consortium and launched a new
system as part of the consortium in July 2022. Mississippi, Maine, and
Rhode Island also remain part of the ReEmployUSA consortium and
continue to work together on changes to the system. Lastly, North and
South Carolina are using the Southeast Consortium benefits system.
6The Southeast Consortium for Unemployment Benefits Integration was composed of
South Carolina, North Carolina, and Georgia. In December 2019, Georgia withdrew from
the consortium.
Page 53 GAO-23-105478 Unemployment Insurance
Appendix III: Summaries of Eight Selected
Appendix III: Summaries of Eight Selected
States’ Modernization Efforts
States’ Modernization Efforts
We reviewed the unemployment insurance (UI) modernization efforts for
eight selected states: Arkansas, Delaware, Maine, Nevada, Ohio,
Pennsylvania, Tennessee, and Texas. This appendix includes summaries
of each state’s modernization efforts, including status and phase, as of
February 2023. 1 This appendix also includes information on the role of
contracting in each state’s modernization efforts.
1As previously reported in GAO-12-957, the phases of modernizing a system can be
sequential or overlapping and performed in an incremental manner. The phases include
(1) initiation, which identifies a business need that requires a technological solution; (2)
concept, when the IT governance organization approves the business needs statement;
(3) planning, which begins when the project has been formally approved and funded; (4)
requirements analysis, during which the business requirements are validated and further
analyzed and decomposed into functional and nonfunctional requirements; (5) design,
which develops detailed specifications that emphasize the physical solution to the end
user’s IT needs; (6) development, in which the system developer takes the detailed design
information and transforms it into machine executable form; (7) test, to determine whether
the business product developed or acquired is ready for implementation; (8)
implementation, in which the business product is moved from development status to
production status; and (9) operations and maintenance, in which the certified and
accredited business product operates in a full-scale production environment.
Page 54 GAO-23-105478 Unemployment Insurance
Appendix III: Summaries of Eight Selected
States’ Modernization Efforts
Arkansas Arkansas officials, including the Assistant Director for Unemployment
Insurance and Deputy Director of Internal Operations, told us the state is
in the process of modernizing its UI benefits system—which is about 50
State: Arkansas
System age (approximately): 50 years
years old—and its tax system—which is 11 years old. The Assistant
(benefits and appeals); 11 years (tax) Director for Unemployment Insurance said the state has made smaller
Modernization status: In progress upgrades to its benefits, appeals, and tax systems, such as adding web-
Modernization phase: Mixed – planning and based functionality that allows claimants to file for benefits and employers
requirements analysis
to pay their payroll taxes; however, none of the systems have been fully
Initiation year: 2023
modernized.
Completion: 2025 (estimated)
Reported cost: $35 million (estimated)
Examples of the role of contracting in
Arkansas officials said that, due to the high-volume of claims received
Arkansas unemployment insurance during the COVID-19 pandemic, their processes for adjudicating claims
(UI) modernization efforts include became overwhelmed because staff had to verify information and retrieve
• contracting with a vendor to move the additional information from employers, which was very time consuming. In
state’s UI system and benefits
applications to the cloud; addition, the officials reported that the call center for the UI program could
• contracting with a vendor to host call not resolve customer problems quickly enough during the pandemic. The
center services; officials noted that the state’s challenges in addressing the increased
• contracted with the National Association volume of claims and call volume were also affected by staffing issues.
of State Workforce Agencies to provide
technical support during development of
the state’s request for proposals for its According to Arkansas officials, to help improve performance during the
ongoing modernization project; and pandemic, the state opted to use a third party service to host its call
• using contractors to provide other center in the cloud, which reduced customers’ average call hold time from
services, such as a cloud-based
mainframe, project management, and 2 hours to 17 minutes when fully staffed. The state also expanded its
staff for its modernization project. mainframe capacity using a cloud-based service to respond to the
Source: GAO analysis of state information and interviews with
state officials, as of February 2023. | GAO-23-105478 massive increase in claimants. The officials added that a contractor also
built an entirely new system for the implementation of the Pandemic
Unemployment Assistance program and integrated the Federal Pandemic
Unemployment Compensation and Pandemic Emergency Unemployment
Compensation programs into the existing UI processing system. 2
2The Coronavirus Aid, Relief, and Economic Security (CARES) Act created three new
federally funded temporary UI programs—Pandemic Unemployment Assistance, Federal
Pandemic Unemployment Compensation, and Pandemic Emergency Unemployment
Compensation—that expanded benefit eligibility and enhanced benefit amounts.
Coronavirus Aid, Relief, and Economic Security (CARES) Act, Pub. L. No. 116-136, §§
2102, 2104, 2107, 134 Stat. 281, 313-28 (March 27, 2020). In addition, the Consolidated
Appropriations Act, 2021 created one additional temporary, supplemental UI program—
the Mixed Earner Unemployment Compensation program. Consolidated Appropriations
Act of 2021, Pub. L. No. 116-260, div. N, tit. II, § 261(a)(1), 134 Stat. 1182, 1961
(December 27, 2020).
Page 55 GAO-23-105478 Unemployment Insurance
Appendix III: Summaries of Eight Selected
States’ Modernization Efforts
In 2021, Arkansas decided it needed to continue to modernize its UI
systems. According to the state’s documentation, the goals of its ongoing
modernization effort are to:
• create a more user friendly interface,
• provide comprehensive and tailorable report generation, and
• provide a performance measurement capability.
According to Arkansas officials, the state contracted with a vendor to
move its UI system and benefits applications to the cloud in preparation
for its modernization project. The Assistant Director for Unemployment
Insurance noted that it has been challenging to obtain the staff the state
needs to support the UI program and the modernization project at the
same time.
In June 2022, the Assistant Director for Unemployment Insurance told us
that the state was in discussions with contractors. However, a lack of
funding to modernize all of the state’s UI systems (i.e., benefits, appeals,
and tax), as well as bid protests, led to project delays.
As of March 2023, Arkansas officials reported that the state had changed
its plans and decided to pursue in-house development of the benefits and
tax systems, although the state still plans to rely on some contractor
support for portions of UI system development, implementation, and
technical support, among other areas. They explained that the amount of
funds designated by the state for modernization would not be enough to
utilize an outside contractor, and was better suited for modernizing the
systems internally. The officials noted that they were in the planning and
requirements analysis phase, and were ramping up hiring the necessary
staff for the project.
Page 56 GAO-23-105478 Unemployment Insurance
Appendix III: Summaries of Eight Selected
States’ Modernization Efforts
Delaware According to Delaware officials, the state has a UI modernization effort
underway to develop an integrated benefits, appeals, and tax system to
State: Delaware
replace the current benefits and tax systems. Officials said that
System age (approximately): 35 years
Delaware’s current UI systems, which were launched in the 1980s, rely
(benefits, appeals, and tax) on an outdated programming language called the Common Business
Modernization status: In progress Oriented Language 3 and are supported by a mainframe.
Modernization phase: Mixed – planning and
requirements analysis
Delaware’s charter for the UI modernization project notes that smaller
Initiation year: 2022
upgrades have been made to the systems since that time, such as adding
Completion: 2026 (estimated)
Reported cost: $49 - $85 million (estimated)
functionality for claimants to file for benefits online and employers to file
Examples of the role of contracting in
their tax reports electronically. According to the Director for the
Delaware’s unemployment insurance (UI) Unemployment Insurance Division, many of the systems used for the UI
modernization efforts include program are standalone with limited integration across the systems. As a
• contracting with a vendor for the result, the state uses manual and paper-based processes to gather
management of its ongoing modernization
project; information and inform claimants of issues with their claims. The official
• contracting with a vendor for UI data added that the standalone nature of the UI systems also makes
cleansing, conversion, and support during integration with newer applications difficult.
modernization;
• contracting with the National Association
of State Workforce Agencies to provide According to Delaware’s UI modernization project charter, the UI program
technical support during the ongoing data currently resides in approximately 10 different systems. As a result,
modernization project;
staff resources are required to support requests for information. The state
• using contractors to provide other
services, such as customer response
anticipates that the process for consolidating this data will be very
management software, identity verification complex. In June 2022, Delaware officials told us that they had contracted
service, and fraud detection; and with a vendor to identify data sources, as well as to gather, clean, and
• planning to obtain contract support to extract data to a cloud-based data warehouse, in preparation for the
maintain the modernized system.
Source: GAO analysis of state information and interviews with
state’s modernization efforts.
state officials, as of February 2023. | GAO-23-105478
Delaware’s project charter also stated that, during the COVID-19
pandemic, the state’s Unemployment Insurance Division received more
claims in the first 4 weeks of the pandemic than in the prior 12 months. In
addition, the charter noted that antiquated and poorly integrated systems
hindered Delaware’s ability to respond and manage the influx of claims
received during 2020 and 2021. This led to delays with claims processing
and subsequent payment of benefits that created a backlog. The Director
for the Unemployment Insurance Division told us the mainframe
performed well, but the state had to upgrade the web interfaces and
telephone systems with additional capacity.
3The Common Business Oriented Language, which was introduced in 1959, became the
first widely used, high-level programming language for business applications.
Page 57 GAO-23-105478 Unemployment Insurance
Appendix III: Summaries of Eight Selected
States’ Modernization Efforts
The Director for the Unemployment Insurance Division also noted the
state’s existing systems had some capability to support the pandemic UI
programs, but the state determined that it could better serve claimants by
using new software programs. The official said that the state deployed
two cloud-based software service platforms to implement those federal
programs and to handle the increase in call and email volume.
As a result of system performance issues experienced during the
pandemic, in 2021, Delaware officials decided to modernize the state’s UI
systems. According to Delaware’s project charter, the development of an
integrated benefits, appeals, and tax system is intended to help the state
eliminate the manual and paper processes that are used to gather
information and inform claimants about issues with their claims. The goals
for Delaware’s modernization effort are to, among other things:
• improve the state’s UI systems and processes,
• improve the security of the UI system and reduce fraud,
• deliver a better customer experience,
• improve employee experience and performance, and
• provide the capability to adapt to changing economic conditions.
Delaware’s modernization project is in the planning and requirements
analysis phase, according to officials. The Senior Project Leader for the
Project Management Office in the Division of Unemployment Insurance
said that Delaware made a decision not to issue a request for information
for the modernization project. Instead, Delaware officials stated that they
worked with the National Association of State Workforce Agencies
(NASWA) 4 to develop a survey that Delaware sent to 16 different states
to gather information about each states’ modernization efforts, requests
for proposals, and experiences with their modernization contractors. As of
February 2023, Delaware officials told us the state intended to issue a
request for proposal for its UI system modernization in late February
2023.
4NASWA represents all 50 state workforce agencies, the District of Columbia, and U.S.
territories.
Page 58 GAO-23-105478 Unemployment Insurance
Appendix III: Summaries of Eight Selected
States’ Modernization Efforts
Maine Maine officials, including the Director and Deputy Bureau Director of
Maine’s Bureau of Unemployment Compensation, said that, in 2012, the
state began the ReEmployME project to modernize its UI systems.
State: Maine
According to the Deputy Bureau Director for the Bureau of Unemployment
System age (approximately): 5 years
(benefits, appeals, and tax) Compensation, at that time, the benefits, appeals, adjudication, and tax
Modernization status: Complete systems were separate systems with very limited interface and data
Modernization phase: Operations and sharing functionality. The officials said the tax and benefits systems were
maintenance at least 30 years old.
Initiation year: 2012
Completion: 2018 (actual)
According to Maine officials, when the state began exploring
Reported cost: $90 million (actual)
modernization of its UI systems, one criterion for a new system was to
Examples of the role of contracting in
Maine’s unemployment insurance (UI) find a recently developed successful state system that could be tailored to
modernization efforts include Maine. The officials told us that the goals of the modernization effort were
• contracting with a vendor to provide to have a system that Maine could keep current and adaptable to
project managers and technical staff to
support major changes to the UI changing needs of the UI program, as well as reduce costs by sharing in
applications; the maintenance and enhancement costs of the system. The Director of
• contracting with a vendor to develop, the Bureau of Unemployment Compensation said that Maine wanted a
maintain, and support the modernized
system, including adding new
shared system that leveraged technology with states of the same size, so
functionality; and that the cost and maintenance would be the same for all states.
• using contractors to provide other
services, such as cloud services, payment Although there were no consortiums in place at the time Maine was
detection and analytics to combat fraud,
and identity verification service. looking for a shared system, the state later joined with other states to
Source: GAO analysis of state information and interviews with form the ReEmployUSA consortium. 5 As a member of the ReEmployUSA
state officials, as of February 2023. | GAO-23-105478
consortium, Maine leveraged Mississippi’s pre-existing contract with a
vendor to develop, implement, and deploy a new system that integrated
Maine’s claims, adjudication, appeals, and tax systems into one system.
Maine officials noted that governance of a shared system can be
challenging for states that traditionally make their decisions
independently. Officials added that developing a governance model takes
time and effort. Further, they noted the importance of compromising when
it comes to system functionality, ensuring compliance with state specific
laws and policies, and prioritizing items based on available resources
internally and within the consortium.
According to officials, during the modernization, Maine faced challenges
with its contractor. Specifically, the officials noted that the contractor did
not always provide enough staffing resources with significant knowledge
5The ReEmployUSA consortium, originally known as the MRM Consortium, was founded
in 2013 by Mississippi, Maine, and Rhode Island. Connecticut and Oklahoma joined in
later years.
Page 59 GAO-23-105478 Unemployment Insurance
Appendix III: Summaries of Eight Selected
States’ Modernization Efforts
of the UI system, which led to project delays. In addition, they noted that
contractor staff turnover also contributed to project delays.
Nevertheless, Maine completed its UI modernization project in 2018 and
its system is in the operations and maintenance phase. Bureau of
Unemployment Compensation officials described some of the features of
the modernized system, which are:
• additional self-service claimant functionality, including automated
claim filing and processing, accounts for claimants to view and update
information, and the ability to upload documents for different
identification verification;
• the ability to integrate the pandemic UI programs into one system as
opposed to having separate stand-alone systems;
• improved data access across the system; and
• a new employer portal that provides the ability to electronically file
their quarterly wage reports and make contributions (previously, this
system was predominately paper-based and required manual data
entry by UI staff).
Maine officials said that, during the COVID-19 pandemic, the state’s UI
systems were stable and able to handle the unprecedented workload
increase. Officials told us the claim volume in the first month of the
pandemic was almost 80,000 claims compared to an average of 2,400
claims in the months prior to the pandemic.
However, according to officials, at the beginning of the pandemic, Maine
experienced issues with the timeliness of payments due to several other
factors. First, there were too few staff to handle the claim volume, so the
state had to hire and train additional staff. A second factor was that many
individuals were filing for UI benefits for the first time and were not familiar
with UI and the related technology for filing claims. According to Maine
officials, this required more intensive services to assist applicants, which
were hampered initially by the lack of available, experienced staff. The
third factor Maine officials cited was the need to develop programming
code for the pandemic UI programs, which did not resemble the
programming code for regular UI.
Page 60 GAO-23-105478 Unemployment Insurance
Appendix III: Summaries of Eight Selected
States’ Modernization Efforts
Nevada According to Nevada officials, including the Administrator of the
Employment Security Division and the Deputy UI Administrator, the state
has a UI modernization effort underway to replace its UI benefits,
State: Nevada
appeals, and tax systems, which it previously modernized between 2010
System age (approximately): 8-10 years
(benefits, appeals, and tax) and 2015. Nevada’s Unemployment Insurance Support Services Program
Modernization status: In progress Chief noted that, although it was beneficial to have new functionality and
Modernization phase: Requirements automated processes after the 2015 modernization effort, there have
analysis been multiple challenges with the current system. For example, the
Initiation year: 2021
official stated that there is no continuing product support by the contractor
Completion: 2025 (estimated)
for the tax system, which the contractor originally developed for the
Reported cost: $72 million (estimated)
banking sector and not UI. As a result, the system has been difficult to
Examples of the role of contracting in
Nevada’s unemployment insurance manage and maintain.
modernization efforts include
• contracting with the National Association The Program Chief also noted that, although the system reporting
of State Workforce Agencies to provide
technical support during the development features are functional, they have been highly inaccurate. As a result, the
of the state’s request for proposals for the office has had to rely on ad hoc queries for information. The official added
ongoing modernization project; that there were also deficiencies in how the benefits and tax systems
• using a contractor for the management of
its ongoing modernization project, as well
work together and it was hard to get those deficiencies fixed by the
as the development and implementation contractor because there was no warranty period. Further, the
of the modernized system; and combination of the existing system issues and retaining employees with
• using contractors to provide other the skills to maintain system functionality has been difficult for the
services, such as the state’s case
management system, field auditing department.
software, and identity verification service.
Source: GAO analysis of state information and interviews with
state officials, as of February 2023. | GAO-23-105478
When the COVID-19 pandemic began, Employment Security Division
officials stated that Nevada’s benefits, tax, and appeals systems could not
handle the increased workload. Officials reported the average number of
claims before the pandemic was approximately 20,000. During the first
week of the pandemic, officials stated that there were approximately
350,000 claims per week which caused the benefits and tax systems to
crash. Officials added that the programming required to add the pandemic
UI programs was a burden on the system as it was not readily able to
process the changes, which led to claimants having difficulties when filing
claims.
In 2021, Nevada officials decided to modernize their UI systems due, in
part, to a backlog of over 1,950 system defects and the systems
performance issues experience during the pandemic. Officials stated the
goals of the 2021 modernization effort are to:
• increase the capacity, productivity, and efficiency of the system with
accurate information and reporting readily available for the accounting
department;
Page 61 GAO-23-105478 Unemployment Insurance
Appendix III: Summaries of Eight Selected
States’ Modernization Efforts
• reduce the amount of manual manipulation required by staff to import
data from other systems into the UI systems to decrease the amount
of work for staff;
• develop a user friendly front-end to make the customer’s experience
better;
• improve the ability to handle an increased workload (e.g., due to a
pandemic); and
• be readily able to incorporate any future emergency UI programs
similar to the Pandemic Unemployment Assistance program.
Nevada is in the requirements analysis phase of its modernization project.
The officials noted that the state obtained assistance from NASWA’s IT
Support Center (ITSC) to help draft the request for proposal, which it
released in February 2022. 6 In December 2022, Nevada announced that
the state had awarded the contract for the modernization. As of February
2023, Nevada officials told us that project managers from the contractor
have relocated to Nevada to work closely with Nevada’s Department of
Employment, Training, and Rehabilitation on gathering background
information needed for the project.
6ITSC was created in 1994 as a partnership between the DOL and the Maryland
Department of Labor, Licensing, and Regulation to support state UI IT initiatives. DOL
supports ITSC through grants to the Maryland agency, and ITSC’s Steering Committee
includes representatives from the Employment and Training Administration.
Page 62 GAO-23-105478 Unemployment Insurance
Appendix III: Summaries of Eight Selected
States’ Modernization Efforts
Ohio Ohio officials, including the Assistant Deputy Director for the Office of
Unemployment Insurance Operations and the Deputy Director of IT
Security Risk and Compliance for the Office of Information Services, told
State: Ohio
System age (approximately): 20 years
us the state has a UI modernization effort underway to replace its
(benefits and appeals); 2 years (tax) benefits, appeals, and tax, systems. According to officials, Ohio’s
Modernization status: In progress modernization effort is for the replacement of the state’s benefits and
Modernization phase: Mixed – planning and appeals systems that are about 20 years old, and the state’s prior tax
operations and maintenance
system that went live in 2011. 7
Initiation year: 2018
Completion: Not yet determined
Reported cost: Total cost not yet determined;
Ohio officials said, in 2018, the state contracted with a vendor to help
$36 million for tax system modernization develop, host, and maintain a new integrated UI system in the cloud,
(actual) known as the State of Ohio Unemployment Resource for Claimants and
Examples of the role of contracting in Employers (SOURCE). The Assistant Deputy Director for the Office of
Ohio’s unemployment insurance (UI)
modernization efforts include Unemployment Insurance Operations noted that SOURCE is expected to
• contracting with a vendor to provide be a fully integrated, modular, and configurable system for Ohio’s UI
consulting and project management benefits, appeals, and tax functions.
during the modernization effort;
• contracting with a vendor to provide,
manage, and host the modernized tax When completed, the SOURCE system is expected to provide features,
system; such as
• contracting with a vendor to develop,
host, maintain, and support the • a customer relationship management solution maintained by state
modernized UI system in the cloud; and
• using contractors to provide other
staff,
services, such as multi-factor
authentication, chatbot and customer
• a chatbot to provide guidance to customers, 8
relationship management software, fraud
detection, and identity verification service. • automated weekly filing and checking of claim status for benefits
Source: GAO analysis of state information and interviews with using a virtual voice agent,
state officials, as of February 2023. | GAO-23-105478
• intelligent ID proofing,
• multifactor authentication, 9 and
• fraud analytics and dashboards for data analytics.
Although Ohio had a modernization effort underway when the COVID-19
pandemic began in 2020, it was not fully completed. Officials said Ohio’s
7Ohio completed a modernization of its 2011 tax system in 2021 but, as of February 2023,
was still in the process of modernizing its benefits and appeals systems.
8A chatbot is a program that interacts directly in a free-form conversation with users via
natural language processing.
9Multifactor authentication in computer networks involves using two or more factors to
ascertain authentication. Factors include something you know (password or personal
identification number), something you have (cryptographic identification device or token),
or something you are (biometric).
Page 63 GAO-23-105478 Unemployment Insurance
Appendix III: Summaries of Eight Selected
States’ Modernization Efforts
legacy UI systems experienced performance issues at the beginning of
the pandemic. According to the Assistant Deputy Director for the Office of
Unemployment Insurance Operations, Ohio received an unprecedented
number of claims, which were more than the state had received in the
prior 2 years combined. For example, Ohio received 28,000 claims in the
month prior to the pandemic and 577,000 in the first month of the
pandemic. As a result, Ohio staff struggled for the first 2 months of the
pandemic to keep up with the volume of claims and to keep the systems
up and running.
Ohio officials told us that the state was able to stabilize the UI systems
and address the backlog of requests after a few months. However, the
Deputy Director of IT Security Risk and Compliance added that, even
after the state fine-tuned, optimized, and expanded the system to better
enable people to file claims, there were still problems during peak times.
Ohio officials told us that the state launched the modernized tax
component of SOURCE in December 2021 and the system is currently in
the operations and maintenance phase. In January 2023, the state
decided to terminate the contract for the development of the benefits and
appeals components of the SOURCE system due to the federal
indictment of two former employees who worked for the modernization
contractor. 10 The officials added that, as of February 2023, the state is
determining next steps for the modernization of its benefits and appeals
systems.
10In August 2022, two former employees of the contractor were indicted in West Virginia
federal court for allegedly stealing source code and making false statements to
investigators.
Page 64 GAO-23-105478 Unemployment Insurance
Appendix III: Summaries of Eight Selected
States’ Modernization Efforts
Pennsylvania According to Pennsylvania officials, including the Directors of the Office of
Unemployment Compensation Benefits Policy and the Office of
Unemployment Compensation Service Centers, the state’s existing tax
State: Pennsylvania
system was developed internally and was launched in 2011. The tax
System age (approximately): 2 years
(benefits and appeals); 12 years (tax) system is currently in the operations and maintenance phase.
Modernization status: Complete Pennsylvania officials told us that the project to modernize its benefits
Modernization phase: Operations and and appeals systems, known as BenMod, began in 2015. According to
maintenance state documentation, at the time, those systems consisted of multiple IT
Initiation year: 2015 applications—written in different computer languages and located on
Completion: 2021 (actual)
different hardware platforms—working together to perform the
Reported cost: $32 million (actual)
unemployment compensation functions.
Examples of the role of contracting in
Pennsylvania’s unemployment insurance
modernization efforts include According to Pennsylvania documentation, the vision for the BenMod
• contracting with the National Association project was to implement an unemployment compensation benefits
of State Workforce Agencies to provide
technical support before going live with
system that provides excellent customer service, quality, and operational
the benefits and appeals systems; efficiencies, and is sustainable and adaptable to the future. However, the
• obtaining contract support for the Director of Unemployment Compensation Benefits Policy told us the state
management of its modernization project, faced a series of challenges in acquiring the new system. For example,
as well testing and technical consulting for
the project; the official stated that:
• contracting with a vendor for the
development and maintenance of its • The modernization contractor originally developed the system for
benefits and appeals system; and
states smaller than Pennsylvania, which had different processes
• using contractors to provide other
services, such as call center services, (such as the manual review of every claim). As a result, the official
field auditing software, and identity noted that Pennsylvania was still finding changes that it needed to
verification service. make to the system.
Source: GAO analysis of state information and interviews with
state officials, as of February 2023. | GAO-23-105478
• The modernization contractor did not include customer feedback
when it designed the UI benefits and appeals system. As a result, the
official noted that the benefits and appeals systems were not
customer-centric and were not designed around how the state’s
customers would want to interact with the technology.
• The project management contractor did not have prior project
experience related to UI benefits and appeals. As a result, the official
noted that the contractor disregarded things that state officials
considered critical.
• The project management and modernization contractors did not
become sufficiently familiar with Pennsylvania’s laws and regulations
and this made it difficult to move forward with the project.
The Director of Unemployment Compensation Benefits Policy stated that,
when the COVID-19 pandemic began, Pennsylvania was in the process
of modernizing its benefits and appeals systems that were still running on
the mainframe. Pennsylvania officials said they experienced some issues
Page 65 GAO-23-105478 Unemployment Insurance
Appendix III: Summaries of Eight Selected
States’ Modernization Efforts
with claims being processed in a timely manner, but the state’s
mainframe system performed fine during high volumes. Pennsylvania
officials said the state’s tax system did not experience any disruptions.
Pennsylvania officials said that the state fully implemented its integrated
benefits and appeals system in 2021. According to the officials,
Pennsylvania’s modernized benefits and appeals systems includes the
ability to, among other things:
• implement identity verification solutions,
• replace manual paper-based processes with electronic and
automated processes,
• search for claimants using some or all of key pieces information, and
• train staff on the new system in an easier manner.
According to officials, the system is in the operations and maintenance
phase.
Page 66 GAO-23-105478 Unemployment Insurance
Appendix III: Summaries of Eight Selected
States’ Modernization Efforts
Tennessee Tennessee officials, including the Assistant Commissioner for the
Employment Security Division and the Assistant Administrator for
Unemployment Insurance, said the state has a modernization effort
State: Tennessee
System age (approximately): 7 years
underway to replace its UI systems. According to officials, the benefits
(benefits and appeals); 40 years (tax) and appeals system, which was previously modernized in 2016, and the
Modernization status: In progress roughly 40-year-old tax system are to be integrated into one system.
Modernization phase: Mixed – requirements
analysis, design, and development
The Assistant Administrator for Unemployment Insurance noted there
Initiation year: 2021
have been challenges with the current benefits system. For example, the
Completion: 2025
official stated there are system deficiencies, functionality issues, and
Reported cost: Total cost not yet determined;
$32 million for benefits and appeals systems limited contractor support for the product. As a result, it is difficult to
modernization (estimated) enhance the system due to its instability. Tennessee officials added that
Examples of the role of contracting in the combination of the existing system issues and retaining employees
Tennessee’s unemployment insurance
modernization efforts include with the skills to maintain system functionality has been difficult for the
• contracting with a vendor to provide a state’s Labor Workforce Division.
needs assessment, roadmap, and
strategy for the modernization project, as
well as technical support during the
Tennessee officials told us that, early in the COVID-19 pandemic, the
development of the request for proposals state had issues scaling the UI system to meet the increase in demand
for the modernization effort; from claimants filing for unemployment benefits, which led to system
• planning to obtain contract support for the crashes and the website timing out. The Assistant Administrator for
development and implementation of the
modernized system; and Unemployment Insurance noted that Tennessee had two state-wide
• using contractors to provide other disasters declared immediately before and at the beginning of the
services, such as the state’s call center, pandemic, which placed additional burden on the systems. The official
fraud detection, and identity verification
service. reported that prior to the pandemic there were roughly 15,000 to 16,000
Source: GAO analysis of state information and interviews with claimants a week. According to officials, at the start of the pandemic
state officials, as of February 2023. | GAO-23-105478
Tennessee received between a few hundred thousand to 1 million claims.
The Assistant Administrator for Unemployment Insurance added that the
tax system performed well during that time since it did not experience the
same workload increase that the benefits system had. However,
according to Tennessee officials, there was difficulty with the vendor
contracted to implement the Pandemic Unemployment Assistance and
Federal Pandemic Unemployment Compensation programs because the
contractor-developed system failed to keep the programs separate and
the system did not know which program to use based on a claimant’s
situation.
Tennessee officials said that, because of the current system’s
performance issues, both before and during the pandemic, the state
believes continued modernization is necessary for future success.
According to the Tennessee’s modernization strategy and roadmap for
the project, the goals for the new UI system are to:
Page 67 GAO-23-105478 Unemployment Insurance
Appendix III: Summaries of Eight Selected
States’ Modernization Efforts
• align the system with business and stakeholder needs by reducing
manual processes and simplifying and integrating workflows to
increase efficiency and improve the stakeholder and customer
experience;
• develop a system that helps the state to comply with state legislation
and is flexible enough to easily adapt to evolving federal and state
requirements; and
• align the system with the state’s technology direction, decrease
maintenance costs, and improve system performance and stability.
Additional benefits of the modernization planned include a reduction in
manual and paper-based processes and improved access to data that
can be leveraged to automate key workflows and tasks.
Tennessee officials stated the modernization project is split into two
separate projects. The benefits and appeals modernization is in the
requirements analysis, design, and development phases. The
modernization project for the tax system is in the requirements analysis
phase.
In February 2023, officials stated that, regarding the benefits and appeals
system, Tennessee started the modernization in September 2022 and
intends to launch the new system in early 2024. Regarding the tax
system, the officials stated that the request for proposal for modernization
of the system was released in December 2022 and they expect to award
the contract in late April 2023. The officials added the state was planning
to launch the new tax system by summer 2025.
Page 68 GAO-23-105478 Unemployment Insurance
Appendix III: Summaries of Eight Selected
States’ Modernization Efforts
Texas According to Texas officials, including the Contract Project Manager for
the Texas Workforce Commission and the Director of Applications
State: Texas
Development and Maintenance for the IT Division, the state has a
System age (approximately): 35 years
modernization effort underway to replace its UI benefits, appeals, and tax
(benefits, appeals, and tax) systems built in the 1980s and 1990s. The officials said Texas has been
Modernization status: In progress adding functionality to its UI systems for over 35 years, but had not fully
Modernization phase: Mixed – requirements modernized its systems. For example, the officials told us that an external
analysis, design, and testing
facing self-service system was developed in the early 2000s.
Initiation year: 2018
Completion: 2024 (estimated)
The Division Director for Unemployment Insurance stated that, in 2012,
Reported cost: $76 million (estimated)
Examples of the role of contracting in
Texas began a project to improve the user interface of the benefits
Texas’ unemployment insurance system and to modernize the tax system. However, the director added
modernization efforts include that the project schedule for the benefits system experienced delays, so
• contracting with the National Association Texas decided to cancel that project along with the tax system
of State Workforce Agencies to gather
requirements for the modernization modernization project that was occurring at the same time.
project;
• planning to obtain contract support for the Texas officials said its current UI systems no longer have the necessary
management of its ongoing modernization
project, as well as to provide independent performance or agility to adapt and evolve to the fast-paced changes
verification and validation services; and required to support a modern workforce of over 13 million. The officials
• using contractors to provide other noted that, as a result, the state has had to use a series of workarounds,
services, such as field auditing software,
data center resources and maintenance,
including manual databases, spreadsheets, and desk procedures, to keep
chatbot software, fraud detection, and up with changes. According to the officials, modifying and enhancing the
identity verification service. current system is problematic and requires extensive programming to
Source: GAO analysis of state information and interviews with
state officials, as of February 2023. | GAO-23-105478 incorporate changes.
In addition, officials told us that continually updating the UI applications
because of mandated legislative and DOL changes have made the
system difficult to maintain from a programming perspective. The Division
Director for Unemployment Insurance added that it has become
increasingly more difficult to find staff who can maintain the legacy
system. Texas officials said that the system does not meet all the
accessibility requirements, is not customer-centric, and does not offer the
modern features that customers expect, such as mobile applications.
As a result, in 2018, Texas officials decided to modernize their UI
systems to make one cohesive system. According to Texas
documentation, the goals of the modernization project are to:
• increase customer pathways to services by having flexible technology
that allows customers to access information and services when,
where, and how the customer needs it;
Page 69 GAO-23-105478 Unemployment Insurance
Appendix III: Summaries of Eight Selected
States’ Modernization Efforts
• integrate and align the systems and services so the systems work
together to eliminate duplication, provide flexibility and agility for
change management, streamline delivery of services, and eliminate
the need to support multiple applications and platforms; and
• equip Texas Workforce Commission staff and partners with
appropriate technology so they have the right tools to provide or
oversee delivery of excellent customer service, pay benefits
accurately, and prevent improper payments.
Although Texas had a modernization effort underway when the COVID-19
pandemic began in 2020, it was not fully completed. Texas officials told
us that, during the pandemic, the backend mainframe performed very
well, but there were some challenges with the external facing web-based
applications. The Deputy Division Director for the Unemployment
Insurance Division noted that it became a challenge to keep the systems
operational and implement changes from DOL at the same time. Officials
stated that, prior to the pandemic Texas had 13,000 claims a week and
about 60,000 a month. Officials added that, in the first 6 weeks of the
pandemic, Texas had 1.5 million claims and there was not enough
system capacity to serve claimants immediately; however, they kept
claimants informed through proactive messaging.
Officials stated that, in January 2021, Texas signed a contract with a
vendor for the modernization project, which they expect to complete in
2024. As of February 2023, Texas officials stated they are in the
requirements analysis, design, and testing phases of their modernization
project.
Page 70 GAO-23-105478 Unemployment Insurance
Appendix IV: Comments from the
Appendix IV: Comments from the Department
of Labor
Department of Labor
Page 71 GAO-23-105478 Unemployment Insurance
Appendix IV: Comments from the Department
of Labor
Page 72 GAO-23-105478 Unemployment Insurance
Appendix IV: Comments from the Department
of Labor
Page 73 GAO-23-105478 Unemployment Insurance
Appendix V: GAO Contact and Staff
Appendix V: GAO Contact and Staff
Acknowledgments
Acknowledgments
Carol C. Harris at (202) 512-4456 or HarrisCC@gao.gov
GAO Contact
In addition to the contact named above, the following staff made key
Staff contributions to this report: Jon Ticehurst (Assistant Director), Lee Hinga
Acknowledgments (Analyst-in-Charge), Brandon Berney, Chris Businsky, Rebecca Eyler,
Samantha Fowler, Lisa Maine, and Drew Yarbrough.
Page 74 GAO-23-105478 Unemployment Insurance
The Government Accountability Office, the audit, evaluation, and investigative
GAO’s Mission arm of Congress, exists to support Congress in meeting its constitutional
responsibilities and to help improve the performance and accountability of the
federal government for the American people. GAO examines the use of public
funds; evaluates federal programs and policies; and provides analyses,
recommendations, and other assistance to help Congress make informed
oversight, policy, and funding decisions. GAO’s commitment to good government
is reflected in its core values of accountability, integrity, and reliability.
The fastest and easiest way to obtain copies of GAO documents at no cost is
Obtaining Copies of through our website. Each weekday afternoon, GAO posts on its website newly
GAO Reports and released reports, testimony, and correspondence. You can also subscribe to
GAO’s email updates to receive notification of newly posted products.
Testimony
Order by Phone The price of each GAO publication reflects GAO’s actual cost of production and
distribution and depends on the number of pages in the publication and whether
the publication is printed in color or black and white. Pricing and ordering
information is posted on GAO’s website, https://www.gao.gov/ordering.htm.
Place orders by calling (202) 512-6000, toll free (866) 801-7077, or
TDD (202) 512-2537.
Orders may be paid for using American Express, Discover Card, MasterCard,
Visa, check, or money order. Call for additional information.
Connect with GAO on Facebook, Flickr, Twitter, and YouTube.
Connect with GAO Subscribe to our RSS Feeds or Email Updates. Listen to our Podcasts.
Visit GAO on the web at https://www.gao.gov.
Contact FraudNet:
To Report Fraud,
Website: https://www.gao.gov/about/what-gao-does/fraudnet
Waste, and Abuse in
Automated answering system: (800) 424-5454 or (202) 512-7700
Federal Programs
A. Nicole Clowers, Managing Director, ClowersA@gao.gov, (202) 512-4400, U.S.
Congressional Government Accountability Office, 441 G Street NW, Room 7125, Washington,
Relations DC 20548
Chuck Young, Managing Director, youngc1@gao.gov, (202) 512-4800
Public Affairs U.S. Government Accountability Office, 441 G Street NW, Room 7149
Washington, DC 20548
Stephen J. Sanford, Managing Director, spel@gao.gov, (202) 512-4707
Strategic Planning and U.S. Government Accountability Office, 441 G Street NW, Room 7814,
External Liaison Washington, DC 20548
Please Print on Recycled Paper.
File and source
- File
- gao-23-105478.pdf
- Size
- 2,804,704 bytes
- SHA-256
- b23b154f13c564db64af8e4ba25a89a792ff0cc395571a54cc578ea709dbc674
- Our copy
- gao-23-105478.pdf
- Original
- www.gao.gov