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State of Illinois
Office of the Auditor General
Performance Audit of the
IDES Unemployment
Insurance Programs
July 26, 2023
Frank J. Mautino
Auditor General
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Springfield, IL 62703
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OR
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http://www.auditor.illinois.gov
To the Legislative Audit Commission, the Speaker
and Minority Leader of the House of Representatives,
the President and Minority Leader of the Senate, the
members of the General Assembly, and the
Governor:
This is our report of the performance audit of the unemployment programs administered
by the Illinois Department of Employment Security during the period of March 1, 2020,
and September 6, 2021.
The audit was conducted pursuant to Legislative Audit Commission Resolution Number
158. This audit was conducted in accordance with generally accepted government
auditing standards and the audit standards promulgated by the Office of the Auditor
General at 74 Ill. Adm. Code 420.310.
The audit report is transmitted in conformance with Sections 3-14 and 3-15 of the Illinois
State Auditing Act.
FRANK J. MAUTINO
Auditor General
Springfield, Illinois
July 2023
July 26, 2023
OFFICE OF THE Performance Audit
AUDITOR GENERAL Report Highlights
Frank J. Mautino Auditor General www.auditor.illinois.gov
Performance Audit of the
IDES Unemployment Insurance Programs
Background: Key Findings:
On September 1, 2021, the Legislative Overpayments (which include fraud, non-fraud, and identity theft) were
Audit Commission adopted Resolution an issue in both the regular UI and PUA programs. IDES reported
Number 158 requiring a performance overpayments for FY20 to FY22 that totaled $5.24 billion; regular UI
audit of the unemployment programs accounted for $2.04 billion and PUA accounted for $3.20 billion.
administered by the Illinois Considering gross benefits associated with regular UI claims were 2.5 times
Department of Employment Security higher than gross benefits associated with PUA claims, it shows the
during the period of March 1, 2020, to magnitude of fraud experienced in the PUA program. IDES noted stopped
September 6, 2021. The Resolution or recovered payments of $150.36 million and $361.34 million for the
contained eight determinations. regular UI and PUA programs respectively.
Unemployment Insurance (UI) is a Many decisions made during the pandemic were intended to decrease or
joint state-federal program that eliminate delays and prioritize paying claims as soon as possible. Several of
provides cash benefits to eligible IDES’ defenses against fraud could not handle the exponential increase in
unemployed individuals. In addition claims. Claimants were unable to register for claims since they were
to federal and State laws already in required to pass these cross-matches in order to file. Beginning in March
place, there were several federal laws 2020, IDES suspended some routine identity cross-matches performed on
enacted in response to the pandemic. all regular UI claims filed because the cross-matches required time to run
The Coronavirus Aid, Relief, and and constricted the processing system severely. These cross-matches were
Economic Security Act, the temporarily suspended and/or processed offline. This allowed IDES to
Consolidated Appropriations Act, better handle the increase in claims processing traffic; however, this left the
2021, and a presidential memorandum, unemployment programs more susceptible to fraud.
created additional unemployment
Timely payment of benefits and preventing fraud are competing
programs for individuals who were not
concepts. Preventing fraud, especially in new programs with evolving
traditionally eligible for
guidance and guidelines, likely would require additional processing time and
unemployment benefits, such as those
a possible delay in benefit distribution to claimants. Conversely, paying
who are self-employed or contract-
claims quickly, especially when certain cross-matches and controls were
based employees. The additional
suspended, increased IDES’ risk of making improper payments.
programs included Pandemic
Unemployment Assistance (PUA), IDES made large payments of backdated benefits while controls were
Federal Pandemic Unemployment suspended which could have contributed to large overpayments and losses
Compensation (FPUC), Pandemic due to fraud and identity theft. Claims were sometimes filed and paid within
Emergency Unemployment a matter of days and then fraudulent activity was subsequently detected.
Compensation (PEUC), Lost Wages Auditors found 158,054 PUA claimants that received a single payment of
Assistance (LWA), and Mixed Earner $10,000 or more (totaling more than $2.3 billion in benefits) within 30 days
Unemployment Compensation or less of the date of application. It is important to note that while these are
(MEUC). The Department was not necessarily fraudulent payments, given the increased risk of identity theft
responsible for implementing the and the size of these payments, it would be a good practice to take additional
programs and distributing benefits. measures to ensure that these payments are issued to eligible claimants.
IDES data shows payments were made to deceased individuals and
incarcerated individuals. The data showed, for both regular UI and PUA combined, a total of 481 deceased
individuals received 10,527 payments totaling $6.0 million. In addition, 3,448 incarcerated individuals received
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92,811 payments totaling $40.5 million. Testing these cases showed that some overpayments had already been
identified as fraud. However, some of the overpayment figures excluded payments made before January 2021 and
therefore understated the overpayment.
The addition of new federal laws and unemployment programs in response to the pandemic resulted in additional
program complexity and constantly changing guidance. The US Department of Labor (DOL) issued official guidance
referred to as Unemployment Insurance Program Letters (UIPLs). Auditors reviewed 72 UIPLs related to the audit
determinations. In addition, the individual UIPLs were constantly being updated and changed. For example, UIPL
16-20 was first issued April 5, 2020; however, there were 6 subsequent changes issued from April 27, 2020, to
September 3, 2021.
While the pandemic created an unprecedented increase in unemployment claims, and likely levels that could not have
been anticipated, the concept of planning for massive economic downturns remains the same. There was a lack of
planning prior to the pandemic that contributed to the delays experienced by unemployment claimants:
- IDES was not prepared to quickly increase staffing, which created delays in answering phone calls and processing
claims. Staffing issues were compounded by retirements and staff being forced to work from home due to the
pandemic.
- PUA benefits could not be processed until a new PUA payment system was in place.
- IDES’ website and the IBIS system crashed due to overload.
- Claimants with missing or hijacked payments experienced substantial delays in getting their payments reissued
due to an inadequate procedure for processing and handling payment tracer forms, especially in times of high
demand. Auditors found that it took IDES, on average, 198 days to reissue hijacked regular UI payments and 445
days for hijacked PUA payments.
Auditors tested 50 regular UI claims and 50 PUA claims and noted the following about timeliness of application
processing:
- On average, the 50 IBIS claims sampled took 14 days from the application date to the date the finding was sent to
the applicant. For approved claims that received at least one payment, it took approximately 16 days from the
date of application to the date the first payment was made.
- On average, the 50 PUA claims sampled took 38 days from the application date to the date the finding was sent to
the applicant. For the 25 claims in our sample that received at least one payment, it took approximately 15 days
from the application date to the date the first payment was made.
The Department entered into eight contracts including 29 amendments during the audit period for services and
software related to administering the unemployment insurance and PUA programs. Pursuant to a Disaster
Proclamation issued by the Governor, these contracts were exempt from bidding and the provisions of the Illinois
Procurement Code. The eight contracts initially totaled $33.5 million. However, with subsequent amendments, the
eight contracts eventually totaled $226.4 million, $160.5 million of which had been expended through January 2023.
Nine of the 29 amendments were signed by IDES between 2 days and 45 days after the effective date of the
amendment.
The US Department of Labor (DOL) introduced additional cross-matches to combat fraud in October 2021 and
February 2022 that IDES is not yet utilizing (Prisoner Update Processing System and Bank Account Verification
service respectively).
The issues experienced at IDES were not unique to Illinois. A Pandemic Response Accountability Committee
(PRAC) report released in December 2021 noted states experienced significant challenges in effectively providing
their states with unemployment benefits. The report noted four common insights from unemployment insurance
findings identified across 16 State Auditor Offices (including Illinois):
- unemployment insurance workloads surged for states;
- the claims surge exploited internal control weaknesses;
- uncommon and varying fraud schemes began to occur as the amount of federal funding expanded; and
- State Workforce Agencies experienced information technology system challenges.
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Key Recommendations:
The audit report contains seven recommendations directed to the Illinois Department of Employment Security including:
The Illinois Department of Employment Security should develop a Recession Plan, including lessons learned during
the COVID-19 pandemic, for future reference in times of rapidly increasing claim volumes.
The Illinois Department of Employment Security should update its procedure for handling payment tracer affidavit
forms to allow the Department to better handle a large influx of forms. This update should include a process for
tracking the submission of payment tracer affidavit forms. If possible, the Department should explore best practices
in this area to determine if more efficient methods and tools are available.
The Illinois Department of Employment Security should research and implement further cross-match and fraud
prevention tools that may be available. The Department should specifically consider implementing the Prisoner
Update Processing System data match and the Bank Account Verification service. These tools would provide the
Department with more opportunities to identify and prevent payment of fraudulent claims.
The Illinois Department of Employment Security should seek to identify and recoup as appropriate any payments for
applicants who received inappropriate benefits. In addition, the Department should specifically target any payments
made to applicants who were deceased or ineligible due to incarceration. IDES should pay special attention to
overpayment balances that only considered January 2021 moving forward.
The Illinois Department of Employment Security should consider instituting additional controls/holds on payments
exceeding a determined amount to minimize loss from fraud when issuing payments for backdated claims and/or large
benefit payment amounts.
This performance audit was conducted by the staff of the Office of the Auditor General.
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REPORT DIGEST – IDES UNEMPLOYMENT INSURANCE PROGRAMS
Report Digest
On September 1, 2021, the Legislative Audit Commission adopted Resolution
Number 158 requiring a performance audit of the unemployment programs
administered by the Illinois Department of Employment Security during the
period of March 1, 2020, to September 6, 2021. The Resolution contained eight
determinations. Our assessment of these determinations is shown in Digest
Exhibit 1. (pages 1-2)
Digest Exhibit 1
ASSESSMENT OF AUDIT DETERMINATIONS
Determination from Audit Resolution Auditor Assessment
A review of the application and review processes Applications for regular Unemployment
and the payment of benefits to individuals Insurance (UI) and PUA followed a similar
focusing on any fraud or inefficiencies which could process, but were accomplished through two
be eliminated to contain costs and improve the different computer systems. Illinois contracted
delivery of benefits to eligible individuals. with Deloitte to develop a system to process
PUA payments. Both systems have various
cross-matches in place to verify claimant identity
and detect fraud. However, some of those
cross-matches were suspended during the
pandemic in an attempt to process payments
more quickly, which increased the risk of making
improper payments. In addition, auditors noted
issuing payments quickly for backdated claims
and/or large benefit payment amounts increased
the opportunities for large overpayments and
losses due to fraud and identity theft, especially
when controls are suspended and the threat of
identity theft is high. (pages 27-32, 60-85, 95-
102)
To the extent feasible, a detailed account of the Overpayments (which include fraud, non-fraud,
funds allegedly disbursed to ineligible and/or and identity theft) were an issue in both the
fraudulent claimants. regular UI and PUA programs. IDES reported
overpayments for FY20-FY22 that totaled $5.24
billion; regular UI accounted for $2.04 billion and
PUA accounted for $3.20 billion. The regular UI
program overpayments include FPUC, PEUC,
LWA, Extended Benefits, and MEUC, while the
PUA program overpayments include FPUC and
LWA overpayments. Considering gross benefits
associated with regular UI claims were 2.5 times
higher than gross benefits associated with PUA
claims, it shows the magnitude of fraud
experienced in the PUA program. IDES noted
stopped or recovered payments of $150.36
million and $361.34 million for the regular UI and
PUA programs respectively. (pages 60, 78-85)
The types of unemployment fraud schemes the IDES experienced three fraud schemes from
Illinois Department of Employment Security has March 1, 2020, through September 6, 2021:
experienced and what steps and procedures it has identity theft, hijacked payments, and fictitious
Illinois Office of the Auditor General
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REPORT DIGEST – IDES UNEMPLOYMENT INSURANCE PROGRAMS
taken to detect and respond to fraudulent employers. To respond to identity theft, among
unemployment claims and whether it has other things, IDES: implemented a fraud
cooperated with the Illinois Attorney General or analytics report and a database of items IDES
federal authorities to detect, counter, and had deemed fraudulent; contracted with Insight
prosecute potentially fraudulent cases. Global to assist with identity theft calls; and
contracted with Pondera to perform detailed
fraud analytics. To respond to hijacked
payments, IDES improvised a process to
reissue the payments. Auditors found that it
took IDES, on average, 198 days to reissue
regular UI hijacked payments and 445 days for
PUA hijacked payments. IDES investigated
allegations of fictitious employers as time
allowed. IDES did not make any referrals to the
Illinois Attorney General during the audit period,
but it did work with the US Department of
Labor’s Office of the Inspector General. (pages
60-77)
Whether the Illinois Department of Employment IDES did not comply with all state and federal
Security has complied with all state and federal statutory and administrative requirements for
statutory and administrative requirements for processing and auditing claims. IDES did not
processing and auditing unemployment claims. implement one of the tools strongly
recommended in May 2020 by the US
Department of Labor, until September 2021.
Other required and recommended cross-
matches were temporarily suspended early in
the pandemic. In addition, IDES failed to file 26
outstanding Employment and Training
Administration (ETA) reports required by the US
Department of Labor. Furthermore, reporting to
the US Department of Labor showed Illinois did
not meet first payment promptness standards in
2021 and 2022. (pages 73-77, 82-87)
An examination of the Illinois Department of IDES did not implement one of the tools that
Employment Security’s decision not to implement was strongly recommended (Integrity Data Hub
additional fraud-prevention tools in April 2020 as tools) in May 2020 by the US Department of
recommended by the federal government and a Labor for more than a year. IDES chose to not
report on whether the state has, since that time, utilize the Integrity Data Hub tools because
come into compliance with federal other IT-related projects were deemed to be of
recommendations. greater urgency during the pandemic. IDES
began utilizing the Integrity Data Hub tools in
September 2021. (pages 73-77)
What factors caused and continue to cause delays IDES experienced technology delays including
in the Illinois Department of Employment website issues, the regular UI processing
Security’s processing of unemployment claims, system crashed due to overload, and having to
looking particularly at administrative decisions, contract for a system to process and pay PUA
technology, and staffing, and what steps the claims. An inability to quickly increase staffing
Illinois Department of Employment Security has led to delays in answering phone calls,
taken to alleviate these delays. processing claims, and reissuing payments for
hijacked payments. IDES did not have a plan in
place for responding to recessions and potential
surges in claims, which contributed to delays.
(pages 54-59)
Illinois Office of the Auditor General
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REPORT DIGEST – IDES UNEMPLOYMENT INSURANCE PROGRAMS
What third-party contractors did the Illinois The Department entered into eight contracts
Department of Employment Security utilize during including 29 amendments during the audit
this time period and were any of these contracts period for services and software related to
no-bid contracts; did a third-party contractor administering the unemployment insurance and
calculate weekly benefit amounts for Pandemic PUA programs. Pursuant to a Disaster
Unemployment Assistance claimants and, if so, Proclamation issued by the Governor, these
were there any procedures to verify the accuracy contracts were exempt from bidding and the
of their calculations; did third-party contractors provisions of the Illinois Procurement Code.
meet the performance measure established by the The eight contracts initially totaled $33.5 million.
Illinois Department of Employment Security prior However, with subsequent amendments, the
to the issuance of the contracts. eight contracts eventually totaled $226.4 million,
$160.5 million of which had been expended
through January 2023. Nine of the 29
amendments were signed by IDES between 2
days and 45 days after the effective date of the
amendment.
Third party contractors input data into the PUA
system and then the PUA system calculated the
weekly benefit amount based on that
information. While there was a procedure for
verifying the accuracy of the weekly benefit
amounts for regular UI (since 2010), this
procedure was not put into place to review PUA
weekly benefit amount calculations until
November 2021. Most of the calculated weekly
benefit amounts in our sample (44 out of 50)
had the minimum weekly benefit amount of
$198. Auditors found one weekly benefit
amount which appeared to be wrong based on
the income listed for the claimant. Auditors
found that the contract deliverables were met for
all but one contract. (pages 27, 38-53, 98)
A summary of the average case processing time, Auditors tested 50 regular UI claims and 50 PUA
the timeliness of benefit payments, and the claims. On average, the 50 regular UI claims
accuracy of these payments. sampled took 14 days from the application date
to the date the finding was sent to the applicant.
For approved claims that received at least one
payment, it took approximately 16 days from the
date of application to the date the first payment
was made. Three out of 28 did not have a first
payment within the federal timeliness standard
of 21 days. On average, the 50 PUA claims
sampled took 38 days from the application date
to the date the finding was sent to the applicant.
For the 25 claims in our sample that received at
least one payment, it took approximately 15
days from the application date to the date the
first payment was made. Three out of 25 did not
have a first payment within the regular UI federal
timeliness standard of 21 days. (pages 95-101)
Source: OAG assessment of the audit determinations contained in LAC Resolution Number 158.
Illinois Office of the Auditor General
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REPORT DIGEST – IDES UNEMPLOYMENT INSURANCE PROGRAMS
Background
Unemployment Insurance (UI) is a joint state-federal program that provides cash
benefits to eligible unemployed individuals. Each state administers a separate
Unemployment Insurance program, but all states follow guidelines established by
federal law. At its core, unemployment insurance is a federal program with
requirements set by the Social Security Act, Federal Unemployment Tax Act, and
other federal acts. The Illinois Unemployment Insurance Act establishes
additional requirements.
In addition to these federal and State laws already in place, there were several
federal laws enacted in response to the pandemic. The federal government,
through passage of the Coronavirus Aid, Relief, and Economic Security (CARES)
Act, the Consolidated Appropriations Act, 2021, and a presidential memorandum,
created additional unemployment programs for individuals who were not
traditionally eligible for unemployment benefits, such as those who are self-
employed or contract-based employees. The Department was responsible for
implementing the Pandemic Unemployment Programs so the benefits could be
distributed. Digest Exhibit 2 provides a timeline of the start and end date for the
new pandemic unemployment programs based on the authorizing legislation.
Digest Exhibit 2
TIMELINE OF NEW PANDEMIC PROGRAMS
January 1, 2020 to September 6, 20211
2020 2021
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
1/1/21
1/27/20 3/15/21
PUA PUA
PUA eligibility began. PUA extended.
extended.
1/1/21 3/15/21
3/28/20
PEUC PEUC PEUC extended.
PEUC eligibility began.
extended.
7/31/20 12/27/20
3/28/20
FPUC benefits FPUC ($300) 3/15/21
FPUC FPUC ($600) eligibility
lapsed. eligibility FPUC ($300) extended.
began.
began.
7/26/20 9/5/20
LWA LWA funds
LWA
eligibility fully allotted
began. to states.
12/27/20
3/15/21
MEUC MEUC eligibility
began. MEUC extended.
CARES Act Presidential Memorandum Consolidated Appropriations Act, 2021 American Rescue Plan Act of 2021
(Enacted March 27, 2020) (Issued August 8, 2020) (Enacted December 27, 2020) (Enacted March 11, 2021)
Note:
1 While payments for PUA began on May 15, 2020, claimants were eligible for assistance for weeks of
unemployment, partial unemployment, or inability to work beginning on or after January 27, 2020.
Source: OAG analysis of pandemic unemployment programs.
Illinois Office of the Auditor General
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REPORT DIGEST – IDES UNEMPLOYMENT INSURANCE PROGRAMS
There were also numerous Unemployment Insurance Program Letters (UIPLs)
issued by the US Department of Labor (US DOL), which provided guidance and
recommendations for administration of unemployment assistance programs
during the pandemic. UIPLs are subject to change due to new legislation and
additional guidance from the US DOL. For example, one UIPL was issued April
5, 2020, and had six subsequent changes issued from April 27, 2020, to
September 3, 2021.
Digest Exhibit 3 shows regular unemployment insurance (UI) and PUA initial
unemployment insurance claims. There was a drastic jump in initial regular UI
claims from 39,916 in February 2020 to 432,420 in March 2020. The monthly
intake of initial claims were highest in April 2020 (517,948) and December 2020
(514,674). The Department received 99,865 initial PUA claims in May 2020,
77,903 in June 2020, and 157,765 in July 2020 after which the number of claims
dropped significantly. PUA initial claims increased again in late 2020 and early
2021 before decreasing again.
Digest Exhibit 3
REGULAR UI AND PUA INITIAL UNEMPLOYMENT INSURANCE CLAIMS APPLICATIONS
January 2018 through December 2021
Source: OAG analysis of Illinois Department of Employment Security data.
Regular UI claim applications are processed through the Illinois Benefits
Information System (IBIS), which is the computerized system used by the
Department to process and pay unemployment benefits. When a claimant submits
an application for regular UI benefits through IBIS, the information submitted on
Illinois Office of the Auditor General
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REPORT DIGEST – IDES UNEMPLOYMENT INSURANCE PROGRAMS
the application goes through a number of identity verifications; these verifications
were different from the PUA applicants which underwent a different identity
verification process. PUA claim applications were processed through the
Unemployment Framework for Automated Claim & Tax Services (uFACTS)
system, which is a system developed, owned, and maintained by Deloitte. From
the time uFACTS began accepting PUA applications on May 11, 2020, to July 18,
2020, uFACTS did not check with IBIS to verify a regular UI claim had been
filed. To have been eligible for PUA benefits, a claimant was required to first be
denied regular unemployment benefits. Beginning July 18, 2020, PUA claimants
had to apply through IBIS and be denied regular unemployment benefits before
being able to apply for PUA benefits through uFACTS. This added additional
verifications to PUA claims which had initially been lacking. (pages 2-14, 20, 27)
Experiences in Other States
Audits from the US DOL Office of Inspector General and audits from other states
have shown that the issues that occurred in Illinois were not limited to Illinois.
States’ difficulties with implementing the new unemployment programs were
attributed to states’ information technology systems not being modernized and
staffing resources being insufficient to manage the increased number of new
claims.
A report issued by the Pandemic Response Accountability Committee noted states
experienced significant challenges in effectively providing their states with
unemployment benefits. The report noted four common insights from
unemployment insurance findings identified across 16 State Auditor offices
(including Illinois): unemployment insurance workloads surged for states; the
claims surge exploited internal control weaknesses; uncommon and varying fraud
schemes began to occur as the amount of federal funding expanded; and State
Workforce Agencies experienced information technology system challenges.
(pages 33-37)
Delays in Processing Unemployment Claims
IDES was not prepared to respond to the needs created by the pandemic.
Various delays were related to technology including the website and claims
processing system. IDES’ website was not equipped to respond to the needs
created by the pandemic. Hits to its website increased from 161,502 in 2019 to
over 126 million in 2020. The IBIS system crashed due to overload. In addition,
PUA benefits could not be processed through IBIS, so there was a delay while a
new system was put in place.
IDES was not prepared to quickly increase staffing to respond to the needs
created by the pandemic. Staffing issues were compounded by retirements and
staff being forced to work from home due to the pandemic. IDES also lacked an
adequate procedure for processing payment tracer forms.
The delays in the unemployment benefit application process were exacerbated by
a lack of planning prior to the pandemic. IDES did not have a plan in place for
responding to recessions and potential surges in claims which contributed to the
Illinois Office of the Auditor General
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REPORT DIGEST – IDES UNEMPLOYMENT INSURANCE PROGRAMS
delays. While the pandemic created an unprecedented increase in unemployment
claims, and likely levels that could not have been anticipated, a UI Recession Plan
could help provide direction in times of rapidly increasing claim volumes. (pages
54-59)
Timeliness of Claims Tested
Timeliness of IBIS determinations and first payments was reasonable for our
sample. On average, the 50 IBIS claims sampled took 14 days from the
application date to the date the finding was sent to the applicant. For approved
claims that received at least one payment, it took approximately 16 days from the
date of application to the date the first payment was made. Three out of 28 did
not have a first payment within the federal timeliness standard of 21 days. We
found that in all 3 cases, the claimant delayed their certification (by 3 days to 30
days) which could have impacted the timeliness of their payment.
For our PUA sample, the timeliness of first payments was reasonable; however
PUA determinations were not timely. On average, the 50 PUA claims sampled
took 38 days from the application date to the date the finding was sent to the
applicant. Only 25 claims in our sample had a first payment date. For the 25
claims in our sample that received at least one payment, it took approximately 15
days from the application date to the date the first payment was made. Three out
of 25 did not have a first payment within the regular UI federal timeliness
standard of 21 days. These 3 claimants received a first payment 1 to 3 days late.
IDES strived to pay claims as quickly as possible. However, when certain
cross-matches and controls were
Digest Exhibit 4 suspended, this increased the risk of
PUA PAYMENTS GREATER THAN $10,000 making improper payments. IDES made
Paid Within 30 days of Application Submittal large payments of backdated benefits while
Payment Range # of Payments controls were suspended which could have
$10,000 - $14,999 83,333 contributed to large overpayments and losses
$15,000 - $19,999 66,126 due to fraud and identity theft. As shown in
$20,000 - $24,999 7,346 Digest Exhibit 4, nine individuals received a
$25,000 - $29,999 926
$30,000 - $34,999 263 PUA payment of more than $40,000.
$35,000 - $39,999 51 These are not necessarily fraudulent
$40,000 - $44,999 9
payments. However, given the increased risk
Total 158,054
of identity theft and the size of these
Source: OAG analysis of IDES PUA payment data. payments, it would be a good practice to take
additional measures to ensure that these payments are issued to eligible claimants.
(pages 95-102)
Illinois Office of the Auditor General
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REPORT DIGEST – IDES UNEMPLOYMENT INSURANCE PROGRAMS
Overpayments and Fraud
Overpayments (which include fraud, non-fraud, and identity theft) were an issue
in both the regular UI and PUA programs. IDES reported overpayments for
FY20 to FY22 of $5.24 billion; regular UI accounted for $2.04 billion and PUA
accounted for $3.20 billion. Considering gross benefits associated with regular
UI claims were 2.5 times higher than gross benefits associated with PUA claims,
it shows the magnitude of fraud experienced in the PUA program. Auditors note
that IDES’ figures are estimates as IDES is still in the process of identifying fraud
through the previously suspended Quarterly Wage cross-
Overpayments and Fraud match. As a result, it is possible that these overpayment
Regular UI $2,041,046,693
numbers are understated. IDES noted stopped or
PUA $3,199,066,058 recovered payments of $150.36 million and $361.34
Total $5,240,112,751 million for the regular UI and PUA programs
respectively. However, of the $5.24 billion in
overpayments, $2.80 billion is classified as identity
theft, which is not considered recoverable because it cannot be collected from the
real owner of the identity/social security number.
IDES experienced three different fraud schemes during the period of March 1,
2020, to September 6, 2021: identity theft, hijacked payments, and fictitious
employers. The Department’s response to these fraud schemes varied and
included items such as adding new fraud tools (such as fraud analytics reports and
additional cross-matches), relying on payment tracer forms for reissuing payments
that were diverted from the true claimant, and investigations by the Benefit
Payment Control (BPC) Subdivision as time allowed.
However, other cross-matches were temporarily suspended early in the pandemic.
These cross-matches were temporarily suspended and/or processed offline. This
allowed IDES to better handle the increase in claims processing traffic; however,
this left the unemployment programs more susceptible to fraud.
IDES went from receiving 4 to 10 payment tracer forms a year to receiving over
2,700 during the pandemic. IDES had to improvise and update the process as
circumstances changed. Due to the changing process and improvising, there was
no system in place for BPC to know that documents had been uploaded and a
payment tracer case was ready to be worked. In some cases, BPC was not aware
of the submitted payment tracer form until a claimant called to check on the
status. Processing payment tracer forms took over 6 months from the date the
payment tracer form was submitted to when the payment was authorized to be
reissued.
The US DOL introduced additional cross-matches to combat fraud in October
2021 and February 2022 that IDES is not yet utilizing (Prisoner Update
Processing System and Bank Account Verification service respectively).
The Department’s main partner in trying to recoup overpayments is the US
Department of Labor’s Office of the Inspector General. IDES did not make any
referrals to the Illinois Attorney General during the audit period. (pages 60-85)
Illinois Office of the Auditor General
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REPORT DIGEST – IDES UNEMPLOYMENT INSURANCE PROGRAMS
Payments Made to Deceased or Incarcerated Individuals
We found paid claims for ineligible claimants. The data showed, for both regular
UI and PUA combined, a total of 481
Digest Exhibit 5 deceased individuals received 10,527
PAYMENTS TO DECEASED AND payments totaling $6.0 million. In addition,
INCARCERATED INDIVIDUALS 3,448 incarcerated individuals received
# of Total 92,811 payments totaling $40.5 million.
Individuals Payments Testing these cases showed that some
Deceased overpayments had already been identified as
Regular UI 35 $172,541 fraud. However, auditors noted that
PUA 446 $5,876,822 overpayments noted on claimant accounts
Incarcerated sometimes excluded payments made before
Regular UI 436 $5,154,138
PUA 3,012 $35,351,513
January 2021 and, as a result, overpayments
could be understated. By excluding these
Source: OAG analysis of IDES claims data. payments from overpayment balances for
individuals that were not eligible, the State is potentially missing out on
opportunities to recoup overpayments. (pages 89-92)
Call Data
IDES’ call data records for April 2020 through April 2022 indicated it received
over 37 million calls to its hotlines and made over 10 million callbacks.
Hundreds of claimants called IDES more than 1,000 times; however, the average
number of phone calls to the hotline was about 12 per phone number and the
median value was 4 per phone number.
Our review of callback data indicated that some claimants received a callback in a
matter of hours, while others waited two weeks or more. Additionally, not all
claimants were successfully contacted after requesting a callback. (pages 93-97,
101-102)
Federal Requirement Noncompliance
IDES did not comply with all state and federal statutory and administrative
requirements for processing and auditing claims. The US DOL Unemployment
Insurance Program Letters (UIPLs) provide guidance and clarifications for the
unemployment programs. The UIPLs required a list of fraud tools and strongly
recommended other fraud tools to help prevent and detect fraud. IDES did not
implement one of the tools that was strongly recommended in May 2020 by the
US Department of Labor (the Integrity Data Hub), until September 2021. IDES
also failed to file 26 outstanding Employment and Training Administration (ETA)
reports required by the US Department of Labor.
Additionally, IDES reporting to the US Department of Labor showed Illinois was
not meeting the first payment promptness standard. Federal timeliness standards
suggest that 87 percent of first payments should be paid within 21 days and 93
percent of first payments should be made within 35 days. Illinois fell below both
of these standards in 2021 and 2022. In 2021 and 2022, the percent of payments
made within 21 days was 75.5 and 71.4 percent, respectively. In 2021 and 2022,
Illinois Office of the Auditor General
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REPORT DIGEST – IDES UNEMPLOYMENT INSURANCE PROGRAMS
the percent of payments made within 35 days was 90.0 and 91.5 percent,
respectively. (pages 60-87)
Contracts and Agreements
The Department entered into eight contracts including 29 amendments during the
audit period for services and software related to administering the unemployment
insurance and PUA programs. Pursuant to a Disaster Proclamation issued by the
Governor, these contracts were deemed necessary to respond to the COVID-19
pandemic and were therefore exempt from bidding and the provisions of the
Illinois Procurement Code. Nine of the 29 amendments were signed by IDES
between 2 days and 45 days after the effective date of the amendment.
The eight contracts initially totaled $33.5 million. However, with subsequent
amendments, the eight contracts eventually totaled $226.4 million, $160.5 million
of which had been expended through January 2023. Digest Exhibit 6 provides a
summary of the contract purpose, procurement method, initial contract amount,
total contracted amount, and the amount of expenditures as of January 2023. As
shown, a significant percentage of the contracted amount has been expended for
three of the contracts. In two of the contracts, less than 25 percent of the contract
was expended, leaving several million dollars unexpended.
Illinois Office of the Auditor General
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REPORT DIGEST – IDES UNEMPLOYMENT INSURANCE PROGRAMS
Digest Exhibit 6
PANDEMIC RELATED CONTRACTS AND AGREEMENTS
Initial Final
Procurement Contract Contract Total
Purpose Method1 Amount Total Expenditures2
Deloitte Telephone agents COVID-19 $12,736,700 $98,472,182 $76,231,114
Consulting LLP (Tier 1) exemption
(Call Center)
Insight Global, Specialists to COVID-19 $3,990,313 $73,544,157 $51,613,787
LLC perform PUA claim exemption
verification services
Deloitte PUA Software COVID-19 $9,490,000 $33,834,194 $27,694,784
Consulting LLP exemption
(uFACTS)
Pitney Bowes, Print and mail COVID-19 $2,250,000 $15,250,000 $3,772,964
Inc. service exemption
Fast Enterprises, Short-Time COVID-19 $4,006,000 $4,171,480 $150,645
LLC Compensation exemption
program software
Pondera Fraud analytics COVID-19 $854,329 $854,329 $834,639
Solutions, LLC exemption
Carahsoft Additional languages COVID-19 $165,391 $205,319 $165,391
Technology Corp. for virtual agent exemption
Multi-Lingual Editing/proof-reading COVID-19 $33,372 $33,732 $33,732
Connections, LLC for virtual agent in exemption
various languages
Total $33,526,105 $226,365,393 $160,497,056
Notes:
1 On March 9, 2020, the Governor issued a Disaster Proclamation, which suspended the provisions of the Illinois
Procurement Code.
2 Total expenditures includes all FY20 and FY21 payments and FY22 payments through January 2023.
Source: OAG analysis of IDES and Comptroller data.
Auditors tested a total of 37 contract deliverables for six of the contracts. We
found that the contract deliverables were met for all but one contract. IDES did
not receive from Insight Global all required weekly reports. Additionally, not all
nondisclosure agreements were filled out completely and filed before beginning
work on the project. This deficiency limited IDES’ ability to ensure all contract
employees were Illinois residents and also failed to ensure contract employees
were made aware of confidentiality procedures before working with confidential
data. (pages 38-53)
Third-party contractors input data into the PUA system. The PUA system then
calculated the weekly benefit amount and payment amount based on the
information (such as wages and dependents) that was input. While there was a
procedure for verifying the accuracy of the weekly benefit amounts for regular UI
weekly benefit amounts (since 2010), this procedure was not put into place to
review PUA weekly benefit amount calculations until November 2021. (page 27)
Illinois Office of the Auditor General
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REPORT DIGEST – IDES UNEMPLOYMENT INSURANCE PROGRAMS
Audit Recommendations
The audit report contains seven recommendations directed to the Illinois
Department of Employment Security. The Department agreed with the
recommendations. The complete response from the Department is included in
this report as Appendix F.
This performance audit was conducted by the staff of the Office of the Auditor
General.
___________________________________
JOE BUTCHER
Division Director
This report is transmitted in accordance with Sections 3-14 and 3-15 of the
Illinois State Auditing Act.
___________________________________
FRANK J. MAUTINO
Auditor General
FJM:TW
Illinois Office of the Auditor General
| xvi |
Contents
Report Highlights i
Report Digest v
Acronyms
Glossary
Introduction 1
Unemployment Insurance Background 2
Unemployment Rates and Claims 12
Authorizing Legislation and Program Guidance 15
Pandemic Unemployment Programs 20
UI and PUA Claim Application Processes 27
Audits 33
Contracts and Agreements 38
Delays in Processing Unemployment Claims 54
Overpayments and Fraud 60
Timeliness and Performance Measures 86
Analysis of Claims Data and Call Data 88
Results of Claim Testing 95
Title XII Federal Loan and Trust Fund Solvency 103
Appendix A – LAC Resolution Number 158 107
Appendix B – Audit Scope and Methodology 110
Appendix C – Timeline of Unemployment Compensation in Illinois 113
Appendix D – Unemployment Insurance Program Letter Listing 118
Appendix E – Description of Available Cross-matches and Fraud Prevention
Tools 123
Appendix F – Agency Responses 125
Recommendations
Recommendation 1 – Contract Signing 40
Recommendation 2 – UI Recession Plan 59
Recommendation 3 – Payment Tracer Affidavit Form Procedure 72
Recommendation 4 – Additional Cross-match Opportunities 77
Recommendation 5 – Fraud Reporting Requirements 85
Contents
Recommendation 6 – Identifying and Recouping Payments Made to Ineligible
Individuals 92
Recommendation 7 – Quick Payment of Backdated Benefits 101
Acronyms
ARPA American Rescue Plan Act of 2021
BAM Benefit Accuracy Measurement
BAV Bank Account Verification
BPC Benefit Payment Control
BTQ Benefits Timeliness and Quality Review
CAA Consolidated Appropriations Act
CARES Coronavirus Aid, Relief, and Economic Security
COVID-19 Coronavirus Disease 2019
DoIT Illinois Department of Innovation and Technology
DUA Disaster Unemployment Assistance
EB Extended Benefits
ETA US DOL Employment and Training Administration
FFCRA Families First Coronavirus Response Act
FPUC Federal Pandemic Unemployment Compensation
FY Fiscal Year
GAO Government Accountability Office
IBIS Illinois Benefits Information System
ICON Interstate Connection Network
IDES Illinois Department of Employment Security
IP Internet Protocol
IRS Internal Revenue Service
IT Information Technology
IVR Interactive Voice Response
LAC Legislative Audit Commission
LWA Lost Wages Assistance
MEUC Mixed Earner Unemployment Compensation
NASWA National Association of State Workforce Agencies
OAG Office of the Auditor General
OIG Office of Inspector General
PEUC Pandemic Emergency Unemployment Compensation
PRAC Pandemic Response Accountability Committee
PUA Pandemic Unemployment Assistance
PUPS Prisoner Update Processing System
SAVE Systematic Alien Verification for Entitlement
SIDES State Information Data Exchange Systems
SSN Social Security Number
STC Short-Time Compensation
uFACTS Unemployment Framework for Automated Claim & Tax
Services
UI Unemployment Insurance
UIPL Unemployment Insurance Program Letter
US DOL US Department of Labor
WBA Weekly Benefit Amount
Glossary
American Rescue Federal legislation extending Pandemic
Plan Act (ARPA) Unemployment Assistance (PUA), Federal Pandemic
Unemployment Compensation (FPUC), Pandemic
Emergency Unemployment Compensation (PEUC)
and Mixed Earner Unemployment Compensation
(MEUC) programs.
Benefit Accuracy Integrity assessment tool using representative
Measurement (BAM) samples of unemployment insurance payments and
Program disqualifying ineligibility determinations. These
samples are investigated to determine whether
unemployment insurance benefits were properly
administered to claimants and whether these
claimants were paid the proper amounts, or
appropriately denied.
Benefit Payment Subdivision of IDES responsible for ensuring the
Control (BPC) integrity of the benefits programs administered by the
Department. BPC is charged with preventing,
detecting and investigating improper payments of
unemployment insurance benefits and making
decisions on the legal entitlement to benefit payments
in matters alleging willful misrepresentation or
concealment of facts in the application, certification,
or receipt of benefits by claimants.
Benefits, Timeliness, The evaluation tool used in determining whether state
and Quality (BTQ) workforce agencies are meeting the performance
standards set by the US Department of Labor.
Consolidated Federal legislation extending unemployment
Appropriations Act, programs established by the CARES Act. Created the
2021 (CAA) Mixed Earner Unemployment Compensation (MEUC)
program.
Coronavirus Aid, Federal legislation allowing states to provide
Relief, and unemployment insurance for workers impacted by the
Economic Security COVID-19 pandemic. Created the Pandemic
(CARES) Act Unemployment Assistance (PUA), Federal Pandemic
Unemployment Compensation (FPUC), and
Pandemic Emergency Unemployment Compensation
(PEUC) programs.
Extended Benefits State program which provides extra benefits in times
of increased unemployment.
Improper Payment An overpayment or an underpayment of
unemployment compensation.
Glossary
Integrity Data Hub NASWA’s centralized platform for state workforce
(IDH) agencies to compare, analyze, and cross-match
unemployment insurance claims data for enhanced
detection and prevention of fraud and improper
payments.
Interstate NASWA system that allows state workforce agencies
Connection Network to request and receive data for use in filing and
(ICON) processing of claims.
National Association National organization representing all 50 state
of State Workforce workforce agencies, District of Columbia (D.C.) and
Agencies (NASWA) US territories. NASWA provides policy expertise,
shares promising state practices, and promotes state
innovation and leadership in workforce development.
Short-Time State program providing an alternative to company
Compensation (STC) layoffs. Allows employees to work part-time and
receive unemployment compensation for the
difference.
Unemployment Guidance to states from the US Department of Labor.
Insurance Program
Letter (UIPL)
Unemployment Trust Fund used to make transfers to the states for the
Fund payment of cash benefits to individuals with respect to
their unemployment or the payment of expenses
incurred by administration of its unemployment
compensation law and public employment offices.
PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
Introduction
On September 1, 2021, the Legislative Audit Commission adopted Resolution
Number 158 (see Appendix A) requiring a performance audit of the
unemployment programs administered by the Illinois Department of Employment
Security (IDES or Department) during the period of March 1, 2020, to September
6, 2021. The Resolution directed that the audit include, but not be limited to the
following determinations:
1. A review of the application and review processes and the payment of benefits
to individuals focusing on any fraud or inefficiencies which could be
eliminated to contain costs and improve the delivery of benefits to eligible
individuals;
2. To the extent feasible, a detailed account of the funds allegedly disbursed to
ineligible and/or fraudulent claimants;
3. The types of unemployment fraud schemes the Illinois Department of
Employment Security has experienced and what steps and procedures it has
taken to detect and respond to fraudulent unemployment claims and whether it
has cooperated with the Illinois Attorney General or federal authorities to
detect, counter, and prosecute potentially fraudulent cases;
4. Whether the Illinois Department of Employment Security has complied with
all state and federal statutory and administrative requirements for processing
and auditing unemployment claims;
5. An examination of the Illinois Department of Employment Security’s decision
not to implement additional fraud-prevention tools in April 2020 as
Illinois Office of the Auditor General
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
recommended by the federal government and a report on whether the state
has, since that time, come into compliance with federal recommendations;
6. What factors caused and continue to cause delays in the Illinois Department of
Employment Security’s processing of unemployment claims, looking
particularly at administrative decisions, technology, and staffing, and what
steps the Illinois Department of Employment Security has taken to alleviate
these delays;
7. What third-party contractors did the Illinois Department of Employment
Security utilize during this time period and were any of these contracts no-bid
contracts; did a third-party contractor calculate weekly benefit amounts for
Pandemic Unemployment Assistance claimants and, if so, were there any
procedures to verify the accuracy of their calculations; did third-party
contractors meet the performance measure established by the Illinois
Department of Employment Security prior to the issuance of the contracts;
8. A summary of the average case processing time, the timeliness of benefit
payments, and the accuracy of these payments.
Unemployment Insurance Background
Unemployment Insurance (UI) is a joint state-federal program that provides cash
benefits to eligible unemployed individuals. Each state administers a separate
Unemployment Insurance program, but all states follow guidelines established by
federal law. At its core, unemployment insurance is a federal program with
requirements set by the Social Security Act, Federal Unemployment Tax Act, and
other federal acts. The Illinois Unemployment Insurance Act establishes
additional requirements.
The US Department of Labor’s Employment and Training Administration is the
federal agency responsible for providing program direction and oversight. IDES
works closely with the US Department of Labor (US DOL) to ensure what the
State enacts conforms to federal requirements.
According to the US DOL, unemployment insurance benefits are intended to
provide temporary financial assistance to unemployed workers who are
unemployed through no fault of their own. The Unemployment Insurance
program is designed to partially compensate a recipient for loss of wages when
someone is out of work or works less than full-time due to lack of work until they
are able to return to work.
Pandemic Unemployment Programs
The federal government, through passage of the Coronavirus Aid, Relief, and
Economic Security (CARES) Act, the Consolidated Appropriations Act, 2021,
and a presidential memorandum, created additional unemployment programs for
individuals who were not traditionally eligible for unemployment benefits, such
as those who are self-employed or contract-based employees. The Families First
Coronavirus Response Act provided full federal funding for Extended Benefits.
Illinois Office of the Auditor General
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
The Department was responsible for implementing the Pandemic Unemployment
Programs so the benefits could be distributed.
Exhibit 1 lists various Unemployment Programs administered by IDES which will
be discussed in more detail later in the report.
Exhibit 1
UNEMPLOYMENT PROGRAMS ADMINISTERED BY IDES
Name Description
Regular Unemployment State-operated insurance program designed to partially compensate
Insurance (UI) eligible individuals for loss of wages when they are out of work.
Pandemic Unemployment Benefits for individuals who had been determined ineligible for
Assistance (PUA) regular state unemployment benefits and were unemployed, partially
unemployed, or unable to work caused by a COVID-19 reason
allowed by federal law.
Pandemic Emergency Additional weeks of unemployment benefits for those who had
Unemployment Compensation exhausted regular unemployment compensation under federal law
(PEUC) and were able to work, available to work, and were actively seeking
work.
Federal Pandemic An emergency increase in weekly unemployment compensation
Unemployment Compensation benefits to eligible claimants. Provided eligible individuals with $600
(FPUC) per week in addition to the weekly benefit amount. Reduced to
$300 per week in December 2021.
Lost Wages Assistance (LWA) A federally-funded supplemental payment. Provided eligible
individuals with $300 per week in addition to the weekly benefit
amount.
Mixed Earner Unemployment An additional $100 weekly benefit for workers who earn money
Compensation (MEUC) through both self-employment income (at least $5,000) and
traditional W2 employment.
Extended Benefits (EB) Provides for 13 extra weeks of benefits in times of increased
unemployment.
Short-Time Compensation Benefits payable to employees under an approved Short-Time
(STC) Compensation plan to avert layoffs by employers.
Source: OAG analysis of Unemployment Program information.
Illinois Department of Employment Security
The Illinois Department of Employment Security (IDES or Department)
administers the Unemployment Insurance program for the State of Illinois. The
Department collects unemployment insurance taxes from the State’s
IDES Headcount liable employers and returns those dollars to eligible Illinois workers
as unemployment insurance benefits. The Department also operates
FY18 1,099
FY19 1,085
an employment service and other special programs for the
FY20 1,035 unemployed and underemployed and matches employer labor needs
FY21 1,123 with the skills of job seekers. Unemployment insurance benefit
FY22 1,120 recipients are required to actively seek employment and register with
the Illinois Employment Service systems.
Illinois Office of the Auditor General
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
According to the Illinois State Budget Book the Department’s headcount dropped
from 1,099 in FY18 to 1,035 in FY20. However, the headcount increased to
1,123 in FY21 and remained stable at 1,120 in FY22. The FY23 estimated
headcount and the FY24 targeted headcount are both 1,120.
Exhibit 2 shows expenditures by funding source for the administration of the
unemployment insurance programs in Illinois, reimbursements from the Road
Fund for benefits paid to former State of Illinois employees, and funding in
response to federal funding shortfalls. A majority of the unemployment insurance
expenditures have federal funding sources and are used for operational and
administrative expenses. For example, Illinois receives funding from the Title III
Social Security and Employment Services Fund. Revenues from this fund are
collected by the Internal Revenue Service (IRS) and distributed by the US DOL to
designated State Workforce Agencies, or state employment agencies.
Exhibit 2
EXPENDITURES FOR ADMINISTRATION OF UNEMPLOYMENT PROGRAMS
FY18-FY22
Actual
Expenditures FY18 FY19 FY20 FY21 FY22
Federal funds $185,394,900 $197,135,900 $212,314,600 $291,253,300 $303,247,900
General Revenue
$46,291,300 $19,408,800 $19,532,800 $107,561,500 $70,382,800
Fund
Road Fund $3,938,800 $4,000,000 $4,000,000 $0 $2,092,300
Special
$886,400 $821,700 $682,000 $751,500 $7,016,200
Administration Acct
Total $236,511,400 $221,366,400 $236,529,300 $399,566,300 $382,739,200
Note: Numbers may not add due to rounding.
Source: Illinois Budget Books.
In FY22, IDES used the Federal Unemployment Compensation Special
Administration Account to pay interest owed on Title XII advances. These
payments substantially increased expenditures from this special administrative
fund. The Unemployment Compensation Special Administration Account
typically includes penalties and interest revenue from delinquent State
unemployment insurance tax collections and improper payments to make up for
federal funding shortfalls. See Title XII Federal Loan and Trust Fund Solvency
section on page 103 for more information.
Unemployment benefits are paid out of the Unemployment Compensation Trust
Fund. The Unemployment Compensation Trust Fund is a federally-held account
into which the Department deposits the State unemployment insurance taxes it
collects from employers. These funds can only be used to pay unemployment
insurance benefits to eligible claimants. These funds are not appropriated by the
General Assembly, and the payments are not processed through the Illinois Office
of the Comptroller.
Illinois Office of the Auditor General
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
IDES Staffing
The Service Delivery Bureau is responsible for planning and directing Illinois’
employment security programs and services for claimants and employers. The
Service Delivery Bureau is comprised of Employment Services, Field Operations,
and Unemployment Insurance Programs divisions (see Exhibit 3). Employment
Services provides assistance to unemployed workers seeking employment. This
audit will primarily focus on the work done by the Field Operations division and
the Unemployment Insurance Programs division.
Exhibit 3
ILLINOIS DEPARTMENT OF EMPLOYMENT SECURITY SERVICE DELIVERY BUREAU
As of August 2021
Illinois Department of
Employment Security
Service Business
Legal Services Offices of the
Delivery Services Chief of Staff
Bureau Director
Bureau Bureau
Field Employment
UI Programs
Operations Services
Division
Division Division
Regional
Offices and Claims
Call Center
UI Training
Adjudication
Program
Benefit
Payment
Control
UI System
Support
Source: OAG analysis of IDES organizational charts.
In Field Operations, there are five regional offices and two call centers (also
known as claimant service centers). There are a total of 18 local offices and 15
job centers. A call center is defined in IDES administrative rules as the modern
day equivalent of the local office where claimants and employers can contact the
Department for resolution of issues involving claims for unemployment insurance
benefits. The majority of in-person appointments to address any claimant issues
take place in local offices.
Prior to the pandemic, the main job titles routinely processing claims, determining
eligibility, and answering phone calls included:
Illinois Office of the Auditor General
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
Employment Security Program Representative – These frontline employees
work with clients face-to-face to process applications and help determine
eligibility by resolving minor unemployment insurance claim issues. They
also assist with re-employment, including workshops, helping with work
search and resumes, and assisting with navigating JobLink, an employment
website run by IDES.
Employment Security Service Representative – These adjudicators resolve
major claims issues like discharge, voluntarily quitting, job refusal, and other
activities that cannot be resolved by a program representative.
Revenue Analyst – These analysts enter wages for UI claims and handle
claimant issues related to wages such as an employer making a Social Security
number (SSN) error in their payroll information.
The Unemployment Insurance Programs division consists of 4 subdivisions:
Claims – The Claims subdivision is charged with interpreting unemployment
insurance related statutes and regulations. The unit has developed training for
Field Operations staff.
Adjudication – The Adjudication subdivision monitors performance areas to
ensure compliance with federal guidelines regarding determining eligibility
for benefits after establishing monetary eligibility. The Adjudication
subdivision also acts as a liaison between legal counsel, the US DOL, and the
field for enacting federal and statewide policy changes.
Benefit Payment Control (BPC) – BPC is responsible for ensuring the
integrity of the benefits programs administered by IDES and is discussed in
more detail later in this report.
UI System Support – UI System Support is charged with the management and
implementation of functions of the Illinois Benefits Information System
(IBIS) for regular unemployment as well as providing system support for
users.
Processing Applications
Auditors inquired about staffing levels for positions that were processing
applications, determining eligibility, calculating benefits, and answering claimant
calls at the beginning of the audit period and at the end of the audit period.
At the start of the pandemic, there were 9 IDES staff processing applications, 13
staff calculating benefit amounts, and 190 determining eligibility for regular UI.
By September 6, 2021, there were still 190 IDES staff determining eligibility, but
IDES now had 19 staff calculating benefit amounts, and IDES could not provide a
valid number for processing claims because IDES had brought in staff members
from other departments to help.
IDES contracted with Deloitte in April 2020 to provide 200 telephone agents. A
September 2020 contract amendment increased that number to 800. In July 2020,
IDES contracted with Insight Global for up to 200 specialists to help with PUA
Illinois Office of the Auditor General
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
claim verification services, including verifying claimants’ wages and income. A
December 2020 amendment to this contract increased the number of specialists
from 200 to 350. See the Contracts and Agreements section on page 38 for
information on these contracts.
At the end of the pandemic, the staffing had decreased from the peak levels; there
were 15 staff processing applications (2 IDES, 13 contractual), 26 determining
eligibility (13 IDES, 13 contractual), and 40 staff calculating benefit amounts (all
contractual).
Exhibit 4 shows the average number of telephone agents handling claimant calls
from January 2019 to October 2021. At the start of the pandemic, there were 107
agents answering telephone calls, none of whom were contractual. IDES faced
complaints and criticism for their inability to answer every call. In June 2020,
IDES reported only answering 15 percent of calls.
The Department contracted with Deloitte on April 28, 2020, and Insight Global on
July 30, 2020, to onboard new agents. By July 2020, there were 465 agents
handling telephone calls. As of September 2021, there were 141 Department
employees and 410 contractual employees answering telephone calls. Delays
caused by staffing and the Department’s response to those delays are discussed
later in this report.
Exhibit 4
AVERAGE NUMBER OF IDES AND CONTRACTUAL AGENTS HANDLING CLAIMANT CALLS
January 2019 through October 2021
700
600
500
400
300
200
100
0
Source: OAG analysis of Illinois Department of Employment Security data.
IDES has three subdivisions that work to ensure the integrity of benefit payments
through different measures. The Benefit Payment Control subdivision is under
the Service Delivery Bureau, while the Benefit Accuracy Measurement and
Illinois Office of the Auditor General
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
Benefits Timeliness and Quality Review subdivisions are part of the Quality
Assurance and Compliance Review division (which is under the Chief of Staff.)
Benefit Payment Control
According to the Department, the Benefit Payment Control (BPC) subdivision is
responsible for ensuring the integrity of the benefits programs administered by the
Illinois Department of Employment Security. The Benefit Payment Control
subdivision is charged with preventing, detecting, and investigating improper
payments of unemployment insurance benefits and issuing fraud determinations.
This includes making decisions on the legal entitlement to benefit payments in
matters alleging willful misrepresentation or concealment of facts in the
application, certification, or receipt of benefits by claimants. Cases investigated
are generated by various cross-matches and specific leads which are discussed in
more detail later in the report.
BPC Special Investigations staff are responsible for wage entry, overpayment, and
fraud/non-fraud determination. A claimant is presumed to have committed fraud
if the claimant has received at least three weeks of unemployment insurance
benefits either without reporting or severely under-reporting wages. Individuals
found to have committed fraud are required to pay a penalty of 15 percent of the
sum received in benefits. The IBIS system will automatically assess the penalty
amount.
Fraud can be referred to BPC internally through a local office, the Benefit
Accuracy Measurement program, and regional office employer protests. Fraud
can also be referred through a private individual, another government agency, or
other sources. During the pandemic, many of the fraud cases were reported to
IDES by individuals that were victims of identity theft.
The IDES BPC Special Investigations unit is responsible for investigating
suspected identity theft cases. According to Department officials, there were 4
investigators at the start of the pandemic, but that number grew to 20 as BPC staff
members transferred to the Special Investigations unit. Even though IDES
contracted with Pondera to help identify identity theft, the Special Investigations
unit still had to review Pondera’s weekly reports and the identity theft that had
been identified and make the appropriate claimant determinations.
BPC is required to report external fraud activity to the US DOL Employment and
Training Administration (ETA) on a quarterly ETA 227 Overpayment Detection
and Recovery Activities Report. However, a US DOL Office of the Inspector
General (OIG) report noted that many states were not completing required
reporting for overpayments. Auditors requested the dates IDES submitted the
quarterly ETA 227 reports to the US Department of Labor for the period of March
1, 2020, to June 30, 2021. All 6 of the reports were filed with the US DOL;
however, all 6 were late ranging from 1 day late to 57 days late.
The IDES BPC Overpayment Recovery and Collections Unit pursues recovering
of benefit overpayments to restore both fraud and non-fraud overpayment
amounts. The US DOL required the same recovery activities for FPUC, PEUC,
Illinois Office of the Auditor General
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
and PUA programs that were normally performed for regular UI programs. If
reasonable attempts to collect an overpayment have been made without success,
the case can be submitted to the Attorney General. The case must also meet other
criteria to be submitted to the Attorney General, such as the overpayment balance
exceeds a certain threshold. According to Department officials, they refer both
civil and criminal cases.
According to IDES, between March 1, 2020, and September 6, 2021, they did not
refer any cases to the Attorney General, but they referred at least 79 matters/leads
to the US DOL Office of the Inspector General. (As of February 2023, only two
convictions had been completed and only $450 had been received from
restitution. Others could be pending.) In addition to cases that are referred to
these agencies, IDES has recovered approximately $511.7 million in recoveries
and stopped payments.
Benefit Accuracy Measurement
Benefit Accuracy Measurement (BAM) is a US DOL federally mandated program
designed to determine the accuracy of paid and denied claims in major
Unemployment Insurance programs. The unemployment insurance claims
process is reconstructed for samples of weekly payments and denied claims using
data verified by trained investigators. BAM is used to identify the root causes of
improper payments. BAM determines the cause of and the party responsible for
the error, the point in the unemployment insurance claims process at which the
error was detected, and actions taken by the agency and employers prior to the
error. BAM is a diagnostic tool for the federal and State Workforce Agency staff
to use in identifying systemic errors and their causes and in correcting and
tracking solutions to these problems. BAM staff are in the Department’s Quality
Assurance and Compliance Review Section.
The US DOL samples 360 cases per year in the 10 states with the smallest
unemployment insurance workloads and 480 cases in the remainder of the states,
unless the states have chosen to select larger samples. IDES procedures note that
a control data file is updated weekly, and Illinois Department of Innovation and
Technology staff randomly select a sample of paid cases and denied cases for
audit. The sample cases are then assigned to an investigator. The investigator
looks at 110 data elements for each sampled payment or denial. Data for 15 of
these elements are captured both before and after the investigation.
According to a report released by the US DOL OIG, states suspended BAM
operations beginning in April 2020. Unemployment Insurance Program Letter
(UIPL) 23-20, dated May 11, 2020, noted that while states had been provided
some flexibility in the short term to stop sampling under the BAM program, it
would be critical for states to resume BAM audits at the earliest possible time.
One UIPL describes BAM as a “mission critical audit function that provides states
with valuable information on the quality and accuracy of their regular
Unemployment Insurance program functions, and it supports estimation [of] the
UI improper payment rate.” An improper payment is any payment that should not
have been made or that was made in an incorrect amount and includes any
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payment to an ineligible recipient. The improper payment rate is a rate that
consists of overpayments and underpayments.
UIPL 25-20, dated June 15, 2020, intended to provide guidance to State
Workforce Agencies on changes in the operation of the BAM program as a result
of the issues arising from the COVID-19 pandemic. States with one million
weeks paid or more or $1 billion in payments or more were instructed to
temporarily suspend the BAM sampling process until changes could be made to
accommodate the increased workload. This UIPL noted that with the large
increase in claims as a result of the pandemic, several data elements in the
software could not accommodate the population of workload counts or the paid
benefit amounts that states were required to report. States were instructed to
retain each week’s unemployment insurance files, so the samples and population
counts could be reconstructed retroactively when changes to the software
application were completed; however, states are not expected to make up cases
for the period to which the suspension applies. UIPL 25-20 also noted that BAM
excluded FPUC, PEUC, and PUA. According to an IDES official, there is no
system or process to measure payment and denied claims accuracy for these
programs.
According to IDES officials, BAM audits were suspended for the first three
months of the pandemic, but they were resumed on paid sample cases on July 6,
2020. BAM did not resume on denied cases until February 2021. The Previous
OAG Audits section on page 33 contains more information on past BAM-related
findings.
Benefits Timeliness and Quality
Benefits Timeliness and Quality Review (BTQ) is a quarterly review conducted
by Department staff to determine if federal standards and acceptable levels of
performance are being met. BTQ focuses on evaluating the quality performance
of nonmonetary determinations and is an evaluation tool used in determining if a
representative’s performance is meeting the standards that have been set by the
US DOL. Nonmonetary determination status is based on reasons such as being
not able or available to work, voluntary leaving of a job, discharge for
misconduct, refusal to work, etc. The evaluations of nonmonetary determinations
are necessary to ensure that the determination to allow or deny unemployment
benefits is properly administered. The reviews also include a data validation
component.
A sampling of nonmonetary determinations is reviewed each calendar quarter.
Each nonmonetary determination in the sample must be independently reviewed,
and the scoring for each element agreed upon by two individuals with
nonmonetary expertise. Elements reviewed include issue codes/types, issue
detection date, program type, week ending date of claim, and nonmonetary
determination outcome. These reviews are conducted internally with the State’s
staff trained to conduct BTQ reviews. BTQ staff are in IDES’ Quality Assurance
and Compliance Review Section, but there is also work done by the Regional
Field Operations staff. Every three years, states also participate in a national
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review. The ETA provides a handbook that provides guidance on the conduct of
BTQ reviews including information concerning sampling size as well as state
training and technical assistance.
Nonmonetary determination performance is tracked over time to determine trends
in performance, problems with particular facets of the nonmonetary process, and
timeliness of nonmonetary determinations (among other
ETA 9056 Nonmonetary
things). Each quarter’s results are compared to prior
Determination Quality Review periods of performance to determine if improvement
Results has occurred. The data may also be used by state and
Period Score federal managers to determine if nonmonetary
Q1 2020 US DOL Waived determinations performance was affected by
Q2 2020 81.58% fluctuations in the business cycle or changes in
Q3 2020 89.13% personnel, administrative procedures, or technology.
Q4 2020 94.74%
Q1 2021 88.66% IDES submitted all 2020 and 2021 BTQ quarterly
Q2 2021 90.59% reviews timely with the exception of the report for the
Q3 2021 92.47% first quarter of 2020 which was waived by the US
Department of Labor due to the COVID-19 pandemic.
Minimum Acceptable Level: 75% In each of the quarters during the audit period, Illinois
exceeded the acceptable level of performance of 75
percent.
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
Unemployment Rates and Claims
According to data from the US DOL Bureau of Labor Statistics, prior to the
COVID-19 pandemic, states were experiencing the lowest unemployment rates
the United States had seen since 1969. Illinois had record low unemployment
rates during April 2019 through February 2020, ranging from 3.6 percent to 4.1
percent. From March 2020 to April 2020, Illinois’ seasonally adjusted rate of
unemployment grew from 4.9 percent to 17.4 percent. The unemployment rate
remained above 10 percent until August 2020 when the rate dropped to 9.8
percent.
Exhibit 5 provides unemployment rates for states in the regional area for January
2020 through December 2021. As shown in the exhibit, Illinois’ unemployment
rate was higher than many of the states around Illinois (Indiana, Iowa, Kentucky,
Minnesota, Missouri, Ohio, and Wisconsin). Between April 2020 and December
2021, Illinois and Michigan alternated as the regional state with the highest
unemployment rate.
Exhibit 5
REGIONAL STATE UNEMPLOYMENT RATES
January 2020 through December 2021
Source: US DOL Bureau of Labor Statistics.
However, Exhibit 6 shows Illinois was in line with other states that are
economically similar to Illinois with at least one major city. In December 2021,
Illinois’ unemployment rate was 5.1 percent compared to 5.8 percent in
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California, 3.5 percent in Florida, 5.4 percent in New York, and 5.5 percent in
Pennsylvania.
Exhibit 6
COMPARISON STATE UNEMPLOYMENT RATES
January 2020 through December 2021
Source: US DOL Bureau of Labor Statistics.
Unemployment Claims
IDES’ website provides initial claims by month. The total initial claims were
around 500,000 for both calendar year 2018 and 2019,
IDES Regular UI Initial Claims while the total for calendar year 2020 was nearly 3
million. The monthly average for initial claims in
CY18 500,233
CY19 503,579
calendar year 2018 and 2019 was 41,686 and 41,965
CY20 2,916,151 respectively, compared to 243,013 in 2020 and
CY21 1,595,984 132,999 in 2021. Exhibit 7 shows a drastic jump in
initial regular unemployment insurance (UI) claims
when claims jumped from 39,916 in February 2020 to
432,420 in March 2020. The monthly intake of initial claims were highest in
April 2020 (517,948) and December 2020 (514,674).
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
Exhibit 7
REGULAR UI AND PUA INITIAL UNEMPLOYMENT INSURANCE CLAIMS APPLICATIONS
January 2018 through December 2021
Source: OAG analysis of Illinois Department of Employment Security data.
The Department received 99,865 initial PUA claims in
IDES PUA Initial Claims May 2020, 77,903 in June 2020, and 157,765 in July
CY20 502,411 2020 after which the number of claims dropped
CY21 249,390 significantly. PUA initial claims increased again in late
2020 and early 2021 before decreasing again.
As the number of new claims rises, the number of
claimants accessing agency resources also rises. According to IDES, hits to its
website increased from 161,502 in 2019 to over 126 million in 2020. Calls to the
IDES claimant services center also rose significantly.
The Department transitioned the IDES hotlines to the callback-only model in July
2020. The callback feature eliminated the option for claimants to wait on hold or
the need to call multiple times a day to reach a claims representative. Instead, a
claimant is placed in line in a queue they selected based on their reason for calling
and then called back by a Department representative in the order their call was
received. Some issues were dealt with by contractors, but more complex issues
required Department staff to handle which required a longer wait time because
there were not as many Department staff.
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Authorizing Legislation and Program Guidance
In addition to federal and State laws already in place (Social Security Act and
Illinois Unemployment Insurance Act), there were several federal laws enacted in
response to the pandemic. There were also numerous Unemployment Insurance
Program Letters issued by the US DOL, which provided guidance and
recommendations for administration of unemployment assistance programs
during the pandemic. Exhibit 8 summarizes federal and State legislation and
other guidance related to unemployment programs administered by the
Department. See Appendix C for a timeline of important dates related to
unemployment compensation in Illinois.
Families First Coronavirus Response Act (FFCRA)
The federal Families First Coronavirus Response Act (FFCRA) was signed into
law on March 18, 2020, and amended the Social Security Act by establishing
emergency transfers to state accounts in the Unemployment Trust Fund. These
emergency supplemental appropriations were in response to the pandemic and
were to be used only for administration of the state’s unemployment
compensation program, not for unemployment compensation payments.
The Families First Coronavirus Response Act also provided for full federal
funding (reimbursement) of any Extended Benefits from the period of March 18,
2020, to December 31, 2020, as well as temporary federal matching for the first
week of Extended Benefits during this period for states with no waiting week.
Extended Benefits are extra benefits in times of increased unemployment.
Within one year after the enactment of the Families First Coronavirus Response
Act, states receiving emergency administration grant funding were to submit to
the Secretary of Labor, the Committee on Ways and Means of the House of
Representatives, and to the Committee on Finance in the
Overdue FFCRA Recipiency Senate a report. The report was to include an analysis
Report of the recipiency rate for unemployment compensation
in the state and a description of steps the state intended
Federal Due Date 3/18/21
IDES Submit Date 11/17/22 to take to increase such recipiency. The report was due
Days Overdue 609 on March 18, 2021. Upon request of the report in
September 2022, IDES officials noted that the report
had not been submitted, but that IDES was working on
submitting the report. IDES submitted the report on November 17, 2022.
Coronavirus Aid, Relief, and Economic Security (CARES) Act
The CARES Act created the Pandemic Unemployment Assistance (PUA), Federal
Pandemic Unemployment Compensation (FPUC), and Pandemic Emergency
Unemployment Compensation (PEUC) programs. This expanded states’ ability to
provide unemployment insurance for workers impacted by the COVID-19
pandemic, including workers who are not traditionally eligible for unemployment
benefits.
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Exhibit 8
AUTHORIZING LEGISLATION AND PROGRAM GUIDANCE
Name Description
Social Security Act Established federal requirements and funding for state
unemployment insurance programs.
Illinois Unemployment Insurance Regulated unemployment insurance eligibility and the payment of
Act benefits to claimants.
Families First Coronavirus Established emergency appropriations to state accounts in the
Response Act (FFCRA) Unemployment Trust Fund in response to the pandemic. These
supplemental appropriations were to be used only for
administration of a state’s unemployment compensation program,
not for unemployment compensation benefits. Illinois’ share of the
$1 billion emergency administrative grants was $41,979,378
(based on a ratio determined by the Social Security Act).
Coronavirus Aid, Relief, and Expanded states’ ability to provide unemployment insurance for
Economic Security (CARES) Act workers impacted by the COVID-19 pandemic, including workers
who are not traditionally eligible for unemployment benefits. The
CARES Act created the Pandemic Unemployment Assistance
(PUA), Federal Pandemic Unemployment Compensation (FPUC),
and Pandemic Emergency Unemployment Compensation (PEUC)
programs. Provided full federal funding of the first week of
compensable regular unemployment for states with no waiting
week.
Presidential Memorandum Approved a lost wages assistance program that authorized the
Governor to provide a $400 payment per week ($300 of the $400
payment would be a federal contribution) to eligible claimants from
the week of unemployment ending August 1, 2020.
Consolidated Appropriations Act, Extended unemployment programs established by the CARES Act
2021 (CAA) through March 14, 2021. CAA also extended certain provisions of
the Families First Coronavirus Response Act, established the
Mixed Earner Unemployment Compensation (MEUC) program,
and amended the CARES Act to establish identity, employment,
and income verification requirements for PUA applicants, most
notably requiring PUA claimants to provide documentation to
substantiate employment or self-employment. Also allowed for the
waiver of repayment if payment was without fault on the part of the
individual or if it would be contrary to equity and good conscience.
American Rescue Plan Act of Extended PUA, FPUC, PEUC, and MEUC programs through
2021 (ARPA) September 6, 2021.
Unemployment Insurance Provide official guidance from the US DOL ETA National Office
Program Letters (UIPLs) relating to unemployment insurance.
Source: OAG analysis of Unemployment Insurance program legislation and guidance.
Regular UI typically required a “waiting week,” which is a qualifying week for
which benefits are not paid. The CARES Act allowed states the option to enter
into an agreement with the US DOL to suspend the “waiting week.”
The Act also required full reimbursement for the total amount of regular
compensation paid and any additional administrative expenses resulting from the
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
agreement. In Illinois, funding began on March 29, 2020, and was to end on or
before December 31, 2020.
Unemployment Insurance Program Letters (UIPLs)
Unemployment Insurance Program Letters (UIPLs) are official guidance from the
US DOL Employment and Training Administration National Office relating to
unemployment insurance. According to a Memorandum of Law issued by IDES,
UIPLs undergo a vetting and clearance process, including review by ETA legal
services and the ETA legislative team. UIPLs provide guidance on a variety of
topics, including the following:
implementing federal legislation;
operating, financial, and reporting instructions for unemployment programs;
and
mandatory and recommended measures to identify fraud and recover
overpayments.
UIPLs are subject to change due to new legislation and additional guidance from
the US DOL. When UIPLs are changed, the US DOL releases an additional
program letter with amendments. Frequently changing guidance from the US
DOL posed additional challenges for the Department when implementing
pandemic unemployment programs. Auditors reviewed 72 UIPLs related to the
audit determinations. These 72 included numerous program letters that were
reissued at later dates due to changes. For example, UIPL 16-20 was first issued
April 5, 2020; however, there were 6 subsequent changes issued from April 27,
2020, to September 3, 2021. Exhibit 9 shows UIPL 16-20 and its subsequent
changes, the subject of the change, and the date the guidance was issued.
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
Exhibit 9
UNEMPLOYMENT INSURANCE PROGRAM LETTER GUIDANCE CHANGE EXAMPLE
UIPL Subject Date
16-20 CARES Act of 2020 – PUA Program Operating, Financial, and 4/5/20
Reporting Instructions.
16-20, Change 1 CARES Act of 2020 – PUA Program Reporting Instructions and 4/27/20
Questions and Answers.
16-20, Change 2 CARES Act of 2020 – PUA Additional Questions and Answers. 7/21/20
16-20, Change 3 CARES Act of 2020 – Eligibility of Individuals who are 8/27/20
Caregivers for PUA in the Context of School Systems
Reopening.
16-20, Change 4 Continued Assistance to Unemployed Workers Act of 2020 – 1/8/21
PUA Program: Updated Operating Instructions and Reporting
Changes.
16-20, Change 5 Expanded Eligibility Provisions for the PUA Program. 2/25/21
16-20, Change 6 PUA Program: Updated Operating Instructions and Reporting 9/3/21
Changes.
Source: US Department of Labor.
Key UIPLs included guidance on the following:
flexibility for claimants’ ability and availability for work, as well as flexible
work search requirements;
temporary emergency state staffing flexibility;
PUA program operating, financial, and reporting instructions;
addressing fraud in the unemployment insurance system and detecting fraud;
implementing the Consolidated Appropriations Act, 2021 (CAA);
implementing the American Rescue Plan Act of 2021 (ARPA); and
identity verification requirements.
Appendix D is a listing of the 72 relevant UIPLs and UIPL changes issued by the
US Department of Labor reviewed by auditors.
National Association of State Workforce Agencies (NASWA)
The National Association of State Workforce Agencies (NASWA) is a national
organization representing all 50 State Workforce Agencies, the District of
Columbia, and the US territories. According to NASWA, its mission is to
enhance the State Workforce Agencies’ ability to accomplish their goals, statutory
roles, and responsibilities.
The UI Integrity Center, established by the US DOL in October 2012, is operated
by NASWA and was designed to assist states in their efforts to more effectively
prevent, detect, and recover improper and fraudulent payments. Services
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provided by the UI Integrity Center include fraud calls to discuss emergent fraud
schemes, virtual and on-site consultation services to states, courses and certificate
programs for staff administering unemployment assistance, resources on state
practices and recommendations, and the Integrity Data Hub which is discussed in
more detail later.
NASWA also operates the Unemployment Insurance Interstate Connection
Network (ICON). ICON provides for the exchange of data between State
Workforce Agencies and federal partners. ICON provides real-time information
to assist state unemployment insurance staff in identifying if a claimant has a
claim or wages in another state. IDES has been utilizing ICON for regular UI for
many years. In addition, NASWA houses the Unemployment Insurance State
Information Data Exchange System (SIDES), which is a web-based system that
allows electronic transmission of information regarding unemployment insurance
claims between State Workforce Agencies and employers.
The US DOL Employment and Training Administration strongly encouraged
states to access the technical assistance, tools, and resources available through the
UI Integrity Center, including the Integrity Data Hub, ICON, and UI SIDES.
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
Pandemic Unemployment Programs
The Department was responsible for implementing the new pandemic
unemployment programs so the unemployment benefits could be distributed.
These benefits were being distributed to individuals who were not traditionally
eligible for unemployment benefits.
Exhibit 10 provides a timeline of the start and end date for the new pandemic
unemployment programs based on the authorizing legislation.
Exhibit 10
TIMELINE OF NEW PANDEMIC PROGRAMS
January 2020 to September 20211
2020 2021
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep
1/1/21
1/27/20 3/15/21
PUA PUA
PUA eligibility began. PUA extended.
extended.
1/1/21 3/15/21
3/28/20
PEUC PEUC PEUC extended.
PEUC eligibility began.
extended.
7/31/20 12/27/20
3/28/20
FPUC benefits FPUC ($300) 3/15/21
FPUC FPUC ($600) eligibility
lapsed. eligibility FPUC ($300) extended.
began.
began.
7/26/20 9/5/20
LWA LWA funds
LWA
eligibility fully allotted
began. to states.
12/27/20
3/15/21
MEUC MEUC eligibility
began. MEUC extended.
CARES Act Presidential Memorandum Consolidated Appropriations Act, 2021 American Rescue Plan Act of 2021
(Enacted March 27, 2020) (Issued August 8, 2020) (Enacted December 27, 2020) (Enacted March 11, 2021)
Note:
1 While payments for PUA began on May 15, 2020, claimants were eligible for assistance for weeks of
unemployment, partial unemployment, or inability to work beginning on or after January 27, 2020.
Source: OAG analysis of pandemic unemployment programs.
Pandemic Unemployment Assistance (PUA)
The CARES Act was signed into law on March 27, 2020, and established the
Pandemic Unemployment Assistance (PUA) program. Any state entering into an
agreement with the US DOL to provide PUA benefits was to be paid 100 percent
of the total amount of assistance and any additional administrative expenses
incurred due to the agreement. Illinois entered into an agreement on March 28,
2020, with the US DOL in order to carry out the provisions of the program.
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The PUA program provided benefits for individuals who had been determined
ineligible for regular State unemployment insurance benefits. Self-employed
workers, those seeking part-time employment, those lacking a sufficient work
history, or those who had exhausted regular benefits are examples of individuals
who would be excluded from regular UI benefits, but could be eligible for PUA.
PUA provided assistance for weeks of unemployment, partial unemployment, or
inability to work caused by a COVID-19 reason allowed by federal law. The
CARES Act required individuals to self-certify that they lost employment income
due to a COVID-19 related reason. Exhibit 11 provides examples of reasons
allowed by federal law.
Exhibit 11
QUALIFYING COVID-19 RELATED REASONS
You have been diagnosed with COVID-19.
You have a member of your household who has been diagnosed with COVID-19.
You are providing care to a household or family member diagnosed with COVID-19.
You have primary caregiving responsibility for a child or other person who is unable to attend
school or another facility as a result of COVID-19.
You are unable to reach the place of employment because you have been advised by a health
care provider to self-quarantine.
You were scheduled to start work and do not have a job because of COVID-19.
You have become the major support for a household because the head of the household died
because of COVID-19.
You refused to return to work or accept an offer of work at a worksite that is not in compliance
with local, state, or national health and safety standards directly related to COVID-19.
You work for a school which is closed due to COVID-19.
Your hours have been reduced or you were laid off as a direct result of COVID-19.
Source: CARES Act and US DOL UIPL 16-20.
The PUA benefit amount was equal to the weekly benefit amount that would
have been paid regularly as computed under the individual’s state
unemployment compensation law plus the Federal Pandemic Unemployment
Compensation amount (see Federal Pandemic Unemployment Compensation
section on page 22). The minimum weekly benefit amount was $198 in Illinois;
however, the weekly benefit amount would have been increased if the State had
existing wage records or the applicant submitted additional supporting evidence
of higher income.
To be eligible for PUA benefits, covered individuals were required to self-certify
(primarily via online self-service and telephone) each week that they were
meeting the requirements for the program, including the COVID-19 related
reasons why they were unemployed, partially unemployed, or unable or
unavailable to work. Auditors found evidence of PUA claimants certifying
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weekly and evidence of the Department monitoring PUA certifications for claims.
See Analysis of Claims Data and Call Data section on page 88 for more details on
PUA certifications.
The PUA program was administered through a voluntary agreement between a
state and the US Department of Labor. The cost of PUA benefits was 100 percent
federally funded. Implementation costs and ongoing administrative costs were
also 100 percent federally funded.
On April 28, 2020, the Department contracted with Deloitte to design and
implement a fully-functional integrated unemployment insurance solution system
necessary to administer the PUA program. On May 11, 2020, Illinois opened the
PUA program for enrollment. The Department began issuing benefit payments to
claimants on May 15, 2020.
Originally, under the CARES Act, PUA benefits were available for up to 39
weeks of unemployment, partial unemployment, or inability to work beginning on
January 27, 2020, (which included backdating), and ending on or before
December 31, 2020. The Consolidated Appropriations
Maximum Weeks of PUA Available Act, 2021 extended weeks of eligibility for PUA
Under CARES Act 39 weeks through March 14, 2021, and increased the duration of
Beginning 1/27/20 assistance to 50 total weeks. The American Rescue
Under 50 weeks Plan Act of 2021 extended PUA assistance through
Consolidated September 6, 2021, and increased the duration of
Appropriations Act
Beginning 1/1/21 assistance to 79 total weeks. IDES stopped accepting
Under American 79 weeks PUA applications October 6, 2021, for retroactive PUA
Rescue Plan Act benefits.
Beginning 3/15/21
According to Department data, gross PUA benefits paid
from May 2020 through December 2021 totaled
$4,305,265,988 (see Exhibit 12).
Federal Pandemic Unemployment Compensation (FPUC)
The CARES Act established the Federal Pandemic Unemployment Compensation
(FPUC) program. FPUC provided an emergency increase in weekly
unemployment compensation benefits. From March 28, 2020 (based on the date
Illinois entered into an agreement with the Department of Labor), to the week
ending July 25, 2020, the FPUC provided an additional $600 per week to
eligible claimants in Illinois. This varies from the statutory end date of July 31,
2020, because Illinois’ benefit week begins on a Sunday and ends on a Saturday.
(Statutory dates do not always align with a state’s benefit weeks.)
Claimants who received at least $1 of regular or federal unemployment benefits
were eligible for FPUC. In Illinois, claimants would automatically receive the
FPUC supplement each week if the individual was currently receiving any kind of
unemployment benefit. Illinois began paying FPUC wage supplements on April
8, 2020.
The Consolidated Appropriations Act, 2021 re-enacted FPUC benefits of $300
per week starting December 27, 2020, and ending March 14, 2021. IDES began
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paying out the $300 FPUC benefit beginning January 4, 2021. The American
Rescue Plan Act of 2021 further extended the $300 FPUC benefit through
September 6, 2021. The FPUC program in Illinois expired September 4, 2021.
These additional benefits and any additional administrative expenses incurred by
Illinois for FPUC payments were 100 percent federally funded.
According to Department data, gross FPUC benefits paid from April 2020
through December 2021 totaled $16,818,301,500 (see Exhibit 12).
Pandemic Emergency Unemployment Compensation (PEUC)
The CARES Act also established the Pandemic Emergency Unemployment
Compensation (PEUC) program, which provided additional weeks of
unemployment benefits for those who had exhausted regular unemployment
compensation (26 weeks of compensation) under federal law and were able to
work, available to work, and were actively seeking work.
Under the CARES Act, PEUC benefits applied to weeks of unemployment
beginning after March 28, 2020, (the date on which Illinois entered an agreement
with the US DOL to participate in the programs) and ending on or before
December 31, 2020. The Department began issuing PEUC payments on April 21,
2020. PEUC payments were made to individuals who met the following
conditions:
had exhausted all rights to regular compensation under state law or under
federal law with respect to a benefit year (excluding any benefit year that
ended before July 1, 2019);
had no rights to regular compensation with respect to a week under such law
or any other state employment compensation law or to compensation under
any other federal law;
were not receiving compensation with respect to such week under the
unemployment compensation law of Canada; and
were able to work, available to work, and actively seeking work.
According to the CARES Act, each eligible individual was to receive total PEUC
benefits equal to 13 times the individual’s average weekly benefit amount,
including the amount of FPUC, for a benefit year (essentially 13 additional weeks
of benefits.) The Consolidated Appropriations Act, 2021 increased PEUC
benefits to 24 times the individual’s average weekly benefit amount (essentially
adding an additional 11 weeks for a total of 24 additional weeks of benefits) and
extended weeks of eligibility to weeks of unemployment ending on or before
March 14, 2021. The American Rescue Plan Act of 2021 increased PEUC
benefits to 53 times the individual’s average weekly benefit amount and extended
unemployment to weeks ending on or before September 6, 2021. This makes a
total of 79 weeks of unemployment compensation.
According to Department data, gross PEUC benefits paid from April 2020
through December 2021 totaled $4,061,328,773 (see Exhibit 12).
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
Mixed Earner Unemployment Compensation (MEUC)
The Consolidated Appropriations Act, 2021 was signed into law December 27,
2020, and amended the CARES Act to establish the Mixed Earner Unemployment
Compensation (MEUC) program. Mixed earners are workers who earn money
both through self-employment income and through traditional W2 employment.
For example, a songwriter who also earns money as an administrative assistant is
a mixed earner. Other examples of mixed earners are gig workers, freelancers,
and other self-employed workers.
If approved for MEUC, claimants received an additional $100 weekly benefit for
each week they received other unemployment benefits. This is in addition to the
automatic $300 FPUC payment. PUA recipients were not eligible for MEUC.
To be eligible for MEUC, a recipient must meet all three of the following
requirements:
claimants must already be eligible for another unemployment program, such
as regular unemployment, Extended Benefits, or PEUC;
claimants must have received unemployment benefits for weeks between
December 27, 2020, and September 4, 2021; and
claimants must have earned at least $5,000 in net self-employment income in
the most recent tax year prior to the initial application for regular benefits.
MEUC benefits were available December 27, 2020, through September 6, 2021.
The Department made initial payments to eligible Illinois claimants August 6,
2021. According to a Department official, payments were delayed because the
Department was required to do marketing and outreach and took time to work
with industry advocates. The official said they also created glossary guides to
help define financial literacy terms.
According to Department data, gross MEUC benefits paid from August 2021
through December 2021 totaled $441,500 (see Exhibit 12).
Lost Wages Assistance (LWA)
On August 8, 2020, a presidential memorandum allocated $44 billion from the
Department of Homeland Security’s Disaster Relief Fund to the Lost Wages
Assistance (LWA) program. LWA authorized governors to give a $400
supplemental payment (in addition to other unemployment compensation
received) per week to eligible claimants. The memorandum authorized a 75
percent federal cost share, meaning $300 would be paid with federal funding, and
$100 would be paid with state funding. States could count funds that were
already used to provide regular UI payments toward the state match, meaning
eligible claimants would receive $300 from the federal government in addition
to their weekly benefit amount. LWA started July 26, 2020, and could continue
through December 27, 2020; however, the program ended on September 5, 2020,
when funding was depleted. According to the Department, September 4, 2020,
was the first week Illinois made payments to claimants.
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According to Department data, gross LWA benefits paid from September 2020
through December 2021 totaled $1,262,076,306 (see Exhibit 12).
Extended Benefits (EB)
The Extended Benefits program provides for extra benefits in times of increased
unemployment. During periods of high unemployment, the Illinois
Unemployment Insurance Act (820 ILCS 405/409) provides for an additional 13
weeks of extended benefits once a claimant exhausts their initial 26 weeks of
benefits. Claimants must also exhaust their weeks of PEUC benefits, if eligible.
The claimant’s weekly Extended Benefits amount should be the same as the
weekly benefit amount during the benefit year.
Claimants are only able to collect Extended Benefits when the State Extended
Benefits indicator is triggered on. Extended Benefits begin with the third week
after a week for which there is a State "on" indicator. The Director of IDES can
determine whether Extended Benefits should be triggered on based upon the
Illinois unemployment rate as defined in the Illinois Unemployment Insurance
Act. The US DOL Secretary can also cause Extended Benefits to be triggered on
in certain circumstances, such as those experienced in 2009 and in 2020.
Traditionally, Extended Benefits are only triggered on for 13 weeks, but the
CARES Act allowed them to stay on longer.
On May 17, 2020, Illinois triggered on Extended Benefits to provide 13 extra
weeks of benefits. Before 2020, Extended Benefits had not been triggered on in
Illinois since 2010, according to Department officials. According to data
provided by the Department, the first Extended Benefits payments were made in
July 2020 and continued through December 2021. Illinois triggered off Extended
Benefits the week ending September 11, 2021.
According to Department data, gross Extended Benefits paid from July 2020
through December 2021 totaled $652,461,089 (see Exhibit 12).
Gross Benefits Paid
Exhibit 12 provides the total gross benefits paid during March 2020 through
December 2021 for regular UI and each of the PUA programs based on
information provided by the Department. The Federal Pandemic Unemployment
Compensation program, which paid out benefits on both regular UI and PUA
claims, paid out gross benefits of $16.8 billion, which was the highest amount
paid out of these programs.
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
Exhibit 12
GROSS BENEFITS PAID BY PROGRAM
March 2020 through December 2021
Gross Benefits
Program Regular UI (IBIS) PUA (uFACTS) Paid Funding Source
FPUC $11,893,069,200 $4,925,232,300 $16,818,301,500 Federal
Regular UI $9,065,089,426 $9,065,089,426 Employer
PUA $4,305,265,988 $4,305,265,988 Federal
PEUC $4,061,328,773 $4,061,328,773 Federal
LWA $899,916,306 $362,160,000 $1,262,076,306 Federal
Extended Benefits $652,461,089 $652,461,089 Federal
MEUC $441,500 $441,500 Federal
Total $26,572,306,294 $9,592,658,288 $36,164,964,582
Source: OAG analysis of IDES data.
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UI and PUA Claim Application Processes
Regular UI claim applications are processed through the Illinois Benefits Information System
(IBIS), which is the computerized system used by the Department to process and pay
unemployment benefits. When a claimant submits an application for regular UI benefits through
IBIS, the information submitted on the application goes through a number of identity
verifications; these verifications were different from the PUA applicants which underwent a
different identity verification process. PUA claim applications were processed through the
Unemployment Framework for Automated Claim & Tax Services (uFACTS), which is a system
developed, owned, and maintained by Deloitte. From the time uFACTS began accepting PUA
applications on May 11, 2020, to July 18, 2020, uFACTS did not check with IBIS to verify a
regular UI claim had been filed. Beginning July 18, 2020, PUA claimants had to apply through
IBIS and be denied regular unemployment benefits before being able to apply for PUA benefits
through uFACTS. This added additional verifications to PUA claims which had initially been
lacking.
Third-party contractors input data into the PUA system. The PUA system then calculated the
weekly benefit amount and payment amount based on the information (such as wages and
dependents) that was input. While there was a procedure for verifying the accuracy of the
weekly benefit amounts for regular UI weekly benefit amounts (since 2010), this procedure was
not put into place to review PUA weekly benefit amount calculations until November 2021.
Determination 1 of LAC Resolution Number 158 asked us to review the
application and review processes and the payment of benefits to individuals
focusing on any fraud or inefficiencies which could be eliminated to contain costs
and improve the delivery of benefits to eligible individuals. Determination 7 also
asked us to determine if a third-party contractor calculated weekly benefit
amounts for Pandemic Unemployment Assistance claimants and, if so, if there
were any procedures to verify the accuracy of their calculations.
Applications for regular UI and PUA followed a similar process, but were
accomplished through two different systems. Regular UI claim applications are
processed through the Illinois Benefits Information System (IBIS), which is the
computerized system used by the Department to process and pay unemployment
benefits. PUA claim applications were processed through the Unemployment
Framework for Automated Claim & Tax Services (uFACTS), which is a system
developed, owned, and maintained by Deloitte. Illinois entered into a contract for
the uFACTS system on April 28, 2020, and began accepting PUA applications on
May 11, 2020. Exhibit 13 provides a simplified flowchart of the general
unemployment claim process for both regular UI and PUA applications.
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Exhibit 13
UI AND PUA APPLICATION PROCESS FLOWCHART
July 18, 2020 to September 6, 2021
Note:
1 Flowchart represents the process after July 18, 2020. Prior to July 18, 2020, PUA applicants did not have to
apply through IBIS and uFACTS did not check with IBIS to verify a regular UI claim had been filed.
Source: OAG analysis of Illinois Department of Employment Security information.
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Regular UI Process
When a claimant submits an application for regular UI benefits, the information
submitted on the application goes through a number of
IBIS Identity Verifications identity verifications, including Secretary of State
Secretary of Validation of validation, Social Security Administration cross-match,
State info against and a Wage Record Validation cross-match. The system
SOS data also performs monetary (i.e., earnings thresholds and wage
Social Looks for history) and nonmonetary (i.e., job loss or being able,
Security claims with
Administration invalid SSNs available, and actively seeking work) determinations. The
Wage Record Compares system creates flags for any information preventing
Validation against wage eligibility. For example, if a claim is submitted in IBIS
records to with an invalid SSN, the cross-match against Social
determine Security Administration data would flag the claim. Flags
monetary
eligibility
can only be removed manually after the flag is cleared.
According to the Department, IBIS automatically
determines the correct claim type, the correct program, employer chargeability,
dependent eligibility, and the weekly benefit amount (WBA) based upon the base
period wage records in IBIS. (Wages are entered by the claimant or caseworker
then those wages are cross-matched against wage records.) A regular UI finding
will automatically be generated to the claimant, and a notice of claim will be sent
to the claimant’s last 30-day employer and/or the last employer. This UI finding
shows: the first certification date; the wages paid by each employer in each
calendar quarter of the base period for insured work; the date of claim and benefit
year begin and end dates; the weekly benefit amount and dependent allowance;
and a maximum benefit balance. Auditors reviewed a sample of UI findings and
letters to employers and found the correspondence generally included these
components. According to the Department, employers also receive, on a quarterly
basis, a listing of all regular UI and Extended Benefits claimants linked to the
employer for the quarter.
If general eligibility requirements are met, the recipient will be provided some
income while searching for a job for up to a maximum of 26 full weeks in a one-
year period. Exhibit 14 lists the general
eligibility requirements. Eligibility
Exhibit 14
UI GENERAL ELIGIBILITY REQUIREMENTS requirements are designed to determine if an
individual was recently employed and lost
Unemployed through no fault of his/her own. that employment through no fault of his/her
Was paid $1,600 or more in wages during the own.
base period for insured work.
Was paid at least $440 of the base period According to a US DOL fact sheet, prior to
wages at any time during the base period the pandemic, a claimant could expect to
outside the calendar quarter in which wages receive the first benefit check generally two to
were the highest. three weeks after filing a claim, which
Registered for work with the Illinois Department included a waiting week. A “waiting week” is
of Employment Security. a qualifying period required by federal law for
Source: Illinois Department of Employment Security which benefits are not paid.
Unemployment Insurance Benefits Handbook.
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Regular UI typically requires this waiting week. However, during the audit
period, the CARES Act allowed states the option to enter into an agreement with
the US DOL to suspend the “waiting week” and pay benefits for two weeks,
instead of one, after their first certification. The agreement with the US DOL also
provides for full reimbursement for the first week of regular unemployment.
Illinois entered into an agreement with the US DOL on March 28, 2020.
Benefit Payment
During the audit period, once a claimant was determined eligible to receive
benefits, IBIS automatically established payment of regular UI benefits via debit
card, unless the claimant had enrolled for payment by direct deposit. Debit cards
were valid for 24 months from issuance. An initial Benefit Payment Explanation
should also be provided to the claimant.
Claimants are required to certify for benefits bi-weekly. Certification is the
process of answering basic questions and attesting to facts to communicate a
claimant’s employment status and establish a claimant’s continued eligibility.
Claimants may certify through the online self-service, Tele-Serve, and/or paper
certifications (allowed in limited circumstances). Certifications are required to
occur in a timely manner, which according to IDES procedures is no later than
one week after their scheduled certification day. Most of the certification process
is automated through Tele-Serve and the online self-service.
Auditors found evidence of regular UI claimants certifying bi-weekly for a two
week period and the Department monitoring regular UI certifications in IBIS. See
the Analysis of Claims Data and Call Data section on page 88 for more details on
regular UI certifications.
PUA Process
To have been eligible for PUA benefits, a claimant was required to first be denied
regular unemployment benefits. PUA claim applications were processed through
uFACTS, a system developed, owned, and maintained by Deloitte. From the time
uFACTS began accepting PUA applications on May 11, 2020, to July 18, 2020,
there were no controls to prevent applicants with no recent claim filed in IBIS
from filing for PUA. Prior to July 18, 2020, uFACTS did not check with IBIS to
verify a regular UI claim had been filed. Also prior to July 2020, PUA applicants
underwent a different identity verification process. The uFACTS system used
Experian; however, a claimant could opt out of the Experian identity verification
at which point the claim would go to adjudication and be worked by contractors
and/or retirees on personal services contracts (whose positions ranged from
Program Representatives to Field Office Supervisor).
Applicants who wanted to receive more than the minimum weekly benefit amount
of $198 had to provide tax documents from the previous tax year to support the
applicant’s net income. According to Department officials, third-party
contractors input data into the PUA system, whereupon the system then calculated
the weekly benefit amount and payment amount based on the information, such as
wages and dependents.
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Pursuant to Determination 7 of the audit’s resolution, auditors inquired if there
were any procedures to verify the accuracy of the calculation of weekly benefit
amounts for PUA claimants. According to IDES officials, since 2010, IDES and
Illinois Department of Innovation and Technology staff conduct weekly benefit
testing for regular UI claims every year from late November into December. The
purpose of the testing is to ensure monetary determinations for weekly benefit
amount and dependent allowances are correctly calculated based upon wages in
the base period. IDES officials said this testing began on PUA claimants in
November 2021 and was conducted by Deloitte and IDES staff. See the Previous
OAG Audits section on page 33 for information on the Statewide Single Audit’s
finding related to weekly benefit amount calculations.
Beginning July 18, 2020, PUA claimants had to apply through IBIS and be denied
regular unemployment benefits before being able to apply for PUA benefits
through uFACTS. After July 18, 2020, once the applicant passed the identity
verification in IBIS and IBIS determined the claimant was not eligible for regular
UI, the applicant was directed to apply for PUA benefits through uFACTS. At
this point, the claimant underwent additional identity verification checks through
Experian. IDES staff were not assigned to make PUA eligibility determinations.
PUA eligibility determinations were handled by agents of Insight Global, a
contractor hired to help verify claimants’ wages and income, and IDES retirees on
personal services contracts.
Per the Consolidated Appropriations Act, 2021, after January 31, 2021, applicants
had to substantiate employment or self-employment within 21 days after
submitting an application for PUA. Applicants who had applied prior to January
31, 2021, were allowed 90 days to provide proof of employment. According to
UIPL 16-20 Change 4, requiring the individual to submit this documentation to
prove eligibility was intended to demonstrate a recent attachment to the labor
force and serve as an important tool against fraud (rather than have such
documentation automatically added to the file based on agency records).
Applicants who had submitted documentation in support of a higher weekly
benefit amount would already have met this requirement.
After applying for PUA, applicants would receive a PUA Finding Letter with
information about the claim, including the weekly benefit amount. Benefit
payments were retroactive, for weeks of unemployment, partial unemployment or
inability to work due to COVID-19 reasons starting on or after January 27, 2020.
To remain eligible for PUA benefits, an applicant had to certify on a weekly basis.
Other Unemployment Compensation Benefits
Once an applicant was receiving regular UI benefits or PUA benefits, they could
be entitled to benefits from the other programs (PEUC, FPUC, LWA, and
MEUC). As a result, both the regular UI processing system (IBIS) and the PUA
processing system (uFACTS) had to have the capability to process these
additional benefits. Exhibit 15 shows which programs were processed through
which system(s). For example, PEUC and MEUC could only be added to regular
UI; therefore, it only had to be processed in IBIS. FPUC and LWA could be
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
added to regular UI or to PUA so these benefits were processed in both IBIS and
uFACTS.
Claimants could be eligible for multiple programs. For example, an applicant
receiving regular UI could be eligible (upon meeting individual program
requirements) for all programs except PUA. Some programs, however, were
exclusive to regular UI claimants. For example, PUA claimants could not receive
PEUC or MEUC.
Exhibit 15
UNEMPLOYMENT PROGRAMS PROCESSING SYSTEMS
Regular UI (IBIS) PUA (uFACTS)
Regular UI Yes -
PUA - Yes
PEUC Yes No
FPUC ($600/$300) Yes Yes
LWA Yes Yes
MEUC Yes No
Source: OAG auditor prepared based on Illinois Department of Employment Security information.
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Audits
Prior OAG audits have contained various findings related to IDES’ unemployment process
including failure to implement general information technology controls over the PUA system and
inadequate process over determining appropriate benefit amounts for the PUA program.
In addition, audits from the US DOL Office of Inspector General and audits from other states
have shown that the issues that occurred in Illinois were not limited to Illinois. States’
difficulties with implementing the new unemployment programs were attributed to states’
information technology systems not being modernized and staffing resources being insufficient
to manage the increased number of new claims.
A report issued by the Pandemic Response Accountability Committee noted states experienced
significant challenges in effectively providing their states with unemployment benefits. The
report noted four common insights from unemployment insurance findings identified across 16
State Auditor Offices (including Illinois): unemployment insurance workloads surged for states;
the claims surge exploited internal control weaknesses; uncommon and varying fraud schemes
began to occur as the amount of federal funding expanded; and State Workforce Agencies
experienced information technology system challenges.
Auditors reviewed recent audits for findings relevant to unemployment insurance,
including programs funded by the CARES Act. Several audits were released by
various sources, including the OAG, US DOL, and audits and reviews from other
states. Some of the most relevant findings are noted below.
Previous OAG Audits
There were various findings in prior OAG audits related to IDES' unemployment
process. We reviewed the IDES Compliance Examinations for FY16 through
FY21, Financial Audits for the Unemployment Compensation Trust Fund for
FY20 and FY21, and Statewide Single Audits for FY19, FY20, and FY21.
A few of the most relevant findings from OAG compliance examinations and
financial audits are noted below.
Failure to Implement General Information Technology Controls over the
PUA System is a repeated finding (for FY21) and noted the service provider
for the PUA system maintained full control over the system and found specific
issues with Change Control, Security, and Disaster Recovery.
Failure to Maintain Accurate and Complete Pandemic Unemployment
Assistance Claimant Data is a new finding for FY21. Auditors were unable
to conclude the PUA claimant data records were complete and accurate under
the Professional Standards promulgated by the American Institute of Certified
Public Accountants. “Due to the inability to conduct detailed claimant testing,
we were unable to determine whether the Department’s financial statements
accurately document the PUA benefits paid during Fiscal Year 2021.”
Inadequate Controls over Service Providers is a new finding for FY21 and
noted the Department had not monitored compliance with the contract
requirements for the service providers tested. We tested compliance with
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
contract requirements and deliverables; results of this testing can be found in
the Contracts and Agreements section on page 38.
Two additional relevant findings were in past OAG audits, but could not be
followed up on in the most recent FY21 audit: 1) the Department failed to ensure
PUA claimants met eligibility requirements; and 2) the Department did not
implement adequate controls over the PUA program processes, including system
edits to prevent claimants who were between the ages of birth to 13 years old or
90 years or older. The audits noted that the Department was unable to provide
complete and accurate claimant data; therefore, the auditors were unable to
conduct detailed testing as part of the most recent FY21 audit.
These findings led the auditors to have a qualified opinion on the FY20 report and
a disclaimer of opinion on the FY21 report. The FY20 audit notes that the system
processing these claims had material weaknesses in the design and operation of
internal control. As a result, the auditors were unable to obtain sufficient
appropriate audit evidence to determine or verify by alternative means whether
accrued claims and certain other paid claims met eligibility requirements.
The FY21 audit notes that the Department has not maintained certain accounting
records and supporting documents for the Trust Fund relating to transactions with
its beneficiaries, nor is the Trust Fund’s internal control adequate to provide
safeguards over Trust Fund assets and to assure the proper recording of
transactions. Accordingly, auditors were unable to extend auditing procedures
sufficiently to determine the extent to which the financial statements may have
been affected by these conditions and therefore were unable to determine if the
Department’s FY21 Trust Fund financial statements were fairly presented.
Although there were some limitations to the data we received as part of this
Performance audit, for purposes of this audit only, we found the data provided
to be adequately reliable. As part of our sample, we verified information when
appropriate. See Appendix B for a discussion of our testing.
We also reviewed the Statewide Single Audits released for FY19, FY20, and
FY21. The FY21 Statewide Single auditors determined that the material
noncompliance resulted in a qualified opinion on compliance for the
Unemployment Insurance program.
Relevant findings for these audits include:
Inadequate Process over Determining Appropriate Benefit Amounts for
the PUA Program is a new finding for FY21 and noted IDES inaccurately
calculated the weekly benefit amount (WBA) for certain claimants of the PUA
program during the year ended June 30, 2021. The use of an outdated weekly
benefit amount payment chart after January 1, 2021, resulted in the weekly
benefit amount for some PUA claimants sampled being $484 instead of $505
(after a January 1, 2021 adjustment).
Inadequate Controls over Determining Eligibility for the PUA Program is
a repeated finding from FY20 and noted the Department did not establish
adequate internal controls over its third party service organization who
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administered the Unemployment Framework for Automated Claim & Tax
Services (uFACTS) system used to determine eligibility for the PUA program.
This included the absence, from May 2020 to February 2021, of a question for
claimants to certify that they were self-employed (or similar).
Failure to Complete UI BAM Case File Reviews is a repeated finding from
FY20 and noted the Department did not complete the Benefit Accuracy
Measurement (BAM) case file reviews in accordance with US DOL
requirements for the Unemployment Insurance program.
Inadequate Controls over Determining Eligibility for Lost Wages
Assistance Payments is a new finding for FY21 and noted IDES did not
establish adequate controls over its third-party service organization who
administered the uFACTS system used to determine eligibility for the PUA
program. Eligibility for PUA also determined eligibility for the LWA
program. IDES has automated controls within uFACTS to validate weekly
self-certifications for unemployment and monitoring of period of
performance, including cutoff when maximum benefits have been issued.
Therefore, controls over allowability, eligibility, and period of performance
for LWA were not able to be tested.
Failure to Implement UI Program Integrity and Overpayment Reduction
Requirements is a repeated finding from FY19. Similar findings on this
issue have been reported since 2015. While IDES developed written
procedures relative to overpayments and entered into agreements to recover
overpayments, the procedures did not address the requirement to impose a
monetary penalty (not less than 15%) on fraud overpayments. In addition,
these procedures did not address the prohibition on providing employers relief
from charges to an employer’s unemployment insurance account when
overpayments are the result of the employer’s failure to provide timely or
adequate information.
US DOL OIG Audits
The US DOL Office of the Inspector General (OIG) is an independent agency
within and has primary oversight of the US Department of Labor and has released
many reports and alert memorandums regarding the new unemployment
programs. The US DOL OIG has made a number of recommendations to the US
DOL ETA to improve management oversight of the Unemployment Insurance
program.
Some of the audits also surveyed states or selected states for in-depth analysis. A
report released in May 2021, covering the period March 27, 2020, to September
30, 2020, noted that Illinois was performing overpayment recoveries. However,
the report noted that Illinois was only partially reporting identity theft
overpayments for PUA, and it was not reporting overpayments for PEUC or
FPUC.
The report noted that many states that did report overpayments still understated
the total amount reported (by an estimated 89 percent). This demonstrates the
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difficulties experienced by many states with reporting overpayments and
performing overpayment recovery activities. The report also attributes the states’
difficulties with implementing three of the new unemployment programs (PUA,
PEUC, and FPUC) to: states’ information technology systems were not
modernized; staffing resources were insufficient to manage the increased number
of new claims; and according to state officials, guidance from ETA was untimely
and unclear.
A report released in September 2022 noted that, despite significant efforts made
by the US DOL ETA, pandemic-related UI funds were not protected from historic
levels of improper payments, including fraud. Improper payments and improper
payment rates are discussed later in this report.
Other State Audits
Several states have released audits of their state unemployment programs.
Several common concerns emerged throughout the audit reports issued by other
states:
State Workforce Agencies were inundated with fraud;
Agencies did not have modernized IT systems and/or internal controls
required to prevent overpayments from occurring;
Agencies did not pay benefits or adjudicate claims in a timely manner; and
Agencies were not equipped to answer the number of calls into their call
centers during the pandemic.
Pandemic Response Accountability Committee Report
The Pandemic Response Accountability Committee (PRAC) was created in
March 2020 by the CARES Act. The PRAC is responsible for conducting and
coordinating oversight of pandemic-related funds and preventing and detecting
fraud. A PRAC report released in December 2021 noted states experienced
significant challenges in effectively providing their states with unemployment
benefits. The purpose of the report was to identify key themes or common
challenges identified during oversight activities completed by the US DOL OIG
and the offices of State Auditors. The report noted four common insights from
unemployment insurance findings identified across 16 State Auditor offices
(including Illinois):
unemployment insurance workloads surged for states;
the claims surge exploited internal control weaknesses;
uncommon and varying fraud schemes began to occur as the amount of
federal funding expanded; and
State Workforce Agencies experienced information technology system
challenges.
According to the report, State Auditors found:
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
the PUA eligibility requirements decreased internal controls, and
state-specific control weaknesses for identity and eligibility verification
negatively impacted the State Workforce Agencies’ ability to detect fraud.
The PUA program did not include the typical verifications required for regular
unemployment benefits, such as approving eligibility for unemployment benefits
based on self-certification rather than requiring a claimant to provide
documentation. This was the case until December 27, 2020, when the
Consolidated Appropriations Act, 2021 required claimants to provide
documentation to substantiate their employment or self-employment to be eligible
to receive PUA.
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Contracts and Agreements
The Department entered into eight contracts including 29 amendments during the audit period
for services and software related to administering the unemployment insurance and PUA
programs. Pursuant to a Disaster Proclamation issued by the Governor, these contracts were
exempt from bidding and the provisions of the Illinois Procurement Code.
The eight contracts initially totaled $33.5 million. However, with subsequent amendments, the
eight contracts eventually totaled $226.4 million, $160.5 million of which had been expended
through January 2023. Nine of the 29 amendments were signed by IDES between 2 days and 45
days after the effective date of the amendment.
Auditors tested a total of 37 contract deliverables for six of the contracts. We found that the
contract deliverables were met for all but one contract. IDES did not receive from Insight Global
all required weekly reports. Additionally, not all nondisclosure agreements were filled out
completely and filed before beginning work on the project. This deficiency limited IDES’ ability
to ensure all contract employees were Illinois residents and also failed to ensure contract
employees were made aware of confidentiality procedures before working with confidential data.
Determination 7 of LAC Resolution Number 158 asked us to determine what
third-party contractors did the Illinois Department of Employment Security utilize
during this time period and were any of these contracts no-bid contracts; did a
third-party contractor calculate weekly benefit amounts for Pandemic
Unemployment Assistance claimants and, if so, were there any procedures to
verify the accuracy of their calculations; did third-party contractors meet the
performance measure established by the Illinois Department of Employment
Security prior to the issuance of the contracts.
During the audit period, the Department, beginning April 9, 2020, entered into
eight no-bid contracts/agreements for services and software related to
administering the unemployment insurance and PUA programs. On March 9,
2020, the Governor issued a Disaster Proclamation, which suspended the
provisions of the Illinois Procurement Code that would in any way prevent,
hinder, or delay necessary action in coping with the disaster as long as they were
not required by federal law. These eight contracts were deemed necessary to
respond to the COVID-19 pandemic and were therefore exempt from
bidding and the provisions of the Illinois Procurement Code. Exhibit 16
provides a summary of the contract purpose, procurement method, initial contract
amount, total contracted amount, and the amount of expenditures as of January
2023.
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Exhibit 16
PANDEMIC RELATED CONTRACTS AND AGREEMENTS
Initial Final
Procurement Contract Contract Total
Purpose Method1 Amount Total Expenditures2
Deloitte Telephone agents COVID-19 $12,736,700 $98,472,182 $76,231,114
Consulting LLP (Tier 1) exemption
(Call Center)
Insight Global Specialists to COVID-19 $3,990,313 $73,544,157 $51,613,787
LLC perform PUA claim exemption
verification services
Deloitte PUA Software COVID-19 $9,490,000 $33,834,194 $27,694,784
Consulting LLP exemption
(uFACTS)
Pitney Bowes, Print and mail COVID-19 $2,250,000 $15,250,000 $3,772,964
Inc. service exemption
Fast Enterprises, Short-Time COVID-19 $4,006,000 $4,171,480 $150,645
LLC Compensation exemption
program software
Pondera Fraud analytics COVID-19 $854,329 $854,329 $834,639
Solutions, LLC exemption
Carahsoft Additional languages COVID-19 $165,391 $205,319 $165,391
Technology Corp. for virtual agent exemption
Multilingual Editing/proof-reading COVID-19 $33,372 $33,732 $33,732
Connections, LLC for virtual agent in exemption
various languages
Total $33,526,105 $226,365,393 $160,497,056
Notes:
1 On March 9, 2020, the Governor issued a Disaster Proclamation, which suspended the provisions of the Illinois
Procurement Code.
2 Total expenditures includes all FY20 and FY21 payments and FY22 payments through January 2023.
Source: OAG analysis of IDES and Comptroller data.
The eight contracts included 29 amendments, 16 of which had an effective date
before September 6, 2021.
Five contracts and one amendment were not signed by an IDES official; however,
four of these contracts had effective dates in the spring/summer of 2020 when
employees were likely sheltering in place.
Nine of the amendments were signed by IDES after the effective date of the
amendment (four for Fast Enterprises, two for Insight Global, two for Deloitte
Call Center, and one for Deloitte uFACTS). For these amendments, the IDES
signatures were anywhere between 2 days and 45 days after the effective date of
the contract amendment. For these amendments, the contractor and IDES were
operating without a contract in place because the amendments were after the
contract’s end date. For six of those nine, the vendor also signed after the
effective date. Performing work without an effective contract in place increases
risk for both the State and the contractor.
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Contract Signing
RECOMMENDATION The Illinois Department of Employment Security should ensure
contracts and amendments are signed prior to the effective date
NUMBER of the contract or amendment.
1
Illinois Department of Employment Security Response:
The Department accepts the Recommendation. Multiple contracts and amendments were deemed
necessary and implemented to respond to the COVID-19 pandemic. The contracts were exempt from
bidding and the provisions of the Illinois Procurement Code under emergency proclamations designed to
expedite disaster response services. In addition, some contracts were negotiated and became effective
when employees and vendors were sheltering in place or establishing remote work locations which
created unique logistical issues requiring specialized solutions due to the pandemic. The Department
recognizes the importance of having contracts in place prior to the receipt of goods or services. Efforts
continue to improve management alignment and internal controls over procurement and contract
areas, especially in times of emergency growth due to recession and economic events or other
extraordinary circumstances.
Contract/Agreement Expenditures
Exhibit 17 provides the amount and percent of expenditures for each of the
discussed contracts that had a total contract amount greater than $1 million. As
shown, a significant percentage of the contracted amount has been expended for
three of the contracts. In two of the contracts, less than 25 percent of the contract
was expended, leaving several million dollars unexpended. Each of the contracts,
including deliverable testing, are discussed below.
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Exhibit 17
PERCENT EXPENDED VS NOT EXPENDED FOR CONTRACTS GREATER THAN $1 MILLION
FY20 to FY22
Source: OAG analysis of Illinois Comptroller data as of January 2023.
Deloitte Consulting LLP Telephone Agent Services (Call Center)
The Department initially contracted with Deloitte Consulting to provide a team of
200 Tier 1 full-time equivalent telephone agents. These telephone agents were to
have access to the IDES contact center and corresponding system(s) to answer,
diagnose, and resolve or properly transfer calls IDES was receiving. Tier 1 agents
were to answer frequently asked questions for employees, information on how to
file a claim, and how to file an appeal. Upon agreement, agents could answer Tier
2 call types, which included questions about account access, change of address or
telephone number, and direct deposit/payment information.
Amendments to the contract both increased the number of call agents and contract
amount and extended the contract end date (see Exhibit 18). The initial contract
included two subcontractors. Within 8 months, an additional 13 subcontractors
were added (1 was subsequently deleted), and up to an additional 800 telephone
agents could be deployed by the vendor as needed as determined by the
Department. The initial contract amount was $12.7 million with an end date of
December 31, 2020; after 9 amendments, the total contract amount was $98.5
million and the contract end date is June 30, 2023. As of January 2023, $76.2
million of the total contract amount (77.4%) had been expended.
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Exhibit 18
DELOITTE CALL CENTER CONTRACT SUMMARY1
Contract/ Start End Contract Revised
Amendment Purpose Date Date Amount Amount
FY20 Contract 200 telephone agents 4/28/2020 12/31/2020 $12,736,700 -
Added 2 additional
Amendment 1 6/4/2020 12/31/2020 +$0 $12,736,700
subcontractors
800 additional telephone
agents, a quality
Amendment 2 assurance program, and 9/10/2020 12/31/2020 +$12,500,000 $25,236,700
extended hours of
operation
Extended contract term
Amendment 3 and added 11 12/22/2020 2/28/2021 +$9,700,000 $34,936,700
subcontractors
Extended contract term,
increased contract
Amendment 4 2/28/2021 4/30/2021 +$7,800,000 $42,736,700
amount, and removed 1
subcontractor
Increased contract
Amendment 5 amount and extended 5/1/2021 6/30/2021 +$7,000,000 $49,736,700
term
Increased contract
Amendment 6 amount and extended 7/1/2021 9/30/2021 +$6,000,000 $55,736,700
term
Increased contract
amount and extended
term, and provided for
Amendment 7 10/1/2021 6/30/2022 +$31,495,813 $87,232,513
the number of agents to
fluctuate during the
contract term.
Increased contract
Amendment 8 amount and extended 7/1/2022 12/31/2022 +$6,239,669 $93,472,182
term
Increased contract
Amendment 9 amount and extended 1/1/2023 6/30/2023 +$5,000,000 $98,472,182
term
Total Contracted Amount: $98,472,182
Expended as of January 2023: $76,231,114
Percentage Expended: 77.4%
Note:
1 Contract amounts and expenditures rounded to the nearest dollar.
Source: OAG analysis of IDES contracts and contract payment data from the Illinois Comptroller.
We conducted testing on a sample of contract deliverables. All contract
requirements tested were met.
The Department contracted with Deloitte Consulting to provide a team of 200
Tier 1 full-time equivalent telephone agents. Of these initial 200 agents, not less
than 150 were to be Illinois residents prior to the performance of the work under
the contract. Each agent was required to return a completed and signed copy of
the nondisclosure acknowledgement form prior to the agent doing any work. One
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of the conditions listed on the nondisclosure obligation acknowledgement form is
that the agent would perform all work under the contract at the work location
provided. Auditors tested 10 Deloitte nondisclosure agreements, which included
contract employees’ addresses to ensure the process was followed and the agents
were Illinois residents. All 10 addresses were Illinois addresses. Additionally, all
the forms were filled out prior to the employee’s start date.
Deloitte was required to establish a quality assurance plan to monitor and track
each agent’s performance of work. Auditors requested and reviewed the quality
assurance plan and determined the requirement was satisfied. Deloitte was also
required to submit weekly written reports describing work performed, number
of calls, number of calls transferred, average talk time, average response time,
average handle time, and problems encountered and their resolutions. Auditors
requested and reviewed all weekly reports covering May 2020 through December
2021. Auditors determined that the weekly reports met contract requirements.
Deloitte was to share quality data on a daily basis with IDES as well. Auditors
inquired with the Department and officials reported receiving quality data on a
daily basis. In a later amendment to the contract, Deloitte was required to
implement and administer a quality assurance program for its agents to increase
efficiency and productivity upon successful implementation of a Silent
Monitoring telephony solution by the State. Auditors determined that this
requirement was completed.
Among other items, the State was responsible for providing call center technology
to agents within the timeframes needed to support call center mobilization.
Auditors reviewed sources for technology IDES provided to Deloitte call center
agents and considered timing between the contract dates and when call center
reports show Deloitte beginning handling calls. Auditors determined that the
State sufficiently met the tested contract deliverable.
Insight Global LLC PUA Verification Services
The Department initially contracted with Insight Global to provide up to 200
qualified specialists, including verifiers, team leads, trainers, and operations
managers, to perform services such as verifying claimants’ wages and income.
The number of specialists increased to 350 in December 2020. These specialists
would:
review claimant records, including tax documents, and when applicable,
contact claimants and employers;
verify and determine claimants’ employment, income, and wages on a case-
by-case basis in accordance with IDES guidance and procedures;
fax and index PUA claims in accordance with IDES guidance and procedures;
and
enter the determination, notes, calculations, and any and all supporting data
into the IDES database and systems.
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Team leads and operations managers, among other tasks, monitored and reviewed
specialists’ work performance for compliance to ensure each specialist complied
with the process, procedures, guidance, documentation, performance, and
accuracy requirements established by IDES. Insight Global trainers were to train
the agents who would be working these issues and were charged with overseeing
their work by conducting weekly audits. The weekly audits involved the
completion of a quality assurance score card including agent name, date issue
worked, claimant ID, claim type, agent resolution, and a pass/fail designation.
The initial contract amount was $4 million with an end date of December 31,
2020 (see Exhibit 19). After 7 amendments, the total contract amount was $73.5
million, and the end date was June 30, 2023. As of January 2023, about $51.6
million of the total contract amount (70.2%) had been expended.
Exhibit 19
INSIGHT GLOBAL CONTRACT SUMMARY1
Contract/ Start End Contract Revised
Amendment Purpose Date Date Amount Amount
PUA claims verification
FY21 Contract 7/30/2020 12/31/2020 $3,990,313 -
(up to 200 vendor staff)
Extended contract term
Amendment 1 and increased vendor 12/22/2020 3/31/2021 +$4,064,454 $8,054,767
staffing to 350
Allowed for IDES and
the vendor “to mutually
agree on the number” of
Amendment 2 specialists to perform 3/1/2021 6/30/2021 +$15,394,838 $23,449,605
services; increased
contract amount and
extended term
Amendment 3 Extended contract term 7/1/2021 7/31/2021 +$0 $23,449,605
Increased contract
Amendment 4 amount and extended 8/1/2021 9/30/2021 +$8,725,958 $32,175,562
term
Increased contract
Amendment 5 amount and extended 10/1/2021 6/30/2022 +$30,394,962 $62,570,524
term
Increased contract
Amendment 6 amount and extended 7/1/2022 12/31/22 +$5,973,633 $68,544,157
term
Increased contract
Amendment 7 amount and extended 1/1/2023 6/30/2023 +$5,000,000 $73,544,157
term
Total Contracted Amount: $73,544,157
Expended as of January 2023: $51,613,787
Percentage Expended: 70.2%
Note:
1 Contract amounts and expenditures rounded to the nearest dollar.
Source: OAG analysis of IDES contracts and contract payment data from the Illinois Comptroller.
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We conducted testing on a sample of contract deliverables. This testing indicated
that not all contract requirements were met.
Each specialist was required to be an Illinois resident prior to his or her
performance of work under this contract unless an exception is approved, in
writing, by IDES. One of the conditions listed on the nondisclosure obligation
acknowledgement form required to be filled out by each specialist is that the
specialist will perform all work under the contract at the work location provided.
Auditors tested 10 nondisclosure agreements containing the contract employees’
addresses to ensure process was followed and the specialists were residents.
Three of the 10 nondisclosure agreements tested did not provide an address of the
specialist, which means the Illinois residency of these 3 could not be confirmed
prior to working on the contract. A document reviewed for another purpose listed
an Illinois city for these three individuals; however, the document was a post-
work summary of hours. Without a location listed on the 3 nondisclosure forms,
it is unclear how IDES ensured that the individuals were Illinois residents prior to
performance of work. IDES reported there were no written exceptions to the
Illinois residency requirements.
In addition, the contract stated, “a specialist will become authorized to perform
work under this Contract when IDES receives from the Vendor a completed and
signed copy of the Specialist’s Nondisclosure Obligation Acknowledgement
form.” Seven nondisclosure agreements tested had a signature date several
months after the employee’s start date; these forms were signed anywhere from
146 days to 233 days after the employee’s start date. This is also concerning
because the nondisclosure obligation acknowledgment form discusses the
specialist’s access to confidential information, asks the specialist to agree to the
conditions, and notes the consequences associated with disclosing confidential
information.
The vendor was also required to provide the IDES liaison with two types of
reports: 1) weekly reports and 2) attendance reports. Auditors reviewed and
determined the weekly reports did not satisfy contract requirements based on the
documents provided. The weekly reports generally contained necessary
requirements but there were many invalid reports, such as multiple reports with
data repeated from a previous week instead of current data. An Insight Global
Representative also noted in an email that IDES never logged in to view these
reports.
Auditors inquired if IDES had received the required attendance reports. IDES sent
auditors a quarterly hours report. Upon review, auditors determined the
attendance report requirement was satisfied.
Deloitte Consulting LLP PUA uFACTS System
The Department contracted with Deloitte to provide software to process PUA
claims. IDES’ system for processing unemployment insurance claims (IBIS) was
not able to process PUA claims. IBIS had parameters in place to support FPUC
payments due to a previous program, but PUA covered a new group of individuals
who were not traditionally covered and for whom IDES did not have any
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experience with. According to Department officials, IDES contracted with
Deloitte because Deloitte “came to them first” and was also doing work in two
other states (Ohio and Colorado).
Deloitte Consulting was to implement a cloud-based version of the
Unemployment Framework for Automated Claim & Tax Services (uFACTS)
solution to meet PUA requirements of the CARES Act. The solution was to
provide PUA functionality necessary to support the CARES Act, processing the
additional claims load, and making PUA and FPUC payments. The projected date
for uFACTS to “go live” was May 8, 2020. The actual go-live date was May 11,
2020.
The contract included assumptions by which the parties acknowledged that
departure from these assumptions may affect the outcome and timeliness of the
engagement. According to an IDES official, the Department had to weigh the
benefits compared to the time and additional dollars. Some of the key
assumptions were:
Critical Functionality – The contract stated, “In light of the COVID-19 crisis
and the pressing need to implement PUA, the State and [vendor] will be
required to prioritize critical functionality over non-critical functionality;
decisions will be governed by the need to pay eligible recipients and not non-
essential or desirable functionality.” The contract defined critical
functionality as core functionality required to process PUA claims in
accordance with the requirements of the CARES Act and other applicable
laws and regulations.
Suspension of federal integrity checks – The contract noted the “recent
compromised performance of Federal integrity checks may require that they
be suspended to ease the customer experience.” The contract states that
integrity may have to be enforced by the State on the back end or through
subsequent releases of cross-match or other integrity capabilities.
Appeals – Appeals functionality was not within the scope of the contract.
Interstate Connection Network (ICON) interface – There would be no
interface between uFACTS to ICON services which assist state UI staff in
identifying if a claimant has a claim or wages in another state.
Identity authentication services – The uFACTS solution included integration
with identity authentication services. Failure to authenticate would not
prevent claimants from applying for benefits but would create a request for
identity information from the claimant and create an identity issue within the
system.
The original contract amount was $9,490,000 with a term of April 28, 2020, to
December 31, 2020 (see Exhibit 20). However, after seven amendments, the final
contracted amount increased to $33,834,194 with an end date of December 31,
2023. As of January 2023, $27.7 million of the total contract amount (81.9%) had
been expended.
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Exhibit 20
DELOITTE uFACTS CONTRACT SUMMARY1
Contract/ End Contract Revised
Amendment Purpose Start Date Date Amount Amount
Cloud-based system for
FY20 Contract 4/28/2020 12/31/2020 $9,490,000 -
PUA benefits
Added Lost Wages
Amendment 1 9/10/2020 12/31/2020 +$325,000 $9,815,000
Assistance component
Extended period of
Amendment 2 12/15/2020 6/30/2021 +$4,550,000 $14,365,000
vendor support
Amendment 3 Extended contract term 7/1/2021 7/15/2021 +$0 $14,365,000
Additional staff and
increased hosting,
Amendment 4 address validation and 7/16/2021 12/31/2021 +$6,377,000 $20,742,000
identity match, and SOC
report
Additional staff and
Amendment 5 9/21/2021 12/31/2021 +$1,692,998 $22,434,998
increased hosting
Extended period of
Amendment 6 1/1/2022 12/31/2022 +$6,847,774 $29,282,772
vendor support
Extended period of
Amendment 7 1/1/2023 12/31/2023 +$4,551,422 $33,834,194
vendor support
Total Contracted Amount: $33,834,194
Expended as of January 2023: $27,694,784
Percentage Expended: 81.9%
Note:
1 Contract amounts and expenditures rounded to the nearest dollar.
Source: OAG analysis of IDES contracts and contract payment data from the Illinois Comptroller.
We conducted testing on a sample of contract deliverables. This testing indicated
that all 14 contract requirements tested were met. Below are examples of
requirements tested.
uFACTS was to interface with other systems, including systems for: scanning
and indexing; printing (to generate outbound correspondence to the claimant);
payment and bank information (daily outbound payment files to existing banks or
payment services); accounting (outbound interface to the State financial account
system); and IBIS (the UI benefits system for routine interfaces that provide
existing claim information along with the status of the claims and claimant wage
information). An optional interface included a nightly batch interface to allow for
child support offsets. According to IDES, uFACTS was able to interface with all
these systems as required.
The vendor was to submit weekly written progress reports describing work
performed, accomplishments, problems encountered and resolutions,
conformance to schedule, and effort required to complete the assignments. In
addition, 30 days after the go-live date, the vendor was to provide a written After
Action Report that included lessons learned and analyzed performance during
each phase of the project and made recommendations for best practices. Auditors
reviewed these documents and determined that they met the contractual
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requirements. Auditors also determined that the vendor conducted training for
State users prior to uFACTS going live and provided training materials as
required by the contract.
IDES was required to provide staff for positions needed to help implement each
of the three project phases (Adaptation and Implementation, Hypercare, and
Maintenance and Operations). For example, IDES was required to provide a State
Project Manager, a Policy Staff person, and various other positions. Auditors
determined that IDES filled these positions as appropriate.
The contract noted that the Vendor warrants that the software would be free from
Severity 1 and 2 material defects at the time of delivery. The contract also notes
that uFACTS will be deemed accepted when IDES is satisfied with testing and
IDES gives approval for uFACTS to “go live,” which is within IDES’ sole
discretion. According to IDES, there were Severity 1, 2, and 3 defects and these
were discussed in weekly status reports. From reviewing the weekly reports, it
appears as though some of these were identified prior to “go live,” while others
were identified afterward. The weekly status reports, as previously discussed,
described problems encountered, priority level of the issue, and resolutions or
efforts required to complete the task or remedy the issue. According to an IDES
official, all Severity 1 and 2 defects were corrected at no additional cost to IDES,
in accordance with the contract.
uFACTS Contract Observations
From the PUA go-live date on May 11, 2020, to July 18, 2020 (when claimants
had to first apply through IBIS), despite the requirement to be denied regular UI
benefits first, there was no check to ensure the PUA applicant had first applied
and been denied regular UI benefits. IDES said claimants were expected to file
for regular UI in IBIS before applying for PUA and, before beginning the filing
process, claimants were asked in the PUA application if they had filed an
unemployment claim and been denied since April 1, 2019. If the applicant stated
no, then they were not able to file a PUA application. If the applicant responded
“yes,” then they were able to continue on to file a PUA application. According to
an IDES official, there was a monetary check using wage records to see if the
individual had Illinois income and determine if the individual was monetarily
eligible for benefits. This issue was resolved July 18, 2020, when PUA applicants
were required to first apply through IBIS (see Exhibit 13).
Pitney Bowes, Inc.
According to the contract, Pitney Bowes, Inc. agreed to provide IDES with
mailing, printing, and fulfillment center services. The vendor was to print, fold,
insert, and mail IDES documents. IDES was to submit PDF files to software
provided by the vendor and installed at an IDES location. This software was to
normalize data, prepare documents, and bundle files to submit documents via
secure file transfer protocol. Finally, the vendor was to set up IDES users in a
client portal for job tracking, address reports, document history, and a document
image archive. No subcontractors were utilized as part of the contract. IDES
signed two contracts with the vendor (one for FY20 and an identical contract for
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FY21) and two amendments to the FY21 contract (see Exhibit 21). The combined
contract period was from April 9, 2020, to January 31, 2022, and the combined
total for both contracts was $15,250,000.
According to a Department official, this contract was entered into because, by the
end of March 2020, the Department’s mail room was inoperative, but there were
600,000 to 700,000 pieces of mail that needed to go out. The Department tried to
partner with other agencies with mail room functions, but due to software and
technology differences, that was not a viable option. Because the Department
already used Pitney Bowes equipment (software and machinery), going with
another company would have taken months.
The FY20 contract amount was $2.25 million with a term of April 9, 2020, to
June 30, 2020. The initial FY21 contract amount was $5.0 million with a term of
July 1, 2020, to February 15, 2021. The contract was amended twice, and the total
FY21 contract amount was $13.0 million with an end date of January 31, 2022.
As of January 2023, $3.77 million of the total contracted amount (24.7%) had
been expended.
Exhibit 21
PITNEY BOWES CONTRACT SUMMARY1
Contract/ Start End Contract Revised
Amendment Purpose Date Date Amount Amount
FY20 Contract Printing and mail services 4/9/2020 6/30/2020 $2,250,000 -
FY21 Contract Printing and mail services 7/1/2020 2/15/2021 $5,000,000 -
Increased contract amount
Amendment 1 2/15/2021 6/30/2021 +$3,000,000 $8,000,000
and extended term
Increased contract amount
Amendment 2 7/1/2021 1/31/2022 +$5,000,000 $13,000,000
and extended term
Total Contracted Amount: $15,250,000
Expended as of January 2023: $3,772,964
Percentage Expended: 24.7%
Note:
1 Contract amounts and expenditures rounded to the nearest dollar.
Source: OAG analysis of IDES contracts and contract payment data from the Illinois Comptroller.
Auditors requested a copy of a report of returned and undelivered mail items that
was required by contract. However, according to IDES officials, all items that are
returned or undeliverable are done so from the United States Postal Service
directly to IDES. As a result, Pitney Bowes would not have any record of those
items and could not create a report.
Fast Enterprises, LLC Short-Time Compensation Program
The Department contracted with Fast Enterprises, LLC to provide the supplies
and services for the design, installation, and configurations of its software for the
administration of Short-Time Compensation (STC) programs. The software is
called FastWS. FastWS was to provide IDES with the necessary functionality
and business capabilities to administer STC plans and claims in compliance with
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applicable laws and regulations including, but not limited to, Section 502 of the
Illinois Unemployment Insurance Act. The vendor was to work with IDES to
identify the workflows, business rules, and requirements for documenting,
automating, and managing STC plans and claims. The vendor was to provide
maintenance, support and hosting services, information related to the use of
FastWS, and all project management services and reports as required by the
contract.
The FastWS contract contained a provision about a mutually agreed upon defect
tracking tool. This tool was to ensure each user issue was properly documented,
tracked, and resolved.
The total contract amount was $4.2 million with a term of December 15, 2020, to
June 30, 2022 (see Exhibit 22). As of January 2023, only $150,645 of the total
contract amount (3.6%) had been expended.
Exhibit 22
FAST ENTERPRISES CONTRACT SUMMARY1
Contract/ Start End Contract Revised
Amendment Purpose Date Date Amount Amount
FY21 Contract STC program software 12/15/2020 12/31/2021 $4,006,000 -
Increased contract amount
Amendment 1 1/1/2022 2/15/2022 +$41,370 $4,047,370
and extended term
Increased contract amount
Amendment 2 2/16/2022 3/15/2022 +$27,580 $4,074,950
and extended term
Increased contract amount
Amendment 3 3/16/2022 4/15/2022 +$27,580 $4,102,530
and extended term
Increased contract amount
Amendment 4 4/16/2022 6/30/2022 +$68,950 $4,171,480
and extended term
Total Contracted Amount: $4,171,480
Expended as of January 2023: $150,645
Percentage Expended: 3.6%
Note:
1 Contract amounts and expenditures rounded to the nearest dollar.
Source: OAG analysis of IDES contracts and contract payment data from the Illinois Comptroller.
We conducted testing on two contract deliverables. The contract required Fast
Enterprises to deliver: user training to IDES through a variety of offline and
online methods; and written status reports on a weekly basis. Auditors inquired
about the completion of these two requirements and determined that these
deliverables were met.
Pondera Solutions, LLC Fraud Analytics
Pondera Solutions, LLC was to provide the necessary implementation services for
the installation and configuration of its fraud analytics and case management
solutions (collectively referred to as system). The contract begin date was
September 11, 2020, with an estimated go-live date for the system of February 22,
2021. However, prior to that date, Pondera conducted other fraud reviews.
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The vendor contracted to run claimants through the fraud analytics solution to
identify areas of risk such as shared values (such as home address, IP address,
email address), deceased participants, behavioral pattern matching, and other
anomalies. Pondera was also to run existing employers through the system to
identify areas of risk.
The total contract amount was $854,329 with a term of September 11, 2020, to
September 15, 2021. As of January 2023, $834,639 of the total contract amount
(97.7%) had been expended (see Exhibit 23).
Exhibit 23
PONDERA SOLUTIONS CONTRACT SUMMARY1
Contract/ Start End Contract Revised
Amendment Purpose Date Date Amount Amount
Fraud analytics and case
FY21 Contract 9/11/2020 9/15/2021 $854,329 -
management system
Total Contracted Amount: $854,329
Expended as of January 2023: $834,639
Percentage Expended: 97.7%
Note:
1 Contract amounts and expenditures rounded to the nearest dollar.
Source: OAG analysis of IDES contracts and contract payment data from the Illinois Comptroller.
We conducted testing on a sample of contract deliverables. All contract
requirements tested were met.
The vendor contracted to verify up to 1,250 new claimants per day. Also, the
vendor would verify the identity of current claimants for initial claims from
March 1, 2020, to September 15, 2020, (about 1.1 million unique claimants).
IDES began receiving reports from Pondera on December 29, 2020. An April
2021 report identified over 13 percent of the 1.1 million claimants as high risk.
Auditors reviewed an example of the match results from April 2021. The results
showed whether individuals matched or did not match on various items including:
name, date of birth, SSN, and address. The results also provide a fraud risk score
and also a summary of all of the reasons in which the individual’s information did
not pass the identity verification. Auditors determined that Pondera met the
contract requirements.
The contract required Pondera to submit a preliminary leads findings report which
includes results from the claimant and employer validation components.
Pondera’s preliminary leads findings report was submitted in December of 2020.
As required, the report provided details of the data sets run and included
categories of risk with a count of the types of flags that were tripped. The report
identified about 11 percent of the 1.1 million claimants as high risk. The report
also included a summary of the analysis performed by its Special Investigations
Unit. Auditors determined that the preliminary leads findings report met contract
requirements.
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Carahsoft Technology Corp. Virtual Agent Dashboard and Training
According to the Basic Ordering Agreement, Carahsoft would provide a
performance analytics dashboard for the IDES virtual agent, as well as training
for the IDES virtual agent in the languages of Spanish, Polish, Hindi, Chinese –
Cantonese, and Chinese – Mandarin.
The five additional languages were to be added to the virtual agent for both chat
and voice on the IDES website and the telephone system. All professional
services for this agreement were to be delivered by Quantiphi, Inc.
The total agreement amount was $205,319 with an amended term of January 13,
2021, to November 22, 2021 (see Exhibit 24). As of January 2023, $165,391 of
the total agreement amount (80.6%) had been expended.
Exhibit 24
CARAHSOFT TECHNOLOGY BASIC ORDERING AGREEMENT SUMMARY 1
Start End Agreement Revised
Agreement Purpose Date Date Amount Amount
IDES virtual agents in
Spanish, Polish, Hindi,
Cantonese, and
FY21 1/13/2021 6/30/2021 $165,391 -
Mandarin, and a
performance analytics
dashboard
IDES virtual agents in
Spanish, Polish, Hindi,
Cantonese, and
FY222 7/1/2021 11/22/2021 $39,928 -
Mandarin, and a
performance analytics
dashboard
Total Agreement Amount: $205,319
Expended as of January 2023: $165,391
Percentage Expended: 80.6%
Notes:
1 Agreement amounts and expenditures rounded to the nearest dollar.
2 Vendor was unable to complete the FY21 agreement tasks within the contract term.
Source: OAG analysis of IDES contracts and contract payment data from the Illinois Comptroller.
Multilingual Connections, LLC
Multilingual Connections, LLC was to provide editing and proof-reading services
for the validation of chatbox text for the languages of Spanish, Polish, Hindi,
Traditional Chinese, and Simplified Chinese.
The agreement amount was $33,732 with a term of May 1, 2021, to June 30, 2021
(see Exhibit 25). As of June 30, 2022, the total agreement amount had been
expended.
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Exhibit 25
MULTILINGUAL CONNECTIONS BASIC ORDERING AGREEMENT SUMMARY1
Start End Agreement Revised
Agreement Purpose Date Date Amount Amount
Editing and proof-reading
services for chatbot in
FY21 Contract Spanish, Polish, Hindi, 5/1/2021 6/30/2021 $33,732 -
Traditional Chinese, and
Simplified Chinese
Total Agreement Amount: $33,732
Expended as of June 30, 2022: $33,732
Percentage Expended: 100.0%
Note:
1 Agreement amounts and expenditures rounded to the nearest dollar.
Source: OAG analysis of IDES contracts and contract payment data from the Illinois Comptroller.
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Delays in Processing Unemployment Claims
IDES was not prepared to respond to the needs created by the pandemic. Various delays were
related to technology including the website and claims processing system. IDES’ website was
not equipped to respond to the needs created by the pandemic. Hits to its website increased from
161,502 in 2019 to over 126 million in 2020. The IBIS system, which is used to process regular
UI claims, crashed due to overload. In addition, PUA benefits could not be processed through
IBIS, so there was a delay while a new system was put in place.
IDES was not prepared to quickly increase staffing to respond to the needs created by the
pandemic. Staffing issues were compounded by retirements and staff being forced to work from
home due to the pandemic. IDES also lacked an adequate procedure for processing payment
tracer forms.
The delays in the unemployment benefit application process were exacerbated by a lack of
planning prior to the pandemic. IDES did not have a plan in place for responding to recessions
and potential surges in claims which contributed to the delays. While the pandemic created an
unprecedented increase in unemployment claims, and likely levels that could not have been
anticipated, a UI Recession Plan could help provide direction in times of rapidly increasing claim
volumes.
Determination 6 of LAC Resolution Number 158 asked us to determine what
factors caused and continue to cause delays in the Illinois Department of
Employment Security’s processing of unemployment claims, looking particularly
at administrative decisions, technology, and staffing, and what steps the Illinois
Department of Employment Security has taken to alleviate these delays. There
were various delays in the unemployment process during the period of March 1,
2020, through September 6, 2021. Claimants experienced the longest delays in
the callback process, processing of claims, and the payment tracer process. There
are various items that can cause delays.
Timeliness of claim processing and callbacks is discussed in the Results of Claim
Testing section on page 95.
Administrative Decisions
There were many decisions made during the pandemic intended to decrease or
eliminate delays. When searching for contractors to implement a PUA system,
IDES officials chose the first vendor that approached them with the promise of
implementing a PUA system quickly. The Department appears to have prioritized
paying PUA claimants as soon as possible. Additionally, some identity/integrity
cross-matches and controls were suspended because they were slowing down or
stopping the claims process. These decisions likely led to other issues (see
Suspended Controls in Illinois section on page 62), but again, the intention
appears to have been to more quickly get payments out to claimants.
There was a lack of planning prior to the pandemic that contributed to the delays.
The magnitude of the COVID-19 pandemic was unimaginable, but the concept of
planning for massive economic downturns remains the same.
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IDES was not prepared to handle the influx of claims for a new population of
applicants. Prior to the pandemic, IDES had a Disaster Unemployment
Assistance process, but IDES estimated it could handle less than 100 DUA
claims. A DUA claim was handled manually on paper except for the DUA
claimant first being denied in IBIS and another system calculating the DUA
weekly benefit amount. IDES officials noted that prior to the pandemic they had
not seen a Disaster Unemployment Assistance claim in years.
Claimants with missing or hijacked payments experienced substantial delays in
getting their payments reissued. This is attributable to there being an inadequate
procedure to process and handle payment tracer forms, especially in times of high
demand. Payment tracer forms are forms submitted by claimants who did not
receive their benefit payments because the payments were diverted by fraudsters.
Prior to the pandemic, the forms were routed through Accounting. But the drastic
increase in payment tracer forms rendered that process inadequate and the
decision was made for the Benefit Payment Control (BPC) subdivision to take
over the payment tracer affidavit processing. However, there was an inadequate
procedure in place to guide the process, especially in times of high demand.
Technology
IDES experienced various delays, especially early in the pandemic, related to
technology:
The IBIS system crashed due to overload;
IDES’ website was not prepared to respond to the needs created by the
pandemic; and
PUA benefits could not be processed through IBIS (because it was a new
group of individuals that were not traditionally covered by unemployment
insurance); therefore, PUA benefits could not be paid out until a PUA
payment system was in place.
This created delays in claimants being able to access and file claims on the IDES
website and short delays in applying for the newly created PUA program.
IDES’ Response to Delays Caused by Technology
The IBIS system for regular UI crashed due to overload. According to IDES,
IBIS processed about 10,000 to 11,000 claims a week before the pandemic, but
there were 500,000 claims received during the first week of the pandemic. IDES
moved to a more stable web-based application and provided online services to
claimants.
According to IDES, hits to its website increased from 161,502 in 2019 to over 126
million in 2020. IDES responded by redesigning the external website and
enhancing the website to address the increased web traffic. IDES added servers
and memory in order to withstand the influx of web traffic.
In addition, PUA could not be processed through IBIS; therefore, on April 28,
2020, IDES entered into a contract with Deloitte to design a system to administer
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the PUA program. On May 11, 2020, Illinois opened the PUA program for
enrollment. The Department began issuing benefit payments to claimants on May
15, 2020. The PUA program was created when the CARES Act was signed into
law on March 27, 2020. According to a US DOL OIG report, many states took
more than 30 days to implement the PUA program. With regards to days until
first payment, Illinois was one of the latest taking 48 days.
Staffing
IDES was not prepared to quickly increase staffing to respond to the needs
created by the pandemic. This created delays in answering phone calls and
processing claims and other related documents such as payment tracer affidavits.
In a matter of days, Illinois went from record low unemployment levels to record
highs. IDES reported heading into the pandemic with baseline staffing numbers
at an all-time low. US DOL OIG concluded that states struggled to implement the
new unemployment programs in part due to insufficient staffing resources to
manage the increased number of new claims.
By March 2020, IDES had sent approximately one-quarter of the IDES workforce
home and closed regional offices in order to limit the spread of COVID-19. All
employees who were able to telework and employees who were not immediately
needed for the delivery of the UI program were asked to begin working from
home. Moving employees to remote work meant that training on all the new
federal programs and all the programmatic training had to be conducted virtually.
While IDES hoped to maintain all UI functionality and most of its workforce
services, the Department predicted there would be necessary lapses in operation in
certain departments, namely Audit, Collections, and Benefit Accuracy
Measurement. Some of these lapses were the result of reassigning staff to
different jobs to help with the unprecedented increase in incoming unemployment
claims. In addition to reassigning IDES staff, IDES contracted with various
vendors to better manage the increase in claims, calls, and fraud. Other states
reporting using similar means to addressing staffing shortages in a June 2022 US
Government Accountability Office (GAO) report.
As noted previously, according to the Illinois State Budget Book, the
Department’s headcount dropped from 1,099 in FY18 to 1,035 in FY20.
However, the headcount increased to 1,123 in FY21 and remained stable at 1,120
in FY22. The FY23 estimated headcount and the FY24 targeted headcount are
both 1,120.
Resource Justification Model for Funding
The Department’s administrative funding comes from employer taxes collected
by the federal government. The federal government distributes funds to states
based on the Resource Justification Model. The Resource Justification Model is
based on the workload levels of an agency over three years and uses past data to
dictate funding (and therefore staffing levels needed) for the next year. The
model uses the previous year, the current year, and the next (budget) year (plus
inflation).
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According to a June 2022 report by the GAO, funding declined steadily during the
decade before the pandemic due to reduced workloads as a result of low
unemployment levels. In the three years leading up to this crisis, Illinois’
unemployment rate was at a historical low. According to the Resource
Justification Model and the previous three years’ data, IDES’s staffing numbers
were justified; however, the model could not have predicted this type of staffing
increase. The federal funding model also did not support a reserve staff which
could have allowed states to train individuals to be activated during a recession.
Onboarding Obstacles
Onboarding obstacles posed a staffing challenge to IDES even prior to the
pandemic. The noted obstacles included the time it takes to get staff onboarded
and trained, and difficulty attracting and retaining qualified applicants.
IDES officials reported they have focused efforts on hiring but are subject to state
civil service laws that make it difficult to quickly ramp up staffing levels. IDES
noted in normal times, it usually takes around 6 months to post a job and fill it.
Then it takes 9 months for managers to train that person on enough of the
unemployment basics to handle calls from a UI claimant. It is also increasingly
difficult to devote time to training when managers and supervisors are often
serving multiple roles and performing the work of multiple employees.
Additionally, training now had to be conducted virtually.
IDES also reported having a difficult time attracting qualified applicants and
getting new employees to stay in the job.
Retirements
Additionally, many employees were retirement-eligible and retirements began
happening in greater numbers and faster than the State could replace them.
According to an IDES official, from April 1 to June 18, 2020, IDES hired 18 full-
time staff, but had 11 retirements. As of June 18, 2020, IDES had 170 full-time
position vacancies. A retiring workforce also affected the amount of institutional
knowledge at IDES. In 2014, 87 percent of the Department’s workforce had more
than 5 years of UI experience. At the beginning of 2020, that number dropped 20
percent.
The Benefit Payment Control (BPC) subdivision in particular is experiencing
staffing shortages due to retirements. Employees move into BPC towards the end
of their careers due to the knowledge and experience required. BPC positions (UI
Special Agents) require three years of major adjudication experience, but they are
having a hard time finding candidates with enough adjudication experience.
According to an IDES official, IDES usually hires BPC employees from local
unemployment offices because they have adjudication experience. Complicating
the matter is that over the past ten to twelve years, IDES has moved from
primarily utilizing unemployment offices to utilizing call centers; the call center
model hires more people for taking claims, but not as many for adjudication.
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IDES’ Response to Delays Caused by Staffing
IDES responded to the delays caused by staffing shortages created by an increase
in claims and calls by:
Moving IDES staff into critical need positions;
Contracting with Deloitte and Insight Global to provide agents to answer
claimant phone calls and questions;
Updating multiple aspects of the call center equipment in an attempt to
accommodate the high volume of calls;
Implementing artificial intelligence in the phone system and on the IDES
website;
Answering and creating hundreds of employer and claimant frequently asked
questions;
Developing and posting a new UI claims video so claimants could understand
the basics of the filing process;
Training Legislative District Office staff so they understand the system better
to assist their constituents or at least explain the process while they wait to get
through on the phones; and
Creating Rapid Response PowerPoint for employers and the business
community on the basics of the UI system and unemployment process.
According to IDES officials, IDES would like to increase staffing in the Benefit
Payment Control subdivision. As of August 31, 2021, BPC consisted of 39 staff
members and had various vacant positions. BPC Special Investigations, a unit
dedicated to identity theft, was historically two people plus the supervisor; during
the pandemic, two staff were added. But because identity theft has become more
sophisticated and prevalent, additional staffing could be helpful in this area.
IDES has contracted with Pondera to help address the identity theft, but reviewing
the weekly reports produced by Pondera which indicate possible identity theft
takes time and additional staffing in BPC Special Investigations would help.
Additionally, due to the drastic increase in identity theft and fraud, BPC had to
process over 2,700 payment tracer affidavit forms, which often meant
investigating the prior issues and payment history.
IDES has proposed lowering the requirement from 3 years of experience to 1-1.5
years to create a larger pool of candidates, but the changes have not been made.
IDES has also proposed a new position for BPC. The current position is a closed
competitive position, meaning it is only open to internal applicants which also
limits the pool of candidates.
Conclusion
IDES was not prepared to respond to the needs created by the pandemic. IDES
did not have a plan for responding to recessions and potential surges in claims.
While the pandemic created an unprecedented increase in unemployment claims,
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and likely levels that could not have been anticipated, a UI Recession Plan could
help provide direction in times of rapidly increasing claim volumes. A Recession
Plan would also ensure that lessons learned from the COVID-19 pandemic can be
accessible to IDES officials in the future.
UI Recession Plan
RECOMMENDATION The Illinois Department of Employment Security should develop a
Recession Plan, including lessons learned during the COVID-19
NUMBER pandemic, for future reference in times of rapidly increasing
claim volumes.
2
Illinois Department of Employment Security Response:
The Department accepts the Recommendation. The pandemic created an unprecedented increase in
unemployment claims at levels that could not have been anticipated. Building on pandemic experience
and recommendations, the Department recognizes an opportunity to develop planning, to provide
direction in times of rapidly increasing claim volumes. This planning will also incorporate the challenges
and timeframes around IT modernization, contract procurement, staffing and training, and will endeavor
to discover opportunities and resources. The Department has upgraded its public facing website to the
newest technology provided by DoIT and the underlying servers are robust enough to handle high
volumes of traffic. In addition, the Illinois Benefit Information System (IBIS) is constantly monitored to
prevent malicious external attacks and ensure sufficient load capacity across its servers.
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Overpayments and Fraud
Overpayments (which include fraud, non-fraud, and identity theft) were an issue in both the
regular UI and PUA programs. IDES reported overpayments for FY20-FY22 totaled $5.24
billion; regular UI accounted for $2.04 billion and PUA accounted for $3.20 billion.
Considering gross benefits associated with regular UI claims were 2.5 times higher than gross
benefits associated with PUA claims, it shows the magnitude of fraud experienced in the PUA
program. IDES noted stopped or recovered payments of $150.36 million and $361.34 million
for the regular UI and PUA programs respectively.
IDES experienced three different fraud schemes during the period of March 1, 2020, to
September 6, 2021: identity theft, hijacked payments, and fictitious employers. The
Department’s response to these fraud schemes varied and included items such as adding new
fraud tools (such as fraud analytics reports and additional cross-matches), relying on payment
tracer forms for reissuing payments that were diverted from the true claimant, and investigations
by the Benefit Payment Control (BPC) subdivision as time allowed.
However, other cross-matches were temporarily suspended early in the pandemic. These cross-
matches were temporarily suspended and/or processed offline. This allowed IDES to better
handle the increase in claims processing traffic; however, this left the unemployment
programs more susceptible to fraud.
IDES went from receiving 4 to 10 payment tracer forms a year to receiving over 2,700 during the
pandemic. IDES had to improvise and update the process as circumstances changed. Due to the
changing process and improvising, there was no system in place for BPC to know that
documents had been uploaded and a payment tracer case was ready to be worked. In some cases,
BPC was not aware of the submitted payment tracer form until a claimant called to check on the
status. Processing payment tracer forms took over 6 months from the date the payment tracer
form was submitted to when the payment was authorized to be reissued.
IDES did not comply with all state and federal statutory and administrative requirements for
processing and auditing claims. The US DOL Unemployment Insurance Program Letters
(UIPLs) provide guidance and clarifications for the unemployment programs. The UIPLs
required a list of fraud tools and strongly recommended other fraud tools to help prevent and
detect fraud. IDES did not implement one of the tools that was strongly recommended in
May 2020 by the US Department of Labor (the Integrity Data Hub), until September 2021.
IDES also failed to file 26 outstanding Employment and Training Administration (ETA) reports
required by the US Department of Labor.
The US DOL introduced additional cross-matches to combat fraud in October 2021 and February
2022 that IDES is not yet utilizing (Prisoner Update Processing System and Bank Account
Verification service respectively).
The Department’s main partner in trying to recoup overpayments is the US Department of
Labor’s Office of the Inspector General. IDES did not make any referrals to the Illinois Attorney
General during the audit period.
LAC Resolution Number 158 contained several determinations related to fraud.
Determination 2 asked us to determine to the extent feasible, a detailed account of
the funds allegedly disbursed to ineligible and/or fraudulent claimants.
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Determination 3 asked us to determine the types of unemployment fraud schemes
the Illinois Department of Employment Security has experienced and what steps
and procedures it has taken to detect and respond to fraudulent unemployment
claims and whether it has cooperated with the Illinois Attorney General or federal
authorities to detect, counter, and prosecute potentially fraudulent cases.
Determination 4 asked us to determine whether the Department had complied
with all state and federal statutory and administrative requirements for processing
and auditing unemployment claims. Determination 5 asked us to examine the
Department’s decision not to implement additional fraud-prevention tools in April
2020 as recommended by the federal government and a report on whether the
state has, since that time, come into compliance with federal recommendations.
Improper Payments
Improper payments are payments that should not have been made or that were
made in an incorrect amount (overpayment or underpayment). Some improper
payments are unintentional; however, some improper payments are the result of
benefit fraud or identity theft fraud. Benefit fraud is when an individual might be
entitled to benefits, but does not provide accurate information or does not notify
the Department when they return to employment (and continue to receive
unemployment benefits). Identity theft fraud is when claims are filed and/or
benefits are collected using stolen identities.
Preventing overpayments and detecting fraud in the UI system while ensuring
unemployed Illinois residents received benefits in a timely manner proved to be
inherently difficult. During the pandemic, many unemployment programs
experienced a vast amount of fraud due to a surge in claims, the state’s efforts to
pay those claims quickly, and looser requirements for a new federal
unemployment benefits program. Additionally, UI programs were a key target for
fraud because fraudsters could receive a large amount of money in one payment.
States were required to pay many more claims during the pandemic and expected
to do so just as quickly as prior to the pandemic. Even prior to the pandemic, the
US DOL Office of the Inspector General (OIG) reported on areas of concern and
continuing matters. The US DOL OIG has repeatedly reported significant
concerns with US DOL and State Workforce Agencies’ abilities to deploy
program benefits expeditiously and efficiently while ensuring integrity and
adequate oversight, particularly in response to national emergencies and disasters.
According to a report released in December 2021 by the Pandemic Response
Accountability Committee, the PUA program did not include the typical
verifications required for regular unemployment benefits and “this reduction in
controls to receive PUA benefits was a direct cause of the widespread fraud seen
across states.” Additionally, according to the US DOL OIG, reliance on self-
certifications rendered the PUA program highly vulnerable to improper payments
and fraud.
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Fraud Schemes Experienced by IDES
Determination 3 asked for the types of unemployment fraud schemes IDES
experienced and what steps it has taken to detect and respond to the fraudulent
unemployment claims. According to Department officials, IDES experienced
three types of fraud schemes from March 1, 2020, through September 6, 2021:
Identity Theft – stolen Personally Identifiable Information is used to file
online claims allowing fraudsters to receive unemployment insurance benefits;
Hijacked Payments – fraudsters hijack payments online and divert payments
for their own use; and
Fictitious Employers – fraudsters steal Personally Identifiable Information
and set up companies to file claims.
In addition, IDES regularly monitors for:
Traditional Fraud – misstating a material fact specifically to underreport or
not report wages while collecting unemployment benefits; and
Overpayments – created when a state determines that the individual
received a payment, or a portion of a payment, to which the individual is
not entitled. Traditionally, overpayments have been classified as either
fraud or non-fraud.
Numerous news sources reported about fraudulent unemployment claims soaring
in Illinois with scammers directing jobless benefits to their own accounts even as
record numbers of residents sought relief due to the COVID-19 pandemic. News
sources also reported fraud cases that involved identity theft, where victims
discover they are a victim when they receive, or their employer receives, a letter
from the Department saying a claim has been filed in their name.
Suspended Controls in Illinois
Several of IDES’ defenses against fraud could not handle the exponential increase
in claims. Claimants were unable to register for claims since they were required
to pass these cross-matches in order to file. Beginning in March 2020, IDES
suspended some routine identity cross-matches performed in IBIS on all claims
filed because the cross-matches required time to run and constricted the system
severely. These cross-matches, discussed below, were temporarily suspended
and/or processed offline. This allowed IDES to better handle the increase in
claims processing traffic; however, this left the unemployment programs more
susceptible to fraud. Exhibit 26 provides a list of all cross-matches that were in
place prior to March 1, 2020, and the dates of any of those cross-match
suspensions.
On March 18, 2020, the Social Security Administration cross-match moved
from real-time hourly processing to nightly offline processing with substantial
backlogs. This move was made to decrease stress on the Social Security
Administration’s system.
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On March 23, 2020, the Secretary of State real-time cross-match was
suspended. In July 2020 there was an offline batch validation of all IBIS
claimants who filed since March, and all PUA claimants since the inception of
PUA. About 10 percent of the batch consisting of 824,258 records did not match
the Secretary of State’s records and required manual handling for documents
received from claimants.
Exhibit 26
IDES CROSS-MATCHES AND FRAUD TOOLS FOR PRE-PANDEMIC UNEMPLOYMENT CLAIMS
In place prior to March 1, 2020
Mandatory or
Cross-Match Recommended1 Occurrence Suspended Resumed
National New Hire Mandatory Weekly - -
Quarterly Wage2 Mandatory Quarterly 2/14/20 3/29/22
Systematic Alien Verification
Mandatory Upon filing - -
for Entitlement (SAVE)
Social Security
Recommended Upon Filing 3/18/20 4/6/20
Administration
State New Hire Recommended Weekly - -
Incarceration Database Recommended Weekly 5/3/20 1/27/22
Interstate Connection Upon filing when
Network (ICON) & Interstate Recommended claimant is out of - -
Benefits (IB) state
State Information Data
Recommended Daily - -
Exchange System (SIDES)
Multiple Claimants/Single
No Monthly 4/2020 12/2020
Address2
Multiple Claimants/Same
No Daily/weekly - -
Bank Account
Wage Record Validation No Upon filing 4/6/20 6/25/20
Monthly Wage2 No Monthly 8/1/21 2/22/22
Secretary of State No Upon Filing 3/23/20 10/29/20
Upon receipt of
Specific Leads No - -
lead
Internet Claims Selection
No If Claim is Flagged - -
Review
Notes:
1 Mandatory or recommended by the US Department of Labor (UIPL 23-20).
2 While these reports were still being run, results were not being worked due to lack of available BPC staff.
Source: Meetings with IDES, fraud narratives and program timelines provided by the Department.
In March 2020, the effect of some Benefit Payment Control cross-matches
(Quarterly Wage, Monthly Wage, National New Hire, State New Hire, Multiple
Claimant/Single Address) was lessened when the Department’s Benefit Payment
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Control personnel had to help with the volume of incoming phone calls.
According to IDES officials, most cross-matches were still being conducted;
however, the BPC personnel were unable to work the match results. In July 2020,
BPC personnel shifted to begin handling calls related to unemployment insurance
identity theft. The Department secured additional contractual support, which
began to handle unemployment insurance identity theft calls, allowing BPC to
resume some normal functions in October 2020. As of March 2023, IDES was
still catching up on Quarterly Wage cross-matches. According to IDES officials,
under the Illinois Unemployment Insurance Act (820 ILCS 405/703) IDES can go
back three years (statute of limitations) to assess claims. Beginning in 2022,
IDES ran the Quarterly Wage cross-match for Quarter 4 of 2019 and Quarters 1
and 2 of 2020. As of March 2023, IDES was running the 2020 Quarters 3 and 4
Quarterly Wage cross-match. The Benefit Payment Control subdivision cross-
matching is discussed in more detail later in this report.
On April 6, 2020, the Wage Record Validation cross-match was suspended in
response to a significant increase in call volume from claimants who were unable
to register because of wage record validation issues.
On May 3, 2020, the Department of Corrections Incarceration Database
cross-match was suspended because, according to IDES officials, the business
process required claimants to report to local offices to prove identity. Local
offices were closed to the public for a period of time during the pandemic.
Identification and Prevention of Fraudulent Claims
The Department was made aware of fraudulent claims by both internal and
external means. Before the pandemic, IDES had various cross-matches in place
to deter and detect fraud such as those listed previously in Exhibit 26 (above).
Fraud is also reported by various entities external to IDES. The Department
received protests from employers, reporting from claimants, reporting from
victims of identity theft, Pondera reports, OIG reports, and payments stopped by
banks which all helped stop fraudulent claims.
The manual process, which requires staff to handle each case, limits the number
of fraud cases that can be worked quickly. This became even more challenging
during the pandemic. Traditional fraud overpayments require BPC staff attention.
Very early in the pandemic, BPC staff was reassigned to other duties to reduce
backlogs in benefit processing. BPC staff also took on additional duties
representing the agency on the frontlines, to serve individuals reporting cases of
identity theft.
IDES Fraud-Prevention Cross-matching
IDES’ Benefit Payment Control (BPC) subdivision is responsible for ensuring the
integrity of the benefits programs administered by IDES. Cases to be investigated
are generated by the quarterly, monthly, new hire, and multiple claimant/single
address cross-matches, and specific leads, which are discussed below. When
accounts are noted as fraudulent, a letter goes out to the claimant and to the
employer of record (chargeable employer). The IBIS and uFACTS systems
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automatically generate letters depending on actions taken on the claim. A reply
due date appears on all correspondence requiring a response.
The Quarterly Wage cross-match indicates earnings during quarters in which
benefits were paid and no wages were reported. Notices mailed as part of the
quarterly cross-match include a Quarterly Earnings Verification Request to the
employer, a Claimant Notice of Audit to the claimant if they are not in pay status,
or a Notice of Telephone Interview to the claimant if they are in pay status. If the
wages do not match on the employer and employee’s responses, a follow-up
investigation is conducted and a call to both the claimant and employer may be
necessary to resolve disputed wages. IDES determines overpayment, if any, and
makes a fraud or non-fraud decision on the claim. When an overpayment is
determined, the claimant is sent a Notice of Overpayment and Recoupment
Decision and Repayment Agreement.
The Monthly Wage cross-match indicates earnings during a month in which
benefits were paid and no wages were reported. Notices mailed as part of the
monthly cross-match include a Monthly Earnings Verification Request to the
employer and a Monthly Benefit Audit Notice to the claimant. IDES determines
overpayment, if any, and makes a fraud or non-fraud decision on the claim.
When an overpayment is determined, the claimant is sent a Notice of
Overpayment and Recoupment Decision and Repayment Agreement.
The New Hire cross-match indicates benefits were paid after an employer-
reported new hire date. Notices mailed as a result of the new hire cross-match
include the New Hire Earnings Verification Request to the employer and the New
Hire Benefit Audit Notice to the claimant. All Earnings Verification Requests
and Notices contain instructions to return them either by mail or by fax. Each
notice has a dedicated assignment queue. The Investigations supervisors assign
items from each queue to their staff for wage entry and overpayment and
fraud/non-fraud determination. However, BPC staff was transferred to help with
calls temporarily suspending BPC investigations from March to October 2020.
The cross-matches were still being performed/run, but no BPC staff were working
or investigating the results. If the claimant does not respond timely, all further UI
benefits are stopped, and IDES makes an overpayment decision. When an
overpayment is determined, the claimant is sent a Notice of Overpayment and
Recoupment Decision and Repayment Agreement.
Fraud allegations received by specific leads are received through agency referrals
or tips from anonymous or known sources (a private individual, another
government agency, or other source). Agency referrals include referrals from
local offices, Benefit Accuracy Measurement (BAM) program findings, or
employer protests.
IDES’ BPC Special Investigations unit receives a monthly multiple
claimant/single address report to identify addresses at which three or more
unemployment insurance claims display the same mailing address. BPC reviews
the report, identifies suspicious addresses, and investigates further. Individual
claim issues are referred to the local office for resolution. According to
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Department officials, there were 4 investigators at the start of the pandemic, but
that number grew to 20 as BPC staff members transferred to the Special
Investigations unit.
In addition to the cross-matches already in place at the start of the pandemic (see
Exhibit 26), Exhibit 27 provides a list of cross-matches IDES put in place during
the pandemic to prevent or detect fraud. See Appendix E for a description of each
cross-match.
Exhibit 27
IDES CROSS-MATCHES AND FRAUD TOOLS FOR REGULAR UI AND PUA CLAIMS
IMPLEMENTED DURING THE PANDEMIC
March 1, 2020 through September 6, 2021
Mandatory or
Cross-Match Occurrence Implementation Date
Recommended1
ID Proofing through uFACTS No Upon filing May 2020
Akamai No Upon filing June 2020
Fraud Analytics Report No Daily and Weekly June 2020
Block List/Daily Scans No Daily July 2020
IBIS and PUA Scans No Nightly July 2020
US DOL OIG Analytics1 Mandatory Single occurrence Sept 2020
Pondera No Weekly Oct 2020
ID Proofing through IBIS No Upon filing Sept 2021
ILogin No Upon login Sept 2021
Integrity Data Hub Recommended Weekly Sept 2021
Ekata No N/A Partially Implemented
Note:
1 Mandatory or recommended by the US Department of Labor (UIPL 23-20). In the case of the US DOL OIG
Analytics, the US DOL OIG filed a subpoena with all states and territories requesting new claims data and
performed various cross-matches on the data received.
Source: Meetings with IDES, fraud narratives, and program timelines provided by the Department.
Department Response to Identity Theft
During the pandemic, fraudsters stole identities and used them to fraudulently
receive unemployment benefits. Beginning in March 2020, IDES suspended
and/or processed offline some routine identity cross-matches performed in IBIS
on all claims filed because the cross-matches required time to run and constricted
the system severely. This allowed IDES to better handle the increase in claims
processing traffic; however, this left the unemployment programs more
susceptible to identity fraud. IDES subsequently took various steps to respond to
identity theft within the unemployment system.
Beginning in June 2020, fraud analytics and internal measures were implemented
to identify potentially fraudulent claimants as discussed below.
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On June 12, 2020, IDES implemented the fraud analytics report. The report
performs many different claimant searches in the IBIS database, gathers each
result, and combines them into a single list. The list includes a variety of searches
such as instances of multiple claimants sharing the same personally identifiable
information.
In June 2020, IDES implemented a fraud tool called Akamai, which is a
protection for the website application. IDES also plans to implement Ekata, an
additional fraud prevention tool. Akamai and Ekata provide identity verification
and email crosschecks.
In July 2020, IDES added a new block list database table to support scanning
within IBIS for items BPC previously deemed to be fraudulent including
claimants, bank accounts, email addresses, and IP addresses. The block list is
continuously populated as BPC staff evaluate lists of flagged claimants from a
wide range of sources, such as US DOL OIG, claimant complaints forwarded by
the debit card provider, claimants related to fraudulent IP addresses, the fraud
analytics report, and various fraudulent activity searches in PUA. The block list
is also populated from BPC audit issues posted in PUA every night so that PUA
BPC blocks are also reflected in IBIS.
The PUA program included Experian identity proofing for all claimants.
Experian has been updated several times beginning in July 2020 to develop a
more robust identity examination. The updates included:
July 19, 2020, update to address potential use of compromised data and a bot
concern;
February 26, 2021, update to Experian IEN, which is a tool that analyzes the
use of identities across various consumer transactions in the past 90 days to
identify when an identity has been compromised or shows unusual activity.
Examples include the number of records with the same phone number but
different last names and the number of different phone numbers associated
with an SSN;
June 8, 2021, update to limit the use of the same PIN and SSN to 3 attempts in
30 days; and
June 9, 2021, update to create an issue in PUA if a claimant attempts identity
verification more than 3 times.
Starting July 18, 2020, the Department required all PUA claimants to apply first
through IBIS (regular unemployment) before applying for PUA. IDES
determined this would increase up-front identity verification by adding IBIS
cross-matches to the Experian check already in the PUA system.
In July and August 2020, BPC began coordinating identity theft payment returns
from banks as a result of the banks’ fraud enforcement actions. However,
when suspected identity theft payments were returned to IDES from banks, they
were sent in lump sums with no account information or individual amounts, and
could not be linked to the claimants for which they were made.
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In August 2020, IDES started flagging claimants who changed their payment
method to a direct deposit account already in use by another claimant and added
additional questions for resetting passwords.
In September 2020, Insight Global began training staff to assist with identity
theft calls to the BPC hotline.
In September 2020, IDES entered into a contract with Pondera to perform fraud
analytics and help the BPC investigation unit. In October 2020, IDES sent a file
to Pondera containing over 1 million claimants. Beginning December 29, 2020,
the Department started receiving a weekly summary report. In April 2021,
Pondera began completing analytics on new claimant IDs on a weekly basis.
Claimant identities were returned as clean or with three increasing levels of
concern. BPC personnel had access to a Pondera-supplied website, which
contained the results of their scans for individual claimants. BPC works all
reports and analyzes claims for markers of fraud.
In June 2020, the US DOL OIG filed a subpoena with all states and territories
requesting information regarding new pandemic claims in both regular UI and
PUA. The US DOL OIG performed a cross-match on all IBIS and PUA
claimants, which included cross-matching claims to a number of databases,
including federal incarceration data, questionable bank accounts, known fraud
addresses, and others (covering March 2020 through October 2020). The results
of their comparisons were returned to the states to investigate as possible fraud.
Starting in 2021, IDES began working with employers to prevent fraudulent
activity. On January 26, 2021, IDES began an employer email campaign to
announce the development of a new reporting form that allows employers to
report identity theft for multiple employee claims. The email campaign also
encouraged the use of SIDES (State Information Data Exchange System), a web-
based system provided by the National Association of State Workforce Agencies
that allows for the electronic exchange of unemployment claim information
between UI agencies and employers. On April 27, 2021, IDES sent a follow-up
email campaign promoting the identity theft reporting form. On July 15, 2021,
and August 25, 2021, IDES sent employer email campaigns regarding fraud and
phishing schemes. On September 7, 2021, IDES introduced multifactor
authentication for employers to access MyTax Illinois as part of a system
enhancement. Multifactor authentication is the use of two or more methods to
authenticate or verify an individual’s identity.
As recommended by the US DOL, IDES began participating in the National
Association of State Workforce Agencies’ Integrity Data Hub in September
2021. The Integrity Data Hub provides cross-matching functionality with other
states’ data to help states with suspicious email domains, data analysis, the
suspicious actor repository, identity verification, multi-state claims, fraud alerting,
and foreign IP addresses.
In September 2021, IDES required IBIS filers to register with ILogin to access
their accounts. ILogin is an Illinois Department of Innovation and Technology
enterprise tool that allows users to access multiple State of Illinois platforms with
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one account. The cloud-based system includes identity proofing, authentication
methods, fraud analytics, and threat monitoring. The new system also utilizes
multifactor authentication.
Department Response to Hijacked Payments
During the pandemic period, fraudsters hijacked payments by diverting payments
from legitimate unemployment claimants to fraudulent accounts. Claimants in
these situations during the audit period were directed to fill out a Payment Tracer
and Affidavit of Non-Receipt of UI Benefits form (payment tracer affidavit).
This form required the applicant to note the weeks for which payment was not
received, the proper bank name and account number, and to certify that he or she
had not received the benefits. Along with the form, the claimant was to provide
identification to verify his or her identity. The form, previously revised in 2018,
was updated in November 2021 and again in December 2021.
According to an IDES official, prior to the pandemic, the Department received 4
to 10 payment tracer forms a year. These payment tracer forms were reviewed by
the Accounting Division and only forwarded to BPC if the payment problem
could not be resolved. This process proved to be inadequate when the number of
hijacked payments increased. Also, there was not a process in place to track
submissions of payment tracer forms which became problematic when the number
increased substantially.
During the pandemic, IDES received over 2,700 payment tracer forms and had to
improvise and update the process as circumstances changed. For example, when
local unemployment offices were not open, IDES could not verify the claimant’s
identity in person. As a result, items were sometimes uploaded to IBIS. Due to
the changing process and improvising, there was no system in place for BPC to
know that documents had been uploaded and a payment tracer case was
ready to be worked until a claimant called to check on the status.
IDES provided informal lists, as of July and October 2022, of payments tracer
forms that were completed, not completed, in-process, and denied. Exhibit 28
shows the breakdown of the population by program and status of the form
(completed, denied, etc.). We randomly selected claimants from each category
for a total of 143 claimants. There were 208 forms submitted for these 143
claimants.
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Exhibit 28
REGULAR UI AND PUA PAYMENT TRACER FORMS
As of July/October 2022
Total Forms for
Population Sample of Claimant ID Claimants Sampled
Regular UI
Completed 2,057 100 160
Denied 19 4 8
Not Completed 563 25 26
Total Regular UI 2,639 129 194
PUA
Completed 38 5 5
In-process 21 5 5
Not Completed 52 4 4
Total PUA 111 14 14
Total Regular UI & PUA 2,7501 143 208
Note:
1 Auditors were unable to determine, for the population, if any forms were duplicates (multiple forms submitted for
the same benefit period); therefore, the number of forms could be overstated.
Source: Illinois Department of Employment Security and OAG sample of payment tracer forms.
We calculated the amount of time it took IDES to process the form until the time
the payment was reissued or denied, or in the cases where the tracer processing
was not yet complete, November 2022 (the date of our testing).
When calculating the time to process payment tracer forms, we used the date the
payment tracer affidavit was signed or the date IDES received the affidavit as the
process start date, whichever was later.
For IBIS payment tracers that had been paid, we chose a random sample of 100
claimants, for a total of 160 payment tracer affidavits (out of a population of
2,057 payment tracer affidavits). As shown in Exhibit 29, many of the payment
tracer forms sampled were submitted in July through September 2021. For this
sample, the first payments were reissued in May 2021; however, for the entire
population, there were nine payments issued in January through April 2021.
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Exhibit 29
SAMPLE OF IBIS PAID PAYMENT TRACER FORMS RECEIVED VS. PAYMENTS REISSUED
December 2020 to July 2022
Source: OAG analysis of IBIS paid payment tracer forms.
From the start of the process to the date a payment was reissued, it took 198
days on average. It took 185 days from the start of the process (a form being
submitted to IDES) to when a memo was sent to Accounting to authorize
reissuing the payment. The remaining 13 days of the 198 were spent reissuing the
payment.
As of October 2022, 19 IBIS payment tracer affidavits had been denied reissuance
of payment. We sampled 4 claimants (a total of 8 payment tracer forms) and
found that, on average, it took 104 days from the start of the process to the date of
the denial letter.
An additional 563 payment tracers were not completed, but in various states of
being worked. We sampled 25 claimants, for a total of 26 payment tracer forms.
Eleven payment tracer affidavits were incomplete and, as of November 30, 2022,
had been in the process for an average of 353 days. From these 11, one individual
had waited 525 days (as of November 2022) and had filed a payment tracer
affidavit on June 23, 2021. Fifteen more were incomplete as of the time of the list
(October 2022), but were subsequently paid prior to our testing in November
2022. Those 15 payments tracers took, on average, 225 days to be processed
(from the start of the process to the date a memo was drafted to instruct
Accounting to authorize reissuance of the payment).
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Payment tracer forms were also submitted for PUA payments including 38 which
had been completed, 21 that were in-process, and 52 were incomplete. Reissued
payments were processed through an IT request for the PUA program rather than
through IDES Accounting; therefore, there were no memos to Accounting for the
PUA population. We chose a random sample from each category.
For PUA payment tracer forms that had been paid, it took an average of 445
days (ranging from 372 to 590 days) from the time IDES received the
payment tracer to the date the payment was reissued. The in-process and not
completed cases were assessed as of our testing in November 2022. For PUA
payment tracer forms that were in-process, the sampled cases were submitted in
2021 and 2022 and took an average of 375 days, ranging from 244 days to 471
days. For PUA payment tracer forms that were not in-process or completed, the
sampled cases took an average of 498 days, ranging from 457 days to 562 days.
Payment Tracer Affidavit Form Procedure
RECOMMENDATION The Illinois Department of Employment Security should update
its procedure for handling payment tracer affidavit forms to allow
NUMBER the Department to better handle a large influx of forms. This
update should include a process for tracking the submission of
3 payment tracer affidavit forms. If possible, the Department
should explore best practices in this area to determine if more
efficient methods and tools are available.
Illinois Department of Employment Security Response:
The Department accepts the Recommendation. The drastic increase in payment tracer forms rendered
the existing process insufficient and the decision was made for the Benefit Payment Control Subdivision
to take over affidavit processing. The Department is improving process procedures and incorporating
planning for times of high demand. Federal testimony consistently outlines that implementing and
expediting new federal programs will continue to challenge states nationwide, due to insufficient
baseline staffing resources and federal budget models that do not adapt quickly to changing situations.
Department Response to Fictitious Employers
IDES procedures address fictitious employer schemes and describe this scheme as
involving an individual or group registering a fictitious company for the sole
purpose of filing fraudulent UI claims. Fictitious employer categories include:
Fictitious Employer – typically involves the registration of a non-existing
business entity as a liable employer for the purpose of filing fraudulent UI
claims. Contribution taxes may be paid; in many instances, the taxes are
delinquent. Once wage credits have been established, fraudulent UI claims
are usually immediately filed.
Fictitious Employee – a fictitious employee is an individual who never
worked for a company but is listed on the quarterly wage reports or has filed
an affidavit stating that a certain amount of wages was earned. This is done
for the purpose of collecting UI benefits to which the individual is not rightly
entitled.
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Employer Fraud – an employer legitimately establishes a business as a liable
employing unit. All necessary forms are completed and, initially, contribution
taxes are paid. The employer provides false information on the quarterly
reports or omits pertinent information for the purpose of collecting or assisting
another individual in receiving benefits to which they are not rightfully
entitled.
Employer/Employee Collusion – a legitimate company removes employees
from the payroll but continues to employ them full-time while paying them
unreported cash wages. The employees file for UI to supplement the
employment compensation. This scheme involves an agreement between
employer and employee.
Alleged cases of fictitious employer fraud are investigated by BPC. The
allegation can come from sources within the Department such as Field Audit,
Operations, and Internal Investigations or from phone tips or letters from persons
outside the Department.
Fraud Prevention Tools Required by Federal Guidance
Determination 5 asked us to examine IDES’ decision to not implement additional
fraud-prevention tools in April 2020 as recommended. UIPL 23-20, released May
11, 2020, reminded states of program integrity functions for the regular UI
program and provided states with guidance regarding program integrity functions
for PUA, FPUC, and PEUC. It also discussed mandatory Benefit Payment
Control activities such as using a National Directory of New Hires cross-match
and a Quarterly Wage cross-match. The UIPL also discussed strongly
recommended Benefit Payment Control activities such as utilizing a Social
Security Administration cross-match and an Interstate Benefits cross-match.
Exhibit 30 provides a list of the federally mandated and recommended anti-fraud
tools noted in UIPL 23-20. As can be seen in the exhibit, IDES had implemented
all of the mandatory and recommended tools before the pandemic except the
Integrity Data Hub tools, which were not implemented until September 2021.
Despite being implemented prior to the pandemic, three other federally mandated
or recommended tools were suspended for a period during the pandemic.
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Exhibit 30
IDES IMPLEMENTATION OF FEDERALLY MANDATED AND RECOMMENDED ANTI-FRAUD
TOOLS
Mandatory/
Control Recommended Implemented1 Suspended Resumed
National Directory of New Hires
Mandatory Pre-Pandemic - -
Cross-Match
Quarterly Wage Cross-Match2 Mandatory Pre-Pandemic 2/14/20 3/29/22
Systematic Alien Verification for
Mandatory Pre-Pandemic - -
Entitlement (SAVE)
State Directory of New Hires
Recommended Pre-Pandemic - -
Cross-Match
Social Security Administration
Recommended Pre-Pandemic 3/18/20 4/6/20
Cross-Match3
Interstate Connection Network
(ICON) and Interstate Benefits Recommended Pre-Pandemic - -
(IB) Cross-Match
State Information Data Exchange
Recommended Pre-Pandemic - -
System (SIDES)
Identity Verification4 Recommended Pre-Pandemic - -
Incarceration Cross-Match Recommended Pre-Pandemic 5/3/20 1/27/22
Integrity Data Hub Tools Recommended Sept. 2021 - -
Notes:
1 “Pre-Pandemic” indicates the cross-match was fully implemented prior to CY2020.
2 While these reports were still being run, results were not being worked due to lack of available BPC staff .
3 Social Security Administration cross-match was moved from real-time hourly processing to nightly offline
processing with substantial backlogs.
4 UIPL 23-20 does not define identity verification; however, UIPL 28-20 examples of identity verification cross-
matches include Social Security Administration, SAVE, Incarceration, ICON, IP Address, and data analytics.
IDES has implemented identity verification in varying levels.
Source: OAG auditor prepared using UIPL 23-20 and information provided by the Department.
Integrity Data Hub
IDES did not start utilizing the Integrity Data Hub until well into the pandemic.
UIPL 23-20 released May 11, 2020, and a US DOL Employment and Training
Administration notice published on August 31, 2020, strongly encouraged states
to use the Integrity Data Hub as an important integrity tool in combatting
unemployment insurance fraud. Both US DOL notices stated that the Integrity
Data Hub was available to all State Workforce Agencies and each state should
strongly consider integrating the Integrity Data Hub tools as part of an effective
Benefit Payment Control operation for the regular UI programs and temporary
unemployment programs, including PUA and PEUC. According to the ETA
notice, the Integrity Data Hub undergoes regular audits and testing to ensure
maximum security. According to a report released in December 2021 by the
Pandemic Response Accountability Committee, as of December 2020, just 32 of
54 State Workforce Agencies used or partially used the Integrity Data Hub.
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The Integrity Data Hub provides cross-matching functionality to address
unemployment insurance fraud and is available to participating states at no cost.
The Integrity Data Hub includes the following tools:
Suspicious Actor Repository – states match current claims against a state-
populated database of fraudulent and suspicious claims data;
Suspicious Email Domains – states receive flags on claims containing email
domains associated with fraudulent activity;
Foreign Internet Protocol (IP) Addresses – states receive flags on claims filed
from IP addresses outside of the US;
Data Analysis – provides the ability to analyze national claims data and
conduct cross-state analysis within a secure system;
Multi-State Cross-match – allows states to submit current unemployment
insurance and PUA claims for cross-matching and receive notifications when
potentially fraudulent claims are filed in multiple states;
Identity Verification – provides centralized identity verification for all claims
in participating states by returning identity scoring information and helping
states prioritize investigations of questionable identities; and
Fraud Alerting – states share information on emerging fraudulent activity
within a secure messaging platform. Registered users receive email
notifications when fraud alerts are created and updated.
According to IDES, Illinois began participating in the Integrity Data Hub in
September 2021. The Department chose not to participate in the Integrity Data
Hub because other IT-related projects during the pandemic were of greater
urgency. However, when it came to the IDES Director’s Office’s attention that
IDES was not participating in the Integrity Data Hub, IDES expressed its
intention to begin participation as soon as possible. This required the Illinois
Department of Innovation and Technology (DoIT) to collaborate with the
National Association of State Workforce Agencies. DoIT began testing data files
in July 2021. The testing of files took longer than DoIT anticipated; therefore,
participation did not begin until September 2021.
According to IDES, the Department began submitting claims data daily on
September 1, 2021, and received weekly reports for flagged claims beginning
September 20, 2021. According to an IDES official, this report contained about
13 hits a week because the Integrity Data Hub was still in its beginning stages, but
there are hopes that it will yield more hits in the future. A May 5, 2022 US DOL
ETA notice stated that the Integrity Data Hub continues to evolve as more states
regularly submit UI claims data to the Hub.
Suspended Cross-matches
As noted previously, the Quarterly Wage cross-match, the Social Security
Administration cross-match, and the Incarceration cross-match were all
suspended during the pandemic.
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The Quarterly Wage cross-match report could still be run, but the BPC staff
that investigated the match results were not available to work the results; BPC
staff had been shifted to other areas of need such as taking phone calls related
to unemployment insurance identity theft.
The Social Security Administration cross-match moved from real-time hourly
processing to nightly offline processing with substantial backlogs. This move
was made March 18, 2020, in order to decrease stress on the Social Security
Administration’s system which was also receiving an unprecedented number
of Social Security number verification inquiries.
The Incarceration cross-match was suspended on May 3, 2020, and did not
resume until January 27, 2022. According to IDES officials, the business
process required claimants to report to local offices to prove identity. Local
offices were closed to the public from March 17, 2020, to August 26, 2021;
however, the cross-match was not resumed until five months after the local
offices were reopened to the public.
Post-Pandemic Cross-match Opportunities
Additional cross-matches to combat fraud were introduced that IDES was not
utilizing. These cross-matches are either funded by or made available through the
US Department of Labor.
Prisoner Update Processing System Data Match
In March 2022, IDES officials said the Department did not have access to a cross-
match with federal correctional facilities. However, in October 2021, UIPL 1-22
announced the availability of an incarceration data exchange system between
ICON and the Social Security Administration Prisoner Update Processing System
(PUPS). As of September 2022, according to an IDES official, they were
unaware of this potential federal incarceration data match. However, in a review
completed just months prior to the onset of the pandemic, the National
Association of State Workforce Agencies recommended IDES take advantage of
the PUPS cross-match which was in development with an estimated go-live date
of CY2020. Although the cross-match was not available until October 2021,
IDES should have been awaiting the PUPS release and been aware upon release
of UIPL 1-22. Upon inquiry, IDES officials said the Department planned to
implement the PUPS cross-match during the first quarter of calendar year 2023.
According to a GAO UI report, a US DOL official noted that as of August 2022,
one state was using the new incarceration data exchange and at least ten states had
submitted a request to access the incarceration data. However, 12 states already
receive incarceration data through direct agreements with the Social Security
Administration and therefore would not be expected to request access to this
service.
Bank Account Verification (BAV) Service
A new Bank Account Verification (BAV) service was released into Integrity Data
Hub production on February 16, 2022. The US DOL strongly recommends using
the Bank Account Verification service to mitigate occurrences of improper
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payments due to unemployment identity fraud. This service is intended to help
states proactively identify and authenticate bank account information on the UI
claim by validating the account’s status and ensuring the individual identified as
the claimant is the account owner and/or authorized user prior to initiating the UI
benefit payment. According to IDES officials, as of January 2023, Illinois was
not participating in the Bank Account Verification service, but IDES planned to
get it set up and utilized sometime in the future. According to a GAO UI report, a
US DOL official noted that as of October 2022, 31 states were using the Bank
Account Verification service.
Additional Cross-match Opportunities
RECOMMENDATION The Illinois Department of Employment Security should research
and implement further cross-match and fraud prevention tools
NUMBER that may be available. The Department should specifically
consider implementing the Prisoner Update Processing System
4 data match and the Bank Account Verification service. These
tools would provide the Department with more opportunities to
identify and prevent payment of fraudulent claims.
Illinois Department of Employment Security Response:
The Department accepts the Recommendation. IDES implemented all of the federal required and
recommended tools; 90% of the tools were implemented prior to the pandemic. Timely payment of
benefits and preventing fraud are competing processes, and during the Covid-19 pandemic certain
crossmatches and controls were suspended or delayed in an effort to reduce delays in claimant benefit
distribution. As the effects of the pandemic lessened, the Department reinstituted these crossmatches
and controls. The Department will continue to research and implement further crossmatch and fraud
prevention tools, including the Prisoner Update Processing System and bank account verification
services. The Department will work closely with NASWA’s Integrity Data Hub to take advantage of
additional services beyond those currently utilized.
Cooperation with Authorities
The Department’s main partner in trying to recoup overpayments is the US
Department of Labor’s Office of the Inspector General. The Department refers
cases for investigation that have a credible lead. According to a Department
official, the Benefit Payment Control subdivision helps gather information and
provides the claims data to the US DOL OIG. Between May 2020 and October
2021, IDES reported referring at least 79 matters/leads to the US DOL OIG.
IDES also works with the US DOL OIG on cases that might have originated from
other sources. The US DOL OIG reported multiple prosecutions involving fraud
committed against IDES through its unemployment system. For example, one
Georgia resident was prosecuted for defrauding IDES of more than $4 million
from September 2020 through July 2021. This scheme involved the use of stolen
identities, which were often associated with elderly Illinois residents. An Illinois
resident was prosecuted for his role in a scheme to defraud the federal
government and several states, including Illinois, of nearly $1 million in UI
benefits. This scheme involved the use of stolen identities and took place
between May 2020 and April 2021.
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The BPC unit refers cases to the Illinois Attorney General when overpayments
between $2,500 and $10,000 have occurred, according to a Department official.
During the audit period, however, no referrals were made to the Attorney
General. Referrals, in the past, have also been made to the Federal Bureau of
Investigation and Postal Inspectors.
IDES voluntarily applied for a UI Tiger Team grant in March 2022 and was
chosen to be in the third round of states assessed. The purpose of the Tiger
Teams was to help states find solutions to address fraud, timeliness of benefit
payments, and equitable access. Illinois began work with the Tiger Team
consultants in April 2022 and concluded the interviews, information sharing, data
analysis, and discovery phase in July 2022. As of December 2022, IDES was
assessing the Tiger Team recommendations and working with the US DOL to
determine which recommendations and projects meet the scope, timeframe, cost
estimate, internal capacity, and procurement process. Illinois’ Tiger Team
allocation is $5.2 million and will draw down from this allocation by submitting
Project Synopsis reports to the US DOL.
IDES also applied for a UI Equity grant. The UI Equity grants are designed to
help states improve their UI systems to ensure benefits go to workers who need
them, eliminate administrative barriers to benefit application, reduce state
workload backlogs, improve the timeliness of unemployment compensation
payments to eligible individuals, and ensure equity in fraud prevention, detection,
and recovery activities. Illinois’ Equity grant allocation is $6.84 million.
Overpayments and Fraud Numbers
Overpayments were an issue in both the regular UI and PUA programs. Fraud
overpayments require IDES staff to handle each case and limits the number of
fraud cases that can be routinely worked. BPC staff are responsible for
investigating overpayments. Very early in the pandemic, BPC staff were
reassigned to other duties to reduce backlogs in benefit processing. BPC staff also
took on additional duties representing the agency on the frontlines, to serve
individuals reporting cases of identity theft.
Overpayments were classified by IDES as fraud, non-fraud, or identity theft:
Fraud is when an individual might be entitled to benefits, but knowingly
makes a false statement or fails to disclose material facts for the purpose of
obtaining benefits, such as returning to work and earning wages without
accurately or completely reporting those facts.
Non-fraud is when the overpayment is without fault or fraud on the
individual’s part.
ID theft is the use of stolen Personally Identifiable Information to file claims
and receive unemployment benefits.
IDES provided auditors with overpayment methodologies and spreadsheet
summaries of overpayments and fraud for FY20 to FY22. Exhibit 31 summarizes
overpayments figures provided by IDES for both IBIS and PUA. The exhibit also
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notes payments recovered and stopped payments and any overpayments for which
IDES has issued waivers.
Auditors note that these figures are estimates as IDES is still in the process of
identifying fraud through the previously suspended Quarterly Wage cross-match.
As a result, it is possible that these overpayment numbers are understated.
Additionally, the US DOL OIG estimates an improper payment rate for pandemic
UI programs to be greater than the reported 21.52 percent. IDES numbers
indicate a rate of approximately 14.5 percent.
For IBIS overpayments (which includes regular UI, PEUC, Extended Benefits,
FPUC, MEUC, and LWA), IDES did not provide complete figures for FY20;
however, it did note $9.19 million in overpayments due to identity theft. FY21
overpayments were noted as $1.02 billion. The Department noted that a total of
$80.55 million was stopped or recovered. FY22 figures were similar. FY22
overpayments were noted as $1.01 billion. There was a total of $69.80 million
stopped or recovered. IDES estimated uncollectible non-fraud and fraud
overpayments at 75 percent for FY20 and 80 percent for FY21 and FY22.
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Exhibit 31
IBIS AND PUA OVERPAYMENTS AND FRAUD
FY20 FY21 FY22 Total
IBIS
ID Theft $9,185,890 $292,544,810 $208,862,419 $510,593,119
Fraud & Non-fraud1 - $726,752,486 $803,701,088 $1,530,453,574
Total IBIS $9,185,890 $1,019,297,296 $1,012,563,507 $2,041,046,693
Recoveries & Stopped - $80,552,710 $69,803,643 $150,356,353
Payments
Overpayment Waiver N/A N/A N/A
Balance Reduction2
Net IBIS Overpayments3 $9,185,890 $938,744,586 $942,759,865 $1,890,690,341
PUA
Fraud $24,570 $22,475,937 $26,184,202 $48,684,709
ID Theft $220,847 $2,074,462,877 $217,795,043 $2,292,478,767
Non-fraud $4,876,538 $672,462,491 $180,563,553 $857,902,582
Total PUA $5,121,955 $2,769,401,305 $424,542,798 $3,199,066,058
Recoveries & Stopped $11,528 $285,310,367 $76,015,679 $361,337,574
Payments
Overpayment Waiver N/A $57,134,173 $63,374,347 $120,508,520
Balance Reduction
Net PUA Overpayments $5,110,427 $2,426,956,765 $285,152,772 $2,717,219,964
Total Net IBIS & PUA $14,296,317 $3,365,701,351 $1,227,912,637 $4,607,910,305
Overpayments3
Notes:
1 IBIS did not have the capability to separate fraud and non-fraud.
2 No IBIS waivers were finalized prior to the end of FY22.
3 Totals may not add due to rounding.
Source: Illinois Department of Employment Security.
For FY20 and FY21, IDES reported $2.77 billion in overpayments for the PUA
program (which also includes FPUC and LWA overpayments). The Department
estimates that approximately $2.07 billion is the result of identity theft, $22.50
million is the result of traditional fraud, and $677.34 million is non-fraud
overpayments. The Department noted that $285.32 million was stopped or
recovered. According to IDES figures, in FY22 total PUA overpayments totaled
$424.54 million, down from $2.77 billion in FY21. There was a total of $76.02
million in stopped or recovered payments.
Limitations in the third party software used to administer PUA did not allow
recovered overpayments from fraud and non-fraud to be allocated to the specific
federal programs. The recoveries and stopped payments could not be broken
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down by program because the recoveries and stopped payments are at the
claimant level, not the program level. For FY20 to FY22, IDES estimated
allowances for uncollectible non-fraud overpayments at 90 percent, fraud at 95
percent, and identity theft at 98 percent.
The Illinois Unemployment Insurance Act establishes a recoupment process for
cases in which an individual receives benefits he or she is found to have been
ineligible for. Overpayments due to identity theft are not considered
recoverable because they cannot be collected from the real owner of the
identity/Social Security number. Fraud and non-fraud overpayments which are
connected to a valid claim for benefits occur for several reasons such as a
claimant returning to work and continuing to collect payment without reporting
earnings or when a separation issue is resolved after payment has been issued.
These types of overpayments are considered recoverable. The Illinois
Unemployment Insurance Act also provides for a process for a waiver of recovery
if the individual is without fault and recoupment would be against good
conscience (an economic hardship for the claimant to repay the benefits).
Waivers of Recovery of Overpayments
PUA overpayment waivers began in March 2021. States were provided
instructions in the form of UIPLs for processing waivers of recovery of PUA
overpayments. The instructions provided circumstances in which a state could
waive recovery of overpayments under the CARES Act Unemployment Insurance
programs. States were instructed that recovery activities for fraudulent
overpayments could never be waived.
In order to be eligible for a waiver, the overpayment must be 1) without fault on
the part of the individual and 2) recovery of the overpayment must be “contrary to
equity and good conscience.” This means that an overpayment can be waived if it
would cause financial hardship to the person from whom it is sought and recovery
could be unconscionable under the circumstances. Waiver determinations must
be made on the facts and circumstances of each individual claim. IDES used a
questionnaire to help make that determination. Once the determination is made,
staff can waive the overpayment balance and, if needed, issue refunds.
Overpayment waivers in PUA began in September 2021.
The US Department of Labor, however, does permit a state to approve a blanket
waiver under certain circumstances. There are seven scenarios identified by the
US Department of Labor that permit a state to approve a blanket waiver which do
not require additional fact-finding or submission of individual requests. In each
of the seven scenarios, the individual affected must still be determined to be
without fault in the creation of the overpayments and that recovery would be
contrary to equity and good conscience.
According to IDES’ website, overpayment waiver request form notices were sent
to eligible claimants with overpayments along with a questionnaire and
instructions on how to file the waiver with IDES.
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The regular UI (IBIS) waiver process started in early 2022. On January 10, 2022,
the Department sent out the first emails notifying the first 10,000 claimants a
letter was coming about an overpayment waiver. On January 19, the Department
sent out the first 10,000 letters to claimants. After that, every other week the
Department sent an email then letter to the next 10,000 claimants. A team at the
local office level was set up to review the overpayment waivers. According to
IDES, this is a very manual process as each overpayment must be reviewed
because different programs have different rules. For example, for regular UI,
only the balance of the overpayment could be waived. For COVID-19 programs,
the established amount was waived and if the claimant had repaid any of the
established amount then the claimant was due a refund.
According to the Department’s website, a claimant will receive a written
determination stating the amount of recovery of overpayment that has been
waived. If a claimant is found to be ineligible for an Overpayment Recovery
Waiver, the instructions on how, when, and where to appeal will be included in
the written determination.
If an overpayment is not waived or recovered, overpayments can be recovered by
the Illinois Comptroller’s Office intercepting money that would normally be paid,
by taking a portion of future unemployment benefits, and in certain cases, by
filing with the Internal Revenue Service to withhold a federal tax return.
Fraud Reporting Requirements
The US DOL Employment and Training Administration (ETA) requires various
forms to be filed in order to monitor program progress, overpayments, and
recovery. Form ETA 227 Overpayment Detection and Recovery Activities
provides information on determinations, overpayments, and recoveries of
overpayments for regular UI. Form ETA 902P Pandemic Unemployment
Assistance Activities provides monthly data on PUA activities including fraud
and non-fraud overpayments and recoveries. Forms ETA 9178-P and ETA 9178-
F are used to monitor a State’s progress related to PUA implementation and a
State’s ability to address fraud.
The US DOL OIG notes that the US DOL ETA and Congress need the
information to fully assess state activities and mitigate the risk of overpayments
and fraud. A US DOL Office of Inspector General report noted that many states
were not completing required reporting for overpayments. According to
Department officials, IDES was partially reporting on the ETA 902P, and the
ETA 227 for PEUC and FPUC reporting was still under development. ETA 227
was broken out for PEUC, FPUC, and MEUC.
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Auditors requested the dates IDES submitted the
Overdue ETA 227 Reports quarterly ETA 227 reports to the US Department of
Period Ending Days Overdue Labor during the audit period. All six of the reports
3/31/20 5 were filed with the US DOL; however, all six were late
6/30/20 24 ranging from 1 day late to 57 days late.
9/30/20 11
12/31/20 57 Exhibit 32 is a chart of fraud overpayment cases
3/31/21 11 reported to the US DOL by IDES on Form ETA 227.
6/30/21 1 According to IDES reporting, there was a dramatic shift
in ways in which fraud was identified. Prior to the
pandemic, the high majority came from fraud wage/benefit cross-match cases;
however, with the quarter ended September 30, 2021, there was a shift to
overpayments for which IDES did not take an active role in detection
(noncontrollable fraud category). Beginning with the quarter ended June 30,
2022, the reported fraud cases shifted back to wage/benefit cross-match, but also
had a significant number detected by the State Directory of New Hires cross-
match.
Exhibit 32
FRAUD OVERPAYMENT CASES REPORTED TO US DOL
Calendar Years 2019 to 2022
Source: Data reported to the US DOL on Form ETA 227.
Exhibit 33 is a chart of non-fraud overpayment cases reported to the US DOL by
IDES on Form ETA 227. This shows that, dating back to 2019, the number of
non-fraud cases reported has been higher than the number of fraud cases reported.
Noncontrollable cases, or overpayments for which IDES did not take an active
role in detection, accounted for the majority of non-fraud cases even prior to the
pandemic and 90.7 percent of the non-fraud cases for 2019 to 2022. Non-fraud
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cases are defined by IDES as overpayments that are without fault or fraud on the
individual’s part.
Exhibit 33
NON-FRAUD OVERPAYMENT CASES REPORTED TO US DOL
Calendar Years 2019 to 2022
Source: Data reported to the US DOL on Form ETA 227.
IDES did not submit the required ETA 9178-P or ETA 9178-F quarterly progress
reports timely during the pandemic.
UIPL 16-20, Change 1 requires states that receive supplemental grant awards to
submit a Quarterly Progress Report using the Form ETA 9178-P. ETA 9178-P is
a monitoring instrument used by the ETA to track a grantee’s progress toward
completing project activities related to PUA implementation costs reimbursement
for one time and additional administrative costs. ETA 9178-P requires the
grantee to provide the ETA with narrative updates on supplemental grant
activities and helps ensure that the grantee achieves the goals described in the
supplemental grant application. Grantees must submit ETA 9178-P within 45
days of each quarter’s end.
UIPL 28-20 requires states to report quarterly progress on Form ETA 9178-F.
ETA 9178-F is a monitoring instrument used by the ETA to track each state’s
progress in addressing fraud in the PUA and PEUC programs with funds provided
by the US Department of Labor. States were permitted to use this targeted
funding for staff or contract services to conduct fraud investigations and other
fraud detection-related activities, or to implement tools to increase prevention,
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detection, and recovery of fraudulent improper payments in the PUA and PEUC
programs.
According to Department officials, IDES was working on a plan to complete the
26 outstanding federal ETA 9178 reports and planned to submit the completed
reports on or before April 30, 2023. IDES’ failure to submit these reports results
in noncompliance with US DOL requirements. Additionally, without the required
quarterly reports, it diminishes the US DOL’s ability to properly monitor the
programs and ensure resources are used efficiently.
Fraud Reporting Requirements
RECOMMENDATION The Illinois Department of Employment Security should submit all
overdue ETA 9178-P and ETA 9178-F quarterly progress reports
NUMBER as required by UIPL 16-20 Change 1 and UIPL 28-20 and continue
to submit the reports on a timely basis.
5
Illinois Department of Employment Security Response:
The Department accepts the Recommendation. IDES developed a plan with the DOL to come into
compliance for outstanding federal reports, and those reports have been submitted. The Department
continues to plan and implement improved internal controls across the agency and is currently mapping
improved processes for grant tracking and reporting.
Improper Payment Rate
In December 2022, the US DOL reported an improper payment rate of 21.52
percent for the UI program, which is also applied to PEUC and FPUC. As of
February 8, 2023, the US DOL had not yet reported the PUA improper payment
rate. Historically, the UI program experienced some of the highest improper
payment rates among federal government benefit programs. The US DOL
established 10 percent as the acceptable maximum percentage of overpaid or
underpaid payments. According to the US DOL OIG, the reported improper
payment rate estimate for the regular UI program has been above 10 percent for
15 of the last 19 years. The ETA reported, as of January 2023, more than $888
billion in total federal and state UI benefits were paid for benefit weeks during the
UI pandemic period, with a significant portion attributable to fraud. According to
the US DOL OIG, the improper payment rate for pandemic UI programs is likely
higher than the reported improper payment rate of 21.52 percent because the rate
does not include estimates for the PUA program.
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Timeliness and Performance Measures
IDES reporting to the US Department of Labor showed Illinois was not meeting the first
payment promptness standard. Federal timeliness standards suggest that 87 percent of first
payments should be paid within 21 days and 93 percent of first payments should be made within
35 days. Illinois fell below both of these standards in 2021 and 2022. In 2021 and 2022, the
percent of payments made within 21 days was 75.5 and 71.4 percent, respectively. In 2021 and
2022, the percent of payments made within 35 days was 90.0 and 91.5 percent, respectively.
Determination 4 of LAC Resolution Number 158 asked us to determine whether
IDES has complied with all State and federal statutory and administrative
requirements for processing and auditing unemployment claims. Determination 8
asked for a summary of the average case processing time, the timeliness of benefit
payments, and the accuracy of these payments.
State Workforce Agencies are required by the US DOL and federal law to meet
various timeliness standards and other accuracy measures when processing
claims. Auditors reviewed IDES’ past and current performance.
According to IDES’ reporting to the US DOL, IDES’ regular UI claims
processing did not meet federal standards for first payment promptness. Federal
standards are established to determine whether states are substantially compliant
with regards to the timeliness of first payment issuance. The US DOL established
Acceptable Levels of Performance for benefit payment timeliness and
determination quality by which all eligibility determinations are to be measured.
The US DOL established 87 percent as the acceptable percentage of all first
payments made within 14 days of the first compensable week (21 days when not
utilizing a waiting week).
Exhibit 34 provides federal timeliness standards and IDES’ performance for
intrastate payments the year ending March 31. For example, in 2019 and 2020
(ending March 31, 2020), IDES made more than 90 percent of first payments
within 14 days. This met the acceptable level of performance of 87 percent. In
2021 (April 1, 2020 – March 31, 2021) and 2022 (April 1, 2021 – March 31,
2022), the percent of payments made within 21 days (21 instead of 14 days due to
Illinois not using a waiting week) dropped to 75.5 and 71.4 percent, respectively.
Federal timeliness standards suggest that 93 percent of payments should be made
within 35 days. Again, Illinois met this standard in 2019 and 2020, but dropped
below the 93 percent in 2021 and 2022.
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Exhibit 34
FEDERALLY REQUIRED TIMELINESS STANDARDS FOR REGULAR UI AND IDES
PERFORMANCE
Year Ending March 31
IDES’ Performance
Timeliness Category Standard 2019 2020 2021 2022
Intrastate First Payment Promptness:
percentage of all 1st payments made
87% 92.5% 93.0% 75.5% 71.4%
within 21 days (14 days when using a
waiting week)
Intrastate First Payment Promptness:
percentage of all 1st payments made 93% 97.7% 97.9% 90.0% 91.5%
within 35 days
Note: Federal standards for payment promptness are based on the 12-month period ending March 31 of each
year.
Source: US Department of Labor.
In a report released in May 2021 by the US DOL OIG, Illinois was one of two
states (out of 12) that paid 87 percent of PEUC and the only state that met the
timeliness standard for the FPUC program. The report focused on the DOL’s
implementation of PUA, PEUC, and FPUC using the same performance standard
applied to the regular UI program and selected 12 states, including Illinois, for in-
depth analysis of timeliness of benefit payments.
Management Reports
IBIS has the capability to run various management reports that potentially serve
as a useful internal control for the Department. Auditors requested and reviewed
an example of various daily, weekly, quarterly, and on demand reports. These
reports were claim detail and summary reports, claim time lapse summary reports,
fraud overpayment reports, intra/interstate untimely first payment reports, and
pending issues detail and summary reports. IDES also has the capability to run a
multiple claimant/single address report, which identifies three or more UI claims
utilizing the same mailing address.
Auditors inquired if any similar reports were generated for PUA. According to
Department officials, IDES did not have daily PUA reports similar to those used
for IBIS claims. Department officials said, in April 2021, Deloitte began
providing a Daily Overpayment Waiver Report and a list of Overpayment Waiver
Issues with Returned Claimant Fact-Findings. Beginning in May 2021, IDES
began receiving daily Issue Activity Reports. The Department also had a daily
PUA Dashboard available featuring Pending and Processed Payment Status,
Indexing Status, and Claims Submission and Work Queue Status. Auditors
reviewed examples of available PUA reports.
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Analysis of Claims Data and Call Data
IDES data shows payments were made to ineligible claimants. We found paid claims for
deceased individuals and incarcerated individuals. The data showed, for both regular UI and
PUA combined, a total of 481 deceased individuals received 10,527 payments totaling $6.0
million. In addition, 3,448 incarcerated individuals received 92,811 payments totaling $40.5
million. Testing these cases showed that some overpayments had been identified. However,
auditors noted that overpayments sometimes excluded payments made before January 2021 and,
as a result, overpayments could be understated. By excluding these payments from overpayment
balances for individuals that were not eligible, the State is potentially missing out on
opportunities to recoup overpayments.
IDES data also shows benefits being paid out to individuals that were born before January 1,
1935, (at least 85 as of March 2020) and after September 6, 2006, (younger than 15 as of
September 2021). Claims for these ages are not prohibited and are not necessarily fraud;
however, they are suspicious. The data showed, for both regular UI and PUA combined, a total
of 4,639 individuals receiving 120,663 payments totaling $65.8 million. The birth years ranged
from 1901 to 2021.
IDES’ call data records for April 2020 through April 2022 indicated it received over 37 million
calls to its hotlines and made over 10 million callbacks. Hundreds of claimants called IDES
more than 1,000 times; however, the average number of phone calls to the hotline was about 12
per phone number and the median value was 4 per phone number.
Auditors requested all PUA claims and all regular UI claims for the period of
March 1, 2020, through September 6, 2021, including any regular UI claims filed
before March 1, 2020, that might have subsequently received FPUC, EB, LWA,
PEUC, and/or MEUC for that claim. The data provided by IDES included
numerous tables and fields and millions of records.
Auditors ran many validity checks on the data to ensure it was sufficiently reliable
for answering the audit’s determinations. For example, auditors checked
distribution of items such as program codes and eligibility status for
reasonableness; checked various dates (such as processing dates) to ensure they
were within an appropriate range; looked for null values in instances where it
would suggest an issue or lack of data; and reviewed week-ending dates and the
timing of payments. Auditors evaluated the appropriateness of the data by
looking for obvious inconsistency errors and completeness. Auditors followed up
with IDES officials about values that seemed unreasonable. Auditors determined
that the data was adequately reliable for the purposes of this Performance report.
For detailed analysis, based on data issues noted in other OAG reports, auditors
chose to sample claims so that the accuracy of the information could be verified.
IBIS Data
There were 7,069,239 regular UI claims submitted to IDES for 3,689,014
claimants. Many of these (66.7%) were new claims. Also, 56.3 percent were
filed in 2020 and 42.8 percent were filed in 2021 (the remaining 1% were
claimants that were already on regular UI). About 3.5 million of the claims have
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a benefit chargeable employer. Over 65 percent of the claims were filed on the
internet. An additional 25 percent were filed in the “system” (for example, claims
transitioning from regular UI to PEUC/Extended Benefits), and the remaining
were filed by telephone, teleserve, or in person. According to the data, there were
2,148,128 (or 58.2%) of claimants with one or more issues that had to be
resolved.
PUA Data
There were 855,835 PUA claimants. Unlike regular UI, PUA claims did not
transition to another program (such as PEUC or Extended Benefits); therefore, a
claimant retained the same claim identification number for the entirety of their
PUA benefits. According to the data, there were 834,549 PUA claimant IDs with
one or more issues.
The Department’s data indicated 288,131 claims were either identity theft or
regular fraud. The overwhelming majority (285,552, or 99.1%) were noted as
identity theft. Only 2,579 were noted as regular fraud.
There were 153,747 claimants (18.0%) that did not have any PUA payments
according to IDES’ data. According to an IDES official, this happens when there
is a denial due to an associated issue, which happens frequently. Many (128,491)
of these claimant IDs were flagged as fraud (128,455 out of 128,491 were identity
theft). Only 25,256 that did not have any payments were listed as “Not Fraud.”
Certifications
In the regular UI data, 1,975,087 claimants had at least one certification for
unemployment benefits. Additionally, auditors could see multiple certifications
for a single claim, indicating claimants had certified for more than one week. The
Department captured the method used in claimant certification including internet,
phone, and paper certifications. The Department tracked the program type for the
certifications, including regular UI and Extended Benefits. The Department also
tracked the status of the claimants’ certifications.
Auditors found evidence of PUA claimants certifying weekly, and the Department
monitoring PUA certifications for claims. In the PUA system, PUA payments
had a corresponding certification date and certification status. In the entire PUA
payment population (approximately 24.8 million records), there were only 5
instances where the payment date was prior to the certification date.
Lack of Enforcement of Eligibility Criteria
IDES data shows payments were made to ineligible claimants. We found paid
claims for deceased individuals and incarcerated individuals. We also found
payments to individuals with ages that are suspicious for being eligible for regular
UI or PUA benefits.
Payments to Deceased Individuals
Auditors tested the SSN and date of birth of deceased individuals against IDES’
claims data. The results show benefits being paid out in the name of deceased
individuals.
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In the regular UI data, auditors found 35 individuals receiving 534 payments
totaling $172,541 that were paid to claimants for periods
Regular UI Payments to occurring after a date of death. Total benefits paid out
Deceased Individuals by claimant ranged from $110 to $33,228.
Count of Deceased 35 Auditors tested 5 (out of 35) individuals to determine if
Total Payments 534 the claims had been identified as inappropriate
Greatest Total $33,228 payments. All 5 of these appeared to have been
Amount Paid to a
Single Claimant
identified by questionnaires completed by employers
Total Payments $172,541 and have overpayments noted on the accounts. The
overpayment amounts ranged from $968 to $3,031.
Auditors noted that it took between 20 days and 123
days for a fraudulent claim letter to be sent out after the employer questionnaire
was completed. For example, one individual had a date of death of December 1,
2019, but had the following actions after the date of death:
December 16, 2020 – a claim was filed using the individual’s information.
December 23, 2020 – an employer questionnaire response was received.
January 11, 2021 – there were two payments processed totaling $968.
January 12, 2021 – a fraudulent claim letter went out with an overpayment
balance on the account noted as $968.
In the PUA data, auditors found 446 individuals receiving 9,993 payments
totaling $5,876,822 that were paid to claimants for periods occurring after a date
of death. Deceased claimants received anywhere between 1 payment and 78
payments. Total benefits paid out by claimant ranged
PUA Payments to from $198 to $43,440. Ninety-four claimants had
Deceased Individuals payments of more than $20,000.
Count of Deceased 446 Auditors tested 5 individuals (out of 446) to determine
Total Payments 9,993
Greatest Total $43,440
if the claims had been identified as inappropriate
Amount Paid to a payments. There were overpayment balances
Single Claimant established for 4 out of the 5 individuals. The
Total Payments $5,876,822 overpayment balances ranged from $2,988 to $21,012.
For one of the four, it is unclear if the overpayment
balance reflects the full overpayment. This individual passed away in November
2017. A claim was submitted for this individual on December 9, 2020. By
January 29, 2021, 6 payments totaling $32,464 were paid for backdated benefits
(February 2020 through claim submission). Three additional payments totaling
$9,408 went out over the next 3 months. Payments to the individual totaled
$41,872, but the PUA system only showed an overpayment balance of $9,408 and
the overpayment letter noted it was for the period January 2021 to April 2021.
Because the date of death was in 2017, all payments to this individual should have
been deemed overpayments.
The one (out of five) that did not have an overpayment balance was noted as
identity verified and employment evidence provided. IDES noted that there is a
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copy of a Social Security card and State Identification card in the file and that the
individual passed Experian Identity Proofing. IDES officials noted that IDES was
not matching claims against death records. Auditors further confirmed the date of
death, date of birth, and name with information on the internet.
Payments to Incarcerated Individuals
Auditors compared the regular UI and PUA claims to a list from the Department
of Corrections of incarcerated individuals and found benefits being paid out to
ineligible individuals.
The regular UI claims data included 436 incarcerated
Regular UI Payments to individuals receiving 17,980 payments totaling
Incarcerated Individuals
$5,154,138. Total payments to individuals ranged from
Count of 436 $102 to $66,299. Auditors tested five individuals to
Incarcerated determine if the claims had been identified as
Total Payments 17,980
inappropriate payments and found that in two of the
Greatest Total $66,299
Amount Paid to a five cases, the Social Security numbers and dates of
Single Claimant birth matched, but the name in IBIS did not match the
Total Payments $5,154,138 name in the IDOC data. It is unclear to auditors how
the identity was verified with the Social Security
Administration if the name did not match the Social
Security number. The other three had overpayment amounts already noted. One
of those three specifically mentioned the claimant being ineligible due to
incarceration.
The PUA claims data included 3,012 incarcerated
PUA Payments to individuals receiving 74,831 payments totaling
Incarcerated Individuals
$35,351,513. Total payments to individuals ranged
Count of 3,012 from $198 to $60,808 with an average total per
Incarcerated individual of $15,107. Auditors tested five individuals
Total Payments 74,831
Greatest Total $60,808
to determine if the claims had been identified as
Amount Paid to a inappropriate payments:
Single Claimant
Total Payments $35,351,513
One of the five did not receive any payments
because the identity was not verified.
One of the five inappropriately received payments
for four weeks in which he/she was incarcerated. The individual was then
paroled and subsequently eligible. However, there are no notes in the PUA
system to suggest that IDES identified those four weeks as overpayments.
Three of the five had been identified as ineligible as a result of the claimant
not responding to the employment evidence verification. There was no
evidence to suggest that the individuals had been identified as ineligible due to
incarceration. In these three cases, an overpayment was established, but only
beginning in January 2021 when the new employment evidence requirement
went into effect. One of these received a first payment of $17,724 for back
pay benefits in 2020 and received total payments of $24,600, yet the
overpayment amount in the PUA system was only $1,494.
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Auditors provided IDES with a list of claimants potentially ineligible due to
incarceration.
IDES should seek to identify and recoup as appropriate any payments made for
benefit weeks prior to January 2021 for which applicants were deceased or
ineligible due to incarceration. Many of the first payments made to individuals
included months of back pay benefits and were a substantial percentage of the
individual’s total benefit amount. By excluding these payments from
overpayment balances for individuals that were not eligible, the State is
potentially missing out on opportunities to recoup overpayments.
According to IDES, the Department was not matching claims against death
records and the Department suspended cross-matching with Department of
Corrections records from May 2020 through January 2022.
Identifying and Recouping Payments Made to Ineligible Individuals
RECOMMENDATION The Illinois Department of Employment Security should seek to
identify and recoup as appropriate any payments for applicants
NUMBER who received inappropriate benefits. In addition, the Department
should specifically target any payments made to applicants who
6 were deceased or ineligible due to incarceration. IDES should
pay special attention to overpayment balances that only
considered January 2021 moving forward.
Illinois Department of Employment Security Response:
The Department accepts the Recommendation. IDES data shows that during the midst of the COVID-19
pandemic payments were made to ineligible claimants, due to a number of factors, including the
evolving guidance for administering the CARES Act programs and the sheer volume of claims brought
on by the effects of the pandemic. For example, during this time, IDES received over 37 million calls to
hotlines regarding 68 million certified claims, an increase of 800% over the prior fiscal year’s total
number of new claims. In the effort to expedite emergency benefit payments to millions of recipients,
the Department accepted that overpayment and fraud recovery would be negatively impacted,
especially as certain crossmatches and controls were suspended. The Department has reinstituted
these crossmatches and controls and plans to institute PUPS and continue to use the Social Security
verification process.
Payments to Suspicious Ages
Auditors analyzed the date of birth of regular UI and PUA applicants. The results
show benefits being paid out to individuals that were born before January 1, 1935,
(at least 85 as of March 2020) and after September 6, 2006, (younger than 15 as
of September 2021). Claims for these ages are not prohibited and are not
necessarily fraud; however, they are suspicious.
The regular UI claims data included 486 individuals receiving 29,632 payments
totaling $8,007,474. Total payments to individuals ranged from $204 to $59,584.
The birth years ranged from 1906 to 2021.
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The PUA claims data included 4,153 individuals receiving 91,031 payments
totaling $57,825,755. Total payments to individuals ranged from $198 to
$59,936. The birth years ranged from 1901 to 2021.
Call Data
IDES’ call data records for April 2020 through April 2022 indicated it received
over 37 million calls to its hotlines and made over 10 million callbacks.
Hundreds of claimants called IDES more than 1,000 times; however, the average
number of phone calls to the hotline was about 12 per phone number and the
median value was 4 per phone number. The vast majority of hotline calls (74.2%)
were noted as “Handled in IVR.” According to an IDES official, “Handled in
IVR” (Interactive Voice Response) meant that the caller hung up and did not
choose an option that went to a contact center queue. The next highest hotline
result was “Callback Scheduled” (16.3%).
In July 2020, IDES transitioned to a callback-only model. The callback feature
eliminated the option for claimants to wait on hold or the need to call multiple
times a day to reach a claims representative. Exhibit 35 shows a drastic reduction
in hotline calls from 7.2 million calls in June 2020, to 2.4 million in July 2020, to
854,000 in August 2020. It is unclear if there was a drastic reduction due to the
switch to the callback-only model or if not all the phone calls were able to get into
the call system due to high volumes (and therefore, the incoming call would not
be recorded and the data might not capture all the people that were trying to call
IDES). The call data showed an increase in callbacks scheduled from a low of
13,913 in April 2020 to 317,573 in July 2020, with an average of 242,194 a
month from April 2020 to April 2022.
Over 6.0 million callbacks were scheduled and 10.3 million callback attempts
were made. However, not all callbacks resulted in reaching a claimant. For
example, some callbacks ended when voicemail was detected or the phone was
not answered. About 5.7 million claimant callbacks were noted as “Handled by
Agent” (55.4%). An additional 2.4 million were noted as “Voicemail Detected”
(23.5%). According to IDES officials, there should be three attempts to contact a
claimant. Auditors tested this in the sample of 50 regular UI claims and 50 PUA
claims. Results can be found in the Results of Claim Testing section that follows
on page 95.
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Exhibit 35
IDES HOTLINE CALLS BY MONTH
April 2020 through April 2022
Source: OAG analysis of Illinois Department of Employment Security call data.
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Results of Claim Testing
IDES strived to pay claims as quickly as possible. However, when certain cross-matches and
controls are suspended, this increases the risk of making improper payments. IDES made large
payments of backdated benefits while controls were suspended which could have contributed to
large overpayments and losses due to fraud and identity theft. IDES should consider instituting
additional controls/holds on payments exceeding a determined amount to minimize loss from
fraud when issuing payments for backdated claims and/or large benefit payment amounts.
Timeliness of IBIS determinations and first payments was reasonable for our sample. On
average, the 50 regular UI claims sampled took 14 days from the application date to the date the
finding was sent to the applicant. For approved claims that received at least one payment, it took
approximately 16 days from the date of application to the date the first payment was made.
Three out of 28 did not have a first payment within the federal timeliness standard of 21 days.
For our sample, the timeliness of PUA first payments was reasonable; however PUA
determinations were not timely. On average, the 50 PUA claims sampled took 38 days from the
application date to the date the finding was sent to the applicant. Only 25 claims in our sample
had a first payment date. For the 25 claims in our sample that received at least one payment, it
took approximately 15 days from the application date to the date the first payment was made.
Three out of 25 did not have a first payment within the regular UI federal timeliness standard of
21 days.
Our review of callback data indicated that some claimants received a callback in a matter of
hours, while others waited two to three weeks or more. Additionally, not all claimants were
successfully contacted after requesting a callback.
Determination 8 of LAC Resolution Number 158 asked for a summary of the
average case processing time, the timeliness of benefit payments, and the
accuracy of these payments. For this detailed analysis, based on data issues noted
in other OAG reports, auditors chose to sample claims so that the accuracy of the
information could be verified. Determination 4 of LAC Resolution Number 158
asked us to determine whether the Illinois Department of Employment Security
has complied with all state and federal statutory and administrative requirements
for processing and auditing unemployment claims. We tested 45 requirements as
part of claims testing.
Auditors conducted testing of the processing of 50 regular UI claims and 50 PUA
claims. We tested timeliness, calls to the call center, and various other program
requirements laid out in state and federal statute and administrative rules. The
sampled claims were submitted during the time period from June 2020 to August
2021.
Regular UI Findings, Determinations, Etc.
Auditors randomly sampled 50 regular UI claims submitted. Auditors found that
the weekly benefit amount and maximum benefit amount were reasonable.
Auditors also found that the last employing unit was notified when appropriate.
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Out of the total 50 sampled, 29 were approved and 21 were denied. Of the 29 that
were approved, auditors noted that recertifications were happening for all
approved applications. In 11 of these 29, there was evidence of a question arising
concerning the claimant’s monetary or nonmonetary eligibility. In each of these
11 cases, the claimant was notified in writing as required and informed as to the
eligibility issue.
All 21 of the denied claims were also notified in writing as required and informed
of the reason for their ineligibility. Claims were denied due to being monetarily
ineligible, failing Secretary of State validation, and being identified as fraudulent
claims.
Timeliness of Regular UI Determination and Payments
Overall, timeliness of IBIS determinations and first payments was reasonable. On
average, the 50 regular UI claims sampled took 14 days from the application date
to the date the finding was sent to the applicant. For cases with no issues, the
finding date is the date that IDES notified the applicant
Regular UI Timeliness Summary of the potential weekly benefit amount. For cases with
Average Days from Application to: issues, this date might be later due to adjudication of
Decision 14 days issues. For the 21 claims that were ultimately denied,
(Denied & Approved) the average number of days from application to the date
Denied 23 days the finding was sent to the applicant was 23 days,
Approved 7 days
ranging from 2 to 128 days. This is compared to only 7
First Payment 16 days
days for the claims that were approved, ranging from 2
to 17 days.
For approved claims that received at least one payment (28 out of the 29 approved
IBIS claims), it took 16 days from the date of application to the date the first
payment was made. Twenty-five out of 28 had a first payment within the federal
timeliness standard of 21 days. The remaining 3 cases had 23 days, 25 days, and
46 days elapse between application date and the first payment.
For the first payments not processed timely, we tried to determine the cause of the
delay or lack of timeliness. We found that in all 3 cases, the claimant delayed
their certification (by 3 days to 30 days) which could have impacted the
timeliness of their payment.
After a claimant certified for the first time, it generally took only a day for the
first payment to be issued. It only took longer than a day in two instances; in
these instances it took two days and four days. IDES’ Administrative Code sets a
goal of no more than 15 days for first payment after first certification.
Regular UI Callback Process
Unemployment applicants experienced delays in receiving assistance when
calling IDES. We looked at the call frequency and pattern of callbacks for the
regular UI claimants in our sample. Not all claimants had placed a call to the call
center. IDES call center data showed that there was a call to IDES for 30 out of
50 regular UI claims tested. Some claimants called the hotline only 1 time and
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one claimant called the hotline 477 times. The median number of hotline calls for
these 30 claimants was 12.
In July 2020, IDES switched from taking live calls to scheduling callbacks.
According to IDES officials, if a claimant was not reached the first time when an
agent attempted a callback, the claimant was to receive two more attempts (for a
total of three callback attempts). According to an IDES official, if a third attempt
is necessary, it should be made on another day to give the claimant various
opportunities to answer the call.
After requesting a callback, it took, on average, six days for the claimant to
receive a callback. Some claimants received a callback in a matter of hours,
while others waited three weeks or more.
Out of the 30 claimants that called the IDES hotline and requested a callback, 12
were not successfully contacted when called back and did not meet IDES’ goal
for callback attempts. Three claimants received the three attempts suggested by
IDES; however, all three attempts were on the same day. This is not ideal
because, as noted above, a third attempt should be made on another day to give
the claimant various opportunities to answer the call. There were nine claimants
that on at least one occasion requested a callback, were not reached, and only
received one or two callback attempts.
According to the data provided by IDES, 1 of the claimants called IDES at least
477 times between April 30, 2020, and September 6, 2021. However, 461 of
these 477 were between April 30, 2020, and June 19, 2020, which was before
IDES transitioned in July 2020 to a callback-only model.
The majority of the 461 (448 of 461) resulted in a call result of “Handled in IVR”
and only 6 were handled by an agent. According to an IDES official, “Handled in
IVR” (Interactive Voice Response) meant that the caller hung up and did not
choose an option that went to a contact center queue. Because the call times were
short in duration and often several times a day (ranging from 1 call a day to 120
calls in a day), it appears there was little to no resolution provided. There was a
break in phone calls until September 11, 2020, when the claimant called again and
scheduled a callback. The claimant got a callback 26 days later on October 7,
2020; however, from the callback data, it appears the claimant was not reached
and there were no other callback attempts. Over the next year, the claimant called
IDES and scheduled a callback 4 additional times and received a callback for
each. Two of these callbacks were within a day, one was 8 days later, and one
was 11 days later.
PUA Findings, Determinations, Etc.
Auditors randomly sampled 50 PUA claims submitted. Of the 50 claims tested,
25 did not have a first payment date, indicating that the claim was denied or never
certified. Claims were primarily denied due to failure to provide identification
and/or were identified as fraudulent claims.
Auditors noted many issues with claimants meeting eligibility requirements.
Only 12 PUA applicants in our sample were noted in the data as meeting
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eligibility criteria; however, two of them were later determined ineligible for
PUA. Both of these were discovered after employment verifications were
returned by the claimants.
The remaining 38 were noted in the data as not meeting eligibility due to fraud,
employment evidence, identity verification, or a combination. Some of the denial
issues were identified by BPC, some by evidence of employment, some by banks,
and some by identity cross-matches or more than one of these methods. Of those
38 noted as not meeting eligibility criteria, 14 still received at least one
payment. These 14 received a first payment ranging from 3 days to 211 days
after the application date. The payment taking 211 days was an outlier due to
adjudication on the case.
Out of 50 claims sampled, 6 did not have an issue letter sent to the claimant, but
were later found to be fraud. There were no payments associated with these 6. It
was unclear to auditors why there were no payments issued.
According to IDES’ weekly benefit amount charts and the claimant’s income
listed, one weekly benefit amount in our sample appeared to be wrong. The
weekly benefit amount was $294, when the weekly benefit amount according to
the charts (and income listed) should have been $329. However, no payments
were made to this claimant due to a failed identity verification. Most of the
calculated weekly benefit amounts in our sample (44 out of 50) had a weekly
benefit amount of the minimum $198, which indicates the claimant did not earn
enough wages to qualify for a greater weekly benefit amount (or provide
documentation to support higher wages).
In order to address improper payments and fraud, the Consolidated
Appropriations Act, 2021 and UIPL 16-20 Change 4 required PUA applicants to
submit evidence of employment or self-employment based on whether they
applied before or after January 31, 2021. Claimants filing before January 31,
2021, who received assistance on or after December 27, 2020, were required to
provide documentation to substantiate employment or self-employment (or
planned commencement of employment or self-employment) within 90 days of
the application date or notice from the Department (whichever is later).
Claimants filing on or after January 31, 2021, were required to provide
documentation to substantiate employment or self-employment (or planned
commencement of employment or self-employment) within 21 days of
application. Of the 50 applications, 25 did not receive any benefit payments.
Eight of the 25 that received payments submitted evidence to substantiate
employment or self-employment. Six of the 8 submitted it within the required
time frame (21 days or 90 days). Two submitted documentation within 25 days
and 103 days respectively.
The submittal or lack of submittal of employment evidence had an impact on
the eligibility for many applicants in our sample. As a result of the submittal
of employment evidence, one resulted in an overpayment established on the
account and one was determined to be eligible for regular UI instead.
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Overpayments were also posted on seven claimants’ accounts for not responding
to the employment or self-employment evidence requirement.
Auditors did not see employment evidence for the remaining 10 claimants.
However, 5 of these 10 were identified as fraud and 1 was noted as having an
unresolved identity issue. All 6 had an overpayment established on the account.
Auditors could not determine if there were overpayments established on the
remaining 4.
Voided Issues
As part of claims testing, auditors encountered two cases where a claimant’s
certifications (and resulting payments for those weeks) were held due to pending
issues. However, the issues got “incorrectly voided” (on November 25, 2020)
which released the payments. Both were later determined to be ineligible in
December 2020. Overpayments were established in both cases in the amount of
$18,930 and $20,118 respectively.
According to IDES officials, in the process of eliminating duplicate identity
issues, 22,578 were correctly voided. IDES officials said that the vendor
conducted a review and it was determined that these two noted cases were the
only two incorrectly voided. However, auditors noted that they sampled just five
PUA claims out of 36,835 submitted in October 2020 and encountered these two
cases.
Quick Payment of Backdated Benefits
Paying claims quickly, especially those with months of backdated benefits,
increases the risk of large overpayments. These claims often had large first
payments for weeks of backdated benefits including $600 FPUC. Some claims
were filed and paid within two weeks, sometimes a matter of days. And in some
cases, fraudulent activity was subsequently detected.
For example, one PUA claim was submitted on June 29, 2020, and received a first
payment of $9,372 on July 6, 2020, a second payment of $3,192 on July 16, 2020,
and a third payment of $1,992 on August 14, 2020. BPC Special Investigations
determined the claim was the result of fraud and on September 8, 2020, IDES sent
the claimant a determination that he/she did not qualify and the payments (totaling
$14,556) were classified as overpayments. PUA program benefits accounted for
29.9 percent of the payments while FPUC benefits accounted for 70.1 percent.
Another PUA claim was submitted on June 27, 2020. On June 30, 2020, the first
and only payment was made on the claim in the amount of $10,572 for the period
from March 22, 2020, to June 21, 2020. On September 10, 2020, BPC mailed a
determination noting the suspected fraudulent activity and on December 7, 2020,
IDES mailed an overpayment notification. PUA program benefits accounted for
26.2 percent of the payments while FPUC benefits accounted for 73.8 percent.
Auditors found 158,054 PUA claimants that received a single payment of $10,000
or more (totaling $2,360,459,961) and received that payment within 30 days of
application. Exhibit 36 provides a breakdown of the number of these payments
by range. About one third (32.4%) of these payments were paid within one week
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of the submittal. Another 30.7 percent were paid within 7 to 14 days. Nearly 95
percent of these claimants received a check for between $10,000 and $20,000.
Nine people received a payment for more than
Exhibit 36 $40,000. All nine of these applications were
PUA PAYMENTS GREATER THAN $10,000 submitted between November 30, 2020, and
Paid Within 30 days of Application Submittal
December 24, 2020, and each requested
Payment Range # of Payments backdated benefits beginning February 2,
$10,000 - $14,999 83,333 2020. Seven out of nine of these payments
$15,000 - $19,999 66,126 were made within 16 days after application
$20,000 - $24,999 7,346
submittal.
$25,000 - $29,999 926
$30,000 - $34,999 263
It is important to note that these are not
$35,000 - $39,999 51
necessarily fraudulent payments. However,
$40,000 - $44,999 9
Total
given the increased risk of identity theft and
158,054
the size of these payments, it would be a good
Source: OAG analysis of IDES PUA payment data. practice to take additional measures to ensure
that these payments are issued to eligible claimants.
Normally, certifications force a weekly check in and represent an important
control in the process. However, for backdated claims, claimants are able to
complete their weekly certifications at the time of application. For example, a
claimant requesting 10 weeks of backdated benefits would certify for all 10 of
those weeks on the application date.
Timely payment of benefits and preventing fraud are competing concepts.
Quickly paying claims, especially when certain cross-matches and controls are
suspended, increases the risk of making improper payments. And, quick payment
of backdated benefits could contribute to large overpayments and losses due to
fraud and identity theft. However, preventing fraud, especially in new programs
with evolving guidance and guidelines, likely would require additional processing
time and a possible delay in benefit distribution to claimants. To strike a balance,
IDES should consider instituting additional controls when issuing payments for
backdated claims and issuing large benefit payment amounts.
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Quick Payment of Backdated Benefits
RECOMMENDATION The Illinois Department of Employment Security should consider
instituting additional controls/holds on payments exceeding a
NUMBER determined amount to minimize loss from fraud when issuing
payments for backdated claims and/or large benefit payment
7 amounts.
Illinois Department of Employment Security Response:
The Department accepts the Recommendation. The Department prioritized expediting emergency
benefit payments during the COVID-19 pandemic; however, quick payment of backdated benefits
contributed to overpayments due to fraud and identify theft. In addition, the Department was
implementing and responding to over 70 federal program and policy guidelines and changes relevant to
these programs. The new pandemic-related programs required additional processing time, and certain
cross-checks caused a delay in benefit distribution. These cross-checks are currently active. The
Department will plan for controls that would be necessary for backdated claims (emergency programs
such as PUA), and institute additional controls for large benefit payment amounts.
Timeliness of PUA Determinations and Payments
For our sample, the timeliness of PUA first payments was reasonable; however,
PUA determinations were not timely. On average, the 50 PUA claims sampled
took 38 days from the application date to the date the finding was sent to the
applicant. For cases with no issues, the finding date is the date that IDES notified
the applicant of the potential weekly benefit amount. For cases with issues, this
date might be later due to adjudication of issues.
Only 25 claims in our sample had payments. Twelve out of the 25 that did not
have a payment date were noted as fraudulent claims. For the 25 that received a
payment, the first payment was typically received approximately 15 days
(excluding an adjudication case) after the application date. Nineteen out of 25
had a first payment within the regular UI federal timeliness standard of 21 days.
Six were not processed timely; however, 2 of those were only paid after the issues
were incorrectly voided and 1 was an adjudication case. The remaining 3
claimants received a first payment 1 to 3 days late.
Letters were sent out to 42 out of 50 claimants following up or noting an issue on
the case. More than half of these letters were sent out within 3 days of the
application date. The rest of the letters went out 4 to 124 days after the
application date. The average number of days from application date to the date
the issue letter was sent out was 14 days. In 11 cases, the issue letter was sent out
between 1 and 72 days after the first payment. In 12 cases the issue letter was
sent out before the first payment.
PUA Callback Process
Unemployment applicants experienced delays in receiving assistance when
calling IDES. We looked at the call frequency and pattern of callbacks for the
PUA claimants in our sample. Not all claimants had placed a call to the call
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center. IDES call center data showed that 19 out of 50 PUA claims tested had
called IDES. Some claimants called the hotline only once while 1 claimant called
the hotline 447 times. The median number of hotline calls for these 19 claimants
was 8.
After requesting a callback, it took, on average, a little over six calendar days for
the claimant to receive a callback. Some claimants received a callback in a matter
of hours, while others waited two weeks or more.
Only 17 of the 19 claimants that called the IDES hotline requested a callback. Of
those 17, 8 were not always successfully contacted.
Six claimants had requested a callback and, at least once, were not
successfully contacted for that callback request. Three of the 6 received the 3
attempts suggested by IDES, but all 3 attempts were on the same day within 4
hours of each other. This is not ideal because a third attempt should be made
on another day, according to an IDES official, to give the claimant various
opportunities to answer the call. The remaining 3 claimants, on at least one
occasion, requested a callback, were not reached, and only received 1 attempt.
Two claimants did not receive any callback for at least one callback
scheduled. For one claimant, we saw evidence of a callback for 7 out of 9
callbacks scheduled, but not the remaining 2. The other claimant requested a
callback one time, but there is no evidence to suggest he/she received that
callback.
According to the data provided by IDES, 1 of the claimants called IDES at least
447 times between May 26, 2020, and August 24, 2021. However, 431 of these
447 were between May 26, 2020, and June 17, 2020, which was before IDES
transitioned in July 2020 to a callback-only model.
Nearly all of the 431 (429 of 431) resulted in a call result of “Handled in IVR”
and only 2 had a different result (IVR Transfer Out and Abandoned in Queue).
According to an IDES official, “Handled in IVR” (Interactive Voice Response)
meant that the caller hung up and did not choose an option, before hanging up,
that went to a contact center queue. Because the call times were short in duration
and often several times a day (ranging from 1 call a day to 183 calls in a day), it
appears there was little to no resolution provided. Then, there was a break in
phone calls until January 26, 2021 and February 17, 2021, when the claimant
called again and scheduled callbacks; however, there are not callback records to
support that the applicant received a callback. Finally, on March 8, 2021, the
applicant scheduled and received a callback 19 days later on March 27, 2021.
Over the next five months, the applicant scheduled six additional callbacks and
received a callback for each. The longest it took for any of these callbacks was
six days.
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Title XII Federal Loan and Trust Fund Solvency
With the onslaught of unemployment claims when the pandemic began, the funds
in Illinois’ Unemployment Compensation Trust Fund were depleted quickly.
Pursuant to the provisions of Title XII of the Social Security Act, as amended by
the Emergency Unemployment Insurance Stabilization and Access Act of 2020,
the Department began taking advances from the federal government on June 23,
2020. This borrowing continued through December 2021.
The loans were interest free through September 6, 2021, at which point, the State
was required to pay an interest rate of 2.2777 percent with that rate dropping to
1.59 percent effective January 1, 2022. Interest payments cannot be paid from the
Unemployment Compensation Trust Fund.
At the beginning of March 2022, the outstanding advance balance was at its
highest at $4.5 billion. On March 25, 2022, Public Act 102-0696 appropriated the
sum of $2.7 billion from the State Coronavirus Urgent Remediation Emergency
Fund to IDES for partial repayment of Title XII advances. IDES applied those
funds to the outstanding Title XII loan balance resulting in a remaining loan
balance of $1.8 billion by April 2022. In September 2022, the balance dropped
again to $1.4 billion and was paid off at the end of January 2023.
Exhibit 37 shows the Title XII advances by month as well as the outstanding
Advance Balance, not including interest.
Exhibit 37
ILLINOIS’ TITLE XII ADVANCES BY MONTH AND OUTSTANDING ADVANCE BALANCE
April 2020 through February 2023
Note: Exhibit does not include interest.
Source: OAG analysis of US Department of Treasury data.
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
The State’s regular UI benefits are funded by tax dollars collected from Illinois
employers. (The temporary federal unemployment programs were federally
funded.)
If a state fails to repay the outstanding federal Title XII advance by November 10
of the year in which a second January 1 has passed, then all taxable employers in
the state will be subject to a reduced credit on their Federal Unemployment Tax
Act tax of 0.3 percent. For calendar year 2022, Illinois was one of five
states/territories that experienced the Federal Unemployment Tax Act credit
reduction due to having outstanding federal advances. The same five
states/territories had an advance balance on January 1, 2023. For each
consecutive January 1 a state or territory passes with an outstanding advance,
following the second one, employers in the state are subject to an additional 0.3
percent reduction in their Federal Unemployment Tax Act credit.
At the point at which the advance balance was paid off, Illinois stopped accruing
interest; however, by this point, Illinois had accrued interest in the amount of
$70.7 million. The interest was required to be paid off at the end of each federal
fiscal year (September 30). As of April 2023, Illinois had paid off $63,715,724 in
interest and had an interest balance of $7,029,858 left to pay off. Exhibit 38
shows the interest expense by month and as well as the total accrued interest.
Exhibit 38
ILLINOIS’ TITLE XII INTEREST BY MONTH AND ACCRUED
June 2021 through April 2023
Note: Interest was required to be paid off at the end of each federal fiscal year.
Source: OAG analysis of US Department of Treasury data.
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PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
In FY22, IDES used a special administrative account (the Federal Unemployment
Compensation Special Administration Account) to pay interest owed on Title XII
advances. The Unemployment Compensation Special Administration Account
typically includes penalties and interest revenue from delinquent State
unemployment insurance tax collections and improper payments to make up for
federal funding shortfalls.
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APPENDIX A PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
Appendix A
LAC Resolution Number 158
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APPENDIX B PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
Appendix B
Audit Scope and Methodology
This performance audit was conducted in accordance with generally accepted
government auditing standards and the audit standards promulgated by the Office
of the Auditor General at 74 Ill. Adm. Code 420.310. Audit 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 found in Legislative
Audit Commission Resolution Number 158.
We examined the five components of internal control – control environment, risk
assessment, control activities, information and communication, and monitoring –
along with the underlying principles. We considered all five components to be
significant to the audit objectives. Any deficiencies in internal control that were
significant within the context of the audit objectives are discussed in the body of
the report.
The audit objectives delineated by Legislative Audit Commission Resolution
Number 158 directed the Auditor General to conduct a performance audit of the
unemployment programs administered by the Illinois Department of Employment
Security (IDES) during the period of March 1, 2020, to September 6, 2021. The
Resolution contained eight determinations (see Appendix A).
In conducting this audit, auditors reviewed applicable State statutes, rules, and
Department policies. Because unemployment insurance (UI) is a joint federal-
state program, we reviewed applicable federal laws. We reviewed the previous
financial audits and compliance examinations of the Illinois Department of
Employment Security released by the Office of the Auditor General, as well as the
Statewide Single Audit. We also reviewed management controls and assessed
risk related to the audit’s objectives. A risk assessment was conducted to identify
areas that needed closer examination. Any significant weaknesses in those
controls are included in this report.
In conducting this audit, we requested and reviewed specific documents and data
related to the unemployment insurance programs. These included process
narratives, audits, staffing information, training documents, policies and
procedures, unemployment benefit system management reports, reports submitted
to the US Department of Labor, contracts, and claims data.
We requested data for the population of unemployment claims in our audit period.
For regular UI, we requested all claims submitted in IBIS requesting regular UI
benefits for the period of March 1, 2020, through September 6, 2021. We also
requested all claims that were submitted in IBIS before March 1, 2020, to capture
claims submitted prior to March 1, 2020, but that subsequently received FPUC,
EB, LWA, PEUC and/or MEUC for that claim. Because the uFACTS system was
specific to the PUA program (and therefore our audit time period), we requested
all claims submitted to the uFACTS system.
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APPENDIX B PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
There are two primary computer systems involved in the application for benefits
process, including: 1) IBIS, the system used to process regular unemployment
insurance claims; and 2) uFACTS, the third-party software used to process PUA
applications. We have reviewed prior audit findings related to unemployment
insurance and have communicated with OAG auditors regarding ongoing audits
and audit issues.
The data provided by IDES included numerous tables and fields and millions of
records. There were 7,069,239 regular UI claims for 3,689,014 claimants. There
were 874,851 total PUA claims for 855,835 claimants. Auditors reviewed at least
10 tables from the IBIS system, with each table containing 3 to 38 columns of
data and as many as 75 million records. Auditors reviewed at least 5 tables from
the PUA system, with each table containing 9 to 17 columns of data and as many
as 24 million records.
We sampled 50 IBIS claims and 50 PUA claims submitted in various months in
2020 and 2021. The sample design allowed auditors to test claims throughout the
audit period and to include claims for both regular UI and PUA. We randomly
sampled from every other month beginning in June 2020. We chose to sample
from claims submitted as opposed to claims paid because we did not want to
exclude the claims identified as fraud prior to being paid. Results of testing can
be found throughout the report.
IDES provided call data for the period of April 2020 to April 2022. There were
over 37 million calls to IDES and over 10 million callbacks during this period.
Auditors tested call data (all calls into the IDES hotline and all callbacks) for each
of the 50 IBIS claims and 50 PUA claims to see if the claimant had called IDES
and requested a callback and if the claimant received a callback. Results of
testing can be found throughout the report.
We assessed the reliability of computerized data provided by IDES. Auditors ran
many validity checks on the data to ensure it was sufficiently reliable for
answering the audit’s determinations. For example, auditors checked distribution
of items such as program codes and eligibility status for reasonableness; checked
various dates (such as processing dates) to ensure they were within an appropriate
range; looked for null values in instances where it would suggest an issue or lack
of data; and reviewed week-ending dates and the timing of payments. Auditors
evaluated the appropriateness of the data by looking for obvious inconsistency
errors and completeness. When possible, we corroborated it to public data. We
followed up with IDES officials when there were values that seemed
unreasonable. We determined that the data was adequately reliable for the
purposes of this Performance report and answering the audit’s determinations.
Based on data issues noted in other OAG reports, for detailed analysis, auditors
chose to sample so that the accuracy of the information could be verified.
We reviewed eight contracts entered into during the audit period and related to the
audit’s objectives. We reviewed contract amounts, amendments, expenditures,
and procurement method. Auditors reviewed all of the contract deliverables
within each contract and chose 37 contract deliverables to test, including IDES
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APPENDIX B PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
deliverables (9) and vendor deliverables (28). The contract deliverables tested
were chosen based upon feasibility of testing and relevancy to the audit
determinations. Results of contract testing are presented in the Contracts and
Agreements section.
IDES provided informal lists of Payment Tracer and Affidavits of Non-Receipt of
UI Benefits. From these lists (completed, not completed, in-process, and denied),
we randomly sampled 143 claimants. The majority of the Payment Tracer and
Affidavits of Non-Receipt of UI Benefits listed were for regular UI claims (2,639
regular UI affidavits and 111 PUA affidavits). Auditors sampled 129 regular UI
claimants and 14 PUA claimants. There were 208 forms submitted for these 143
claimants. We calculated the time it took IDES to process the forms. Results of
testing are noted in the report.
We reviewed a summary of overpayments for State fiscal year 2020 through 2022
provided by the Department. This included funds allegedly disbursed to ineligible
and/or fraudulent claims (identity theft, fraud, and non-fraud).
The samples selected for all sample testing were not statistically significant;
therefore, the results should not be projected to the population for any of the
samples.
The date of the Exit Conference along with the principal attendees are noted
below:
Exit Conference June 20, 2023
Agency Name and Title
Illinois Department of Employment Raymond Marchiori, Acting Director
Security Melissa Coultas, Chief of Staff
Kevin Lovellette, Chief Legal Counsel
Thomas Revane, Chief Information Officer
Isaac Burrows, Chief Financial Officer
Marcia Armstrong, Director’s Office
Representative
Jim Schreiber, Audit Liaison
Kelly McGrath, Manager of Accounting and
Reporting
Derek Michaels, Private Secretary to the
Director
Illinois Office of the Auditor General Tricia Wagner, Senior Audit Manager
Alison Storm, Audit Supervisor
Sydney Payne, Audit Staff
Ryan Rizner, Audit Staff
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APPENDIX C PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
Appendix C
Timeline of Unemployment Compensation in Illinois
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APPENDIX C PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
Note:
Differences in event dates reported by IDES and dates reported previously in the audit are attributable to the
Illinois benefit week starting on Sundays and ending on Saturdays while program dates set by federal laws start
and end on different days of the week.
Source: OAG auditor prepared.
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APPENDIX D PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
Appendix D
Unemployment Insurance Program Letter Listing
UIPL Subject Issue Date
12-01 Outsourcing of Unemployment Compensation Administrative Function. 12/28/2000
14-05 Changes to UI Performs. 2/18/2005
14-05, Performance Criterion for the Overpayment Detection Measure; 10/12/2005
Change 1 Clarification of Appeals Timeliness Measures; and Implementation of
Tax Quality Measure Corrective Action Plans.
14-05, Performance Criteria for Appeals Case Aging Measures and the 12/13/2006
Change 2 Starting Date for Measuring Nonmonetary Determinations Time Lapse.
12-01, Outsourcing of Unemployment Compensation Administrative 11/26/2007
Change 1 Functions - Claims Taking.
14-05, Acceptable Levels of Performance Criteria for Appeals Case Aging 4/16/2008
Change 3 Measures and Nonmonetary Determination Quality Review.
19-11 National Effort to Reduce Improper Payments in the Unemployment 6/10/2011
Insurance Program.
28-11 Unemployment Insurance State Integrity Task Forces and Strategic 9/1/2011
Plans.
12-14 Required Use of the Treasury Offset Program to Collect Covered 5/20/2014
Unemployment Compensation Debt.
1-16 Federal Requirements to Protect Individual Rights in State 10/1/2015
Unemployment Compensation Overpayment Prevention and Recovery
Procedures.
4-17 Disclosure of Confidential Unemployment Compensation Information 12/16/2016
to the Department of Labor’s Office of Inspector General.
1-16, Federal Requirements to Protect Claimant Rights in State 1/13/2017
Change 1 Unemployment Compensation Overpayment Prevention and Recovery
Procedures - Questions and Answers.
2-19 Recovery of Certain Unemployment Compensation Debts under the 12/12/2018
Treasury Offset Program.
13-19 National Directory of New Hires and State Directory of New Hires 6/7/2019
Guidance and Best Practices.
3-20 Minimum Disaster Unemployment Assistance Weekly Benefit Amount 12/12/2019
January 1 - March 31, 2020.
10-20 Unemployment Compensation for Individuals Affected by COVID-19. 3/12/2020
13-20 Families First Coronavirus Response Act, Division D Emergency 3/22/2020
Unemployment Insurance Stabilization and Access Act of 2020.
14-20 CARES Act of 2020 - Summary of Key Unemployment Insurance 4/2/2020
Provisions and Guidance Regarding Temporary Emergency State
Staffing Flexibility.
15-20 CARES Act of 2020 - FPUC Program Operating, Financial, and 4/4/2020
Reporting Instructions.
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UIPL Subject Issue Date
16-20 CARES Act of 2020 - PUA Program Operating, Financial, and 4/5/2020
Reporting Instructions.
17-20 CARES Act of 2020 - PEUC Program Operating, Financial, and 4/10/2020
Reporting Instructions.
16-20, CARES Act of 2020 - PUA Program Reporting Instructions and 4/27/2020
Change 1 Questions and Answers.
18-20 CARES Act of 2020 - Emergency Unemployment Relief for State and 4/27/2020
Local Governmental Entities, Certain Nonprofit Organizations, and
Federally-Recognized Indian Tribes.
20-20 CARES Act of 2020 - Operating, Financial, and Reporting Instructions 4/30/2020
for Section 2105: Temporary Full Federal Funding of the First Week of
Compensable Regular Unemployment for States with No Waiting
Week.
21-20 CARES Act of 2020 - Short-Time Compensation Program Provisions 5/3/2020
and Guidance Regarding 100 Percent Federal Reimbursement of
Certain State STC Payments.
13-20, Families First Coronavirus Response Act, Division D Emergency 5/4/2020
Change 1 Unemployment Insurance Stabilization and Access Act of 2020 -
Reporting Instructions, Modification to Emergency Administrative
Grants Application Requirement, and Questions and Answers.
15-20, CARES Act of 2020 - FPUC Program Reporting Instructions and 5/9/2020
Change 1 Questions and Answers.
23-20 Program Integrity for the Unemployment Insurance Program and the 5/11/2020
UI Programs Authorized by the CARES Act of 2020 - FPUC, PUA, and
PEUC Programs.
17-20, CARES Act of 2020 - PEUC Program: Questions and Answers, and 5/13/2020
Change 1 Revised Reporting Instructions for the PEUC ETA 227.
24-20 Temporary Changes to the Federal-State Extended Benefits Program 5/14/2020
in Response to the Economic Impacts of the Coronavirus Disease
2019 Pandemic Emergency.
10-20, Interpretation of “Between and Within Terms” Denial Provisions in 5/15/2020
Change 1 Section 3304(a)(6)(A) of the Federal Unemployment Tax Act.
15-20, CARES Act of 2020 - New Data Collection Instrument and Revised 6/15/2020
Change 2 Reporting Instructions for FPUC.
25-20 Benefit Accuracy Measurement Program Operations in Response to 6/15/2020
the COVID-19 Pandemic.
16-20, CARES Act of 2020 - PUA Additional Questions and Answers. 7/21/2020
Change 2
14-20, CARES Act of 2020 - Questions and Answers. 8/12/2020
Change 1
18-20, Amendments to the CARES Act of 2020 - Emergency Unemployment 8/12/2020
Change 1 Relief for State and Local Governmental Entities, Certain Nonprofit
Organizations, and Federally Recognized Indian Tribes.
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APPENDIX D PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
UIPL Subject Issue Date
27-20 Presidential Memorandum on Authorizing the Other Needs Assistance 8/12/2020
Program for Major Disaster Declarations Related to COVID-19 -
Unemployment Insurance-Related Technical Assistance for States
Administering LWA.
27-20, Unemployment Insurance Related Technical Assistance for States 8/17/2020
Change 1 Administering LWA Questions and Answers.
16-20, CARES Act of 2020 - Eligibility of Individuals who are Caregivers for 8/27/2020
Change 3 PUA in the Context of School Systems Reopening.
28-20 Addressing Fraud in the Unemployment Insurance System and 8/31/2020
Providing States with Funding to Assist with Efforts to Prevent and
Detect Fraud and Identity Theft and Recover Fraud Overpayments in
the PUA and PEUC Programs.
27-20, Unemployment Insurance Related Technical Assistance for States 11/16/2020
Change 2 Administering LWA.
9-21 Continued Assistance for Unemployed Workers Act of 2020 - 12/30/2020
Summary of Key Unemployment Insurance Provisions.
17-20, Continued Assistance for Unemployed Workers Act of 2020 - PEUC 12/31/2020
Change 2 Program: Extension, Transition Rule, Increase in Total Benefits, and
Coordination Rules.
24-20, Continued Assistance Act of 2020 - Provisions Affecting the Federal- 12/31/2020
Change 1 State Extended Benefits Program.
15-20, Continued Assistance Act of 2020 - FPUC Program Reauthorization 1/5/2021
Change 3 and Modification and MEUC Program Operating, Reporting, and
Financial Instructions.
12-01, States’ Ability to Exercise Flexibility in Staffing Models for the 1/8/2021
Change 2 Performance of Certain Unemployment Compensation (UC)
Administrative Activities.
16-20, Continued Assistance to Unemployed Workers Act of 2020 - PUA 1/8/2021
Change 4 Program: Updated Operating Instructions and Reporting Changes.
28-20, Additional Funding for Identity Verification or Verification of PUA 1/15/2021
Change 1 Claimants and Funding to Assist with Efforts to Prevent and Detect
Fraud and Identity Theft as well as Recover Fraud Overpayments in
the PUA and PEUC Programs.
16-20, Expanded Eligibility Provisions for the PUA Program. 2/25/2021
Change 5
14-21 American Rescue Plan Act of 2021 - Key Unemployment Insurance 3/15/2021
Provisions.
15-20, American Rescue Plan Act of 2021 - Extensions to the FPUC Program 3/26/2021
Change 4 and MEUC Program.
17-20, American Rescue Plan Act of 2021 - PEUC Program: Extension, 3/26/2021
Change 3 Elimination of Transition Rule, Increase in Total Benefits, and
Extension of Coordination Rule.
18-20, American Rescue Plan Act of 2021 - Amendments to the Emergency 3/26/2021
Change 2 Unemployment Relief for State and Local Governmental Entities,
Certain Nonprofit Organizations, and Federally-Recognized Indian
Tribes.
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UIPL Subject Issue Date
24-20, American Rescue Plan Act of 2021 - Provisions Affecting the Federal- 4/7/2021
Change 2 State Extended Benefits Program.
16-21 Identity Verification for Unemployment Insurance Claims. 4/13/2021
19-21 Benefits Held by Banks and Financial Institutions as a Result of 5/4/2021
Suspicious and/or Potentially Fraudulent Activity and the Proportional
Distribution Methodology Required for Recovering/Returning Federally
Funded Unemployment Compensation (UC) Program Funds.
20-21 State Instructions for Assessing Fraud Penalties and Processing 5/5/2021
Overpayment Waivers under the CARES Act.
10-20, Short-Time Compensation for Reopening the Economy. 5/25/2021
Change 2
13-20, Review of State Compliance for Receipt of Emergency Administrative 6/3/2021
Change 2 Grants and Clarification on Benefit Offset Requirements.
13-20, Ending the Emergency Flexibilities Authorized under Section 4102(b). 7/1/2021
Change 3
14-21, State Responsibilities After the Temporary Unemployment Benefit 7/12/2021
Change 1 Programs under the CARES Act End Due to State Termination of
Administration or When the Programs Expire.
4-17, Requirement for States to Refer Allegations of Unemployment 8/3/2021
Change 1 Compensation Fraud, Waste, Abuse, Mismanagement, or Misconduct
to the DOL OIG and to Disclose Information Related to the CARES Act
to DOL OIG for Purposes of UC Fraud Investigation and Audits.
28-20, Additional Funding to Assist with Strengthening Fraud Detection and 8/11/2021
Change 2 Prevention Efforts and the Recovery of Overpayments in the PUA and
PEUC Programs, as well as Guidance on Processes for Combatting
Identity Fraud.
22-21 Grant Opportunity to Support States with Fraud Detection and 8/11/2021
Prevention, Including Identity Verification and Overpayment Recovery
Activities.
16-20, PUA Program: Updated Operating Instructions and Reporting 9/3/2021
Change 6 Changes.
28-20, Extension of Time to Submit Request for Funding under Grant 9/17/2021
Change 3 Opportunity Announced in Unemployment Insurance Program Letter
No. 28-20, Change 2.
22-21, Extension of Time to Submit Request for Funding under Grant 9/17/2021
Change 1 Opportunity Announced in Unemployment Insurance Program Letter
No. 22-21.
1-22 Announcing the Availability of an Incarceration Data Exchange and 10/29/2021
Instructions to Access the Data Exchange between the Unemployment
Insurance ICON and the Social Security Administration Prisoner
Update Processing System (PUPS).
2-22 Grant Opportunity to Support States Following a Consultative 11/2/2021
Assessment for Fraud Detection and Prevention, Promoting Equitable
Access, and Ensuring the Timely Payment of Benefits, including
Backlog Reduction, for all Unemployment Compensation Programs.
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APPENDIX D PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
UIPL Subject Issue Date
20-21, Additional State Instructions for Processing Waivers of Recovery of 2/7/2022
Change 1 Overpayments under the CARES Act.
2-22, Extension of Time for States to Express Interest in the Grant 2/16/2022
Change 1 Opportunity Announced in Unemployment Insurance Program Letter
No. 2-22.
2-22, Additional Extension of Time for States to Express Interest in the 9/19/2022
Change 2 Grant Opportunity Announced in Unemployment Insurance Program
Letter No. 2-22.
Source: US Department of Labor.
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APPENDIX E PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
Appendix E
Description of Available Cross-matches and Fraud
Prevention Tools
Name Description
Akamai Performs identity verification and email cross-matches similar to Ekata.
Block List/Daily Scans Database table to support scanning within IBIS for claimants, bank
accounts, email addresses, and IP addresses that BPC deemed to be
fraudulent.
DOL OIG Cross-Match Audit performed by the Department of Labor Office of the Inspector General
on all states and territories requesting new pandemic claims in both regular
UI and PUA. The audit included cross-matching claims to a number of
databases including incarceration data, questionable bank accounts, known
fraud addresses, and others. The results of their comparisons were
returned to the states.
Ekata Performs identity verification and email cross-matches.
Foreign Internet Integrity Data Hub tool that matches claims against a continuously updated
Protocol (IP) Address list of Foreign (non-US) based IP addresses.
Detection
Fraud Alerting Integrity Data Hub tool that allows states to share information on emergent
Capability fraud schemes/activity identified in their states to improve awareness
across the community.
Fraud Analytics Report Performs claimant searches in the IBIS database, gathers each result, and
combines them into a single list; i.e. Email address shared among multiple
claimants.
IBIS and PUA Scans Nightly report queries run/provided by the DoIT team.
ID Proofing Uses questions to verify identity, i.e. In 1985 you bought your first car. What
color was it? ID proofing was upgraded to analyze the use of identities
across all transactions in the past 90 days to identify when an identity has
been compromised or shows unusual activity.
ILogin Multi-factor authenticated login implemented in August 2021 for use across
State benefit programs.
Inmate Database Illinois Department of Corrections cross-match; provides access to records
provided by state and local police departments and incarceration facilities,
including data from other states.
Internet Claims Manual review of claims for particular cases (e.g. an employer is not in the
Selection (ICS) Review system, and other eligibility issues).
Interstate Connection Checks if claimant has filed for benefits in another state when the claimant
Network (ICON) & has out of state wages.
Interstate Benefits (IB)
Monthly Wages Compares monthly wages paid and benefits received.
Multiple Claimants, Identifies addresses in which multiple claimants receive five or more
Same Address Unemployment Insurance benefit payments at a single address.
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APPENDIX E PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
Name Description
Multiple Claimants, Flags claims where two or more claimants are using the same bank
Same Bank Account account.
Multi-State Cross- Integrity Data Hub tool that identifies where UI claims data is being used
Match (MSCM) across multiple states (for example, flagging a Social Security number that
is being used across four different states).
National New Hire Information originally collected for nationwide child support enforcement
purposes from the ICON system used to identify claimants who continue to
receive benefits after they have resumed work.
Pondera Cross-Match Analytics on new claimant identities. Claimant identities are returned as
clean or with three increasing levels of concern.
Quarterly Wages Matches employer quarterly wages reported for a claimant with UI benefits
paid to a claimant during a quarter.
Secretary of State Matches name, birth date and weight on the identification card.
(SOS)
Social Security Matches name and birth date.
Administration (SSA)
Specific Leads Leads provided by IDES staff, anonymous sources, or employers to
consider fraud.
State Information Data Various data exchange formats for requesting and receiving information
Exchange System from employers and third party administrators; ensures complete and valid
(SIDES) information is received in an established consistent format.
State New Hire Illinois employer reported information containing the name, address, Social
Security number, and date of hire of each newly hired individual and the
hiring employer’s information to identify claimants who continue to receive
benefits after they have resumed work.
Suspicious Actor Integrity Data Hub tool that matches UI claims against other states’ known
Repository (SAR) suspicious claims data.
Suspicious Email Integrity Data Hub tool that matches claims against a database of
Domains suspicious email domains that have been associated with fraudulent
activity.
Systematic Alien Department of Homeland Security’s system to verify if an alien individual
Verification for has been lawfully admitted for permanent residence in the US and is
Entitlement (SAVE) eligible for public benefits.
Wage Record Matches wages reported by employers with wage information submitted by
Validation claimants when claimants file their initial claim.
Source: OAG auditor prepared.
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APPENDIX F PERFORMANCE AUDIT OF IDES UNEMPLOYMENT INSURANCE PROGRAMS
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