Unemployment Insurance: Transformation Needed to Address Program Design, Infrastructure, and Integrity Risks (GAO, June 2022)
Summary
A United States Government Accountability Office report to congressional addressees, Unemployment Insurance: Transformation Needed to Address Program Design, Infrastructure, and Integrity Risks, GAO-22-105162, dated June 2022. The Highlights state that DOL reported an increase in estimated improper payments from $8.0 billion (9.2 percent improper payment rate) for fiscal year 2020 to $78.1 billion (18.9 percent improper payment rate) for fiscal year 2021, and that from March 2020 through January 2022 at least 146 individuals pleaded guilty to federal charges of defrauding UI programs. GAO states that it has determined that the UI system should be added to its High-Risk List. GAO recommends that DOL develop and implement a plan for transforming UI, and states that DOL agreed with the recommendation.
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“Unemployment Insurance: Transformation Needed to Address Program Design, Infrastructure, and Integrity Risks (GAO, June 2022).”
Original at www.gao.gov. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/unemployment-insurance-transformation-needed-high-risk/
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United States Government Accountability Office
Report to Congressional Addressees
UNEMPLOYMENT
June 2022
INSURANCE
Transformation
Needed to Address
Program Design,
Infrastructure, and
Integrity Risks
GAO-22-105162
June 2022
UNEMPLOYMENT INSURANCE
Transformation Needed to Address Program Design,
Infrastructure, and Integrity Risks
Highlights of GAO-22-105162, a report to
congressional addressees
Why GAO Did This Study What GAO Found
A high-risk designation is intended to GAO and others have reported that challenges with Unemployment Insurance
help spur progress in areas needing (UI) administration have affected states’ ability to effectively meet the needs of
transformation. The UI system has unemployed workers, both historically and during times of economic downturn—
faced long-standing challenges with such as the COVID-19 pandemic. Reported challenges with program design and
effective service delivery and program variation in how states administer UI have contributed to declining access and
integrity. The historic levels of job loss disparities in benefit distribution. In the pandemic, challenges emerged relating to
during the COVID-19 pandemic providing customer service, timely processing of claims, and implementing new
worsened existing challenges. programs. Moreover, GAO, the Department of Labor (DOL), and the DOL Office
Congress created four new UI
of Inspector General have reported on the need to modernize state IT systems.
programs to support workers during
the pandemic. However, The risk of UI improper payments, including from fraud, greatly increased during
unprecedented demand for benefits the pandemic. Prior to the pandemic, DOL regularly reported billions of dollars in
and the need to quickly implement the annual estimated improper payments in UI, and it reported an increase from $8.0
new programs presented challenges billion (9.2 percent improper payment rate) for fiscal year 2020 to $78.1 billion
for states and increased risks of (18.9 percent improper payment rate) for fiscal year 2021. According to DOL,
improper payments, including from historically, the primary causes of improper payments related to eligibility
fraud. determination issues, such as providing benefits to those who had returned to
This report examines (1) challenges in work and failed to report their earnings. However, DOL stated that during the
responding to the needs of pandemic, increased identity theft was a main cause. Total UI improper
unemployed workers and economic payments are not known partly because DOL has not yet reported estimates for
changes; (2) risks of improper certain pandemic UI programs. States have also struggled with incomplete
payments, including from fraud; (3) the reporting of billions of dollars in identified overpayments. The CARES Act UI
extent to which UI experienced programs created new, and increased existing, fraud risks. From March 2020
impaired performance and financial through January 2022, at least 146 individuals pleaded guilty to federal charges
loss; and (4) potential options for UI of defrauding UI programs and charges were pending against at least 249
transformation suggested by individuals. As a result of the increase in fraud-related cases during the
stakeholder panels. pandemic, federal and state entities continue to investigate UI fraud.
GAO reviewed audit products and These extensive challenges pose significant risk to UI service delivery and
relevant federal laws and guidance;
expose the UI system to significant financial losses. Based on GAO’s findings—
reviewed literature to identify UI-related
including many open recommendations in this area—GAO has determined that
challenges and risks; analyzed
improper payment reporting; convened
the UI system should be added to GAO’s High-Risk List. DOL has some activities
a panel of 16 stakeholders with UI planned and underway for the UI system, such as creating a UI modernization
subject-matter expertise; and office and implementing strategies aimed at reducing risk; however, many long-
compared findings against GAO standing issues remain unaddressed. Leaving these issues unaddressed will
criteria for designating programs as heighten the risk of the UI system not meeting fundamental program
high risk. expectations of serving workers and the broader economy, and may undermine
public confidence in the responsible stewardship of government funds.
What GAO Recommends
Participants in stakeholder panels GAO convened identified various options for
GAO recommends that DOL develop transforming the UI system. Options include changes to program design to better
and implement a plan for transforming target support, improvements to infrastructure, and enhancements to program
UI that meets GAO’s high-risk criteria integrity—e.g., tightening federal standards for state UI implementation, such as
for transformations. DOL agreed with those for eligibility, benefit amounts, and duration; improving and modernizing IT
the recommendation and described systems; and obtaining additional data sources to identify fraudulent claims. In
actions it is taking to address it.
addition, GAO identified broad considerations to help policymakers and others
View GAO-22-105162. For more information, assess key aspects of different options for transforming UI programs and
contact Tom Costa at (202) 512-4769 or addressing related risks. Such considerations include the comprehensiveness
costat@gao.gov, or Mary Hannah Padilla at and flexibility of potential transformations.
(202) 512-5683 or padillah@gao.gov .
United States Government Accountability Office
Contents
Letter 1
Background 5
Reported Challenges with State UI Administration and Outdated
IT Systems Affect UI Responsiveness 14
Risk of UI Improper Payments, Including Those Due to Fraud,
Increased during the Pandemic 25
Sustained Action Is Critical to Address Risks to UI System 41
Panelists Offered Options to Transform UI Design, Systems, and
Integrity; Several Considerations Could Be Used to Assess
Them 48
Conclusions 52
Recommendation for Executive Action 52
Agency Comments and Our Evaluation 53
Appendix I Objectives, Scope, and Methodology 56
Appendix II Comments from the Department of Labor 61
Appendix III Open Recommendations to the Department of Labor 66
Appendix IV Stakeholder Panelists’ Suggested Options for Transforming
Unemployment Insurance 69
Appendix V GAO Contacts and Staff Acknowledgments 77
Related GAO Products 78
Tables
Table 1: Regular Unemployment Insurance (UI) Estimated
Improper Payments (IP), July 1, 2015–Mar. 31, 2020,
Nationally 26
Page i GAO-22-105162 UI Risks and Transformation
Table 2: Potential Transformation Options Stakeholder Panelists
Identified Related to Changing Unemployment Insurance
(UI) Program Design 48
Table 3: Potential Transformation Options Stakeholder Panelists
Identified Related to Improving Unemployment Insurance
(UI) System Infrastructure 49
Table 4: Potential Transformation Options Stakeholders Identified
Related to Enhancing Unemployment Insurance (UI)
System Integrity 50
Table 5: Considerations for Assessing Unemployment Insurance
(UI) Proposals 51
Table 6: List of Stakeholder Panelists in GAO Roundtables to
Identify Unemployment Insurance Challenges and
Options for Transformation, Held Aug. 4-5, 2021, Titles,
and Institutional Affiliation at the Time of Roundtables 58
Table 7: Unemployment Insurance (UI) System
Recommendations to the Department of Labor (DOL)
That Are Open as of June 7, 2022 66
Figure
Figure 1: Timeliness of Nationwide First Payments of Regular
Unemployment Insurance (UI) Benefits, Jan. 2020–Feb.
2022 20
Page ii GAO-22-105162 UI Risks and Transformation
Abbreviations
BAM Benefit Accuracy Measurement
DOL Department of Labor
EB Extended Benefits
ETA Employment and Training Administration
FEMA Federal Emergency Management Agency
FPUC Federal Pandemic Unemployment Compensation
ITSC Information Technology Support Center
MEUC Mixed Earner Unemployment Compensation
NASWA National Association of State Workforce Agencies
OIG Office of Inspector General
OMB Office of Management and Budget
PEUC Pandemic Emergency Unemployment Compensation
PII personally identifiable information
PIIA Payment Integrity Information Act of 2019
PUA Pandemic Unemployment Assistance
UI Unemployment Insurance
UIPL Unemployment Insurance Program Letter
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Page iii GAO-22-105162 UI Risks and Transformation
Letter
441 G St. N.W.
Washington, DC 20548
June 7, 2022
The Honorable Ron Wyden
Chairman
Committee on Finance
United States Senate
The Honorable Gary C. Peters
Chairman
Committee on Homeland Security and Governmental Affairs
United States Senate
The Honorable Carolyn B. Maloney
Chairwoman
Committee on Oversight and Reform
House of Representatives
Overseen by the Department of Labor (DOL) and administered by the
states, the Unemployment Insurance (UI) program is a federal-state
partnership that provides temporary financial assistance to eligible
workers who become unemployed through no fault of their own. During
economic downturns, UI’s role in supporting workers and our overall
economy becomes more vital. For example, from roughly April 2020
through December 2021, UI programs combined provided about $849
billion in compensation to claimants, according to DOL. 1 However, the UI
system has faced long-standing challenges with effective service delivery
and program integrity. These challenges have been exacerbated during
times of unprecedented demand for UI benefits, such as the 2007–2009
1This amount includes about $191 billion in compensation paid under the regular UI and
Extended Benefits programs, and $658 billion in compensation paid under temporary UI
programs in place during the pandemic, which expired on September 6, 2021. The
compensation amounts for the temporary programs represent all compensation paid
throughout the existence of the programs. These programs were generally created at the
end of March 2020 and expired in September 2021, though some payments may have
occurred after September 2021 for weeks of unemployment prior to the programs’
expiration. We obtained April 2020 through December 2021 compensation amounts for
the regular UI and Extended Benefits programs on May 3, 2022 from DOL’s data
summary website at https://oui.doleta.gov/unemploy/data_summary/DataSum.asp. We
obtained compensation amounts for the temporary UI programs on May 3, 2022 from
DOL’s website at https://oui.doleta.gov/unemploy/docs/cares_act_funding_state.html.
Page 1 GAO-22-105162 UI Risks and Transformation
recession and the COVID-19 pandemic, which led to historic levels of job
loss.
In response to the COVID-19 pandemic, Congress allowed states to ease
certain requirements in the regular UI program to help support
unemployed workers, and also created new UI programs that expanded
eligibility and enhanced UI benefits. However, states faced challenges
processing a historically high number of claims and ensuring the timely
payment of benefits to eligible individuals. The unprecedented demand
for UI benefits and the urgency with which states implemented the new
programs during the pandemic also increased the risk of improper
payments, including those due to fraud. 2
In recent years, GAO, DOL, and the DOL Office of Inspector General
(OIG) have reported on the need for improving federal and state
management of the UI system, modernizing IT, and improving program
integrity. 3 Based on our findings from this body of work—including
findings from two new GAO reports we are issuing concurrently—and the
urgent need to address persistent issues in the UI system, we have
2The Payment Integrity Information Act of 2019 (PIIA) defines an improper payment as
any payment that should not have been made or that was made in an incorrect amount
(including overpayments and underpayments) under statutory, contractual, administrative,
or other legally applicable requirements. It includes any payment to an ineligible recipient,
any payment for an ineligible good or service, any duplicate payment, any payment for a
good or service not received (except for such payments where authorized by law), and
any payment that does not account for credit for applicable discounts. 31 U.S.C. §
3351(4). Further, when an executive agency’s review is unable to discern, because of
lacking or insufficient documentation, whether a payment was proper, the agency must
treat the payment as improper in producing an improper payment estimate. 31 U.S.C. §
3352(c)(2). Fraud involves obtaining something of value through willful misrepresentation.
Whether an act is fraudulent is determined through the judicial or other adjudicative
systems. In this report, “fraud risk” includes existing circumstances that provide an
opportunity to commit fraud.
3For the purposes of this report, the UI system includes UI programs that were established
prior to the COVID-19 pandemic (including the regular UI program and Extended
Benefits), and programs established in response to the COVID-19 pandemic (such as
Pandemic Unemployment Assistance and Federal Pandemic Unemployment
Compensation, among others).
Page 2 GAO-22-105162 UI Risks and Transformation
determined that the UI system should be on our High-Risk List and are
making an out-of-cycle high-risk designation. 4
This high-risk designation is intended to help spur progress in resolving
persistent issues by shining a spotlight on key issues and ways the
federal government can lead efforts to find solutions, such as by
addressing our 21 open recommendations and those of the DOL OIG,
and focusing on using federal funds efficiently to maximize results. 5 DOL
continues to take some steps to address challenges, but a coordinated
and sustained approach is important to ensure significant progress in
improving program performance and integrity. As the nation’s economy
recovers from the effects of the COVID-19 pandemic, and states and
DOL have more capacity to reflect on challenges the UI system faced
before and during the pandemic, DOL now has the opportunity to give
concerted attention to the long-term risks facing the UI system and to
considerations in addressing them.
We prepared this report under the authority of the Comptroller General in
light of congressional interest in the area of UI. 6 This report examines (1)
challenges related to the UI system’s ability to respond to the needs of
unemployed workers and to changing economic conditions; (2) the risk of
4The reports being issued concurrently with this report are GAO, Pandemic
Unemployment Assistance: Federal Program Supported Contingent Workers amid Historic
Demand, but DOL Should Examine Racial Disparities in Benefit Receipt, GAO-22-104438
(Washington, D.C.: June 7, 2022) and Unemployment Insurance: Pandemic Programs
Posed Challenges, and DOL Could Better Address Customer Service and Emergency
Planning, GAO-22-104251 (Washington, D.C.: June 7, 2022). The High-Risk List
highlights federal programs and operations that we have determined are in need of
transformation. The High-Risk List also names federal programs and operations that are
vulnerable to waste, fraud, abuse, and mismanagement. See GAO, High-Risk Series: Key
Practices to Successfully Address High-Risk Areas and Remove Them from the List,
GAO-22-105184 (Washington, D.C.: Mar. 3, 2022).
5See appendix III for more information on open GAO recommendations.
6See 31 U.S.C. § 717(b)(1). Congressional interest in the area of UI further developed
from our work in response to the CARES Act. The CARES Act included a provision for
GAO to conduct monitoring and oversight of the use of funds made available to prepare
for, respond to, and recover from the COVID-19 pandemic. Pub. L. No. 116-136, div. B, §
19010, 134 Stat. 281, 579-81 (2020). We have regularly issued government-wide reports
on the federal response to COVID-19. For the latest report, see GAO, COVID-19: Current
and Future Federal Preparedness Requires Fixes to Improve Health Data and Address
Improper Payments, GAO-22-105397 (Washington, D.C.: Apr. 27, 2022). Our
government-wide reports are available on GAO’s website at
https://www.gao.gov/coronavirus. Because the scope of the evaluation went beyond
COVID-19 funding, we conducted our work under the authority of the Comptroller General.
Page 3 GAO-22-105162 UI Risks and Transformation
improper payments, including from fraud, in the UI system; (3) the extent
to which challenges place the UI system at risk of significantly impaired
performance and financial loss, and how to address such risks; and (4)
potential options for transforming the UI system.
For our first objective, we reviewed audit products by GAO, the DOL OIG,
and state audit agencies to determine the challenges that DOL and states
face, including IT system constraints, in responding to unemployed
workers’ needs and to changing economic conditions. 7 We also reviewed
published articles related to UI, written or recommended by participants in
our stakeholder panels (discussed below), to identify both the historical
and recent challenges the UI system has faced with addressing the needs
of unemployed workers and the role the system has played in the larger
economy.
For the second objective, we reviewed relevant federal laws and Office of
Management and Budget (OMB) implementing guidance to identify the
requirements that agencies must satisfy for improper payments reporting.
In addition, we reviewed audit reports by GAO and the DOL OIG to
determine the risks that DOL and states face regarding improper
payments, including from fraud. We also analyzed UI improper payment
estimates from both DOL and OMB’s PaymentAccuracy.gov website. We
assessed the reliability of the data by reviewing DOL’s documentation
and the DOL OIG audits on the quality of the estimates. We determined
that the estimates were sufficiently reliable for the purposes of this report;
however, we also note the limitations of the estimates, as described in
this report.
For the third objective, we drew from GAO and DOL OIG reports on UI-
related issues, and the two other UI-related reports we are issuing
concurrently with this report. 8 We also met with DOL officials to discuss
ongoing and planned activities to address challenges identified in these
reports. To determine whether UI should be on the High-Risk List, we
compared our findings from prior reports, DOL OIG reports, and this work
against the GAO criteria for determining whether a government program
7The scope and methodology for GAO products we reviewed are contained in the
respective reports. See “Related GAO Products” at the end of this report.
8GAO-22-104438 and GAO-22-104251.
Page 4 GAO-22-105162 UI Risks and Transformation
or function is high risk. 9 We also considered federal internal control
standards for monitoring during our review. 10
To address objectives 1, 2, and 4, we convened a 2-day virtual
roundtable composed of 16 stakeholder panelists with UI-related
academic research experience, practical and applied experience running
or assessing the UI system, or both. We selected potential panelists from
government, the private sector, public–private partnerships, and
academia to obtain educated views on topics related to transforming UI
programs. The purpose of the roundtable discussions was to obtain
stakeholder views on the risks facing the UI system, and options for how
it could be transformed to better meet the demands of unemployed
workers during periods of unprecedented job loss. The discussions were
recorded and transcribed to ensure that we accurately captured panelists’
statements. We analyzed the transcripts to develop a list of common
themes and options for transformation. The inclusion in this report of
individual options that stakeholders provided for transforming the UI
system is meant to be illustrative and should not be interpreted as an
endorsement by GAO or any federal agency or department. Appendix I
provides a detailed discussion of our objectives, scope, and methodology
for this review.
We conducted this performance audit from April 2021 to June 2022 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Background
Designating Federal The increased significance of the UI system during the pandemic drew
Programs as High Risk attention to its vulnerabilities and susceptibility to fraud, waste, abuse,
and mismanagement. Since the early 1990s, our High-Risk program has
focused attention on government operations with greater vulnerabilities to
9GAO, Determining Performance and Accountability Challenges and High Risks,
GAO-01-159SP (Washington, D.C.: Nov. 1, 2000).
10GAO, Standards for Internal Control in the Federal Government, GAO-14-704G.
(Washington, D.C.: Sept. 10, 2014).
Page 5 GAO-22-105162 UI Risks and Transformation
fraud, waste, abuse, and mismanagement, or that are in need of
transformation to address economy, efficiency, or effectiveness.
To determine which federal programs and operations to designate as high
risk, we use the criteria laid out in Determining Performance and
Accountability Challenges and High Risks. 11 We consider qualitative
factors, such as whether the risk (1) involves public health or safety,
service delivery, national security, national defense, economic growth, or
privacy or citizens’ rights; or (2) could result in significantly impaired
service, program failure, injury or loss of life, or significantly reduced
economy, efficiency, or effectiveness. We also consider the exposure to
financial loss. At a minimum, $1 billion must be at risk in areas such as
the value of major assets being impaired; revenue sources not being
realized; major agency assets being lost, stolen, damaged, wasted, or
underutilized; potential for or evidence of improper payments; and
presence of contingencies or potential liabilities. Before making a high-
risk designation, we also consider corrective measures that are planned
or underway to resolve a material control weakness and the status and
effectiveness of these actions.
We release a High-Risk series report every 2 years at the start of each
new Congress. Our reports detail progress made on previously
designated high-risk issues, and designate any new issue areas we
identify as high risk, based on the above criteria, in these reports or in
separate products outside of the 2-year cycle. As in this case, we
sometimes make out-of-cycle designations to highlight urgent issues, help
ensure focused attention, and maximize the opportunity for the federal
government to take action. 12
GAO has five criteria for evaluating a program’s progress toward removal
from the High-Risk List: (1) a demonstrated strong commitment and
leadership support to address the risk(s); (2) the capacity (i.e., the people
and other resources) to resolve the risk(s); (3) a corrective action plan
that defines the root causes, identifies effective solutions, and provides
11GAO-01-159SP.
12GAO has placed the following issues on the High-Risk List outside of GAO’s biennial
high-risk update cycle: the Government-Wide Personnel Security Clearance Process
(2018); the U.S. Postal Service’s Financial Viability (2009); the 2010 Census (2008); the
National Flood Insurance Program (2006); the Pension Benefit Guaranty Corporation
Insurance Programs (2003); the U.S. Postal Service’s Transformation Efforts and Long-
Term Outlook (2001); and the Department of Housing and Urban Development Single-
Family Mortgage Insurance and Rental Housing Assistance Programs (1994).
Page 6 GAO-22-105162 UI Risks and Transformation
for substantially completing corrective measures near term, including
steps necessary to implement solutions we recommend; (4) a program
instituted to monitor and independently validate the effectiveness and
sustainability of corrective measures; and (5) the ability to demonstrate
progress in implementing corrective measures.
UI Program Administration The federal government and states work together to administer UI
and Funding programs. States design and administer their own UI programs within
federal parameters, while DOL oversees states’ compliance with federal
requirements, such as by reviewing state laws to confirm they are
designed to ensure payment of benefits when due. According to DOL,
state statutes establish specific benefit structure, eligibility provisions,
benefit amounts, and other aspects of the program. Regular UI benefits—
those provided by state UI programs since before the CARES Act was
enacted—are funded primarily through state taxes levied on employers
and are intended to replace a portion of a claimant’s previous
employment earnings, according to DOL. 13
The CARES Act created three federally funded temporary UI programs
that expanded benefit eligibility and enhanced benefit amounts, which
were amended by the Consolidated Appropriations Act, 2021, and the
American Rescue Plan Act of 2021. 14
1. Pandemic Unemployment Assistance (PUA) authorized UI benefits
for individuals not otherwise eligible for UI benefits, such as self-
employed and certain gig economy workers, who were unable to work
as a result of specified COVID-19-related reasons. 15
2. Federal Pandemic Unemployment Compensation (FPUC)
generally authorized an additional weekly benefit for individuals who
13To be eligible for regular UI benefits, applicants must generally demonstrate workforce
attachment, be able and available to work, and be actively seeking work. 42 U.S.C. §
503(a)(12). Administration of the regular UI program is financed by a federal tax on
employers, according to DOL.
14The CARES Act also addressed other aspects of the UI system, such as authorizing
certain flexibilities for states to hire additional staff. In addition to the CARES Act, the
Families First Coronavirus Response Act provided up to $1 billion in emergency grant
funding to states in fiscal year 2020 for UI administrative purposes.
15At the time of the program’s expiration, PUA generally authorized up to 79 weeks of
benefits. Pub. L. No. 117-2, § 9011(a), (b), 135 Stat. 4, 118; Pub. L. No. 116-260, div. N,
tit. II, § 201(a), (b), 134 Stat. 1182, 1950-1951 (2020); Pub. L. No. 116-136, § 2102, 134
Stat. 281, 313 (2020).
Page 7 GAO-22-105162 UI Risks and Transformation
were eligible for weekly benefits under the permanent UI programs—
e.g. regular UI—and the temporary CARES Act UI programs. 16
3. Pandemic Emergency Unemployment Compensation (PEUC)
generally authorized additional weeks of UI benefits for those who had
exhausted their regular UI benefits. 17
In addition, the Consolidated Appropriations Act, 2021 created the Mixed
Earner Unemployment Compensation (MEUC) program, which was
extended by the American Rescue Plan Act of 2021. 18 According to DOL,
the MEUC program was intended to cover regular UI claimants whose
benefits do not account for significant self-employment income and who
thus may have received a lower regular UI benefit than they would have
received had they been eligible for PUA. 19
The federal government directly funded the administration of, and benefits
for, the new pandemic-related UI programs ($723.4 billion obligated as of
February 28, 2022 for COVID-19 relief related to UI) and relied on states
16FPUC generally authorized an additional $600 benefit through July 2020 as well as an
additional $300 benefit for weeks beginning after December 26, 2020, through the end of
the program. Pub. L. No. 117-2, § 9013, 135 Stat. 4, 119; Pub. L. No. 116-260, div. N, tit.
II, § 203, 134 Stat. 1182, 1953; Pub. L. No. 116-136, § 2104, 134 Stat. 281, 318. In
addition, on August 8, 2020, the President signed a memorandum directing the
Department of Homeland Security’s Federal Emergency Management Agency (FEMA) to
provide up to $44 billion in lost wages assistance. Pursuant to the presidential
memorandum, upon receiving a FEMA grant, states and territories could provide eligible
claimants $300 or $400 per week—which included a $300 federal contribution—in addition
to their UI benefits. The White House, Memorandum on Authorizing the Other Needs
Assistance Program for Major Disaster Declarations Related to Coronavirus Disease 2019
(Aug. 8, 2020). FEMA approved 53 states and territories to provide lost wages assistance
to eligible claimants for a maximum of 6 weeks of unemployment experienced from the
week ending on August 1, 2020, through the week ending on September 5, 2020.
17At the time of the program’s expiration, PEUC generally authorized an additional 53
weeks of benefits for claimants who were fully unemployed. Pub. L. No. 117-2, § 9016(a),
(b), 135 Stat. 4, 119-120; Pub. L. No. 116-260, div. N, tit. II, § 206(a), (b), 134 Stat. 1182,
1954; Pub. L. No. 116-136, § 2107, 134 Stat. 281, 323.
18The MEUC program, which was voluntary for states, authorized an additional $100
weekly benefit for certain UI claimants who received at least $5,000 of self-employment
income in the most recent tax year prior to their application for UI benefits. Pub. L. No.
117-2, § 9013(a), 135 Stat. 4, 119; Pub. L. No. 116-260, div. N, tit. II, § 261(a)(1), 134
Stat. 1182, 1961. The $100 weekly benefit was in addition to other UI benefits received by
claimants; however, individuals receiving PUA benefits could not receive MEUC
payments.
19Not all participating states and territories had begun paying MEUC benefits as of
February 7, 2022, according to DOL.
Page 8 GAO-22-105162 UI Risks and Transformation
to ensure benefits reached individuals who lost their jobs due to the
pandemic. These programs expired on September 6, 2021, although
some states ended their participation in one or more of these programs
before that date. 20
During the pandemic, regular UI claimants who exhausted their regular UI
and PEUC benefits also had access to the Extended Benefits (EB)
program—established in 1970—if their claim was in a state that triggered
the program. 21 The EB program extends the receipt of UI benefits if
certain economic criteria, known as triggers, are met. Specifically, the EB
program uses triggers based on the unemployment rate of people
covered by UI (the insured unemployment rate), and the unemployment
rate based on the wider population (the total unemployment rate).
According to DOL, the program provides, depending on state law, up to
an additional 13 or 20 weeks of benefits and is activated in states during
periods of high unemployment. 22
States’ UI IT Environment State workforce agencies rely extensively on IT systems to carry out their
program functions, including benefit eligibility determinations, recording
claimant filing information, and calculating benefit amounts. However,
many states continue to rely on aging, or legacy, IT systems developed in
the 1970s and 1980s. 23 Legacy systems run on outdated or unsupported
hardware and software that are expensive to maintain and may use older
programming languages such as the Common Business Oriented
Language. 24 As a result, state workforce agencies may not be able to
20According to DOL, 24 states withdrew from at least one of the CARES Act UI programs
before the programs expired: Alabama, Alaska, Arizona, Arkansas, Florida, Georgia,
Idaho, Iowa, Louisiana, Mississippi, Missouri, Montana, Nebraska, New Hampshire, North
Dakota, Ohio, Oklahoma, South Carolina, South Dakota, Tennessee, Texas, Utah, West
Virginia, and Wyoming.
21Pub. L. No. 91-373, Title II, 84 Stat. 695, 708-13 (codified as amended at 26 U.S.C. §
3304, note).
22The EB program was activated in all states except South Dakota at some point during
the pandemic, according to DOL. If unemployment was not high enough to activate the EB
program in a state, or if regular UI claimants exhausted their PEUC and EB, they may
have been eligible for PUA benefits if they also met PUA eligibility requirements.
23The National Defense Authorization Act for Fiscal Year 2018 defines a legacy IT system
as an IT system that is outdated or obsolete. Pub. L. No. 115-91, § 1076(8), 131 Stat.
1283, 1586-87 (2017).
24The Common Business Oriented Language, which was introduced in 1959, became the
first widely used, high-level programming language for business applications.
Page 9 GAO-22-105162 UI Risks and Transformation
ensure these legacy systems have effective internal controls to address
current security vulnerabilities and other IT risks to the UI program.
According to the National Association of State Workforce Agencies
(NASWA), as of December 2021, 32 of the 53 states and territories were
still using legacy IT systems to support their UI benefits system, tax
system, or both. 25
We previously reported that modernizing legacy IT systems allowed
agencies to leverage IT to successfully address their missions and
achieve a wide range of benefits. IT modernization can include
transforming legacy code into a more modern programming language,
migrating legacy services to cloud computing solutions, and re-designing
mainframe applications to cloud-based applications. 26 Further, the
benefits of a successful IT modernization effort can include cost savings,
improved customer service, enhanced security, and reduced amount of
labor needed to maintain legacy systems and software, among other
things.
DOL has provided some administrative funding, when available, and
technical support to the state agencies to assist with their IT
modernization efforts. For example, in 2017, the department awarded
supplemental grants to support states’ UI IT modernization. 27 More
recently, in August 2021, DOL announced plans to, among other things,
use $2 billion in funding, provided by the American Rescue Plan Act of
2021, to further assist states with modernizing their IT systems, detecting
and preventing fraud, promoting equitable access, and assuring the
timely payment of UI benefits. 28 DOL’s Employment and Training
Administration (ETA) also provides states with technical assistance on IT
25NASWA represents all 50 state workforce agencies, the District of Columbia, and U.S.
territories.
26Cloud computing is a means for delivering computing services via IT networks. When
executed effectively, cloud-based solutions can allow agencies to pay for only the IT
services used, and thus pay less for more services. GAO, Information Technology:
Agencies Need to Develop Modernization Plans for Critical Legacy Systems, GAO-19-471
(Washington, D.C.: June 11, 2019).
27See Department of Labor, Unemployment Insurance Program Letter 22-17,
Unemployment Insurance Supplemental Funding Opportunity for State Consortia to
Modernize Tax and Benefit Systems (Sept. 8, 2017).
28Department of Labor, US Department of Labor Announces Funding to States to
Modernize Unemployment Insurance System, Combat Fraud, Address Equity
(Washington, D.C.: Aug. 11, 2021).
Page 10 GAO-22-105162 UI Risks and Transformation
modernization by funding and overseeing the Information Technology
Support Center (ITSC), operated by NASWA. 29
DOL is also working with the U.S. Digital Service to develop modular
technology solutions that states may adopt as part of ongoing
modernization and improvement efforts. 30 In May 2022, officials stated
that they began pilot testing the first module, which is focused on the
claimant experience, on March 31, 2022 in Arkansas and on April 26,
2022 in New Jersey. DOL officials also stated that the department is
working with the U.S. Digital Service and the states to develop a blueprint
for the UI customer experience which would help inform the need for
future IT infrastructure investments and development.
Process for Estimating An improper payment is any payment that should not have been made or
Improper Payments in UI that was made in an incorrect amount (including an overpayment or
underpayment) under statutory, contractual, administrative, or other
legally applicable requirements. 31
The Payment Integrity Information Act of 2019 (PIIA) requires federal
executive agencies to take various steps regarding improper payments
29ITSC was created in 1994 as a partnership between DOL and the Maryland Department
of Labor, Licensing and Regulation to support state UI IT initiatives. DOL supports ITSC
through grants to the Maryland agency, and ITSC’s Steering Committee includes
representatives from ETA. According to ETA officials, ITSC supports state UI IT
modernization efforts by collecting and disseminating information, providing training,
maintaining a collection of software tools and components, and helping states leverage
the systems and products built by other states.
30The U.S. Digital Service, a component within OMB, was established by the President in
August 2014 and aims to improve the most important public-facing federal digital services.
3131 U.S.C. § 3351(4). When an agency cannot determine, due to lacking or insufficient
documentation, whether a payment is proper, the payment shall be treated as an improper
payment. 31 U.S.C. § 3352(c)(2). In this report we refer to such payments as “unknown
payments.” In this report, incorrect amounts are overpayments, underpayments, and
unknown payments that are made to eligible UI recipients, and any payment made to an
ineligible UI recipient.
Page 11 GAO-22-105162 UI Risks and Transformation
and requires OMB to issue guidance to implement those requirements. 32
Additionally, PIIA requires OMB to annually identify a list of high-priority
federal programs for greater levels of oversight and review. Each agency
administering a high-priority program is required to quarterly report to
OMB certain improper payment information, such as actions the program
has taken or intends to take to prevent improper payments from occurring
in the future. This information is included in a Payment Integrity
Scorecard on PaymentAccuracy.gov. 33
DOL uses its Benefit Accuracy Measurement (BAM) system to determine
the accuracy of UI benefit payments and estimate the amount and rate of
improper payments. 34 Under the BAM system, each state reviews a
number of randomly selected cases on a weekly basis and reconstructs
the UI claims process to assess the accuracy of the payments that were
made. 35 Each state determines what the benefit payment should have
been according to its laws and policies. States report the results of their
BAM case reviews to DOL—including overpayments and
underpayments—through an online data system. DOL uses the data to
estimate improper payment rates by state, as well as to calculate a
nationwide rate. DOL also uses the BAM system to identify the cause of
improper payments, such as payments made to individuals who continue
to make claims after returning to work and failing to report earnings, were
determined ineligible due to an unreported disqualifying job separation,
32PIIA repealed the prior improper payment statutes but instead enacted substantially
similar provisions in a new subchapter of the U.S. Code. However, the core structure of
federal executive agency assessment, estimation, analysis, and reporting of improper
payments remains consistent with the prior statutory framework. See 31 U.S.C. §§ 3351-
3352. See also Office of Management and Budget, Appendix C to OMB Circular A-123,
Requirements for Payment Integrity Improvement, OMB Memorandum M-21-19
(Washington, D.C.: Mar. 5, 2021); Office of Management and Budget, Financial Reporting
Requirements, Circular No. A-136, (Washington, D.C.: Aug. 10, 2021).
33DOL UI quarterly reports can be found at: https://www.paymentaccuracy.gov/payment-
accuracy-high-priority-programs/.
34BAM is a statistical survey used to identify and support resolutions of deficiencies in a
state’s UI system. BAM is also used to identify the root causes of improper payments and
supports other analyses conducted by DOL to identify improper payment prevention
strategies and to measure progress in meeting improper payment reduction targets.
35Approximately 24,000 cases are drawn from states annually, with sample sizes ranging
from 360 cases per year in the 10 states with the smallest UI workloads to 480 cases in
the remainder of the states.
Page 12 GAO-22-105162 UI Risks and Transformation
such as quitting a job without good cause or being discharged for
misconduct.
According to DOL officials, many UI improper payments cannot be
prevented given certain legal requirements that states pay claims in a
timely manner, based on the best information available at the time, and
provide claimants with due process when the state finds an eligibility
issue. Specifically, DOL cited federal law requiring that when an eligibility
issue is detected, the claimant must be given notice and the opportunity
to provide the state with additional information before being denied
benefits. In addition, DOL noted that the state is required to resolve
eligibility issues within 1 week of detection. If the state cannot resolve the
issue by this deadline, it must pay the claimed week. According to DOL
states cannot always prevent improper payments because of the time
needed to exercise due process. 36
We have previously reported that the identification of improper payments
could suggest that a program is vulnerable to fraud; however, it is
important to note that not all improper payments are fraudulent
payments. 37 Specifically, fraud involves obtaining something of value
through willful misrepresentation, such as applicants falsifying information
on income or employment eligibility to receive benefits, and is determined
through the judicial or other adjudicative systems. 38 As such, improper
payment estimates do not measure, and are not intended to measure,
fraud in a particular program. Federal and state entities continue to
investigate and report on high levels of fraud, potential fraud, and fraud
risks in UI programs.
36Federal law requires states to have methods of administration in their UI programs that
are found by DOL to be reasonably calculated to ensure full payment of UI benefits “when
due.” 42 U.S.C. § 503(a)(1). DOL points to a Supreme Court decision stating that this
language was intended to mean “at the earliest stage of unemployment that such
payments [are] administratively feasible after giving both the worker and the employer an
opportunity to be heard.” Cal. Dep’t of Hum. Res. Dev. v. Java, 91 S. Ct. 1347, 1354
(1971).
37COVID-19: Significant Improvements Are Needed for Overseeing Relief Funds and
Leading Responses to Public Health Emergencies, GAO-22-105291. Washington, D.C.:
Jan. 27, 2022.
38According to DOL, because states may use different definitions for categorizing an
overpayment as fraudulent, an overpayment that is classified as fraudulent in one state
might not be classified as fraudulent in another state. Whether an act is fraudulent is
determined through the judicial or other adjudicative systems.
Page 13 GAO-22-105162 UI Risks and Transformation
Long-standing challenges with UI administration and outdated IT systems
Reported Challenges have affected states’ ability to meet the needs of unemployed workers,
with State UI both historically and during times of economic downturn—particularly the
COVID-19 pandemic. According to our past work and that of the DOL
Administration and OIG, and the views of our stakeholder panelists, these types of program
Outdated IT Systems issues that have resulted in significantly impaired service, significantly
reduced effectiveness, or significantly reduced efficiency are some of the
Affect UI qualitative factors we considered when determining to add the UI program
Responsiveness to our High-Risk List. For example:
• Multiple participants in our stakeholder panels reported that the
current UI program design and variation across states are contributing
to declining worker access and disparities in benefit distribution.
• We and others have reported that states’ difficulties with administering
UI during the pandemic, including implementing new CARES Act UI
programs, have exacerbated existing challenges with providing
customer service and timely claims processing.
• We, DOL, and the DOL OIG have reported significant risks with the
continued use of older legacy IT systems that also hindered states’
ability to implement new UI programs during the pandemic.
• States have faced multiple challenges, including funding uncertainties
and staff limitations, in their attempts to modernize UI IT systems.
UI Program Design Has
Led to Challenges
Workers’ Participation in the UI Prior to the COVID-19 pandemic, the proportion of unemployed workers
Program Has Declined over filing for UI benefits—referred to as the recipiency rate—was near a
Time historic low, after generally declining from the 1950s. This historical
decline has multiple causes, including state restrictions on eligibility,
according to DOL, or other potential causes such as an increase in
workers who are ineligible for benefits. Such ineligible workers can
include those experiencing long-term unemployment who have exhausted
their eligibility for benefits, those who quit or were fired for cause, and
certain types of contingent workers. 39 According to DOL, the recipiency
39See Ryan Nunn and David Ratner, Rethinking Unemployment Insurance Taxes and
Benefits (Tax Policy Center, Urban Institute and Brookings Institution, Oct. 28, 2019), and
William J. Congdon and Wayne Vroman, Covering More Workers with Unemployment
Insurance: Lessons from the Great Recession (Washington, D.C.: Urban Institute, Feb.
2021).
Page 14 GAO-22-105162 UI Risks and Transformation
rate was 54.6 percent in 1958 and declined to 28.1 percent in 2019. 40 In
addition, recipiency rates varied widely by state, from 9.5 percent (North
Carolina) to 59.0 percent (New Jersey) in 2019, according to DOL.
Program design is among the factors contributing to declining
participation and fewer individuals filing for regular UI benefits (i.e., the
decline in the recipiency rate), including states tightening requirements for
participation in UI, according to DOL and participants in our stakeholder
panels. In addition, some stakeholder panelists noted that, as an
employer-based structure, the regular UI program does not cover workers
for whom payroll taxes are not paid, such as independent contractors or
self-employed workers, who are estimated to number in the millions.
Furthermore, changes in the way people work also may have led to a
decline in coverage. For example, researchers have noted that contingent
workers, who may have irregular work and earnings histories, may be
more likely to face difficulties in qualifying for regular UI. During the
COVID-19 pandemic, the temporary PUA program was the first
nationwide program to provide these workers with access to UI benefits,
provided they met program eligibility criteria. 41
UI Program Is Administered The regular UI program was designed as a federal-state partnership that
Differently across States and gives states considerable flexibility, resulting in essentially 53 different UI
Territories, Which Leads to programs across the states and territories. Stakeholder panelists noted
Inconsistent Levels of Worker that minimum and maximum UI benefit amounts, duration of benefit
Support periods, and eligibility rules are substantially different by state, resulting in
inconsistent levels of support for workers. In our 2015 report, we found
that reductions in state benefit durations resulted in some individuals
receiving substantially less in total UI benefits. 42 In addition, DOL,
panelists, and we have identified concerns about racial and other
40This overall decline included a drop after the 2007–2009 recession, from 40.1 percent in
2009 to 25.7 percent in 2013. In 2020, the recipiency rate increased sharply to 78.0
percent. According to DOL officials, this was due to the large number of UI continued
claims during the pandemic.
41For more information about the PUA program and the experiences of contingent workers
during the pandemic, see GAO-22-104438. In that report, we also make a
recommendation for DOL to study and advise the Congress and other policymakers on
the costs, benefits, and risks of various options to systematically support self-employed
and contingent workers during periods of involuntary unemployment outside of declared
disasters.
42GAO, Unemployment Insurance: States’ Reductions in Maximum Benefit Durations
Have Implications for Federal Costs, GAO-15-281 (Washington, D.C.: Apr. 22, 2015).
Page 15 GAO-22-105162 UI Risks and Transformation
disparities—including those associated with disability and internet
access—in accessing and receiving UI benefits. 43 Panelists noted that
there is a correlation between states with low UI recipiency rates and
states with a high percentage of African American residents, as compared
to other states.
States also take different approaches to monitoring ongoing UI claimant
eligibility, including compliance with work search requirements. In our
2018 report, we made several recommendations related to monitoring
ongoing claimant eligibility that remain unaddressed and that we have
designated as high priority. For example, we recommended that DOL
clarify and monitor states’ compliance with work-search verification
requirements. 44
Panelists Noted That the Stakeholder panelists noted limitations with the EB program’s
Extended Benefits Program effectiveness amid changing national economic conditions. The EB
Has Limited Effectiveness program responds to recessions by extending the duration of UI benefits.
during Economic Downturns According to DOL, an important part of the mission of UI is to stabilize the
U.S. economy during recessions by helping individuals maintain their
purchasing power by replacing a portion of income lost through
unemployment. However, panelists highlighted various issues with the EB
program. For example:
• Multiple panelists raised questions about the statistical validity of the
specific triggers that are used to activate the EB program.
43For more information about racial and ethnic disparities in the receipt of UI benefits, see
GAO-22-104438 and GAO, Management Report: Preliminary Information on Potential
Racial and Ethnic Disparities in the Receipt of Unemployment Insurance Benefits during
the COVID-19 Pandemic, GAO-21-599R (Washington, D.C.: June 17, 2021). As we have
previously reported, DOL has taken a variety of steps to address equity in the UI program,
including making grant funds available to states to address equity issues. DOL has also
deployed teams of experts, including equity experts, to states to identify challenges to UI
benefit access and best practices for addressing those challenges. In addition, in April
2022, DOL released an Equity Action Plan, which among other things summarized DOL’s
ongoing and planned actions to advance equity in the UI system and support
marginalized, vulnerable, and underserved communities. For more information about
these efforts, see GAO-22-104438.
44GAO, Unemployment Insurance: Actions Needed to Ensure Consistent Reporting of
Overpayments and Claimants’ Compliance with Work Search Requirements, GAO-18-486
(Washington, D.C.: Aug. 22, 2018). A listing of open GAO recommendations is in
appendix III of this report.
Page 16 GAO-22-105162 UI Risks and Transformation
• Multiple panelists noted that in prior recessions, most workers were
re-employed before their regular UI benefits ran out, and therefore,
the EB program was not relevant for those workers.
• Multiple panelists noted that in recent recessions, Congress created
temporary programs to expand UI because the EB program did not
respond adequately to national recessions.
State Agencies Have Struggled States’ benefit amounts and approaches to UI financing, risk the viability
to Fund UI Benefits and of the program. The regular UI program is generally funded through a
Administrative Costs mixture of federal and state taxes on employers. 45 When a state exhausts
the funds available for regular UI benefits, it may borrow from the federal
government. As we previously reported, during the 2007–2009 recession
and the COVID-19 pandemic, many states took out federal loans to pay
for UI benefits. For example, in 2010, after the 2007–2009 recession, 30
states and territories held approximately $40.2 billion in federal loans. 46
Similarly, during the pandemic, many states took federal loans to pay for
UI benefits. For example, as of April 23, 2021, 20 states and territories
held loans with a combined total balance of $55.1 billion. By March 31,
2022 the number of states and territories holding federal loans had
dropped to 10 with a total combined balance of $37.6 billion. In 2015, we
found that states that had reduced UI benefit durations after the 2007–
2009 recession had weaker pre-recession trust funds. 47
45The regular UI program is primarily funded through state and federal taxes on
employers, though according to DOL, three states also require employee contributions
under certain conditions. Under the Federal Unemployment Tax Act, employers are
generally required to pay a federal unemployment tax at a rate of 6 percent on the first
$7,000 of wages paid to an employee each year, which funds administrative costs
associated with the regular UI program and the federal share of benefits paid under the
EB program, among other things. The Federal Unemployment Tax Act provides a credit of
up to 5.4 percent against federal tax liability to employers who pay state taxes in a timely
manner under an approved state UI program. If a state has outstanding loan balances on
January 1 for 2 consecutive years and does not repay the full amount of its loans by
November 10 of the second year, the Federal Unemployment Tax Act credit rate for
employers in that state will be reduced. Thus, the federal taxes paid by employers in that
state will increase, all else being equal.
46GAO, COVID-19: Additional Actions Needed to Improve Accountability and Program
Effectiveness of Federal Response, GAO-22-105051 (Washington, D.C.: Oct. 27, 2021).
We did not adjust this 2010 loan balance amount for inflation.
47Other factors we identified included higher unemployment rates, lower rates of union
membership, and single-party control of the executive and legislative branches. See
GAO-15-281.
Page 17 GAO-22-105162 UI Risks and Transformation
In addition, participants in our stakeholder panels also noted that funding
for UI administration has been a historical challenge. From fiscal years
2010 to 2019, funding available for state UI administration declined about
21 percent. 48 Several panelists commented that insufficient federal
funding for UI administration has resulted in state unemployment
agencies being understaffed or having outdated technology. One panelist
also noted that, with additional funding, DOL could better assist states. In
their totality these programmatic and administrative issues could pose an
inherent risk to service delivery in the UI system if left unaddressed. They
could also significantly reduce the economic stabilization effects and the
overall efficiency of the program. 49
State UI Programs Have We and others have reported on administrative challenges that states
Faced Administrative encountered as they implemented both the regular and pandemic-related
UI programs, posing risks for how effectively workers were served. These
Challenges with Customer
reported challenges are in the areas of providing customer service,
Service, Payment delivering timely UI benefits, and implementing new programs.
Timeliness, and
Implementing New Customer service. States have reported facing ongoing administrative
Programs challenges in providing effective customer service to UI claimants, even
outside of economic downturns. In our 2016 report, we found that during
the 2007–2009 recession many states reported facing challenges in
processing record numbers of UI claims, including insufficient call center
staff and staff turnover, as well as delays in claimants receiving benefits. 50
Furthermore, many states reported that insufficient call center staff was a
challenge in 2014 and 2015, several years after the recession ended and
federal administrative funding had returned to pre-recession levels. Also,
in each of the focus groups held during our prior work, regular UI
claimants who applied for benefits by phone between July 2014 and July
2015 reported experiencing long call wait times or having to call multiple
times to reach program representatives, as well as having difficulty using
48After adjusting for inflation, this represents a decline of about 32 percent, using the
gross domestic product price index.
49In its official comments, see appendix II, DOL stated that funding constrains for the UI
system have historically posed ongoing threats to states’ ability to administer UI programs
with efficiency and integrity.
50GAO, Unemployment Insurance: States’ Customer Service Challenges and DOL’s
Related Assistance, GAO-16-430 (Washington, D.C.: May 12, 2016).
Page 18 GAO-22-105162 UI Risks and Transformation
automated phone systems. During the COVID-19 pandemic, similar
challenges were again cited by states and claimants. 51
Payment timeliness. Stakeholder panelists noted the importance of
delivering timely UI benefits to unemployed workers who need
assistance. The long waits for payments during the pandemic caused
financial and other hardships for some workers. For example, some PUA
claimants we spoke with as part of our work examining that program said
they needed to negotiate rent payment delays, defer bills, or accrue credit
card debt while they were waiting for their first PUA payment. Claimants
from across multiple UI programs we spoke with as a part of our work
examining CARES Act UI programs during the pandemic told us that they
used funds from their retirement accounts and other savings, relied on
family and friends for loans to meet living expenses, and accepted
assistance from community-based food pantries and other organizations
to get help with food and utilities amidst payment delays. 52
As we have previously reported, extensive claims-processing backlogs
led to substantial delays in first payments of regular UI benefits early in
the pandemic, and those delays continued for some states later in the
pandemic. At the beginning of the pandemic, the nationwide percentage
of regular UI first benefits paid within 21 days of a claimant’s initial
eligibility fell from about 97 percent in March 2020 to about 52 percent in
June 2020. 53 Although the timeliness of these first payments improved
nationally from fall 2020 through early 2021 (see fig. 1), first-payment
timeliness generally declined again from about 79 percent in April 2021 to
about 52 percent in October 2021. First payment timeliness improved
again from late 2021 through January 2022, before declining again to 63
percent in February 2022. Many regular UI claimants continue to face
significant delays in receiving their first benefits. Nationwide, about 18
percent of regular UI claimants who received their first benefits in
51GAO-22-104251. In that report, we also make a recommendation for DOL to review the
challenges that states faced during the pandemic to identify best practices for helping
claimants and share those practices with the states.
52GAO-22-104438 and GAO-22-104251.
53GAO-22-105051 and GAO-22-105291. One of DOL’s core performance measures is the
percentage of all regular UI first payments made within either 14 or 21 days of the first
week of benefits for which claimants are eligible; DOL considers 87 percent to be an
acceptable level of performance. DOL uses 14 days as the timeliness goal for states with
a waiting week requirement and uses 21 days for states without a waiting week
requirement.
Page 19 GAO-22-105162 UI Risks and Transformation
February 2022 had been waiting longer than 10 weeks. By comparison, of
the regular UI claimants nationwide who received their first benefits in
March 2020, less than 1 percent had been waiting longer than 10
weeks. 54
Figure 1: Timeliness of Nationwide First Payments of Regular Unemployment Insurance (UI) Benefits, Jan. 2020–Feb. 2022
Notes: We analyzed regular UI first-payment timeliness data that states had reported to the
Department of Labor (DOL) as of March 28, 2022. At that point, all 53 states and territories had
reported data for February 2022 and prior months. One of DOL’s core performance measures is the
percentage of all regular UI first payments made within either 14 or 21 days of the first week of
benefits for which claimants are eligible, depending on whether the state requires that eligible
claimants serve a waiting period before receiving benefits. DOL considers 87 percent to be an
acceptable level of performance. We focus on payments made within 21 days because in guidance
released at the start of the pandemic, DOL recommended that states consider temporarily waiving
their waiting week requirements.
Implementing new programs. Prior to the pandemic, the DOL OIG had
noted concerns with DOL and states’ ability to deploy program benefits
quickly and efficiently while ensuring integrity and adequate oversight,
particularly in response to national emergencies and disasters. During the
54GAO-22-105397.
Page 20 GAO-22-105162 UI Risks and Transformation
pandemic, states received record levels of UI claims as they
simultaneously implemented the new CARES Act UI programs, which
overwhelmed their existing staff resources and resulted in claims
backlogs. Initial claims for regular UI benefits nationwide reached a
historic peak of more than 6 million per week in late March and early April
2020, and states reported receiving more than 1.3 million weekly PUA
initial claims in late May 2020. GAO and the DOL OIG have reported that
selected states struggled to implement the CARES Act UI programs due
to insufficient staffing and unclear guidance from DOL, among other
issues. 55 The DOL OIG also reported that states had to develop new
systems to implement the CARES Act UI programs, resulting in backlogs
in processing claims for weeks, and in some cases, months. 56 These
backlogs further contributed to service delivery inefficiencies already
present in the UI system.
State IT Challenges
Include Using and
Modernizing Legacy UI
Systems
Legacy Systems Pose Risks As mentioned earlier, many states rely on legacy systems for their UI
and Challenges for State UI programs. DOL OIG and GAO have reported on the risks and challenges
Programs that legacy systems pose for state UI programs, which have led to,
among other things, reduced efficiency and effectiveness. 57 For example:
• Inefficient system performance. Prior to the COVID-19 pandemic, in
May 2016, we reported that legacy IT systems were a challenge for
many states, according to our survey. 58 Specifically, 29 of 48 states
55GAO-22-104251. The DOL OIG reported that states struggled to implement the CARES
Act UI programs because their IT systems were not modernized, staffing resources were
insufficient to manage the increased number of new claims, and guidance from DOL was
untimely and unclear, according to state officials. See Department of Labor Office of
Inspector General, COVID-19: States Struggled to Implement CARES Act Unemployment
Insurance Programs, Report No. 19-21-004-03-315 (Washington, D.C.: May 28, 2021).
56DOL OIG, Report No. 19-21-004-03-315.
57We have ongoing work looking at state UI IT system modernization efforts, including
successes and challenges, as well as DOL’s management and oversight of its efforts to
assist agencies with their modernization efforts.
58GAO, Unemployment Insurance: States’ Customer Service Challenges and DOL’s
Related Assistance, GAO-16-430 (Washington, D.C.: May 12, 2016).
Page 21 GAO-22-105162 UI Risks and Transformation
(60 percent) reported that their IT systems had significant limitations,
which had implications for the ability of state programs to efficiently
process UI claims and serve claimants. 59 For example, state officials
reported that outdated systems led staff to have to check multiple
systems for claims information, which could lead to errors in
processing claims that significantly reduced the efficiency and
effectiveness of the program. Additionally, state officials told us that
because claimants could not check status updates and other
information online, they needed to rely on phone call centers, which
also consumed significant staff resources.
After the start of the pandemic, in June 2020, we reported that the
unprecedented number of UI claims posed challenges for states’
capacity to process them. 60 More specifically, state UI programs faced
challenges with legacy data systems. According to DOL and
representatives of state workforce agencies, states with UI IT systems
that dated as far back as the 1970s had reported system performance
issues. We further noted that relatively few states had load-tested
their systems to handle large volumes of claims, according to
representatives of state workforce agencies.
• Slower processing of payments. In May 2021, the DOL OIG
reported that states with legacy systems started the PEUC program
15 days slower than states with modernized systems, and the PUA
program 8 days slower on average. 61 Further, the OIG reported that
legacy IT systems were a primary hindrance to states’ ability to
implement CARES Act UI programs more effectively. Specifically, the
OIG reported that officials from 17 of 50 states and territories (34
percent) stated their IT systems were unable to implement provisions
of the CARES Act, such as those creating the PUA program. 62
• Inability to detect and recover improper payments (including
from fraud). The May 2021 DOL OIG’s report also identified legacy IT
systems as one of the causes of states’ inability to detect and recover
59We did not receive survey responses from UI programs in the District of Columbia, North
Carolina, and Vermont. Our review did not include UI programs in Puerto Rico and the
U.S. Virgin Islands.
60GAO, COVID-19: Opportunities to Improve Federal Response and Recovery Efforts,
GAO-20-625 (Washington, D.C.: June 25, 2020).
61Department of Labor, Office of Inspector General, COVID-19: States Struggled to
Implement CARES Act Unemployment Insurance Programs, Report No. 19-21-004-03-
315 (Washington, D.C.: May 28, 2021).
62Arkansas, Idaho, and Vermont were not included among the states.
Page 22 GAO-22-105162 UI Risks and Transformation
improper UI payments, including fraudulent payments. For example,
state officials reported that their IT systems did not have the capability
to perform cross-matches—a method used to detect improper
payments—for such a large volume of claims.
• Difficulty reporting UI program activities to DOL. The May 2021
DOL OIG’s report also identified legacy IT systems as one of the
causes of states being unable to report their CARES Act UI program
activities to DOL. For example, state officials noted that they were
unable to program the newly required reports in their IT systems.
More generally, we have previously reported that the use of legacy
systems can contribute to additional risks, including: 63
• Security vulnerabilities. Legacy systems may operate with known
security vulnerabilities that are either technically difficult or
prohibitively expensive to address. In some cases, vendors no longer
provide support for hardware or software, creating security
vulnerabilities and additional costs. In the UI program, this may pose a
privacy risk for claimants as their information could become more
easily accessible to criminals who target the UI system.
• Staffing issues. We have reported that it is difficult to find employees
with experience working with older technology and programming
languages to operate and maintain legacy systems. Therefore, state
agencies may need to pay a premium to hire specialized staff or
contractors.
• Increased costs. The cost of operating and maintaining legacy
systems increases over time due, in part, to security risks and staffing
issues, as described earlier. Further, the high costs of maintaining
legacy systems could limit state agencies’ ability to modernize and
develop new or replacement systems.
States Have Encountered Our work has also identified challenges that states face in modernizing
Challenges with Modernizing their legacy UI systems, such as funding uncertainty, staffing and vendor
Their UI Systems limitations, and system capacity and scaling limitations. 64 Participants
from our August 2021 stakeholder panels identified similar challenges.
63GAO, Information Technology: Agencies Need to Develop Modernization Plans for
Critical Legacy Systems, GAO-19-471 (Washington, D.C.: June 11, 2019).
64GAO-20-625; GAO-16-430; and GAO, Information Technology: Department of Labor
Could Further Facilitate Modernization of States’ Unemployment Insurance Systems,
GAO-12-957 (Washington, D.C.: Sept. 26, 2012).
Page 23 GAO-22-105162 UI Risks and Transformation
• Funding uncertainty. In our prior reporting, we identified challenges
that states reported regarding declining or inconsistent federal and
state funding for UI IT modernization, leading to difficulties in project
planning. 65 In addition, states reported uncertainties surrounding their
ability to procure sufficient funding throughout the entirety of their
modernization efforts. Participants from our panel also noted that
funding for UI IT modernization has been a constraint for many years.
In particular, a panelist noted that federal administrative funding for
the regular UI program is not designed to address large systems
costs.
• Staffing limitations. In our prior reporting, we found that UI IT system
development can be hindered by a shortage of staff with technical and
project management expertise to manage IT modernization efforts.
States also reported difficulties with balancing staff resources to
operate legacy systems while operations are established in new
systems. Participants from our panel also cited similar challenges. For
example, a participant noted that modernization efforts without quality
project management often stall and end up costing more. Also, a
participant noted that states often underestimate the staffing needs for
both implementing and testing a new system upgrade, while
concurrently managing the staffing needs that normal UI program
operations require. Further, a modernization effort typically requires
the top staff to support the effort, but states also need these staff to
run the ongoing UI program, creating additional challenges to
managing change.
• Vendor limitations. In our prior reporting, we identified challenges
that states reported related to using vendors for UI modernization
efforts, including having too few vendors for selection. Participants
from our panel also noted vendor-related challenges due to every
state quickly needing to implement the additional CARES Act UI
programs with only a small number of vendors in the UI area. In our
prior reporting, we also noted that a system developed by a vendor
poses challenges to operate and maintain. For example, states
reported concerns that they did not have sufficient staff expertise to
maintain these systems once vendor staff left.
• System capacity and scaling limitations. As mentioned earlier, we
previously reported that states faced challenges in ensuring sufficient
system capacity to process the unprecedented number of UI claims
during the COVID-19 pandemic. According to NASWA officials, this
challenge with claims processing was due to states not sufficiently
65GAO-16-430 and GAO-12-957.
Page 24 GAO-22-105162 UI Risks and Transformation
load-testing their systems to handle large volumes of claims prior to
the pandemic. Participants from our August 2021 stakeholder panel
also noted limitations in the ability of states to scale their systems to
meet increased demand. For example, a panelist noted that states
had not previously determined where the slowest components of the
UI process were and whether those components could scale up if
needed. The panelist added that, as a result, states faced challenges
in scaling aspects of their UI systems, such as applicant identity
verification.
The risk of improper payments, including those due to fraud, in the
Risk of UI Improper regular UI program increased during the pandemic. Prior to the COVID-19
Payments, Including pandemic, DOL regularly reported billions of dollars in annual estimated
improper payments in the UI program. DOL reported that the UI program
Those Due to Fraud, experienced a large increase in estimated amounts of improper payments
Increased during the in fiscal year 2021. DOL OIG and our stakeholder panelists identified
factors that contributed to the higher risk of improper payments during the
Pandemic pandemic in the regular UI program, and to the significant risk of improper
payments in the pandemic UI programs. These factors included untimely
and unclear federal guidance, and insufficient and under-trained state
personnel. The full extent of the UI system’s improper payments is not
presently known because DOL and states have struggled to reliably
report improper payments information, and DOL has not yet estimated
amounts of improper payments for the PUA and MEUC programs.
Furthermore, according to DOL officials and stakeholder panelists, the
CARES Act UI programs exacerbated existing fraud risks and also
created new fraud risks—mainly related to more sophisticated identity
theft schemes. 66 Federal and state entities continue to emphasize the
need to prevent, detect, and investigate UI fraud. 67
66Fraud involves obtaining something of value through willful misrepresentation. Whether
an act is fraudulent is determined through the judicial or other adjudicative systems. In this
report, “fraud risk” includes circumstances that provide an opportunity to commit fraud.
67We have ongoing work reviewing the extent of fraud in the UI system.
Page 25 GAO-22-105162 UI Risks and Transformation
DOL Has Annually For fiscal years 2016 through 2020, DOL annually reported billions of
Reported Billions of dollars in estimated improper payments for the regular UI program,
ranging between 9 and 13 percent of UI benefits. Because of these high
Dollars in Estimated
estimated improper payment amounts, OMB designated the UI program
Improper Payments for the as a high-priority program for greater levels of oversight and review,
Regular UI Program including quarterly reporting and inspector general review.
Our analysis of DOL’s estimated regular UI program improper payments
data for fiscal years 2016 through 2020 (prior to the COVID-19 pandemic)
found three primary causes of improper payments: 68
• Work search. Erroneous payment is made where the claimant fails to
actively seek employment. 69
• Benefit year earnings. Claimant continues to erroneously receive UI
benefits after returning to work or fails to accurately report earnings.
• Separation issues. Claimant is ineligible for UI benefits due to
separating from employment for a non-qualifying reason, such as
voluntarily quitting employment or is discharged for cause.
As shown in table 1, these three primary causes of improper payments
accounted for approximately 79 percent of the $15.7 billion in estimated
UI improper payments—out of the total $136.1 billion in regular UI
benefits paid—during that period.
Table 1: Regular Unemployment Insurance (UI) Estimated Improper Payments (IP), July 1, 2015–Mar. 31, 2020, Nationally
Percentages Estimated IP amounts (dollars in billions)
DOL-reported causes of IP UI benefits Paid Estimated UI IP Overpayments Underpayments Total
Work search 3.9 34.3 5.38 0.00 5.38
Benefit year earnings 3.4 29.4 4.48 0.12 4.60
Separation issues 1.8 15.4 2.42 0.00 2.42
Total top three causes of IP 9.1 79.1 12.27 0.12 12.39
68DOL uses the BAM process to determine the accuracy of paid and denied UI claims.
DOL’s fiscal year for reporting improper payment estimates covers July 1 of the previous
year through June 30 of the current year. For example, DOL’s fiscal year 2020 improper
payment estimate generally covers July 1, 2019, through June 30, 2020. However, the
sampling and investigation program was suspended for the quarter April 1, 2020, through
June 30, 2020, because of operational flexibilities provided to states in response to the
pandemic, according to DOL.
69Two GAO recommendations to DOL related to work search verification activities remain
open, including one priority recommendation. See appendix III.
Page 26 GAO-22-105162 UI Risks and Transformation
Percentages Estimated IP amounts (dollars in billions)
DOL-reported causes of IP UI benefits Paid Estimated UI IP Overpayments Underpayments Total
Total all causes of IP 11.5 100.0 15.09 0.57 15.66
Legend:
DOL = Department of Labor
FY = fiscal year
Source: GAO analysis of Department of Labor Benefit Accuracy Measurement data. | GAO-22-105162
Notes: Data may not sum to totals because of rounding.
The total regular UI benefits amounts and estimated improper payment amounts are based on
information obtained from DOL’s Benefit Accuracy Measurement system for the periods from July 1,
2015 through March 31, 2020. DOL’s fiscal year for reporting improper payment estimates covers
July 1 of the previous year through June 30 of the current year.
GAO guidance for high-risk designation considers programs to be high
risk when a minimum of $1 billion of assets is at risk. 70 In fiscal year 2021,
DOL’s estimated amount of improper payments for the UI program
increased over ninefold, from approximately $8.0 billion in fiscal year
2020 to approximately $78.1 billion in fiscal year 2021. This increase in
estimated improper payments resulted from (1) the doubling of the
improper payment rate from approximately 9.2 percent in fiscal year
2020, to approximately 18.9 percent in fiscal year 2021; and (2) the
increase of reported outlays in the UI program from approximately $86.9
billion in fiscal year 2020 to approximately $413.0 billion in fiscal year
2021. 71 The increase in reported outlays was largely driven by the
inclusion of two of the three CARES Act UI programs in the total UI
estimate. 72 The outlook for estimated improper payments is not expected
to significantly improve for fiscal year 2022. DOL has set the improper
payment rate target for fiscal year 2022 at no higher than 17 percent. The
improper payment rate for PIIA compliance is less than 10 percent. 73
70GAO-01-159SP.
71The source for these outlays is www.paymentaccuracy.gov. The sampling period covers
outlays from July 1, 2020 to June 30, 2021.
72The estimated improper payment rate for the 2021 UI program was applied to calculate
the estimated improper payment amounts for the FPUC and PEUC programs. The
estimated improper payment amounts for these two programs were incorporated in the
overall estimated improper payment amount for the UI program.
73PIIA defines compliance as executive agencies taking various actions, including
reporting an improper payment rate of less than 10 percent for each program and activity
for which an estimate was published under section 31 U.S.C. § 3352(c). 31 U.S.C. §
3351(2).
Page 27 GAO-22-105162 UI Risks and Transformation
DOL OIG and Panelists DOL OIG and our stakeholder panelists identified several factors that
Identified Factors for contributed to the higher risk of improper payments during the pandemic
in the regular UI program and a significant risk of improper payments in
Increased Risk of
the CARES Act UI programs. These factors included:
Improper Payments during
the Pandemic • Untimely and unclear federal guidance. According to the DOL OIG,
states reported the DOL ETA guidance was untimely and unclear,
minimizing the guidance’s ability to assist states in making decisions
about initial and continued eligibility. 74 According to panelists, the
pressure states faced to quickly implement PUA and other CARES
Act UI program requirements made it difficult to establish sufficient
controls ahead of program implementation to prevent improper
payments. 75 Some state officials also told us that guidance was
issued or changed after the states had begun program
implementation, making it difficult to ensure compliance. Panelists
added that some state workforce agencies did not fully understand
DOL guidance on implementing the new CARES Act UI programs,
which panelists stated, led to improper payments. For example,
panelists discussed that state agencies may have misunderstood
guidelines for CARES Act UI programs outlining allowable reasons for
employee separation, which panelists stated expanded the regular UI
program guidelines to include quarantined individuals and individuals
at risk. Officials from one state we spoke with for our concurrent work
on CARES Act UI programs told us that the initial guidance on PUA
eligibility and actions states could take in response to suspicious
claims could have been improved with more information and
examples.
• Insufficient number of and under-trained state personnel.
Panelists also noted that during the pandemic, some states hired new
staff quickly and provided limited training, which may have led to an
increase in mistakes in determining claimants’ eligibility. State officials
we spoke with for our concurrent work on CARES Act UI programs
also told us that to address staffing shortages—one of their most
urgent needs when claims volume increased—they supplemented
their existing staff using one or more of the following strategies: hiring
new staff, borrowing staff from other agencies, and contracting for
74Department of Labor Office of Inspector General, Report No. 19-21-004-03-315.
75The Consolidated Appropriations Act, 2021 created additional program integrity
requirements for the CARES Act UI programs, including several new measures related to
PUA eligibility. See, e.g., Pub. L. No. 116-260, div. N, tit. II, §§ 241(a), 263(a), 134 Stat.
1182, 1959-60, 1963.
Page 28 GAO-22-105162 UI Risks and Transformation
staff. As states increased their staff in response to the surging claims
volume, state officials said they shortened the length of training,
streamlined training, and adopted other approaches to expedite
claims processing. 76 Despite states’ efforts to increase their claims
processing staff, in some cases, it was not sufficient to handle the
increases in claims.
Federal and State Entities DOL and states have faced challenges in reporting reliable improper
Struggled to Report payments information and developing adequate processes to identify and
recover overpayments during the pandemic. The DOL OIG has identified
Reliable Improper
issues related to the suspension of BAM assessments, the current non-
Payments Data and reporting of estimated improper payments in certain CARES Act UI
Identify and Recover programs, incomplete reporting of waived and recovered overpayments,
Overpayments and states’ failure to perform required overpayment activities. 77 Thus, the
full extent of improper payments for the UI system is not presently known.
• Suspension of BAM assessments. Under BAM, states conduct
independent assessments of representative samples of paid and
denied claims of permanent UI programs to determine the accuracy of
UI benefit payments and estimate the amount and rate of improper
payments. According to DOL, by conducting these assessments,
states can develop and implement corrective actions if the
assessments identify improper payments, including potentially
fraudulent payments. 78 For fiscal year 2020 reporting, DOL allowed
states to suspend these assessments for 3 months (April through
June 2020), enabling the states to reassign staff to address increased
claims volume. As a result, DOL OIG reported that $64.3 billion (74
percent) of the total $86.9 billion of benefit payments went untested
for that fiscal year. The DOL OIG report stated that DOL complied
with OMB requirements for fiscal year 2020, including the 3-month
76GAO-22-104251.
77GAO, COVID-19: Urgent Actions Needed to Better Ensure an Effective Federal
Response, GAO-21-191 (Washington, D.C.: Nov. 30, 2020). Department of Labor, Office
of Inspector General, COVID-19: States Struggled to Implement CARES Act
Unemployment Insurance Programs. Report No. 19-21-004-03-315 (Washington, D.C.:
May 28, 2021).
78The state assessments of improper payments include potential fraud; however, states’
definitions for categorizing an overpayment as fraudulent vary.
Page 29 GAO-22-105162 UI Risks and Transformation
suspension. 79 For fiscal year 2021 reporting, DOL resumed BAM
testing for improper payments.
• Current non-reporting of estimated improper payments in certain
CARES Act UI pandemic programs. As we reported in November
2020, it is especially important for agencies with large appropriated
amounts, like DOL, to quickly estimate their improper payments,
identify root causes, and develop corrective actions when there are
concerns about the possibility that improper payments could be
widespread. 80 At that time, we also reported that the DOL OIG
recommended that DOL estimate improper payments for CARES Act
UI programs; however, DOL made the decision not to include claims
filed exclusively under the CARES Act UI programs in the regular UI
program for estimating improper payments. As we reported in
November 2020, DOL officials informed us that DOL planned to
conduct an improper payment risk assessment for CARES Act UI
programs after the first year of each CARES Act UI program’s
operations in accordance with OMB guidance. 81
For fiscal year 2021 reporting, DOL included FPUC and PEUC in the
approximately $78.1 billion estimated amount of improper payments
for the UI program. However, because PUA has unique and distinct
eligibility requirements, applying the improper payment methodology
for the regular UI program would not be appropriate, according to
DOL officials. Officials said they are exploring methods to estimate the
rate of improper payments for PUA that will not be overly burdensome
for states. DOL officials stated that they are required to submit the
improper payment estimation methodology to OMB by June 2022, and
79In addition, DOL’s OIG reported that an independent auditor had concluded that DOL
had met all the statutory criteria for compliance with the Payment Integrity Information Act
of 2019. The OIG also reported that DOL had received direction from OMB to utilize the
results from the first 3 quarters of the program year for its improper payment reporting in
fiscal year 2020 and that DOL’s decision to suspend fourth quarter program year testing
was approved by OMB. Department of Labor, Office of Inspector General, The U.S.
Department of Labor Complied with the Payment Integrity Information Act for FY 2020, but
Reported Unemployment Insurance Information Did Not Represent Total Program Year
Expenses, Report No. 22-21-007-13-001 (Washington, D.C.: Aug. 6, 2021).
80GAO-21-191.
81According to OMB guidance, agency management is responsible for managing payment
integrity risks to reduce improper payments and protect taxpayer funds. The guidance
provides that all newly established programs should complete an improper payment risk
assessment after the first 12 months of the program. See Office of Management and
Budget, Appendix C to OMB Circular A-123, Requirements for Payment Integrity
Improvement, OMB Memorandum M-21-19 (Washington, D.C.: Mar. 5, 2021).
Page 30 GAO-22-105162 UI Risks and Transformation
they plan to include the estimates in DOL’s fiscal year 2022
reporting. 82
Likewise, DOL also did not perform a risk assessment for MEUC
during fiscal year 2021, as its total duration did not meet the 12-month
threshold established by OMB guidance, according to DOL. DOL will
likely not estimate or report improper payments for the MEUC
program as it expired in September 2021.
• Incomplete reporting of waived and recovered overpayments.
DOL reported that, as of March 28, 2022, states and territories had
identified approximately $35.1 billion in overpayments made in UI
programs during the first 7 quarters of the pandemic combined (April
2020 through December 2021). 83 This $35.1 billion in reported actual
overpayments includes
• $13.3 billion in PUA overpayments, 84
• $11.8 billion in FPUC overpayments, 85
• $8.1 billion in regular UI and EB overpayments, and
82OMB guidance, Appendix C to Circular No. A-123, Requirements for Payment Integrity
Improvement, directs federal agencies to report information related to improper payment
estimates annually. This information is then posted to www.paymentaccuracy.gov.
83As we have previously reported, DOL data show that the dollar amount of state-reported
overpayments in the regular UI program increased substantially during the pandemic,
coinciding with historically high numbers of UI claims. States have also reported large
amounts of overpayments in the CARES Act UI programs. Regarding underpayments,
states do not report the actual amount of underpayments to DOL. However, states
estimate underpayments based on representative samples of paid and denied regular UI
claims and report these estimates to DOL.
84States and territories report PUA overpayments data to DOL on a monthly basis, and
the total amount shown includes overpayments related to identity theft. We accessed the
PUA overpayments data on March 28, 2022; these data are subject to change as more
states report data and as states revise previously reported data. For consistency with the
regular UI overpayment data, which states and territories report on a quarterly basis, the
PUA overpayment amount shown is for April 2020 through December 2021. The number
of states and territories that have reported PUA overpayments data varies by month.
85FPUC benefits were paid in addition to other UI benefits. About 92 percent of reported
FPUC overpayment amounts were paid on regular UI or PUA claims.
Page 31 GAO-22-105162 UI Risks and Transformation
• $2.0 billion in PEUC overpayments. 86
States and territories may waive the recovery of overpayments in
certain circumstances. 87 Although the data are incomplete, states and
territories reported waiving about $1.6 billion of regular UI, EB, PEUC,
and FPUC overpayments during the first 7 quarters of the pandemic
combined (April 2020 through December 2021). 88 As of March 28,
2022, 24 states had reported some data on waived PUA
overpayments, reporting a combined total of about $0.4 billion waived
from April 2020 through December 2021. However, additional data on
the amounts of PUA overpayments states have waived are needed to
effectively monitor the recovery of overpayments.
When states and territories recover overpayments, they report the
recovered amount in the period when the recovery occurs. For
example, states and territories reported recovering about $0.7 billion
in the PEUC and FPUC programs combined from April 2020 through
December 2021 (i.e., since the creation of those programs). 89
However, we have found that although DOL has monitored and
assisted states with addressing benefit overpayments and potential
fraud, it and states needed to implement additional efforts to track the
recovery of overpayments. 90 As of March 28, 2022, 39 states and
territories had reported some data on recovered PUA overpayments,
86Due to rounding, the sum of these overpayment amounts by program differs from the
total overpayment amount. States and territories report regular UI, EB, PEUC, and FPUC
overpayments data to DOL on a quarterly basis. We accessed the data on March 28,
2022. At that point, not all states and territories had reported overpayment amounts for all
programs in all quarters. States and territories may revise the amount of overpayments
they have identified for 3 years after the reporting quarter, according to DOL officials.
87States were authorized to waive PUA overpayments under the Consolidated
Appropriations Act, 2021. According to this act, if an individual receives PUA benefits they
were not entitled to, the state must generally require such individuals to repay the amount;
however, the state can waive that requirement if the individual was without fault and
repayment would be contrary to equity and good conscience. Pub. L. No. 116-260, div. N,
tit. II, § 201(d), 134 Stat. 1182, 1952. According to DOL, states are able to retroactively
waive PUA overpayments from the beginning of the program onward.
88We accessed the waived overpayments data on March 28, 2022; these data are subject
to change as more states and territories report data and as states and territories revise
previously reported data.
89We accessed the recovered overpayments data on March 28, 2022; these data are
subject to change as more states and territories report data and as states and territories
revise previously reported data.
90GAO-22-105397.
Page 32 GAO-22-105162 UI Risks and Transformation
including a combined total of about $1.3 billion recovered from April
2020 through December 2021. 91
In January and March 2021, we recommended, and DOL agreed, that
the department collect data from states on the amount of
overpayments recovered and waived in the PUA program, similar to
the regular UI program. In response to our recommendation, DOL
updated state reporting requirements for the PUA program to include
the collection of data on recovered and waived PUA overpayments.
However, because of the limited number of states and territories that
had reported data on recovered and waived PUA overpayments to
DOL as of March 28, 2022, our related recommendations remain
open. Sustained reporting by more states is needed to help inform
DOL, policymakers, and the public about the amount of PUA
overpayments that states have waived and recovered and about the
amount that remains outstanding.
• Failure to perform required overpayment recovery activities. In
late May 2021, the DOL OIG reported, among other things, that some
states did not perform required overpayment recovery activities. 92
Specifically, the DOL OIG found that 19 states (38 percent) did not
perform the required overpayment recovery activities, such as benefit
offsets, for the recipients to repay the UI overpayments. 93 The OIG
further reported that once states identify overpayments, it is essential
that they complete recovery activities to mitigate the risk of financial
91The total PUA amount shown also includes recovered overpayments related to identity
theft. As of March 28, 2022, states and territories had also reported recovering about $2.0
billion in the regular UI and EB programs from April 2020 through December 2021.
However, the amounts recovered for any quarter may be from overpayments established
in many previous periods. Thus, the total amount does not measure the extent to which
overpayments made during the pandemic have been recovered.
92Department of Labor, Office of Inspector General, COVID-19: States Struggled to
Implement CARES Act Unemployment Insurance Programs, Report No.19-21-004-03-
315. (Washington, D.C.: May 28, 2021).
93In this case, benefit offsets are benefits withheld by the state agency to satisfy the
requirement for the recipient to repay an overpayment.
Page 33 GAO-22-105162 UI Risks and Transformation
loss as a result of overpaid claims. 94 The OIG recommended that
DOL assist states with reporting of claims, overpayments, and fraud to
create clear and accurate information and then use the overpayment
and fraud reporting to prioritize and assist states with fraud detection
and recovery. DOL agreed with the OIG’s recommendation and said it
would take steps to implement the recommendation.
CARES Act UI Programs We previously reported that the amount of fraudulent and potentially
Exacerbated Existing and fraudulent activity in UI programs increased substantially after the three
CARES Act UI programs were enacted, relative to the amount of such
Created New Fraud Risks activity in the regular UI program before the pandemic. 95 The increased
amount of benefits awarded and legacy IT systems’ inability to adequately
guard citizens’ sensitive information, gave criminals incentive to commit
fraud. DOL officials also identified other factors—including significant
increases in claims workload, new and inexperienced staff, and quick
implementation of new programs—that provided opportunities for
exploitation of program and system vulnerabilities. In addition, officials
from DOL and NASWA and our panelists identified new and existing fraud
schemes targeting CARES Act UI programs. These fraud schemes are
useful for understanding factors contributing to fraud risk in CARES Act
UI programs, which we identified through a review of DOL OIG reports,
state audit reports, Department of Justice (DOJ) cases, and information
discussed during the expert panels. In October 2021, we made several
recommendations to DOL regarding fraud risk management in UI and we
94DOL has issued various guidance documents during the pandemic related to
overpayments, including the following: Department of Labor, Program Integrity for the
Unemployment Insurance (UI) Program and the UI Programs Authorized by the
Coronavirus Aid, Relief, and Economic Security (CARES) Act of 2020—Federal Pandemic
Unemployment Compensation (FPUC), Pandemic Unemployment Assistance (PUA), and
Pandemic Emergency Unemployment Compensation (PEUC) Programs, UIPL 23-20
(Washington, D.C.: May 11, 2020); Addressing Fraud in the Unemployment Insurance (UI)
System and Providing States with Funding to Assist with Efforts to Prevent and Detect
Fraud and Identity Theft and Recover Fraud Overpayments in the Pandemic
Unemployment Assistance (PUA) and Pandemic Emergency Unemployment
Compensation (PEUC) Programs, UIPL 28-20 (Washington, D.C.: Aug. 31, 2020);
Benefits Held by Banks and Financial Institutions as a Result of Suspicious and/or
Potentially Fraudulent Activity and the Proportional Distribution Methodology Required for
Recovering/Returning Federally Funded Unemployment Compensation (UC) Program
Funds, UIPL 19-21 (Washington, D.C.: May 4, 2021); and Grant Opportunity to Support
States with Fraud Detection and Prevention, Including Identity Verification and
Overpayment Recovery Activities, in All Unemployment Compensation (UC) Programs,
UIPL 22-21 (Washington, D.C.: Aug. 11, 2021).
95GAO-22-105051.
Page 34 GAO-22-105162 UI Risks and Transformation
continue to monitor the agency’s progress in responding to these open
recommendations. 96
Fraud Schemes Identified Officials from DOL and NASWA, and participants in our stakeholder
Targeting CARES Act UI panel, identified new and existing fraud schemes targeting CARES Act UI
programs. According to DOL officials, potential fraud in the regular UI
Programs
program historically involved a misrepresentation of eligibility, such as an
employee’s failing to report returning to work, failing to report earned
Examples of Fraud Schemes Targeting
CARES Act Unemployment Insurance (UI)
wages, or failing to fulfill work search requirements; or an employer’s
Programs failing to report a reason for separation. Officials stated that although DOL
Department of Labor (DOL) officials told us was aware of isolated occurrences of identity-related fraud before the
that they have observed the use of new fraud pandemic, such as the use of false identities, it has seen an increase in
schemes targeting CARES Act UI programs.
Multiple panelists also shared information on the frequency and volume of identity-related fraud, as well as significantly
fraud schemes in CARES Act UI programs. more sophisticated identity theft fraud schemes, since the pandemic
• Hijacking bank accounts. According to began (see sidebar).
DOL officials, after an individual submits a
legitimate application for UI benefits and
provides bank account information for the According to DOL officials, the most common fraud schemes during the
funds’ direct deposit, a fraudster will
hijack the applicant’s UI system account
pandemic included the use of stolen personally identifiable information
and reroute the deposit from the (PII) to file a claim or multiple claims; the use of synthetic identities (i.e.,
applicant’s bank account to a bank real identities mixed with fictitious information); and cybersecurity
account the fraudster can access. Multiple
panelists also discussed fraudsters attacks—including the use of bot attacks in attempts to overwhelm state
hijacking bank accounts and referred to UI systems or launch phishing schemes—to obtain individual PII to
this as an account takeover scheme.
perpetrate future fraud. NASWA officials and panelists also shared
• Mimicking state UI websites. According to
DOL, when people conduct Internet concerns about schemes orchestrated by organized crime groups,
searches for their state’s UI office, they including those from foreign countries. One panelist, who has been
may find, and file claims on, a fraudulent investigating UI fraud at the state level, stated that many fraudsters who
website that looks like the state workforce
agency’s website, thus providing their had stolen identity information prior to the pandemic saw the CARES Act
personally identifiable information (PII) to UI programs as an opportunity to use that information to obtain benefits.
fraudsters.
• Email account scheme. According to at
least one panelist, an individual may
create variations of an email address for
fraudulently applying for multiple UI
benefits using stolen PII.
• Selling stolen information. Panelists
stated that individuals create and sell
“how-to” guides on the dark web that
provide instructions for fraudulently
applying for UI benefits. These guides
may include examples of stolen PII that a
fraudster can use to submit many
fraudulent applications for benefits.
Source: GAO analysis of stakeholder panel. | GAO-22-
105162
96GAO-22-105051.
Page 35 GAO-22-105162 UI Risks and Transformation
Factors Contributing to Fraud Our review of DOL OIG reports, state audit reports, and DOJ cases
Risk in CARES Act UI uncovered new and existing fraud risk factors that contributed to an
Programs increase in UI fraud during the pandemic. 97 Specifically, we identified the
following fraud risk factors in CARES Act UI programs: 98
• Reliance on self-certification. The CARES Act allowed PUA
applicants to self-certify aspects of their eligibility and did not require
them to provide any documentation of self-employment or prior
income. 99 In October 2020, DOL’s OIG reported that states cited the
PUA self-certification requirement as a top fraud vulnerability. 100 We
have previously reported that relying on program participants to self-
report and self-certify information on agency forms, instead of
verifying such information independently, could cause an agency to
miss opportunities to prevent program fraud and abuse. 101
• Waiver of waiting period. During the pandemic, states were
encouraged to process and pay claims quickly while experiencing a
historic number of claims. Based on federal laws and in an effort to
speed claims processing, DOL encouraged states to temporarily
suspend the existing waiting period for benefits and the CARES Act
generally provided full federal funding for the first week of regular UI
benefits to states that did so. According to DOL officials, under the
regular UI program, DOL allows states to take up to 21 days to make
the first payment of benefits, giving them time to detect potential
fraud. Waiving the waiting period meant that some states had less
97Stakeholder panelists also discussed identifying and improving the use of resources to
address fraud. See appendix IV.
98Factors contributing to fraud risk include conditions or actions that are most likely to
cause or increase the possibility of fraud. Factors contributing to fraud risk do not
necessarily indicate that fraud exists but are often present when fraud occurs.
99The Consolidated Appropriations Act, 2021, enacted in December 2020, extended the
PUA program and included a requirement that all PUA claimants must submit
documentation substantiating employment, self-employment, or the planned
commencement of employment or self-employment. Pub. L. No. 116-260, div. N, tit. II, §
241(a), 134 Stat. 1182, 1959-60.
100Department of Labor, Office of Inspector General, COVID-19: States Cite
Vulnerabilities in Detecting Fraud While Complying with the CARES Act UI Program Self-
Certification Requirement, Report No. 19-21-001-03-315 (Washington, D.C.: Oct. 21,
2020).
101GAO, Telecommunications: FCC Should Take Action to Better Manage Persistent
Fraud Risks in the Schools and Libraries Program, GAO-20-606 (Washington, D.C.: Sept.
16, 2020.)
Page 36 GAO-22-105162 UI Risks and Transformation
time to employ tools for fraud prevention and detection, according to
NASWA officials.
• Low staffing levels. As noted above, states lacked adequate staffing
resources to properly implement the CARES Act UI programs,
including processing claims. State agency staffing levels are
determined on the basis of claim volume levels in previous years,
according to DOL OIG officials. At the start of the pandemic, many
state UI programs had been experiencing their lowest claims volume,
and thus their lowest staffing and funding levels, since the 1970s. To
process the high volume of claims after the pandemic began, many
states reassigned benefit payment control staff to claims processing,
with the result that few staff were working to prevent and detect fraud,
according to DOL OIG officials.
• Legacy IT systems. In the beginning of the pandemic, legacy IT
systems made it difficult for many states to conduct internal control
activities as many of these IT systems lacked the controls needed to
prevent cybersecurity attacks or the use of fraudulently obtained
identity information, according to DOL OIG officials. These officials
stated that some state IT systems were not equipped to handle the
volume of claims, and some may not have been easily compatible
with the NASWA UI Integrity Center’s Integrity Data Hub resources. 102
However, many states have begun using Integrity Data Hub resources
since the onset of the pandemic, according to DOL officials.
• Variation in data analysis across states. States’ use of resources
for data mining, cross matching, and identity verification varies.
According to DOL officials, the department does not have authority to
require states to use the databases available in the UI Integrity
Center’s Integrity Data Hub, such as the Identify Verification or Multi-
State Cross-Match databases. Additionally, not all states were able to
cross match claims with federal incarceration data, and many state UI
102The Integrity Data Hub is a centralized, multistate data system that the UI Integrity
Center operates in partnership with DOL, using DOL funding. The Integrity Data Hub
provides state workforce agencies with cross-matching capabilities to analyze UI claims
data to detect and prevent UI fraud and improper payments.
Page 37 GAO-22-105162 UI Risks and Transformation
offices did not have access to state-level incarceration data. 103
However, according to officials, they have worked with the Social
Security Administration to establish a secure data exchange that
allows states to cross-match UI claims data with incarceration
records. While states’ use of these various data matching tools
increased during the pandemic, not all states are currently using
them, according to DOL officials. 104 Without more consistent use of
these tools across states, states may miss opportunities to identify
fraudsters.
Status of DOL’s Fraud Risk DOL is aware of fraud risks in CARES Act UI programs, particularly risks
Management Efforts of fraudulent claim schemes, but has not comprehensively assessed
these fraud risks. In its fiscal year 2020 agency financial report, DOL
acknowledged an increase in suspected fraudulent activity—specifically,
organized fraud schemes targeting the CARES Act UI programs. 105 In
DOL’s fiscal year 2021 agency financial report, DOL’s OIG identified
fraud—specifically, claimants who received UI benefits through fraudulent
schemes, such as those perpetrated during the COVID-19 pandemic—as
one of the four leading causes of improper payments.
However, as we reported in October 2021, DOL has not comprehensively
assessed UI fraud risks in alignment with leading practices or
documented a prioritized approach to managing fraud risks. 106 We made
several recommendations related to this issue, including that DOL
designate a dedicated entity responsible for managing the process of
assessing fraud risks to the UI program. DOL neither agreed nor
disagreed with these recommendations. In its December 2021 Statement
103For example, the state auditor of California reported that the California Employment
Development Department was unprepared to guard against inmate fraud in this program
because it lacked a system to cross‑match all incoming claims against incarceration data.
The department estimated that it paid $810 million in benefits to 45,000 claimants who
were incarcerated. Auditor of the State of California, Employment Development
Department: Significant Weaknesses in EDD’s Approach to Fraud Prevention Have Led to
Billions of Dollars in Improper Benefit Payments, Report 2020-628.2 (Sacramento, Calif.:
Jan. 28, 2021).
104In March 2020, only three states were participating in Multi-State Cross-Match,
compared to 43 states in March 2022, according to DOL officials. Additionally, DOL
officials said that the Integrity Data Hub’s identity verification services went live in July
2020; 34 states are using the identity verification solution as of March 2022. All states and
the DOL OIG participate in the Integrity Data Hub’s Fraud alerting capability, according to
DOL officials.
105Department of Labor, Agency Financial Report Fiscal Year 2020 (Washington, D.C.:
Nov. 16, 2020).
106GAO-22-105051.
Page 38 GAO-22-105162 UI Risks and Transformation
of Executive Action, DOL reiterated that its Chief Financial Officer and
ETA’s Assistant Secretary are responsible for risk management in the UI
program. In April 2022, DOL officials stated that they are in the process of
formally documenting this designation, and these officials’ antifraud
responsibilities, consistent with our Fraud Risk Framework. DOL also
reiterated that it will incorporate the recommended practices and
approaches from the Fraud Risk Framework in its risk assessment
activities as it moves forward. As of May 2022, these recommendations
remain open. We continue to monitor DOL’s fraud risk assessment
activities and have ongoing work in this area.
DOL officials said they continue to collaborate with a variety of other
entities to address fraud prevention, detection, and recovery. For
example, as reported in October 2021, officials said they meet regularly
with the DOL OIG to discuss emerging UI fraud issues, streamline
communication with states, and coordinate fraud prevention and recovery
efforts. Further, DOL has issued guidance requiring states to share claims
data with the DOL OIG relating to the federal pandemic-related UI
programs. In addition, officials said they continue to participate in
biweekly banking work group calls to discuss ongoing recovery efforts
and improve communication among banking organizations, federal
government agencies, and law enforcement agencies.
Multiple panelists stated that they believe UI fraud will continue to evolve
as states adopt new controls, and now that fraudsters have gained
experience with how to take advantage of the UI program, panelists
expect higher levels of fraud to persist after the pandemic. As we reported
in October 2021, without conducting a fraud risk assessment that includes
the CARES Act UI programs, DOL lacks reasonable assurance that it has
identified the most significant fraud risks for the regular UI program that
will exist after the pandemic. Further, until DOL has a dedicated antifraud
entity responsible for managing the fraud risk assessment process,
consistent with leading practices, the department may not be well
positioned to strategically manage UI fraud risks. In addition,
incorporating this assessment in a documented fraud risk profile and its
broader antifraud strategy would position DOL to deal more effectively
with any future emergency UI programs.
Federal and State Entities Federal and state entities continue to investigate and report on high levels
Continue to Investigate UI of fraud, potential fraud, and fraud risks in the UI programs. For example:
Fraud • As of March 17, 2022, DOL OIG reported opening more than 38,000
investigative matters involving alleged UI fraud. In addition, the DOL
Page 39 GAO-22-105162 UI Risks and Transformation
OIG reported that as of February 2022, its UI investigations have
resulted in over $830 million in investigative monetary results.
• DOL OIG efforts have also identified billions of dollars in potential UI
fraud under investigation. For example, in June 2021, DOL’s OIG
reported that it had identified about $17 billion of potentially fraudulent
UI benefits paid from March 2020 through October 2020 in the
following four areas: (1) multi-state claimants, (2) Social Security
numbers of deceased individuals, (3) federal prisoners, and (4)
suspicious email accounts. 107 The DOL OIG has a number of ongoing
and planned efforts examining UI, including coordination with law
enforcement to address UI fraud.
• In addition, since March 2020, DOJ has publicly announced charges
in numerous fraud-related cases related to the UI programs.
Specifically, from March 2020 through January 2022, at least
146 individuals pleaded guilty to federal charges of defrauding UI
programs, and federal charges were pending against at least 249
individuals. 108
Several state auditors have also reported on fraud, potential fraud, and
fraud risks in the UI programs. For example, state auditors in California,
Kansas, and Louisiana identified millions of dollars in potentially
fraudulent payments. 109
107This amount differs from what we have previously reported due to clarification we
received from the DOL OIG in May 2022. For more information, see Department of Labor,
Office of Inspector General, Alert Memorandum: The Employment and Training
Administration Needs to Issue Guidance to Ensure State Workforce Agencies Provide
Requested Unemployment Insurance Data to the Office of Inspector General, Report No.
19-21-005-03-315 (Washington, D.C.: June 16, 2021).
108Of the at least 146 individuals who pleaded guilty, at least 93 had been sentenced as of
January 31, 2022. Sentences varied. For example, in one case of UI fraud, an individual
was sentenced to 1 year of probation and an order to pay a $2,000 fine and over $16,000
in restitution. In another case, an individual was sentenced to 108 months in prison and an
order to pay over $455,000 in restitution.
109Auditor of the State of California, Employment Development Department: Significant
Weaknesses in EDD’s Approach to Fraud Prevention Have Led to Billions of Dollars in
Improper Benefit Payments, Report 2020-628.2 (Sacramento, Calif.: Jan. 28, 2021).
Louisiana Legislative Auditor, Louisiana Workforce Commission, Improper Payments in
the Unemployment Insurance Program: Ineligible Incarcerated Recipients, (Baton Rouge,
La.: Apr. 28, 2021). Kansas Legislative Division of Post Audit, Evaluating the Kansas
Department of Labor’s Response to COVID-19 Unemployment Claims (Part I), Report No.
R-21-003 (Topeka, Kans. Feb. 2021).
Page 40 GAO-22-105162 UI Risks and Transformation
As a result of the many challenges facing the UI system that we and
Sustained Action Is others have identified, and that are discussed in greater detail above, we
Critical to Address have determined that the UI system is in need of transformation and
should be on our High-Risk List. In designating a program as high-risk,
Risks to UI System we consider: (1) qualitative factors such as whether risks could result in
significantly impaired service delivery; (2) exposure to financial loss; and
(3) effectiveness of corrective measures that are planned or underway.
Moving forward, DOL can address these risks through a coordinated and
sustained approach to ensuring progress in leadership commitment,
capacity, action plans, monitoring, and significant improvements in
program performance and integrity.
As detailed above, challenges we and others have identified are
extensive enough to pose significant risk to UI service delivery and have
exposed the UI system to potentially significant financial losses. In
summary:
• Service delivery. Supporting workers who become unemployed and
stabilizing the economy are at the core of the UI system’s mission.
However, as stated above, we and others have reported on chronic
management and resource challenges the UI system has faced,
including inequities in the system, outdated IT infrastructure, and
staffing limitations. During the pandemic, historic and urgent demand
for services and the need to implement new and expanded UI benefits
overwhelmed states, causing benefit payment timeliness to plummet
and significantly straining customer service. Although the scale of the
demand placed on the UI system was unprecedented, these
challenges exacerbated inherent risks in the program that challenge
its ability to respond effectively to economic downturns and to ensure
equity in service delivery across states and worker groups.
• Financial loss. As previously stated, prior to the pandemic DOL
regularly estimated that improper payments in the regular UI program
totaled billions of dollars annually. In fiscal year 2021, during the
pandemic, DOL reported that the estimated UI improper payment rate
doubled, and due to the historic demand for UI, the amount of
estimated improper payments was almost 10 times the previous fiscal
year’s estimate. 110 DOL expects this elevated improper payment rate
to continue for fiscal year 2022. In addition, states have reported
billions of dollars in established overpayments in the PUA program,
110As stated above, the estimated improper payments for the 2021 UI program includes
improper payment estimations for the FPUC and PEUC programs, but does not include
PUA and MEUC improper payments.
Page 41 GAO-22-105162 UI Risks and Transformation
which is not included in DOL’s estimates of improper payments.
Furthermore, caused in part by the need to meet the urgent demand
for unemployment support, the magnitude of potential financial loss
during the pandemic has likely weakened public confidence in the
integrity of the UI system.
In designating the UI system as high risk, we also considered actions that
DOL could take to help address challenges. These actions can be
grouped in the areas of: leadership commitment, capacity, action plan,
monitoring, and demonstrating progress. DOL has some activities
planned and underway that may address the risks we have identified, and
our most recent recommendations also offer guidance for future agency
efforts. However, developing lasting and system-wide solutions, by
utilizing a coordinated and sustained approach and working closely with
all states as appropriate, is important to meet the vision for improvements
outlined in DOL’s UI modernization plan. If DOL determines legislative
action is needed, providing technical assistance to Congress could also
be helpful.
Leadership commitment. As noted above, our work and the work of the
DOL OIG have identified the need for DOL to improve its leadership and
coordination of actions to address risks to UI program access, claims
processing, and program integrity. DOL leadership has acknowledged the
need for significant reform of the UI system. In its fiscal year 2022 and
2023 congressional budget justifications, DOL stated the need for
“reforms is urgent, and the Administration is eager to work with Congress
on broad changes to modernize the [UI] program as well as advance
racial, geographic, and gender equity in the UI system.” On August 31,
2021, DOL announced the establishment of the Office of Unemployment
Insurance Modernization within the Office of the Secretary to provide
strategic leadership as the department works with state agencies and
federal partners to implement the strategic vision outlined in its UI
modernization plan. The office is also providing oversight and
management of $2 billion in funds from the American Rescue Plan Act of
2021 to prevent and detect fraud, promote equitable access, and ensure
timely benefits payments, according to DOL.
The formation and work of this office are promising signals of DOL’s
commitment to modernization and reform of the UI system. Sustained
activity and attention will be critical to the success of the effort. However,
according to DOL officials, the Office of UI Modernization is temporary
and consists of a small leadership team that is working to facilitate
progress and coordinate efforts across DOL entities. Moreover, officials
Page 42 GAO-22-105162 UI Risks and Transformation
told us that they do not have long-term timelines for planned activities due
to the temporary nature of the office’s role, and that they expected the
longer-term modernization effort would eventually be led by ETA’s Office
of Unemployment Insurance. A long-term strategic plan and sustained
leadership are critical to ensure fulfillment of the vision outlined in DOL’s
UI modernization plan. In addition, as we and the DOL OIG have
reported, past UI modernization efforts have had mixed results because
of challenges faced by states.
Capacity. Limitations in state and federal capacity have been recurring
findings in our UI reports and those of the DOL OIG, especially related to
ensuring the UI system responds effectively to economic downturns, as
discussed above. UI is a federal-state partnership, and according to DOL,
state statutes establish specific benefit structures, eligibility provisions,
benefit amounts, and other aspects of the program. Although state
standards can vary, DOL helps to ensure states’ compliance with federal
requirements and provides guidance, technical assistance, funding for
state administration through grants, and other support to states. In
addition, we and the DOL OIG have reported on specific capacity
challenges that affect the ability of states to effectively administer the
program, especially during economic downturns.
• Staffing limitations. We have reported on states’ challenges with
providing effective customer service and how economic downturns
including the pandemic significantly exacerbated these challenges. 111
Too few call center and claims processing staff, turnover, and
insufficient time to train new staff can have significant consequences,
including delaying payments, claimant frustration, and processing
mistakes. As we previously noted, stakeholder panelists stated that
insufficient federal funding for UI administration has resulted in state
unemployment agencies being understaffed and that the high demand
for UI during the pandemic also strained DOL’s staff capacity to
support states. Providing for staffing levels at the state and federal
levels that are adequate to meet demand for UI during all phases of
the economic cycle is critical to ensuring effective service delivery.
• Outdated IT infrastructure. To perform core program functions, state
UI agencies rely extensively on IT systems, many of which are legacy
systems, as discussed in detail above. A lack of effective IT
infrastructure limits the ability of states to process claims efficiently,
increases the risk of processing errors, fraud, and security
111See GAO-16-430 and GAO-22-104251.
Page 43 GAO-22-105162 UI Risks and Transformation
vulnerabilities, and may pose a privacy risk for claimants. As
previously noted, the DOL OIG reported during the pandemic that
officials in 17 of 50 states and territories said their IT systems were
not sufficient to implement provisions of the CARES Act and several
states reported their IT systems were not able to complete improper
payments detection and recovery. DOL has taken steps in the past to
provide administrative funding, when available, and technical support
to state agencies to assist with UI IT modernization efforts. However,
we have previously identified challenges states reported related to
inconsistent funding. We and the DOL OIG also have ongoing work
specifically examining UI IT modernization efforts.
• Effectiveness of benefit triggers to respond to economic
downturns. As previously stated, participants in our stakeholder
panels noted limitations of the EB program’s effectiveness amidst
changing national economic conditions. Stabilizing the economy
during economic downturns is a critical mission of the UI program,
which entails the UI system having sufficient flexibility and effective
triggers to provide additional support to workers when most needed.
As mentioned earlier, the American Rescue Plan Act of 2021
appropriated $2 billion for DOL to detect and prevent fraud, promote
equitable access, and ensure the timely payment of UI benefits. DOL has
used some of this funding to provide technical assistance teams and
grant opportunities to states to enhance fraud prevention and equitable
and timely access to benefits. Some of these efforts may increase staff
and other capacity. DOL has also used some of this funding to support
states in modernizing their IT systems, including beginning efforts to
develop modular technology solutions that can be integrated with state IT
systems and a blueprint for the UI customer experience. 112 These are
positive initial steps. However, lasting and system-wide solutions are
important to meet the vision for infrastructure improvements outlined in
DOL’s UI modernization plan.
Action plan. DOL outlined several principles for reform of the UI system
in its fiscal year 2022 and 2023 congressional budget justifications,
including the need for a modern system to provide adequate benefits in
every state, be easily scalable and respond automatically to economic
downturns, reflect the modern economy and labor force, and ensure
112See Department of Labor, Announcing Grant Awards Made to States Selected to
Participate in the Unemployment Insurance (UI) Information Technology (IT)
Modernization Project - Claimant Experience Pilot, TEN No. 16-21 (Washington, D.C.:
Dec. 2, 2021).
Page 44 GAO-22-105162 UI Risks and Transformation
access and integrity before the next crisis. These principles represent a
vision for action. In addition, in April 2022, DOL released an Equity Action
Plan, which among other things, outlined existing barriers to equitable
outcomes in the UI system and summarized DOL’s ongoing and planned
actions to advance equity and support marginalized, vulnerable, and
underserved communities. However, as noted in a new report we are
issuing concurrently with this report, DOL has not yet conducted
comprehensive analyses of the extent of or potential causes of system-
wide disparities in benefit receipt or options for supporting nontraditional
workers and reflecting a modern economy. 113 In addition, we have
reported that DOL has not comprehensively assessed UI fraud risks in
alignment with leading practices as provided in our Fraud Risk
Framework. 114 Clear plans to identify root causes and potential solutions
to the challenges underlying DOL’s reform principles are necessary for
long-term progress. Implementing our recommendations in these areas
could generate useful information for DOL’s UI modernization strategic
planning and sequencing of activities.
Monitoring. Identifying and validating the effectiveness of DOL’s efforts
are key components of ensuring progress. DOL collects a variety of data
from states related to UI claims, compensation, payment timeliness,
established overpayments, and other information. However, we have
identified some limitations in the completeness and accuracy of the
information DOL has at its disposal. 115 We have made several
recommendations related to obtaining more accurate and complete data
on the number of people who receive benefits and the amount of PUA
overpayments that were recovered and waived. 116 In these reports we
have also reported on some states’ challenges to report data during the
pandemic, and in a report being issued concurrently with this report, the
limitations of data DOL collects related to claimant demographics. 117 In
another concurrent report we are recommending that DOL obtain
information about customer service challenges during the pandemic to
113GAO-22-104438.
114GAO, A Framework for Managing Fraud Risks in Federal Programs, GAO-15-593SP,
(Washington, D.C.: Jul. 28, 2015) and GAO-22-105051.
115GAO-22-105397 and GAO-22-104438.
116GAO-21-191, GAO-21-265, and GAO-21-387.
117GAO-22-104438.
Page 45 GAO-22-105162 UI Risks and Transformation
identify best practices for helping claimants. 118 Implementing our
recommendations in these areas could provide quality baseline
information about the UI program, including performance during the
pandemic. Monitoring the effectiveness of DOL’s UI modernization
activities will need a continuous effort to obtain high-quality and
potentially new data related to DOL’s UI reform principles.
Demonstrated progress. Implementing our UI-related recommendations
and those of the DOL OIG, will demonstrate progress in areas that align
with DOL’s principles and vision for UI reform and are critical for resolving
the significant risks in the UI system. Progress will necessitate DOL
working closely with states and other partners within its authorities, and if
DOL determines legislative action is needed to facilitate progress in some
areas, working closely with Congress to consider options. Among areas
where progress is needed are:
• Reducing the improper payment rate. As we discussed above, the
estimated regular UI improper payment rate was high—9.2 percent—
prior to the pandemic and then more than doubled—18.9 percent—
during the pandemic. According to DOL, improper payment rates are
expected to remain at elevated levels in fiscal year 2022, and DOL set
the 2022 target improper payment rate at no higher than 17 percent.
• Advancing equity in the UI system, including across racial and
ethnic groups and states. Benefit amounts and recipiency rates vary
substantially by state, and we and others have found evidence of
racial, ethnic, and gender disparities in the receipt of benefits. 119 DOL
has also stated that the need for UI reforms is urgent, including to
advance racial, geographic, and gender equity in the UI system.
• Better reaching current worker populations and reflecting the
modern economy. As we discussed above, according to DOL, the
percentage of unemployed workers filing for UI benefits (the
recipiency rate) has generally declined from almost 55 percent in
1958 to just 28 percent in 2019, prior to the pandemic. Although the
decline is a result of a number of factors, DOL emphasized in its fiscal
year 2022 and 2023 congressional budget justifications that “the UI
system must reflect the modern economy and labor force… [and find]
a way to address the lack of support in the existing UI system for
118GAO-22-104251.
119GAO-22-104438.
Page 46 GAO-22-105162 UI Risks and Transformation
many workers, including independent contractors, low-income and
part-time workers, and workers with nontraditional work histories.”
• Restoring pre-pandemic payment timeliness levels. As we
discussed above, in March 2020, prior to the spike in UI demand
during the pandemic, almost all regular UI claimants received their
first benefit payments within 3 weeks of their first being eligible.
Timeliness of regular UI first payments plummeted early in the
pandemic. In June 2020, just about half of regular UI claimants
received their first benefit payments within 3 weeks. Timeliness of
regular UI first payments fluctuated since then, and in February 2022,
remained well below DOL’s acceptable level of performance.
• Improving response to economic downturns. As stated above, the
pandemic placed tremendous strain on the UI system and
overwhelmed state efforts to provide benefits in a timely manner while
implementing new emergency UI benefit programs. According to state
officials, their experiences implementing these programs were further
complicated by DOL’s unclear guidance. Avoiding a repetition of
challenges faced during the pandemic necessitates proactive
improvements before the next economic downturn.
Federal internal control standards state that management should
remediate identified internal control deficiencies on a timely basis and
also should establish an organizational structure, assign responsibility,
and delegate authority to achieve the entity’s objectives. 120 As part of this,
it is critical that an agency has effective strategic planning to help assure
that program operations achieve an entity’s mission. As the country works
to emerge from the pandemic, continued economic instability and
structural changes to the labor force are possible. Leaving known UI
challenges unaddressed will continue to place the UI system in a position
of heightened risk of not meeting fundamental program expectations of
serving workers and the broader economy and responsibly stewarding
governmental funds.
120GAO-14-704G.
Page 47 GAO-22-105162 UI Risks and Transformation
Stakeholders participating in our panel discussion identified specific
Panelists Offered options for transforming UI programs. These options fell into three main
Options to Transform categories: changes to program design to better target UI support,
improvements to UI program infrastructure, and enhancements to
UI Design, Systems, program integrity. 121 We have identified some broad considerations for
and Integrity; Several assessing the options that may be relevant to department officials and
other policymakers as they develop related proposals. For an expanded
Considerations Could discussion of stakeholder panelists’ suggested options, see appendix IV.
Be Used to Assess
Them
Changes to Program Stakeholder panelists identified a variety of potential changes to better
Design to Better Target UI target UI support, including: broadening eligibility and reducing
administrative barriers to increase access to UI; changing how benefits
Support
are calculated to better target UI benefit amounts; standardizing certain
UI requirements and operations across states to increase consistency of
UI support; and sufficient funding for UI administration and certain UI
benefits (see table 2).
Table 2: Potential Transformation Options Stakeholder Panelists Identified Related to Changing Unemployment Insurance (UI)
Program Design
Transformation objective Potential transformation options identified by stakeholder panelists
Increase • Create a new program specifically to cover workers not currently covered by regular UI,
access to UI such as independent contractors and self-employed workers, to broaden eligibility
• Narrow the classification of independent contractors to increase UI coverage
• Streamline UI application and employment verification processes, thus reducing
administrative barriers to access
Better target UI benefit amounts • Use a flexible wage-replacement rate to adjust benefits based on economic conditions
and income level
121We identified options for UI transformation based on our analysis of the stakeholder
panel discussions. These options for transformation are not listed in any specific rank or
order, and their inclusion in this report should not be interpreted as GAO endorsing any of
them. Implementing any one transformation option or a combination of options might
require additional efforts to address program design or legal issues. We did not assess
how effective the potential transformation options may be, or the extent to which legal
changes and federal financial support would be needed to implement them. Options
presented do not represent a consensus among panelists, but instead represent options
presented by at least one panelist and then, in most cases, discussion by the group as a
whole.
Page 48 GAO-22-105162 UI Risks and Transformation
Transformation objective Potential transformation options identified by stakeholder panelists
Increase consistency of UI support • Federalize the UI system
• Tighten federal standards for state UI programs
• Revise triggers for the Extended Benefits program and set parameters for other
recessionary expansions to make UI expansions more automatic and consistent across
states
Ensure sufficient UI funding • Increase federal funding for UI administrationa
• Provide federal funding for certain UI benefits
• Require employee contributions to UI
Source: GAO analysis of stakeholder statements. | GAO-22-105162
Note: We identified transformation objectives based on our analysis of the stakeholder panelists’
proposed transformation options. These potential transformation options are not listed in any specific
rank or order and their inclusion in this report should not be interpreted as GAO endorsing any of
them. We did not assess how effective the potential transformation options may be or the extent to
which program design modifications, legal changes, and federal financial support would be needed to
implement any given transformation option or combination of transformation options. Options
presented do not represent a consensus among panelists but instead represent options presented by
at least one panelist and then, in most cases, discussion by the group as a whole.
a
The Department of Labor’s (DOL) fiscal year 2023 budget justification noted that the factors included
in DOL’s formula for estimating state administrative funding had not been updated in decades, and
proposed updates to two of these factors. Specifically, the budget justification stated that outdated
measures of claims processing rates and staff salary rates had resulted in state administrative
funding estimates that were not reflective of current administrative costs. According to DOL, the use
of these outdated factors consistently left states underfunded, which contributed to them not being
prepared for the surge in claims from the pandemic.
Improvements to UI As discussed earlier, we and others have reported that states have faced
Systems Infrastructure challenges in modernizing their UI IT systems. Stakeholder panelists
identified strategies to help improve UI system infrastructure, including
options to overcome challenges associated with modernizing IT systems
(see table 3).
Table 3: Potential Transformation Options Stakeholder Panelists Identified Related to Improving Unemployment Insurance
(UI) System Infrastructure
Transformation objective Potential transformation options identified by stakeholder panelists
Improving and modernizing IT systems • Increase the focus on the user experience in state UI IT systemsa
• Ensure that staff have project and product management expertiseb
• Use incremental or modular development and implementation practicesc
• Establish well-defined modernization outcome goals
Source: GAO analysis of stakeholder statements. | GAO-22-105162
Note: We identified transformation objectives based on our analysis of the stakeholders’ proposed
transformation options. These potential transformation options are not listed in any specific rank or
order and their inclusion in this report should not be interpreted as GAO endorsing any of them. We
did not assess how effective the potential transformation options may be or the extent to which
program design modifications, legal changes, and federal financial support would be needed to
implement any given transformation option or combination of transformation options. Options
presented do not represent a consensus among panelists but instead represent options presented by
at least one panelist and then, in most cases, discussion by the group as a whole.
Page 49 GAO-22-105162 UI Risks and Transformation
a
User experience testing can occur as part of usability testing. Usability testing refers to evaluating a
product or service by testing it with representative users. Typically, during a test, participants will try
to complete typical tasks while observers watch, listen, and take notes. The goal is to identify any
usability problems, collect qualitative and quantitative data, and determine the participant’s
satisfaction with the product.
b
Product management is the practice of identifying customer requirements, prioritizing those
requirements, and interfacing with product owners to confirm alignment between the software
components and enterprise goals.
c
Incremental or modular development is where an investment may be broken down into discrete
projects, increments, or useful segments, each of which are undertaken to develop and implement
the products and capabilities that the larger investment must deliver. Dividing investments into
smaller parts helps to reduce investment risk, deliver capabilities more rapidly, and permit easier
adoption of newer and emerging technologies.
Enhancements to UI Stakeholder panelists identified strategies to help strengthen internal
Program Integrity controls and improve the use of resources to address fraud (see table 4).
Table 4: Potential Transformation Options Stakeholders Identified Related to Enhancing Unemployment Insurance (UI)
System Integrity
Transformation objective Potential transformation options identified by stakeholder panelists
Strengthening existing internal controls • Improve communication and guidance
• Maintain employer verification requirements
Identifying and improving the use of • Improve identity verification
resources to address fraud • Obtain additional data sources for analytics
• Obtain additional information on fraud schemes
• Encourage states’ use of UI Integrity Center’s Integrity Data Hub
• Provide additional training
• Improve workforce planning
• Provide additional resources to investigate and prosecute fraud
Source: GAO analysis of stakeholder statements. | GAO-22-105162
Note: We identified transformation objectives based on our analysis of the stakeholders’ proposed
transformation options. These potential transformation options are not listed in any specific rank or
order and their inclusion in this report should not be interpreted as GAO endorsing any of them. We
did not assess how effective the potential transformation options may be or the extent to which
program design modifications, legal changes, and federal financial support would be needed to
implement any given transformation option or combination of transformation options. Options
presented do not represent a consensus among panelists but instead represent options presented by
at least one panelist and then, in most cases, discussion by the group as a whole.
Considerations for We identified some broad considerations that may be relevant for
Assessing Options for UI policymakers and others to consider when reviewing options for
transforming UI programs (see table 5). These considerations, such as
Transformation
comprehensiveness and flexibility, can be used to assess key aspects of
different options for transformation. We identified these considerations
based on the panel discussions as well as a review of selected literature
and UI transformation proposals. These considerations are not intended
Page 50 GAO-22-105162 UI Risks and Transformation
to cover all possible considerations, and is not intended to assign a
weight to the different considerations.
Table 5: Considerations for Assessing Unemployment Insurance (UI) Proposals
Consideration Example/Description of consideration
Comprehensiveness To what extent will participation in the UI program reflect the current U.S. workforce?
Flexibility To what extent could the UI program change with the state of the economy?
Funding The risk to the taxpayer and likelihood of deficit financing.
Provision of stimulus To what extent could the UI program provide a stabilizing effect on the U.S. economy
during economic downturns?
Practicality To what extent will the UI program minimize administrative burden and use reliable data
for key metrics?
Sufficiency To what extent will UI benefit levels and duration reduce financial hardship by
compensating for lost income?
Unintended effects To what extent will the UI program take account of incentives to limit duration of
unemployment spells?
Source: GAO analysis of stakeholder panel discussion. | GAO-22-105162
Some of the broad considerations we identified align with the principles
that DOL plans to use to guide its UI modernization efforts. DOL outlined
these principles in its fiscal year 2023 budget justifications and August
2021 UI modernization plan. 122 These principles include the following:
• ensuring adequate benefit levels and duration for unemployed
workers;
• ensuring the UI system can ramp up quickly and automatically in
response to recessions;
• addressing the lack of access to UI for workers misclassified as
independent contractors, low-income and part-time workers, and
workers with non-traditional work histories;
• ensuring the long term solvency of UI trust funds;
• investing in expanded reemployment services; and
122Department of Labor, Fiscal Year 2023 Congressional Budget Justification,
Employment and Training Administration, State Unemployment Insurance and
Employment Service Operations,
https://www.dol.gov/sites/dolgov/files/general/budget/2023/CBJ-2023-V1-07.pdf. Also see
Department of Labor, Fact Sheet: Unemployment Insurance Modernization: American
Rescue Plan Act Funding for Timely, Accurate and Equitable Payment in Unemployment
Compensation Programs (Washington, D.C.: Aug. 11, 2021).
Page 51 GAO-22-105162 UI Risks and Transformation
• improving UI program access and integrity.
The COVID-19 pandemic caused states to face challenges processing a
Conclusions historically high number of UI claims and ensuring that eligible individuals
received the appropriate amount of benefits in a timely way. The
unprecedented demand for UI benefits, coupled with programmatic
flexibilities—such as the waiving of work search requirements, and PUA’s
reliance on self-certification—during the pandemic that increased risks of
improper payments, including those due to fraud, have added to the UI
system’s long-standing challenges of balancing effective service delivery
and program integrity. These challenges highlight the need for
transformation and improved federal and state management to better
support the purpose of the UI system.
Program risks associated with regular UI—including administrative
challenges with providing customer service and timely processing of UI
benefits, and outdated IT systems—have hindered the program’s ability to
efficiently and effectively fulfill its purpose, and the pandemic exacerbated
these issues in all UI programs. Moreover, the risks associated with
improper payments and fraud, both in regular UI and in the now-expired
CARES Act UI programs, have exposed the programs to potentially
significant financial losses. Accordingly, as transformation is necessary,
we are designating the UI system as a new area to be added to our High-
Risk List, and will continue to monitor DOL’s progress in meeting the five
criteria for removal from the list. DOL’s UI modernization plan, and its
efforts to work with states to address fraud, advance equity, and
modernize IT systems, are steps in the right direction to help resolve the
persistent problems in the UI system; however, further efforts and
sustained action to address recurring UI issues would help to stabilize the
programs and prevent future disruptions to UI administration during
economic downturns.
The Secretary of Labor should develop and execute a transformation plan
Recommendation for that meets GAO’s high risk criteria for transformation; the plan should
Executive Action outline coordinated and sustained actions to address issues related to
providing effective service and mitigating financial risk, including ways to
demonstrate improvements. Planned actions may include addressing
audit recommendations, and determining whether legislative changes are
needed, as appropriate. Planned actions may also include achieving
quantifiable results in reducing improper payment rates, including those
related to fraud; improving efficiency in claims processing and restoring
pre-pandemic payment timeliness levels; better reaching current worker
Page 52 GAO-22-105162 UI Risks and Transformation
populations; and enhancing equity in benefit distribution.
(Recommendation 1)
We provided a draft of this report to DOL for review and comment. We
Agency Comments also provided drafts of applicable sections of the report to each of the
and Our Evaluation panelists that participated in our discussions. We received written
comments from DOL that are reproduced in appendix II and summarized
below. DOL and the panelists also provided technical comments, which
we incorporated, as appropriate.
In its comments, DOL noted that states were not prepared to respond to
the unprecedented level of unemployment caused by the COVID-19
pandemic and as a result, customer service suffered, benefits were
delayed, and criminals attacked the system perpetrating unacceptable
fraud. DOL stated that it is building on investments, such as pursuing
more appropriate administrative funding for states and actively working to
help states modernize their IT systems, to ensure states are better
prepared for future economic downturns.
DOL also stated that our report incorrectly implies that DOL had, and
continues to have, funding available to provide all states with funding for
IT modernization. DOL also disagreed with our characterization of the
department-issued guidance for temporary pandemic programs as
“untimely and unclear.” We accepted some of DOL’s technical comments,
and nevertheless, we maintain that our characterization of these findings
is consistent with the supporting evidence, including from sources such
as the DOL OIG and state officials. DOL also emphasized that the UI
system is chronically underfunded, and that DOL recognized lack of
training for new programs as a risk and worked to address it as quickly as
possible.
DOL agreed with our recommendation to develop and execute a
transformation plan that meets GAO’s high-risk criteria for transformation,
and that outlines coordinated and sustained actions to address issues
related to providing effective service and mitigating financial risk,
including ways to demonstrate improvements. DOL highlighted initiatives
that are responsive to our recommendation, such as efforts aimed at
reducing improper payments and combating fraud; enhancing equity in
program access and benefit distribution; and improving efficiency in
claims processing, among others. We recognize that DOL has valuable
efforts under way, and we encourage DOL to continue to pursue efforts to
transform the UI system to help meet, in part, the criteria for removal from
Page 53 GAO-22-105162 UI Risks and Transformation
the GAO high-risk list. These actions, if implemented effectively, would
help address our recommendation.
We are sending copies of this report to the appropriate congressional
committees, the Secretary of Labor, the Office of Management and
Budget, and other relevant agencies. In addition, the report is available at
no charge on the GAO website at https://www.gao.gov.
If you or your staff have any questions about this report, please contact
Thomas Costa, (202) 512-4769, costat@gao.gov or Mary Hannah Padilla,
(202) 512-5683, padillah@gao.gov. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last page
of this report. GAO staff who made key contributions to this report are
listed in appendix V.
Thomas M. Costa
Director, Education, Workforce, and Income Security
Mary Hannah Padilla
Director, Financial Management and Assurance
Seto J. Bagdoyan
Director, Forensic Audits and Investigative Service
Lawrance L. Evans, Jr.
Managing Director, Applied Research and Methods
Page 54 GAO-22-105162 UI Risks and Transformation
Carol C. Harris
Director, Information Technology and Cybersecurity
Page 55 GAO-22-105162 UI Risks and Transformation
Appendix I: Objectives, Scope, and
Appendix I: Objectives, Scope, and
Methodology
Methodology
This report examines (1) challenges related to unemployment insurance
(UI) system’s ability to respond to the needs of unemployed workers and
to changing economic conditions; (2) the risk of improper payments,
including from fraud, in UI programs; (3) the extent to which challenges
place the UI system at risk of significantly impaired performance and
financial loss, and what progress is needed to address this risk; and (4)
potential options for transformation that can be applied to UI programs,
based on the views and perspectives shared in stakeholder panels.
To accomplish our first objective, we reviewed audit products by GAO, 1
the Department of Labor (DOL) Office of Inspector General (OIG), and
state audit agencies to determine the challenges that DOL and states
face, including IT system constraints, in responding to unemployed
workers’ needs and to changing economic conditions. We selected these
audit reports for their recent and relevant information on UI customer
service delivery, claims processing and IT operations. Most of these audit
products were published since September 2016, with a few exceptions to
help ensure we reported information for all topics within our scope. (See
the list of related GAO products at the end of this report.) We also
reviewed published articles related to UI and developed or recommended
by our panelists to identify both the historical and recent challenges the UI
system has faced in addressing the needs of unemployed workers and
the role the system has played in the larger economy.
For the second objective, we reviewed relevant federal law and Office of
Management and Budget (OMB) guidance to identify the requirements
that agencies must satisfy for improper payments reporting. In addition,
we reviewed audit products, mostly published after September 2016, by
GAO and the DOL OIG to determine the risks that DOL and states face
regarding improper payments, including from fraud. We also analyzed
improper payment estimates from both DOL UI websites and OMB’s
PaymentAccuracy.gov website. We assessed the reliability of the data by
reviewing DOL’s documentation and the DOL OIG audit reports on the
quality of the estimates. We determined that the estimates were
sufficiently reliable for the purposes of this report; however, we also note
the limitations of the estimates, as described in GAO guidance. 2
1The scope and methodology for GAO products we reviewed are contained in the
respective reports. See the list of Related Products for key GAO reports.
2GAO, Assessing Data Reliability, GAO-20-283G (Washington, D.C.: Dec. 16, 2019).
Page 56 GAO-22-105162 UI Risks and Transformation
Appendix I: Objectives, Scope, and
Methodology
For the third objective, we drew from the previously mentioned GAO and
DOL OIG reports on UI-related issues, and the analyses and information
contained in this report and our two other UI-related reports we are
issuing concurrently with this report. 3 We also met with DOL officials to
discuss ongoing and planned activities to address challenges identified in
these reports. To determine whether UI should be on the High-Risk List,
we compared our findings from prior reports, DOL OIG reports, and this
work with the criteria for determining whether a government program or
function is high risk. 4 We also considered federal internal control
standards for monitoring during our review. 5
Stakeholder Roundtable To address objectives 1, 2, and 4, we also convened a 2-day virtual
Discussions roundtable composed of 16 stakeholder panelists whom we selected from
government, the private sector, public-private partnerships, and academia
to discuss topics related to transforming UI programs.
Selection of Panelists We used multiple selection criteria to achieve diversity of views and
experience among the panelists. To develop our list of potential
participants, we solicited suggestions from GAO staff with subject-matter
expertise, including expertise in program administration, fraudulent
payments, financial managements, economics, methodological
approaches, and information technology, to provide suggestions for five
to 10 potential panelists who would have knowledge of the UI system.
Based on these suggestions, we created an initial list of 55 potential
panelists. We gathered data points on each potential panelist based on,
among other things, stakeholder perspective, sector representation, years
and types of experience, area of expertise, race and ethnicity, gender,
institutional affiliations, and published works that we used as criteria for
selecting panelists to invite. Using this information, we narrowed down the
list of 55 potential panelists suggested by the GAO mission teams into a
diversified list of 24 potential panelists. These potential panelists included
academic researchers, program evaluators, labor economists, former
federal agency officials, investigators, and state and local practitioners. 6
3GAO-22-104438 and GAO-22-104251.
4GAO, Determining Performance and Accountability Challenges and High Risks,
GAO-01-159SP (Washington, D.C.: Nov. 1, 2000).
5GAO, Standards for Internal Control in the Federal Government, GAO-14-704G.
(Washington, D.C.: Sept. 10, 2014).
6The comments of the stakeholders represented the views of the stakeholders themselves
and not the organizations with which they were affiliated at the time of the roundtables,
and are not generalizable to the views of others in the field.
Page 57 GAO-22-105162 UI Risks and Transformation
Appendix I: Objectives, Scope, and
Methodology
We contacted these 24 potential panelists to discuss their availability and
interest in the roundtable discussions. We then invited the interested
stakeholders to participate in our panel discussions, and 16 accepted our
invitation. The 16 stakeholders who participated in the roundtables and
their affiliations at the time of the roundtables are listed in table 6.
Table 6: List of Stakeholder Panelists in GAO Roundtables to Identify Unemployment Insurance Challenges and Options for
Transformation, Held Aug. 4-5, 2021, Titles, and Institutional Affiliation at the Time of Roundtables
Panelist Title Institutional affiliation
Rebecca Dixon Executive Director National Employment Law Project (NELP)
Arindrajit Dube Professor of Economics University of Massachusetts
Michele Evermore Deputy Director for Policy Department of Labor (DOL), Office of Unemployment
Insurance Modernization
Gay Gilbert Former UI Administrator DOL
Doug Holmes President Unemployment and Workers’ Compensation (UWC)
Elliot Lewis Former Assistant Inspector General for Audit DOL Office of Inspector General
Chris Magee Performance Audit Data Analytics Manager Office of the Louisiana State Auditor
Ioana Marinescu Economist University of Pennsylvania
Bruce Meyer McCormick Foundation Professor The Harris School of Public Policy, University of Chicago
Marina Nitze Public Interest Technology Fellow New America
Jennifer Pahlka Founder and Former Executive Director Code for America
Ben Peirce Vice President National Association of State Workforce Agencies’
(NASWA) Technology Services and Programs
Jesse Rothstein Professor of Public Policy & Economics University of California, Berkley
Doug Swetnam Section Chief Data Privacy and Identity Theft Unit, Office of the Indiana
Attorney General
Beth Townsend Chair / Executive Director NASWA’s UI Committee / Iowa’s Workforce Development
Stephen Wandner Senior Fellow National Academy of Social Insurance
Source: GAO analysis of stakeholder panel discussion. | GAO-22-105162
Reporting of Discussion We did not report on all options for transformation presented in the
Results stakeholder panels; however, we presented those options that received
the most discussion. The options for specific transformation actions we
present in this report were identified by the stakeholder panelists. To
ensure that we captured relevant information from all those who were
present, the 2-day roundtable discussions were (1) led by moderators to
keep the discussion on topic and ensure that all stakeholders were able
to respond to each question; (2) recorded; and, (3) transcribed to ensure
that we accurately captured stakeholders’ statements. We analyzed the
roundtable transcripts to identify common themes discussed by and key
Page 58 GAO-22-105162 UI Risks and Transformation
Appendix I: Objectives, Scope, and
Methodology
statements of stakeholders regarding proposed transformation options.
To conduct this analysis, several analysts independently studied the
roundtable transcripts, identified themes presented by the panelists, and
labeled and extracted the passages addressing those themes. Their
analyses then provided the input for a regrouping of these extracts into
the themes presented in this report.
We did not poll stakeholder participants or take votes on approaches
discussed during the roundtable. Consequently, we do not provide counts
or otherwise quantify the number of stakeholders agreeing to an
approach. Further, because stakeholders were generating and discussing
ideas as part of a free-flowing group discussion, the number of times a
concept was or was not repeated does not necessarily indicate the level
of consensus on that concept. Throughout the report, we use the term
“panelists” to refer to more than one stakeholder.
The inclusion in this report of individual stakeholder options should not be
interpreted as GAO’s endorsement of them. The options are not listed in
any specific rank or order. We did not assess how effective the options
may be or the extent to which program design modifications, legal
changes, and federal financial support would be needed to implement any
given transformation action or combination of transformation actions. We
identified transformation options based on our analysis of the
stakeholders’ proposed transformation actions.
Reporting of We identified some broad considerations that may be relevant for
Considerations policymakers and others to consider when reviewing options for
transforming UI programs. These considerations can be used to assess
key aspects of different options for transformation, such as
comprehensiveness and flexibility. We identified these considerations
based on the panel discussions as well as a review of selected literature
and UI transformation proposals. These considerations are not intended
to cover all possible considerations, and is not intended to assign a
weight to the different considerations.
To obtain views on these considerations from panelists, we provided a
copy of the draft considerations to panelists by email after the session.
We asked the panelists whether there were additional considerations that
they felt should be included, or whether there were considerations that
should not be included. To obtain additional responses, we sent a
reminder email when comments were due. We ultimately obtained
responses from eight participants. Overall, the responses from the
panelists that we heard from was positive, although some panelists
Page 59 GAO-22-105162 UI Risks and Transformation
Appendix I: Objectives, Scope, and
Methodology
suggested either changes in wording or that some of the considerations
would involve changes to the original design of the UI program.
We conducted this performance audit from April 2021 to June 2022 in
accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe that
the evidence obtained provides a reasonable basis for our findings and
conclusions based on our audit objectives.
Page 60 GAO-22-105162 UI Risks and Transformation
Appendix II: Comments from the Department
Appendix II: Comments from the Department
of Labor
of Labor
Page 61 GAO-22-105162 UI Risks and Transformation
Appendix II: Comments from the Department
of Labor
Page 62 GAO-22-105162 UI Risks and Transformation
Appendix II: Comments from the Department
of Labor
Page 63 GAO-22-105162 UI Risks and Transformation
Appendix II: Comments from the Department
of Labor
Page 64 GAO-22-105162 UI Risks and Transformation
Appendix II: Comments from the Department
of Labor
Page 65 GAO-22-105162 UI Risks and Transformation
Appendix III: Open Recommendations to the
Appendix III: Open Recommendations to the
Department of Labor
Department of Labor
As shown in table 7, GAO has made 21 recommendations to the
Department of Labor (DOL) to improve the Unemployment Insurance
system, including five new recommendations—one made in this report—
and 16 earlier recommendations that have not been fully implemented by
DOL. Of these 21 recommendations, GAO currently considers three of
these recommendations to be priority recommendations. 1
Table 7: Unemployment Insurance (UI) System Recommendations to the Department of Labor (DOL) That Are Open as of June
7, 2022
Source report and
recommendation
No. number Priority Recommendation
1. GAO-22-105162, #1 - The Secretary of Labor should develop and execute a transformation plan that meets
GAO’s high risk criteria for transformation; the plan should outline coordinated and
sustained actions to address known issues related to providing effective service and
mitigating financial risk, including ways to demonstrate improvements. Planned
actions may include addressing audit recommendations, and determining whether
legislative changes are needed, as appropriate. Planned actions may also include
achieving quantifiable results in reducing improper payment rates, including those
related to fraud; improving efficiency in claims processing and restoring pre-pandemic
payment timeliness levels; better reaching current worker populations; and enhancing
equity in benefit distribution.
2. GAO-22-104438, #1 - The Secretary of Labor should study and advise the Congress and other
policymakers on the costs, benefits, and risks of various options to systematically
support self-employed and contingent workers during periods of involuntary
unemployment outside of declared disasters, including considering options’ feasibility
and approach to fraud prevention.
3. GAO-22-104438, #2 - The Secretary of Labor should ensure the Office of Unemployment Insurance
examines and publicly reports on the extent of and potential causes of racial and
ethnic inequities in the receipt of Pandemic Unemployment Assistance benefits, as
part of the agency’s efforts to modernize UI and improve equity in the system. The
report should also address whether there is a need to examine racial, ethnic, or other
inequities in regular UI benefit receipt, based on the PUA findings.
4. GAO-22-104251, #1 - The Secretary of Labor should ensure that the Office of Unemployment Insurance
review the customer service challenges that states faced during the pandemic,
identify comprehensive information on customer service best practices, and provide
states with this information to assist them in improving service delivery.
5. GAO-22-104251, #2 - The Secretary of Labor should ensure the Office of Unemployment Insurance
assesses lessons learned from the pandemic to inform its future disaster response
efforts and support the Congress on ways to address future emergencies.
1Priority open recommendations are the GAO recommendations that warrant priority
attention from heads of key departments or agencies because their implementation could
save large amounts of money; improve congressional and executive branch decision
making on major issues; eliminate mismanagement, fraud, and abuse; or ensure that
programs comply with laws and funds are legally spent, among other benefits.
Page 66 GAO-22-105162 UI Risks and Transformation
Appendix III: Open Recommendations to the
Department of Labor
Source report and
recommendation
No. number Priority Recommendation
6. GAO-22-105051, - The Secretary of Labor should designate a dedicated entity and document its
#4 responsibilities for managing the process of assessing fraud risks to the
unemployment insurance program, consistent with leading practices as provided in
our Fraud Risk Framework. This entity should have, among other things, clearly
defined and documented responsibilities and authority for managing fraud risk
assessments and for facilitating communication among stakeholders regarding fraud-
related issues.
7. GAO-22-105051, - The Secretary of Labor should identify inherent fraud risks facing the unemployment
#5 insurance program.
8. GAO-22-105051, - The Secretary of Labor should assess the likelihood and impact of inherent fraud
#6 risks facing the unemployment insurance program.
9. GAO-22-105051, - The Secretary of Labor should determine fraud risk tolerance for the unemployment
#7 insurance program.
10. GAO-22-105051, - The Secretary of Labor should examine the suitability of existing fraud controls in the
#8 unemployment insurance program and prioritize residual fraud risks.
11. GAO-22-105051, - The Secretary of Labor should document the fraud risk profile for the unemployment
#9 insurance program.
12. GAO-21-387, #15 - The Secretary of Labor should ensure the Office of Unemployment Insurance collects
data from states on the amount of overpayments waived in the Pandemic
Unemployment Assistance program, similar to the regular unemployment insurance
program.
13. GAO-21-265, #12 - The Secretary of Labor should ensure the Office of Unemployment Insurance collects
data from states on the amount of overpayments recovered in the Pandemic
Unemployment Assistance program, similar to the regular unemployment insurance
program.
14. GAO-21-191, #8 √ The Secretary of Labor should ensure the Office of Unemployment Insurance
pursues options to report the actual number of distinct individuals claiming benefits,
such as by collecting these already available data from states, starting from January
2020 onward.
15. GAO-18-633, #1 - The Secretary of Labor should systematically collect sufficient information on state
profiling systems, possibly through DOL’s new UI state self-assessment process, to
identify states at risk of poor profiling system performance. For instance, DOL could
collect information on challenges states have experienced using and maintaining
their profiling systems, planned changes to the systems, or state processes for
assessing the systems’ performance.
16. GAO-18-633, #2 - The Secretary of Labor should develop a process to use information on state risks of
poor profiling system performance to provide technical assistance to states that need
to improve their systems. DOL may also wish to tailor its technical assistance based
on state service delivery goals and technical capacity.
17. GAO-18-633, #3 - The Secretary of Labor should update agency guidance to ensure that it clearly
informs states about the range of allowable profiling approaches.
18. GAO-18-486, #1 √ The Assistant Secretary of DOL’s Employment and Training Administration should
provide states with information about its determination that the use of state formal
warning policies is no longer permissible under federal law.
Page 67 GAO-22-105162 UI Risks and Transformation
Appendix III: Open Recommendations to the
Department of Labor
Source report and
recommendation
No. number Priority Recommendation
19. GAO-18-486, #2 - The Assistant Secretary of DOL’s Employment and Training Administration should
monitor states’ efforts to discontinue the use of formal warning policies.
20. GAO-18-486, #3 √ The Assistant Secretary of DOL’s Employment and Training Administration should
clarify information on work search verification requirements in its revised Benefit
Accuracy Measurement procedures. The revised procedures should include an
explanation of what DOL considers to be sufficient verification of claimants’ work
search activities.
21. GAO-18-486, #4 - The Assistant Secretary of DOL’s Employment and Training Administration should
monitor states’ compliance with the clarified work search verification requirements.
Source: GAO analysis. | GAO-22-105162
Page 68 GAO-22-105162 UI Risks and Transformation
Appendix IV: Stakeholder Panelists’
Appendix IV: Stakeholder Panelists’ Suggested
Options for Transforming Unemployment
Insurance
Suggested Options for Transforming
Unemployment Insurance
Stakeholders participating in our panel discussion identified specific
options for transforming Unemployment Insurance (UI) programs. These
options fell into three main categories: changes to program design to
better target UI support, improvements to UI program infrastructure, and
enhancements to program integrity. 1
Changes to Program Multiple panelists identified a variety of potential changes to better target
Design to Better Target UI UI support, including: broadening eligibility and reducing administrative
barriers; changing how benefits are calculated; standardizing certain UI
Support
requirements and operations across states; and increasing federal
funding for UI administration and certain UI benefits.
Increase Access to UI by The pre-pandemic recipiency rate was near a historic low prior to the
Broadening Eligibility and pandemic and had been declining over time. Multiple stakeholder
Reducing Administrative panelists expressed concerns that state eligibility requirements and
Barriers workers’ earning histories negatively affect recipiency rates and undercut
the mission of UI. Therefore, panelists proposed a range of
transformation options to increase the share of unemployed workers who
are eligible to receive benefits, and reduce administrative barriers to
access. Some of those options include:
• Create a new program specifically to cover workers not currently
covered by regular UI, such as independent contractors and self-
employed workers. Multiple stakeholder panelists suggested a
variety of program models, including a permanent version of
Pandemic Unemployment Assistance (PUA); a job seeker’s allowance
for workers not covered by regular UI, which would provide limited
benefits for a short period for those actively seeking work; and a
voluntary program for self-employed workers to contribute to UI and
receive limited UI benefits.
• Narrow the classification of independent contractors. Multiple
panelists also suggested that additional workers could be covered by
UI without creating new programs by addressing the possible
1We identified options for UI transformation based on our analysis of the stakeholder
panel discussions. These options for transformation are not listed in any specific rank or
order and their inclusion in this report should not be interpreted as GAO endorsing any of
them. Implementing any one transformation option or a combination of options might
require additional efforts to address program design or legal issues. We did not assess
how effective the potential transformation options may be or the extent to which legal
changes and federal financial support would be needed to implement them. Options
presented do not represent a consensus among panelists but instead represent options
presented by at least one panelist and then, in most cases, discussion by the group as a
whole.
Page 69 GAO-22-105162 UI Risks and Transformation
Appendix IV: Stakeholder Panelists’ Suggested
Options for Transforming Unemployment
Insurance
misclassification of workers as independent contractors or revising
overly broad definitions of independent contractors. At least one
panelist suggested that national action on worker classification is
needed to increase UI coverage.
• Streamline UI application and employment verification
processes, thus reducing administrative barriers to access.
Multiple panelists suggested strategies such as partnering with payroll
processors to collect employment records and allowing
unemployment agencies to access Internal Revenue Service income
data for the prior year. In addition, at least one panelist suggested that
when a worker is laid off, the employer could provide the worker with
instructions on how to apply for UI benefits, in addition to providing
information about the worker’s separation to the state UI agency.
Better Target UI Benefit Multiple stakeholder panelists expressed concern that some states’ UI
Amounts by Using a Flexible benefit amounts are too low to ensure that a significant proportion of the
Wage-Replacement Rate necessities of life can be met on a week-to-week basis while a search for
work takes place, and one panelist noted this concern particularly in
regards to lower income workers. However, some panelists also
expressed concerns that benefits may be too generous in some
circumstances, such as the fixed benefit supplement—provided in the
Federal Pandemic Unemployment Compensation (FPUC) program—
regardless of prior earnings during the pandemic.
A majority of panelists generally agreed that benefit amounts that replace
a given percentage of prior pay, and that could be adjusted based on
economic circumstances or income levels, would better meet the goals of
UI and would allow for a more targeted response during emergencies.
Multiple panelists said that during economic downturns, benefit amounts
could be increased to target a higher wage-replacement rate than during
periods of economic growth or stability, or benefits for lower-wage
workers could reflect higher wage-replacement rates. At least one
panelist noted that it could be difficult for states to adjust wage-
replacement rates using their current systems.
Increase Consistency of UI Multiple stakeholder panelists recommended a range of transformation
Support by Standardizing options to ensure that all states’ programs fulfill the purpose of UI
Requirements and Operations equitably, from making UI a fully federal program, to increasing federal
across States standards, to revising triggers for the Extended Benefits (EB) program.
Specifically:
• Federalize the UI system. Multiple panelists discussed the possibility
of federalizing the UI system, stating that a new federal program could
Page 70 GAO-22-105162 UI Risks and Transformation
Appendix IV: Stakeholder Panelists’ Suggested
Options for Transforming Unemployment
Insurance
incorporate state variations, such as using triggers based on state
data, but states would not have control over the program. However,
this option was not uniformly supported by all panelists, with one
advocating for continuing discretion at the state level.
• Tighten federal standards for state UI programs. Multiple panelists
also recommended more stringent federal standards to ensure that all
states have adequate UI programs, including minimum standards for
eligibility as well as benefit amount and duration. They suggested that
these federal standards would increase coverage and the adequacy
of benefits in states with the lowest coverage and benefit levels, and
would help address inequities in the system.
• Revise triggers for the EB program and set parameters for other
recessionary expansions to make UI expansions more automatic
and consistent across states. Multiple panelists discussed revising
triggers for the EB program so they would be activated more quickly
during economic downturns. At least one panelist also suggested that
Congress set parameters in advance for other types of recessionary
expansions, such as increases in benefit amounts. Multiple panelists
stated that a more automatic and structured response to downturns
would give states time to prepare to implement recessionary
programs and reduce the opting-out that results when expansions are
politicized.
Ensure Sufficient UI Funding Multiple stakeholder panelists stated that a lack of funding for UI has
by Increasing Federal been a historical challenge. Multiple panelists specifically addressed
Contributions toward insufficient federal funding for UI administration, and they also noted that
Administration and Certain states have faced challenges adequately funding their UI trust funds,
Benefits which typically fund most benefits for workers. To address these funding
challenges, panelists suggested the following:
• Increase federal funding for UI administration. Multiple panelists
recommended increasing funding for UI administration, including
providing more consistent funding outside of economic downturns so
that states are able to appropriately hire and train staff in preparation
for future downturns. 2 At least one panelist also recommended
2The Department of Labor’s (DOL) fiscal year 2023 budget justification noted that the
factors included in DOL’s formula for estimating state administrative funding had not been
updated in decades, and proposed updates to two of these factors. Specifically, the
budget justification stated that outdated measures of claims processing rates and staff
salary rates had resulted in state administrative funding estimates that were not reflective
of current administrative costs. According to DOL, the use of these outdated factors
consistently left states underfunded, which contributed to them not being prepared for the
surge in claims from the pandemic.
Page 71 GAO-22-105162 UI Risks and Transformation
Appendix IV: Stakeholder Panelists’ Suggested
Options for Transforming Unemployment
Insurance
increasing Department of Labor (DOL) staff to better support states in
areas such as the creation of trust fund projections.
• Provide federal funding for certain UI benefits. Multiple panelists
recommended that the federal government fully fund some
unemployment benefits, though their recommendations varied in
scope. The recommended components for federal funding were: (1)
all UI benefits during recessions, (2) all benefits under the EB
program, and (3) health benefits for workers receiving Short-Time
Compensation. 3
• Require employee contributions to UI. At least one panelist also
suggested requiring employee contributions to UI as an alternative
funding source.
Improvements to UI
Systems Infrastructure
Improving and Modernizing IT We and others have reported that states have faced challenges in
Systems modernizing their UI IT systems. Multiple stakeholder panelists identified
strategies to help improve UI systems and overcome challenges
associated with modernizing them. For example, multiple panelists
suggested that states should:
• Increase the focus on the user experience. Multiple panelists
recommended that states design UI systems to provide a user-
centered experience. Specifically, they stated that UI systems should
have features that make it easier for people to obtain benefits, such
as multiple access channels for users (e.g., web portals and call
centers); 24-hours-a-day, 7-days-a-week user access; and the ability
for users to track claim status. In addition, multiple panelists stated
that users should be consulted for feedback throughout the
modernization process and that modernization should include user
experience testing. 4 They warned that without focusing on the user
3Short-Time Compensation is a program that allows employers to avoid layoffs by
reducing employees’ work hours. Employees whose hours are reduced are able to collect
a percentage of unemployment benefits to replace a portion of their lost wages.
4User experience testing can occur as part of usability testing. Usability testing refers to
evaluating a product or service by testing it with representative users. Typically, during a
test, participants will try to complete typical tasks while observers watch, listen, and take
notes. The goal is to identify any usability problems, collect qualitative and quantitative
data, and determine the participant’s satisfaction with the product.
Page 72 GAO-22-105162 UI Risks and Transformation
Appendix IV: Stakeholder Panelists’ Suggested
Options for Transforming Unemployment
Insurance
experience throughout the modernization process, state UI systems
potentially risk failing to meet user needs.
• Ensure that staff have project and product management
expertise. Multiple panelists expressed that project management is a
key factor in the successful completion of modernization efforts. They
added that project management helps to keep vendors accountable
and modernization costs within estimated projections. At least one
panelist noted that states should also consider implementing product
management strategies. 5 Specifically, they stated that product
management enables a product manager to push back on certain
system requirements that may be counterproductive to the central
goals of modernization efforts. They also expressed that a rigid
adherence to system requirements is a key driver of complexity in UI
systems and can contribute to the failure of UI modernization efforts.
• Use incremental or modular development and implementation
practices. 6 Multiple panelists stated that modernizing in one large
effort is not ideal and carries a great degree of risk. Modernizing
systems in an incremental or modular manner can be more effective.
They expressed that states should work to transfer knowledge,
resources, and modules (i.e., segments of modernized software)
among each other. At least one panelist emphasized that the more
that states can share with each other, the better they can leverage
their investments.
• Establish well-defined modernization outcome goals. Multiple
panelists expressed that states should measure the performance of
modernized UI systems against well-defined goals, including
determining what constitutes both successful and unsuccessful
performance of UI systems. They suggested that states should first
set goals—such as policy goals, administrative goals, or equity and
access goals—and then determine what is needed to reach those
goals. They noted that modernization without establishing and
measuring against clear outcome goals may result in dollars wasted.
5Product management is the practice of identifying customer requirements, prioritizing
those requirements, and interfacing with product owners to confirm alignment between the
software components and enterprise goals.
6Incremental or modular development is where an investment may be broken down into
discrete projects, increments, or useful segments, each of which are undertaken to
develop and implement the products and capabilities that the larger investment must
deliver. Dividing investments into smaller parts helps to reduce investment risk, deliver
capabilities more rapidly, and permit easier adoption of newer and emerging technologies.
Page 73 GAO-22-105162 UI Risks and Transformation
Appendix IV: Stakeholder Panelists’ Suggested
Options for Transforming Unemployment
Insurance
Enhancements to UI Multiple stakeholder panelists recommended a range of options to
Program Integrity strengthen existing internal controls for the UI program, including the
following:
Strengthening Existing Internal • Improve communication and guidance. Multiple panelists
Controls discussed that some state workforce agencies’ or claimants struggled
to interpret DOL guidance on the CARES Act UI programs. For
example, at least one panelist said that some beneficiaries were
determined to be eligible due to administrative errors when state
workforce agency staff did not understand how to determine eligibility
properly. Another panelist stated that claimants could benefit from
additional guidance on UI program rules, including how to apply for
benefits, to help avoid improper payments.
• Maintain employer verification requirements. Multiple panelists
noted that employer verification has historically been a valuable
internal control in the regular UI program. For example, at least one
panelist said that in effect, wage verification requirements for applying
for regular UI was acting as a form of identity verification.
Identifying and Improving the In response to the increase in fraudulent and potentially fraudulent activity
Use of Resources to Address in UI, reported by the DOL OIG, multiple stakeholder panelists suggested
Fraud that DOL and states identify and improve their use of resources to
address fraud. For example:
• Improve identity verification. Multiple panelists stated that the UI
program should consider how to improve the identity verification
process and the tools used for this process. At least one panelist
suggested that states be required to follow the National Institute of
Standards and Technology (NIST) Identity Assurance Level (IAL) 2
and Authentication Assurance Level (ALL) 2 compliance standards for
identity verification to prevent criminals from easily applying for
benefits with stolen identity information.
• Obtain additional data sources for analytics. Multiple panelists
noted that obtaining access to additional data would help DOL, the
DOL OIG, and states identify fraudulent claims. For example, at least
one panelist explained that in the past, DOL OIG has had to issue
subpoenas to states to obtain claims payment data for analysis.
Similarly, at least one panelist mentioned that the DOL OIG has also
had to subpoena states for prison data, which can take months to
obtain. Another panelist stated that since the pandemic started,
financial institutions have started to collaborate with states to share
information on potential fraud based on their own data analytics
efforts, which may improve states’ fraud detection abilities.
Page 74 GAO-22-105162 UI Risks and Transformation
Appendix IV: Stakeholder Panelists’ Suggested
Options for Transforming Unemployment
Insurance
• Obtain additional information on fraud schemes. Multiple panelists
stated that it would be helpful for state workforce agencies to obtain
more information on fraud schemes, including information about what
type of data is for sale on the dark web. As discussed previously,
panelists noted that fraudsters are selling “how-to” guides that provide
detailed instructions on how to fraudulently apply for UI benefits in a
particular state and provide recommendations on how to answer
questions from the state workforce agencies. At least one panelist
suggested that obtaining this type of information would help inform a
state of its vulnerabilities. 7
• Encourage states’ use of UI Integrity Center’s Integrity Data Hub.
Multiple panelists discussed states’ varied use of fraud detection and
prevention tools and stated that increased use of these tools, such as
those offered by the Integrity Data Hub could enhance fraud
prevention and reduce improper payments. For example, at least one
panelist said that the Integrity Data Hub’s tools for states to cross-
reference claims have been used in multiple states and states are
encouraged to share their claim types through the hub. These tools
could help detect fraudsters who have fraudulently applied for benefits
in multiple states.
• Provide additional training. Multiple panelists noted that providing
training to state workforce agency staff is important in addressing
fraud. They also emphasized the importance of training staff on fraud-
related tools and technology. For example, when a state uses data
matching to identify potential instances of fraud, it will need an
adequate number of trained staff members to review the matches and
conduct additional analysis to determine if the case is an instance of
potential fraud, another type of improper payment, or is legitimate. In
addition, at least one panelist noted that regular staff should receive
more robust and regular training to better prepare for future
emergencies.
• Improve workforce planning. Multiple panelists suggested that DOL
and state workforce agencies improve workforce planning to prepare
for future staffing needs. At least one panelist proposed that it would
be helpful to have a plan for hiring staff to assist with reviewing claims
in future emergencies.
7In follow-up comments, one panelist emphasized the importance of designing antifraud
controls that address specific vulnerabilities to avoid unnecessarily impeding access to
benefits.
Page 75 GAO-22-105162 UI Risks and Transformation
Appendix IV: Stakeholder Panelists’ Suggested
Options for Transforming Unemployment
Insurance
• Provide additional resources to investigate and prosecute fraud.
Multiple panelists noted that additional federal resources would help
states investigate and prosecute UI fraud. 8 Specifically, at least one
panelist indicated that state and local governments have experienced
resource constraints, including large case backlogs and not enough
investigative staff. Further, at least one panelist stated that it would be
valuable for the federal government to assist state and local
governments with these fraud investigations. In addition, multiple
panelists noted that many international fraudsters believe that they will
not be prosecuted because UI fraud has not been a priority for
prosecutors. For example, one panelist emphasized that additional
investigative resources to track international fraudsters and a renewed
focus on prosecuting these individuals would have a deterrent effect
on future UI fraud.
8In October 2021, we reported on additional federal efforts to investigate and prosecute
fraud. See GAO-22-105051.
Page 76 GAO-22-105162 UI Risks and Transformation
Appendix V: GAO Contacts and Staff
Appendix V: GAO Contacts and Staff
Acknowledgments
Acknowledgments
Thomas Costa, (202) 512-4769, costat@gao.gov
GAO Contacts
Mary Hannah Padilla, (202) 512-5683, padillah@gao.gov
Seto J. Bagdoyan, (202) 512-4749, bagdoyans@gao.gov
Lawrance L. Evans Jr., (202) 512-4802, evansl@gao.gov
Carol C. Harris, (202) 512-4456, harriscc@gao.gov
In addition to the contacts named above, Danielle Giese (Assistant
Staff Director), Matthew Valenta (Assistant Director), Cole Haase (Analyst in
Acknowledgments Charge), Brandon Berney, Benjamin Bolitzer, Caitlin Croake, Ahmad
Ferguson, Lee Hinga, Casey Keplinger, Lauren Kirkpatrick, Michael
Kniss, Abby Marcus, Christopher Morehouse, Emma O’Shea, Nana Ama
Osei-Gyamfi, Nolan Roosa, Taya Tasse, and Anne Thomas made key
contributions to this report. Also contributing to this report were Mary
Crenshaw, Caitlin Cusati, Nagla’a El-Hodiri, Gabrielle Fagan, Alex
Galuten, Jonathan Ticehurst, and Walter Vance.
Page 77 GAO-22-105162 UI Risks and Transformation
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Funds and Leading Responses to Public Health Emergencies.
GAO-22-105291. Washington, D.C.: January 27, 2022.
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Second Year. GAO-21-387. Washington, D.C.: March 31, 2021.
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and Other Challenges Require Focused Federal Attention. GAO-21-265.
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Page 78 GAO-22-105162 UI Risks and Transformation
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(105162)
Page 80 GAO-22-105162 UI Risks and Transformation
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