United States Government Accountability Office

GAO Testimony before the Subcommittee on 

Human Resources, Committee on Ways 

and Means, House of Representatives

UNEMPLOYMENT 

INSURANCE 

Enhancing Program 

Performance by Focusing 

on Improper Payments and 

Reemployment Services 

Statement of Sigurd R. Nilsen, Director 

Education, Workforce, and Income Security Issues 

For Release on Delivery

Expected at 10:00 a.m. EDT 

Thursday, May 4, 2006

 

GAO-06-696T 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

May 4, 2006

UNEMPLOYMENT INSURANCE 

Enhancing Program Performance by 

Focusing on Improper Payments and 

Reemployment Services 

Highlights of GAO-06-696T, a testimony 

before the Subcommittee on Human 

Resources, Committee on Ways and 

Means, House of Representatives 

Unemployment Insurance (UI) has 

been a key component in ensuring

the financial security of America’s 

workforce for over 70 years. In 

fiscal year 2004, UI covered about 

129 million wage and salary

workers and paid about $41 billion 

in benefits to nearly 9 million 

workers who lost their jobs. The 

Department of Labor (Labor) and

states have a shared responsibility

to enhance UI program 

performance by ensuring that only 

eligible individuals receive benefits 

while on the UI rolls and fostering 

reemployment. Labor’s Office of

Inspector General and others have 

found that aspects of UI may be

vulnerable to fraud and improper 

payments, and despite the size and 

scope of UI, there has been little 

national information to fully assess

states’ efforts to foster

reemployment. This testimony 

draws upon results of several GAO 

reports on (1) Labor’s efforts to 

identify, estimate, and prevent

improper benefit payments and (2) 

federal and state efforts to help 

speed UI claimants’ return to work.

We are not making new 

recommendations at this time.

Labor generally agreed with the UI

findings in our referenced reports,

but took issue with our 

recommendation that the Secretary

work with states to consider 

collecting more comprehensive

information on UI claimants’ 

services and outcomes. We

continue to believe this information 

is needed. 

Labor estimates that about $3.4 billion in UI benefits was overpaid 

nationwide in calendar year 2004, but is taking actions to help states improve 

their ability to detect and prevent overpayments. According to Labor’s 

Benefit Accuracy Measurement program, in 2004 claimants were responsible 

for a majority of the overpayments. Claimants may fail to report their work 

as required, or may use Social Security numbers that did not exist or 

belonged to other individuals to fraudulently obtain UI benefits, resulting in 

overpayments. Actions by state agencies and employers may also contribute 

to overpayments. Labor has introduced a number of initiatives to help states 

improve their ability to detect and prevent overpayments, including new 

computer matches with federal databases, a new core performance measure 

intended to provide states with added incentives for detecting and 

preventing overpayments, and additional funding for states’ overpayment 

detection efforts. Labor’s budget request for fiscal year 2007 includes 

funding to continue some of these efforts. 

In our review of states’ efforts to help UI claimants quickly return to work, 

we found that states most often made use of federal UI program 

requirements to help connect claimants with reemployment. All federally 

approved state UI programs must include able-to-work and available-forwork requirements that claimants must meet in order to receive benefits. In 

many states, these requirements also serve to link claimants to 

reemployment opportunities and services. In addition, states provide 

targeted reemployment services to particular groups of UI claimants, most 

often through federally required claimant profiling. However, despite states’ 

efforts to design systems that link UI claimants to reemployment services, 

few data are available to gauge whether or not their efforts are having the

intended result. Labor has some initiatives that may begin to shed light on 

claimant outcomes, but they fall short of providing a comprehensive 

understanding of services and outcomes for UI claimants. Labor’s fiscal year 

2007 budget request does not include funding for additional evaluations on 

federally required efforts to target reemployment services.

Responsibility for UI Overpayments (Calendar Year 2004) 

www.gao.gov/cgi-bin/getrpt?GAO-06-696T.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact Sigurd Nilsen at 

(202) 512-7215or nilsens@gao.gov. 
Mr. Chairman and Members of the Subcommittee: 

I am pleased to be here today to assist you in your deliberations on 

Unemployment Insurance (UI) program performance issues as they relate

to the Department of Labor’s (Labor) $2.7 billion fiscal year 2007 budget 

request for the UI program. My testimony will focus primarily on the 

results of our past work in UI benefit overpayment and reemployment 

services. The UI program has been a key component in ensuring the 

financial security of America’s workforce for over 70 years. The UI 

program is a federal-state partnership designed to partially replace lost 

earnings of individuals who become unemployed through no fault of their

own and, which in turn, helps to stabilize the economy in times of 

economic downturn. In fiscal year 2004, the UI program covered about 

129 million wage and salary workers and paid about $41 billion in benefits

to nearly 9 million workers who had lost their jobs. Labor and states have 

a shared responsibility to enhance UI program performance by ensuring 

that only eligible individuals receive benefits while on the UI rolls and to 

foster reemployment. However, Labor’s Office of Inspector General (OIG) 

and others have found that numerous aspects of the UI program may be 

vulnerable to fraud and to improper payments to claimants, and, despite 

the size and scope of this program, there has been little information at the

national level to fully assess states’ efforts to foster reemployment. 

Today, I will draw upon results of recent reports we have completed that

provide information on UI program performance issues. In particular, I 

will discuss in relation to Labor’s budget request (1) Labor’s efforts to 

identify, estimate, and prevent improper benefit payments, and (2) what is 

being done at the state and federal levels to help speed UI claimants’ 

return to work. To address the first question, we drew upon two of our 

recent studies. In the first study, we reviewed Labor guidance, data, and 

reports and interviewed Labor officials and groups involved in

unemployment insurance.1

 In the second study, which reviewed states’ 

efforts to estimate improper payments on state-administered federal 

programs, including UI, Food Stamps, Medicaid, and other programs, we 

primarily conducted surveys of state officials, interviewed federal and 

state officials, and reviewed performance and accountability reports and 

 1

GAO, Unemployment Insurance: Increased Focus on Program Integrity Could Reduce

Billions in Overpayments, GAO-02-697 (Washington, D.C.: July 12, 2002). 

Page 1 GAO-06-696T 
our prior reports.2

 To address the second question, we drew upon the 

results of another of our previous study, where we had conducted 

telephone interviews with UI and workforce development officials in 

50 states; sent a follow-up questionnaire to gather information on the 

strategies states use to collect data on UI claimants who receive 

reemployment services; interviewed state and local program officials 

during site visits in Georgia, Maryland, Michigan, and Washington; and 

interviewed Labor officials and other experts in the area of UI and 

reemployment services.3

In summary, Labor estimates that about $3.4 billion in UI benefits was 

overpaid nationwide in calendar year 2004, but is taking actions to help 

states improve their ability to detect and prevent overpayments. Labor 

attributes a majority of overpayments to improper actions taken by 

claimants, although states and employers can also contribute to 

overpayments. Labor has introduced a number of initiatives to help states

improve their ability to detect and prevent overpayments, including new 

computer matches with federal databases, a new core performance 

measure intended to provide states with added incentives for detecting 

and preventing overpayments, and additional funding for states’ 

overpayment detection efforts. Labor’s budget request for fiscal year 2007 

includes funding to continue some of these efforts. As annual 

overpayments reach the billions, it will be important for federal and state 

stakeholders to take the necessary action to address the overpayment 

issue. Avoiding improper payments may do more to enhance program 

performance in the long term than detecting and collecting overpayments

after they have occurred. To help UI claimants return to work quickly, 

states most often make use of federal UI program requirements to connect 

claimants with available services at various points in their claims. In 

addition, states provide targeted reemployment services to particular 

groups of UI claimants. The federal requirement of claimant profiling is 

typically the primary mechanism for targeting reemployment services to 

specific claimants. However, despite states’ efforts to design systems that 

link UI claimants to reemployment services, few data are available to 

gauge the extent to which their efforts are having the intended result. 

 2

GAO, Improper Payments: Federal and State Coordination Needed to Report National 

Improper Payment Estimates on Federal Programs, GAO-06-347 (Washington, D.C.: Apr.

14, 2006). 

3

GAO, Unemployment Insurance: Better Data Needed to Assess Reemployment Services to 

Claimants, GAO-05-413 (Washington, D.C.: June 24, 2005). 

Page 2 GAO-06-696T 
Labor’s current and planned initiatives may help fill the information gap, 

but they fall short of providing a comprehensive understanding of services 

and outcomes for UI claimants. 

The UI program was established by Title III of the Social Security Act in 

1935 and is a key component in ensuring the financial security of 

America’s workforce. The program serves two primary objectives: (1) to 

temporarily replace a portion of earnings for workers who become 

unemployed through no fault of their own and (2) to help stabilize the 

economy during recessions by providing an infusion of consumer dollars 

into the economy. UI is made up of 53 state-administered programs that 

are subject to broad federal guidelines and oversight. In fiscal year 2004, 

these programs covered about 129 million wage and salary workers and 

paid benefits totaling $41.3 billion to about 8.8 million workers. 

Background 

Federal law provides minimum guidelines for state programs and 

authorizes grants to states for program administration. States design their 

own programs, within the guidelines of federal law, and determine key 

elements of these programs, including who is eligible to receive state UI 

benefits, how much they receive, and the amount of taxes that employers 

must pay to help provide these benefits.4

 State unemployment tax 

revenues are held in trust by the federal government and are used by the 

states to pay for regular weekly UI benefits, which typically can be 

received for up to 26 weeks. 

To receive UI benefits, an unemployed worker must file a claim and satisfy 

the eligibility requirements of the state in which the worker’s wages were 

paid. Generally, states require that workers must have a minimum amount 

of wages and employment over a defined base period, typically about a 

year before becoming unemployed, and have not already exhausted the 

maximum amount of benefits or benefit weeks to which they would be 

entitled because of other recent unemployment. In addition workers must 

have become unemployed for reasons other than quitting a job or being 

fired for work-related misconduct, and be able and available to work. In 

order to demonstrate that they are able to work and available for work and 

 4

In accordance with federal law, all state UI systems are experience rated so that

employers’ contribution rates vary on the basis of their experience with unemployment. In 

practice, this typically means that an employer who lays off many workers that claim 

unemployment insurance benefits will pay more in taxes than an employer that lays off 

fewer workers.

Page 3 GAO-06-696T 
are still unemployed, claimants must submit a certification of continuing 

eligibility—by mail, telephone, or Internet, depending on the state—

throughout the benefit period. This practice is usually done weekly or 

biweekly. States may continue to monitor claimant eligibility through an 

eligibility review program, in which certain claimants are periodically 

contacted to review their eligibility for benefits, work search activities, 

and reemployment needs.

UI Performance 

Measurement 

Labor has the responsibility under Title III of the Social Security Act for 

ensuring that states operate effective and efficient UI programs. Various 

provisions of federal law require that certain UI activities be performed 

promptly and accurately. Section 303(a)(1) of the Social Security Act 

requires, as a condition of a state’s receiving UI administrative grants, 

“such methods of administration . . . as are found by the Secretary of Labor 

to be reasonably calculated to insure full payment of unemployment 

compensation when due.” Labor uses various administrative data to

provide information on the functioning of all UI program activities. Labor 

divides the measures into two categories: core measures, which entail

oversight on key performance areas representative of the UI program, and 

management information measures, which facilitate the analysis of 

performance and to assist in planning corrective activities when 

necessary. 

One of Labor’s performance measurement efforts is the Benefit Accuracy 

Measurement (BAM) program, which is designed to determine the 

accuracy of paid and denied claims in the UI program. It does this by 

reconstructing the UI claims process from samples of weekly payments 

and denied claims using data verified by trained investigators. For claims 

that were overpaid, underpaid, or improperly denied, the BAM program 

determines the cause of and the party responsible for the error, the point

in the UI claims process at which the error was detected, and actions 

taken by the agency and employers prior to the error. For erroneously paid

claims, the BAM program determines the amount of benefits the claimants 

should have received, which becomes the basis for subsequent recovery 

efforts. BAM provides two rates of improper payments. The first, the 

Annual Report Overpayment Rate, includes estimates of nearly every 

divergence from what state law and policy dictate the payment should 

have been. The second rate, the Operational Overpayment Rate, includes 

only recoverable overpayments states are most likely to detect through 

ordinary overpayment detection and recovery procedures. Operational 

overpayments are the most likely to be detected and established for 

eventual recovery and return to the UI Trust Fund. 

Page 4 GAO-06-696T 
Reemployment Services Since UI was established, there have been two major changes in the 

nation’s workforce development system that have directly affected states’

UI programs. Specifically, in November 1993, Congress enacted legislation 

amending the Social Security Act to require that each state establish a 

Worker Profiling and Reemployment Services (WPRS) system and 

implement a process typically referred to as claimant profiling. The 

claimant profiling process uses a statistical model or characteristics 

screen to identify claimants who are likely to exhaust their UI benefits 

before finding work. Claimants identified through this process are then 

referred to reemployment services while they are still early in their claim. 

For profiled claimants, participation in designated reemployment services 

becomes an additional requirement for continuing eligibility for UI 

benefits. The second major change was the enactment of the Workforce 

Investment Act of 1998, which requires states and localities to bring 

together about 17 federally funded employment and training services into

a single system—the one-stop system. State UI programs are mandatory 

partners in the one-stop system. Another mandatory partner is the federal

Employment Service, established by the Wagner-Peyser Act in 1933 to link 

job seekers with job opportunities. The Employment Service (ES) has 

historically been collocated with state UI offices to facilitate UI claimants’ 

access to federally funded labor exchanges, job search assistance, job 

referral, placement assistance, assessment, counseling, and testing. 

Labor’s 2007 Budget 

Request 

For UI, Labor’s fiscal year 2007 budget includes a request for $2.7 billion.

This amount is about $101 million higher than the fiscal year 2006 enacted 

level. This request, according to Labor’s budget overview, funds projected 

workloads and includes several UI program increases. First, Labor is 

proposing a $30 million increase in fiscal year 2007 for the amount 

available to states to conduct reemployment and eligibility reviews. Labor 

notes that the reviews—which entail in-person interviews with claimants 

at one-stop centers—can reduce overpayments as well as speed 

reemployment. Second, Labor is proposing a $10 million UI program 

increase to prevent and detect fraudulent claims due to identify theft. 

Labor proposes to use the new funding for staff to investigate and 

reconcile potential identity theft identified through data cross-matching. 

Page 5 GAO-06-696T 
Labor estimates that about $3.4 billion in UI benefits was overpaid 

nationwide in calendar year 2004, but is taking actions to help states 

improve their ability to detect and prevent overpayments. According to 

Labor’s Benefit Accuracy Measurement program, in 2004 (the most recent 

year for which we could obtain specific data) claimants were responsible 

for a majority of the overpayments. Claimants may fail to report their work

as required, or may use Social Security numbers (SSN) that did not exist 

or that belonged to other individuals to fraudulently obtain UI benefits, 

resulting in overpayments. State agencies may also contribute to 

overpayments if they fail to properly record eligibility information. In 

addition, employers may contribute to UI overpayments if they fail to

report required information to states in a timely manner. Labor has 

introduced a number of initiatives to help states improve their ability to 

detect and prevent overpayments, including new computer matches with 

federal databases, a new core performance measure intended to provide 

states with added incentives for detecting and preventing overpayments, 

and additional funding for states’ overpayment detection efforts. Labor’s 

budget request for fiscal year 2007 includes funding to continue some of 

these efforts. 

More than $3.4 Billion 

in Overpayments 

Estimated in 2004, but 

Labor is Taking Some 

Actions to Enhance 

Program Integrity 

The Majority of 

Overpayments Are 

Attributable to Claimants 

Of the $3.4 billion in overpayments identified nationwide by the BAM 

program in calendar year 2004,5

 almost $2 billion (58 percent) was 

attributable to UI claimants alone, while state agency errors and 

employers were responsible for overpayments by others (see fig. 1). With

respect to claimants, overpayments may occur because individuals work 

while receiving benefits, fail to register with employment services (as 

required in most states), fail to look for a new job, or misrepresent their 

identity. In calendar year 2004, the most common cause of overpayments 

was unreported or erroneously reported earnings and income, accounting

for almost 28 percent of overpayments in that year. The second-leading

cause of overpayments—constituting 21 percent of all overpayments—was 

payments to individuals who are not entitled to UI benefits because of the 

circumstances under which they became unemployed (separation issues). 

Other sources of overpayments were attributable to individuals who failed 

to look for work (16 percent) and individuals who did not register for 

employment services (10 percent). Federal and state officials have 

 5

Of this amount, Labor officials told us that the states could have potentially detected and 

recovered $1.8 billion, or about 53 percent of the total overpayments it estimated occurred, 

using current procedures. 

Page 6 GAO-06-696T 
reported that some types of overpayments are more difficult to detect than

others. For example, in a prior report, some officials told us that it could 

be difficult for states to accurately determine, in a cost-effective manner, if 

a claimant was actively searching for work (an eligibility requirement in 

some states).

Figure 1: Responsibility for UI Overpayments (Calendar Year 2004) 

Note: Percentages do not add to 100 percent because of rounding. 

5%

6%

6%

9%

15%

58%

Source: Labor.

Claimant and Employer

Employer

Other

Claimant and Agency

State Agency

Claimant

Other sources of overpayments include state agency errors and inaccurate 

or untimely information provided by employers. Labor’s BAM program 

shows that state agency errors, such as failing to properly record 

important eligibility information such as wages, accounted for about 15 

percent of all estimated overpayments in 2004. Employers accounted for 

about 6 percent of the total estimated overpayments in 2004. Employers 

and their agents do not always comply in a timely manner with state 

Page 7 GAO-06-696T 
requests for information needed to determine a claimant’s eligibility for 

benefits. For example, one Labor OIG audit found that $17 million in 

overpayments occurred in four states because employers did not respond 

to the states’ request for wage information. Our work suggests that 

employers may resist requests to fill out paperwork from states because 

they view the process as time-consuming and cumbersome. In addition, 

because employers are unlikely to experience an immediate increase in 

the UI taxes they pay to the state as a direct result of overpayments, they 

do not see the benefit in complying with states’ requests for wage data in a 

timely manner. 

Our prior work and work by Labor’s OIG also shows that some UI 

overpayments result from identity-related violations. For example, our 

prior work shows that in 2001, Labor identified about $1.4 million in UI 

overpayments resulting from Social Security violations. 8

 Labor 

determined these overpayments to be the result of fraud. More recently, in 

its fiscal year 2007 budget justification, Labor estimated that 

approximately $313 million in overpayments results from identity theft 

each year. Labor’s OIG has documented identity theft schemes as a major 

management challenge. For example, in its semiannual report to Congress, 

the OIG reported on a case in which individuals used more than 200 stolen 

identities to file 222 UI claims and obtain more than $693,000 in UI benefits

from February 2001 through February 2005.9

Labor is Taking Actions to 

Help States Detect and 

Prevent Overpayments 

Labor has introduced several initiatives to help states improve their ability 

to detect and prevent overpayments in the UI program. First, Labor has 

initiated a pilot using the National Directory of New Hires (NDNH) to 

further assist in identifying and preventing improper payments, including

overpayments. The NDNH is a database, maintained by the Department of 

Health and Human Services’ Office of Child Support Enforcement, that 

contains information on all newly hired employees, quarterly wage reports

for all employees, and UI claims nationwide. The NDNH enhances states’ 

ability to detect unreported work violations by UI claimants working in 

other states or for certain employers that operate in multiple states. In 

addition, the NDNH can help improve the accuracy of Labor’s error 

 8

GAO, Unemployment Insurance: Increased Focus on Program Integrity Could Reduce

Billions in Overpayments, GAO-02-697 (Washington, D.C.: July 12, 2002). 

9

Department of Labor, Office of Inspector General, Semiannual Report to the Congress, 

April 1, 2005--September 30, 2005, Vol. 54. 

Page 8 GAO-06-696T 
estimates. Information from the NDNH cross-match can be readily 

integrated into Labor’s BAM program by cross-matching the SSNs of the 

claimants against the NDNH. In fiscal year 2005, three states (Texas, Utah,

and Virginia) participated in the pilot. According to Labor, initial results of 

the pilot show that overpayment detections increased 114 percent in 

Texas, 41 percent in Utah, and 73 percent in Virginia. The Texas 

Workforce Commission also reported that using the national cross-match 

in combination with the existing statewide cross-match helped detect 50 

percent more cases of potential fraud in one quarter than it would have 

detected otherwise. In addition, on the basis of its NDNH pilot results, 

Labor reported in its fiscal year 2005 performance and accountability 

report that a substantial amount of additional overpayments could be 

detected using the database. Labor reported that it is moving ahead with 

full implementation of the NDNH cross-match with 5 states (Connecticut,

Texas, Utah, Virginia, and Washington), and expects 29 states to use the 

NDNH by the end of fiscal year 2006. 

In addition to its NDNH pilot, Labor is also pursuing the use of other data 

sources to improve UI program integrity. In particular, Labor continues to

promote states’ data sharing with other agencies, such as the Social 

Security Administration (SSA), to identify and prevent overpayments. 

According to Labor’s fiscal year 2005 performance and accountability 

report, the department has funded states to exchange data with SSA on a 

real-time basis, giving states the ability to verify claimants’ identity and 

prevent most overpayments due to fraudulent or mistaken use of SSNs. 

Labor’s fiscal year 2007 budget request includes $10 million in funding to 

detect and prevent fraudulent UI benefit claims that use personal 

information stolen from workers. Labor estimates that the requested funds 

could generate savings of at least $77 million to the UI Trust Fund by 

preventing erroneous payments caused by the use of stolen identities. 

Along with efforts to enhance states’ use of data sharing to detect and 

prevent overpayments, Labor has taken other steps to enhance UI program 

integrity, including the development of a new core performance measure 

for overpayment detection at the state level. More specifically, Labor has 

announced that states will be given an additional incentive to prevent and

detect overpayments by implementing core measures in states’ 

performance budget plans based on the level of overpayments the states 

have detected. While Labor has established overpayment detection as one 

of its core measures, it has not yet specified the level of performance that 

states will be required to meet under this measure. In addition, Labor’s 

fiscal year 2006 budget request contained a legislative proposal designed

to give states the means to obtain funding for program integrity activities, 

Page 9 GAO-06-696T 
including additional staff to enhance recoveries and prevent 

overpayments. Moreover, to reduce overpayments, Labor awarded 

Reemployment and Eligibility Assessments grants to 21 states during fiscal 

year 2005. The grants have been used to conduct in-person claimant 

interviews to assess claimants’ continued eligibility for benefits and to 

ensure that individuals understand that they must stop claiming benefits 

upon their return to work.10 Labor’s fiscal year 2007 budget request 

includes $30 million in additional funding to continue this effort. Labor 

estimates that these funds could be used to conduct an additional 539,000

interviews and could save the UI Trust Fund as much as $151 million by 

reducing the average duration of UI benefits for claimants who are 

interviewed. 

In addition to the initiatives contained in its budget request, Labor plans to

submit a legislative proposal in the near future that includes several 

initiatives to further help states detect and recover overpayments.11 Among 

other things, this proposal may include suggestions to allow the 

Department of the Treasury to garnish federal income tax refunds to 

recover UI overpayments as a means of improving overpayment 

recoveries. The proposal may also allow states to use a small percentage 

of recovered overpayments to fund their benefit payment control and 

program integrity activities as an incentive to focus their efforts on those 

activities. In addition, the proposal may seek to provide employers with a 

stronger incentive to inform the state when inappropriate UI claims are 

made. More specifically, the proposal could require states to charge 

employers a higher UI tax rate when claimants are overpaid, if it is 

determined that the overpayment was the employer’s fault (such as when 

an employer fails to provide wage information to the state in a timely 

manner). Such additional charges could lead to an increase in the UI tax 

rate for affected employers. 

 10These interviews would also promote use of reemployment services available in One-Stop

Career Centers to assist claimants to become reemployed more quickly. 

11According to Labor, this proposal will be similar to the 2005 legislative proposal (the 

Unemployment Compensation Program Integrity Act of 2005). 

Page 10 GAO-06-696T 
In our review of states’ efforts to help UI claimants quickly return to work, 

we found that states most often make use of federal UI program 

requirements to help connect claimants with reemployment services at 

various points in their claims, usually beginning at the time their initial 

claim is filed. All federally approved state UI programs must include ableto-work and available-for-work requirements that claimants must meet in 

order to receive benefits. In many states, these requirements also serve to

link claimants to reemployment opportunities and services. In addition, 

states provide targeted reemployment services to particular groups of UI 

claimants. The federal requirement of claimant profiling is typically the 

primary mechanism for targeting reemployment services to specific 

claimants. Despite states’ efforts to design systems that link UI claimants 

to reemployment services, few data are available to gauge the extent to 

which their efforts are having the intended result. Moreover, Labor’s fiscal 

year 2007 budget request does not include funding specifically designated

for conducting evaluations of federally required efforts to target 

reemployment services. 

States Make Use of 

Federal Requirements 

to Help Speed 

Reemployment of UI 

Claimants, but 

Knowing More about 

Outcomes Could 

Enhance Program 

Performance 

States Use Compliance 

with Work Requirements 

and Target Services to 

Particular Groups of 

Claimants to Help Speed 

Reemployment 

Although all UI claimants can access the range of reemployment services 

through the one-stop system at any time, UI program requirements often 

provide the context for states’ efforts to link claimants to reemployment 

services. Specifically, all federally approved state UI programs require that

claimants be able and available to work. To meet these conditions, 44 

states require that UI claimants register with the state’s labor exchange—

that is, job-matching services provided through the Wagner-Peyser-funded 

Employment Service—in order to be eligible for UI benefits. In addition, 

49 states impose a work search requirement as a condition for continuing 

UI eligibility, and claimants must document that they are meeting their 

state’s work search requirement in a number of ways. Most commonly, 

claimants are required to keep a log of work search activities that may be 

subject to review, or they must certify that they are able and available to 

work through the process of filing for a continuing claim. 

These work registration and work search requirements often serve to link

claimants to reemployment services. The process of registering for work 

with the state’s labor exchange, for example, may bring claimants into an 

Employment Service office or one-stop center where reemployment 

services are delivered. 

Some states also use their processes for monitoring compliance with the 

work search requirement to direct claimants to reemployment services. 

Officials in 39 of the 49 states that require claimants to actively seek 

Page 11 GAO-06-696T 
employment told us that telephone or in-person interviews with claimants 

may be used to monitor compliance with this requirement. In over twothirds of these states, officials told us that some information on job search 

strategies or reemployment services is provided during the interview. 

States also engage some claimants in reemployment services directly 

through programs that identify certain groups for more targeted 

assistance. States primarily target reemployment services to claimants 

identified through federally required claimant-profiling systems—a 

process that uses a statistical model or characteristics screen to identify 

claimants who are most likely to exhaust their UI benefits before finding 

work. While claimants identified and referred to services through profiling 

can access the services available to all job seekers through the one-stop 

system, participation in the services they are referred to—most often 

orientation and assessment services—is mandatory for profiled claimants. 

In addition, many officials told us that the services profiled claimants 

received depended on their individual needs following an assessment, the 

development of an individual plan, or the guidance of staff at a one-stop 

center. While failure to report to required reemployment services can 

result in benefits being denied, states vary in the conditions that prompt 

denying benefits. 

Maryland, for example, targets reemployment services to profiled 

claimants through its Early Intervention program. This program, which 

began in 1994, offers an interactive, 2-day workshop, addressing selfassessment, job search resources, resume writing and interviewing skills, 

and other community resources available to job seekers. Profiled 

claimants selected for the workshop who fail to attend are given one 

opportunity to reschedule; after that, their failure to participate is reported

to the UI program and their benefits may be suspended. When claimants

complete the workshop, they are registered with the Maryland Job 

Service, they receive an individual employment plan, and the workshop 

facilitator may refer them to additional services. Officials told us that 

although they currently do not have data to show the impact of this 

program, they have received very positive feedback about the quality and 

effectiveness of the workshops. 

Some states have developed additional methods to target reemployment 

services to particular groups of UI claimants. For example, one-stop staff 

in Washington have the ability to identify various subgroups of claimants 

using a tracking device called the Claimant Progress Tool. Officials told us

that one-stop staff typically use this tool to identify claimants who are 

about 100 days into their claim, and then contact them for targeted job

Page 12 GAO-06-696T 
search assistance and job referrals. This process was developed to help 

the state achieve a goal of reducing the portion of its UI benefits that 

unemployed workers claim. Georgia’s state-funded Claimant Assistance 

Program identifies claimants who are seen to be ready for employment 

and requires them to participate in the same services required of profiled 

claimants. This program is designed to help the state achieve its goal of 

generating savings for the UI Trust Fund. 

During fiscal years 2001 through 2005, states often made use of Labor’s 

Reemployment Services Grants—totaling $35 million per year—to fund 

some of the targeted services. Officials in the majority of the states we 

interviewed told us their states had used the Reemployment Services 

Grant funds to hire staff to provide reemployment services to UI 

claimants. For example, Maryland state officials said they used their funds 

to hire staff for the Early Intervention program, enabling them to run more 

workshops in areas that needed them and to make further improvements 

in the program. Some states also used these grants to direct reemployment 

services to claimants beyond those who have been profiled and to support 

other enhancements in the provision of reemployment services to 

claimants. For example, Washington state officials told us they used funds

from these grants to support the development of the Claimant Progress 

Tool. Beginning in fiscal year 2005, Labor began shifting its focus away 

from these grants that funded direct reemployment services for UI 

claimants toward the Reemployment and Eligibility Assessment Grants. 

These new grants focus states’ efforts on providing face-to-face eligibility 

interviews with claimants as a way to ensure compliance with work search 

requirements. As part of these interviews, eligibility workers may refer 

claimants to reemployment services funded by Employment Services, the 

Workforce Investment Act (WIA), or the Trade Adjustment Assistance 

(TAA) program. 

Little Information Exists to 

Assess whether States’ 

Efforts Are Achieving the 

Intended Outcomes 

Despite states’ efforts to design systems that link UI claimants to 

reemployment services, little is known about the extent to which 

claimants receive reemployment services or about the outcomes they 

achieve. Although states must meet a number of federal reporting 

requirements for their UI and employment and training programs, 

including reporting on the outcomes of profiled claimants, none of these 

reports provide a complete picture of the services received or the 

outcomes obtained by UI claimants. Labor only recently began to require 

that states provide information on the reemployment outcomes of UI 

claimants, and the ongoing evaluations of claimant profiling are limited. 

Page 13 GAO-06-696T 
States must track and report annually on several performance measures 

considered key indicators of UI program performance, but these measures 

largely focus on benefit and tax accuracy, quality, and timeliness. In 

addition, states must also report to Labor on their claimant-profiling 

process, but information in these reports represent only a portion of all UI

claimants the state has served, a proportion that can vary from place to 

place and from month to month depending on available resources. 

UI claimants may access other federally funded reemployment assistance 

through the Wagner-Peyser Employment Service, WIA Adult or Dislocated 

Worker programs, and, if they are laid off because of trade, the Trade 

Adjustment Assistance program. To monitor the performance of these 

programs, Labor requires states to meet a number of reporting 

requirements, but these reports are submitted on a program-by-program 

basis, and none provide a complete picture of the services received or the 

outcomes obtained by all UI claimants. 

Having data that show the degree to which reemployment services are 

reaching UI claimants is key to good program management and provides a 

first step toward understanding the impact of these programs. However, 

knowing how many claimants may be accessing reemployment services 

and the type of outcomes they may be achieving has proven difficult for 

state and local officials. We found that only 14 states go beyond the federal 

reporting requirements to routinely track the extent to which UI claimants 

receive services from the broad array of federally funded programs that 

are designed to assist them, and only 6 states routinely monitor outcomes 

for UI claimants who receive reemployment services. States most often 

told us that tracking claimant services across multiple programs was made 

difficult by the fact that reemployment services and UI claimant data were

maintained in separate data systems—systems that were either 

incompatible or difficult to link. 

Labor has some initiatives that may begin to shed light on claimant 

outcomes, but these efforts may not go far enough. Labor recently 

modified its UI performance measures to require states to track a 

reemployment rate for their UI claimants—defined as the percentage of UI

claimants who are reemployed within the quarter following their first UI 

payment. This change will help focus efforts on speeding reemployment 

and will improve the understanding of how many UI claimants are quickly 

reemployed nationwide, but it will not allow for an assessment of the 

outcomes of claimants who access reemployment services compared to 

those who do not. Furthermore, states must meet federal requirements to 

target reemployment services using the claimant-profiling process, but 

Page 14 GAO-06-696T 
little is known about the effectiveness of their efforts. Labor funded an 

evaluation of the claimant profiling system in 8 states beginning in 1996,

including an assessment of UI benefit duration, employment, and earnings. 

The current evaluation of the profiling process focuses exclusively on how 

well the models are able to predict whether a claimant will exhaust UI 

benefits, not on whether the process results in shorter benefit duration or 

better employment outcomes for claimants. Budget authority to conduct

the current evaluation expires at the end of fiscal year 2006, and no 

additional funds have been requested in the fiscal year 2007 budget 

specifically to conduct further evaluations on profiling. 

Labor is also developing a system to consolidate performance reporting 

for Labor’s Employment and Training Administration (ETA) programs. 

This system—ETA’s Management Information and Longitudinal Evaluation 

(EMILE) system—would consolidate reporting across a range of Labor 

programs including WIA, Employment Service, and TAA. Current plans do

not include incorporating UI reporting into EMILE. Last year, we 

recommended that Labor work with states to explore the feasibility of 

collecting more comprehensive information on UI claimants’ services and 

outcomes. Although Labor generally agreed with our findings, Labor 

commented that current and planned data collection efforts would provide 

sufficient information to policy makers. While Labor’s new initiatives, in 

combination with current reporting requirements, will provide valuable 

information on the reemployment activities of some UI claimants, these 

efforts will not allow for a comprehensive, nationwide understanding of 

claimants’ participation in the broad range of reemployment services 

designed to assist them. Furthermore, these efforts will not move states in 

the direction of having the data they need to better manage their systems. 

UI’s size and importance make it critical that the program is performing at 

a peak level. With annual overpayments reaching the billions, it will be 

important for federal and state stakeholders to take the necessary action

to address this issue. Labor’s current initiatives and its proposed action 

contained in the fiscal year 2007 budget request could help, but work 

remains. In the long run, program performance can be enhanced by 

avoiding improper payments rather than trying to detect and collect them. 

Labor’s initiatives to help states detect and prevent overpayments 

represent a positive step toward improving UI program integrity. In 

particular, Labor’s initiative to promote states’ use of the NDNH database

and its continued effort to encourage states’ use of SSA’s data for verifying 

the identity of claimants appear promising. However, to maximize the 

effectiveness of these initiatives, it is important for as many states as 

Concluding 

Observations 

Page 15 GAO-06-696T 
possible to participate. In addition, while Labor’s development of a new 

core performance measure on payment accuracy has the potential to 

facilitate states’ focus on detecting and preventing overpayments, it is 

premature to evaluate the effectiveness of this effort. Moreover, although 

Labor continues to fund grants for states to conduct in-person 

reemployment and eligibility assessments, more time is needed to fully 

assess how effective these initiatives will ultimately be. Finally, while 

Labor’s June 2005 legislative proposal to charge employers for UI 

payments to ineligible individuals could result in UI tax rate increases for 

those employers, such a change merits further consideration. 

To help claimants get the reemployment services they need, states have 

often designed their processes to make use of federal UI program 

requirements in linking claimants with services. However, knowing 

whether their efforts are actually resulting in better employment outcomes 

and reduced UI benefit payments has proven difficult for federal, state, 

and local officials. Findings from evaluations are limited, and most states 

lack much of this information, arguably critical for good program 

management—often because data reside in separate systems that cannot 

be easily linked. In the new environment created under the Workforce 

Investment Act, where claimants may be served by a range of programs 

that go beyond UI and ES, it becomes increasingly important to find new 

ways to link program data across a broader range of programs. Doing so is 

an essential step in understanding what’s working and what’s not. Labor’s

current and planned initiatives may help fill the information gap, but they 

fall short of providing a comprehensive understanding of services and 

outcomes for UI claimants. 

Mr. Chairman, this completes my prepared statement. I would be happy to

respond to any questions you or other members of the subcommittee may 

have at this time. 

For information regarding this testimony, please contact Sigurd R. Nilsen, 

Director, Education, Workforce, and Income Security Issues, at (202) 512-

7215. Individuals who made key contributions to this testimony include

Dianne Blank, Jeremy Cox, Brett Fallavollita, Michael Hartnett, Margaret 

A. Holmes, and Carla Lewis. 

GAO Contacts and 

Staff 

Acknowledgments 

Page 16 GAO-06-696T 
Page 17 GAO-06-696T 

Related GAO Products 

Improper Payments: Federal and State Coordination Needed to Report 

National Improper Payment Estimates on Federal Programs. GAO-06-

347. Washington, D.C.: April 14, 2006.

Financial Management: Challenges Continue in Meeting Requirements

of the Improper Payments Information Act. GAO-06-581T. Washington, 

D.C.: April 5, 2006. 

Unemployment Insurance: Factors Associated with Benefit Receipt. 

GAO-06-341. Washington, D.C.: March 7, 2006. 

Trade Adjustment Assistance: Most Workers in Five Layoffs Received 

Services, but Better Outreach Needed on New Benefits. GAO-06-43. 

Washington, D.C.: January 31, 2006. 

Workforce Investment Act: Labor and States Have Taken Actions to 

Improve Data Quality, but Additional Steps Are Needed. GAO-06-82. 

Washington, D.C.: November 14, 2005. 

Unemployment Insurance: Better Data Needed to Assess Reemployment 

Services to Claimants. GAO-05-413. Washington, D.C.: June 24, 2005. 

Unemployment Insurance: Information on Benefit Receipt. GAO-05-291. 

Washington, D.C.: March 17, 2005. 

Trade Adjustment Assistance: Reforms Have Accelerated Training 

Enrollment, but Implementation Challenges Remain. GAO-04-1012. 

Washington, D.C.: September 22, 2004. 

Workforce Investment Act: States and Local Areas Have Developed 

Strategies to Assess Performance, but Labor Could Do More to Help.

GAO-04-657. Washington, D.C.: June 1, 2004. 

Financial Management: Fiscal Year 2003 Performance and 

Accountability Reports Provide Limited Information on 

Governmentwide Improper Payments. GAO-04-631T. Washington, D.C.: 

April 15, 2004. 

Workforce Training: Almost Half of States Fund Employment Placement 

and Training through Employer Taxes and Most Coordinate with 

Federally Funded Programs. GAO-04-282. Washington, D.C.: February 13,

2004. 
Workforce Investment Act: One-Stop Centers Implemented Strategies to 

Strengthen Services and Partnerships, but More Research and 

Information Sharing Is Needed. GAO-03-725. Washington D.C.: June 18, 

2003. 

Multiple Employment and Training Programs: Funding and 

Performance Measures for Major Programs. GAO-03-589. Washington, 

D.C.: April 18, 2003. 

Unemployment Insurance: Increased Focus on Program Integrity Could

Reduce Billions in Overpayments, GAO-02-697 Washington, D.C.: July 12, 

2002. 

Unemployment Insurance: Role as Safety Net for Low-Wage Workers Is 

Limited. GAO-01-181. Washington, D.C.: December 29, 2000. 

Page 18 GAO-06-696T (130576) 
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