Unemployment Insurance: Enhancing Program Performance by Focusing on Improper Payments and Reemployment Services
Published: 2006-05-04T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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.
section_title: What GAO Found
paragraphs: 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-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, 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.

section_title: Letter
paragraphs: 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. 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  our prior reports. 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.
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.
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.
subsections: section_title: Background
paragraphs: 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.
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. 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  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.
subsections: section_title: UI Performance Measurement
paragraphs: 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.
section_title: Reemployment Services
paragraphs: 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.
section_title: Labor’s 2007 Budget Request
paragraphs: 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.
section_title: More than $3.4 Billion in Overpayments Estimated in 2004, but Labor is Taking Some Actions to Enhance Program Integrity
paragraphs: 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.
subsections: section_title: The Majority of Overpayments Are Attributable to Claimants
paragraphs: Of the $3.4 billion in overpayments identified nationwide by the BAM  program in calendar year 2004, 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  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).
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  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.  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.
section_title: Labor is Taking Actions to Help States Detect and Prevent Overpayments
paragraphs: 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  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,  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. 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. 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.
section_title: States Make Use of Federal Requirements to Help Speed Reemployment of UI Claimants, but Knowing More about Outcomes Could Enhance Program Performance
paragraphs: 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 able- to-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.
subsections: section_title: States Use Compliance with Work Requirements and Target Services to Particular Groups of Claimants to Help Speed Reemployment
paragraphs: 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  employment told us that telephone or in-person interviews with claimants  may be used to monitor compliance with this requirement. In over two- thirds 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 self- assessment, 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  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.
section_title: Little Information Exists to Assess whether States’ Efforts Are Achieving the Intended Outcomes
paragraphs: 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.
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  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.
section_title: Concluding Observations
paragraphs: 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  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.
section_title: GAO Contacts and Staff Acknowledgments
paragraphs: 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.
section_title: Related GAO Products
paragraphs: 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.
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