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This report reflects the findings of the Office of Inspector General at the time that the audit report was issued. More current information may be available as a result of the resolution of this audit by the Department of Labor program agency and the auditee. For further information concerning the resolution of this report's findings, please contact the program agency.
Report Number: 05-99-005-03-315
Issue Date: March 18, 1999
Our audit of the UI benefit/wage record cross-match process in seven states showed there are inherent weaknesses in using the cross match as an overpayment detection method. The cross-match process compares claimants' weekly UI benefit payments to employers' wage payments reported quarterly to the states. When this cross match identifies claimants with both UI benefits and wages for the same quarterly period, a universe of potential UI overpayment cases is developed. Employers are then asked for detailed wage information to confirm whether an overpayment has occurred.
One of the weaknesses we found was the failure of employers (including large national corporations and service providers) to respond to the states' requests for detailed wage information. As a consequence, millions of dollars in UI overpayments are going undetected.
We found that six of the seven states that we audited had a 25 percent or higher non-response rate to the states' request for detailed wage information. An estimated $17 million of overpayments was not detected in four of the seven states we audited because employers did not return detailed wage information. Employers and their service providers often did not return wage information because they did not understand the purpose of the wage request, nor who should respond.
Our audit also showed that a potentially more effective overpayment detection and prevention tool may be available through use of reports required by the recently enacted Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (PRWORA). This new law requires employers to report new hires within 20 days after their hiring date. This information will help states in their efforts to identify individuals who are working and also receiving UI benefits.
To improve overpayment detection and to help states carry out effective new-hire detection programs, we recommended ETA provide direction to the states with respect to:
(1) Reminding employers and their service providers of their responsibility to respond to wage requests;UIS was in general agreement with the findings and recommendations and stated that the problems we cited appear to be widespread. UIS also agreed with our recommendations and assessments of the potential benefits of the New Hire Reporting System. UIS further acknowledged the need to improve the administration of the wage/benefit cross-match process through obtaining a higher response rate from employers. However, UIS said nothing about initiating a corrective action plan. It stated that it will distribute copies of the final report to the states and urge them to take appropriate action. Since the states cannot correct these issues alone, we believe much more is needed. UIS must provide the leadership, coordination of resources, and regulatory assistance required to make the necessary improvements in the system.(2) Tracking and contacting employers that routinely fail to respond, and focus follow-up efforts on those claims with the highest potential for overpayment;
(3) Refining cross-match operations, analyzing their followup results, and considering imposing penalties on employers that do not respond to wage requests; and
(4) Obtaining timely access to the State and National Directories of New Hires, ensuring that this data is used in their UI Benefit Payment Control operations.
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