[TEXT ONLY]
THAN $2.5 MILLION IN UNEMPLOYMENT INSURANCE
TAX CONTRIBUTIONS
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During calendar year (CY) 1999, we followed up with the State Employment Security Agencies to determine what effect Employment Security Manual (ESM) revisions made in response to a prior OIG audit had on states’ success in identifying hidden (or unreported) wages and collecting related tax contributions from employers through field tax audits. ETA revised the ESM in February 1999 in response to a recommendation in an OIG report entitled Improvements Are Needed in the Evaluation of Audit Quality and the Reporting of Blocked
Claim Audits (OA Report No. 03-98-008-03-315, issued September 25, 1998). Blocked claim audits are one of the more effective ways to identify hidden wages. However, the report disclosed that many states were discouraged from conducting this type of audit because it did not meet the definition of a reportable audit (output) on ETA’s 581 Contributions Operations report. ETA revised the definition, allowing states to get credit for conducting blocked claim audits beginning in CY 1999. In our follow-up,23 states reported that they had identified more than 13,000 employees who had been misclassified by their employers and had recovered more than $2.5 million of Unemployment Insurance (UI) tax contributions as a result of blocked claim audits conducted during CY1999 that would not have been conducted without the ESM
revisions. In addition, we found that 13 states plan to report blocked claim audit results in CY 2000, while another 13 states (or 25 percent) still have no plans to perform blocked claim audits.
(OA Report No. 03-00-005-03-315, issued March 10, 2000)
