Unemployment Insurance:

Opportunities to Strengthen the Tax Collection Process

HRD-89-5: Published: Jun 8, 1989. Publicly Released: Jun 8, 1989.

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GAO reviewed the Department of Labor's (DOL) guidance and oversight of state unemployment insurance (UI) programs.

GAO found that: (1) the DOL UI Quality Appraisal Program does not provide specific, meaningful state performance goals; (2) DOL plans to implement a UI Quality Control Program to ensure that state systems for collecting UI taxes from employers are effectively implemented; (3) DOL has reduced its control over state UI administrative expenses and its reporting and administrative requirements; (4) some states have active collection procedures for UI taxes, while some states have more passive systems that signal employers that UI tax nonpayment will be tolerated; (5) DOL has sponsored a number of pilot projects to improve state UI tax collection techniques, but most states are not implementing improved techniques; (6) most states were receptive to improving their collection procedures, but might be reluctant to implement improvements because any resulting administrative cost savings would accrue to the federal UI Fund, not the states responsible for the savings; and (7) DOL has relied excessively on states' Single Audit Act audits for program oversight.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOL has completed its RQC and PRP. RQC was designed to evaluate the strengths and weaknesses of each state UI tax operation. It focuses on outcomes measures and will promote information sharing on best practices to collect account receivables. While currently voluntary, RQC will become a mandatory oversight system after federal regulations are cleared and implemented. DOL's PRP provides a measure of state performance and is currently being field pretested in six states for 3 months and will be followed by a 12-month field test. It appears that DOL is complying with the spirit and intent of this recommendation. Therefore, it is suggested that action on this recommendation be considered completed.

    Recommendation: The Secretary of Labor should direct the Assistant Secretary for Employment and Training to: (1) use DOL oversight systems, when improved, as the principal means for determining whether state UI programs are being managed effectively; and (2) augment these systems with state single-audit results.

    Agency Affected: Department of Labor

  2. Status: Closed - Not Implemented

    Comments: Labor does not feel obliged to require states to use resources to identify out-of-state employers owing UI tax and will not act on this recommendation. Reliance will be placed on the encouragement of interstate cooperation and the willingness of states to devote resources to identification efforts.

    Recommendation: The Secretary of Labor should direct the Assistant Secretary for Employment and Training to establish and fund a national program for identification of out-of-state employers that are obligated to pay UI tax.

    Agency Affected: Department of Labor

  3. Status: Closed - Not Implemented

    Comments: Labor never agreed with this recommendation. It thinks its ongoing activities are meeting the objectives and intends no further action.

    Recommendation: The Secretary of Labor should direct the Assistant Secretary for Employment and Training to designate an organization in DOL to be responsible for overseeing the identification, development, and dissemination of effective UI control techniques.

    Agency Affected: Department of Labor

  4. Status: Closed - Not Implemented

    Comments: Although it has done so under previous administrations, Labor does not currently believe it appropriate to advance effective legislative procedures through the process for review and approval of state UI laws.

    Recommendation: The Secretary of Labor should direct the Assistant Secretary for Employment and Training to develop criteria and procedures to govern DOL review of state UI law amendments and use the process to promote effective collection practices.

    Agency Affected: Department of Labor

  5. Status: Closed - Implemented

    Comments: Guidance on effective tax procedures is being conveyed to states during multi-state tax conferences.

    Recommendation: The Secretary of Labor should direct the Assistant Secretary for Employment and Training to develop guidance for states to use in establishing judicial and administrative procedures for state tax collections directed to minimizing delinquency and detecting nonreporters.

    Agency Affected: Department of Labor

  6. Status: Closed - Not Implemented

    Comments: The legislative proposals discussed in the report are not being introduced.

    Recommendation: The Secretary of Labor should direct the Assistant Secretary for Employment and Training to review legislative proposals for consolidating UI tax collections at the state level to determine their effect on states' ability to maintain benefit levels and fund UI administrative costs.

    Agency Affected: Department of Labor

  7. Status: Closed - Not Implemented

    Comments: Labor believes that it is unable to reduce its 4-year schedule completion due to design complexity and need for detailed pilot testing.

    Recommendation: The Secretary of Labor should direct the Assistant Secretary for Employment and Training to expedite the development and implementation of the planned UI tax collection Quality Control Program, utilizing principles of effective state controls identified in this report.

    Agency Affected: Department of Labor

  8. Status: Closed - Implemented

    Comments: DOL has completed its Revenue Quality Control (RQC) and Performance Review Projects (PRP). RQC was designed to evaluate the strengths and weaknesses of each state UI tax operation. It focuses on outcomes measures and will promote information sharing on best practices to collect account receivables. While currently voluntary, RQC will become a mandatory oversight system after federal regulations are cleared and implemented. DOL's PRP provides a measure of state performance and is currently being field pretested in six states for 3 months and will be followed by a 12-month field test. It appears that DOL is complying with the spirit and intent of this recommendation. Therefore, it is suggested that action on this recommendation be considered completed.

    Recommendation: The Secretary of Labor should direct the Assistant Secretary for Employment and Training to replace the DOL Quality Appraisal Program goals for state UI tax collections with more meaningful performance expectations that focus on ways to maximize collections, rather than numbers of actions accomplished.

    Agency Affected: Department of Labor

  9. Status: Closed - Not Implemented

    Comments: Labor does not believe that the absence of a quality control system for revenue collection is a material weakness in its oversight controls. Instead, it has characterized its current initiatives to develop such a system as modifications to keep pace with changing times and technologies.

    Recommendation: The Secretary of Labor should include in DOL year-end Federal Managers' Financial Integrity Act reports to the President and Congress a discussion of material internal control weaknesses in the DOL Quality Appraisal and Quality Control programs.

    Agency Affected: Department of Labor

 

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