Unemployment Insurance: Opportunities to Strengthen the Tax Collection Process

Highlights

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

Recommendations

Recommendations for Executive Action

Agency Affected	Recommendation	Status
Department of Labor	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.	Closed – Implemented 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.
Department of Labor	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.	Closed – Not Implemented Labor believes that it is unable to reduce its 4-year schedule completion due to design complexity and need for detailed pilot testing.
Department of Labor	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.	Closed – Not Implemented The legislative proposals discussed in the report are not being introduced.
Department of Labor	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.	Closed – Implemented Guidance on effective tax procedures is being conveyed to states during multi-state tax conferences.
Department of Labor	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.	Closed – Not Implemented 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.
Department of Labor	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.	Closed – Not Implemented Labor never agreed with this recommendation. It thinks its ongoing activities are meeting the objectives and intends no further action.
Department of Labor	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.	Closed – Not Implemented 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.
Department of Labor	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.	Closed – Implemented 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.
Department of Labor	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.	Closed – Not Implemented 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.

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Topics

Employment

Auditing standardsCollection proceduresFinancial management systemsInternal controlsQuality controlState-administered programsTax administrationTax nonpaymentTrust fundsUnemployment compensation programs