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Unemployment Insurance: State Use of Warnings Related to Work Search Requirements Affects DOL's Improper Payment Estimates

GAO-18-133R Published: Nov 21, 2017. Publicly Released: Dec 21, 2017.
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What GAO Found

Department of Labor (DOL) data show that some states have formal warning policies that allow Unemployment Insurance (UI) claimants to receive benefits after the first discovered occurrence of their failing to meet work search requirements while most states do not have such policies. As a result, states are inconsistent in whether they report such benefit payments as overpayments, which has an impact on DOL's reported improper payment rate for the UI program. According to DOL officials, 18 states and the District of Columbia have formal warning policies and, therefore, have not counted as overpayments cases in which claimants who failed to search for work in one week were provided benefits.

In contrast, DOL officials noted that 34 states do not have formal warning policies. Accordingly, all cases in which those states find that a claimant was provided benefits despite not having met work search requirements are counted as overpayments and are factored into DOL's reported improper payment rate. Analysis of DOL data shows that if formal warning cases had been included in DOL's calculation of the overpayment rates for fiscal year 2016, the nationwide overpayment rate would have increased by about 5 percentage points, from an estimated 11.1 percent to an estimated 16.3 percent.

The variation among states related to formal warning policies makes it difficult for DOL and others to understand the reasons behind states' reported overpayments associated with work search requirements. Federal internal control standards state that management should communicate quality information externally through reporting lines so that external parties can help the entity achieve its objectives and address related risks. More consistent reporting could help DOL fully understand improper payments associated with work search requirements and work with states to address the issue.

DOL is in the process of preparing guidance to states on the use of formal warning policies, according to DOL officials. Guidance is an important tool that agencies use to clarify federal requirements and communicate information about the implementation of programs to grantees. In preparing guidance for states, DOL has an opportunity to determine and communicate how state policies on work search requirements and their related overpayment reporting should align with federal requirements and reporting expectations. Some states may need to take action after the guidance is issued. Providing specific information on any actions required and, if actions are required, setting timeframes for completion and monitoring states' responses to the guidance could help ensure that DOL achieves its desired results. 

Why GAO Did This Study

The UI program provides temporary income support to eligible workers who become unemployed through no fault of their own. Individuals who claim unemployment are generally required to actively search for work as a condition of receiving benefits. However, the specific work search requirements vary by state, according to DOL. Overseen by DOL, and administered by states, the UI program paid $32 billion to 6.2 million individuals in fiscal year 2016. That same year, the program had the seventh-highest reported improper payment estimate among all federal programs. Currently, the leading reported cause of UI improper payments is overpayments to claimants who failed to meet work search requirements.

This report describes (1) differences in state policies regarding claimants who fail to satisfy the work search requirement and implications for DOL's improper payment estimates, and (2) DOL's plans to address formal warning policies that some states have implemented. For this report, GAO reviewed DOL's payment accuracy data, interviewed DOL officials, and reviewed DOL documentation, relevant federal laws, regulations, and guidance.



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Eligibility criteriaEligibility determinationsErroneous paymentsFederal regulationsInternal controlsOverpaymentsProgram abusesUnemployment compensation programsUnemployment insuranceImproper paymentsBenefit payments