Policy Documents

Increased Focus on Program Integrity Could Reduce Billions in Overpayments

United States General Accounting Office –
June 12, 2002

The Department of Labor’s Unemployment Insurance (UI) Program paid about $30 billion in benefits in calendar year 2001 to workers who lost their jobs. The UI program is a federal-state partnership designed to partially replace the lost earnings of individuals who become unemployed through no fault of their own and to stabilize the economy in times of economic recession. Each state taxes employers to finance a UI trust fund that can be drawn upon in economic downturns.  The health of each state’s trust fund depends, in part, on the amount of taxes collected from employers; current economic conditions, such as the level of unemployment; and the ability of the state to control its benefit payments by accurately determining individuals’ eligibility for UI benefits in a timely manner. Inaccurate or untimely eligibility information may contribute to overpayments and fraud and place unnecessary burdens on a state’s trust fund. Overpayments include payments that should not have been made or were made for incorrect amounts. 

In recent years, reports from Labor’s Office of Inspector General (OIG) and others have identified numerous aspects of the UI program that may be vulnerable to overpayments and fraud. In light of the dramatic increase in the number of unemployed workers filing for UI benefits in the past year and the program’s potential exposure to fraud and overpayments, you asked us to determine (1) the extent and type of overpayments in the UI program, including those that may be attributable to fraud or abuse; and (2) the factors that contribute to overpayments in the UI program, as well as actions taken by Labor to ensure program integrity. 

To address these issues, we reviewed internal Labor guidance and documentation, performance plans and reports, as well as performance data relevant to Labor’s oversight of the UI program. We also reviewed overpayment data from Labor’s Benefit Accuracy Measurement (BAM) and Benefit Payment Control (BPC) systems. In addition, we conducted in depth interviews with more than 100 management and line staff in Labor’s headquarters and 6 regional offices, as well as UI officials in 6 states— California, Colorado, Illinois, Maryland, Massachusetts, and New York. We selected these states based on numerous criteria, including performance data from the Department of Labor, size of their workforce, availability of overpayment detection and recovery tools, and geographic location. Finally, we spoke with other groups that are involved in unemployment insurance, such as employer representatives and the National Association of State Workforce Agencies. We performed our work between September 2001 and May 2002 in accordance with generally accepted government auditing standards.