Unemployment Insurance: DOL Needs to Further Help States Overcome IT Modernization Challenges
Fast Facts
The Department of Labor oversees unemployment insurance—distributing funds to states, who then provide these funds to eligible people within their state.
During the COVID-19 pandemic, some states had trouble processing unemployment insurance claims due to issues with their IT systems—some of which are about 50 years old. DOL is helping states modernize these systems by, for example, sending experts to evaluate them and recommend improvements.
DOL could improve its oversight by setting IT modernization standards for states and then measuring the states' progress against those standards. Our recommendations address this issue.
Highlights
What GAO Found
The eight states in GAO's study were in varying phases of modernizing their unemployment insurance (UI) IT systems, ranging from planning to operations and maintenance. As of February 2023, six of the eight states had modernization efforts underway, but not yet completed. According to officials from the six states, these efforts were expected to replace legacy UI systems that ranged from 7 to about 50 years old. The remaining two states completed modernization efforts in 2018 and 2021 and were in the operations and maintenance phase. To support their modernization efforts, the eight states rely extensively on contractors for system development and implementation, technical support, and identity verification.
The selected states reported several modernization successes. For example, states reported improved system stability after migrating systems to cloud computing solutions and a reduction in paper-based UI processes. However, states also identified modernization challenges in five areas: staffing, contracting, management, financial, and technical (see figure).
Eight States' Unemployment Insurance IT System Modernization Challenge Areas
Regarding staffing, most states reported not having enough staff resources and not having staff with the necessary expertise to support their modernization efforts. To help states address modernization challenges, the Department of Labor (DOL) initiated several efforts, such as sending teams of experts to states and conducting pilot tests of UI technology solutions for states.
DOL has gaps in managing its efforts to assist states' with UI IT modernization and its oversight of states' UI IT performance. Although DOL fully implemented key contract management activities on its first pilot, the department did not fully implement leading pilot design practices such as developing a data analysis plan and ensuring stakeholder communication. Without fully implementing leading pilot design practices, DOL likely cannot ensure its future pilots produce information needed to make effective program and policy decisions. Regarding oversight, although DOL is responsible for overseeing the UI program to ensure that the states are operating the program effectively and efficiently, it has not measured states' UI IT performance. Until DOL finalizes IT standards and measures state UI IT performance, the department will be limited in its ability to monitor whether states' UI systems are performing efficiently and effectively.
Why GAO Did This Study
In the wake of the COVID-19 pandemic, the nation experienced historic levels of job loss. According to DOL data, approximately $878 billion in benefits were paid across all UI programs from April 2020 to September 2022. However, state UI programs with legacy IT systems faced performance issues in processing the unprecedented number of UI claims. Due to this challenge and others, GAO added the overarching UI system to its High-Risk List in June 2022.
GAO was asked to review UI IT modernization issues. The specific objectives were to (1) provide the status of modernization efforts for selected states, including the role of contracting; (2) identify notable modernization successes and challenges; and (3) evaluate DOL's management activities in assisting states and overseeing their efforts.
To do so, GAO analyzed documentation and interviewed state officials from a nongeneralizable sample of eight states (selected based on varying location and population size, among other criteria). GAO also reviewed relevant DOL policies and guidance documents and compared them to key management and oversight activities. In addition, GAO interviewed department officials.
Recommendations
GAO is making three recommendations to DOL to address pilot design weaknesses, establish standards for states' UI IT performance, and then measure such performance. DOL agreed with one recommendation and partially agreed with two. GAO continues to believe all recommendations are warranted.
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Labor | 1. The Secretary of the Department of Labor should direct the Office of Unemployment Insurance Modernization and the Office of the Chief Information Officer to update their processes for UI pilots to reflect leading practices for pilot design, and implement the leading pilot design practices that address the weaknesses that we identified on its future pilots. (Recommendation 1) |
In its comments on our draft report, DOL partially concurred with our recommendation. In October 2023, DOL described pilots that the department was currently engaged in and its design approach for the pilots. In order to close this recommendation, DOL will need to provide documentation that demonstrates the department has updated its processes for the pilots to reflect leading practices, and that it has implemented leading practices to address the weaknesses we identified.
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| Department of Labor | 2. The Secretary of the Department of Labor should direct the Office of Unemployment Insurance to define UI IT modernization standards for states. (Recommendation 2) |
In its comments on our draft report, DOL partially concurred with our recommendation. In October 2023, DOL outlined steps it would take to address the recommendation, including establishing IT standards and notifying states. As of February 2024, DOL had not provided documentation that it had completed these steps. We will continue to be in contact with DOL to gain additional information on the actions the department is taking and their progress toward completion.
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| Department of Labor | 3. The Secretary of the Department of Labor should direct the Office of Unemployment Insurance to measure states' UI IT performance against established standards. (Recommendation 3) |
In its comments on our draft report, DOL concurred with our recommendation. As of February 2024, DOL had not yet established IT standards needed to measure states' UI IT performance. We will continue to be in contact with DOL to gain additional information on the actions the department is taking and their progress toward completion.
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