Legacy tech hindered delivery of unemployment benefits during the pandemic, IG finds

The implementation of key unemployment insurance programs created at the start of the COVID-19 pandemic was hampered by antiquated IT, staffing shortages and unclear guidance to states from the Department of Labor, which "struggled" along with states to stand up and oversee these programs, according to an audit from the agency's Office of the Inspector General released Wednesday.

It took some states weeks to start new programs and get payments out. Many didn't follow required for preventing overpayments, and there were also issues with incomplete and inaccurate data reporting, the report says.

The report states that the delays caused "financial hardships" to beneficiaries and auditors estimated that in addition, at least $39.2 billion in improper payments were at risk of not being detected and recovered as of Jan. 2, 2021.

The audit zeroed in on 12 "high-risk" states, but also incorporated survey responses from the rest of the states. It focused specifically on three programs created by the Coronavirus Aid, Relief and Economic Security (CARES) Act, which created new programs that provided additional compensation once benefits were exhausted, covered self-employed workers and contractors and added a $600 supplement to payments.

Antiquated IT was a primary contributor to problems with the rollout, the audit report states.

States with modernized systems were able to stand up new programs "significantly faster," and the IG's analysis found a "clear correlation" between modernization status and the amount of time it took for first payments to go out.

On average, it took states 50 days to issue a payment to a claimant under the pandemic emergency unemployment compensation program. The IG noted that that's longer than a typical 30-day billing cycle, and an "unreasonable length of time for UI claimants experiencing financial hardships as they struggled to pay bills and satisfy basic needs, such as food and housing."

It is also longer than recommended guidance for regular UI payments from the Employment and Training Administration, the office within DOL that deals with UI, which calls for states to pay 87% of claimants within seven or 14 days.

Obsolete IT also directly impacted states' ability to follow DOL guidance for detecting improper payments, like cross-matching claims with a national registry of new hires, and recovering them.

The agency concurred with the recommendations, some of which they are already implementing.

The American Rescue Plan Act designated $2 billion for UI. DOL is using some of it to work with the United States Digital Service and states to create a customer experience blueprint to inform future IT upgrades, according to the agency's response.

The agency is also working with states on piloting modular modernized IT elements like front-end claims taking and ID verification with American Rescue Plan Act money.

Sen. Ron Wyden (D-Ore.) is a co-sponsor of a bill meant to overhaul UI tech with modular tech from the federal government. He and other Democrats have encouraged DOL to use their bill as a guide to spending the American Rescue Plan funds.

"If we don't do this now, we will see the same problems during the next recession, with unacceptable levels of fraud, and jobless workers waiting months and spending hours and hours on the phone to get the benefits they have earned," Wyden said.