Findings of the unemployment audit

Yesterday, December 16th, the Legislative Audit Bureau released its report on unemployment claims handling in Wisconsin.

The report is divided into three parts: telephone claims handling, processing of appeal decisions, and benefit over-payments. The most notable finding concerns telephone claims handling.

Telephone problems

The report shows that from late-November 2013 through mid-January 2014 that more than 70% and 80% of all calls to the Department’s initial claims phone line were blocked (see p.18 of the report). Furthermore, 50% to almost 90% of all calls to the inquiry phone line were blocked from July 2013 through mid-January 2014 (see p.19 of the report). That is a staggering collapse of the Department’s phone system.

At the January 2014 meeting of the Advisory Council, the Department explained this phone problem as a seasonal blip that was slightly more than expected because folks preferred the telephone to the on-line system:

Ms. Knutson asked the Council if there was any other business the Council would like to address. Mr. Gustafson referenced a recent story that aired in the Green Bay area related to the Unemployment Insurance claim telephone line experiencing back-ups. He asked how the department is handling this issue. Division Administrator Robert Rodriguez stated that currently the department is experiencing its typical peak season but due to a multitude of things this season has been more difficult. Mr. Rodriguez stated that the department received 220,000 calls last week. Mr. Rodriguez explained that the department cannot dictate how claimants use the system although online is recommended. It is, of course, the claimant’s choice but the department would like everyone who is able to use the online filing portal to use it, but understands that some people have limitations.

Mr. Gustafson stated there was not any real issue causing the increase in telephone calls such as something similar to the most recent recession, and he was worried that the story was misleading and painted the department in a bad light and it implied a much larger problem. Mr. Rodriguez stated that the department is scaled well for 46 or 47 weeks to meet demand but we have responded to the most recent influx by adding staff, which the department typically does during the seasonal peak, and has authorized additional overtime. Mr. Gustafson stated that the story did not ask the question how the department was reacting to the issue. Mr. Rodriguez stated that an individual having to call the department 20-40 times is not acceptable but reiterated that current numbers show that the issue is going away. Ms. Feistel asked if there were issues with the online claim filing system. Ms. Knutson recognized and asked Mr. Lutfi Shahrani, the department’s Benefits Director, to address the Council on this issue.

Mr. Shahrani stated that this is not a new issue. Wisconsin typically takes 8,000 calls in early November and that number increases towards the end of November and for the month of December but then begins to taper off in January. Mr. Shahrani stated that the difficulty is not on the side of those filing for benefits, but for those who are placing inquiry calls. A multitude of factors, such as the expiration of the federal EUC program, the reduction in capacity due to how the holidays fell this year, and the additional individuals who were unable to work due to the deep freeze all are contributing to the increase in inquiry calls. Mr. Shahrani brought up the 220,000 figure stating that we do not have 220,000 claimants currently receiving benefits. He explained how callers who repeatedly hit redial clog the system. He reiterated the department has reacted to the issue by hiring additional staff, extending work hours by allowing more overtime, by not allowing vacation during the holidays and by rededicating staff during the peak time. Mr. Shahrani also stated that just yesterday the IVR system which handles incoming calls was only at 60 to 70% capacity. Mr. Gustafson again reiterated that he felt the department was unfairly characterized within the news story.

As the audit report indicates, news reports at the time actually understated how extensive the phone meltdown was, and the Department’s explanation to the council about this problem was inadequate (for instance, the number of calls being blocked was hardly typical from prior years).

The report offers no explanation for why there was a sudden increase in phone calls. At the council meeting, the Department offered the explanation that the increase in calls arose because of the expiration of Extended Unemployment Compensation (“EUC”) benefits, a reduction in capacity because of the holidays (while the audit report claims that 20 LTE staff were added in October 2013 there is no explanation about the tasks to which those LTE staff were assigned), and historically bad weather that led to an increase in temporary layoffs. In his letter attached to the report, Secretary Newson points to the following cause for the meltdown: “During the winter of 2013-2014, uncertainty about the federal Emergency Unemployment Compensation program triggered a further spike in call volume.”

That explanation makes the most sense. As the audit report shows, unemployment has been steadily declining the past three years. The number of claims filed in the 2013-14 fiscal year was 520,100 — 272,200 less than the number of claims filed in the previous fiscal year. If there was a sudden spike in claims during last winter, the data is available on a weekly basis to show whether such a spike actually occurred. Since there is no data in the report about a winter increase in claims, the available conclusion is that a sudden spike in claims was not the reason for the sudden spike in phone calls.

So, the explanation for the increase in calls turns on folks wanting to know about EUC benefits that were slated to expire in December 2014 if Congress did nothing about the issue. As noted previously in this blog, the expiration of EUC benefits was a bigger issue in Wisconsin then in other states:

In Wisconsin, 23,700 individuals are slated to lose their EUC benefits at the end of December according to this House report. That’s about one out of every 242 residents having their income slashed just before the New Year.

Further, because EUC benefits affected everyone in the unemployment program, the number of folks in Wisconsin wanting to know what would happen to those benefits was obviously more than 24,000. Unfortunately, until December 13th (when the Department finally posted information on EUC benefits on its website), the only way for folks to find any information relating to EUC benefits was to call the Department. Even after information was posted to its website, the terse language in that post (if folks could even find this post) probably left many questions about EUC benefits unanswered, such as should they still file weekly claims in case the program was renewed and how would EUC benefits start up again if Congress acted?

Certainly, there might not be easy answers to these kinds of questions. But, folks facing the loss of all income will have these kinds of questions and more. As a result, the Department’s web response did little to quell the phone calls coming in. Not until it was clear that Congress would do nothing about EUC benefits in mid-January 2014 did the number of calls begin to decline.

And, this web response does not portend well when unemployment questions arise in the future. The audit report touts as one solution in the future an October 2014 upgrade to Department computer systems that provides claimants with basic information about their claims. There are three problems with those proposed solution. First, it is only available to those who can use the Department’s on-line system.  Second, there is no evidence that the Department is doing anything to encourage and educate folks about on-line access.  The Department does not use LinkedIn, FaceBook, or Twitter to provide unemployment information or on-line access at any level. Third, the current on-line information does not include an easy way to add new information and issues that might be relevant next year or the year after that by incorporating information from sources outside of the Department or providing easy access to the Department’s specific claimant records. In other words, this improved on-line experience is hardly a solution at all.

Appeals processing

The audit report shows that the handling of appeals has improved even though the staff (aka administrative law judges) handling those appeals has declined (from 33 in 2011 to just over 25 in July 2014). Decisions are now generally being issued within the time lines established by federal authorities. Comparisons in the report with other states, see pp.26-7, however, are misleading because those states may have different notice requirements than in Wisconsin. Wisconsin, for example, only requires six days hearing notice. Other states typically require more than six days hearing notice. Cf. 430 CMR § 4.11 (ten days hearing notice in Massachusetts), “Preparing For Your Appeal Hearing” at 3 (ten days hearing notice in Illinois), “A Guide To Unemployment Insurance Appeals Hearing” at 7-8 (in Michigan, ten days notice for unemployment hearings, 20 days notice for cases involving fraud allegations), and Minn. R. 3310.2905(2) (ten calendar days hearing notice in Minnesota).

What is most interesting is the breakdown of appeal issues presented in the audit report. Of 68,900 appeals filed in the past three fiscal years:

  • 19,400 concerned discharges
  • 8,900 concerned quits
  • 4,400 concerned able and available issues, and
  • 36,200 (more than half) concerned 32 other reasons

See pp.23-4 of the report. In Massachusetts, where I was an administrative law judge for unemployment cases in early 2000s, 80-90% of all cases being appealed concerned quit or discharge issues. Even with the complications created by EUC benefits, I suspect that this percentage of cases concerning quit or discharge issues still hovers around 70% and that this percentage similarly applies to other states. In Wisconsin, however, quit and discharge cases make up only 41% of the cases being appealed. That shift in caseload is remarkable and deserves further examination.

Over-payments

The audit report notes that over-payments occur generally because of unintentional mistakes but that most of the over-payment amount at issue is from what the Department has characterized as intentional fault. This last finding has caught the attention of a few politicians.

The report does not indicate, however, that the Department is often finding intentional concealment on facts that only show a mistake. For the past year, the Labor and Industry Review Commission (“LIRC” or “Commission”) has been publishing on its website on a monthly basis it seems decisions overturning concealment determinations. See, e.g., the discussions here, here, here, and here. Given that the Commission only receives about 12% of all appeal tribunal decisions, which in turn are less than half of all determinations issued, there are most likely many, many concealment determination that should be overturned but never are because no appeal is filed in time in those cases.

The report also does not indicate that there are steps the Department could take to reduce the over-payment amounts at issue. Most over-payments occur because claimants and employer report differing amounts of wages earned in a given week (most claimants are not in the habit or tracking their hours in the same manner and detail that employers do and so often their reports do not match their employers). At present, the Department does not get wage reports from employers until quarterly unemployment tax reports are filed. Other states, however, use information from employers’ bi-weekly or weekly payroll and tax withholding reporting to verify wage reports on weekly claim certifications. In January 2013, I sent the following e-mail message to Department staffers:

Dear Scott and Lutfi,

Here is the info on the Massachusetts effort wage matching effort:

Unemployment Insurance Fraud
Protecting the integrity of the unemployment insurance program is a responsibility that we take seriously.

Through our Program Integrity Department, the Massachusetts Department of Unemployment Assistance focuses on the prevention, detection, investigation and prosecution of those who defraud or attempt to defraud the unemployment insurance program.

DUA works with other agencies
Numerous actions are taken to prevent and detect the fraudulent collecting of benefits. For instance, our Program Integrity Department regularly compares wage records from the Massachusetts Department of Revenue with records of current UI claims to ensure that claimants who work part-time while collecting UI benefits report those earnings to DUA.

The Department of Revenue also provides our Program Integrity Department with a weekly report of workers added to employers’ payrolls. This “new hire” report is also matched against UI records to check that claimants who return to work do not continue to collect benefits. It is important for both workers and employers to be aware that eligibility for UI benefits ends on the day an individual starts full-time work.

To prevent fraud, our Program Integrity Department matches records with those of other state and federal agencies including the Social Security Administration, the state Department of Corrections, and others.

Once DUA establishes that a claimant has collected unemployment insurance benefits to which he or she was not entitled, the Program Integrity Department’s Recovery Unit aggressively works to recover the overpaid benefits. A variety of collection tools are utilized including criminal and civil prosecutions, the interception of Massachusetts state income tax refunds, mail dunning, and the offset of any future unemployment benefits. Additionally, DUA levies a 12 percent annual interest charge against any outstanding overpayment balance if the claimant was determined to be “at fault”.

You can help
We welcome information from concerned citizens who know of workers who continue to collect UI benefits while they are employed.

You can report individuals who are collecting benefits while working full-time and employers who are paying workers and not reporting wages via any one of these methods:

1. Completing the DUA Fraud Hotline Complaint Form
2. Calling the Fraud Hotline – 1-800-354-9927
3. Emailing uifraud@detma.org
4. Writing to the U.I. Program Integrity Department, P.O. Box 8610, Boston, MA 02114. Or Fax to 617-723-5312

Employers can also download an AntiFraud Poster pdf format of poster_antifraud_508.pdf in English and Spanish.

From http://www.mass.gov/lwd/workers-and-unions/general-resources/report-fraud/ui-fraud.html

From what I understand, Wisconsin does everything above except for the weekly new-hire reporting/matching. From what I recollect, Wisconsin does new-hire matching every quarter.

* * *

Also, it appears that New Mexico has adopted something similar to Massachusetts along with a new web portal for both claimants and employers:

New unemployment insurance tax & claims system launched
For the Headlight Posted: 01/10/2013 02:54:21 PM MST

ALBUQUERQUE – The New Mexico Department of Workforce Solutions (NMDWS) this week successfully launched a new Unemployment Insurance (UI) system, marking the first time any state has simultaneously launched an integrated UI tax and claims system.

In just two days, the new system has already paid out $4 million in UI claims, certified over 17,000 people for their weekly benefits, helped over 22,000 customers open self-service online accounts, and enabled nearly 1,000 employers to electronically file wage reports, some for the first time.

Governor Susana Martinez said New Mexico’s new UI system is significantly improving the timeliness and accuracy of UI payments, enhancing the level of service provided to unemployed workers and businesses, and strengthening the state’s ability to prevent, detect, and recover improper UI payments.

“In just 36 months, we have replaced a 30-year-old tax system with a modern UI system that is more convenient for customers, more efficient for state workers, and more secure for the businesses that fund this program,” said Governor Martinez.

Since Monday, January 7, the NMDWS UI Operations Center has fielded some 182,000 phone calls from 17,500 unique callers. “While this extraordinarily high call volume impacted our ability to respond to all callers in a timely fashion, we successfully converted data from the old system to the new one,” said Secretary of NMDWS Celina Bussey. “The new UI system has been stable since it was launched and the majority of regular UI claims have been paid promptly.”

NMDWS has more than doubled the staff in their UI Operations Center and taken a number of additional steps to ensure that the agency is meeting the needs of its customers.

“We have immediately addressed any issues that have arisen and we are constantly monitoring our operations to ensure that we are providing the highest level of service to our customers,” Bussey said.

She noted that thousands of people have been able to go online to certify and receive their UI benefits and hundreds of employers and third-party administrators have already taken steps to directly manage their own UI accounts without NMDWS staff assistance.

“With anything new there is a learning curve,” Bussey said. “Our customer service agents are doing everything they possibly can to help our customers adjust to our new program integrity measures and understand the many options and benefits of the new system.”

Bussey said that a banking error unrelated to the new system was quickly resolved on Tuesday and everyone who has certified for benefits has received their UI payments. She also said that Wells Fargo has agreed to refund debit card holders any fees they may have incurred as a result of the delay in benefits being deposited in their accounts.

Since the new UI system launched on Monday, claimants have been applying for benefits, requesting payments, maintaining account information, and responding to requests for information. These new self-service options are helping to expedite UI payments to unemployed workers and more quickly resolving issues between employers and claimants.

The new UI system is also providing New Mexico employers with a single repository of all UI business functions. This self-service functionality is speeding up the processing of new registrations and appeals, and allowing employers to electronically file wage reports and respond to notices of claim filings. In the past, paper filing has cost NMDWS significant resources and delayed important wage data from being entered into the UI system.

The new system is also automatically calculating taxable wages and amounts due and accepting electronic payments from employers. In the past, all payments were processed with paper checks. On Tuesday, the first batch of employer electronic payments was successfully processed directly to the bank – without staff intervention.

The vast majority of calls to NMDWS’ toll-free number – some 7,000 – have dealt with the new federal law that extended unemployment benefits.

Bussey said NMDWS is working through each individual Emergency Unemployment Compensation (EUC) claim to help eligible claimants register for benefits. Due to recent rule changes and the complexity of multiple extended UI benefits, each claim is taking more time than usual to set up.

Of the 7,000 New Mexico EUC claimants potentially eligible for continued extended benefits, NMDWS has successfully paid about 1,000 this week. Many others claimants who no longer have money available in their UI account are calling NMDWS to inquire about their eligibility. NMDWS is working to determine if these people are eligible and, if so, to set them up with payments.

To strengthen the integrity of New Mexico’s UI program the new system includes what is known as “intelligent data collection and data validation” to reduce errors and increase the accuracy of UI payments. The system recognizes applicants after they have logged into their accounts and then directs them to the appropriate task. It also includes new tools to prevent overpayments and automated cross-matches with state and federal databases, such as the National Directory of New Hires.

Additional information about the new Unemployment Insurance Tax & Claims System and the New Mexico Department of Workforce Solutions is available at http://www.dws.state.nm.us. For the latest announcements and updates, follow NMDWS on Twitter (twitter.com/NMDWS) and the official YouTube channel (youtube.com/user/nmdws).

from
http://www.demingheadlight.com/deming-community/ci_22349104/new-unemployment-insurance-tax-claims-system-launched

If the Department here in Wisconsin took advantage of employer’s payroll filing rather than the quarterly unemployment tax filing, then discrepancies in wage reporting would be addressed within a few weeks rather than months later (indeed, many investigations I have seen about wage reporting discrepancies usually occur nine months to a year later). It is perplexing to say the least for why the Department has not begun exploring the option of using payroll reporting to verify claim information. In short, over-payment issues are not just a claimant problem. The Department could easily be more efficient and thorough in its own work in order to catch these kinds of problems earlier.

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