Detailed Information on the
Unemployment Insurance Administration State Grants Assessment

Obtaining additional tools and resources to help states prevent fraud and reduce benefit overpayments.

Integrating use of the National Directory of New Hire crossmatch into the UI Benefit Accuracy Measurement survey to improve detection of claimants' eligibility for UI benefits (by January 2008).

Advising, facilitating and coordinating state adjudication training designed to improve claimant eligibility determinations. Ten sessions with 40 students each are scheduled over 2007-08.

Support a five-state consortium's development of the Separation Information Data Exchange System (SIDES) to ensure that accurate employer information on the circumstances of job separations reaches adjudicators in time to result in accurate decisions.

Give states new tools for cross-matches with Social Security Administration records and employer-reported data on new hires that will reduce fraud and benefit overpayments.

Target resources on reviews of continued eligibility to help claimants find suitable employment.

Simplify the performance measurement system, to focus on a few key measures.

Targeting resources on reviews of continued eligibility to help claimants find suitable employment.

Measure: Payment timeliness: Percentage of intrastate UI first payments made within 14 days in states with a waiting week and 21 days if no waiting week

Explanation:Prompt payment of benefits to eligible unemployed workers is central to the mission of the unemployment insurance program. This measure reflects the percent of beneficiaries whose first check is issued within 21 days after the first week for which they are eligible for benefits. This period of time is adequate, in most cases, for states to calculate benefit amounts and determine whether individuals meet all eligibility requirements.

Measure: Establish tax accounts promptly: Percentage of determinations about UI tax liability of new employers made within 90 days of the end of the first quarter they became liable.

Explanation:Prompt determinations of employers' liability for state unemployment taxes are necessary for prompt benefit payments and equitable financing of those benefits. State payroll taxes, paid by employers on the wages of their covered workers, finance the UI benefits. This measure gauges the percent of new employers whose state unemployment tax accounts are established within 90 days after the calendar quarter that they were first liable for taxes. Prompt establishment of employer liability ensures that the UI agency begins receiving tax and wage reports, the basis for quick and accurate monetary eligibility determinations on any separated employees and the collection of UI taxes.

Measure: Establish overpayments: Dollar amount established for recovery as a percentage of estimated overpayments that states can detect and recover under state law.

Explanation:This measure was developed in 2003 to gauge states' effectiveness in detecting and establishing recoverable overpayments. Certain overpayments, attributable to individual behavior such as those resulting from individuals continuing to claim benefits after returning to work, are difficult to prevent. However, detection of these types of overpayments is not only more feasible but also cost effective. This measure sets a standard of comparing the overpayments each state actually establishes for recovery against an estimate of total recoverable overpayments, which are determined to be detectible through the states' normal integrity practices. (States' actual overpayment rates cannot be compared meaningfully, because these rates combine the effects of different eligibility conditions with the states' effectiveness in administering them). Over the last five years, States have established between $1.0 and $1.1 billion dollars a year in overpayments, about half of which they have recovered.

Measure: Facilitate reemployment of UI claimants: Percentage of UI claimants who received a first payment in a given quarter who entered employment within the subsequent quarter.

Explanation:This measures how well states facilitate reemployment by capturing the percentage of claimants who become reemployed in the quarter following the quarter in which they received their UI first payment; one calendar quarter is generally considered a good measure of time to check to see whether these "job-ready" claimants have become reemployed. A general reemployment measure is appropriate because UI facilitation depends both on a state's actual job-matching efforts and on the incentives that its UI eligibility environment provides for claimants to promptly find and accept suitable work. States compile the data for this measure by tabulating the number of persons who received a first payment in one calendar quarter who also had earnings (from UI wage records) in the next calendar quarter. States began submitting data for this measure to the Department in March 2006. The national reemployment rate for the past three years has been approximately 65%.

Measure: The number of timely and accurate initial benefit payments claims per $1,000 of inflation-adjusted base grant funds.

Explanation:The UI efficiency measure is the number of quality-weighted base initial claims that $1,000 of base grant funds, in constant 1995 dollars, can purchase. The UI administrative budget has "base" and "contingency" components. "Base" is the portion that maintains states' infrastructure and allows states to handle a normal ("base") level of claims activity. The base claims level is determined by analyzing historical claims levels. Contingency refers to the above-base portion. For the efficiency measure, total base claims are adjusted downward to reflect only "quality" claims, in practice an average of the percents of first payments made timely and benefit dollars that were proper. Benefit-based quality weights are used because over 80 percent of the administrative budget goes for benefit activities. Constant 1995 dollars are used because no funds for inflation have been provided to the program since 1995. Targets for FY 2009 and beyond reflect an update of the benchmark for base claims. In FY 2007, the system processed 9.1 timely/accurate claims per $1,000 of inflation-adjusted base grants.

Is the program purpose clear?

Explanation: This grant program is intended to fund state costs of "proper and efficient" administration of the Unemployment Insurance (UI) benefit program.

Evidence: Sec. 302(a) of the Social Security Act (SSA) provides that the Secretary of Labor will certify payments for the 'proper and efficient' administration of states' UI laws that the Secretary has approved under the Federal Unemployment Tax Act (FUTA).

Does the program address a specific and existing problem, interest, or need?

Explanation: The UI administrative grants program addresses the need for funds to administer state UI programs. The UI program is a Federal-state partnership with shared responsibilities. Federal law created a strong incentive for states to establish and finance UI benefit programs by the fact that employers receive a partial offset to the Federal Unemployment Tax Act (FUTA) tax if their states have established UI programs financed through state UI taxes. In return, the law requires the Federal government to fund state administrative expenses using FUTA revenues.

Evidence: Sec. 303(a), SSA, and Sec. 3304(a), FUTA, list the conditions for certifying state UI laws for administrative grants and for employers to receive credit against the FUTA tax.

Is the program designed so that it is not redundant or duplicative of any Federal, state, local or private effort?

Explanation: There is no other program responsible for funding the administrative costs of the UI system. Federal law allows states to use their UI tax revenues only to pay benefits, not administrative expenses. The Secretary of Labor is required to fund state UI program administration as long as state laws and administrative practices conform to Federal requirements.

Evidence: Sec. 303(a)(4), SSA, and Sec. 3304(a)(4), FUTA. Congress appropriates funds for UI administration from Federal taxes collected under Sec. 3301, FUTA.

Is the program design free of major flaws that would limit the program's effectiveness or efficiency?

Explanation: The Administration believes that giving states control over their UI administrative funding would increase state flexibility and strengthen the UI program and has proposed legislation to do this. The states -- not DOL -- control the complexity of their UI programs and their administrative procedures and practices. DOL's grants take the level of unemployment, the number of employers subject to state UI taxes, and certain other cost factors into account, but DOL cannot easily assess or control the underlying efficiency of state UI operations.

Evidence: The President's Budget for FYs 2003 and 2004 included legislative proposals to reform the administrative funding structure of the UI system. It proposed to significantly reduce the Federal unemployment tax and give states the responsibility for funding their own UI administrative costs.

Is the program effectively targeted, so program resources reach intended beneficiaries and/or otherwise address the program's purpose directly?

Explanation: Allocation of funds among states by DOL is based on workload projections (e.g., unemployment claims and employer tax accounts) and state-specific cost factors. This effectively targets funds to each state in proportion to the number of beneficiaries and employers it serves and the cost of doing business in the state.

Evidence: Sec. 303(a), SSA, requires that the state have procedures that are "reasonably calculated" to assure that UI payments are made "when due" in order to receive administrative grants from the Federal government. DOL's allocation procedures assure that states with higher workloads get more administrative funds. See ET Handbook 410, Resource Justification Model http://atlas.doleta.gov/rjm.

Does the program have a limited number of specific long-term performance measures that focus on outcomes and meaningfully reflect the purpose of the program?

Explanation: For 2002, DOL redefined its strategic goals for the UI program and now uses four outcome-focused goals that collectively cover the performance of the UI system: 'Make timely and accurate benefit payments to unemployed workers, facilitate the reemployment of Unemployment Insurance claimants, and set up unemployment insurance tax accounts promptly for new employers.' DOL is also working to develop a meaningful efficiency measure for the UI program. Efficiency measures based on cost per unit output, e.g., cost of processing an initial claim, can be misleading because of economies of scale and fluctuating workload levels over the business cycle.

Evidence: DOL's current long-term performance measures are clear and meaningfully related to the program's mission. DOL is also exploring alternative efficiency measures, including time per claimant served. According to one unit cost efficiency measure, initial claims cost $17.08 on average to process in FY 2001 and $15.33 in FY 2002. Higher workloads in FY 2002 coupled with modest staff increases drove the per unit cost down, but per unit cost will likely increase during the economic recovery. Strategic Plan Fiscal Years 1999-2004, available at www.dol.gov/_sec/stratplan/main.htm. US Department of Labor FY 2004 Annual Performance Plan, page 33, and the Department's FY 2004 Budget at www.dol.gov/_sec/Budget2004.

Does the program have ambitious targets and timeframes for its long-term measures?

Explanation: In its new FY 2003-2008 strategic plan, DOL has set ambitious targets for its long-term goals to: (1) pay benefits timely; (2) pay benefits accurately; (3) facilitate UI claimant reemployment; and (4) establish tax accounts promptly. Measures and targets for (1) and (4) were set immediately based on the existing performance management system. The measure for (2) was selected in FY 2003 after consulting with the UI system, and a goal was set. Measure (3) was defined in FY 2003 and 6 states will pilot test the measure after which a baseline and target will be set.

Evidence: Goals for 2008: Payment Timeliness: 91.0% of all intrastate first payments will be made within 14/21 days: Payment Accuracy: Establish for recovery at least 60.5% of the amount of estimated overpayments that states can detect and recover. Facilitate Reemployment: A target will be set against baseline data collected in FY 2003 for the entered employment rate of UI claimants. Establish Tax Account Promptly: 83.0% of determinations about the UI tax liability of new employers will be made within 90 days of the end of the first quarter they become liable.

Does the program have a limited number of specific annual performance measures that demonstrate progress toward achieving the program's long-term measures?

Explanation: DOL's strategic plan and long-term measures are based in part on a long-standing system of annual performance measures plus measures that capture other important outcomes. DOL's annual performance measures are the same as its long-term measures. The annual goals are generally set to reflect progress toward the long-term goal. However, specific annual goals are adjusted to reflect projected unemployment rates, which affect state workloads and their ability to meet timeliness targets.

Evidence: Strategic Plan Fiscal Years 1999-2004, available at www.dol.gov/_sec/stratplan/main.htm. US Department of Labor FY 2004 Annual Performance Plan, page 33, and the Department's FY 2004 Budget at www.dol.gov/_sec/Budget2004.

Does the program have baselines and ambitious targets and timeframes for its annual measures?

Explanation: Ambitious targets for first payment timeliness, overpayment detection, and establishment of new employer tax accounts have been established for FYs 2004-2008. Annual targets are based on a regression methodology that relates these future levels to the projected unemployment rate. An FY 2004 target for the reemployment measure will be developed based on system experience in FY 2003.

Evidence: Strategic Plan Fiscal Years 1999-2004, available at www.dol.gov/_sec/stratplan/main.htm. US Department of Labor FY 2004 Annual Performance Plan, page 33, and the Department's FY 2004 Budget at www.dol.gov/_sec/Budget2004.

Do all partners (including grantees, sub-grantees, contractors, cost-sharing partners, etc.) commit to and work toward the annual and/or long-term goals of the program?

Explanation: Each state annually submits a State Quality Service Plan (SQSP) that is both a performance management document and a budget document. As part of the SQSP, states provide assurances they will conform and comply with Federal requirements and that they will administer a quality program as measured by DOL. States that fail to meet specific levels of performance must include corrective action plans in the SQSP. In addition, state agencies face pressure from their state officials and the public if they fail to make timely benefit payments or have high levels of erroneous payments.

Evidence: UI Program Letter 32-02, "Call Memo for the Fiscal Year (FY) 2003 Unemployment Insurance (UI) State Quality Service Plan" and ET Handbook No. 336, 17th Edition Unemployment Insurance State Quality Service Plan (SQSP) Planning and Reporting Guidelines at http://atlas.doleta.gove/dmstree

Are independent and quality evaluations of sufficient scope and quality conducted on a regular basis or as needed to support program improvements and evaluate effectiveness and relevance to the problem, interest, or need?

Explanation: The UI program is frequently studied by DOL's Office of the Inspector General (OIG) and the General Accounting Office (GAO). In addition, DOL's Employment and Training Administration regularly contracts with outside researchers to look at various aspects of program performance -- administrative features as well as the social safety net aspects of the program -- and the reports are subsequently made available on DOL's website. One recent evaluation focused on the impact of filing initial claims through the telephone instead of in person. Another looked at the impact on UI recipiency rates and benefit durations from state eligibility practices concerning reasons for job loss and work search.

Evidence: See "The Latest Seminannual Report to the Congress" and "Top Management Issues at the U.S. Department of Labor" at www.oig.dol.gov and GAO Report Unemployment Insurance Increased Focus on Program Integrity Could Reduce Billions in Overpayments GAO 02-697. DOL-commissioned studies: A Study of Unemployment Insurance Recipients and Exhaustees: Findings from a National Survey, 1990 atlas.doleta.gov/dmstree/op/op90/op_03-90.pdf; Evaluation of the Impact of Telephone Initial Claims Filing wdr.doleta.gov/owsdrr/00-3/; www.ows.doleta.gov/dmstree/op/op2k/op_05-01.pdf; Unemployment Insurance in the One-Stop System, www.ows.doleta.gov/dmstree/op/op2k/op_01-00.pdf; Unemployment Insurance Non-Monetary Policies and Practices: How Do They Affect Participation? A Study of 8 States, /wdr.doleta.gov/owsdrr/ETA-occasional.asp

Are Budget requests explicitly tied to accomplishment of the annual and long-term performance goals, and are the resource needs presented in a complete and transparent manner in the program's budget?

Explanation: While DOL has a number of strong links between resources and performance, it still falls short in the final steps of linking dollars to the quality of performance, such as benefit timeliness. The request is based on workload projections under the Administration's economic assumptions, but it is not sufficiently refined to project the quality differences, e.g., in more timely or more accurate benefit payments, based on different funding levels. However, DOL has analyzed the link between resources and a state's ability to detect and establish overpayments for recovery. The analysis indicated that by increasing current overpayment detection and recovery efforts, states could recover over $4 for every additional $1 expended. DOL has been gathering states' cost data under the Resource Justification Model and let a contract for a study to test the linkages between resources and performance in administration of the UI program. DOL's FY 2004 performance budget for UI administrative grants shows the full costs of UI administration.

Evidence: See DOL's 2004 Budget at www.dol.gov/_sec/budget2004 and ET Handbook 410 at atlas.doleta,gov/rjm. The analysis of the effect of increasing resources for overpayments is Cost-Benefit Analysis of Expanding Benefit Payment Control Activities www.ows.doleta.gov/unemploy/integrity.asp

Has the program taken meaningful steps to correct its strategic planning deficiencies?

Explanation: Deficiencies in strategic planning are identified through performance analyses, OIG audits, and GAO audits. In order to reduce UI overpayments, DOL developed a work plan that was included in the President's Management Agenda. As part of this work plan, DOL developed a new accuracy measure to assess how well states identify and recover overpayments and has included this measure in its strategic plan. DOL is also looking at ways to get UI beneficiaries back to work faster and has developed a new strategic plan measure related to the reemployment of UI claimants. By analyzing state entered-employment rates, DOL expects to identify states that are facilitating reemployment and to gain insight from them into the combination of reemployment services and UI eligibility requirements and their enforcement that results in the quickest return to suitable work for UI claimants.

Evidence: The new UI performance measures are discussed in UIPL 27-02, Government Performance and Results Act of 1993 (GPRA) Fiscal Year (FY) 2002 Unemployment Insurance (UI) Program Goals and UIPL 15-03, Government Performance and Results Act Fiscal Year (FY) 2003 Unemployment Insurance (UI) Program Goals. Information about DOL's score card for the President's Management Agenda can be found at www.dol.gov/dol/pma/pma_results.htm#financial. The score card is available at www.results.gov/agenda/scorecard.html

Does the agency regularly collect timely and credible performance information, including information from key program partners, and use it to manage the program and improve performance?

Explanation: States report performance data monthly or quarterly through standard required reports. DOL reviews these data and issues quarterly and annual performance reports. States are required to submit to DOL corrective action plans for unacceptable performance as part of their annual SQSP submission. A data validation system has been developed and is scheduled for implementation in 2003.

Evidence: In response to information about continuing problems of high benefit overpayment rates in many states, DOL developed a work plan for reducing overpayments. It conducted several analyses of the causes of overpayments and cost-effective actions states can take to reduce them. DOL also developed a measure of payment accuracy that measures the prevention and detection of overpayments. See UIPL 23-03 Unemployment Insurance (UI) Benefit Payment Accuracy and Integrity; UIPL 33-02 Development of an Unemployment Insurance (UI) Payment Accuracy/Integrity Measure. UI Program Letters are available at http://wdr.doleta.gov/directives/.

Are Federal managers and program partners (grantees, subgrantees, contractors, cost-sharing partners, etc.) held accountable for cost, schedule and performance results?

Explanation: The UI management structure and approach include a number of elements that support achievement of program results. At the Federal level, DOL has tied its performance goals to performance ratings for managers, providing an incentive for taking personal responsibility for program performance. State performance is monitored by the Department. States that fail to meet acceptable levels of performance must include corrective action plans as part of their annual SQSP. State performance results are published annually, creating an informal competition and incentive to improve performance. Many states also have Advisory Councils that hold state program managers accountable for all aspects of the UI program including performance and operational costs.

Evidence: UI Program Letter 32-02, 'Call Memo for the Fiscal Year (FY) 2003 Unemployment Insurance (UI) State Quality Service Plan' and ET Handbook No. 336 17th Edition 'Unemployment Insurance State Quality Service Plan (SQSP) Planning and Reporting Guidelines. See 'Handbooks' at http://atlas.doleta.gov/dmstree.

Are all funds (Federal and partners') obligated in a timely manner and spent for the intended purpose?

Explanation: UI program funds are obligated consistently within required time limits. The Department provides base grant planning targets to states before the beginning of each fiscal year and allocates additional funds on a quarterly basis according to variations in workload levels. Spending authority is provided immediately following OMB's apportionment of appropriations. States obligate most funds by the end of the first quarter of the year following the appropriation year. Funds used for automation may be carried forward for up to 3 years. States are subject to the Single Audit Act and audits by the OIG. The OIG has audited states in several areas of UI program activity in recent years (remote claims grants, Y2K grants, information systems security, and states indirect cost charging) and found no significant material weaknesses. Funds are spent for their intended purposes.

Evidence: States submit quarterly financial status reports (SF269) for obligations and expenditures. In addition, states annually submit detailed cost data for actual spending that can be compared to how funds were allocated for various purposes. Dates by when funds must be obligated are issued each year in the annual SQSP call memo. Examples of OIG Reports: Year 2000 Grant Expenditures: 04-00-003-03-315 North Carolina; 04-01-001-03-315 New Mexico; 04-01-004-03-315 Nevada; 04-01-005-03-315 Pennsylvania; 04-01-006-03-315 Ohio; 04-01-008-03-315 California; 04-01-010-03-315 Montana; 04-02-003-03-315 New York Indirect Costs Charged to Department of Labor Grants: 03-01-006-03-315 Maryland; 03-02-001-03-315 Massachusetts; 03-02-002-03-315 New Jersey; 03-03-001-03-315 Wisconsin

Does the program have procedures (e.g., competitive sourcing/cost comparisons, IT improvements, approporaite incentives) to measure and achieve efficiencies and cost effectiveness in program execution?

Explanation: The UI program makes funds available to states on a competitive basis for certain purposes, including IT improvement projects such as those that enable UI beneficiaries and employers to access the UI system through the Internet or by telephone. DOL funds projects that will produce tangible gains in efficiency and customer service. In addition, DOL disseminates information and provides forums for state staff to share improvements in efficiency through technology. DOL also creates incentives for states to become more efficient because it takes processing times into account when it allocates available administrative funds. Using data from each state about the time (minutes per unit) it requires to process various workload items, e.g., claims, tax audits, DOL penalizes less efficient states by reducing their time factors relatively more than for more efficient states in order to allocate available resources. This approach has put pressure on states to reduce the time taken to process workloads so that their funding more closely correlates with their operational needs.

Evidence: Over the years, funds have been made available to states through competitive grants for projects that would improve productivity and efficiency. Recently, 'Remote Systems Grants' have allowed states to implement telephone and internet claims which have increased productivity and efficiency. As part of the evaluation process for a remote system grant DOL has required states to demonstrate a high return on investment both in terms of customer service and dollars saved subsequent to implementation. States also submit Supplemental Budget Request for IT projects which is a competitive process. Field Memorandum No. 11-02 and similar annual memos describe the process of ratcheting down the times/costs for less efficient states.

Does the program collaborate and coordinate effectively with related programs?

Explanation: There is no other program responsible for funding the administrative costs of the UI system. States are prohibited from diverting their UI taxes away from benefit payments. In order to help UI claimants return to work, the UI program is a mandatory partner in the One-Stop Career Center system, which provides reemployment assistance and other services to UI claimants and other jobseekers.

Evidence: Federal law allows states to use their UI tax revenues only to pay benefits, not administrative expenses. See Sec. 303(a)(4), SSA, and Sec. 3304(a)(4), FUTA. Congress appropriates funds for UI administration from Federal taxes collected under Sec. 3301, FUTA. For list of mandatory partners in the One-Stop Career Centers, see Sec. 121, Workforce Investment Act, PL 105-220.

Does the program use strong financial management practices?

Explanation: The financial statements for the unemployment trust fund (UTF) are audited each year by the OIG. As part of the process, the auditors report on any material internal control weaknesses. The auditors have issued an unqualified opinion for the last six years and there are no material internal control weaknesses. Also, states report UTF financial information on a monthly basis. As noted in the auditors' reports, this information is timely and accurate. To support some of the day-to-day oversight of state banking practices and monitor trust fund balances, DOL has access to and uses the Bureau of Public Debt's UTF management information system. States have systems to detect, establish and recover UI benefit overpayments. In addition, DOL requires states to have a Benefit Accuracy Measurement program, using statistical samples intended to identify causes of overpayment and assist in correcting them.

Evidence: See OIG Top Management Issues for FY 2002; President's Management Agenda Scorecard; and DOL Annual Report on Performance and Accountability for Fiscal Year 2002, page 122.

Has the program taken meaningful steps to address its management deficiencies?

Explanation: While the OIG did not characterize UI overpayments as a material internal control weakness, it did identify UI overpayments as a management deficiency and a current year reportable condition in the OIG's FY 2001 Annual Report. In response, DOL developed a work plan to minimize overpayments, which was included in DOL's part of the President's Management Agenda. Implementation of work plan items is nearing completion. In its FY 2002 report, the OIG noted that it generally concurred with the corrective actions described by management but that certain measures needed to be finalized. The revised corrective action plan will be reviewed during the OIG's FY 2003 audit work.

Evidence: Information about DOL's score card for the President's Management Agenda can be found at www.dol.gov/dol/pma/pma_results.htm#financial. The score card is available at www.results.gov/agenda/scorecard.html ; OIG findings are reported in Annual Report on Performance and Accountability for Fiscal Year 2002, page 145, and Annual Report on Performance and Acountability for Fiscal Year 2001, pages 156-157.

Does the program have oversight practices that provide sufficient knowledge of grantee activities?

Explanation: State partners report program data through standard federally required reports. DOL issues quarterly and annual performance reports based on these data. In addition, Federal staff conduct on-site quality reviews of specific state activities such as UI benefit eligibility determinations, tax operations and Benefit Accuracy Measure review. DOL has developed a data validation system scheduled for implementation in 2003.

Evidence: See ET Handbook No. 336, Unemployment Insurance State Quality Service Plan (SQSP) Planning and Reporting Guidelines, available at http://wdr.doleta.gov/directives/attach/ETHand336-17th_chp1.pdf.

Does the program collect grantee performance data on an annual basis and make it available to the public in a transparent and meaningful manner?

Explanation: Various workload and performance data are collected at various time increments: monthly, quarterly and annually. Data are made available to the public on state performance for the most important measures monthly. Other performance data are available quarterly and/or annually.

Evidence: The following performance reports are available at http://ows.doleta.gov/unemploy/performance.asp Government Performance Results Act; Tier One Performance Measures Reports; UI PERFORMS Annual Report; State Performance Ranking

Has the program demonstrated adequate progress in achieving its long-term outcome performance goals?

Explanation: The Department redefined its GPRA goals for UI in FY 2002, establishing 4 measures and associated goals: (1) pay benefits timely; (2) pay benefits accurately; (3) facilitate UI claimant reemployment; and (4) establish tax accounts promptly. All 4 measures relate to key elements of the UI mission. Measures and targets for (1) and (4) were set immediately based on the existing performance management system. The measure for (2) was selected in FY 2003 after consulting with the UI system, and a goal set. Measure (3) was defined in FY 2003 and 6 states will pilot test the measure after which a baseline and target will be set. The score is based on the program's ability to meet the target for measure (4).

Evidence: UI program long-term measures and goals were redefined in FY 2003; see UI Program Letter 15-03, Government Performance and Results Act (GPRA) Fiscal Year (FY) 2003 Unemployment Insurance (UI) Program Goals. Targets for measure (4) were exceeded and so its targets for FY 2004 and beyond were revised upward using a regression methodology that tied future target levels to the Administration's budget assumptions for the total unemployment rate. Initial targets for (1) have been missed due to unexpectedly high UI workloads, and its targets for FY 2004 and beyond have been revised downward using a regression methodology that ties future levels to Administration assumptions about the unemployment rate. Milestones for implementing measures (2) and (3) were attained, but no experience exists for judging accomplishment of the 59% target for measure (2).

Does the program (including program partners) achieve its annual performance goals?

Explanation: Two of DOL's revised measures had performance goals for FY 2002: Make timely benefit payments to unemployed workers and establish employer tax accounts promptly. The program fell short of meeting the criteria for making timely benefit payments and exceeded the expected performance level for establishing employer tax accounts promptly. Based on the earlier measures and goals in DOL's Annual Report for FY 2001, the goal for first payment timeliness was met in 2000 but not in 2001, and the goal for quality of benefits eligibility determinations was not met in 2000 or 2001.

Evidence: The Department made progress in making its performance goals for FY 2002: Establish new employer tax accounts within 90 days of liability: 81.7% against a goal of 80%; Make timely benefit payments to unemployed workers: 88.7% against a goal of 91%. In part, the ability of the UI system to meet the timely benefit payment goal was heavily influenced by the overwhelming workload: regular claims increased by 12% and implementation of Temporary Extended Unemployment Compensation increased workloads by another 40%.

Does the program demonstrate improved efficiencies or cost effectiveness in achieving program performance goals each year?

Explanation: Past investments in efficiency-promoting technologies have changed the UI claims-taking process from a labor-intensive in-person process to a technology-based process handled over the telephone or Internet. To illustrate, the cost per million weeks of benefit paid (Average Weekly Insured Unemployment or AWIU) for comparable points in the UI cycle was $834 million in FY 1994 vs. $736 million in FY 2002, a cost reduction of 12%. (Year-to-year cost comparisons can be misleading because workload fluctuations associated with the business cycle change the composition of fixed and variable costs.)

Evidence: The UI program has consistently made funds available to states through competitive grants for projects that would improve productivity and efficiency. 'Automation Grants' enabled states to acquire and upgrade computer systems. 'Remote Systems Grants' have allowed states to implement telephone and internet claims filing. In Field Memorandum No. 6-03 on grants to develop remote systems, DOL requires states to demonstrate 'a high return on investment both in terms of customer service and dollars saved subsequent to implementation.'

Does the performance of this program compare favorably to other programs, including government, private, etc., that have similar purpose and goals?

Explanation: There are no other Federal or state programs responsible for providing temporary income support to laid-off workers who are capable of working. Under the legal structure of the UI program, DOL is solely responsible for funding the administrative costs of the UI system.

Evidence: Federal law allows states to use their UI tax revenues only to pay benefits, not administrative expenses. See Sec. 303(a)(4), SSA, and Sec. 3304(a)(4), FUTA. Congress appropriates funds for UI administration from Federal taxes collected under Sec. 3301, FUTA.

Do independent and quality evaluations of this program indicate that the program is effective and achieving results?

Explanation: The studies identified earlier in Question 2.6, as well as other studies of the UI system, have not identified major defects in the system. However, they have identified a number of areas in which improvements are needed. For example, DOL and states routinely assess the benefit overpayment rate using a statistical sample, but the overpayment rate had remained relatively stable instead of dropping over time. As a consequence, the OIG and GAO encouraged a concerted effort to reduce overpayments and to increase recoveries. DOL has placed increased emphasis on helping states address this problem and has established a new outcome measure that takes into account the ability to detect overpayments on a cost-effective basis and which types of overpayments can be recovered under state laws.

Evidence: See 'the latest Semiannual Report to the Congress' and 'Top Management Issues at the U.S. Department of Labor ' at www.oig.dol.gov and GAO Report Unemployment Insurance Increased Focus on Program Integrity Could Reduce Billions in Overpayments GAO-02-697.