Department of Labor Could Further Facilitate Modernization of States' Unemployment Insurance Systems
GAO-12-957: Published: Sep 26, 2012. Publicly Released: Sep 26, 2012.
What GAO Found
The Department of Labor (Labor) facilitates states efforts to modernize information technology (IT) systems supporting their unemployment insurance (UI) programs by (1) providing funds for administrating overall UI operations and (2) participating in groups that provide technical support to states. While the federal-state structure of the UI program places primary responsibility for its administration on the states, Labor provides potential strategies for IT modernization activities through supplemental budget funds.
Federal funds for UI modernization efforts come primarily from two sources: (1) supplemental budget funds that are designated by Labor for state IT modernization efforts and (2) general UI administration funding. General administration funding primarily consists of State UI and Employment Service Operations funds (an administrative grant issued by Labor at the beginning of each fiscal year); Job Creation and Worker Assistance Act of 2002 funds, (distributed under the Reed Act, a mechanism by which the federal government transfers surplus UI funds to states); and American Reinvestment and Recovery Act funds (an economic stimulus package enacted in February 2009). However, federal funds can be used for multiple UI purposes, and states are not required to report costs for UI modernization projects.
The status of the nine states UI IT modernization efforts that GAO reviewed range from planning to deployment. Of the nine states, three are part of a consortium (multiple states that develop a single common system) and are all in the initial planning phase; two individual state efforts are in the development phase; two are in a combination of different phases; and two are in operations and maintenance. For example, Virginia is in the development phase whereas Minnesota has a deployed system and is in operations and maintenance.
States and Labor have challenges specific to (1) individual states and (2) consortiums modernization efforts. The challenges for individual states that GAO reviewed relate to having sufficient technical expertise and limited funding, among others, and challenges faced by consortiums relate to differences in state laws and business processes among member states. It is widely recognized that analyzing and prioritizing challenges and then documenting lessons learned can help mitigate risk and track successful ideas for more effectively managing IT in the future. A committee was tasked to assess lessons learned from consortium efforts which may serve as a valuable first step toward helping the states mitigate challenges. However, the effort is not complete and does not represent an independent survey of all the states lessons learned. As such, Labor has not yet comprehensively evaluated and prioritized challenges and lessons learned, disseminated them to each state, or facilitated an appropriate information sharing mechanism. Until it does, Labor may miss opportunities to help support future consortium and state modernization efforts.
All nine states reviewed have established selected management controls for modernizing IT which, if properly implemented, could help reduce the risks of modernization challenges. The controls align with industry-accepted program management practices, such as independent verification and validation; and include state-specific practices, such as oversight through a Chief Information Officer office and consortium-specific practices, such as governance structures.
Why GAO Did This Study
Labors UI program is a federal-state partnership that provides partial compensation for lost earnings of eligible individuals who become unemployed through no fault of their own. In fiscal year 2011, about $117 billion was spent on the UI program. To administer the program, states rely heavily on IT, including benefits and tax systems. However, a July 2010 state survey noted that most of the UI IT systems are outdated and cannot efficiently handle their current workloads.
GAO was asked to (1) determine Labor's role in facilitating UI IT modernization efforts, (2) identify and describe the types of federal funding selected states have spent on modernization, (3) provide the status of modernization for selected states, (4) determine key modernization challenges, and (5) determine what management controls have been established for IT modernization. To do this, GAO analyzed documentation and interviewed officials from a nongeneralizable sample of nine states (selected based on varying location, size, and modernization status); and reviewed Labor policies; and interviewed department officials.
What GAO Recommends
GAO recommends that Labor (1) comprehensively analyze and document challenges and lessons learned and (2) distribute the lessons learned to each state to share and foster ideas for effective modernization of UI systems. Labor generally agreed with the first recommendation; it did not agree or disagree with the second recommendation, but said it is committed to sharing lessons learned.
For more information, contact Valerie Melvin at (202) 512-6304 or firstname.lastname@example.org.
Recommendations for Executive Action
Status: Closed - Implemented
Comments: In response to our recommendation, in August 2013 the Department of Labor completed a comprehensive lessons learned report from single states and multi-state consortium efforts and identified specific areas to help mitigate challenges such as ensuring staff have sufficient project management expertise. The department noted that it plans to continuously update the report to reflect new lessons learned and experiences on an ongoing basis. As a result of this action, the Department of Labor should be in a better position to communicate the benefits from the experiences of efforts to modernize state unemployment insurance systems.
Recommendation: To further facilitate state and consortium modernization efforts, the Secretary of Labor should direct the Administrator of the Office of Unemployment Insurance to perform a comprehensive analysis of lessons learned and identify specific areas that would help mitigate current state challenges and provide guidance for future consortiums and individual state efforts. This assessment should include an evaluation of ITSC's lessons learned and observations identified, as well as input from individual states, consortium representatives, and the ITSC Steering Committee. Lessons learned and best practices identified could include practices for mitigating issues associated with inconsistent and insufficient funding streams, helping ensure staff have the necessary technical and project management expertise to manage modernization technology resources, and sufficient staff to operate both legacy and modernized systems while developing and implementing new systems; and consortium-specific challenges, including practices for addressing concerns about differences in state requirements and business processes among consortium member states, mitigating potential liabilities and concerns that lead states face in providing services to and oversight of another states' modernization efforts, and identifying independent qualified leadership for consortium efforts.
Agency Affected: Department of Labor
Status: Closed - Implemented
Comments: In response to our recommendation, in August 2013 the Department of Labor disseminated a comprehensive lessons learned report to the states and subsequently hosted a webinar to inform the states of a virtual platform for networking and collaboration. As a result, the Department of Labor and the state unemployment insurance agencies should be in a better position to share ideas, best practices, and lessons learned on a continuing basis.
Recommendation: To further facilitate state and consortium modernization efforts, the Secretary of Labor should direct the Administrator of the Office of Unemployment Insurance to distribute the analysis of lessons learned to each state to share and foster ideas and facilitate the efficient and effective modernization of UI systems through an information-sharing platform or repository, such as a website, so that state agencies can contribute ideas and case studies of best practices and lessons learned on a continuing basis, and so that states' input can be solicited for each major phase of system development.
Agency Affected: Department of Labor