Office of the Auditor General: Performance Audit Report

8/18/2019 Office of the Auditor General: Performance Audit Report

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Office of the Auditor GeneralPerformance Audit Report

Claimant Services Unemployment Insurance Agency, Talent Investment Agency

Department of Talent and Economic Development

April 2016

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State of Michigan Auditor GeneralDoug A. Ringler, CPA, CIA


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The auditor general shall conduct post audits of financial

transactions and accounts of the state and of all branches,

departments, offices, boards, commissions, agencies,

authorities and institutions of the state established by this

constitution or by law, and performance post audits thereof.

Article IV, Section 53 of the Michigan Constitution


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Report Summary

erformance Audit Report Number:

Claimant Services641-0318-14

Unemployment Insurance Agency, Talent Investment Agency, Department of Talentand Economic Development

Released: April 2016

The Unemployment Insurance Agency (UIA) helps jobless workers and their families by providingup to 20 weeks of regular unemployment insurance (UI) benefits while they seek new employment.UIA reported that it received 607,652 new claims and paid UI benefits totaling approximately $1.1

billion to 370,980 unduplicated claimants in fiscal year 2014. UIA's fiscal year 2014 administrativeexpenditures totaled approximately $155.6 million.

Audit Objective Conclusion

Objective #1: To assess the clarity and comprehensiveness of UIA's communications with UIclaimants.

Moderately clear andcomprehensive

Findings Related to This Audit ObjectiveMaterial

ConditionReportableCondition

AgencyPreliminary

Response

UIA needs to improve its efforts to obtain and/or consider

supporting information and provide claimants with the facts andrationale when it determines that claimants provided false ormisleading information. Adjudicating these issues may result inreimbursement, penalties, and criminal prosecution. Also, theseimprovements will help claimants better understand theallegations against them to make informed decisions on their nextcourse of action (Finding #1).

X Agrees

UIA needs to continue to enhance existing and explore new socialmedia methods and processes for communicating with currentand prospective UI claimants. Accessible and comprehensivecommunications help ensure that claimants timely understandthe various requirements for receiving UI benefits (Finding #2).

X Agrees

UIA did not effectively and efficiently process claimant andemployer mail that was returned undeliverable and without a

forwarding address. Doing so resulted in increased printing,mailing, and workload costs of its mailroom personnel, claimsexaminers, and others. Also, claimants and employers did notreceive important communications from UIA (Finding #3).

X Agrees

UIA did not ensure that employers posted notices informing workers that they were covered for UI benefits. Also, moreaccurate instructions could have reduced the number of untimelyclaims, including the 45,700 ineligibility determinations issued between October 1, 2013 and February 26, 2015, for failing toapply in a timely manner (Finding #4).

X Agrees


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A copy of the full report can be

obtained by calling 517.334.8050

or by visiting our Web site at:

www.audgen.michigan.gov

Office of the Auditor General

201 N. Washington Square, Sixth Floor

Lansing, Michigan 48913

Doug A. Ringler, CPA, CIA Auditor General

Laura J. Hirst, CPA

Deputy Auditor General

Findings Related to This Audit Objective

(Con t i n u e d )Material


AgencyPreliminary

Response

UIA should seek regular feedback from claimants to evaluate theirsatisfaction with UIA's service delivery systems, processes, andpersonnel and to timely identify and address issues requiringmanagement's attention (Finding #5).

X Agrees


Objective #2: To assess UIA's efforts to ensure compliance with the U.S. Department of Labor'squality and timeliness standards related to UI claims processing.

Moderately effective



AgencyPreliminary

Response

UIA did not consistently meet federal performance standardsrelated to initial benefit payments, nonmonetary determinationprocessing, and appeals processing. In addition, UIA needs toimprove the quality of its separation-related nonmonetarydeterminations. These conditions resulted in delayed benefitpayments and improper benefit payments and claims denials, which, if left uncorrected, could result in the loss of federaladministrative grant funding (Finding #6).

X Agrees


Objective #3: To assess UIA's efforts to identify claimants likely to exhaust their UI benefits andrefer them to appropriate reemployment services.

Moderately effective



AgencyPreliminary

Response

UIA did not periodically evaluate whether its Worker Profilingand Reemployment Services (WPRS) system effectively reducedprogram participants' length of unemployment and the amount ofUI benefits paid. Also, UIA did not periodically review andupdate its profiling model to accurately identify the claimants who were most likely to exhaust their regular UI benefits beforereturning to work. Annual savings to Michigan with an effective WPRS system could total over $11.7 million (Finding #7).

X Agrees

UIA did not refer some claimants who met UIA's mandatoryreemployment service participation criteria to the Michigan Workforce Development Agency for reemployment services. Also,UIA did not take sufficient action to reduce the number ofclaimants that it excused, without consequence, from mandatoryparticipation in reemployment services after missing theirscheduled appointment. Some claimants may not have returnedto work as soon as otherwise possible, resulting in lost wages tothe claimants and increased costs to the UI program (Finding #8).

XPartiallyagrees


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Michigan Office of the Auditor General

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TABLE OF CONTENTS

CLAIMANT SERVICES

Page

Report Summary 1

Report Letter 3

Audit Objectives, Conclusions, Findings, and Observations

Communications With UI Claimants 8

Findings:

1. Improvement needed for adjudicating issues with potentially false or

misleading information. 102. Continued enhancements needed for communicating with current and

prospective UI claimants. 13

3. Improvements needed for processing undeliverable mail. 16

4. Improvements needed to ensure that employers provide their workerswith required UI information. 19

5. Regular feedback from claimants needed to evaluate their satisfaction. 21

Compliance With USDOL Standards 23

Findings:

6. Improvement needed to meet federal performance standards. 24Profiling and Reemployment Services 27

Findings:

7. Evaluation of the WPRS system and review of the profiling model needed. 28

8. Improvement needed to ensure that claimants are referred to andparticipate in reemployment services. 30

Supplemental Information

Survey Description 32Summary of Survey Responses - Customer Service 33

Agency Description 40

Audit Scope, Methodology, and Other Information 41

Glossary of Abbreviations and Terms 45


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This Page Left Intentionally Blank


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AUDIT OBJECTIVES, CONCLUSIONS,

FINDINGS, AND OBSERVATIONS


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COMMUNICATIONS WITH UI CLAIMANTS

BACKGROUND The Unemployment Insurance Agency (UIA) has four remoteinteractive claim centers. One center takes unemploymentinsurance (UI) claims and answers claimant questions over the

telephone. The other three centers process incomingcorrespondence, process and adjudicate* claims, andcomplete other claims-related tasks. Also, UIA has 15 problemresolution offices located throughout the State that provideclaimants with access to telephones and computers for filingtheir UI claims and that offer personal assistance to claimantson UI-related matters. In addition, UIA has a designated teamthat answers claimant questions sent to UIA electronically.

In October 2013, UIA implemented the benefit section of itsnew computer system, Michigan Integrated Data AutomatedSystem (MiDAS). MiDAS provides for more efficientprocessing of claims than UIA's predecessor system. UIA

simultaneously upgraded its Michigan Web Account Manager(MiWAM), which allows claimants to file UI benefit claims,monitor the status of claims, file appeals, and respond to factfinding requests through the Internet.

AUDIT OBJECTIVE To assess the clarity and comprehensiveness of UIA'scommunications with UI claimants.

CONCLUSION Moderately clear and comprehensive.

FACTORSIMPACTINGCONCLUSION

UIA effectively used many of the communication strategiesfor claimants recommended in the U.S. Department ofLabor's (USDOL's) UI Claimant and Employer MessageToolkit.

UIA provided claimants with multiple avenues for filing UIclaims, completing their biweekly certifications, andcommunicating with UIA.

Instructions provided to claimants when applying andcertifying for UI benefits were generally clear andcomprehensive.

Most UIA form letters sent to claimants were clear andcomprehensive.

Material condition* related to obtaining the necessaryinformation for accurately adjudicating select claims andproviding claimants with the reasons supporting UIA's(re)determinations.

* See glossary at end of report for definition.


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Reportable condition* related to enhancing methods andprocesses for communicating with claimants.

Reportable condition related to ineffective and inefficientprocessing of undeliverable claimant and employer mail.

Reportable condition related to ensuring that employersposted notices and provided workers with requiredinformation regarding unemployment benefits.

Reportable condition related to not obtaining servicesatisfaction information from claimants.



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FINDING #1

UIA needsimprovement inmaking and

communicating(re)determinationsof intentionalmisrepresentation.

UIA could haveimproved efforts tocontact 22 claimantswho did not respondto UIA's originalrequests forinformation related to46 (re)determinationsfinding intentionalmisrepresentation.

UIA needs to improve its efforts to obtain and/or consider supporting information and provide claimants with the facts andrationale for claims identified as including potentially false ormisleading information (intentional misrepresentation*).

Accurately adjudicating issues of intentional misrepresentation

is crucial because of the statutory benefit payback provisionsand significant penalties, along with the potential for criminalprosecution. Also, claimants need to know how UIA arrived atits conclusions to allow claimants to make informed decisionson whether to protest or appeal the (re)determinations.

Between October 1, 2013 and March 31, 2015, UIA issued60,324 (re)determinations finding intentional misrepresentationon 47,350 claims. We reviewed 60 of these (re)determinationsand noted:

a. UIA could have improved its efforts to contact 22claimants who did not respond to UIA's original

requests for information related to 46 (76.7%)(re)determinations. Also, UIA did not inform claimantsthat, absent new information provided by anothersource, failure to respond to the requests forinformation would result in a finding of intentionalmisrepresentation. Instead, the requests stated thatfailure to respond would result in a (re)determinationbased on available information. UIA assessed the 22claimants statutorily required penalties totaling$184,795.

The United States Postal Service (USPS) returned 2(9.1%) of the 22 requests as undeliverable. UIAinformed us that it did not resend the returned requeststo claimants because the claimants' deadlines torespond to the requests, which would not change withremailing, would have already passed. Also, UIA didnot open 5 (10.9%), 13 (28.3%), and 3 (6.5%) of the 46misrepresentation issues for 6 months to 1 year, 1 to 2years, and more than 2 years, respectively, after thelast UI benefit payments for the related claims.Because of these significant time lags, some of therequests for information related to the intentionalmisrepresentations that UIA sent electronically mayalso have gone undeliverable and contributed to the

high nonresponse rate. Although UIA's attempts to obtain claimant informationmet State and ET Handbook 301, 5th Edition,requirements, additional attempts to contact theseclaimants would have better ensured that the claimantswere provided adequate due process prior to findingintentional misrepresentation.



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b. UIA did not obtain and/or consider sufficient informationto support some adjudications made for claimants whoresponded to UIA's requests for information related toissues of intentional misrepresentation.

UIA asked claimants only two questions on the

requests for information:

(1) Did the claimants intentionally provide falseinformation to obtain benefits that they were notentitled to receive? (A "yes" or "no" answer wasrequired.)

(2) Why did the claimants think they were entitled tobenefits?

UIA determined intentional misrepresentation existedwhen claimants either answered "yes" to the firstquestion, where a "yes" appears to be an admission, or

answered "no" to the first question but checked the boxfor 1 of 3 of the 7 non-"other" responses to the secondquestion. Although some of these responses appearedto provide sufficient proof of intentionalmisrepresentation, others did not. For example,responding "no" to the first question and that one needsthe money in response to UIA's second question maynot, in itself, adequately support an intentionalmisrepresentation (re)determination.

The Handbook states that adjudicators should closelyexamine all of the facts related to (re)determinations ofintentional misrepresentation. Examples of relevantfacts to consider in making the (re)determinationsinclude claimants' education levels, language barriers,and prior claims experiences.

c. UIA did not include the reasons for, or facts that led to,the written (re)determinations of intentionalmisrepresentation, when UIA contacted the claimant, asrequired by Title 20, Part 602, Appendix A of the Codeof Federal Regulations (CFR) and Section 421.32(a) ofthe Michigan Compiled Laws. Instead, the(re)determinations only stated that the claimants'actions indicated that the claimants intentionally misled

and/or concealed information to obtain benefits that theclaimants were not entitled to receive.

RECOMMENDATION We recommend that UIA improve its efforts to obtainsupporting information and provide claimants with the facts andrationale for (re)determinations of intentionalmisrepresentation.


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AGENCYPRELIMINARYRESPONSE

UIA provided us with the following response:

The UIA agrees that (re)determinations finding intentionalmisrepresentation should include the facts, supportinginformation, and the reason(s) on which the (re)determinationis based. In 2015, the UIA began a review of its intentional

misrepresentation (re)determinations processes. As a result,intentional misrepresentation matters are investigated,reviewed, and determined by staff to ensure the inclusion ofrelevant facts, reason(s), and conclusions within these(re)determinations. The UIA continuously reviews andimplements improvements in its system in order to better servecustomers.


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FINDING #2

Enhancedcommunicationswith claimants are

needed.

UIA did not answer234,901 (89.1%) of263,726 calls madeto its call center.

UIA needs to continue to enhance existing and explore newsocial media* methods and processes for communicating withcurrent and prospective UI claimants. Suggestedenhancements include:

a. Continue to improve claimants' ability to reach UIA's

call center.

Since 2011, UIA has made significant upgrades to itscall center telephone system that provide for greateroversight and management of call center staff, theability to offer a limited number of claimants the optionof receiving a call back from UIA rather than waiting onhold, and other benefits. Although theseenhancements reduced total claimant hold times andcall lengths, many calls continued to go unanswered.For example, UIA did not answer 234,901 (89.1%) of263,726 calls made to its call center during businessweeks ended August 22, 2014 and September 22,

2014. Also, callers abandoned 8,333 (28.9%) of the28,825 calls while waiting on hold for a UIArepresentative. Because the number of calls greatlyexceeded the number of claimants during these weeks,it is likely that some individual claimants made multiplecall attempts.

Claimants' inability to reach UIA's call center was asignificant frustration echoed by many claimants whoresponded to our claimant satisfaction survey(presented as supplemental information in this report).

b. Explore the feasibility and usefulness of using socialmedia (e.g., Facebook, Twitter, and LinkedIn) tocommunicate important UI-related information to thepublic.

USDOL's UI Claimant and Employer Message Toolkitpromotes the use of social media as a best practice forefficiently disseminating content and maximizing impactwith broad audiences. UIA could utilize social media toeducate claimants about available UI benefit programs,significant program requirements, common errors madeby claimants when applying and certifying for UIbenefits, and other issues.

UIA could also use social media to help address someof the findings in this report. For example, UIA coulduse it to monitor and improve claimant satisfaction(Finding #5); promote the use of its electroniccommunications, which would reduce the burden on itsmore expensive call centers (part a. of this finding); and



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better inform the public of the timeliness requirementsfor applying for UI benefits (Finding #4).

c. Improve the selection of and access to claimantwebcasts (videos).

UIA's Web site provides links to a variety of webcastson topics directly impacting UIA claimants. On variousoccasions from March through May 2015, we attemptedto view many of these webcasts. However, none of thewebcasts would play. Also, UIA did not have anywebcasts related to MiWAM, its automated claimsprocessing system, which went live approximately 19months earlier.

USDOL's UI Claimant and Employer Message Toolkitpromotes claimant webcasts for communicatingimportant UI-related information to claimants becausethey are easier to digest than straight text documents.

d. Improve its requests for information by specifying thetime periods associated with the employment-relatedquestions included in the requests for information sentto claimants.

Michigan Administrative Code R 421.121(2) requiresemployers to report their quarterly wages to UIA within25 days of the end of their respective fiscal yearquarters. Four months after the end of each calendarquarter, UIA matches the employer-reported wageswith the wages reported by UI claimants during theirbiweekly benefit certifications. Claimants with wagedifferences exceeding established thresholds areidentified for further review. UIA sends these claimantsa request for information regarding their currentemployment status.

Because significant time often elapses before UIAsends these information requests, it is often notpossible for UIA to know if the claimants' reportedemployment-related information is relevant to its review.Identifying employment status during the time period ofthe potential wage underreporting can help UIA ensurethat the employment-related information is relevant to

its review.

RECOMMENDATION We recommend that UIA continue to enhance existing andexplore the feasibility of adding social media methods andprocesses for communicating with current and prospective UIclaimants.


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AGENCYPRELIMINARYRESPONSE


The UIA agrees that continued enhancement to existing socialmedia methods and communications regarding prospective UIclaimants is needed.

With respect to the numbers used by the Office of the AuditorGeneral (OAG) regarding the call center, these are AutomatedNumber Identification (ANI) results, which identify call attemptsand not true number of unique callers. For example, for theweeks ended August 22, 2014 and September 20, 2014, therewere 58,212 "total unique calls." Of these "total unique calls,"the UIA did not answer 28,131 (nearly 50%) of the 58,212.

During the same period for the business weeks ended August 21, 2015 and September 19, 2015, the total uniquecalls were 33,688. Of these "total unique calls," UIA did notanswer 7,160 (21%) of the 33,688 "total unique calls." This isan improvement of 29% over the past year. In the past year,

UIA has decreased the number of abandoned calls by 15%.

The UIA call center is not the sole source for customers toreach UIA. The employers/claimants can e-mail the UIAthrough their MiWAM accounts or claimants can visit theirlocal problem resolution offices.

Social media is an important tool that the UIA utilizes toincrease its reach to customers and communicate importantinformation regarding unemployment insurance. The UIA,through the Talent Investment Agency (TIA) social mediasites, communicates important UI-related information to thepublic such as available UI benefit programs, requirements,

events, best practices, and other news of interest orassistance to claimants. The TIA Twitter and Facebook pagesare also used to direct UIA customers to the appropriateresources on the UIA Web site as well as monitor and answercustomer inquiries.

The UIA is updating all webcasts available on the public UIAWeb site. New videos will appear throughout the remainder of2016.

To further enhance the UIA reach to customers, an up-to-datee-mail listserv for UIA customers with a MiWAM account has

been created in order to forward updates and messagesregarding unemployment insurance.


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FINDING #3

Improvements areneeded in returnedmail processes.

UIA did not effectively and efficiently process claimant andemployer mail that was returned undeliverable and without aforwarding address. Doing so resulted in increased printing,mailing, and workload costs of its four mailroom personnel,claims examiners, and others. Also, claimants did not receiveimportant information related to their eligibility for, amount of,

and duration of UI benefits, and employers did not receiveinformation directly impacting their unemployment tax liabilities.

UIA estimated that the USPS returned 451,000 undeliverablemail items to UIA in 2014 while UIA expended approximately$3.8 million for postage.

UIA Manual Section 7935 requires UIA mailroom personnel toscan returned mail containing any of nine benefit-related formsinto its electronic document repository (FileNet) when the maildoes not contain a forwarding address. UIA claims examinersmust call claimant addressees only to obtain their currentaddresses. Claimants are held ineligible for benefits when they

cannot be reached or do not return messages left by UIAclaims examiners within 48 hours. UIA does not inactivateinvalid claimant or employer addresses to prevent sendingadditional mailings to them. Returned mail without a forwardingaddress or that does not require scanning is shredded withoutadditional review.

Of 50 randomly selected returned mail items (46 employeraddressees and 4 claimant addressees) discarded forshredding on April 3, 2015, UIA mailroom personnelinappropriately discarded without required processing14 (28.0%) mail items for 13 unique addressees. Mailroompersonnel did not appropriately process 2 of the 14 mail itemsbecause the specific forms included therein (and one otherform) were mistakenly excluded from the preprinted list offorms to be pulled for additional processing. Additionalanalysis of the 13 unique addressees and 2 judgmentallyselected employers with returned mail not requiring scanningdisclosed:

a. Seven addressees were active employers that did notreceive either UIA benefit-related mail or both tax andbenefit-related mail. There was no indication that UIAtried to obtain a valid mailing address for 6 (85.7%) ofthe 7 employers. However, with minimal effort, we

identified current mailing addresses for 4 (57.1%) of theemployers whose addresses had changed up to sevenyears earlier. Two (28.6%) of these employers hadaccumulated delinquent UI taxes, interest, andpenalties totaling over $79,000. UIA sent one of theseemployers 129 undeliverable mail items containing taxnotices, tax liens, benefit determinations, and otherissues and significant amounts of undeliverable mail tothe other employers.


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b. Three addressees were for employers that legallydissolved and/or discontinued their operations from 1 to5 years earlier. Another employer addressee was nolonger doing business in Michigan but had not filed thenecessary paperwork to officially dissolve the business.UIA continued to send correspondence to the defunct

employers at their last known addresses. For example,UIA sent 27 pieces of benefit-related mail to one of theemployers after UIA officially closed the employer's taxaccount in September 2014.

c. Two addressees were UIA claimants with open actionsthat will result in UIA sending additional undeliverablemail to the claimants. One of the claimants diedapproximately two years ago. From October 21, 2014through May 4, 2015, UIA sent the estate of thedeceased claimant 114 monthly statements to collect a$1,184 benefit overpayment resulting from an issue thatUIA opened and adjudicated against the claimant after

the claimant's death for failing to respond to UIA's factfinding questionnaire.

UIA was not able to provide any explanation as to why itcontinued to send mail to undeliverable addresses.

RECOMMENDATIONS We recommend that UIA attempt to identify the correct mailingaddresses for all claimants and employers when mail isreturned undeliverable and without a forwarding address andevaluate the need for additional mailings pending thisidentification.

We also recommend that UIA process undeliverable mail inaccordance with its written policy.

AGENCY

PRELIMINARY

RESPONSE


The UIA agrees that "returned mail" remains a challenge forthe UIA. For this audit, the OAG estimated that the USPSreturned 451,000 pieces of mail during calendar year 2014.When compared against the volume of mail received by theUIA during calendar year 2014, less than 8% of the mail hadbeen returned.

The UIA validates addresses against USPS records. UIA willreinforce existing procedures that require staff to updateand/or verify addresses when a piece of returned mail includesa "forwarding address" as supplied by the USPS.


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Further, UIA intends to develop and institute a qualityassurance lead staff member charged with, among otherthings:

Identifying (a) qualitative and quantitative issuesassociated with returned mail; (b) commonalities

among returned mail issue(s); and (c) "priority"forms where the return of which may requirefurther action; (d) low priority forms where thereturn of which may be destroyed; (e) bestpractices used in both the private and publicsectors; and (f) exploration of alternate strategiesand approaches to "find" proper mailing addresseswhen items are returned as undeliverable.

Finally, the UIA will continue to review, revise, and reinforce itsreturned mail procedures.


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Online Filing Kit. With more than 200,000 employers locatedthroughout the State of Michigan, it is simply not possible forthe UIA to conduct 200,000 on-site visits for purposes of"ensur[ing] that employers post [the required] notices . . . ."However, the UIA's Field Audit Division has updated its fieldaudit handbook, which requires staff to verify compliance with

R. 105(1) as a part of the UIA's random audit processes;thus, a portion of the state's employers will be reviewed forposting compliance. Additionally, the UIA has revised FormUIA 1711 - Unemployment Compensation Notice toEmployees and updated the information.

Further, the UIA holds employer and unemployed workerseminars throughout the year and will provide copies of thenotice in the literature.

Finally, the UIA participates in several programs intended tofacilitate the unemployment process by bringing theemployer, affected workers, and UIA staff together at the

same time and place. These programs are known as RapidResponse and Worker Orientations.


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FINDING #5

UIA needs to obtain

and utilize claimant

satisfaction data.

UIA should seek regular feedback from claimants to evaluatetheir satisfaction with UIA's service delivery systems,processes, and personnel and to timely identify and addressissues requiring management's attention.

UIA's mission* is to provide the highest quality UI services to

ensure the economic growth of Michigan's workers andemployers. Consistent with its mission, UIA identifiedcustomer centricity as one of its core values to guide theperspective and actions of its employees. A widely usedmeasure of service quality, which also aligns with UIA'scustomer centric mission and values, is customer satisfaction.

In its 2014 Putting Citizens First report that surveyedapproximately 17,000 citizens across 15 states (includingMichigan) and interviewed government leaders, the McKinseyCenter for Government identified regular customer satisfactionassessment as a critical tool for focusing employees on theimportance of fulfilling customer expectations and providing

management with data driven insights into the parts of theiroperations that are working well and those requiringimprovement.

UIA last completed a narrow-scoped claimant satisfactionsurvey in 2010. Also, UIA obtained claimant feedback via abrief seven-question comment card available in its problemresolution offices. However, UIA informed us that it did notcompile and analyze the information contained on thecomment cards. The majority of UIA/claimant interactionsoccur online or on the telephone, which presents UIA with arelatively inexpensive way to obtain claimant feedback while itis still fresh in the minds of the claimants. For example, UIAcould survey claimants in MiWAM immediately after theycomplete their UI benefit application or first biweeklycertification or at any other point when the claimants interactwith MiWAM. Similar opportunities exist for claimants whocomplete their UI claims-related activities over the telephone.

We conducted a mail and online survey of 500 claimants (seesupplemental information). Our survey identified significantdissatisfaction with the protest and appeals processes. If UIAconducted similar surveys and identified the root cause of theclaimants' dissatisfaction, UIA could take timely action tocorrect deficiencies in the systems, processes, and/or

personnel and improve the overall quality of its services.

RECOMMENDATION We recommend that UIA regularly seek feedback fromclaimants to evaluate their satisfaction with UIA's servicedelivery systems, processes, and personnel and to timelyidentify and subsequently address issues requiringmanagement's attention and action.



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AGENCY

PRELIMINARY

RESPONSE


The UIA agrees that there is a need to gauge its customersatisfaction regarding the services it provides. The UIA alsoacknowledges there are opportunities to improve customerservice by utilizing tools such as online surveys and surveying

customers following unemployment worker and employerseminars.

UIA has been making strides in obtaining feedback from itscustomers by providing customers with comment cards afterobtaining service at one of its problem resolution offices.

In June 2015, the UIA began an effort to gauge customersatisfaction by launching an ongoing Feedback Survey on itspublic Web site. Staff review and analyze customer feedbackquarterly to determine problem areas and gauge customersatisfaction and understanding of the UI system. Claimantconcerns are forwarded to the appropriate unit to timely

address and resolve.

The online survey measures satisfaction with customer serviceand elicits suggestions for improvement. The survey isperiodically revised to provide additional opportunities forcustomer feedback. Customers are encouraged to take theonline survey by staff, through flyers in the problem resolutionoffices, social media, and messages included with several UIAcommunications.


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COMPLIANCE WITH USDOL STANDARDS

BACKGROUND UI Performs is USDOL's performance management system forthe overall UI program. UI Performs aims to ensureincreasingly effective, consistent, and efficient service to

workers and employers. The core measures within UIPerforms monitor key activities that have uniform nationalacceptable levels of performance.

AUDIT OBJECTIVE To assess UIA's efforts to ensure compliance with USDOL'squality and timeliness standards related to UI claimsprocessing.

CONCLUSION Moderately effective.

FACTORSIMPACTING

CONCLUSION

UIA has made and continues to make significant changesto its business processes, which resulted in meaningfulimprovements in its performance relative to federalperformance standards.

UIA has aggressively worked to reduce its backlogs, whichhas negatively impacted its ability to meet federalperformance standards.

Reportable condition related to not meeting or notconsistently meeting federal performance standards.


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FINDING #6

UIA did not meetvarious federalclaims processing

performancestandards.

UIA did not consistently meet federal performance standardsrelated to initial benefit payments, nonmonetary determination*processing, and appeals processing. In addition, UIA needs toimprove the quality of its separation-related nonmonetarydeterminations. These conditions resulted in delayed benefitpayments and improper benefit payments and claims denials,

which, if left uncorrected, could result in the loss of federaladministrative grant funding.

In August 2011, the USDOL's Employment and Training Administration (ETA) designated UIA as "marginally at risk" forconsistently failing to meet ETA's UI Performs core measuresrelated to first payment timeliness and lower authority appealsprocessing timeliness. In 2014, after UIA failed to sufficientlyimprove its performance, ETA designated UIA as "at risk" andbegan intensive efforts to assist UIA with improving itsperformance. As of June 30, 2015, UIA was still designated asat risk. We noted:

a. UIA did not consistently meet the UI Performs coremeasure that required UIA to make at least 87% of allinitial benefit payments within 21 days of the weekending date of the first compensable week of aclaimant's benefit year*. UIA's monthly performancewas below standard for 14 (66.7%) months during the21-month period ended June 30, 2015. UIA'sperformance ranged from a low of 67.4% in February2014 to a high of 91.0% in December 2014.

b. UIA did not meet the UI Performs core measure thatrequired the completion of at least 80% of nonmonetarydeterminations (both separation and non-separationissues) within 21 days of their issue detection dates.For the quarter ended September 30, 2011, UIAcompleted only 53.0% and 38.6% of its separation andnon-separation determinations, respectively, within 21days. For the quarter ended March 31, 2015, UIA hadincreased its timely completion of separation and non-separation determinations to 72.2% and 74.4%,respectively.

c. Michigan did not meet the UI Performs core measurethat required the average age of pending lowerauthority appeals to be 30 days or less. Since being

designated marginally at risk, the average age ofpending lower authority appeals has steadily increasedfrom 34 days for the quarter ended September 30, 2011to 94 days for the quarter ended June 30, 2015. Forthe quarter ended June 30, 2015, Michigan was thesecond lowest performing state relative to this coremeasure.



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d. UIA did not earn consistently high scores for the qualityof its separation-related nonmonetary determinations.Nonmonetary determinations are critical for determiningclaimants' past, present, or future eligibility for UIbenefits and impact the rights of both claimants andemployers. Therefore, it is imperative that UIA make

these determinations only after obtaining, or attemptingto obtain, all the facts relevant to the issue at hand.

As shown in the chart below, during the five mostrecently completed quarters, UIA met the UI Performscore measure for both separation and non-separationissues, which required a quality score of 95 or higher onat least 75% of the nonmonetary determinationssampled and reviewed. However, the quality of itsseparation-related determinations significantly laggedthat of its non-separation related determinations, wasinconsistent from quarter to quarter, and was only 1.0%above the minimum acceptable performance level

during the most recently completed quarter:

Percentage of Determinations Scoring 95 Points or Higher

For the Quarter Ended

Nonmonetary

Determination Type

June 30,

2014

September 30,

2014

December 31,

2014

March 31,

2015

June 30,

2015

Separations 85.4% 79.6% 91.7% 79.6% 76.0%

Non-separations 93.8% 91.7% 90.7% 85.7% 89.4%

The predominant reason that individual separation-related nonmonetary determinations did not achieveacceptable quality scores was because of insufficientfact finding. For example, UIA made determinationswithout sending out fact finding questionnaires, waitingfor fact finding questionnaires to be returned byclaimants or employers, or obtaining rebuttalstatements from claimants or employers, whennecessary.

UIA informed us that high workloads experienced during theeconomic downturn of 2008 and 2009 resulted in significant

quantities of backlogged work items which continue tonegatively impact its claims processing performance today. Also, UIA stated that its efforts to process the backlogged workitems were hampered by significant staffing reductions causedby decreased federal administrative funding after the GreatRecession.

After being designated as marginally at risk, UIA implemented,and continues to refine, a new benefits system thatautomatically completes many different work items that werepreviously completed manually. Also, UIA reengineered, and


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continues to review, evaluate, and reengineer, many of itsbusiness processes to make them more effective and efficient.In addition, UIA staff have worked and continue to worksignificant amounts of overtime to process the large quantity ofbacklogged work items. Further, UIA provided fact findingtraining to applicable UIA staff, developed a fact finding desk

guide, and increased its monitoring of nonmonetarydetermination quality. However, continued work is necessaryfor UIA to consistently meet federal performance standards.

RECOMMENDATIONS We recommend that UIA continue to take actions toconsistently meet federal performance standards related toinitial benefit payments, nonmonetary determinationprocessing, and appeals processing.

We also recommend that UIA continue to improve the quality ofits separation-related nonmonetary determinations.

AGENCY

PRELIMINARY

RESPONSE


The UIA agrees and will continue to take actions toconsistently meet the federal performance standards. TheUIA is currently meeting the standards for all core measuresthe UIA controls. For example, in the ETA Region 5 QuarterlyPerformance Report for the period January 1, 2015 throughDecember 31, 2015, the UIA scored 87.6% for All FirstPayment Promptness and 80.6% for NonmonetarySeparation - Quality, surpassing the acceptable level ofperformance.

For the finding specific to lower authority appeals, this processand allocation of resources for same is not administered bythe UIA. However, the UIA will continue to work with itspartners to improve timeliness.


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PROFILING AND REEMPLOYMENT SERVICES

BACKGROUND As a condition of receiving federal UI grant funding, the federalSocial Security Act, as amended by Public Law 103-152,requires all states to establish and maintain a system for

profiling* new claimants for regular UI benefits and referringclaimants for reemployment services* (Worker Profiling andReemployment Services [WPRS] system). Profiling identifiesclaimants who are most likely to exhaust their UI benefits andneed reemployment services to transition to new employment.Reemployment services include job search workshops, jobclubs, counseling and testing, referrals to employers, and othersimilar services. The Social Security Act makes completion ofreemployment services mandatory for identified claimants tomaintain their eligibility for UI benefits.

AUDIT OBJECTIVE To assess UIA's efforts to identify claimants likely to exhaust

their UI benefits and refer them to appropriate reemploymentservices.

CONCLUSION Moderately effective.

FACTORSIMPACTINGCONCLUSION

UIA routinely profiled claimants for regular UI benefits and,excluding a small number of claimants for whom it lacked acounty of residence, appropriately referred applicableclaimants for reemployment services.

Reportable condition related to lack of periodicallyevaluating the WPRS system and updating of its profilingmodel.

Reportable condition related to the non-referral of somemandatorily required claimants to reemployment servicesand insufficient action to ensure that referred claimantsattended reemployment services.



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FINDING #7

Evaluation of theWPRS system andreview of the

profiling model isneeded.

UIA's profiling modelnot reviewed andupdated since 2003.

UIA did not periodically evaluate whether its WPRS systemeffectively reduced program participants' length ofunemployment and the amount of UI benefits paid. Also, UIAdid not periodically review and update its profiling model toaccurately identify the claimants who were most likely toexhaust their regular UI benefits before returning to work.

Federal and state studies have shown that states' WPRSsystems varied significantly in their design and effectivenessand recommended that all states periodically evaluate theeffectiveness of their programs. The studies alsorecommended that states periodically update their profilingmodels to reflect changes in their states' economy, such asthe decline of industries or occupations and the availability ofnew administrative data. Although the studies identified thatsome states' WPRS systems had little or no impact onreducing the length of time that participants wereunemployed, the most effective system evaluated reduced theduration of participants' unemployment by an average of 2.2

weeks compared with nonparticipating claimants with similarrisk profiles. With approximately 18,600 profiled UIAclaimants receiving reemployment services and an averageweekly UI benefit payment totaling $285 in 2014, annualsavings to Michigan with an equally effective WPRS systemwould total over $11.7 million. Also, significant financialbenefits would accrue to the system participants throughincreased work-related wages.

UIA's profiling model, in use since 2003, calculates a claimant'sprobability for benefit exhaustion using a set of weightedvariables, including a claimant's educational background, baseperiod wages, prior unemployment experience, occupation atseparating employer, and industry. Since its implementation,19 (20.0%) of 95 industries in Michigan have experienced jobincreases or job reductions exceeding 25.0%.

In addition, with the implementation of MiDAS in October 2013,UIA now captures more comprehensive occupational andindustry data than used in its profiling model. By adjusting itsprofiling model to account for these changes, UIA couldimprove the effectiveness of its profiling model and the overalleffectiveness of the WPRS system.

UIA informed us that other priorities have precluded it from

evaluating the effectiveness of its related profiling model.

RECOMMENDATIONS We recommend that UIA periodically evaluate theeffectiveness of its WPRS system.

We also recommend that UIA periodically review and updateits profiling model.


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AGENCY

PRELIMINARY

RESPONSE


As to the first recommendation, the UIA agrees to continue touse federally required reports to measure the efficiency of theWPRS program and the successor program, ReemploymentServices and Eligibility Assessment (RESEA). ETA reports

(ETA 9048 Profiling and Reemployment Services and ETA9049 Profiling and Reemployment Services Outcomes) arecreated by the UIA and submitted to USDOL and are used byall stakeholders to measure program effectiveness.

Prior to the OAG's finding, the UIA and the MichiganWorkforce Development Agency (MWDA) formed a team tomonitor the progress of RESEA. The RESEA team wasestablished for the purpose of increasing services to thecustomer, ensuring that all USDOL requirements are beingmet, and ensuring that unemployed workers are scheduled forand attend their RESEA appointments. UIA providesassistance to MWDA to ensure that reports are generated

timely and guidelines are being met and provides feedback asto what is currently successful and what can be improved.

As to the second recommendation, the UIA agrees with theOAG recommendation. The UIA will seek to update itsprofiling model in 2016 and ensure that a periodic review iscompleted.


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FINDING #8

Claimants were notconsistentlyreferred for

reemploymentservices.

Action is needed toreduce claimantsexcused fromreemploymentservices.

UIA did not consistently refer claimants who met UIA'smandatory reemployment service participation criteria toMWDA for reemployment services. Also, UIA did not takesufficient action to reduce the number of claimants that itexcused, without consequence, from mandatory participation inreemployment services after missing their scheduled

appointment. As a result of these conditions, some claimantsmay not have returned to work as soon as otherwise possible,resulting in lost wages to the claimants and increased costs tothe UI program.

UIA Manual Section 6345WR(6) requires that, each week, UIAidentify new claimants who are not job attached, received theirfirst UI benefit payment within five weeks of their respectivebenefit year begin date, and met UIA's criteria for mandatoryreemployment services. UIA is then responsible for referringidentified claimants to MWDA for scheduling reemploymentservices, mailing notification of the scheduled appointments,and adjudicating nonattendance issues. We reviewed the

application of these processes and noted:

a. For claimants who did not identify their county ofresidence when applying for benefits, UIAinappropriately excluded the referral for reemploymentservices. For the 15-month period endedDecember 31, 2014, we identified 1,638 claimantswhom UIA designated as meeting its initial criteria formandatory reemployment services but whom UIA didnot refer for services. We randomly selected andreviewed the case files of 10 claimants from each of thelast 3 quarters of 2014 and noted that UIA did not refer11 (36.7%) of the claimants to reemployment servicesbecause UIA did not have the claimants' county ofresidence recorded in MiDAS. Appropriate reasonsexisted for UIA to not refer the other 19 claimants.

The county information in MiDAS is used to identify theMichigan Works! Service Center located closest to eachclaimant's residence.

b. UIA automatically excused a significant number ofclaimants from mandatory participation inreemployment services and determined that theclaimants were "not ineligible" for UI benefits when the

claimants missed their scheduled appointment andinformed UIA that they did so because they did notreceive the appointment notification.

Section 28(1)(e) of the Michigan Employment Security Act requires that claimants participate in reemploymentservices as a condition of UI benefit eligibility. For the15-month period ended December 31, 2014, UIA


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excused 1,819 claimants from mandatory participationin reemployment services because the claimants statedthat they did not receive the appointment notifications. Although these claimants represented 7.2% of all theclaimants scheduled for reemployment services duringthe period, UIA did not take action to determine why so

many claimants did not receive the notifications or takeother measures to better ensure that claimants receivethe notifications.

For example, UIA could begin sending appointmentnotifications electronically to those claimants whodesignate electronic communication as their preferredmethod of communication with UIA. At the time of ouraudit, all notifications were mailed via the USPS. Thischange would have the added benefit of reducing UIA'sprinting and mailing costs. UIA could also begin toretain and review the appointment notifications that theUSPS returns as undeliverable.

RECOMMENDATIONS We recommend that UIA consistently refer claimants meetingUIA's mandatory reemployment service participation criteria toMWDA for reemployment services.

We also recommend that UIA take action to reduce the numberof claimants excused, without consequence, from mandatoryparticipation in reemployment services after missing theirscheduled appointment.

AGENCY

PRELIMINARY

RESPONSE


As to the first recommendation, UIA agrees with therecommendation and has created and implemented a methodto ensure that county selections occur for all eligible claimants,through both systematic change and staff review. The currentprocess allows for the claimants to choose their appointmenttimes after they have been notified to participate in re-employment services. In addition, UIA began notifyingclaimants by sending appointment notifications electronicallyto claimants who designated electronic communication as theirpreferred method of communication with UIA.

As to the second recommendation, the UIA disagrees with thebasis for the recommendation. The UIA investigates inquiriesas required by the Michigan Employment Security Act. TheUIA does fact finding on the issue and issues a(re)determination with regard to the claimant not attending theappointment for reemployment services or an assertion thatthe notice was not received. The UIA believes it hasproceeded to ensure that those claims were properly reviewedand action, if necessary, was taken.


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SUPPLEMENTAL INFORMATION

SURVEY

DESCRIPTION

With the assistance of UIA, we identified all claimants whoapplied for UI benefits during the period October 1, 2013through November 30, 2014. The survey focused on UIA's

claims processing timeliness, customer service, and the clarityand comprehensiveness of UIA's communications.

We e-mailed an online survey to 400 randomly selectedclaimants. Also, we mailed a survey to 100 randomly selectedclaimants who had not provided UIA with an e-mail address.We received a total of 106 responses, a response rate of21.2%.

Following is a summary of the survey results that includes thenumber and percentage of responses received for each item.The total number of responses for each item may not agreewith the total number of responses reported because

respondents were instructed to answer only the questions thatwere applicable to them and one respondent gave multipleanswers to one question.


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Number of e-mailed responses: 86

Number of mail responses: 20

Response Response

Percent Count

15% 16

15% 16

70% 73

0% 0

105

1

Response Response

Percent Count

11% 2

17% 3

28% 5

28% 5

0% 0

17% 3

18

88

Response Response

Percent Count

30% 6

20% 4

20% 4

30% 6

20

86

Response Response

Percent Count

0% 0

30% 6

15% 3

40% 8

5% 1

10% 2

20

86

1. How did you file your most recent unemployment insurance (UI) claim?

In person at an Unemployment Insurance Agency (UIA) office

By telephone

Over the Internet

UNEMPLOYMENT INSURANCE AGENCY

Talent Investment Agency

Summary of Survey Responses - Customer Service

Department of Talent and Economic Development

Three or four attempts

Answer Options

By mail

answered question

skipped question

2. Approximately how long did it take to receive assistance with filing your UI claim?

I did not require assistance.

Answer Options

Answer Options

Five or six attempts

I received services immediately.

Less than 1 hour

Between 1 and 2 hours

Between 2 and 3 hours

More than 3 hours

answered question

Thirty minutes or less

From 31 to 60 minutes

More than 60 minutes

I called back later.

UIA took my telephone number and called me back.

answered question

skipped question

Seven or more attempts

answered question

skipped question

4. If you were transferred for personal assistance with filing your UI claim, how long did it take to speak with a

I spoke with a UIA employee immediately.

UIA employee?

skipped question

3. How many call attempts did it take to reach UIA's automated claims filing system?

One or two attempts

Answer Options


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Response Response

Percent Count

70% 7

30% 3

10

96

Response Response

Percent Count

16% 16

48% 49

20% 20

8% 8

9% 9

102

4

Response Response

Percent Count

22% 22

33% 34

21% 21

12% 12

13% 13

102

4

Response Response

Percent Count

84% 84

16% 17

101

5

Response Response

Percent Count

80% 67

20% 17

84

22

Answer Options

Not satisfied

Very dissatisfied

skipped question

9. For your most recent UI claim, have you received any UI benefit payments yet?

Yes

No

answered question

Answer Options

Answer Options

Answer Options

skipped question

skipped question

8. For your most recent UI claim, were you eligible for UI benefits?

Yes

No

answered question

Very satisfied

Satisfied

Neither satisfied nor dissatisfied

Not satisfied

Very dissatisfied

answered question

Answer Options

answered question

skipped question

7. Please rate your satisfaction with the timeliness with which UIA processed your claim for UI benefits.

skipped question

6. Please rate your satisfaction with the clarity of the questions asked by UIA as part of the claims filing

Very satisfied

Satisfied


5. Did UIA call you back within the time frame that UIA stated on the telephone?

Yes

No

answered question

process.


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Response Response

Percent Count

64% 46

29% 21

4% 2

1% 1

1% 171

37

Response Response

Percent Count

23% 16

50% 35

17% 12

9% 6

1% 1

70

36

Response Response

Percent Count

39% 27

44% 31

10% 7

1% 1

6% 4

7036

Response Response

Percent Count

12% 12

18% 19

17% 18

11% 11

15% 15

27% 28

103

3

Answer Options

10. How did you complete the biweekly certification(s) for your most recent UI claim?

answered question

skipped question

Very satisfied

Satisfied


Not satisfied

Very dissatisfied

Not applicable

Not satisfied

Very dissatisfied

answered questionskipped question

13. Please rate your satisfaction with the timeliness with which UIA issued a decision related to protests

associated with your claim.

skipped question

12. Please rate your satisfaction with the timeliness with which UIA processed your biweekly certifications.

Very satisfied

Satisfied


Answer Options

Very satisfied

Satisfied


Not satisfied

Very dissatisfied

answered question

In person at a UIA office

Through the mailanswered question

skipped question

11. Please rate your satisfaction with the clarity of the questions asked by UIA as part of the biweekly

Answer Options

Over the Internet

Via the telephone using UIA's Michigan Automated Response Voice

Via the telephone with the assistance of a UIA employee

certification process.

Answer Options


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Response Response

Percent Count

16% 11

20% 14

37% 26

11% 8

16% 1170

36

Response Response

Percent Count

66% 44

34% 23

67

39

Response Response

Percent Count

6% 4

17% 12

26% 18

4% 3

20% 14

26% 18

69

37

Response Response

Percent Count

8% 4

46% 23

20% 10

16% 8

10% 5

50

56

Response Response

Percent Count

58% 28

42% 20

48

58

14. Please rate your level of agreement with the following statement: UIA considered all relevant information

Strongly agree

Agree

when it issued its decision related to the protest of my claim.

Yes

No

answered question

skipped question

16. Please rate your satisfaction with the timeliness with which appeals associated with your claim were heard and a decision rendered.

Neither agree nor disagree

Disagree

Strongly disagreeanswered question

skipped question

15. Was the protest resolved in your favor?

Not applicable

answered question

skipped question

17. Please rate your level of agreement with the following statement: I was provided with information that

Strongly agree

clearly defined my responsibilities regarding the appeal of my claim.

Very satisfied

Satisfied


Not satisfied

Very dissatisfied

Answer Options

18. Was the appeal resolved in your favor?

Yes

No

answered question

skipped question

Agree


Disagree

Strongly disagree

answered question

skipped question

Answer Options

Answer Options

Answer Options

Answer Options


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Response Response

Percent Count

16% 16

46% 45

24% 24

6% 6

7% 798

8

Response Response

Percent Count

16% 16

39% 38

32% 31

7% 7

6% 698

8

Response Response

Percent Count

16% 16

50% 49

20% 20

8% 8

5% 5

98

8

Response Response

Percent Count

18% 17

49% 48

25% 24

6% 6

2% 2

979

filing and biweekly certification requirements.

Very dissatisfiedanswered question

skipped question

20. Please rate your satisfaction with the comprehensiveness of the information available to you regarding

Very satisfied

UIA's claims filing and biweekly certification requirements.

19. Please rate your satisfaction with the clarity of the information available to you related to UIA's claims

Very satisfied

Satisfied


Not satisfied

Answer Options

Answer Options

21. Please rate your satisfaction with the ease with which you were able to complete your UI claim-related

Very satisfied

Satisfied


Not satisfied

responsibilities.

as a UI claimant.

Satisfied


Not satisfied

Very dissatisfiedanswered question

skipped question

Answer Options

Satisfied


Not satisfied

Very dissatisfied

answered questionskipped question

Very dissatisfied

answered question

skipped question

22. Please rate your satisfaction with the information provided to you regarding your rights and responsibilities

Very satisfied

Answer Options


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Response Response

Percent Count

12% 12

38% 37

16% 16

7% 7

11% 11

14% 14

97

9

Response Response

Percent Count

23% 22

38% 36

8% 8

5% 526% 25

96

10

Response Response

Percent Count

16% 16

6% 6

77% 75

97

9

Response Response

Percent Count

70% 14

30% 6

20

86

concerns.

Very dissatisfiedNot applicable

answered question

skipped question

24. Please provide your opinion of UIA employees' knowledge of the UI-related information applicable to

your claim.

23. Please rate your satisfaction with the timeliness of UIA's responses to your claim-related questions and

Very satisfied

Satisfied


Not satisfied

Answer Options

skipped question

25. Were you selected to participate in the Profiling and Reemployment Services Program at Michigan Works!?

Yes, and I participated in the program.

Yes, but I did not participate in the program.

No

Very knowledgeable

Knowledgeable

Unknowledgeable

Very unknowledgeableNo basis for opinion

answered question

answered question

skipped question

Answer Options

Answer Options

Answer Options

answered question

skipped question

26. Did you receive reemployment services that were specific to your individual needs?

Yes

No


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Response Response

Percent Count

6% 1

6% 1

59% 10

12% 2

18% 3

17

89


DisagreeStrongly disagree

answered question

skipped question

27. Please rate your level of agreement with the following statement: The reemployment services that I

Strongly agree

Agree

Answer Options

received from Michigan Works! provided me with valuable skills that allowed me to return to work sooner

than I otherwise would have.


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AGENCY DESCRIPTION

The federal Social Security Act of 1935 created the UI programas a joint federal-state partnership, with each state responsiblefor designing its own program within broad federal guidelines.

In response to this Act, UIA was originally created as theMichigan Employment Security Commission by the MichiganEmployment Security Act of 1936, being Sections 421.1 -421.75 of the Michigan Compiled Laws. Under ExecutiveOrder No. 2014-12, UIA was transferred from the Departmentof Licensing and Regulatory Affairs to the Talent Investment

Agency, Department of Talent and Economic Development.

UIA helps jobless workers and their families by providing up to20 weeks of regular UI benefits while they seek newemployment.

For fiscal year 2014, UIA reported that it received 607,652 new

claims and paid UI benefits totaling approximately $1.1 billionto 370,980 unduplicated claimants. As of April 11, 2015, UIAhad 640 permanent full-time employees and 95 limited-termemployees. UIA's fiscal year 2014 administrative expenditurestotaled approximately $155.6 million.


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AUDIT SCOPE, METHODOLOGY, AND OTHER INFORMATION

AUDIT SCOPE To examine the program and other records of UIA related toclaimant services. We conducted this performance audit* inaccordance with generally accepted government auditing

standards. Those standards require that we plan and performthe audit to obtain sufficient, appropriate evidence to provide areasonable basis for our findings and conclusions based on ouraudit objectives. We believe that the evidence obtainedprovides a reasonable basis for our findings and conclusionsbased on our audit objectives.

PERIOD Our audit procedures, which included a preliminary survey, auditfieldwork, report preparation, analysis of agency responses, andquality assurance, generally covered the period October 1, 2012through September 30, 2015.

METHODOLOGY We conducted a preliminary survey to gain an understanding ofUIA's claimant services to establish our audit objectives andmethodology. Our preliminary survey included:

Interviews with various members of UIA managementand staff.

Review of applicable State and federal laws,appropriations acts, rules, regulations, policies,procedures, and manuals.

Examination of reports from various internal and externalaudits and reviews of UIA and similar organizations.

Analysis of management reports.

Research to identify industry standards, best practices,and headline events.

Analysis of UIA's internal control* related to eligibilitydeterminations and UI benefit claims processing.

Review of selected performance and quality data andstatistics.

OBJECTIVE #1 To assess the clarity and comprehensiveness of UIA'scommunications with UI claimants.



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To accomplish our first objective, we:

Reviewed UIA's use of various best practices forcommunication included within USDOL's UI Claimantand Employer Message Toolkit.

Identified best communication practices used by otherstates, i.e., Idaho, Kansas, Maine, Oregon, and Texas.

Reviewed and analyzed UIA efforts to communicate withclaimants and potential claimants on UIA's Web sites,publications, and selected forms.

Analyzed client comment cards collected at UIA'sproblem resolution offices and UIA's use of claimantsatisfaction surveys.

Evaluated the clarity and comprehensiveness of theinstructions given to claimants in the UI benefit

application and certification processes.

Reviewed the effectiveness of UIA's call center atanswering and responding to claimant telephone calls.

Evaluated the clarity and comprehensiveness of UIA'soverall communications for 50 randomly selectedclaimants who applied for UI benefits betweenOctober 1, 2013 and November 30, 2014.

Evaluated the clarity and comprehensiveness of UIA'sintentional misrepresentation-related communications for30 randomly selected claims with an intentionalmisrepresentation (re)determination issued fromOctober 1, 2013 through March 31, 2015. The 30 claimscontained a total of 60 intentional misrepresentationcases.

Evaluated the clarity and comprehensiveness of UIA'scommunications related to 25 randomly selectedappeals.

Analyzed UIA's returned mail processing procedures.

Sent a claimant satisfaction survey to 500 randomly

selected claimants.

Assessed whether UIA ensured that employers compliedwith claimant notification requirements.

OBJECTIVE #2 To assess UI A's efforts to ensure compliance with USDOL'squality and timeliness standards related to UI claims processing.


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To accomplish our second objective, we:

Analyzed the reports of UIA's consultants and reviewedUIA's implementation of the recommended processimprovements included therein.

Reviewed UIA's processes for monitoring the quality andtimeliness of its claims processing functions and itsprocesses for following up identified deficiencies.

Evaluated the quality and timeliness of UIA's processingof 50 randomly selected claims, 30 randomly selectedclaims with intentional misrepresentation, and 30randomly selected claims with appeals.

Reviewed UIA's progress at reducing its backloggedwork items.

Analyzed UIA's performance over time relative to UI

Performs performance standards.

Evaluated the sufficiency of training provided to claimsexaminers.

OBJECTIVE #3 To assess UIA's efforts to identify claimants likely to exhausttheir UI benefits and refer them to appropriate reemploymentservices.

To accomplish our third objective, we:

Reviewed the history of how and when UIA establishedits profiling methodology.

Interviewed UIA, MWDA, and USDOL's ETA employeesto obtain an understanding of UIA's and MWDA'sapplicable processes and controls.

Reviewed memorandums of understanding between UIAand MWDA.

Reviewed policies, procedures, and other authoritativeguidance.

Identified claimants with an increased risk of exhaustingtheir UI benefits before finding a job for the five quartersended December 31, 2014 and determined if UIAreferred the claimants to MWDA for reemploymentservices.

Reviewed a random selection of 30 claimants notreferred to reemployment services to determine if therewas a valid reason for nonreferral.


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Determined if UIA appropriately sanctioned claimantswho were referred to, but did not attend, reemploymentservices.

CONCLUSIONS We base our conclusions on our audit efforts and the resulting

material conditions and reportable conditions.

When selecting activities or programs for audit, we direct ourefforts based on risk and opportunities to improve Stategovernment operations. Consequently, we prepare ourperformance audit reports on an exception basis.

AGENCYRESPONSES

Our audit report contains 8 findings and 13 correspondingrecommendations. UIA's preliminary response indicates that itagrees with 12 recommendations and disagrees with 1recommendation.

The agency preliminary response that follows eachrecommendation in our report was taken from the agency'swritten comments and oral discussion at the end of our auditfieldwork. Section 18.1462 of the Michigan Compiled Laws andthe State of Michigan Financial Management Guide (Part VII,Chapter 4, Section 100) require an audited agency to develop aplan to comply with the recommendations and submit it within60 days after release of the audit report to the Office of Internal

Audit Services, State Budget Office. Within 30 days of receipt,the Office of Internal Audit Services is required to review theplan and either accept the plan as final or contact the agency totake additional steps to finalize the plan.


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GLOSSARY OF ABBREVIATIONS AND TERMS

adjudicate A process by which UIA reviews evidence to come to a decisionthat determines rights and obligations of the parties involved.

benefit year The period of 52 consecutive calendar weeks beginning with thefirst week the claim was filed.

ETA Employment and Training Administration.

intentionalmisrepresentation

An occasion when a person makes a false statement orrepresentation knowing it to be false, or knowingly and willfully withintent to defraud fails to disclose a material fact, to obtain orincrease a benefit or other payment.

internal control The plan, policies, methods, and procedures adopted bymanagement to meet its mission, goals, and objectives. Internalcontrol includes the processes for planning, organizing, directing,and controlling program operations. It also includes the systemsfor measuring, reporting, and monitoring program performance.Internal control serves as a defense in safeguarding assets and inpreventing and detecting errors; fraud; violations of laws,regulations, and provisions of contracts and grant agreements; orabuse.

material condition A matter that, in the auditor's judgment, is more severe than areportable condition and could impair the ability of management tooperate a program in an effective and efficient manner and/orcould adversely affect the judgment of an interested personconcerning the effectiveness and efficiency of the program.

MiDAS Michigan Integrated Data Automated System.

mission The main purpose of a program or an entity or the reason that theprogram or the entity was established.

MiWAM Michigan Web Account Manager.

MWDA Michigan Workforce Development Agency.


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nonmonetarydetermination

A decision made by an initial authority based on facts related to anissue detected that has the potential to affect a claimant's past,present, or future benefit rights and for which a determination ofeligibility was made. Nonmonetary eligibility determination criteriainclude having a qualifying job separation reason, being able andavailable to work, seeking work, and registering for work with the

State's workforce agency.

OAG Office of the Auditor General.

performance audit An audit that provides findings or conclusions based on anevaluation of sufficient, appropriate evidence against criteria.Performance audits provide objective analysis to assistmanagement and those charged with governance and oversight inusing the information to improve program performance andoperations, reduce costs, facilitate decision making by parties withresponsibility to oversee or initiate corrective action, and contribute

to public accountability.

profiling A system to identify and rank or score UI claimants by theirpotential for exhausting their benefits for referral to appropriatereemployment services.

reemployment services Services including job search assistance and job placementservices, such as counseling, testing, and providing occupationaland labor market information, assessment, job search workshops,ob clubs, and referrals to employers, and other similar services.

reportable condition A matter that, in the auditor's judgment, is less severe than amaterial condition and falls within any of the following categories:an opportunity for improvement within the context of the auditobjectives; a deficiency in internal control that is significant withinthe context of the audit objectives; all instances of fraud; illegalacts unless they are inconsequential within the context of the auditobjectives; significant violations of provisions of contracts or grantagreements; and significant abuse that has occurred or is likely tohave occurred.

RESEA Reemployment Services and Eligibility Assessment.

social media Forms of electronic communication, using Web sites andapplications, through which users create and share content.

TIA Talent Investment Agency.

UI unemployment insurance.


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UIA Unemployment Insurance Agency.

USDOL U.S. Department of Labor.

USPS United States Postal Service.

WPRS Worker Profiling and Reemployment Services.


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Office of the Auditor General: Performance Audit Report

Documents

Transcript of Office of the Auditor General: Performance Audit Report