References: 20 CFR 602; Federal Register Notice, March 26, 1990, 54 FR 11112; UIPL 13-93, January 12, 1993; and Benefits Quality Control State Operations Handbook, ET Handbook No. 395. Background: The final rule to establish the Unemployment Insurance Quality Control program is found at 20 CFR Part 602. Effective October 5, 1987, QC programs in the 50 States, the District of Columbia, and Puerto Rico have selected weekly random samples of UI benefit payments for investigation under the mandatory program. 20 CFR 602.21(g) provides that each State shall: Release the results of the QC program at the same time each year, providing calendar year results using a standardized format to present the data as prescribed by the Department; States will have the opportunity to release this information prior to any release by the Department. The notice of procedures for the release of BQC data for the UI program was published in the Federal Register on March 26, 1990, at 54 FR 11112. Date of Record: The Department has established close of business (c.o.b.) April 30, 1995, as the date of record for State databases for computation of the error rates for the CY 1994 Annual Report of BQC data. All information in the Annual Report will be based on CY 1994 BQC cases that have been signed off by the QC supervisor by c.o.b. April 30, 1995. States must not reopen any CY 1994 BQC cases after this date until they have reviewed the computations of the error rates and have reconciled any differences between the State and National databases. Any data analysis supporting the Annual Report must be run on the database as it exists at c.o.b. on April 30. If States make any further changes, their data and results will differ from the data and results of the National Office. These differences will then have to be reconciled. Annual Report Software: As described in UIPL 13-93, the software which produces the Annual Report excludes Emergency Unemployment Compensation (EUC) program eligibility option cases from the rates calculations. It also excludes cases which do not meet the definition of the BQC population, for example, interstate or supplemental payments. These cases are coded "9" in data element c1. The software adjusts the population dollars paid to exclude any EUC and code "9" cases. The CY 1994 footnote look-up table can be found in Attachment 1, pages 2 and 3. For cases with a reopen code of "3" (the State has changed the data in a previously closed case), the reopen date is used in determining the appropriateness of footnotes concerning time lapse requirements. The States may run the Annual Report software as soon as all cases are completed. The National Office will produce an Annual Report for each State, based on the CY 1994 BQC cases as of c.o.b. April 30, 1995. Annual Report Format: The Annual Report format is shown in Attachment 1. It is divided into three main sections. Quality Control Data o Total Dollars Paid in Population Total UI benefits paid to the population of UI claimants who comprise the sampling frames for all weeks in CY 1994 for which the State pulled a BQC sample, adjusted to exclude EUC program eligibility option cases and other UI payments that do not meet the definition of the BQC population. o Sample Size Total UI payments selected during CY 1994 (BQC batches 9401 through 9453) and completed (QC supervisor sign-off) by c.o.b. April 30, 1995, excluding EUC program eligibility and other cases that do not meet the BQC population definition. This is the number of BQC sample cases from which the rates and sampling errors (confidence intervals) are estimated. o Proper Payments The weighted ratio estimate of total dollars properly paid to total dollars paid expressed as a percentage. o Overpayments The weighted ratio estimate of total dollars overpaid to total dollars paid expressed as a percentage. o Underpayments The weighted ratio estimate of total dollars underpaid to total dollars paid expressed as a percentage. o 95% Confidence Interval A confidence interval, expressed as +/- a percentage, will be constructed for each of the three estimated rates. The actual rate is expected to lie within 95 percent of the intervals constructed from repeated samples of the same size and selected in the same manner as the BQC sample. Footnotes The footnotes that will appear on State BQC Annual Reports to describe certain conditions that affect the data are described in Attachment 1, pages 2 and 3. Narrative States are invited to supply a narrative analysis that will accompany their Annual Report. The Department will include this narrative in the digest of State Annual Reports that it will prepare (see section 10, below). The narrative may include, but is not limited to, a discussion of State laws and how they affect error rates, an explanation of circumstances that led to some degree of inaccuracy in the reported error rates, and proposed or actual corrective action strategies. State narratives must be received in the National Office no later than June 9, 1995. States not planning to submit a narrative should notify the National Office by June 9, 1995, that no narrative will be submitted. The procedures for preparing and transmitting the Annual Report narrative to the National Office are described in Attachment 2. Supplemental Data: In order for the SESAs to interpret the data in the Annual Report and provide narrative explanations of the data, the Department recognizes the need for additional information on cause and responsibility. The software that produces the BQC Annual Report will also generate a separate report consisting of up to 16 responsibility categories and up to 6 cause categories. Responsibility and cause data will be reported as percentages of UI dollars overpaid. The format for this report is shown in Attachment 3. In order to provide States with the greatest flexibility in interpreting the data, all possible responsibility codes and broad cause categories can be generated. States can combine categories which contain few sample cases, where appropriate. No sampling errors will be computed because the publication of these percentage rates is not mandatory by the State. States should be aware that some of these percentages are based on small numbers of BQC sample cases and may have relatively large sampling errors. The Department may publish such data in the technical appendix, along with additional analysis where appropriate. Comment Period: BQC Annual Reports produced by the Department of Labor will be transmitted to each State on May 12, 1995. Each State should review its Annual Report and if there are any comments submit them to the National Office (Attn: TEUQS, Andy Spisak) by May 31, 1995. SESA comments will be discussed and reconciled by June 9, 1995. Public Release by SESA: As summarized from the Federal Register notice of March 26, 1990: Each State will release the required data annually through established channels for disseminating State performance data. In accordance with established State procedures, the data must be provided to those who normally receive performance/evaluation data and to anyone else who requests it. It is no longer necessary to publish a notice of availability. States must release their Annual Reports by June 30, 1995. If a State fails to release data in accordance with these procedures, the Department, in its annual review of State QC operations as specified in 20 CFR, Part 602, Section 602.31, will take appropriate action. Federal Release of Data: The Department will announce the availability of QC program data for CY 1994 through a notice published in the Federal Register on or about July 31, 1995. The Department's publication will be a digest prefaced by background information on the Quality Control program, and a brief discussion of how the error rate estimates are computed. Readers will be discouraged from comparing results among States. Each State's section, including its Annual Report and narrative, will be displayed separately. State sections will be ordered alphabetically to discourage ranking and comparisons. The name of the State official designated by the State as its Annual Report contact will also be published. For CY 1994, the Department will continue the practice begun with CY 1989 data of publishing certain analytical information on aspects of the BQC findings. If the Department determines that a State has failed to follow the prescribed QC methodology -- regarding sample selection, data collection methodology, or case completion timeliness -- to such an extent that the data are not reliable, the Department will publish an explanation of the major deficiency in lieu of an Annual Report for that State. Also in accordance with instructions in the Program and Budget Plan, ET Handbook No. 336 (11th edition, change 2), States will be required to address these areas by submitting corrective action plans for the upcoming fiscal year. Key Dates: The following is a summary of key dates for the public release of CY 1994 BQC data. 4/30 States check BQC databases and resolve any database problems. 4/21 States submit any request for waiver of time lapse requirements, along with supporting analysis, to appropriate Department of Labor ETA Regional Administrator. 4/30 Date of record for State BQC databases for Annual Report purposes. Cases closed by supervisors after this date will NOT be included in the Annual Report. States should not reopen any CY 1994 cases to change the database after this date until their Annual Report is finalized and any analysis for the release of the data or the narrative is completed. 4/30 Department of Labor electronically transmits the modified Annual Report software and footnote look-up table to each State's Sun computer. 5/12 Department of Labor sends Annual Reports to the State Administrators over signature of Mary Ann Wyrsch, Director, UIS. 5/15-5/31 States review Annual Reports, including footnotes, and provide comments to Department of Labor. 6/1-6/9 Department of Labor and States discuss and reconcile comments in collaboration with Department of Labor Regional Offices. 6/9 States provide name of contact persons to appropriate Department of Labor ETA Regional Administrator. States provide narratives or notice of waiver of narrative comments to Department of Labor National Office. 6/30 States release CY 1994 BQC Annual Report and send copy of the release to the appropriate Department of Labor ETA Regional Administrator. 7/14 States send copies of any press releases and/or newspaper articles relating to the Annual Report released by the SESA for CY 1994 to the appropriate Regional Administrator. 7/31 Department of Labor publishes notice in the Federal Register announcing the availability of BQC data. Action Required: State Administrators are requested to: a. provide copies of these guidelines to the appropriate staff; b. ensure that annual report narrative comments or notice of waiver of such comments is transmitted to the Department of Labor National Office by c.o.b. June 9, 1995; and c. ensure that the following items are supplied to ETA Regional Administrators: (1) any request for a waiver of time lapse requirements by c.o.b. April 21, 1995; (2) the name, location, and telephone number of a contact person to whom interested parties can write or call with questions or inquiries about the State's annual release of BQC data by c.o.b. June 9, 1995; (3) a copy of the State annual BQC data release by June 30, 1995; and (3) copies of State releases of BQC data, any press releases and/or newspaper articles relating to the Annual Report released by the SESA for CY 1994 by July 14, 1995.

Background: Based on an inquiry from the Department of Labor (DOL), Service Delivery Areas (SDAs) have provided information on educational training packages and vendors previously used for Title II-B of the Job Training Partnership Act Summer Youth and Employment Training Programs. The lists were compiled by Regions (i.e., the types of educational curriculum and the names of vendors used by the SDAs in a region), and, in most cases, contain a brief description of the curriculum components, and a SDA contact person. The lists are for informational purposes only and do not represent endorsement of these educational training packages or vendors by DOL. Action: States are requested to share this information with their SDAs as soon as possible.

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References: Job Training Partnership Act, as amended; JTPA Regulations 20 CFR Parts 629 and 630 published in the Federal Register on September 22, 1989; JTPA Interim Final Regulations published in the Federal Register on December 29, 1992; and Training and Employment Guidance Letter No. 9-92, Policy Framework for the 1993 Summer Youth Employment Program Supplemental Appropriation: "Summer Challenge: A Program of Work and Learning for America's Youth." Background: The Employment and Training Administration recognizes that the anticipated addition of supplemental funds to the summer program may require the modification of already procured service and supply contracts and/or the addition of other service providers and suppliers. The expectations contained in TOGGLE 9-92 for expanded and enriched academic instruction will necessitate new or modified arrangements with education providers. This TEIN is one in a series of specially identified summer guidance and information issuances. Procurement: In procuring supplies and services for the CY 1993 summer program, every effort should be made to use existing competitive procurement processes in keeping with the intent of the JTPA Amendments as well as State and local efforts to improve cost effectiveness. However, in implementing the expected new features of this year's summer program, the Governor may declare an "exigency" for purposes of procuring supplies and services on an expedited basis, including sole-source justification and documentation where necessary. Sole-source justification and documentation may cite this TEIN and the time constraints associated with this national JTPA program initiative as the basis for expedited or non-competitive procurement. Effective use of cost/price analysis procedures will be necessary for these expedited or non-competitive procurements to be certain that supplies and/or services are provided at a fair and reasonable price. For example, an academic enrichment package purchased "off-the-shelf" would qualify as a fair and reasonable price if it can be shown that the package is sold at this "price" to the general public. Additionally, the State should ensure that existing Federal and/or State procurement requirements are complied with such as the following: -- "Selection of Service Providers" at Sec. 107 of the Act (pre-1992 Amendments). -- Applicable certifications and assurances such as Lobbying (29 CFR Part 93), Debarment and Suspension (29 CFR Part 98), and the new Nondiscrimination and Equal Opportunity Requirements of JTPA (29 CFR Part 34.20, see new assurance at 29 CFR 34.20 (a)). The State is reminded that the transition provision at 20 CFR 627.904(k) of the Interim Final JTPA regulations (December 29, 1992) requires the use of current rules and regulations (September 22, 1989) for the II-B summer program. This provision extends to procurements undertaken during the entire course of the CY 1993 summer program. Action: States are requested to bring this information to the attention of the Service Delivery Areas as quickly as possible.

References: The Wagner-Peyser Act, as amended (P.L. 97-300); 20 CFR 652; TEGL No. 4-94. Background: The Secretary of Labor is issuing final planning allotments for each State's share of PY 1995 funds for basic labor exchange activities. These allotments (Attachment I) are based on the FY 1995 appropriation of $845,912,000 and are distributed by the statutory formula described in Section 6 of the Act. The allotments are also being published in the Federal Register. The data used are Calendar Year 1994 averages of civilian labor force (CLF) and number of unemployed individuals. Section 6(b)(4) of the Act authorizes the Secretary of Labor to reserve up to 3 percent of the total fund availability to assure that each State will have sufficient resources to maintain statewide employment service (ES) activities. The set-aside for distribution through an administrative formula for PY 1995 is $24,791,040. The 3 percent distribution is included in the total final allotment. The set-aside was distributed in two steps to States whose relative share of resources declined from the previous year. In Step 1, those States with a CLF below one million and that are also below the median CLF density were held harmless at 100 percent of their prior year relative share of resources. The remainder was distributed in Step 2 in pro rata shares to all other States that lost in relative share from the prior year but did not meet the size and density criteria for Step 1. Differences between preliminary and final planning estimates are caused by the use of Calendar Year data as opposed to the earlier data used for preliminary planning estimates and postage savings related to U.S. Postal Service changes in methodology of calculating charges and improved mail management practices. Postage costs incurred by States during the conduct of ES activities are billed directly to the Department of Labor by the U.S. Postal Service. The States' final allotments do not include $19,544,000 of the total amount available, which is withheld for the payment of the States' ES penalty mail costs. Action: State planning activities are to be guided by the process described in the Wagner-Peyser Act, Federal Regulations at 20 CFR Part 652, and planning guidance provided by ETA Regional Offices.

Reference: Employment Security Manual (ESM), Part V, Section 3670-3693, Field Audit Function (ETA Audit Policy); Core Revenue Quality Control, Operations Handbook. Background: The role of the field auditor in administering a compliance program under State UC laws requires a high degree of technical knowledge covering State and Federal employment taxes and acquired investigative skill. Depending on individual State approaches to auditor training, acquired knowledge and skills are often reflected in varying degrees of auditor productivity and inconsistent audit quality. The need for a broader approach to field auditor development, beyond their own State UC law and rules, has frequently been expressed by State UC tax managers at National and multi-Regional Tax Conferences and has also been recommended by Federal and State auditors. The variables in payroll control, employer-employee relationships and remuneration for individual services cannot be monitored efficiently unless the auditors' education includes background familiarity with the larger arena of Federal employment tax laws and the inter-relationship of similar but unique State UC tax programs. State UC Tax Field Auditor Training Program: A field auditor training program which focuses on issues beyond a single State's UC law and rules, is nearing completion. The program, developed under a cooperative agreement with the Indiana Department of Employment and Training Services (IDETS), will provide States a special supplement of broad based instruction that will complement existing State UC tax compliance training for UC field tax personnel. The training program will: (A) Provide State UC compliance staff with a working knowledge of the Federal Unemployment Tax Act and other related Federal employment tax applications; (B) explain ETA audit policy provisions and the Federal interest in UC audit performance; (C) encourage interstate cooperation in compliance efforts; (D) improve professionalism in audit performance and report integrity, and discuss Generally Accepted Auditing Standards (GAAS) and their application in payroll and tax compliance audit applications; and (E) raise the level of auditor awareness of outside influences on employment tax administration, through tax avoidance, employment practices and legislation. Development: Many State UC tax experts have participated in the program design and development. All States were surveyed for input as to their existing policy on field audit operations, auditor training programs and desired subject matter for supplemental training. A workshop comprised of experienced UC tax compliance experts from twenty-five States representing each of the ten ETA regions, reviewed options resulting from the survey and provided guidance on desired or needed training and audit program development. Design: The training program under development is structured to be folded into existing State training with an introduction to Federal employment tax law, ETA policy on UC auditing, meeting State quality control requirements and the inter-dependence of the States' UC tax programs. Subject matter will be broad based and include, but not be limited to: (A) The Federal Unemployment Tax Act (FUTA) and related employment tax provisions of the Internal Revenue Code and Social Security Act referred to in FUTA; (B) the inter-relationship of Federal and State roles in unemployment tax programs and the value of inter-State cooperation; (C) an explanation of Generally Accepted Auditing Standards to the extent they apply to payroll and the limited financial auditing practiced in UC tax compliance audits; (D) all elements of current ETA audit policy (ESM, Part V, Sections 3670-3693 (as revised) and the proposed Revenue Quality Control audit quality requirements; (E) working relationships often designed to circumvent standard employment classification tests; (F) examples and explanations of special provisions in Federal and State laws that either extend or restrict worker coverage and employer tax liability; (G) trainee introduction to the central office processes for which he/she provides support, such as, status, cashiering, employer accounting, delinquency/collections, computer services available to the auditor; and (H) instructions for setting up and closing out of an audit assignment. This includes making the appointment, the entrance interview, closeout interview, auditor's report and the central office review. The training program for State UC tax auditors will be in stand- alone modules that may be used, in the whole as a phase of, or to complement training for State tax staff, or in parts to supplement existing State training formats. As a complement to State training programs, the modules will focus primarily on expanding the trainees' knowledge of outside factors and audit approaches that contribute to the overall effectiveness of their State tax compliance programs. Each stand alone training module will have a trainee and a corresponding trainer section. The training modules package will consist of: (A) A supervisory executive summary to provide SESA management with a training program overview; (B) an instructor's manual that follows each module and training unit, with desired results to exercises and options available to auditors in coverage issues; (C) a student manual with text and exercises designed to carry a trainee step-by-step through each module; (D) video instruction to enhance trainee understanding of the subject matter; and (E) all texts and printed material on floppy disks in a flat ASCII format. Trainer and student manuals for each unit will include test exercises to familiarize trainees with application of the procedures and principles covered in that unit. These test exercises will help instructors measure trainee comprehension of the training material. All modules will contain transparency and flip chart masters for use in group training sessions. The complete training program package will be made available to each State in reproducible units. Program Delivery: Three Train-the-Trainer sessions have been scheduled for State staff who are responsible for auditor training and/or performance in their respective States. Such individuals should attend one of the three sessions that have been scheduled as follows: May 18-21, Atlanta, Georgia June 15-18, Denver, Colorado June 22-25, Indianapolis, Indiana The Indiana Agency and its contractor, The White River Training Company, will provide you directly with specifics on the training sessions. Hotel accommodations will be provided by the contractor. Trainers will be responsible for transportation, meals and other travel expenses. Attending a Train-the-Trainers session is essential to the success of the program because it will provide State trainers with specific knowledge and skills to deliver the program and guidance to develop related State-specific material for their auditor training programs. The Train-the-Trainers sessions will also enhance State trainers' knowledge of Federal and multi-State employment tax interface that they may not have exposure to in their own programs. Action Required: State Agency Administrators are requested to: (A) Provide the information in this Directive to their UC Directors and/or appropriate tax managers and training officers; (B) select individuals to be responsible for implementation and integration of the program into their auditor training program; and (C) assure that individuals who will be conducting the training attend one of the three train-the-trainer sessions.

References: Training and Employment Information Notice (TEIN) No. 49-93, Capacity Building Strategy Paper; and TEIN No. 11-94, "Consultation with our Customers." Background: TEIN No. 11-94, dated November 4, 1994, discussed the Employment and Training Administration's (ETA) intention to conduct an extensive "consultation process" to strengthen our understanding of the technical assistance and training needs of the Nation's employment and training system. ETA is committed to the continuous improvement of employment and training staff capabilities as a key intervention in improving the quality of services provided to participant and employer customers. One activity of the consultation effort is the administration of a broad-based, system-wide survey to assess the capacity building and technical assistance needs of employment and training staff. The Department ofLabor systematically gathers information on the capacity building and technical assistance needs of its partners in order to achieve continuous improvement and provide high quality services to its primary customers -- the participant and the employer. To that end, this survey, along with other components of the capacity building effort, will obtain information needed to help design staff training programs which will help unify the current employment and training system; be flexible enough to meet local developmental needs; reach the hands- on service provider level; and ultimately improve the quality of services that our customers receive. Survey Instruments: Working with National and Regional Office staff, the Technical Assistance and Training Corporation (TATC), the contractor engaged to assist in this effort, developed the survey instruments for this project. Approved by the Office of Management and Budget, the surveys will be completed by State and local program directors and staff of the Job Training Partnership Act (JTPA), the U.S. Employment Service (ES/UI), the One-Stop Implementation States, the Job Opportunities and Basic Skills (JOBS) program, and other Federal, State and local employment and training initiatives. There are two different survey forms: Program Directors/Managers Form - These surveys will be completed by Program Directors or Managers, Assistant/Deputy Directors or Managers, Supervisors of Front-Line Staff, or Contract Manager/Monitors. Front-Line Staff Form - These surveys will be completed by Intake/Outreach workers, Case Managers, Counselors, Teachers, Instructors, or Trainers, Job Developers, Job Placement specialists and other staff who interact directly with participants and employers. TATC will mail survey packets directly to State and local Program Directors and will include a sampling plan for local distribution. All individual responses will be kept completely confidential; only summary results will be reported. Each packet will also contain "stamped" return envelopes for mailing the completed surveys back to TATC (each survey will have its own return envelope). Participation in this survey effort is voluntary, however, cooperation in completing the survey is greatly appreciated. The results of the survey will be used to establish priorities for the use of ETA resources and to create a capacity building system that addresses the long-range developmental needs of a customer- focused employment and training network. Survey results will be formatted by Regions, States and programs within States and will include information on common needs across programs, effectiveness of current training methods, and information on best practices and program models. The results will be widely distributed. Action: Recipients of this TEIN are requested to inform Directors and Program Administrators of Service Delivery Areas, Substate Areas, One-Stop Career Systems, and Employment Service/Unemployment Insurance programs of the upcoming survey and strongly encourage their participation in this system-wide effort. A copy of this TEIN will be sent by the Department of Health and Human Services to each State JOBS Director.

References: UIPL 44-90 (September 21, 1990); Core Revenue Quality Control Operations Handbook (July 31, 1992). Background: Revenue QC is being developed in four separate modules: (1) Core, which assesses the quality of State Employment Security Agencies' (SESAs') internal tax processing operations; (2) Benefit Charging, covering how accurately employer chargeability is determined and charges are allocated; (3) Employer Compliance, which is to measure the accuracy of employers' contributions reports and completeness of payment of contributions due; and (4) Data Validation, to assess the accuracy of data obtained through required UI reports. The first two modules have been tested and the voluntary stage of RQC reflects the Core RQC test findings. Core RQC assesses how timely, accurately, and completely UI tax operations internal to the SESA are conducted. However, it is not concerned with the accuracy of the information tax units receive or how completely employers pay taxes due. The Employer Compliance (EC) module is intended to fill this gap. EC is intended to assess the accuracy of the information reported on contributions reports and the information on which States have made status determinations. This pilot project will test the feasibility of doing this by taking randomly-selected samples of employer accounts and auditing them according to ES manual standards. This sample of firms can also be used to estimate how much of contributions due were paid timely during the audit year, so that the results can be compared with what is obtained from the new RQC computed measure "The percent of amounts due that were paid timely." Although all SESAs routinely conduct employer audits, the employers are rarely selected in a way that permits the audit findings to be used to generalize about the behavior of all the State's subject employers. Some SESAs select employers at random but do not take the next step of analyzing the random results to make inferences about compliance rates. Both steps--random selection, and analysis of findings--are part of the EC module, and are the subject of this pilot. The basic design for the pilot was developed by Abt Associates, Inc., the current RQC technical support contractor, with input from an expert panel of UI tax administrators. Abt estimated that each pilot State would need to complete 1,600 "random" audits (actually, chosen using an efficient sampling design) to provide a sufficiently precise estimate of compliance. For comparison, it would be desirable to have another 400 audits chosen either from previous blocked claims or IRS 1099 leads, or both. The 2,000 (or 2,400) audits are to be done in a 12-month period, and all will refer to the same base year. All audits will be expected to meet RQC/ESM standards for quality. It is expected that a certain number of out-of-State employers will be selected; the design calls for them to be audited as well as in-State employers. The pilot is scheduled to begin in October 1993 and run for 12 months. More details on the pilot are provided in the attached paper. Objectives: This pilot is intended to assess the feasibility of including an Employer Compliance module in RQC. It will attempt to do this by (a) measuring the extent of incomplete or inaccurate reporting in the pilot States; (b) estimating the costs of conducting large-scale random audits, including the foregone audit yield and possibly lower compliance because of reductions in audits selected using the SESA's usual targeting methods; (c) providing better estimates of sample sizes needed for EC purposes; (d) noting the operational realities of periodically conducting this kind of large-scale research effort as part of a continuing field audit program, particularly in States with differing ADP capabilities; (e) determining whether data can be effectively put to use for audit selection and employer education; and (f) determining whether EC is the most cost-effective way to estimate non-compliance. (g) The sample will also be used to estimate the percentage of contributions due accrued during the audit year that was paid timely and (h) will be used to gather information on employee leasing companies and/or their clients, for future research by SESAs or UIS. Structure and Timing: The Department is seeking five States to implement the basic design developed by Abt Associates, Inc. Staff from the pilot States will be expected to help refine the design. Technical assistance in fine-tuning the design, providing training, and managing the pilot will be provided by a contractor (yet to be selected), who will also evaluate the results. Based on the responses to this solicitation, the Department expects to select participants by approximately June 1. The State pilot coordinators will meet with Federal staff and the pilot support contractor to refine the design and set interim deadlines and tasks, including training plans, later in June. Shortly thereafter, State ADP staff will be asked to meet with Federal and contractor staff to refine specifications for the sampling frame, sample selection, and retrieving data relevant to the pilot. The pilot is scheduled to begin in October 1993 and run for 12 months. Eligibility and Selection Criteria: It is assumed that most States with an interest in the pilot will have audit or field staff programs large enough that it will be feasible to conduct 1,600 random audits. States must be able to conduct audits meeting the new standards for quality and documentation. To meet this criterion, a State must have completed the RQC Field Audit Program Review (preferably as part of having implemented RQC voluntarily) and initiated any program improvements needed. If such has not been done by time of responding to this solicitation, the State must agree to do so by August and complete any needed program improvement by October. Each eligible State must provide a pilot coordinator who is willing to assist in the refinement of the basic design. If the number of volunteers permits, selection will emphasize diversity of participants with regard to geographical location, size, industrial mix, and degree of tax (especially audit) automation. Resources Provided for the Pilot: a. ADP Support. The pilot has many aspects amenable to or requiring automation: selecting the "random" component of firms to be audited; extracting data elements from the mainframe for the audit record; storing the auditor's data; tracking the progress of audits; analyzing results. The Department will provide software and/or specifications for many of these functions. In addition, each State will receive resources to defray the costs of programming/installing project software. b. Auditor Support. The Department will provide every pilot State with the equivalent of nine staff years over a three-year period to defray most of the additional staffing costs of conducting the pilot. c. Travel Funds for Out-of-State Audits. The Department will provide funds to defray the estimated costs of conducting out-of- State audits as part of the project. d. Technical Support. The Department will secure the services of a technical support contractor to assist with managing and then evaluating the pilot. Action Required: Interested SESAs are asked to communicate their desire to participate to Regional Offices by 45 days from the date of release of this UIPL.

Reference: ET Handbook No. 395 and UIPL 41-92 (August 3, 1992). Background: Since the start of the Quality Control (QC) Program, the Office of Quality Control has envisioned a change in the methods used to collect and verify QC data. The primary reason for this change is cost savings, which will be reallocated to fund other QC activities. Additionally, SESAs have long requested relief from the rigors of in-person verifications which resulted in excessive travel times and produced results which could be obtained using other, more cost effective methods. To measure the effectiveness of these other verification methods, a Telephone Pilot was conducted in four SESAs. The pilot findings indicated that telephone verifications were in fact, a viable option to the present BQC in-person methodology. Individual components of the QC investigation which could be conducted using other than the in-person method were identified. The Pilot results demonstrated that these components could be investigated using the telephone/FAX, and or mail with little or no loss in data quality. There were six design considerations developed that were applied in conjunction with the data generated by the Telephone Pilot to produce the alternative methodologies. The following provides a brief description of the six design considerations: (1) Data Quality. The BQC's credibility is based on the quality of its data. Use of alternatives to the in-person method of investigation which lessen the accuracy of its findings must be justified by considerable gains in other areas. (2) Cost Savings. One of the major appeals of alternative methods is their ability to increase the efficiency of BQC verifications. Cost savings was important and was appraised in conjunction with its impact on data quality. These cost savings had to be developed to specifically show the impact of savings versus loss in data quality. (3) State Flexibility. SESAs have long requested more flexibility in how they can routinely conduct BQC investigations. The use of telephone or mail was always available to the SESAs, but only in extenuating circumstances, and it was necessary to provide adequate justification when using these "other" methods. These alternative methods will allow SESAs more flexibility when conducting investigations. (4) Administration. This was a consideration because the Department must be capable of administering these changes equitably among SESAs. This means that the budgetary and policy implications of these changes must be comparable and consistent among SESAS. (5) Monitoring. Monitoring by both Regional and National Office (RO) (NO) staff is an integral part of maintaining QC data integrity. Where variations in the methodology to be applied for a particular investigative component exists, the Federal Monitor will be required to determine if the proper application of the methodology was utilized. It is preferable to minimize monitoring subjectivity and increase monitoring consistency when implementing the alternative methodologies. (6) Consistency in Methodology. Maintaining a consistent methodology throughout BQC is a primary consideration. This is so that any differences in BQC findings reflect the true rate of mispayments in the universe of State UI payments, and not the differences in how thoroughly BQC verifications are done. The above design considerations played an integral part when addressing the feasibility of applying the pilot results to the five QC investigative components. These investigative components are: (1) Claimant Interview, (2) Benefit Year/Base Period Wages, (3) Separation Information, (4) Work Search Verifications, and (5) Third Party and Other Verifications. After presenting these findings in several meetings throughout the year, and receiving input from both Regional and SESA QC staff, the Department is now moving towards implementation of these alternative methods. For each individual investigative component, Handbook No. 395 will be revised to indicate the primary and secondary method(s) to be used in the collection and verification of QC information. The Handbook will provide detailed instructions for each component, and the method(s) to be applied. The Department had anticipated implementing these changes in May 1993. However, any change to the QC investigative methodology requires approval from the Office of Management and Budget, and due to unforeseen delays, it is necessary to move the implementation date. Policy: SESAS are scheduled to begin implementation of the new alternative methods on all BQC cases effective July 5, 1993, which is the sample pull date for Batch 9327. This may also be applied to incomplete cases from previously selected batches. However, SESAs may choose to complete these unfinished cases using the "old" in-person method, at their discretion. The investigative components that will be mostly impacted by the new methodology are: Work Search Contact Interviews, Employer Interviews, and Third Party Verifications. A draft copy of Chapter VI, which explains the methodology changes in detail, is provided as an attachment (See Attachment A). There were basically no changes to the in-person method used for the Claimant Interview. The Claimant Interview anchors the BQC investigation, and is the major detection point for a number of overpayments and underpayments of all types. Additionally, the Pilot indicated that there was a considerable loss in data quality when using other than the in-person method for conducting the Claimant Interview. There were major changes to the Work Search Verification methodology. Work Search verifications must continue to be conducted in-person, with a number of "sanctioned exceptions". The in-person method remains the "primary" method of verification for this investigative component. This was necessary for several reasons including a loss in data quality, difficulty in administering and monitoring, and the overall inconsistencies among SESAs that would be exhibited by permitting SESA flexibility for Work Search Verifications. For a detailed listing of the "sanctioned exceptions", see Attachment A, (Work Search Contact Interviews, item No. 7). A number of "exceptions" were also rejected, due primarily to their inability to satisfy certain design considerations. The primary method for conducting Employer Interviews is now the use of telephone/FAX. See Attachment A, (Employer Interviews, item No. 8).The primary method for conducting Third Party verifications is now by use of telephone/FAX. See Attachment A, (Third Party Verifications, item No. 9). Resource Allocations: Due to the launching of Revenue Quality Control, a number of BQC positions have been reallocated effective May 10, 1993. The reallocation of the BQC positions means that SESAs' weekly sample size will be adjusted beginning with Batch 9319 which has a sample pull date of May 10, 1993, and again beginning July 5, 1993, the sample pull date for Batch 9327 and the effective date of alternative methods. (See sample adjustment chart, Attachment B). Additionally, SESAs currently conducting Program Improvement (PI) studies are to make the sample adjustments and continue their PI studies, while ensuring that minimum sampling requirements are met. SESAs that may need an extension of their current PI study should follow the procedures in UIPL 37-91. Procedures: SESAs should begin preparation for implementing alternative methods on July 5, 1993. These preparations include, but are not limited to, revisions to the State QC Procedures Operations Handbook, staffing adjustments, forms development, etc. Action Required: SESA Administrators are requested to provide this information to appropriate staff.

References: JTPA Sections 161 and 162, as amended by the Job Training Reform Amendments Act of 1992; Department of Labor Appropriations Act, P.L. 103-333 (for PY 1995); Training and Employment Guidance Letter No. 4-94; Public Law 104-6 (Defense Department supplemental). Background: On April 10, 1995, President Clinton signed Public Law 104-6, a Defense Department supplemental appropriation, which also contained a $200 million rescission to the PY 1995 Title II-C Youth Training Program grants. This represents a 33.4 percent reduction from the previously appropriated level of $598,682,000. A second rescission package is currently pending in Congress. The House bill contains a $310 million reduction to the program, while the Senate rescission would be $272 million. The effect of the Public Law 104-6 $200 million rescission is not in the House bill, but is reflected in the Senate bill reduction; thus the possibility remains for a further reduction that could be in the range from $110 million to $272 million. The House/Senate conference to finalize the rescissions package is expected to occur during the week of May 8 and it is expected that the final bill will go to the President by May 29. Implementation: The attached table shows the $200 million reduction by State, and is being provided for planning purposes. The final revised Title II-C allocations will not be issued until final action is taken on the second bill. Notices of Obligation (NOOs) will be issued on or about July 1, 1995. One option for dealing with the Title II-C reductions is the flexibility provided by the Act to shift up to 10 percent of Title II-A funds, and/or 20 percent of Title II-B funds to Title II-C, provided such transfers are described in the Job Training Plan and approved by the Governor (20 CFR Part 628.550). Also, the Senate rescission bill includes language that would authorize transfers of up to 50 percent from II-B to II-C. Final Conference action will determine whether that provision stays. States and SDAs should ensure that all subgrants and subcontracts contain a clause which limits these agreements to the availability of Federal funds. Action: States are requested to begin adjusting their PY 1995 planning efforts in light of the information contained in this issuance and to advise their SDAs to do the same.