DIRECTIVE	:	UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 20-89
TO	:	ALL STATE EMPLOYMENT SECURITY AGENCIES
FROM	:	DONALD J. KULICK Administrator for Regional Management
SUBJECT	:	Final Report on Department of Labor Office of Inspector General (OIG) Technical Assistance to Determine Underreported State UI Taxes, Report No. 04-86-074-03-315

1. Purpose. To transmit the subject OIG report for information and reference purposes.

2. Background. Recently the Departmental Office of the Inspector General (OIG) provided technical assistance to five State employment security agencies (SESAs) using OIG developed software to test and refine automated techniques for identifying employers who may have underpaid their State unemployment insurance (UI) taxes due to underreporting of taxable wages, and to develop methods for improving the accuracy of UI wage history files (identify and correct social security number (SSN) errors in SESA wage record files).

   Each SESA review covered a complete calendar year. Using the conventional programs developed by OIG, 3,355 employers who potentially underpaid $6.7 million in State 0I taxes were identified, and an additional 9,921 employers who potentially underpaid $4.0 million in State UI taxes were also identified using special programs developed in two of the States.

   From approximately 28 million social security numbers on the five States' wage record files their edit program identified over 400,000 social security account number errors which can easily be corrected using the computer, rather than manually correcting the files.

   The software also provides the capability for identifying high profile employers for potential field audit assignment or in-house reviews, reducing the number of monetary redeterminations and helping to prevent erroneous wage information from being given to other public agencies.

3. Equipment and Cost Considerations. Computer programs written in Easytrieve Plus were used by OIG staff to access Employer Tax and Employee Wage History files. This is a powerful, high level, easy to use programming language which can be used on IBM or IBM compatible computer systems. There are other access programs available on the marketplace which can be used on other vendors computer equipment. It is also conceivable that if a State has computer equipment other than IBM, the flowcharts and logic contained in the report could be used to expedite development of similar programs by these States.

   There are no estimates available of costs to SESA's to implement this system. However, the experience of the OIG technical staff in this area indicates that it takes 3 months, using 2 full time fully experienced technicians from start to finish to implement the system. In addition, approximately 20 workdays of staff time were required at the end to check outputs and correct and reenter data. However, OIG believes that the resources needed to maintain the system, once implemented, will be minimal.

   SESAs choosing to implement this system will have to finance the cost of the implementation from within their base UI grant. There are no additional funds available for this purpose at the National office.

4. Technical Assistance. Due to variations in State UI laws and procedures used by States concerning the transfer of wage credits. from predecessor to successor accounts and variations in wage base limits extensive programming changes to the basic OIG package offered by the OIG will most likely become necessary. If a SESA is interested in implementing the system the OIG can provide program listings or magnetic tape copies of the programs. OIG staff may also be made available on a limited basis for telephone consultation or technical assistance. Interested SESAs are encouraged to establish systems as described, or similar to the systems described, to detect potential underreported taxes by employers and SSN errors.

5. OIG Recommendation. The recommendation by the OIG that the Employment and Training Administration (ETA) consider modifying the current desired level of achievement (DLA) for field audit penetration for those States that decide to implement the system is not being considered at this time. ETA has initiated several projects focusing on performance measurement. These include Revenue QC, Performance Measurement Project and the cash management improvement initiative. The decision to revise or modify any of the current DLA's will be made on conclusion of these efforts.

6. Action Required. State agency Administrators are requested to share the contents of the attached OIG report with members of the Unemployment Insurance and ADP staff having responsibility for the areas covered in the report.

7. Inquiries. Inquiries or expressions of interest in the system should be directed to the appropriate Regional Office. Contact persons in the Atlanta Regional Office of the Inspector General are Stan McGhee or Van O'Connor. They may be reached at FTS telephone number 8-257-3256 or commercial telephone number area code 404-347-3256.

8. Attachment. Office of Inspector General (OIG) Final Report--"Summary Report of OIG Technical Assistance Reviews to Determine Underreported State UI Taxes...," Report Number 04-86-074-03-315, September 23, 1988.