Audit of the Executive Office of Labor and Workforce Development—Department of Unemployment Assistance Objectives, Scope, and Methodology

An overview of the purpose and process of auditing the Executive Office of Labor and Workforce Development—Department of Unemployment Assistance.

Overview

In accordance with Section 12 of Chapter 11 of the Massachusetts General Laws, the Office of the State Auditor has conducted a performance audit of certain activities of the Executive Office of Labor and Workforce Development (EOLWD) for the period March 12, 2020 through December 31, 2021.

We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.

Below is a list of our audit objectives, indicating each question we intended our audit to answer; the conclusion we reached regarding each objective; and, if applicable, where each objective is discussed in the audit findings.

Objective	Conclusion
Did the Department of Unemployment Assistance (DUA) ensure that incarcerated individuals did not receive Pandemic Unemployment Assistance (PUA) benefits in accordance with the US Department of Labor’s (DOL’s) Employment and Training Administration’s (ETA’s) Unemployment Insurance Program Letter No. 23–20, dated May 11, 2020?	No; see Finding 1
Did DUA ensure that Commonwealth of Massachusetts employees did not receive PUA benefits in accordance with DOL’s ETA’s Unemployment Insurance Program Letter No. 23–20, dated May 11, 2020?	No; see Finding 2
Did DUA investigate and report all overpayments over $10,000 to the DOL Office of the Inspector General (OIG) in accordance with DOL’s ETA’s Unemployment Insurance Program Letter No. 04–17 (Change 1)?	No; see Finding 3
Did DUA update its internal control plan to address the COVID-19 pandemic in accordance with the Office of the Comptroller of the Commonwealth’s (CTR’s) “COVID-19 Pandemic Response Guidance,” dated September 30, 2020?	Yes
Did DUA submit annual, quarterly, and monthly Unemployment Insurance Trust Fund (UITF) reports to the Legislature in accordance with Section 14F of Chapter 151A of the General Laws?	No; see Finding 4

To accomplish our audit objectives, we gained an understanding of the aspects of DUA’s internal controls that we deemed relevant to our objectives by reviewing agency policies and procedures and by interviewing DUA staff members and management responsible for the administration and management of the areas under audit.

To obtain sufficient, appropriate evidence to address our audit objectives, we performed the procedures described below.

Benefits Paid to Incarcerated Individuals

To confirm that DUA ensured that incarcerated individuals did not receive PUA benefits in accordance with the requirements of DOL’s ETA’s Unemployment Insurance Program Letter No. 23–20, dated May 11, 2020, we took the following actions:

• DUA provided us with a list from its PUA system, with data originating from the Massachusetts Parole Board, of individuals incarcerated in Massachusetts during the audit period. We also reviewed DUA’s PUA claim system.
• We selected a random, statistical² sample of 103 from the population of 7,102 claims filed for PUA benefits by individuals who were identified by the Massachusetts Parole Board as having been incarcerated during the audit period, using a 95% confidence level,³ a 50% expected error rate,⁴ and a 20% desired precision range.5
• Using DUA’s PUA claim system, we identified, for each of the 103 sampled claims, each filing individual’s claim status for each week that they filed for PUA benefits, the date each claim week (which is a week for which a claimant requested benefits) was filed, the amount paid and the payment date, and the dates of their incarceration and release. For each claim in our sample, we compared the filing individual’s identified dates of incarceration, according to data from the Massachusetts Parole Board, to the dates that they received PUA benefits to determine whether DUA made any payments to individuals who were incarcerated four or more days during the week for which they received benefits.
• For each claim in our sample, we compared the dates the filing individual was incarcerated to the weeks they submitted claims for PUA benefits. We also reviewed the Benefits Issues tab within DUA’s PUA claim system to determine whether the claim had an incarceration issue noted in the system and, if so, the date documented within the system that the incarceration was initially detected.
• We reviewed the detailed information within DUA’s PUA system for weeks that each individual claimed PUA while they were reported by the Massachusetts Parole Board as incarcerated to determine whether DUA paid PUA benefits while each individual was incarcerated.

See Finding 1 for issues we identified with DUA paying incarcerated individuals PUA benefits.

Benefits Paid to Commonwealth Employees

To confirm that DUA ensured that Commonwealth of Massachusetts employees did not receive PUA benefits in accordance with DOL’s ETA’s Unemployment Insurance Program Letter No. 23–20, dated May 11, 2020, we took the following actions:

• DUA provided us with the list of Commonwealth employees during May 2020 that it originally received from CTR. We also reviewed DUA’s PUA claim system.
• We selected a random, statistical sample of 80 from a population of 5,488 claims filed for PUA benefits by individuals who were reported by CTR as having been Commonwealth employees at that time, using a 95% confidence level, a 25% expected error rate, and a 20% desired precision range.
• Using DUA’s PUA claim system, we identified, for each sampled claim, the filing individual’s claim status for each week they filed, the date each claim week was filed, the amount paid and the payment date, and the dates between the payment and the date a denial was assessed by DUA, if any. We also reviewed the CTHRU website, the Commonwealth’s statewide payroll open records system, to determine whether the claimant was listed on the website as having earnings from the Commonwealth of Massachusetts in 2019, 2020, or 2021.
• For each claim sampled, we determined whether there were any instances where an active Commonwealth employee was paid a claim for PUA benefits.

See Finding 2 for issues we identified with DUA paying PUA benefits on behalf of Commonwealth employees.

Reporting of Overpayments

To determine whether DUA investigated and reported all overpayments over $10,000 to DOL OIG in accordance with DOL’s ETA’s Unemployment Insurance Program Letter No. 04–17 (Change 1), we took the following actions:

• We exported from the DUA’s PUA claim system a report of all existing overpayments with an account type of “PUA—Massachusetts,” a receivable type (in this case, the specific pandemic unemployment program) of “Pandemic Unemployment Assistance,” and an impact type (in this case, the reason the claim was denied) of “Incarceration Denial.”
• Overpayments in excess of $10,000 must be reported to DOL. To determine whether DUA reported overpayments to DOL, we requested, from DUA, evidence for the entire population of 50 existing PUA overpayments in excess of $10,000 that were related to an incarceration denial.

See Finding 3 for issues we identified with DUA reporting overpayments exceeding $10,000 to DOL.

Internal Control Plan Updates

To determine whether DUA updated its internal control plan to address the COVID-19 pandemic in accordance with CTR’s “COVID-19 Pandemic Response Guidance,” dated September 30, 2020, we took the following actions:

• We requested, and DUA provided us with, its internal control plan that was in effect during the audit period.
• We reviewed this plan and its attachments and inspected each to determine whether it was updated to reflect the impact of the COVID-19 pandemic on DUA’s business and operating processes.

Based on our testing, DUA prepared an internal control plan that reflected the impact of the COVID-19 pandemic on its business and operating process.

UITF Reporting

To determine whether DUA submitted annual, quarterly, and monthly UITF reports to the Legislature in accordance with Section 14F of Chapter 151A of the General Laws, we took the following actions:

• We received from EOLWD’s Department of Economic Research 15 UITF reports generated during the audit period and the associated emails for the submission of each to the Legislature.
• We inspected the dates and recipients of each email to determine whether EOLWD submitted each UITF report to the Legislature by the required due date.

See Finding 4 for issues we identified with DUA’s UITF reports.

We used statistical sampling methods for testing; however, we did not project the results of our testing to any population.

Data Reliability Assessment

To determine the reliability of the data from DAU’s PUA system, we took the following actions:

• We interviewed DUA employees and Massachusetts Parole Board employees who were knowledgeable about the data. We also reviewed DUA policies over its information system controls.
• We reviewed the System and Organization Control reports⁶ that covered the periods November 1, 2019 through April 30, 2020; May 1, 2020 through April 30, 2021; and May 1, 2021 through April 30, 2022. We verified that the System and Organization Control reports described testing of certain information system general controls (access controls, configuration management, contingency planning, and segregation of duties) and that they were tested without exceptions.
• We performed electronic testing by reviewing the data for blank fields and duplicate entries, and we ensured that all required fields contained appropriate information (for example, date fields reported valid dates).
• To verify that the first names, last names, Social Security numbers, dates of birth, commitment numbers, and commitment dates matched the information recorded in DUA’s PUA claim system, we traced this information from a random sample of 35 individuals from each of the nine incarceration batch files,⁷ which were provided to us by DUA but originated from the Massachusetts Parole Board.

Based on the results of the data reliability assessment procedures described above, we determined that the information we obtained was sufficiently reliable for the purposes of our audit.

2.   Auditors use statistical sampling to select items for audit testing when a population is large (usually over 1,000) and contains similar items. Auditors generally use a statistics software program to choose a random sample when statistical sampling is used. The results of testing using statistical sampling, unlike those from judgmental sampling, can usually be used to make conclusions or projections about entire populations.

3.   Confidence level is a mathematically based measure of the auditor’s assurance that the sample results (statistic) are representative of the population (parameter), expressed as a percentage.

4.   Expected error rate is the number of errors that are expected in the population, expressed as a percentage. It is based on the auditor’s knowledge of factors such as prior year results, the understanding of controls gained in planning, or a probe sample.

5.   Desired precision range is the range of likely values within which the true population value should lie; also called confidence interval. For example, if the interval is 90%, the auditor will set an upper confidence limit and a lower confidence where 90% of transactions fall within those limits.

6.    A System and Organization Control report is a report, issued by an independent contractor, on controls about a service organization’s systems relevant to security, availability, processing integrity, confidentiality, or privacy.

7.    DUA provided us with nine separate files, which we used to compile our list of individuals who were reported by the Massachusetts Parole Board as being incarcerated in Massachusetts during the audit period.

Date published:	December 12, 2024