An audit issued by CliftonLarsenAllen for fiscal year 2023 determined that DUA overdrew approximately $2.5 billion from the federal Unemployment Compensation Trust Fund. The audit also found that, between 2020 and 2021, DUA drew on federal funds to pay claims that were the responsibility of the Commonwealth’s Unemployment Insurance Trust Fund, which is supported by employer contributions. As a result, the Executive Office of Labor and Workforce Development (EOLWD) engaged in discussion with ETA to address the issue related to EOLWD’s mistaken use of funds from the federal Unemployment Compensation Trust Fund.
DUA officials reported that the state has since entered into a settlement with the US Department of Labor, reducing the total repayment obligation to $2.1 billion, to be paid over a 10-year period. Repayment began on December 1, 2025, with annual installments scheduled through the terms of the agreement. Under the terms, the principal will be repaid using funds from the state’s Unemployment Insurance Trust Fund, while interest costs will be covered by the state’s General Fund.
During our audit, we inquired about the measures that EOLWD implemented to mitigate the risk of future overspending. In July 2023, ETA conducted a monitoring review to identify the root causes of the improper use of funds. Following this review, EOLWD was required to develop and submit a corrective action plan (CAP) to ETA outlining the steps the Commonwealth has taken, or plans to take, to address deficiencies in internal controls and financial reporting that contributed to the issue.
On November 27, 2024, ETA provided an update to the Secretary of EOLWD regarding its monitoring of DUA’s implementation of the CAP.
- CAP Element 1 pertained to the Statewide Single Audit Report and oversight findings from auditors regarding the issues that led to the overspending of approximately $2.5 billion in UI Pandemic Benefits. The CAP required DUA to update policies and procedures to address the root causes of the identified issues. EOLWD provided documentation demonstrating that it had addressed the lack of internal controls and ineffective oversight processes that resulted in the overspending of UI Pandemic Benefits funding, including the dates on which the internal controls were implemented. Additionally, EOLWD must supply documentation detailing the process it uses to deposit refunds and returned benefit payment claims into the appropriate UI subaccounts.
- CAP Element 2 pertained to the accuracy of Federal Accounting and Financial Reporting (including reports ETA-2112, ETA-5159, and ETA-902P). The CAP aimed to improve DUA’s accuracy with its reports to ETA and other federal agencies. This initiative coincided with DUA’s EMT project. The plan outlined the timeline for submitting ETA reports and identified the best strategy for transitioning reports from the Commonwealth’s legacy UI system to the EMT system.
- CAP Element 3 planned to address the organizational structure and communication challenges between EOLWD and DUA to ensure appropriate financial management of the Commonwealth’s Unemployment Insurance Trust Fund and accurate accounting of benefit payments. This included updates to policies and procedures to address challenges in DUA’s organizational structure.
- CAP Element 4 planned to improve the Commonwealth’s Unemployment Insurance Trust Fund’s accounting and transactions, including account reconciliation. This included updates to policies and procedures, ensuring that financial transaction details are supported by appropriate source documentation.
ETA reviewed EOLWD’s responses for all the CAP elements described above and confirmed that EOLWD provided supporting documentation and that all CAP elements had been addressed. However, the CAP required EOLWD to provide ETA with a written update about its new system features, including internal controls and the structure of its communications, following the implementation of Phase 2 of the EMT project. According to our discussions with EOLWD officials, they have not sent ETA a written update, despite regular meetings to discuss the implementation of Phase 2 of the EMT. Additionally, EOLWD mentioned that the CAP did not include a deadline for this update that ETA needed.
Given the exorbitant amount of taxpayer dollars involved, we recommend that DUA ensure that it provides ETA with the required written update regarding the implementation of Phase 2 of the EMT project. Although the CAP did not establish a specific deadline for this update, DUA should have written documentation about its ongoing activities and progress related to the CAP throughout the EMT implementation process to increase transparency and accountability. We recommend that DUA provide ETA the required written update and revise it as necessary to reflect progress made.
| Date published: | September 21, 2026 |
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