Narrative: a. 5.

State Quality Service Plan (SQSP)

Integrity Action Plan (IAP)

Arkansas – Fiscal Year (FY) 2024

Accountable Agency Official(s).

List the person or persons accountable for ensuring integrity in the state’s unemployment insurance (UI) program.

Name: Kristen Rhodes-Berry

Title: Assistant Director of Unemployment Insurance Email: Kristen.rhodes@arkansas.gov

Phone: 501-683-5366

*Note: Unemployment Insurance Program Letter (UIPL) No. 09-23, issued on June 30, 2023, makes reference to UIPL No. 22-21, Change 2, throughout the guidance. However, on July 13, 2023, the Employment and Training Administration (ETA) issued UIPL No. 10-23, which rescinded UIPL No. 22-21, Change 2. UIPL No. 11-23, also issued on July 13, 2023, changed the amount of the integrity grant funding originally issued under UIPL No. 22-21, Change 2, but maintained the guidance on required and recommended fraud prevention and detection and overpayment recovery activities.

(Topic #1: National Priority) – Ensuring UI program integrity by assessing and evaluating fraud risks, implementing, and maintaining sufficient controls to effectively mitigate the likelihood and impact of fraud, and reducing improper payments.

• In evaluating fraud risks, states should consider both eligibility fraud risks and identity (ID) fraud risks.
• State plans to evaluate UI fraud risks and implement and maintain sufficient controls to effectively prevent fraud and reduce improper payments, including state actions to develop their own state-specific antifraud strategy.
  • Key elements of an antifraud strategy include:
• Who is responsible for fraud risk management activities? Arkansas’ fraud risk management is a team effort and includes but is not limited to UI claims processing and Administration, Benefits IT staff running data analytics, Contributions IT staff running data analytics, Internal Audit and fraud prevention staff working with law enforcement and OIG.
• Establish roles and responsibilities of those involved in fraud risk management activities, such as the antifraud entity and external parties responsible for fraud controls and communicate the role of the Office of Inspector General (OIG) to investigate potential fraud.
  • UI Claims processing staff: Report suspicious activity with the claims filing process. For example, consistent email address or employer combinations, incorrect geographic information, (City, County, and Zip Code do not reconcile.)
  • UI Administration: Writing policy and procedures to report employer or claimant potential fraud schemes.
  • Benefits IT staff: Ensure geofencing is actively working to deter foreign threats. Data Analysis that looks for the same employer account number, claims with no addresses, signs of inaccurate geographic information (City, State, Zip not matching area of employer)
  • Contributions Staff: Ensuring payment is received when an employer is attempting to create an account more than 6 months in the past. Looking for consistent wages across multiple quarters, and geographic information on claim vs employer account, filing reports and not submitting payments, with claims.
• Internal Audit Staff: Researching account number and large scheme issues, and patterns for potential fraud.

• What is the program doing to manage fraud risk?
  • ADWS takes possible fraud identification seriously and is of the utmost importance in the UI program. We complete data analytics on demographic information, including geographic information on each claim, and utilize the Integrity Data Hub, to pull information reported by other states.
  • Implemented staff training designed specifically on identifying potential fraudulent claims and ID verification. These are completed in sprints and refreshed every six months.

• Describe the program’s activities for preventing, detecting, and responding to fraud, as well as monitoring and evaluation.
  • ADWS currently utilizes:
    • Social Security crossmatch during the application process verifies:
      • Legal Name
      • Date of Birth
      • SSN
    • DOL sponsored solutions such as Login.gov and USPS for ID verifications as well checking IDs in person at Local offices.
    • Systematic Alien Verification for Entitlement (SAVE) - SAVE verifications are executed after the application is completed by the non-citizen claimants and while staff are processing the claim.
    • Department of Corrections and Department of Community Corrections - Crossmatches run each week against applications and weekly certifications.
    • Interstate Connections Network (ICON) - All claims are checked though State Identification Subsystem (SIDI) and the Interstate Benefits Inquiry (IBIQ), to ensure there are no claims in other states for the same claim period, or overpayments to be collected in other states utilizing the benefits offset process.
    • Internet Protocol (IP) Addresses are monitored, and multiple claims submitted by the same IP address (other than our workforce centers who are whitelisted) are watched.
    • Data Analytics are used and no more than 4 claims can have the same first line address, bank routing information, or e-mail address.
    • Integrity Data Hub is used for:
      • Suspicious Actor Repository (SAR)
      • Multi-State Crossmatch (MSCM)
      • Identity Verification (IDV)
      • Bank Account Verification (BAV)
      • Fraud Alerts
      • Foreign Internet Protocol (IP) Address Detection
      • Suspicious Email Domains
• Geofencing to exclude foreign IP addresses.
• Receives and uses examples from the Fraud Alert System as teaching tools.
• National Integrity Academy. ADWS encourages staff to complete modules in their career tract and to learn more about other positions and sections.
• The Internal Audit section is currently utilizing the additional funds made available for researching federal program fraud and actively working with the Office of Inspector General (OIG) on prosecutions.
• When is the program implementing fraud risk management activities?
  • Create timelines for implementing fraud risk management activities, as appropriate, including monitoring and evaluations.
    • Where is the program focusing its fraud risk management activities? ADWS is currently focusing on ID verification and employer fraud schemes. Working with DOL and the USPS for ID Verification at no additional cost to the state has been a beneficial process and a great learning tool. ADWS looks forward to partnering with DOL in the future on additional “plug and play” solutions.
    • Partnering with OIG on large prosecutions where possible and connecting theft of public benefits with larger criminal activity rings for longer periods of incarceration and restitution has created press coverage in efforts to deter possible future bad actors.
  • Demonstrate links to the highest internal and external residual fraud risks outlined in the fraud risk profile. ADWS continues its commitment by demonstrating the concern from upper management and the Governor’s office with fraud, waste, and abuse in the UI program. Continued training occurs with all UI staff in monthly sprints and a report on progress in reducing fraud is submitted to the Governor’s office each quarter.
• Why is fraud risk management important?
  • Communicate the antifraud strategy to employees and other stakeholders, and link antifraud efforts to other risk management activities, if any. ADWS continues to place the utmost importance on identifying fraud in the UI program to maintain the integrity of the UI Trust Fund.
  • See A Framework for Managing Fraud Risks in Federal Programs at https://www.gao.gov/assets/gao-15-593sp.pdf for additional information.

• State use of tools, services, strategies, process improvements, and/or procedural changes adopted by the state to combat fraud, verify identities, and enhance recovery efforts. States must identify which tools, solutions, and service provider(s) are used in the state’s fraud management operations, including but not limited, to the following areas: data analysis, risk-based ID verification, fraud prevention and detection, and cybersecurity.
• Include strategies, solutions, and/or activities using funds the Department has made available to states for combatting fraud and strengthening UI program integrity under UIPL Nos. 28-20;28-20, Change 1;28-20, Change 2;28-20, Change 4;22-21;11-23; and 02-22.

Fraud Prevention and detection 

• As part of the online EZARC application, a check with the Social Security Administration that verifies the following data elements match:
  • Social Security Number
  • Legal Name
  • Date of Birth
• A Notice to Last Employer (5013 form) is sent to each employer listed on the claim.
  • The employer must be selected from a list created in the Contributions system (Tax21).
  • If employer information entered is not in the Tax21 system, the pseudo account number 999999999 is inserted.
  • A staff member researches pseudo account numbers for possible misclassification of wages, fraudulent claim, or possible employer fraud before the claim can be processed.
• The responses to these notices are sent to a queue that staff work and set issues to move through the adjudication process for a decision with appeals rights.
• Employers can indicate “Employee does not work here” or “Employee is still employed here” on that form which assists in identifying fraudulent claims.
• A Notice to Base Period Employer (550 form) is submitted to all employers in the base period.
  • The base period employers are identified in the wage file and submitted by employers on quarterly wage reports (209B).
  • If a fraudster lists an incorrect last employer, that employer can select “Claimant is still Employed” or provide additional information to assist is locating possible fraud.
• Cybersecurity:
  • EZARC, the online claim system, and the ARKNET weekly certification systems, are both geofenced which allows access to IP addresses that are only from within the US.
  • The vendor and the Department of Information Services (state IT group) monitor the systems for suspicious activity.
    • Data analytic reports, (for example numerous claims being filed with the same IP address in short time frames) are reported to ADWS who then researches the claims involved.
    • ARKLine (phone weekly claim system)/ARKNet (internet based weekly claim system) are no longer able to use the most common pins (ie 0000, 1111, 1234, last for of SSN or Date of Birth Month and year.)

• Provide details on overpayment recovery efforts including:
  • Actions with banks, financial institutions, and with Federal law enforcement’s forfeiture and seizure efforts. Recovery Efforts:
    • Collection letters mailed to claimants from the Benefits Payment Control systems.
    • Federal Treasury Offset Program (TOPS) to recover overpayments on claims.
    • Arkansas State Income tax offset through the Department of Finance Administration.
    • Interstate Reciprocal Overpayment Recovery Arrangement (IRORA) to collect for other overpayment balances due in other states or territories as well as encourage other states and territories to collect for Arkansas balances due.
    • Contact banks on fraudulent claims to recoup funds paid.
    • Wage garnishments and assessments are filed to collect overpaid funds.
    • Assessments filed securing real property.
    • Possible Criminal Prosecution.
    • Working with OIG on larger fraud schemes.

• Information on how the state is using waivers of recovery of overpayments both for regular UI and temporary UC programs created by the CARES Act, including if the state is using approved blanket waivers as described in UIPL No. 20-21, Change 1.
  • ADWS applied for and received one blanket waiver approval via DOL.
  • ADWS does have a CARES act related finding that requires retroactivity to determine if claims that should have been paid using UI funds instead of PUA  funds. As the weeks have been moved to the UI program ADWS has identified several claimants that would have been paid less in UI benefits than they received as part of the PUA program. We are in the process of data entering these balances due and waiving them per guidance in UIPL 20-21.
• The remaining Cares Act issues, when bad actors have been identified are currently being setup for active collections.
• How the state is using the Treasury Offset Program (TOP) for benefit overpayment recovery, how the state is ensuring covered debts are being submitted, and any barriers/challenges in working with TOP.
  • ADWS actively uses the TOP program as well as State income tax for offsetting both claimants and employers balance due. Both efforts have been successful, although burdensome with the IRS additional requirements to safeguard Federal Tax Information. This has required ADWS to have a separate and even more secure system, where only three individuals have access to meet the Pub 1075 requirements. While the trust fund benefits from collecting in this fashion, additional funds are not provided in the operations budget for the arduous task, and UI Admin spends additional funds to meet the requirements of Pub 1075.

• State use of UI Integrity Center resources, with a particular focus on state connection to the Integrity Data Hub (IDH) and use of its datasets to crossmatch unemployment compensation (UC) claims and aid in the prevention and detection of fraud and improper payments (see Training and Employment Notice (TEN) No. 24-21);
• Discuss the state’s connection to the IDH, including frequency of IDH use.
  • Does the state submit all initial and continued claims for IDH cross-matching? If not, what is preventing the state from sending all claims? Yes, all claims info is submitted each week.
• If the state is not connected to the IDH and/or is connected but not regularly submitting UI claims data through a webservice/real-time connection to IDH, provide details on the state’s plan for how to increase usage and an anticipated timeline to:
  • Connect to the IDH. ADWS currently connects and submits files to IDH.
  • Increase frequency of IDH use. Yes, ADWS is currently researching a real-time approach. When claimants apply for benefits through the online system, and before staff process the application, the score would be populated so staff can go through additional ID verification efforts at that time as opposed to retroactively, to further reduce the improper payment rate.
  • Fully leverage all available IDH capabilities. IDH capabilities include:
    • Suspicious Actor Repository (SAR) Utilized
    • Multi-State Crossmatch (MSCM) Utilized
    • Identity Verification (IDV) Utilized
    • Bank Account Verification (BAV) Utilized
    • Fraud Alerting Utilized
    • Foreign Internet Protocol (IP) Address Detection Utilized
    • Suspicious Email Domains and Patterns Utilized
  • Update the IDH connection to a webservice/real-time connection. ADWS is currently researching a real-time approach. When claimants apply for benefits through the online system, and before staff process the application, the score would be populated so staff can go through additional ID verification efforts at that time as opposed to retroactively, to further reduce the improper payment rate. If this cannot be accomplished due to current system limitations, we will create the file daily in the future.
  • Identify barriers to using any of the available IDH capabilities. ADWS is researching connecting to IDH in real-time to stop payment from being issued and stopping needed retro activity. We are currently still utilizing the mainframe system, which makes adapting the data to new solutions burdensome and financially prohibitive. The work to move to acloud-based infrastructure is currently planned to be completed by the end of calendar year 2024.
• If the state has not executed IDH Participation Agreement - Version 5.0 (see TEN No. 24-21), provide details on the anticipated timeline to update to IDH Participation Agreement – Version 5.0.

Discuss the state’s use of the UI National Integrity Academy’s virtual trainings and/or eLearning lessons. ADWS currently utilizes these tools in training.

We are encouraging staff to complete the training sections available through the National Association of State Workforce Agencies’ (NASWA) learning management platform which has been successful with training new Benefits Accuracy Management (BAM) and Data Validation (DV) staff. ADWS also utilizes the good working relationship with our DOL regional office that provides excellent guidance on a variety of topics.

• Discuss the state’s use of UI Integrity Knowledge Exchange Library resources, including the Behavioral Insights Toolkit (see TEN No. 15-21). Yes, we utilize the toolkit and implement the suggestions as possible.
• Discuss the state’s participation in State Consultative Services. ADWS has used state consultant services especially for the prior RFP. This service was extremely helpful and beneficial to our modernization efforts.

Note: The IDH Team has a one-page dashboard report for each state summarizing current IDH utilization and areas where IDH use might be expanded. Please reach out to IDHTeam@naswa.org to request a copy of your state’s IDH utilization dashboard report. 

• State use of required and recommended integrity controls and overpayment recovery activities as outlined in UIPL No. 11-23, including any additional effective cross-matching and overpayment recovery activities and identified best practices.
• Provide details regarding the state’s use of each cross-match/integrity control and overpayment recovery activity (required and recommended) as outlined in UIPL No. 11-23. Include details on the frequency of crossmatch/integrity controls use (e.g., conducted on all initial claims, all continued claims, only when suspicious activity is identified?) and frequency of overpayment recovery activities.
• Crossmatches/integrity controls and recovery activities include:

Crossmatches/Integrity Controls

• ID Verification; At each initial, reopened, and additional UI claim for benefits.
• National Directory of New Hires (NDNH); Weekly against current claims.
• Quarterly Wage Records Crossmatch; Currently quarterly but transitioning to daily in March of 2024.
• Systematic Alien Verification for Entitlement (SAVE); At each Initial, reopened, and additional claim.
• Referral of allegations reasonably believed to constitute UC fraud, waste, abuse, mismanagement, or misconduct to DOL-OIG; As identified.
• UI Integrity Center’s IDH; Currently weekly, researching lift needed to go to real time as initial, additional and reopened claims are filed.
• Digital Authentication, such as Multifactor Authentication (MFA); Currently used via Login.gov and USPS, or in person at the local office, by providing physical ID.
• Device Fingerprint/Reputation Management; Not currently utilizing.
• Fraud Risk Scoring (i.e., Case Management Prioritization); Via IDH currently each week.
• Comparisons and crossmatches that detect shared characteristics, Each night as part of batch processing.
• Social Security Administration crossmatches (i.e., Unemployment Insurance Query (UIQ), Prisoner Update Processing System (PUPS), Death Master File); Weekly, for others, still working on getting PUPS up in AR.

• Federal, state, and local incarceration crossmatches; Weekly.
• Deceased Records crossmatches; Weekly.
• Vital Statistics crossmatches; Weekly
• State Directory of New Hires (SDNH); Weekly but transitioning to daily in March 2024.
• Department of Motor Vehicle crossmatch; Not currently participating.
• Interstate Benefits (IB) crossmatch; At the initial, reopened, or additional claims.
• State Identification Inquiry (SID) and IB8606 enhancements made to the Interstate Connection (ICON) network crossmatch to prevent concurrent claim filing in multiple states; At the initial, reopened, and additional claim.
• Use of a unique identifier to identify claimants instead of using the full SSN; Currently using full SSN.
• Fictitious employer crossmatches; Researching to create solution, to run as employer accounts are created.
• Periodic IT security assessments and audits consistent with National Institute of Standards and Technology (NIST)-compliant information technology security guidelines; Quarterly, and as fraud schemes are identified.
• Adequate internal controls to protect the integrity and security of state assets; Quarterly, and as fraud schemes are identified.
• Implement a cross-functional integrity task force to develop and implement state-specific action plans to reduce UI improper payments.
  • Promising practices:
    • Working with DOL and the USPS for ID Verification at no additional cost to the state has been a beneficial process and a great learning tool. ADWS looks forward to partnering with DOL in the future on additional “plug and play” solutions.
    • Partnering with OIG on large prosecutions where possible connecting theft of public benefits with larger criminal activity rings for longer periods of incarceration and restitution. This has created press coverage in efforts to deter possible future bad actors.

Overpayment Recovery Activities

• Benefit Offsets; As identified in overnight batch processes.
• TOP; Balances reported annually and increase and decreases for additional interest and payments made outside of the OTP system weekly.
• Cross Program Offset Recovery Agreement (CPORA); Daily.
• Interstate Reciprocal Offset Recovery Arrangement (IPORA); Daily
• Negotiating repayment plans; ADWS is unable to take settlement and compromise for benefits balances due.
• Accepting repayments through various methods (e.g., online, via debit/credit card); Currently accept cash and check. Working to implement online payment method but stalled with vendor issues.
• State Income Tax Offset Program: Balances are submitted once each year, and updates are submitted weekly for interest and payments made outside of the system. Payments are received from the Department of Finance and Administration monthly for balances collected.
• Wage garnishments: As identified as part of the quarterly cross match process. We are planning for this feature to be done as the wages are reported by employers.
• Property liens and assessments; As the appeal period has exhausted for balances over $200.00.
• Offsets of lottery winnings, homestead exemptions, and other benefits; Does not currently participate, no ability in current Arkansas Law.
• Active participation in probate and/or bankruptcy proceedings; Yes, for balances over $500.00 where fraud has been assessed.
• Skip tracing; Does not currently participate.
• Work proactively and collaboratively with banks and financial institutions; Yes, as possible and over the $500.00 threshold when an assessment has been field.
• Civil actions; Yes, as needed.
• Credit bureau referrals: This would be handled at the county level if an assessment has been filed.
• State/federal prosecution As needed for fraud over payments over $5,000.00 threshold.
• Penalties and interest on overpayments in compliance with state and federal law; yes 15% penalty then 35% additional penalty for fraudulent if not paid within 30 days. Interest added each month at 10% per year.
• Collection agency referrals; Does not currently participate.
• Implementing a voluntary fraud self-disclosure program; Yes, claimants can indicate that they committed fraud on wage earnings investigations notices, or by calling the service center.
• Other recovery methods as determined by state law or policy.
• Identify any additional integrity controls or recovery activities the state uses that are not listed in UIPL No. 11-23. Actively engaging with the employer community and fostering that relationship to ensure employers fully understand the requests for information, to stop separation fraud, wage earnings investigations, failure to attend a scheduled interview, work search audits, failed to pass a pre-employment drug screen.
• Provide promising practices. ADWS has recently integrated the New Hire Registry reporting requirement, into the employer reporting system. We are planning on running New Hire cross matches daily, to as quickly as possible identify potential wage earnings issues.
• Identify challenges with crossmatches or in overpayment recovery activities. Crossmatches are great, but they are all retroactivity based. Once a claim is in pay status per the JAVA rule, they must remain in pay status, even though they appeared on a verified crossmatch. It would benefit the improper payment rate, if we were able to stop payments once identified, and resume if the claimant is found to have not committed fraud. Also, the requirement to reach back out to the employer after the submission of a new hire entry, with the same individual, Date of Birth and Legal name seems excessive, and leads to the claimant receiving additional benefits that they are most likely ineligible to receive.
• If the state does not currently use one of the integrity controls or recovery activities listed in UIPL No. 11-23, provide the state’s plan and anticipated timeline to request and obtain access to the cross-match/integrity control or to implement the overpayment recovery activity.

Note: If the state does not plan to obtain access to a crossmatch/integrity control or implement a specific recovery activity, please explain.

State use and employer participation in State Information Data Exchange System (SIDES) (see TEN No. 12-16).

• Provide details on the state’s current usage of SIDES.
  • Like the UI State Information Data Exchange System (SIDES), ADWS’ Adjudication (AAS) system is web-based and designed to streamline and increase the efficiency of the nonmonetary determination process. Since AAS was implemented in Arkansas, ADWS has continued to enhance the system to further streamline the adjudication process. Through the electronic response system employers receive and respond to Notices to Last Employer, Notices to Base Period Employer, and questionnaires regarding nonmonetary issues via the Internet. ADWS is aware that the United States Department of Labor (USDOL) encourages states to fully implement SIDES; however, ADWS’ Automated Adjudication System and electronic response system for employers, which is based upon our own state UI law, enables Arkansas to maintain the same functionality as SIDES along with ability to tailor questionnaires designed to elicit more information from employers with no additional subscription costs to the agency. ADWS will consider incorporating SIDES into its modernized benefits system.
• If the state does not currently use all available SIDES exchanges, provide the state’s plan for how to connect to all SIDES exchanges and an anticipated timeline to implement each SIDES exchange. Sides Exchanges include: ADWS does not currently participate in any of the below listed SIDES programs but is considering after we move to a more modernized cloud-based system.
• Separation Information
• Monetary & Potential Charges
• Additional Fact-Finding
• Determinations & Decisions
• Earnings Verification
• Benefit Charges

Identify any barriers to SIDES exchange participation, either in state promotion or in employer adoption. Due to the ADWS’s current state on the mainframe, integrating additional items with the mainframe is cost prohibitive and overly complex. Once we move to the cloud-based environment, we will consider joining SIDES.

State strategies designed to facilitate claimants’ compliance with state work search requirements while also supporting their reemployment such as adoption of the work search requirements in the Model Work Search Legislation (see TEN No. 17-19).

1. Outline the state’s work search requirement and explain state challenges with work search improper payments. The Arkansas Legislature passed additional legislation to increase the number of work search activities each week, and better define in statute what is considered work search activity, as well as increased the number of work search audits UI staff must perform each week. ADWS is a work search warning state, which assists with this measure. We are working towards transitioning to a more updated claims filing system that will require work search activity to be entered in the weekly certification process. This will greatly increase the quality and quantity of the information received and reduce staff time needed to complete the required audits.
2. Discuss the state’s plan to improve work search compliance by reducing work search errors and strengthening reemployment. ADWS UI is more fully integrating with the RESEA program to better facilitate job search and access to supportive services. We are also working with a vendor to require work search specific reporting at the time of weekly certification filing. The new system to report work search activity will include current LMI information as well as designated training providers for those needing training or re-training, to better re-attach to the workforce. This new system will allow UI staff to reach out to Arkansas employers immediately as opposed to requesting the work search log from the claimants after they have been selected for audit. Fostering a good working relationship with the employer community is key to the success of this project.

(Topic #2) – State plans and actions to address the state's top three improper payment root causes in Payment Integrity Information Act (PIIA) 2022.

1. • Identify the state’s top three improper payment root causes.
     • Separation Issues 44.1% of improper payments,
     • Wage Earnings Issues 40.8% of improper payments
     • Other issues 6.67% of improper payments
   • Explain the state’s challenges in reducing improper payments in the top three root cause categories.
2. Separation issues, are most directly tied to staffing issues in the Adjudication department. As all states have experienced ADWS had large staffing turnovers during the pandemic period and is working to incentivize retention of existing staff while enticing additional staff to come to the UI program. Adjudication takes an average of 2 years to absorb the knowledge needed to make quality decisions. The quality of our decisions is well above the required measures, due to a dedicated effort by management, but timeliness continues to be a challenge for the limited number of experienced staff. If the issue is not heard timely and was in pay status, per the JAVA rule, they must remain in pay status until a decision is made, increasing the amount of the overpayment.
3. Wage Earnings Issues: As all are crossmatched, we are identifying the problem after it has occurred. We are working with the employer community to redesign the wage earnings detection system, to enable audit notices to be created the day the wages are reported by the employer. By encouraging employers to report wages as close to the end of the quarter as possible and allowing them to postdate the accompanying payments not due for 30 days after the end of the quarter, we expect to identify wage earnings issues more quickly and further reduce the improper payment rate.
4. Other issues: These are a combination of responsibilities and the time required to work the items submitted by employers. We are working with the employer community to ease the burden on submitting additional documentation utilizing the online systems and reduce the staff touch needed to add the items to the official record. We believe this will reduce the lag time to set issues, for decisions, to during the waiting week, and before the claim is in pay status.
5. the state’s plan to reduce improper payments in each root cause category. Listed above by root cause.

(Topic #3) – State coordination and collaboration with the DOL-OIG and other state and Federal law enforcement agencies to investigate and prosecute UI fraud and recover overpayments. This should also include state plans to continue providing all confidential UC information to DOL-OIG for purposes of both investigating fraud and performing audits. ADWS has an active relationship with OIG and works to submit all fraud to OIG for possible prosecutions. This has been most beneficial when they can tie UI fraud to other fraud rings for larger criminal charges, including multi state schemes, human trafficking, illegal drug sales and smuggling.

Criminal prosecutions from claims related to the pandemic period are proving difficult to criminally prosecute due to statute of limitations, and staff time constraints. With the recent legislative changes reducing the maximum benefits amount to 12 compensable weeks of at max benefits $5,412.00 in UI benefits. At this dollar value of benefits, we have had challenges working with employers to participate in the criminal prosecution process. While the funds collected will assist in keeping the trust fund at the optimal balance, this does not provide additional funds for this staff intensive processes, which would be charged to UI Administration funds, which is already stretched thin.

(Topic #4) – State plans to strengthen program integrity in UI tax operations, including current activities and plans to identify and prevent worker misclassification, State Unemployment Tax Act (SUTA) Dumping, and fictitious employer schemes, and development/use of effective employer audit strategies (i.e., use of remote audits).

• Current activities and plans to address:
  • Worker Misclassification

ADWS has continued to struggle with the identification of misclassified workers. Retaining well qualified staff has been challenging as they have more financial incentive for leaving ADWS and moving to other state agencies and completing similar work requirements. We recently received approval to increase the pay grade for senior field tax representatives that complete misclassification investigations as well as audit employers for compliance. We believe this enhancement for staff as well as continued use of technology to simplify audit process will assist in the identification of misclassified employees and meeting the audit core measures with DOL.

• SUTA Dumping:

ADWS currently uses the SDDS (SUTA Dumping Detection System) but has not identified many instances of true SUTA dumping. We have been successful with educating employers to better understand the requirements, which may then lead to a transfer of experience and the creation of a payment plan, to assist the employers in correcting the identified issues.

• Fictitious employer schemes
  1. UI Claims processing staff: Report suspicious activity with the claims filing process. For example, consistent email address or employer combinations, incorrect geographic information, (City, County, and Zip Code do not reconcile.)
  2. UI Administration: Writing policy and procedures to report employer or claimant potential fraud schemes.
  3. IT staff: ensure geofencing is actively working to deter foreign threats. Data Analysis looking for the same employer account number, claims with no addresses, signs of inaccurate geographic information (city, state, zip, not matching area of employer), IP address tracking.
  4. Contributions Staff: Ensuring payment is received when an employer is attempting to create an account more than 6 months in the past. Looking for consistent wages across multiple quarters, and geographic information on claim vs employer account, filing reports and not submitting payments, with claims
  5. Internal Audit Staff: Researching Account number and large scheme issues, and patterns for potential fraud.
• Development/use of effective employer audit strategies (including, but not limited to, use of remote audits)

(Topic #5) – State plans and actions to strengthen internal security and ensure that all appropriate internal controls and processes are in place and are adequate to assess internal risks and threats, ensure program integrity, and minimize program vulnerabilities (see UIPL No. 14-17)

(Topic #6) – State plans and actions to evaluate the effectiveness and equity of fraud prevention and detection, ID verification, and improper payment reduction activities. State should include strategies to ensure that processes used to detect and prevent fraud are effective and do not limit the ability for a legitimate claimant to apply for and become eligible for UC. States implementing or using facial recognition technology in their ID proofing processes must also report findings from bias testing and provide updates on efforts to mitigate biases or barriers in this section of the IAP.

• Identify potential barriers that are created by fraud prevention and detection functions for legitimate claimants. Provide plans and actions designed to mitigate such risks. ADWS has claimants who are unable to be approved though the Login.gov online based ID verification tool for a variety of reasons. This may be through the phone number not being in the claimant’s name, or not having a current Driver’s License or state issued ID card. Alternate options are available for in person verification at 200+ post offices, through the USPS pilot program, and additional types of documentation are acceptable to be utilized at the local office including military ID and mortgage paperwork for example. Then, additional options of identification can be provided at the local office including, expired DL or state issued ID, State issued school ID with picture, Concealed Carry License or Medical card.
• As required in UIPL No. 11-23, states must ensure there is at least one timely, effective, and accessible non-digital alternative to online ID verification, which should not be overly burdensome on applicants, limit access to public benefits programs or the timely receipt of benefits, or stigmatize members of the public in any way. Provide details on the state’s non- digital ID verification option(s).
• Alternate options are available for in person verification at 200+ post offices, through the USPS pilot program, and additional types of documentation are acceptable to be utilized at the local office including military ID and mortgage paperwork for example. Additional options of identification can be provided at the local office including, expired DL or state issued ID, State issued school ID with picture, Concealed Carry License or Medical card.
• Include how the state flags cases for suspected fraudulent activity and how investigation resources are assigned, including:

1. What risk scoring elements and/or prioritization elements are used. Multistate state claims and suspicious actors, bank accounts reported by IDH, incorrect geographic information on the claim (for example City and Zip Code do not match, or residential address and selected County do not match.)
2. How the risk scoring elements and/or prioritization elements are weighted. Via IDH score methodology.
3. How the state evaluates the weights based on false positives and negatives.
4. How risk scoring elements and/or prioritization elements are updated. Via IDH
5. How the state ensures the fraud risk scoring and/or prioritization of cases does not negatively affect legitimate claimants. A requirement to contact the service center is issued, giving the claimant 10 days to report to a USPS location or local office to prove ID in person. If this is not completed in the 10 days, then an issue is set for failed to report, and is sent to adjudication for a decision including appeal rights.
6. Include details on how the state measures claimants’ usage of both digital and non-digital identity verification options, how the state reviews digital services for false positive and false negatives, and how the state ensures legitimate claimants have alternative paths to prove their identity and/or resolve issues, including providing a possible recourse. If a claimant selected Login.gov, and was unsuccessful, a requirement to contact the service center is issued, giving the claimant 10 days to report to a USPS location or local office to prove ID in person. If this is not completed in the 10 days, an issue is set for failure to report, and is sent to adjudication for a decision including appeal rights.

(Topic #7) – State plans and actions to mitigate negative consequences for victims of UI ID fraud, including ensuring simplified processes to remove the victim’s liability for overpayments resulting from ID fraud.

• Include details regarding how the state provides a reporting mechanism for UI ID fraud on their websites, communicates status updates for such investigations, and takes action to protect the victim when the state determines that UI ID fraud has occurred (see UIPL No. 11-23 for more details on protecting victims of ID fraud). All information is available through the ADWS website and the Attorney General’s office websites. Claimants are required to file a police report in their local jurisdiction that a claim was filed using their identity without their consent. The bank account and other information on the claim are researched via the internal fraud unit and bank subpoenas. A decision is then issued to the claimant at the correct contact information and the false address information, including appeal rights. If it was determined to be an identity theft claim, the overpayment is moved to a pseudo SSN in case the bad actor is identified in the future. This stops all collections efforts against the identity theft victim.  
• Include the state’s procedures for mitigating negative impacts on the UI ID fraud victim (e.g., establishing a pseudo claim record, temporarily marking the overpayment as “uncollectible”, etc.). Listed above.

(Topic #8) – If the state has not provided complete and accurate overpayment reporting on the ETA 227 reports (Overpayment Detection and Recovery Activities), and the ETA 902P report (Pandemic Unemployment Assistance Activities), the state must provide information on plans for improvement, including timeframes and milestones, for addressing the issue and ensuring complete, accurate, and timely reporting in FY 2024.

• If the state has submitted all data for the ETA 227 or 902P reports, this section is not applicable, and the state can input “N/A”. All ADWS corrections have been submitted for the 227 reports and 902P reports.