States’ Use of IT to Administer UI Programs

State agencies rely extensively on IT systems to carry out their UI  program functions. These include systems for administering benefits and  for collecting and administering the taxes used to fund the programs. The systems are costly and difficult to support. Most states’ systems cannot efficiently handle current workload  demands, including experiencing difficulties implementing new federal  or state laws due to constraints imposed by the systems. Labor’s Role in Facilitating IT Modernization

In addition to providing general oversight of the UI program, the  Department of Labor plays a role in facilitating the modernization of  states’ UI IT systems. States Face Challenges in Modernizing Their Tax and Benefit Systems

Our September 2012 report noted that selected states had made varying  progress in modernizing the IT systems supporting their UI programs. Specifically, we found that each of the three states that were part of a  multistate consortium were in the initial phases of planning that included  defining business needs and requirements; two individual states were in  the development phase—that is, building the system based on  requirements; two were in a “mixed” phase where part of the system was  in development and part was in the operations and maintenance phase;  and two were completed and in operations and maintenance. These  efforts had, among other things, enhanced states’ UI technology to  support web-based services with more modern databases and replaced  outdated programming languages. In  particular, individual states encountered the following challenges, among  others:
All nine states cited limited funding and/or the increasing cost of UI  systems as a major challenge. For example, they said that the  economic downturn had resulted in smaller state budgets, which  limited state funds for IT modernization. States also identified challenges in operating and maintaining a  system developed by vendors because state employees may  have lacked the needed expertise to maintain the new system  once the vendor staff leave. Six of the nine states noted that continuing to operate their legacy  systems while simultaneously implementing new UI systems required  them to balance scarce staff resources between the two major efforts. In addition to the challenges facing individual states, we found that states  participating in multistate consortiumschallenges:   encountered a separate set of
Representatives from all three consortiums indicated that differences  among states in procurement, communication, and implementation of  best practices; the involvement of each state’s IT office; and the  extent to which the state’s IT is centralized could impact the effort to  design and develop a common system. States within a consortium often had different views on the best  approach to developing and modernizing systems. States had concerns about liabilities in providing services to another  state. All three consortium representatives we spoke to noted that obtaining  an independent and qualified leader for a multistate modernization  effort was challenging. Both individual states and consortium officials had developed methods to  mitigate specific challenges and identified lessons learned. Accordingly, we  recommended that Labor (1) perform a comprehensive analysis of  lessons learned and (2) distribute the analysis to each state through an  information-sharing platform or repository, such as a website. Labor  generally agreed with the first recommendation; it did not agree or  disagree with the second recommendation but said it was committed to  sharing lessons learned. These controls included the  following: establishing aspects of a project management office for centralized  and coordinated management of projects under its domain;  incorporating industry-standard project management processes, tools,  and techniques into their modernization UI efforts; adopting independent verification and validation to verify the quality of  the modernization projects; and employing IT investment management standards, such as those  called for in our IT investment management framework. If effectively implemented, these controls could help successfully guide  the states’ UI modernization efforts. In summary, while states have taken steps to modernize the systems  supporting their UI programs, they face a number of challenges in  updating their aging legacy systems and moving program operations to a  modern web-based IT environment. States  have begun to address some of these challenges, and the nine states in  our review had established some IT management controls, which are  essential to successful modernization efforts.
Why GAO Did This Study

The joint federal-state unemployment insurance program is the Department of Labor's largest income maintenance program, and its benefits provide a critical source of income for millions of unemployed Americans. The program is overseen by Labor and administered by the states. To administer their UI programs, states rely heavily on IT systems--both to collect and process revenue from taxes and to determine eligibility and administer benefits. However, many of these systems are aging and were developed using outdated computer programming languages, making them costly and difficult to support and incapable of efficiently handling increasing workloads. Given the importance of IT to state agencies' ability to process and administer benefits, GAO was asked to provide testimony summarizing aspects of its September 2012 report on UI modernization, including key challenges states have encountered in modernizing their tax and benefit systems. To develop this statement, GAO relied on its previously published work.

What GAO Found

As GAO reported in September 2012, nine selected states had made varying degrees of progress in modernizing the information technology (IT) systems supporting their unemployment insurance (UI) programs. Specifically, the states' modernization efforts were at various stages--three were in early phases of defining business needs and requirements, two were in the process of building systems based on identified requirements, two were in a "mixed" phase of having a system that was partly operational and partly in development, and two had systems that were completely operational. The enhancements provided by these systems included supporting web-based technologies with more modern databases and replacing outdated programming languages, among others.
Nevertheless, while taking steps to modernize their systems, the selected states reported encountering a number of challenges, including the following:
Limited funding and the increasing cost of UI systems . The recent economic downturn resulted in smaller state budgets, limiting what could be spent on UI system modernization. In addition, competing demands and fluctuating budgets made planning for system development, which can take several years, more difficult.
A lack of sufficient expertise among staff . Selected states reported that they had insufficient staff with expertise in UI program rules and requirements, the ability to maintain IT systems developed by vendors, and knowledge of current programming languages needed to maintain modernized systems.
A need to continue to operate legacy systems while simultaneously implementing new systems . This required states to balance scarce resources between these two efforts.
In addition, a separate set of challenges arose for states participating in multistate consortiums, which were established to pool resources for developing joint systems that could be used by all member states:
Differences in state laws and business processes impacted the effort to design and develop a common system.
States within a consortium differed on the best approach for developing and modernizing systems and found it difficult to reach consensus.
Decision making by consortium leadership raised concerns about liability for outcomes that could negatively affect member states.
Consortiums found it difficult to obtain a qualified leader for a multistate effort who was unbiased and independent.
Both consortium and individual state officials had taken steps intended to mitigate challenges. GAO also noted that a comprehensive assessment of lessons learned could further assist states' efforts. In addition, the states in GAO's review had established certain IT management controls that can help successfully guide modernization efforts. These controls include establishing a project management office, using industry-standard project management guidance, and employing IT investment management standards, among others.

What GAO Recommends

In its prior report on states' UI system modernization efforts, GAO recommended that the Department of Labor conduct an assessment of lessons learned and distribute the analysis to states through an information-sharing platform such as a website. Labor agreed with the first recommendation; it neither agreed nor disagreed with the second recommendation, but stated that it was committed to sharing lessons learned.