COMMONWEALTH OF PUERTO RICO DEPARTMENT OF LABOR AND HUMAN RESOURCESLocal Government

Finding No. 2020-006 Federal Agency: United States Department of Labor Federal Program Title and CFDA Number: All Federal Programs Compliance Requirement: Financial Reporting Type of Finding: Material Weakness in Internal Control (MW). Instance of Noncompliance (NC) This finding is similar to prior-year finding 2019-007 Statement of Condition As discussed in Findings 2020-001, 2020-002, 2020-003, 2020-004, 2019-005. The Department has several deficiencies regarding internal control structure over financial reporting. Due to such failure, the Department does not have the ability to produce accurate federal reports on a timely basis and federal programs were not properly monitored as to compliance with applicable laws and regulations. Refer to those findings for more detail. Criteria Refer to findings 2020-001, 2020-002, 2020-003, 2020-4, 2020-005 Cause of Condition Refer to findings 2020-001, 2020-002, 2020-003, 2020-4, 2020-005 Effect of Condition Refer to findings 2020-001, 2020-002, 2020-003, 2020-4, 2020-005 Recommendation Refer to findings 2020-001, 2020-002, 2020-003, 2020-4, 2020-005 Questioned Costs None. Auditee Response See Department's Corrective Action Plan.

Finding No. 2020-007 Federal Agency: United States Department of Labor Federal Program Title and CFDA Number: 17.225 Unemployment Insurance 17.225 COVID-19 Unemployment Insurance Programs Compliance Requirement: Reporting Type of Finding: Material Weakness in Internal Control (MW). Instance of Noncompliance (NC) This finding is similar to prior-year finding 2019-008 Statement of Condition The results of the procedures performed in the financial and performance reporting requirements showed the following instances of noncompliance: Unemployment Insurance (UI) Program: (1) ETA 581 for the period ended 6/30/2020 was submitted 14 days after due date. (2) ETA 191 for the periods ended 3/31/2020 and 6/30/2020 was submitted 10 and 16 days after due date respectively. (3) ETA 227 for the periods ended 3/31/2020 and 6/30/2020 was submitted 39 and 19 days after due date respectively. (4) ETA UI3 of 12/31/2019 was submitted 14 days after due date. (5) ETA 2112 for the periods ended 3/31/2020, 5/31/2020 and 6/30/2020 were submitted 72, 82, and 52 days after due date respectively. Pandemic Unemployment Assistance (PUA) Program: (1) ETA 902P PUA for periods ended 4/30/2020, 5/31/2020, and 6/30/2020 were submitted 243, 112, and 182 days after due date respectively. These reports are prepared and submitted by the same employee; therefore these reports are not reviewed by another independent employee or supervisor prior to issuance. (2) ETA 538 and ETA 539 are presented and transmitted to the ETA based on the information provided by an external source (Evertec), which cannot be compare to determine its completeness and accuracy. Supervisors do not review the information presented on these reports to ensure accuracy and completeness prior to issuance. (3) ETA 9178-P progress report was not submitted to the ETA for the quarter ending on June 30, 2020. (4) ETA 207 for period ended 6/30/2020 was submitted 184 days after due date. (5) ETA 5130 for period ended 6/30/2020 was submitted 127 days after due date. (6) ETA 227 (PEUC) for period ended 6/30/2020 was submitted 83 days after due date. The report presents inconsistencies and information that belongs to other programs (7) ETA 218 for period ended 6/30/2020 was submitted 174 days after due date. (8) ETA 5159 presented balances that are not consistent with the PEUC claims and payment program activity during the period ending on 6/30/2020. Additionally, other condition identified on the reports mentioned above and the ETA 539 is that these reports are presented and transmitted to the ETA based on the information provided by an external source (Evertec), which cannot be compare to determine its completeness and accuracy. Supervisors do not review the information presented on these reports to ensure accuracy and completeness prior to issuance. (9) ETA UI3 for period ended 6/30/2020 was submitted 55 days after due date. Lines 9, 11, 13, and 15 (Third Tier Programs) of section B of the report presents information provided by an external source (Evertec), which does not present supporting documents to compare and determine its completeness and accuracy. Line 13 of the report does not agree with the PEUC program activity presented on ETA 207. Supervisors do not review the information presented on these reports to ensure accuracy and completeness prior to issuance. (10) ETA 9178-P progress report was not submitted to the ETA for the quarter ending on June 30, 2020. Federal Pandemic Unemployment Compensation (FPUC) Program: (1) ETA UI3 for the period ended 6/30/2020 was submitted 55 days after due date. (2) ETA 227 (FPUC) for the period ended 6/30/2020 was submitted 82 days after due date. The report was submitted without presenting information because the overpayments programming of FPUC was established on the SABEN platform on October 7, 2020. (3) ETA 5159 for the period ended 6/30/2020 we were unable to identify whether supplemental benefits were not included on this report. Additionally, other condition identified on the reports mentioned above is that these reports are presented and transmitted to the ETA based on the information provided by an external source (Evertec), which cannot be compare to determine its completeness and accuracy. Supervisors do not review the information presented on these reports to ensure accuracy and completeness prior to issuance. (4) ETA 9178-P progress report was not submitted to the ETA for the quarter ending on June 30, 2020. Emergency Unemployment Insurance Stabilization and Access Act of 2020 (EUISAA): (1) ETA 8403 for periods ended 5/30/2020 and 6/30/2020 were submitted 532 and 41 days after due date with errors amended subsequently. (2) ETA 2112 for the period ended 4/30/2020 was submitted 71 days after due date. This report is prepared and submitted by the same employee; therefore this report was not reviewed by another independent employee or supervisor prior to issuance. Criteria For the submission of these reports the ETA Handbook 401 5th edition is established with the purpose of presenting the instructions for use by State Workforce Agencies (SWAs) for the preparation and submittal of most Unemployment Insurance (UI) reports. ET Handbook No. 402, Unemployment Insurance Required Reports Handbook, shows how to report through the UI electronic entry system. Reports must be sent in time to arrive in the National Office by the due date. Further reporting and submission instructions are included on UIPL No. 13-20 Change 1; Attachment I to UIPL No. 15-20; UIPL No. 15-20 Change 1; Attachment I to UIPL No. 15-20 Change 2; Attachment I and IV to UIPL No. 16-20; Attachment III and IV to UIPL No. 16-20 Change 1; Attachment I to UIPL No. 17-20; and UIPL No. 17-20 Change 1 for the CARES Act programs established due to the COVID-19 pandemic. Based on 2 CFR 200.328 and 200 CFR 200.329 monitoring activities for reporting compliance requirement should include the review by external parties to corroborate information included in the reports of Federal awards or periodic comparison of reports to supporting records. Cause of Condition There are no established procedures for monitoring and reviewing reports before they are submitted to the Federal Government. Due to the high volume of work, the creation of new reports for the programs established due to the COVID-19 pandemic, and the decrease in personnel, there was a lack of follow-up on the due dates of federal reports by the personnel in charge to prepare them. Effect of Condition Reports submitted to the Federal government may contain errors and not be detected on time. Recommendation Additional training for staff in charge of federal programs on timely reporting. Procedures should be implemented to establish a review of the federal reports by an employee independent of preparing them or a supervisor before their submission to the Federal government. Questioned Costs None. Auditee Response See Department's Corrective Action Plan.

Finding No. 2020-008 Federal Agency: United States Department of Labor Federal Program Title and CFDA Number: 17.225 Unemployment Insurance 17.225 COVID-19 Unemployment Insurance Compliance Requirement: Eligibility Type of Finding: Material Weakness in Internal Control (MW) and Noncompliance (NC) This finding is similar to prior-year finding 2019-009 Statement of Condition During the audit, we noted that the internal controls established by the Department over the processing of unemployment insurance claims are ineffective to sufficiently prevent fraudulent unemployment insurance benefit payments. The Department?s system used to process unemployment insurance claims is outdated and do not provide the tool to promptly identify and prevent fraudulent claims. (See related financial statement finding 2020-002). Also, Controls over claims processing were weakened through the suspension of the first week waiting period, a simplified application implement to streamline and expedite processing and the inability to apply the normal wage verification procedures to claims for self-employed individuals and independent contractors. In order to respond to the increase in fraudulent claims, the Department engaged and develop a new system call ?FAST PUA? for the processing unemployment insurance of claims. This system was available from the month of August. However, whether the investment to implement the new unemployment insurance processing system is viable to addressing fraud risk, remains unclear. Unemployment Insurance (UI) Program: Based on our test performed to 60 claimants selected on our sample for the Unemployment Insurance (UI) Program paid during the fiscal year ended on June 30, 2020, we noted the following instances of noncompliance: ? 1 of 60 cases, which represents a 2% of the sample, presented that the claimant was not unemployed by involuntary reasons and therefore does not qualify to receive the UC benefits. ? 3 of 60 cases, which represent a 5% of the sample, presented that the calculation of the weekly benefits were not correct and consistent with the program requirements and the auditor?s recalculation. ? 1 of 60 cases, which represents a 2% of the sample, the claimant was not eligible to obtain UI benefits because the person was receiving income. ? 1 of 60 cases, which represent a 2% of the sample, did not comply with the waiting period between the request of benefits not paid (compensated by PRDOL). ? 6 of 60 cases, which represent a 10% of the sample, the claimants exceeded the 26 weeks of benefits limit. Pandemic Unemployment Assistance (PUA) Program: Based on our test performed to 120 claimants selected on our sample for the Pandemic Unemployment Assistance (PUA) Program paid during the fiscal year ended on June 30, 2020, we noted the following instances of noncompliance: ? 14 of 120 cases, which represent a 12% of the sample, separation of employment information was not found. ? 115 of 120 cases, which represent a 96% of the sample, the claimant?s occupation was not available. ? 120 of 120 cases, which represent a 100% of the sample, the following question was not presented in the initial claim ?At the time of request of PUA benefits, the participant are looking for part-time employment, or full time employment? ? 120 of 120 cases, which represent a 100% of the sample, the following question was not presented in initial claim ?Prevented from going to work because have been advised by health care provider to stay in quarantine or social distancing because have tested positive for COVID-19? ? 104 of 120 cases, which represent an 87% of the sample, the employer name was not available. ? 8 of 120 cases, which represent a 7% of the sample, the type of period (Basic or Alternative) and the period covered (quarters) were not available. ? 116 of 120 cases, which represent a 97% of the sample, salaries of the quarter of higher income were not found. ? 8 of 120 cases, which represent a 7% of the sample, two or more quarters with salaries within basic period, were not available. ? 1 of 120 cases, which represent a 1% of the sample, the reason for the claim was not found. ? 107 of 120 cases, which represents an 89% of the sample, the merchant certification or registry was not available. ? 90 of 120 cases, which represent a 75% of the sample, documents of evidence of income such as receipts, invoices, income tax returns, recent announcements of business were not found and therefore, benefit amounts could not be recomputed. ? 5 of 120 cases, which represent a 4% of the sample, 2018 income tax return was available and automatically the minimum benefit for PUA was granted ($66); however, we could not re-compute the benefit amount because it is necessary to present evidence of 2019 income tax return. ? 1 of 120 cases, which represents 1% of the sample, checkbook was available; however it is not possible to re-compute the benefits, determine the difference and identify the income to be eligible for the benefit because it is required to present the 2019 income tax return. ? 17 of 120 cases, which represent a 14% of the sample, there was a difference in benefit calculation because the benefit granted was less than the corresponding amount. ? 109 of 120 cases, which represent a 91% of the sample, benefits are classified as questioned costs because there is a lack of documentation to prove that applicants are eligible to receive benefit. ? 2 of 120 cases, which represent a 2% of the sample, was found that documents presented on SABEN platform does not correspond to the claimant. ? 2 of 120 cases, which represent a 2% of the sample, was found a difference of $9.00 and $97.00 in benefits overpaid respectively, because due to lack of income tax return documentation it is established that the benefit granted to the claimant is the minimum weekly benefit amount ($66). ? Eligibility determinations are not reviewed or approved by a supervisor, because this processes are automatic. Therefore, it is determined that they do not comply with the internal control of reviewing and supervising the processes and eligibility determinations of the claimants. ? Benefit calculation are automatically computed in SABEN. These processes are not reviewed or recomputed by supervisor or technician with knowledge in the laws and regulations of the program. Therefore, it is determined that this internal control is not being complied. ? Since not all documents are in SABEN for review and monitoring, the auditor was unable to identify whether benefits were discontinued in time once the eligibility requirements are no longer met by the claimant. Therefore, it is determined a noncompliance on this internal control. Pandemic Emergency Unemployment Compensation (PEUC) Program: Based on our test performed to 120 claimants selected on our sample for the Pandemic Emergency Unemployment Compensation (PEUC) Program paid during the fiscal year ended on June 30, 2020, we noted the following instances of noncompliance: ? There is not a verification process established beyond verifying on screen 07 of the SABEN platform (?Payment History? screen) to validate that the claimants has exhausted their 26 weeks of UI benefits prior to receiving PEUC benefits. ? There is not a process established to certify that the beneficiary does not receive benefits under the laws of Canada. ? 8 of 120 cases, which represent a 7% of the sample, the claimant exceed the 13-week limit of receiving PEUC benefits. ? 1 of 120 cases, which represent a 1% of the sample, according to the information on the SABEN platform, the claimant did not received PEUC benefits during the period. ? 12 of 120 cases, which represent a 10% of the sample, presented that the calculation of the weekly benefits were not correct and consistent with the program requirements and the auditor?s recalculation. ? 2 of 120 cases, which represent a 2% of the sample, present having received benefits from the program prior to week 4/4/2020, the week in which began the payment of PEUC benefits. ? 1 of 120 cases, which represent a 1% of the sample, $240 weekly benefit was disbursed prior to 7/1/2020, the date on which the maximum weekly benefit increased from $190 to $240 according to the law. ? 1 of 120 cases, which represent a 1% of the sample, two or more quarters with salaries within basic period were not available; only one quarter with salaries was available for examination. Federal Pandemic Unemployment Compensation (FPUC) Program: ? Refer to Unemployment Insurance (UI) Program instances of noncompliance mentioned above. ? Refer to Pandemic Unemployment Assistance (PUA) Program instances of noncompliance mentioned above. ? Refer to Pandemic Emergency Unemployment Compensation (PEUC) Program instances of noncompliance mentioned above. Criteria Management is responsible for establishing and maintaining effective internal controls to process and disburse unemployment insurance benefits consistent with federal program guidelines including appropriate procedures to prevent and detect fraudulent payments. The Uniform Guidance, 2 CFR 200.303 prescribes requirements for recipients of federal awards to establish and maintain an effective system of internal control over federal awards that provides reasonable assurance that the federal awards are managed in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional UI provisions. - Title II, Subtitle A, Section 2102 of the CARES Act creates the Pandemic Unemployment Assistance temporary federal program which provides up to 39 weeks of benefits to individuals who are not eligible for regular UC or extended benefits under State or Federal law or PEUC. These benefits were also for those individuals self-employed, individuals seeking part-time employment and those lacking sufficient work history. For further guidance under the Pandemic Unemployment Assistance Program during the period, refer to UIPL No. 16-20, and UIPL No. 16-20 Change I. - Title II, Subtitle A, Section 2104 of the CARES Act creates the Federal Pandemic Unemployment Compensation Program, as a temporary emergency increase in unemployment compensation benefits, providing an additional $600 per week to individuals who are collecting regular UC, including Unemployment Compensation for Federal Employees and Unemployment Compensation for Ex-Servicemembers, as well as to the Pandemic Emergency Unemployment Compensation program, the Pandemic Unemployment Assistance program, the Extended Benefits program, the Short-Time Compensation program, the Trade Readjustment Allowances program, the Disaster Unemployment Assistance program, and the Payments under the Self-Employment Assistance program. For further guidance under the Federal Pandemic Unemployment Compensation Program during the period, refer to UIPL No. 15-20, UIPL No. 15-20 Change I, and UIPL No. 15-20 Change II. - Title II, Subtitle A, Section 2107 of the CARES Act creates the Pandemic Emergency Unemployment Compensation temporary federal program, which provides up to 13 weeks of benefits to individuals who have exhausted all rights to regular compensation under state or Federal law with respect to a benefit year that ended on or after July 1, 2019; have no rights to regular compensation with respect to a week under any State or Federal UC law; are not receiving compensation with respect to such week under the UC law of Canada; and are able to work, available to work and actively seeking work. For further guidance under the Pandemic Emergency Unemployment Compensation Program during the period, refer to UIPL No. 17-20, and UIPL No. 17-20 Change 1. The state must comply with the provisions contained in the state Agreements with the Department to administer PEUC, PUA and FPUC programs and all funding instruments for such programs. States must perform such duties and functions in accordance with Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards at 2 C.F.R. Part 200 and 2 C.F.R. Part 2900 applicable to all grants and cooperative agreements. Additionally, the Department?s administrative requirements for grants and cooperative agreements at 29 C.F.R. Parts 31, 32, 38, 96, and 98 apply to grant funds provided for these activities. Additionally, the Department must comply with the law 167 of 2018, where it is stipulated that as of 7/1/2019 the minimum weekly benefit would increase to $33 and the maximum weekly benefit would increase to $190. Thereafter, effective 7/1/2020, the minimum weekly benefit will increase to $60 and the maximum weekly benefit will increase to $240; taking into consideration that the benefit calculation will be made according to the table established by the Secretary through regulations prescribed in Regulation No. 9056: ?Reglamento para Administrar el Seguro por Desempleo?. Cause of Condition The large volume of claims stressed an outdated system and the unprecedented economic impact warranted rapid processing claims. The rapid implementation of the new unemployment benefit programs authorized by the CARES Act did not allow sufficient time to employ wage verification and other procedures. Other procedures to identify client identity, prior wages and overall eligibility were also weakened due to the unprecedented volume of claims and new procedures employed to expedite benefit payments. Lastly, the substantial increase in fraudulent claims activity is largely considered to be the result of sustain and targeted efforts impacting many states throughout the United States. The lack of claimants? information at the date of the claim evaluation might prevent the Department's personnel to properly evaluate the eligibility of the claim causing overpayments of benefits. Effect of Condition Fraudulent insurance claims have been paid and the unemployment insurance processing system require further enhancements to timely identify fraudulent benefit claims prior to disbursement. These enhancement shall be develop to ensuring the compliance with the federal program, including the prevention and detection of fraudulent benefit payments. Recommendation We recommend management the following: 1. Continue to enhance procedures to timely identify fraudulent claims by strengthening controls within the unemployment insurance program claims processing system, as well as those newly implemented processing functionalities established within the new developed ?FAST PUA? system. 2. Develop and implement a strategic plan to address the required modernization of the unemployment claims processing system. 3. The Department?s staff in charge of determining eligibility be oriented regarding this requirement criteria to ensure that the unemployment insurance benefits are granted only to claimants that comply with all established requirements. 4. The Department should continue to perform collection efforts to the claimants which resulted with unemployment insurance benefits overpayments. Questioned Costs Known questioned costs amounted to $841,962.00. Projected questioned costs are undeterminable. Auditee Response See Department's Corrective Action Plan.

Finding No. 2020-009 Federal Agency: United States Department of Labor Federal Program Title and CFDA Number: 17.225 Unemployment Insurance 17.225 COVID-19 Unemployment Insurance Compliance Requirement: Special Test & Provisions- Match with IRS 940 FUTA Tax Form; UI Program Integrity ? Overpayments; UI Reemployment Programs: Worker Profiling and Reemployment Services (WPRS) and Reemployment Services and Eligibility Assessments (RESEA); and Program Integrity Functions for the Regular UI Program ? Cross Match Activities Type of Finding: Material Weakness in Internal Control (MW) and Instance of Noncompliance (NC) This finding is similar to prior-year finding 2019-010 Statement of Condition Match with IRS 940 FUTA Tax Form ? This report was submitted 6 days after due date. Unemployment Insurance (UI) Program - Overpayments: We examined 120 Unemployment?s Insurance overpayments files selected in our sample. As a result of our testing, we noted the following instances of noncompliance: ? 1 of 120 cases, which represents a 1% of the sample, was an overpayment that did not proceed. Once the external auditor requested information of the case, the department detected that it was not appropriate and in July 2022 the overpayment was deleted on the SABEN platform. ? 22 of 120 cases, which represents an 18% of the sample, the period of 24 months that the Investigation Unit has from the date on which the overpayment is established to intervene in the cases and classify them as premeditated (fraud) or not premeditated already expired. After this period, the Investigation Unit can intervene, but if the case was premeditated (fraud), the department loses the power to disqualify the claimant from receiving benefits during a year and to impose the penalty; it can only recover the overpayment for a period of five years from the date on which the overpayment was established. ? 1 of 120 cases, which represents a 1% of the sample, the case was classified as premeditated (fraud), but because the checks expired the overpayment did not proceed. The UI overpayment was deleted, but due to an error on the codification on the SABEN platform the FPUC (Supplementary Benefit) overpayment has not been codified to eliminate the FPUC overpayment. The Investigation Unit cannot revoke the penalty of the UI overpayment on the claimant until the FPUC overpayment is eliminated. ? 1 of 120 cases, which represents a 1% of the sample, the overpayment was classified as administrative, but because the checks were expired the overpayment did not proceed. The UI overpayment was eliminated, but the FPUC (Supplementary Benefits) overpayment has not been eliminated yet on the SABEN platform, creating an overpayment the claimant do not owe. ? 4 of 120 cases, which represents a 3% of the sample, classified as premeditated (fraud) the document ?Determinacion y Descalificacion de Sobrepagos? presented errors on the calculation of the total overpayment and the penalty imposed, causing and incongruence between the document and the total overpayment presented on the webpage ?Historial de Sobrepago? (Screen 09) of the SABEN platform and the amount recomputed by the auditor. ? 4 of 120 cases, which represents a 3% of the sample, classified as premeditated (fraud) the document ?Determinacion y Descalificacion de Sobrepagos? was not obtained for examination. This document is created on the BARTS platform, and due to a lack of updates on the platform the Investigation Unit had to prepare the case manually and not through the platform. By not having this document, the auditor could not validate that the total amount of overpayment and penalty reflected in the document agreed with the information on the SABEN platform and the amount recomputed by the auditor. ? 1 of 120 cases, which represents a 1% of the sample, the auditor was unable to examine the document PR-SD 353. ? 78 of 120 cases, which represent a 65% of the sample, the overpayments were not recovered by PRDOL. The total overpayments of UI and FPUC claims included on our testing not recovered by the Department totals $447,116, where $115,480 correspond to the UI program and $331,636 to the FPUC program. ? The NSE (?Negociado de Seguridad de Empleo?) does not perform a follow-up process, or a continuous monitoring process for the recovery of the overpayments. The auditor could not validate the Billing Notice to recovery of overpayments of the claimants on the ?Recover? platform, which has not been operating since November 20, 2020. Pandemic Unemployment Assistance (PUA) Program - Overpayments: We examined 120 Pandemic Unemployment Assistance overpayments files selected in our sample. As a result of our testing, we noted the following instances of noncompliance: ? 69 of 120 cases, which represents a 58% of the sample, the period of 24 months that the Investigation Unit has from the date on which the overpayment is established to intervene in the cases and classify them as premeditated (fraud) or not premeditated already expired. After this period, the Investigation Unit can intervene, but if the case was premeditated (fraud), the department loses the power to disqualify the claimant from receiving benefits during a year and to impose the penalty; it can only recover the overpayment for a period of five years from the date on which the overpayment was established. ? 2 of 120 cases, which represent a 2% of the sample, the Department must reimburse the claimant for overpayments recovered in an amount greater than the total amount of the overpayment. ? 1 of 120 cases, which represents a 1% of the sample, the claimant has an overpayment as a result of a monetary redetermination, and the overpayment has not been created and therefore has not been recovered. ? 1 of 120 cases, which represents a 1% of the sample, there was an error in determining the weekly benefit amount, where the weekly benefit given for PUA was $660 instead of $66. ? 2 of 120 cases, which represent a 2% of the sample, the document PR-SD 353 was not provided for examination. ? 1 of 120 cases, which represents a 1% of the sample, the document PR-SD 353 was incomplete, presenting income in weeks subsequent to the overpayment. This observation had not been made by management until the intervention of the auditor. ? 2 of 120 cases, which represents a 2% of the sample, the documents PR-SD 647 and PR-SD 648 was not provided for examination. ? 1 of 120 cases, which represents a 1% of the sample, classified as premeditated (Fraud), but due to the lack of documents, the term to disqualify the claimant and impose the penalty has already passed. Depending on whether or not the documents are found, the overpayment is classified as no premeditated or the overpayment is eliminated. ? 4 of 120 cases, which represent a 3% of the sample, the overpayments have the same program codification (41) but do not pertain to PUA. They belong to one of the DUA programs active during the period. Some of these overpayments were created automatically by the SABEN platform when a claimant who received DUA, applied for the PUA benefits. Therefore, the department does not have procedures whereby programs can be segregated to identify overpayments and classify them properly. ? 3 of 120 cases, which represent a 3% of the sample, classified as premeditated (fraud) the document ?Determinacion y Descalificacion de Sobrepagos? was not obtained for examination. This document is created on the BARTS platform, and due to a lack of updates on the platform the Investigation Unit had to prepare the case manually and not through the platform. By not having this document, the auditor could not validate that the total amount of overpayment and penalty reflected in the document agreed with the information on the SABEN platform and the amount recomputed by the auditor. ? 88 of 120 cases, which represent a 73% of the sample, the overpayments were not recovered by PRDOL. 4 of these overpayments belong to the DUA program which have the same coding as the PUA on the SABEN platform (code 41), and therefore are not segregated, have a total balance of $1,449 without being recovered by the PRDOL. The remaining 85 overpayments, due to the fact that one claimant presents overpayments from both DUA and PUA programs; present a total balance without being recovered by the PRDOL of $135,284; in where $31,633 correspond to the PUA program, and $103,651 to the FPUC program. ? The NSE (?Negociado de Seguridad de Empleo?) does not perform a follow-up process, or a continuous monitoring process for the recovery of the overpayments. The auditor could not validate the Billing Notice to recovery of overpayments of the claimants on the ?Recover? platform, which has not been operating since November 20, 2020. Pandemic Emergency Unemployment Compensation (PEUC) Program - Overpayments: We examined 120 Pandemic Emergency Unemployment Compensation overpayments files selected in our sample. As a result of our testing, we noted the following instances of noncompliance: ? 4 of 120 cases, which represents a 3% of the sample, the period of 24 months that the Investigation Unit has from the date on which the overpayment is established to intervene in the cases and classify them as premeditated (fraud) or not premeditated already expired. After this period, the Investigation Unit can intervene, but if the case was premeditated (fraud), the department loses the power to disqualify the claimant from receiving benefits during a year and to impose the penalty; it can only recover the overpayment for a period of five years from the date on which the overpayment was established. ? 1 of 120 cases, which represents a 1% of the sample, the document PR-SD 353 was incomplete, since it did not presented the claimant?s earnings in one of the weeks of the overpayment. ? 1 of 120 cases, which represents a 1% of the sample, the claimant paid an overpayment that was eliminated and therefore, the Department owes that money to the claimant. ? 25 of 120 cases, which represents a 21% of the sample, present PEUC benefits payments prior to ending week 4/4/2020, week in which benefits began to be provided under this program. ? 1 of 120 cases, which represents a 1% of the sample, $240 weekly benefit was disbursed prior to 7/1/2020, the date on which the maximum weekly benefit increased from $190 to $240 according to the law. ? 1 of 120 cases, which represents a 1% of the sample, the overpayment was established on 8/9/2021 and was classified as premeditated (fraud); however, the 15% penalty was imposed only to the PELIC overpayment and not to the FPUCJ overpayment. ? 38 of 120 cases, which represent a 32% of the sample, the overpayments were not recovered by PRDOL. The total overpayments of PEUC and FPUC claims included on our testing not recovered by the Department totals $29,565, where $3,564 correspond to the PEUC program and $26,001 to the FPUC program. ? The NSE (?Negociado de Seguridad de Empleo?) does not perform a follow-up process, or a continuous monitoring process for the recovery of the overpayments. The auditor could not validate the Billing Notice to recovery of overpayments of the claimants on the ?Recover? platform, which has not been operating since November 20, 2020. Federal Pandemic Unemployment Compensation (FPUC) Program - Overpayments: ? Refer to Unemployment Insurance (UI) Program instances of noncompliance mentioned above. ? Refer to Pandemic Unemployment Assistance (PUA) Program instances of noncompliance mentioned above. ? Refer to Pandemic Emergency Unemployment Compensation (PEUC) Program instances of noncompliance mentioned above. UI Reemployment Programs: Worker Profiling and Reemployment Services (WPRS) and Reemployment Services and Eligibility Assessments (RESEA) We examined 25 claimants who participated on the Reemployment Services and Eligibility Assessments (RESEA) program and as a result of our testing; we noted the following instances of noncompliance: ? 11 of 25 cases, which represent a 44% of the sample, the participant did not attend to the initial RESEA session. ? 3 of 25 cases, which represent a 12% of the sample, the participant did not attend the rescheduled session of the RESEA program. ? 1 of 25 cases, which represents a 4% of the sample, the participant did not register in Wagner Peyser (WP). Additionally, related to this test the following documents were not available on the Power App Platform: ? 10 of 25 cases, which represent a 40% of the sample, the form ?Historial de Empleo? was not available for examination. ? 11 of 25 cases, which represent a 44% of the sample, the form DSE 128 ?Evaluacion de Destrezas? was not available for examination. ? 7 of 25 cases, which represent a 28% of the sample, the form 231 ?Revision de Elegibilidad del Reclamante? was not available for examination. ? 12 of 25 cases, which represent a 48% of the sample, the ?Plan Individual de Reempleo? was not available for examination. ? 7 of 25 cases, which represent a 28% of the sample, the ?Plan de Empleabilidad? was not available for examination. ? 7 of 25 cases, which represent a 28% of the sample, the Objective Evaluation was not included. ? 12 of 25 cases, which represents a 48% of the sample, the ?Registro para Servicios de Carrera? was not included. ? 18 of 25 cases, which represents a 72% of the sample, evidence of employment efforts was not available (Form ?Registro Gestiones de Busqueda de Empleo). ? 8 of 25 cases, which represent a 32% of the sample, the form ?Auto-Evaluacion? was not available for examination. ? 21 of 25 cases, which represent an 84% of the sample, participants did not obtain employment. Program Integrity Functions for the Regular UI Program ? Cross Match Activities Unemployment Insurance (UI) Program - Cross Match Activities: Based on procedures conducted on the performance of cross-match activities by the Department on an ongoing basis, the results of our testing determine the following instances of noncompliance: ? The PRDOL does not perform the National Directory of New Hires Cross-Match activity since 2016. ? The PRDOL did not perform the Quarterly Wage Records Cross-Match activity for the fourth quarter of the fiscal year (March through June, 2020). ? No evidence was presented for examination by the auditor that the Systematic Alien Verification for Entitlement (SAVE) cross-match activity was conducted during the period. Pandemic Unemployment Assistance (PUA) Program - Cross Match Activities: Based on procedures conducted on the performance of cross-match activities by the Department on an ongoing basis, the results of our testing determine the following instances of noncompliance: ? The three mandatory cross-match activities were not performed by the PRDOL in the quarter ending 6/30/2020. The three mandatory cross-match activities are: o National Directory of New Hires Cross-Match o Quarterly Wage Records Cross-Match o Systematic Alien Verification for Entitlement (SAVE) Cross-Match Pandemic Emergency Unemployment Compensation (PEUC) Program - Cross Match Activities: Based on procedures conducted on the performance of cross-match activities by the Department on an ongoing basis, the results of our testing determine the following instances of noncompliance: ? The three mandatory cross-match activities were not performed by the PRDOL in the quarter ending 6/30/2020. The three mandatory cross-match activities are: o National Directory of New Hires Cross-Match o Quarterly Wage Records Cross-Match o Systematic Alien Verification for Entitlement (SAVE) Cross-Match Criteria Based on 26 CFR section 31.3302(a)-3(a), states are required to annually certify for each taxpayer the total amount of contributions required to be paid under the state law for the calendar year and the amounts and dates of such payments in order for the taxpayer to be allowed the credit against the FUTA tax. In order to accomplish this certification, states annually perform a match of employer tax payments with credit claimed for these payments on the employer?s IRS 940 FUTA tax form. Public Law No. 112-40, enacted on October 21, 2011, and effective October 21, 2013, amended sections 303(a) and 453A of the Social Security Act and sections 3303, 3304, and 3309 of FUTA to improve program integrity and reduce overpayments. For further explanation refer to UIPL No. 02-12, UIPL No. 02-12 Change 1, and UIPL No. 02-12 Change 2. Public Law No. 74 ?Ley de Seguridad de Empleo de Puerto Rico?, enacted on June 21, 1956, and effective January 1, 1957, establishes on section 4(b)(7), that within the twenty-four (24) calendar months immediately preceding such week of overpayment and with intent to commit fraud to obtain benefits that were not payable under this law, if the claimant has made any false statement or representation about a material fact knowing that it was false or knowingly concealed some material fact for the purpose of obtaining or increasing the benefits under this law, in which case it will be disqualified for the week in which the Director makes a determination in this regard and for the fifty-two (52) weeks immediately following such week. As established on UIPL No. 15-20, published on April 4, 2020, if an individual is deemed ineligible for regular compensation in a week and the denial creates an overpayment for the entire weekly benefit amount, the FPUC payment for the week will also be denied; and the FPUC overpayment must also be created. This also applies for the PUA and PEUC programs. Section 2104(f) of the CARES Act only provides for an individual being ineligible for future benefits in accordance with the applicable provisions of state UC law, it does not permit the establishment of a penalty on FPUC that was fraudulently obtained, so states may not impose fraud penalty provisions on FPUC payments. Based on UIPL No. 16-20, published on April 5, 2020, the requirements of 20 CFR 625.14 shall apply with respect to PUA overpayments and fraud to the same extent and in the same manner as in the case of DUA. Based on UIPL No. 20-21, published on May 5, 2021, prescribes that states must apply the fraud monetary penalty for FPUC, MEUC, PEUC, and the first week of regular UC that is reimbursed in accordance with Section 2105 of the CARES Act for all fraud overpayments established on or after the date of publication for this UIPL. Sec. 306 of 42 U.S.C. 506(a) prescribes that the Secretary of labor (in this section referred to as the ?Secretary?) shall award grants under this section for a fiscal year to eligible States to conduct a program of reemployment services and eligibility assessments for individuals referred to reemployment services as described in section 303(j) for weeks in such fiscal year for which such individuals receive unemployment compensation. Worker Profiling and Reemployment Services (WPRS), which is mandated by Section 303(j) of the Social Security Act, is designed to identify UI claimants who are most likely to exhaust their benefits and need reemployment assistance to return to work, and refer them to appropriate reemployment services, such as: job search and job placement assistance; counseling; testing; provision of occupational and labor market information; and assessments. The number of individuals served under the WPRS is determined by the state (and/or local areas) based on its capacity to serve these individuals. UIPL No. 41-94 provides guidance on WPRS requirements. RESEA is authorized by Section 306 of the Social Security Act and builds on the success of both WPRS and RESEA?s predecessor, the former UI Reemployment and Eligibility Assessment (REA) program. RESEA uses an evidence-based integrated approach that combines an eligibility assessment for continuing UI eligibility and the provision of reemployment services. Operating guidance for the RESEA program is updated annually. UIPL No. 08-20 provides RESEA operating guidance for FY 2020. Section 7511, Part V, of the Employment Security Manual (ESM) requires state unemployment compensation (UC) laws to include provisions for such methods of administration as are, within reason, calculated (1) to detect benefits paid through error by the state UC agency or through willful misrepresentation or error by the claimant or others, (2) to deter claimants from obtaining benefits through willful misrepresentation, and (3) to recover benefits overpaid under certain circumstances. These required functions are accomplished through state agency BPC units or other designated staff responsible for promoting and maintaining the integrity of the UI program through prevention, detection, investigations, establishment, and recovery of overpayments. BPC units or designated staff also prepares cases for prosecution. The following BPC activities are mandatory for states to implement for the regular UI programs on an ongoing basis. States must implement these functions for the PEUC and PUA programs in the same manner as for the regular UI programs. ? National Directory of New Hires Cross-match (UIPL No. 13-19 and UIPL No. 19-11). UIPL No. 13-19 provides detailed, recommended operating procedures for crossmatching with state and national directories of new hire data; ? Quarterly Wage Records Cross-match (20 CFR ? 603.23); and ? Systematic Alien Verification for Entitlement (SAVE) (Section 1137(d) of the Social Security Act (SSA) (42 U.S.C. ?1320b-7). Cause of Condition Deficiencies in the programmatic system related on overpayments of benefits from UI and the CARES Act temporary programs established due to the COVID-19 pandemic; which causes a lack in segregation and classification of overpayments by programs to maintain a proper follow-up of such overpayments. Lack on follow-up procedures for the collection of overpayments before they become uncollectible. Deficiencies in the programmatic system for the examination of claimants who participate in reemployment programs. Deficiencies detecting errors on benefit payments, or preventing non-eligible claimants from obtaining benefits through willful misrepresentation, by not implementing cross-match activities properly and timely. Effect of Condition The Department?s automated procedures related to the notice of overpayments sent to individuals had not been reviewed and actualized. Errors in the programming of automated systems from external IT contractors exist, and since November 2020 the billing of notice and account statements have not been set to individuals with overpayments. By not implementing mandatory cross-activities, the Department faces a higher volume of potentially fraudulent or ineligible claims, and failing to timely detect and stop possible benefit payments to individuals who knowingly misrepresent their information. Recommendation The Department and state agencies that administer UC program have made the prevention of improper payments a high priority in order to maintain the integrity of the UC program. We recommend that the Department maintain an alternative written procedure for identifying overpayments and classifying them in a manner that allows the State to take appropriate follow-up action. To improve the recovery of all applicable overpayments, the Department should develop a billing tracking mechanism to monitor these issues. In the same way, the Department must implement processes where those claimants who are not eligible or who present erroneous information can be detected in time, in order to reduce the amount of improper payments disbursed and therefore, reduce the volume of overpayments. Questioned Costs None. Auditee Response See Department?s Corrective Action Plan.

Finding No. 2019-010 Federal Agency: United States Department of Labor Federal Program Title and CFDA Number: All Federal Programs Compliance Requirement: Reporting Type of Finding: Significant Deficiency (SD) and Instance of Noncompliance (NC) Statement of Condition This finding is similar to prior-year finding 2019-011 The Data Collection Form and the Reporting Package for the year ended June 30, 2020 was not timely submitted to the federal government. The Data Collection Form and the Reporting Package must be submitted by the auditee within the earlier of 30-day after the receipt of the auditor?s reports or nine (9) months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant or oversight agency for audit. No extension from the cognizant or oversight agency was noted. Criteria The Uniform Guidance 2 CFR Section 200.512(a) requires the audit to be completed and the reporting package and data collection form be submitted to the Federal Audit Clearinghouse (?FAC?) nine months after the end of the audit period. Cause of Condition The Department has not been able to provide the necessary information for the preparation of the single audit report on a timely basis in order to complete its reporting requirement for the fiscal year ended on June 30, 2020. Effect of Condition The Department is not complying with the reporting requirements set forth by federal regulations, which could affect the future of its federal grants. Recommendation The Department should adopt policies and procedures to ensure that the annual audit is performed and submitted in a timely manner. Questioned Costs None. Auditee Response See Department?s Corrective Action Plan.

Finding No. 2019-007 Federal Agency: United States Department of Labor Federal Program Title and CFDA Number: All Federal Programs Compliance Requirement: Financial Reporting Type of Finding: Material Weakness in Internal Control (MW). Instance of Noncompliance (NC) This finding is similar to prior-year finding 2018-007 Statement of Condition As discussed in Findings 2019-001, 2019-002, 2019-004, 2019-005. The Department has several deficiencies regarding internal control structure over financial reporting. Due to such failure, the Department does not have the ability to produce accurate federal reports on a timely basis and federal programs were not properly monitored as to compliance with applicable laws and regulations. Refer to those findings for more detail. Criteria Refer to findings 2019-001, 2019-002, 2019-4, 2019-005 Cause of Condition Refer to findings 2019-001, 2019-002, 2019-4, 2019-005 Effect of Condition Refer to findings 2019-001, 2019-002, 2019-4, 2019-005 Recommendation Refer to findings 2019-001, 2019-002, 2019-4, 2019-005 Questioned Costs None Auditee Response See Grantee's Corrective Action Plan

Finding No. 2019-008 Federal Agency: United States Department of Labor Federal Program Title and CFDA Number: 17.225 Unemployment Insurance Compliance Requirement: Reporting Type of Finding: Significant Deficiency in Internal Control (SD). Instance of Noncompliance (NC) This finding is similar to prior-year finding 2018-008 Statement of Condition Our procedures performed in the financial and performance reporting requirements we noted the following instances of noncompliance: (1) ETA 902 Disaster Unemployment Assistance reports for the periods ended 10/31/2018 and 4/30/2019 were submitted 314 and 133 days after due date, respectively. Criteria For the submission of ETA's 90-2 the ET Handbook 401 5th edition, established, instructions for use by State Workforce Agencies (SWAs) for the preparation and submittal of most Unemployment Insurance (UI) reports. ET Handbook No. 402, Unemployment Insurance Required Reports Handbook, which shows how to report through the UI electronic entry system and reports must be sent in time to arrive in the National Office by the due date. For the submission of ETA 9130, Financial Status Report, U/ Programs -All ETA grantees are required to submit quarterly financial reports for each grant award. Instructions to comply with the submission deadlines are contained on http://www.doleta.gov/grants. Based on 2 CFR 200.327 and 200 CFR 200.328 monitoring activities for reporting compliance requirement should include the review by external parties to corroborate information included in the reports of Federal awards or periodic comparison of reports to supporting records. Cause of Condition There no procedures in place to monitoring and reviewing federal reports before submitted them to Federal government. Lack of follow up due dates of federal reports by the personnel in charge to prepare them. Effect of Condition Reports submitted to the Federal government may contain errors and not be detected on time. Recommendation Additional training to personnel in charge of federal programs for timely reporting submittal. Procedures should be implemented to establish a review of the federal reports by an employee independent of preparing them before their submission to the Federal government. Questioned Costs None Auditee Response See Grantee's Corrective Action Plan

Finding No. 2019-009 Federal Agency: United States Department of Labor Federal Program Title and CFDA Number: 97.034 Disaster Unemployment Assistance Compliance Requirement: Eligibility-Disaster Unemployment Assistance (DUA) Type of Finding: Material Weakness in Internal Control (MW) and Noncompliance (NC) This finding is similar to prior-year finding 2018-009 Statement of Condition The Department of Labor made improper payments for Disaster Unemployment Assistance claims for the second consecutive year, resulting in overpayments to DUA program for the year ended on June 30, 2019. We examined 60 claims files selected in our sample which are detailed as follows: sixteen (16) claimants are Regular Unemployed Workers type which represents 27% of our sample; forty four (44) are Unemployed Self- Employed Individuals type, which represents 73% of our sample. Based on our test performed of claimant's files for the Disaster Unemployment Assistance Program (DUA) paid during fiscal year ended on June 30, 2019, we noted the following documentation are missing on claimant's files: ? Based on our examination, we noted that 33.3% of the population did not file the initial application on claimant's file form PRSD 500 "Solicitud de Beneficios por Desempleo (based on 20 claimants of 60). For the sample covering the sixteen (16) regular unemployed workers, we noted the following: ? 38% did not provide a certification of the employers proving that they are unemployed due to the disaster. (Based on 6 regular employee claimants of 16). ? 12.5% did not include the form AD-14 "Hoja de Trabajo para Determinar Asistencia Semanal" (Based on 2 regular employee claimants of 16). For the sample covering the forty four (44) Self - Employee unemployed workers, we noted the following: ? 34% did not include the form AD-14 "Hoja de Trabajo para Determinar Asistencia Semanal" (Based on 15 self-employed claimants of 44). ? 75% did not file the PR-AD-1A an application with weekly gross salary information (Based on 33 self-employed claimants of 44). ? 61% did not include in the PR-AD-1A form the claimant?s occupation information (Based on 27 self-employed claimants of 44). ? 61% did not include the claimant signature on the PR-AD-1A form. (Based on 27 self-employed claimants of 44). The following information was missing in the PR-AD-1 for ?Solicitud de Asistencia por Desempleo Ocasionado por Desastre? for the self- employee participants: ? 56% of the sample the files examined does not include the date of Unemployment. (Based on 25 self-employed claimants of 44). ? 61% did not include the gross salary information. (Based on 27 self-employed claimants of 44). ? 56% of the cases tested, the signatures of the participants are missing in the form PR?AD-1 (based on 25 self- employed claimants of 44). ? 79% of the interviewer signatures are missing in the form PR-AD-1 (Based on 35 self-employed claimants of 44). ? 91% of the claims tested are not signed by the UI supervisor (Based on 40 self- employee claimants of 44). ? 77% of the self- employee claims did not include the ?Affidavit of Schedule Employment and Salaries? PR-AD-5 (Based on 34 self-employee claimants of 44). ? 86% of the self- employee claims did not include the ?Affirmation of Self Employee Form? (Based on 38 self-employee claimants of 44). ? 88% did not include evidence of the progress of efforts to return to Self-Employment business activities. (Based on 39 self- employee claimants of 44). ? 75% did not include the Eligibility Determination of Entitlement Disaster. (Based on 33 self- employee claimants of 44). ? 79% did not include evidence of the interview by the UI staff to the claimant in order to documenting the eligibility process. (Based on 35 self-employee claimants of 44). ? 52% did not include Tax Returns in order to corroborate wages information. (Based on 23 self-employee claimants of 44). For the total population tested (60 claimants) we noted the following: ? On 8 (1 regular employee and 7 self-employed) claimants? files we do not find evidence of salaries or compensation of the claimant for the evaluation and determination of the benefits to be paid by the Department under the provisions of the DUA program. Total payments made to this claimants amounted to $7,212 ($244 regular employee and $6,968 self-employed). Under these circumstances these cases might be considered over payments and, if not properly documented, shall be collected by the Department from the claimants. Also, we noted that the Department identified additional claimants with over payments of $24,851, from which $15,237 were recovered and the remaining $9,614 still uncollected at the date of our test. Accordingly, total possible overpayments identified during our testing amounted to $16,826, including $9,614 identified by the Department. Criteria The Federal Emergency Management Agency (FEMA) has delegated to the Secretary of Labor the responsibility for administering those provisions of the Stafford Act that pertain to the DUA program and payment of DUA. Under the DUA program, the SWA is accountable to DOL and, through DOL, to FEMA. The SWA works in coordination with both agencies in preparing prompt announcements regarding the availability of DUA, submitting initial and supplemental funding requests, and accurately reporting funding and workload information on DUA monthly and quarterly reports. Since FEMA has delegated to the Secretary of Labor the responsibility for administering the DUA program, FEMA transfers resources to DOL's Employment and Training Administration (ETA) to provide funding to States impacted by the disaster after a major disaster declaration has been made. The Disaster Unemployment Assistance (DUA) is authorized by the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act). DOL oversees the DUA program and coordinates with FEMA, which provides the funds for payment of DUA and for State administration. State Workforce Agencies administer the DUA program on behalf of the Federal Government. Based on a request by the Governor of a State or the Chief Executive of a federally recognized Indian tribal government, the President declares a major disaster and authorizes the type(s) of Federal assistance to be made available and the geographic areas that have been adversely affected by the disaster. The Presidential declaration may authorize Individual Assistance (IA), which includes the provisions for DUA (20 CFR part 625). Cause of Condition Department's files do not provide evidence that its personnel request to the claimants the necessary wages and other relevant information to corroborate the information of the workers to properly process the claims filed and assesses their eligibility to the program. No proper documentation in SABEN system in PRSD Notes is made by UI staff to document the claims. No monitoring the eligibility process to properly make correct eligibility determinations. Lack of adherence to eligibility criteria and requirements by the Department?s staff in charge of determining eligibility at regional offices. Effect of Condition The lack of workers' information at the date of the claim evaluation might prevent the Department's personnel to properly evaluate the eligibility of the claim causing overpayments of benefits. Recommendation We recommend that the Department?s staff in charge of determining eligibility be oriented regarding this requirement criteria to ensure that the disaster compensation benefits are granted only to claimants that comply with all established requirements. Department should continue to perform collection efforts to the workers which resulted with DUA benefits overpayments. Questioned Costs None Auditee Response See Grantee's Corrective Action Plan

Finding No. 2019-010 Federal Agency: United States Department of Labor Federal Program Title and CFDA Number: 17.225 Unemployment Insurance Compliance Requirement: Special Test & Provisions- UI Program Integrity - Overpayments Type of Finding: Material Weakness in Internal Control (MW) and Instance of Noncompliance (NC) Statement of Condition We examined 40 Unemployment?s Insurance overpayments files selected in our sample. As a result of our testing we noted that seven (7) overpayments cases were not recovered by PRDOL. These cases represent 17.5% of our sample. Also, the ?Billing Notice? and Account Statements? were not available for audit examination. The total overpayments of UI claims included on our testing not recovered by the Department amounted to $6,048. Based on the result of the audit sample, the auditor could not validate the collection effort made by the Investigations and Determination of Overpayments Unit of the Employment Security Bureau of the Department. This is due to the fact that the platform called "Recover" used by the Unit to generate the ?Billing Notices? has not been operating since November 2020. Also, the Investigations Unit does not have an alternative procedure in place for the collection process in order to recover UI benefits overpayments. Criteria Unemployment Compensation Integrity Act of 2011 (Integrity Act), Pub. L. No. 112-40, enacted on October 21, 2011, and effective October 21, 2013, amended sections 303(a) and 453A of the Social Security Act and sections 3303, 3304, and 3309 of FUTA to improve program integrity and reduce overpayments. (See UIPL Nos. 02-12, and 02-12, Changes 1 and 2). Cause of Condition Deficiencies in the programmatic system related on overpayments UI benefits. Effect of Condition The Department?s automated procedures related to the notice of overpayments sent to individuals had not been reviewed and actualized. Errors in the programming of automated systems from external IT contractors exist, and since November 2020 the billing of notice and account statements have not been set to individuals with overpayments. Recommendation The department and state agencies that administer UC program have made the prevention of improper payments a high priority in order to maintain the integrity of the UC program. We recommend that the Department maintain an alternative written procedure for identifying overpayments and classifying them in a manner that allows the State to take appropriate follow-up action. To improve the recovery of all applicable overpayments, the Department should develop a billing tracking mechanism to monitor these issues. Questioned Costs None Auditee Response See Grantee?s Corrective Action Plan

Finding No. 2019-011 Federal Agency: United States Department of Labor Federal Program Title and CFDA Number: All Federal Programs Compliance Requirement: Reporting Type of Finding: Significant Deficiency (SD) and Instance of Noncompliance (NC) Statement of Condition The Data Collection Form and the Reporting Package for the year ended June 30, 2019 was not timely submitted to the federal government. The Data Collection Form and the Reporting Package must be submitted by the auditee within the earlier of 30-day after the receipt of the auditor?s reports or nine (9) months after the end of the audit period, unless a longer period is agreed to in advance by the cognizant or oversight agency for audit. No extension from the cognizant or oversight agency was noted. Criteria The Uniform Guidance 2 CFR Section 200.512(a) requires the audit to be completed and the reporting package and data collection form be submitted to the Federal Audit Clearinghouse (?FAC?) nine months after the end of the audit period. Cause of Condition The Department has not been able to provide the necessary information for the preparation of the single audit report on a timely basis in order to complete its reporting requirement for the fiscal year ended on June 30, 2019. Effect of Condition The Department is not complying with the reporting requirements set forth by federal regulations, which could affect the future of its federal grants. Recommendation The Department should adopt policies and procedures to ensure that the annual audit is performed and submitted in a timely manner. Questioned Costs None Auditee Response See Grantee?s Corrective Action Plan

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