U.S. DEPARTMENT OF LABOR
Employment and Training Administration
Washington, D. C. 20210
November 9, 1992
October 31, 1994
UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 03-93
ALL STATE EMPLOYMENT SECURITY AGENCIES
BARBARA ANN FARMER
Unemployment Insurance Revenue Quality Control -- Transition to Mandatory Implementation
Purpose. To announce plans to implement the Revenue portion of the Quality Control program in fiscal year 1994 (FY '94); and to offer a period of transition beginning January 1, 1993.
References. Federal Register Notice of November 6, 1989 (54 FR 46708); Federal Register Notice of September 3, 1987 (52 FR 33520); UIPLs: 24-92 (April 23, 1992), 44-90 (September 21, 1990), 8-90 (November 15, 1989), 14-89 (February 8, 1989).
Background. The Regulation mandating the Quality Control (QC) program recognized "consensus principles" proposed by major parties with an interest in the unemployment insurance (UI) program, including a commitment by the Department to expand the initial benefits portion of QC (BQC) to cover UI tax operations. In 1988, the Department began the development of the portion of QC called Revenue Quality Control, or RQC.
The RQC has been designed to produce information as directly helpful to State managers as possible by identifying problems and their causes. The RQC program will emphasize information sharing and the providing of technical assistance to State employment security agencies (SESAs) in order to promote high quality in UI tax operations.
Additionally, RQC will serve as a vehicle for Federal oversight. The Department is responsible for ensuring that the expenditures of funds to the States are for proper and efficient administration of State law. The RQC program can assess how well SESAs achieve quality in carrying out their own policy decisions. The RQC program has four components: (1) Core RQC, (2) Benefit Charging, (3) Employer Compliance, and (4) Data Validation. Employer Compliance and Data Validation are still in the developmental stages. A pilot study has been completed on Benefit Charging, and a portion will be incorporated into the QC program. This directive addresses Core RQC.
Core RQC assesses SESA tax operations using three data collection techniques: (1) required reporting of data used for Computed Measures, (2) Program Reviews, and (3) Surveys. Required Reporting is similar to the reports and indicators currently used in tax assessment (e.g., 581 Reports and tax DLAs). The Program Review is divided into Systems Reviews and Acceptance Samples. Systems Reviews examine tax processes for the existence of internal controls and quality assurance systems. Acceptance Samples examine small numbers of transactions to verify the effectiveness of these controls.
Surveys gather information on methods and procedures for the purpose of identifying successful operations and sharing information amongst the SESAs. The Program Review and Survey segments of Core RQC have been pilot tested in eight SESAs and design changes have been made.
Operating and Monitoring Schedule. Initial plans had been to implement RQC (mandatory) in all SESAs by October 1, 1993. However, the required steps for the Department to publish amendments to the QC Regulation to accommodate RQC have made this date unrealistic; it will be later in FY '94. The Department has received feedback from numerous SESAs indicating their readiness to commence RQC. For this reason and because RQC is designed to operate on a calendar year basis, the Department strongly encourages all SESAs to accept the opportunity of implementing the program during the period of transition as presented in section 5 below. The RQC reviews will be conducted on a cyclical basis in a manner similar to the current Quality Appraisal system, i.e., the reviews will be conducted annually; however, every third year staff from the Regional Office (RO) and other SESAs will participate. Those portions of the systems review are found to be complete (i.e., all systems and controls to assure accuracy were verified to be present) will not have to be repeated during years that the SESA conducts a self-evaluation. This review cycle will ensure integrity of the findings and will foster the exchange of information among SESAs. Similarly to BQC, RQC will operate on a calendar year basis. There is flexibility as to when the Systems Reviews and the Acceptance Samples need be done. They may be started as early as January and April, respectively. However, it is essential that the ADP preparation be completed no later than the beginning of the review period in order to assemble the universes needed for sampling.
Staffing. Based upon the experience from reviews conducted in eight pilot SESAs in 1991-1992, one-staff year will be adequate to conduct RQC. (This effort can be completed by one full-time person or divided up between several staff on a part-time basis.) As a result, the FY '93 Grants to States budget has allocated one position for each SESA (except the Virgin Islands) to prepare for RQC effective January 1, 1993. The SESAs may find it advantageous to temporarily assign more than one full-time staff during the early stages of implementation. Similarly to BQC, staff conducting the RQC review must possess a specialized expertise of the subject matter. However, the specific skills needed are significantly different for RQC than for BQC. For RQC, a comprehensive knowledge of the UI Tax system is necessary to successfully complete the tasks. Skills in planning and conducting reviews of State systems and procedures are also necessary. Listings of Necessary Knowledge/ Skills and Tasks to be Performed are included as attachments to this directive to be used in developing position descriptions.
Organizational Placement of RQC. The QC Regulation (20 CFR Part 602.20) requires that QC be: "... independent of, and not accountable to, any unit performing functions subject to evaluation by the QC unit." The Regulation would prohibit RQC staff from reporting to a manager whose sole or predominant responsibility is to manage an area, e.g., status or field audit, being evaluated. Thus, the staff could be assigned to the State Commissioner of Labor, SESA Administrator, UI Director, a director responsible for UI program assessment, or the Chief of Tax. The SESA management, in consultation with the RO, should place the RQC data and findings.
ADP Support. Specifications for building sampling population frames from the SESA mainframe computer will be provided to the SESAs in March 1993. The COBOL programs for the sampling extraction routines will follow in September 1993. The AS&T funding provided annually to support QC will be entered into the Artecon system used for the UI data base. The Department will provide data entry software in November 1993, and equipment will be provided to the RQC staff who will be responsible for data entry. Funding for support on the Artecon system has already been provided to all SESAs.
Federal Role. The Department will provide an RQC operating manual to the SESAs. Prior to this, a draft will be transmitted to all SESAs and ROs for comment, and a final version will be issued upon clearance and OMB approval. The Department will also provide technical assistance during the implementation of RQC and conduct ongoing, periodic monitoring.
Transition. The knowledge and skills for staff assigned to RQC differ significantly from those for BQC staff. For this reason, a period of transition beginning January 1, 1993 is being offered that SESAs can use for preparation, training, familiarization, and practice prior to the mandatory implementation of Core RQC. Funds have been provided to each SESA to support one RQC position for this during FY '93. The Department encourages SESAs to utilize this opportunity to achieve a smooth transition into RQC. The period of transition provides maximum flexibility for making staffing adjustments for RQC. It will provide lead time for staff training and for preparation for the review. For the SESA ADP units, it allows lead time for the review of the proper sampling specifications and development of sampling extraction systems. In addition, by participating in the period of transaction, SESAs will be able to identify any weaknesses in tax operations early on, allowing time for program improvements to be made before mandatory implementation.
Training. It will be necessary for SESAs to complete training prior to participation in RQC. The Department will provide training sessions in Washington, D.C. during the transition period and again for mandatory implementation. (Funds for travel to the training have been provided with the RQC staffing allocation.) Training will cover both ADP implementation and program review. Sessions will be identical; if taken for the transition, it will not be necessary to attend later training for mandatory implementation. Schedules will be announced at a later date.
Possession of Data. Data from RQC reviews conducted during the period of transition will be information for use by the SESAs. SESAs will not be required to report data to the Department; however, they will be subject to RO monitoring to ensure proper implementation of the program.
Making the Transition. The SESAs choosing to begin RQC during the period of transition will need to be provided for SESAs making the transition.
Action Required. The SESA Administrators are requested to:
Consider the information presented by this directive and decide whether to implement RQC during the period of transition or to implement when RQC becomes mandatory (FY '94).
Begin the planning process for:
(1) determining the location of RQC,
(2) staffing RQC,
(3) training the RQC staff, as necessary:
training at National Office.
(4) ADP participation:
assigning ADP systems programmer to RQC,
building the sampling frames for each universe,
testing of database,
installing the COBOL sample selection routines.
Inform all affected units of these impending changes.
Inquiries. Questions should be directed to the appropriate RO.
Tasks to be Performed
Attachment A to UIPL 3-93 - Necessary Knowledge/Skills
Experience with the UI tax system and a comprehensive understanding of how it operates.
An understanding of basic accounting and auditing principles.
An understanding of statistical analysis and sampling techniques.
An understanding of and demonstrated skill at work flow analysis and process improvement.
A basic understanding of automation and its application to the UI tax program.
The ability to work with personnel at various organizational levels including management, tax unit, and data processing staff.
The ability to develop work plans, organize work assignments, and complete assignments on schedule.
The ability to communicate effectively in writing through preparation of review findings and reports.
The ability to communicate effectively through oral interviews of staff in the SESA and in other agencies, and through presentation of findings and recommendations to management.
Attachment B to UIPL 3-93 - Tasks to be Performed
Conduct meetings with SESA management staff to explain RQC program.
Maintain familiarity with UI tax law, procedures, organizational charts, etc.
Review RQC to determine specific applicability in the SESA.
Develop annual workplans to conduct RQC review.
Schedule interviews with SESA management and line staff.
Conduct reviews of internal controls provide reasonable assurance of timely and accurate outputs.
Select and review samples of outputs (acceptance samples) to test the effectiveness of internal controls.
Gather information of the existing methods and tools utilized by the SESA in selected tax functions (methods surveys).
Prepare report of findings and conclusions.
Present findings to SESA management.
Make recommendations for program improvements.
Develop plans for program improvements and participate in their implementation.
Travel to and spend time in other SESAs to assist in conducting on-site RQC reviews. (Note: as in the Quality Appraisal system, the SESA and RO will confer on which staff to send for out-of-State appraisals. This role will not necessarily be restricted to the RQC staff.)