Employment Development Department
January 11, 2021
Elaine M. Howle, CPA
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
I appreciate your acknowledgement of both the unprecedented challenges faced by EDD and the massive undertaking it was to get much-needed benefits out since the start of the COVID-19 pandemic and the fact that this is not a challenge unique to California. I also recognize there is much work to be done to improve our state's unemployment system and will implement all recommendations provided to EDD in this audit.
During the course of this pandemic, in addition to operating the state's unemployment insurance program, EDD has implemented four brand new federal benefit programs – Federal Pandemic Unemployment Compensation (FPUC), Pandemic Unemployment Assistance (PUA), Pandemic Emergency Unemployment Compensation (PEUC), and Lost Wages Assistance (LWA). PUA in particular was designed without the same safeguards as California's standard unemployment program and opened the system to fraud at record levels. The federal guidance for the PUA program provided insufficient support to states grappling with an unprecedented volume of claims.
Additionally, states have seen complex, coordinated and aggressive attacks by national and international criminals. Without coordinated assistance from the Trump Administration, states were left to deal with this extraordinary influx of fraud on their own while also endeavoring to distribute benefits to people in desperate need.
While there are additional improvements that EDD must make, the department has taken steps to increase efficiencies, expedite payment processes, and prevent fraud including:
- Enhanced automation of the federal Work Sharing Program, which helps businesses avert layoffs by reducing staff hours and allowing staff to receive both part-time earnings and a prorated percentage of UI benefits, thereby keeping their jobs and allowing the business to remain open.
- ① EDD automated claim processing through a new temporary tool and as noted in the audit, was recommended for long term use.
- In July Governor Newsom announced a Strike Team to set a path for reforms at EDD to improve the claimant experience, expedite payments and improve processes.
- EDD has implemented 48 of 100 Strike Team recommendations and is reviewing implementation timelines for long-term recommendations.
- ② By January 27, EDD will eliminate the backlog of 1.6 million claims identified by the Strike Team.
- EDD launched ID.me a third-party identify verification program that helps stop identity fraud at the beginning of the process and helps process claims more quickly compared to the previous manual verification process.
- ③ From October 1 to December 30, 2020, ID.me stopped over 357,000 fraudulent attempts to file a claim. This represents 30 percent of all claimants who have filed using ID.me.
- ④ Increased transparency by launching a new dashboard tracking claims and backlog numbers – this continues to be refined as EDD receives feedback from stakeholders and pursuant to the audit recommendation.
- ⑤ Adopted a burndown chart as a workload management tool to allocate resources properly to manage the backlog.
- Implemented Document Upload solution for claimants to provide documents online.
- ⑥ Completed migration to the Virtual Contact Center to improve the customer experience.
- EDD implemented the new Knowledge Management System which allows the department to more quickly onboard new hires and ensure more timely and a greater continuity of responses provided by call center staff.
- Launched a state level coordination group led by the Governor's Office of Emergency Services (CalOES), in partnership with State District Attorneys, and federal and state law enforcement partners, which has already put additional safeguards in place and is actively investigating and prosecuting fraud cases.
You also point out that many of these problems at EDD existed during the last recession. We agree that in order to function in bad times, the government needs to make investments in good times in infrastructure, technology, funding, and staff training and prioritize ensuring access to the most vulnerable, including the limited-English speaking and other populations facing accessibility barriers. This audit has redoubled our resolve to explore ways we can reinforce our infrastructure and capabilities to respond more effectively to surges like this.
The leadership team at EDD is committed to building an EDD that improves in the short run and can deliver in times of crisis. We are committed to carrying out your recommendations, as shown in EDD's attached responses. Thank you for your assistance and for the recommendations. Please know that we will continue to collaborate with you as EDD moves forward.
Public Release Date: January 26, 2021
CSA Audit: Poor Planning and Ineffective Management Left It Unprepared to Assist Californians Unemployed by COVID-19 Shutdowns
Employment Development Department Response
California State Auditor Report #1 2020-128
Title: EDD's Poor Planning and Ineffective Management Left It Unprepared to Assist Californians Unemployed by COVID-19 Shutdowns
The EDD prepared the following responses to the recommendations provided within the CSA Report 2020-128:
To provide a more transparent picture of backlogged claims, by March 2021 EDD should revise its public dashboards to clearly indicate the number of claims that have waited longer than 21 days for payment because EDD has not yet resolved pending work on the claim.
EDD Response to Recommendation #1:
The EDD agrees with this recommendation. The EDD first initiated a data dashboard to illustrate weekly unemployment claim activity in May and has made revisions since. In addition, two new dashboards were implemented in September with the advice of the EDD Strike Team to reflect work on an established backlog of claims, and a legislatively required (AB107) dashboard was also implemented to illustrate categories of claims that may end up taking more time to resolve along with call center data.
⑦ Over the last few months, the EDD has been working to refine the data and further clarify what should be considered backlog and agrees with the recommendation to clarify the dashboard data by removing two categories, 1) "Waiting for claimant certification" because this category is not dependent on EDD action, and 2) "Pending overpayment" since this is not a barrier to payment.
All of the major data elements are being consolidated into one user-friendly data dashboard which shows trends over the pandemic and will clearly indicate the number of unique claimants waiting longer than 21 days for payment because of unresolved issues. That new tableau-style dashboard is scheduled for release in February 2021.
To ensure that its identity verification processes are as robust as possible, EDD should determine by June 2021 the reasons why claimants cannot successfully complete their identity verification through ID.me and work with its vendor to resolve these problems. EDD should thereafter monitor the rate of successful identity verifications on a regular basis to ensure that it consistently minimizes unnecessary staff intervention.
EDD Response to Recommendation #2:
The EDD agrees with this recommendation and is working with the vendor to determine and document the causes of why some claimants have had difficulty in successfully completing their identity verification through ID.me. While the majority of claimants are able to complete the identity verification process using ID.me, EDD will analyze the root causes of when claimants cannot successfully complete the process and work closely with ID.me to address any issues. We will also monitor metrics on identity verifications on a regular basis to continuously improve our claimants' experience and help improve the processing times. Our goal is to complete this process by June 2021.
To retain as much automation in initial claims processing as possible, by June 2021, EDD should determine the automation modifications achieved through its emergency processing tool that it can retain and, by September 2021 it should make those a permanent feature of its UI Online application.
EDD Response to Recommendation #3:
The EDD agrees with this recommendation. Our goal is, by June 2021, to complete an evaluation of the temporary claims processing automation measures that we have taken and assess which measures will continue to serve us in a permanent manner. EDD will analyze efficiencies to improve processing times while maintaining claimant identity controls in place. EDD plans to make permanent the identified modifications by September 2021.
To ensure that it does not delay needed improvements to its IT systems, EDD should by, June 2021, identify the elements of the BSM that can assist it in making timely payment and that it could implement in an incremental fashion. It should then prioritize implementing the elements most likely to benefit Californians.
EDD Response to Recommendation #4:
EDD agrees with this recommendation. At the recommendation of the EDD Strike Team and in coordination with the Department of Technology, the BSM project was paused in September 2020. One reason this step was taken was to refocus the project so that inefficiencies could be more fully reviewed to ensure operational challenges identified during the pandemic are not included on a new platform. Instead, EDD will review policies and procedures and administrative simplification of the program before launching a new BSM project.
We also recognize that continual improvement is needed and our goal is, by June 2021, to identify capabilities that we can leverage and implement sooner that will allow for enhancements in claims processing and payments. We will implement any such solution in an iterative and modular approach and will prioritize based on benefits to our constituents as the key driver of modernization priority.
To ensure its ability to respond in a timely fashion to fluctuations in its workload, EDD should immediately begin modeling workload projections that account for possible scenarios that would cause a spike in UI claims. EDD should plan its staffing around the likelihood of those scenarios, including having a contingency plan for less likely scenarios that would have a significant impact on its workload.
EDD Response to Recommendation #5:
⑧ The EDD agrees with this recommendation that economic forecasts and related workload changes need to be an integral part of UI workload management. The EDD will continue to model future economic conditions, potential workload scenarios and the associated staffing needs. Historically, UI staffing levels are linked to the state unemployment levels/rates and based on recession data. The establishment of the UI Branch Command Center Division in January 2021 will assist with workload forecasting and workload management.
The EDD established an Unemployment Insurance Command Center Division in January 2021 to help oversee the planning of workloads and resource allocations. One of the primary functions will be to help forecast future workloads, customer service demands while considering the claimant experience through focus groups, etc. and staffing levels needed to meet performance objectives. The Command Center will identify tools to project/forecast workloads, staffing/resource allocations to help measure production, performance and quality. In summary, the Command Center will focus on identifying tools to minimize contact center calls and provide for more self-service options, make data driven decisions for resource allocations based on projected workloads peaks and valleys and review quality of the customer service.
To continue providing benefits to Californians in need while also effectively responding to the Department of Labor's directive regarding immediately resuming all eligibility determinations and resolving all suspended determinations, EDD should do the following:
Perform a risk assessment of its deferred workloads, including deferred eligibility determinations and retroactive certifications. EDD's assessment should take into account the relative likelihood that it issued payments to ineligible claimants by considering historic overpayment trends as well as the new or altered eligibility requirements the federal government adopted in response to the pandemic. If necessary, EDD should either partner with another state agency or contract for assistance in performing the analysis in support of this assessment.
EDD Response to Recommendation #6:
The EDD agrees with the recommendation. Due to the COVID-19 pandemic, California experienced an astronomical number of UI claims. Facing an unprecedented and rapidly growing workload, EDD took steps to respond to the very real financial hardship experienced by many Californians relying on timely payment of their UI benefits, which is central to the unemployment insurance program. EDD will perform the recommended risk assessment of the workloads that were deferred during this time.
Develop a workload plan that prioritizes its deferred workloads based on the risk assessment and determine the staffing and IT resources needed to accomplish the work within expected timeframes.
EDD Response to Recommendation #7:
EDD agrees with this recommendation and will develop a workload plan based upon the aforementioned risk assessment results from the workgroup on deferred workload. Historically, UI staffing and federal funding levels are linked to the state unemployment caseload/rates and based on recession data. The EDD will continue to model future economic conditions, potential workload scenarios and the associated risks and staffing needs.
Hire and train staff as necessary in order to carry out the workload plan.
EDD Response to Recommendation #8:
The EDD agrees with this recommendation and will hire and train staff to carry out the workload plan. As part of the plan, the EDD will deploy cross training of staff to address seasonal fluctuations with UI workloads, deferred workloads, implementation of legislatively mandated pandemic unemployment programs and future projects or initiatives when determining hiring and training needs.
Using the workload plan, EDD should process the deferred work in alignment with the following: the need to pay timely benefits to new or continued claimants, federal expectations about the urgency of the deferred work, and any deadlines by which EDD may no longer be allowed to recoup inappropriately paid benefits.
EDD Response to Recommendation #9:
EDD agrees with this recommendation to implement the workload plan in alignment with the considerations outlined above.
To ensure that it is able to take informed steps to provide better customer service through improved call center performance, EDD should implement a formal policy by no later than May 2021 that establishes a process for tracking and periodically analyzing the reasons why UI claimants call for assistance. By no later than October 2021, and every six months thereafter, EDD should analyze these data to improve its call center by doing the following:
- Identifying and resolving weaknesses or problems with the ways in which it provides assistance to UI claimants through self-service and non-call center options.
- Developing specialized training modules to quickly train its staff on the most commonly requested items with which callers want assistance.
EDD Response to Recommendation #10:
EDD agrees with these recommendations. The newly established EDD Unemployment Insurance Branch Command Center Division will manage these recommendations and other solutions that enhance the customer experience through improved call center operations. By May 2021, the EDD will implement a policy to establish a process for tracking and analyzing the reasons why UI claimants call for assistance. By October 2021, the EDD will begin analyzing the resulting data to improve the customer experience with specific focus on enhancements to self-service and non-call center options that assists customers, and identification of specialized training for staff to better assist callers.
To assess the effectiveness of its call center, by May 2021 EDD should also implement a policy for tracking and monitoring its rate of first-call resolution data on at least a monthly basis to evaluate whether it is providing effective assistance to callers.
EDD Response to Recommendation #11:
The EDD agrees with this recommendation. To align with the recommendation above, by May 2021, the EDD will establish a policy to track and monitor first call resolution (FCR) data. Between May 2021 and October 2021, the EDD will develop the tools and processes to collect FCR data. Beginning October 2021, the EDD will begin evaluating whether it is providing effective assistance to callers using FCR data.
To maximize the number of calls that its staff are able to answer, as soon as possible EDD should add the pre-recorded message functionality to its new phone system to advise claimants of their rights and responsibilities after they file their claim with an agent.
EDD Response to Recommendation #12:
The EDD agrees with this recommendation. EDD has been working to reestablish the prerecorded message functionality following telephone claim filing.
To provide a more convenient customer experience, as soon as possible EDD should implement features of its new phone system that allow callers to request a call back from an agent instead of waiting on hold for assistance.
EDD Response to Recommendation #13:
The EDD agrees with this recommendation. EDD has been working to reestablish the call back feature on the Virtual Call Center platform.
CALIFORNIA STATE AUDITOR'S COMMENTS ON THE RESPONSE FROM The Employment Development Department
To provide clarity and perspective, we are commenting on EDD's response to our audit. The numbers below correspond to the numbers we have placed in the margin of EDD's response.
① EDD is partially correct that we recommend it continue using the temporary measures it employed during the pandemic to automate claim filing. However, as we note, some of the changes EDD made to automatically file claims are not sustainable in the long term. Accordingly, we recommend that EDD should determine the automation modifications achieved through its emergency processing tool that it can retain and make those a permanent feature of its UI Online application.
② EDD's assertion does not account for claims that have been added to the backlog since September 2020. In the Introduction we note that EDD reported 1.6 million claims were in its backlog as of September 2020—a figure it determined using the strike team's methods. Further, the assertion does not acknowledge important work on claims received between March 2020 and September 2020 that EDD has yet to perform. As we note, EDD faces an impending workload of deferred eligibility determinations, many of which originate from claims submitted before September 2020. Therefore, EDD's statement that it will eliminate the backlog of work related to these claims is an incomplete picture of the work it still needs to perform and for which it has no clear plan to address. As such, EDD's assertion that it will eliminate the backlog by January 27, 2021, is unrealistic. Finally, as we note, the impending work also threatens EDD's ability to pay new and continuing claims in a timely fashion.
③ EDD highlights the number of fraudulent attempts to file a claim that were prevented by ID.me. Although that success is a positive effect of implementing ID.me, we note that among the estimated number of legitimate claimants who attempted to validate their identities, about 20 percent—or just under 144,000 individuals—were unable to successfully validate their identity. Therefore, we have recommended that EDD determine the causes of these failed identity verification attempts and work with the vendor to resolve these issues.
④ Although EDD public dashboards provided more information to the public, the information it presented is unclear. We note that information on the backlog dashboards that EDD has posted to its website does not represent the number of claims awaiting payment. Specifically, as of December 15, 2020, EDD reported a backlog of 685,700 claims when only fewer than 20,000 of those claims were waiting for payment. Accordingly, to provide a more transparent picture of backlogged claims, we recommend that EDD refine its dashboards to clearly explain the number of claims waiting for payment for longer than 21 days due to pending work that EDD has not resolved.
⑤ EDD is correct that it adopted the burndown chart—which we describe as a "workload tool"—as a workload management tool. However, as we describe, it has not used available data about the expected number of upcoming claims to model various scenarios and plan its staffing allocations accordingly. As a result, EDD has risked improperly deploying its staff and being unable to deploy those staff to quickly address spikes in its workload and issue timely payments to Californians in need of assistance.
⑥ We disagree with EDD's assertion that the implementation of the VCC phone system improved the customer experience. As we discuss in our report, when EDD quickly implemented the preliminary, minimal version of the new VCC system in April 2020, it lost valuable functionality featured in the old phone system for improving claimant call experience, such as the ability for callers to have the next available agent call them back or to schedule a specific time for callback from an EDD agent. Additionally, we note that even after the implementation of the VCC system, EDD failed to meaningfully improve its call answer rates or customer service.
⑦ EDD's statement too narrowly summarizes our recommendation. We discuss the two claim categories EDD raises in its response only as examples of claims it included in its backlog calculation that do not represent claimants waiting on payments. To fully implement our recommendation EDD will need to clearly display the number of claims that have waited longer than 21 days for payment because EDD has not yet resolved pending work on the claim. Taking that action will require EDD to remove additional claims from its backlog calculation. Finally, EDD must consider the value of the more inclusive backlog calculation that we describe in our report. Implementing our recommendation does not preclude EDD from continuing to publicly share other information about its workloads so that the public and policy makers can continue to understand the full scope of its work.
⑧ EDD did not share its plans for the establishment of its UI Branch Command Center Division with us before submitting its response. Since this division was launched in January 2021, we look forward to reviewing the way this new division addresses recommendations from our report during our follow up process.