Report 2020-628.2 Recommendation 9 Responses

Report 2020-628.2: Employment Development Department: Significant Weaknesses in EDD's Approach to Fraud Prevention Have Led to Billions of Dollars in Improper Benefit Payments (Release Date: January 2021)

Recommendation #9 To: Employment Development Department

To ensure that it maintains a robust set of safeguards against fraud, EDD should, by May 2021, develop a plan for how it will assess the effectiveness of its fraud prevention and detection tools.

The Employment Development Department (EDD) has implemented the Fraud Prevention Tools Assessment Plan on September 23, 2021. The plan was updated to include staff from EDD's Policy, Accountability and Compliance Branch, Information Technology Branch, and Unemployment Insurance Branch who are responsible for leading and executing the plan.

California State Auditor's Assessment of Status: Fully Implemented

EDD provided us with its plan for its approach to evaluate the effectiveness of its fraud prevention and detection tools, a description of the phases in which the assessment will take place, expected outputs, and roles and responsibilities. EDD's plan has also identified staff that will be responsible for leading key elements of the plan. EDD shared evidence that it is now in the very early stages of implementing its plan. This progress is encouraging but it will be critical to maintaining full implementation for EDD to continue these early efforts. We note that due to recent changes to state law, EDD is now required to report to the Legislature regularly about its assessment of the effectiveness of its fraud prevention and detection tools.

The EDD has formed the enclosed plan to assess the effectiveness of its fraud prevention and detection tools. Elements of this plan will serve as reusable components to allow for the ongoing monitoring of existing solutions and as a repeatable framework to assess fraud tools. The approach classifies each tool by category - fraud detection or identity verification solution - and then proceeds to assess a solution according to criteria appropriate for its type. Thereafter, a tool undergoes a two-phased evaluation process based on features/functions, and performance/output specific to its category's metrics and scoring model.

Executed, the findings of this plan will weigh the efficacy of the EDD's component tools by objective measures and rank order [if applicable]; elicit strategic considerations that may identify tool gaps or redundancies; and inform of potential approaches for remediating gaps and/or evolving the maturity of the EDD's capabilities.

California State Auditor's Assessment of Status: Partially Implemented

EDD provided us with its plan for its approach to evaluate the effectiveness of its fraud prevention and detection tools, a description of the phases in which the assessment will take place, expected outputs, and roles and responsibilities. However, EDD's plan has not identified staff that will be responsible for leading key elements of the plan. Instead, the plan states that filling those roles will depend on EDD's available budget and competing priorities. At the next 90-day response, EDD should provide us with an update on designating staff for these roles.

The EDD has contracted with a consulting partner, Accenture, who is assisting the EDD in forming a plan to assess the effectiveness of the EDD's existing fraud prevention and detection tools. EDD and Accenture's plan will detail the steps by which existing fraud prevention and detection tools will be assessed and needed actions will be inventoried and prioritized. The steps will include Accenture's interviews and review of existing material and technology to determine how EDD has to improve their fraud prevention and detection environment. The plan will also provide a path for the prioritization of the actions and schedule in a roadmap, so that the EDD has a clear course to fortify their fraud prevention and detection capabilities. The EDD anticipates that this plan will be completed by the May 2021 deadline.

California State Auditor's Assessment of Status: Pending

All Recommendations in 2020-628.2

Agency responses received are posted verbatim.