In this issue:

• UI fraud presents challenges internationally
• On Point exhibits at UWC conference in Dallas
• Why buy package software?
• Washington employers help control tax costs by reporting new workers
• Colorado busts 13-year fictitious employer scam
• Independent contractors ... really?
• 09.30.07: Deadline looms to obligate UI integrity funds

Welcome to the June 2007 issue of BullsEye, the On Point Technology newsletter. Our goal is to keep you up-to-date on the latest unemployment insurance news and developments at On Point Technology.

UI fraud presents challenges internationally

Unemployment Insurance (UI) benefits fraud is not exclusive to the United States. It is an issue that countries around the world are fighting. Some schemes have yet to been seen here in the US, but you can be certain they will eventually migrate here.

The most predominant scams that have taken place in South Africa involve thieves posing as "bogus labor officials." The South Africa Unemployment Insurance Fund has warned people to beware of these bogus labor officials duping people out of their unemployment benefits using the following methods:

• Directly approaching the Fund with the personal data of unsuspecting claimants, falsely pretending to represent them
• Requesting employers deposit their workers' contributions into a certain bank account, which is controlled, of course, by the thieves
• Contacting both employers and workers in order to get them to pay for non-existent registrations and other services
• Contacting domestic employers asking them for their banking details as a part of registering their employees for unemployment insurance

The benefits fraud situation in Sweden has grown to the extent that the government has had to seek new and harsher penalties including jail sentences for providing false information or failing to notify the government when a citizen's circumstances change, such as a return to work. The proposal is aimed at streamlining the rules, while at the same time giving a powerful signal about the importance of protecting the benefits system.

Just last month, France uncovered a benefits scam that defrauded their system of $20 million euros ($26.8 million USD) over the past 11 years. The main suspects include six people from the same family.

As you can see, we are not alone in our fight against UI fraud.

On Point exhibits at UWC conference in Dallas

Last month we exhibited our package software products Aware, Barts, and Recover at the annual Unemployment Workers' Compensation (UWC) UI Issues Conference. We look forward to this conference each year as it affords us a wonderful opportunity to explore UI integrity issues and developments with both public and private sector executives. Everyone in attendance has a joint interest in protecting state UI trust funds from fraudulent claims and insuring that all employers pay they fair share of taxes.

This was the first conference under the leadership of new Executive Director, Doug Holmes, and it certainly lived up to everyone's expectations. Everyone at On Point Technology would like to thank Doug and the UWC staff for putting together a conference that was well run, interesting, and provided a wealth of timely and pertinent materials.

Why buy package software?

If you look across the country at the history of both unemployment insurance (UI) tax and benefit applications utilizing custom software development, it is not a pretty picture. Few projects can be considered a success and not many have come in on time or within budget. For every success, whether partial or complete, the path is strewn with failures involving the following scenarios: systems that don't work, functionality that is not delivered, projects that go over budget, or go-live dates that are not met.

In speaking with several State Workforce Agencies (SWAs), On Point Technology has repeatedly heard the same litany of complaints:

• Attempts by the vendor to reduce the scope of the project but not the price
• Vendors showing up on day two with change orders in hand
• Vendor staff without the qualifications they committed to in the proposal
• Vendors spending Agency funds to gather mountains of documentation to be used against the Agency if and when the project goes bad
• Software that cannot pass user acceptance testing

The list goes on, but you get the picture. Custom software development of large systems, as required in the UI community, is difficult at best and a disaster at worst. It strains Agency resources, results in cost overruns, fails to deliver a usable product, and often results in public relations nightmares.

One solution to avoiding the pitfalls of custom development is to procure package software. Package software is an out-of- the-box application that is customized to meet an Agency's specific needs and preferred ways of doing business, without starting with a blank piece of paper.

With package software an Agency gets several advantages:

• A truly firm fixed price
• An opportunity to see the system work before it is deployed in the Agency
• An ability to experience the application before it is customized and installed
• An opportunity to incorporate exactly which customizations are needed
• An ability to discuss the product with Agencies that have already installed it
• A minimum need to involve resources such as Agency program and technical staff
• Help desk assistance available from the moment it goes live
• Access to upgrades and enhancements via a support and maintenance contract

On Point Technology takes great pride in the fact that we sell package software that provides all of these advantages and more. To learn more about our commercial off-the-shelf package applications contact Bob Yokavonus at 908-526-0426 or robert.yokavonus@onpointtech.com.

Washington employers help control tax costs by reporting new workers

Employers in the State of Washington helped cut approximately $3.3 million in unemployment benefit charges over the past year by promptly reporting their new employees to the State.

The Washington Employment Security Department matches its record of claimants who are collecting unemployment benefits with new hire information from employers to find claimants continuing to collect benefits after they've found a new job. Washington recently enhanced its On Point Technology Barts application by adding the New Hire Module.

From May 2006 through April 2007, the crossmatch found 6,814 people who were claiming benefits after a new employer reported hiring them. Those matches represent about $2.7 million in unemployment benefits that had been paid out. In some cases, the match was found before benefits were paid, totaling $572,690 over the year.

Colorado busts 13-year fictitious employer scam

The Colorado Department of Labor and Employment uncovered the single largest unemployment insurance (UI) benefits scam in the State's history—a fictitious employer scheme. A Colorado woman has been charged by a grand jury with eight counts of theft, seven counts of criminal impersonation, 20 counts of forgery and 16 counts of computer crime, in a scheme that lasted some 13 years and involved $426,000 in fraudulent UI benefits. The benefits were obtained by registering fake businesses, making minimal payments into the UI Trust Fund and then declaring that the businesses had failed and the employees laid off.

The accused used her own name, as well as seven false names, to pose as laid-off employees. She allegedly accessed various online claims and benefits systems and used the fictitious identities to rent Post Office Boxes in various locations to receive the benefits.

Did you know On Point Technology's Aware package software system, which Colorado is in the process of installing, can provide the functionality to identify fictitious employers? For more information or a demonstration contact Bob Yokavonus at 908-526-0426 or robert.yokavonus@onpointech.com.

Independent contractors ... really?

It has been made apparent from the ever increasing number of articles and news clips in recent months that employees are illegally and deliberately misclassified as Independent Contractors. The problem is seen from coast to coast. The articles describe schemes in which employers misclassified employees for a number of reasons, such as:

• Avoiding payroll taxes
• Not having to provide Workers' Compensation Insurance coverage
• Filing to pay minimum wage or adhering to other wage related laws, rules, and regulations

While there seems to be a growing concentration in certain areas of the construction industry, often involving the employment of illegal aliens, it appears as though few industries are immune from this type of fraud. A clue as to the existence of this scheme can be found in the analysis of IRS Form 1099, which the workers receive rather than the W-2s they should receive. On Point Technology knows of at least one state that has succeeded in detecting these instances by pursuing the IRS Form 1099 clue.

To make such an analysis quick and easy, On Point Technology has incorporated an IRS Form 1099 one-click audit into its Aware package software application. To learn more about it, contact Bob Yokavonus at 908-526-0426 or robert.yokavonus@onpointech.com.

09.30.07: Deadline looms to obligate UI integrity funds

State Workforce Agencies have approximately three months to obligate funds for UI integrity programs that were distributed by UI Field Memoranda 12-05 and 13-05. For more information on securing these funds to acquire On Point Technology's package software applications, contact Bob Yokavonus at 908-526-0426 or robert.yokavonus@onpointech.com.