DIRECTIVE	:	UNEMPLOYMENT INSURANCE PROGRAM LETTER NO. 51-89
TO	:	ALL STATE EMPLOYMENT SECURITY AGENCIES
FROM	:	DONALD J. KULICK Administrator for Regional Management
SUBJECT	:	Unemployment Insurance (UI) Computer Equipment Purchased by the National Office and Provided to State Employment Security Agencies (SESAs)

1. Purpose. 

   1. To inform SESAs of the future installation of computer equipment in each SESA to support several projects within the UI program, and

   2. to inform States of the Department of Labor (DOL) administrative requirements for such equipment.

2. Background. Expansion of UI program needs which require additional computer capacity and the aging and limitations of equipment previously provided to SESAs for Quality Control (QC) has necessitated the purchase of new computer equipment by the National Office to be placed in each SESA. The primary uses for the equipment will be: (1) the QC program and (2) the electronic transfer of UI required reports.

   The National Office has been moving toward an electronic method of transmitting required reports data for some years, with the Cost Information System (CIS) serving as a prototype. Much was learned from the prototype system and is reflected in the design of the new system. In addition, with the maturing of the QC program, changes in State QC sample sizes have placed many of the existing machines at the limits of their capacity. The installation of new hardware and software will provide for increased capacity needed for the QC program as well as for uniform and improved automated submittal of UI required reports. As States are provided with the hardware and software, electronic submittal of data is expected to become the required procedure for UI reporting, with office of Management and Budget approval. More specific information will follow at a later date.

3. Hardware. SESAs will be supplied with microcomputer systems from Artecon, Inc. These microcomputers are Sun Microsystem 3/60s in an Artecon cabinet. Artecon will provide, in addition to the computer systems, installation, a Unix operating system, some training, maintenance, and various peripherals. Additional equipment may be distributed to SESAs in the future. These systems are procured centrally by the National Office for the SESAs at a cost of approximately $45,000 per system, from the UI National Activities category of the State Unemployment and Employment Service Operations appropriation.

4. Software. Current plans are for each machine to support a suite of commercial software packages to include a spread sheet package, statistical package, database management system (DBMS), graphics package, and word processing package. Included will be custom software designed to input the UI required reports and transmit them to the National office electronically. Custom software for QC case entry, analysis, and tracking will also be part of this UI system. Specific software packages will be provided to States as they become available.

   The database system will be loaded from a tape provided by the National Office with each SESA's UI statistical reports data for the prior three years plus the current year's information for the SESA's use. It is planned that SESAs will also be able to access the National Office database to download pieces of national statistical reports data or statistical reports data from other SESAs on an as needed basis, beginning in the spring of 1990.

5. Timetable. SESA equipment is scheduled to be installed during fiscal years 1989 and 1990. Regional offices will inform SESAs when the machines are scheduled for installation as well as provide site preparation instructions. Commercial software is not anticipated to be ready for distribution until the fall; however, Artecon will begin delivery of machines earlier in order to meet phased delivery schedule commitments. As a result, some SESAs will receive equipment before software is available.

6. SESA/National Office Coordination and Training. A full-time system support position is funded in each SESA as part of the QC allocation to function as the SESA point of contact to handle site preparation, installation, and scheduling of the new equipment and serve as custodian for the system and as data base administrator. Under separate cover, shortly before installation, the designated SESA system support position will receive an installation packet including an acceptance test plan and a hardware/software checklist, which is to be used to verify the equipment and software installed in the SESA. Once the installation has been verified, a copy of the checklist and results of the acceptance test plan should be forwarded to the National Office as soon as possible so that the invoices on the equipment can be paid and the equipment inventory updated by the National Office. A copy of the checklist should also be sent to the Regional Office.

   Training is being made available to the system support individual responsible for the operation, maintenance and administration of the equipment. Information on this training is being announced separately. Training on the use of the software will be also provided at a future date to appropriate staff.

7. DOL Administrative Requirements. These computer systems are purchased centrally by the National office using UI grant funds. DOL grants to State governments, defined at 29 CFR 97.3 as "an award of financial assistance .... in the form of money, or property in lieu of money...", are subject to Departmental regulations at 29 CFR Part 97, which provide administrative requirements for grants to State governments. DOL's administrative requirements for States relating to the use, management, and disposition of these computer systems are at 29 CFR 97.32 (Equipment) and 29 CFR 97.33 (Supplies). 29 CFR Part 97 supercedes previous administrative requirements for State grantees published at 41 CFR 29-70, effective October 1, 1988. 29 CFR 97.3 defines equipment and supplies as summarized below:

   Equipment - tangible, nonexpendable personal property having a useful life of more than one year and acquisition cost of $5000 or more per unit. (A State may use its own definition of equipment provided that the definition includes equipment defined above. Proposed revisions to administrative regulations will require that a State must use its own definition, with the above proviso.)

   Supplies - all tangible personal property excluding equipment.

   Acquisition cost - net invoice unit price including cost of modifications, attachments, accessories, or auxiliary apparatus necessary to make the property usable for the purpose for which acquired.

   For purposes of these requirements as they relate to these computer systems, "unit" is defined as follows: In general, each component is a separate unit, e.g., tape drives, printers, modems, and terminals are individual units. However, the central processing unit.(CPU) combined with the disk drives, transerver, console, and ethernet are to comprise a single "unit", as described in the Site Preparation and Equipment Specification document previously provided to SESAs by the Regional Offices. With these definitions, the CPU "unit" and the tape drives are classified as "equipment", since their acquisition cost is $5000 or more. The following administrative requirements for equipment apply to these items. Other components (except for software) are classified as "supplies".

   1. Title to Equipment. As provided in 29 CFR 97.32(a), title to the equipment vests in the State upon receipt. However, in accordance with 29 CFR 97.32(g), DOL reserves the right to transfer title to the CPU (the "unit" as defined above) and tape drives to the Federal Government or to a third party when the equipment is no longer required for the purposes for which it was acquired. (See disposition of equipment below.)

   2. Use and Management of Equipment. As provided in 29 CFR 97.32(b), States will use and manage equipment acquired under a grant in accordance with State laws and procedures. In the future the National office or Regional office may need to periodically verify equipment residing in each State, since there may be subsequent transfers of equipment between the National office and/or States (see paragraph 7c below).

   3. Disposition of Equipment. For the CPUs and tape drives which are subject to DOL'S reserved right to direct transfer of title, disposition shall be accomplished in one of two ways

      If a State wishes to replace a CPU or tape drive or no longer needs these items to support the specified purposes or other UI activities, it should report the item or items to the Regional office by letter describing the equipment and its location and requesting disposition instructions. The Regional office will forward the request to the National Office, which will reply in writing within 120 days as to whether the equipment is to be sent to DOL, transferred to a third party, or kept by the State. If it is to be kept by the State, the State shall follow its own state procedures and laws for disposition of equipment (29 CFR 97.32(b)) and Office of Management and Budget (OMB) Circular A-87, Attachment B, Paragraph C.3. (Capital Expenditures) requirements for disposition of capital assets. (The current A-87 requires that the DOL equity be refunded if the State sells the equipment or ceases to use it for UI purposes.)

      On the other hand, the National Office may initiate the disposition process by notification in writing to the state of the disposition instructions for the equipment subject to the reserved right to direct transfer of title. Normally, the National office will only initiate a transfer of title to equipment due to changes in workloads, upgrades of systems, replacement, etc., and when the transfer is mutually beneficial to all of the parties involved. The disposition instructions will indicate whether the equipment is to be sent to DOL, transferred to a third party, or kept by the State.

   4. Previous Equipment Purchased by DOL and Provided to States. The National office is currently drafting revised administrative regulations for the UI program which will extend the new DOL administrative requirements to equipment acquired by (or provided to) the states before October 1, 1988. The new administrative requirements have raised the threshold definition of equipment from $500 acquisition cost to $5000 (or State definition including at least such equipment). Under the new definition, the PRO 380 equipment previously provided to States is classified as "equipment" in a manner similar to the new Artecon systems now being provided, i.e., the CPUs, consoles, and disk drives are considered a single unit of equipment, while other components are supplies. The new requirements described above will also apply to the PRO 380 equipment. Since DOL previously reserved the right to transfer title to the PRO 380 equipment, the procedures for disposition described in subparagraph c above will apply. The National office intends that States will continue to use the PRO 380 systems, augmented by the Artecon systems, for purposes of submittal of UI required reports and for the UI QC program.

   5. Supplies. As provided in 29 CFR 97.33(a), title to computer system components classified as supplies vests in the State. If the unused portion of all such computer system supplies has a total aggregate fair market value of $5000 or more at the time that such property is not needed for UI or other federally sponsored activities, the State is required by 29 CFR 97.333(b) to compensate DOL for its share of the aggregate fair market value.

8. Action Required. SESAs are requested to:

   1. Provide this information to appropriate staff in the agency,

   2. Have the designated system support position perform the necessary verifications of the equipment and software installed in the SESA and forward the results as described in paragraph 6 to Jean A. O'Donoghue, Contracting Officers' Technical Representative (COTR), ATTN: TEURA, with a copy of the checklist to the Regional Office, and

   3. Follow instructions in paragraph 7c and 7d when requesting replacement of the equipment subject to DOL reserved right to transfer title or if such equipment is no longer needed.

9. Inquiries. Questions can be addressed to your Regional Office.