The U.S. Department of Labor recently rejected a request from the District for more than $1.4 million in federal funding because the city’s employment agency has failed to address several problems identified when it was designated “high risk” in January 2012.

For more than a year, the Labor Department has worked closely with the Department of Employment Services (DOES) after it was criticized for allowing at least 130 city workers to receive a total of $800,000 in unemployment benefits while they were still in their jobs.

In a two-page letter to Mayor Vincent C. Gray (D) last week, Thomas C. Martin, a Labor Department grant officer, said that the “intense level of technical assistance” to resolve the problems is not working and that the city has failed to account for several million dollars in previously awarded federal grants.

He also said that as “the result of continuing concerns,” the department’s inspector general is reviewing the city department.

‘Tremendous progress’

In a statement Monday, Najla A. Haywood, a spokeswoman for DOES, said there has been “tremendous progress” in improving procedures. And she said the funding was to be used to improve the department’s systems to better “prevent, detect and deter fraud.”

“This denial does not in any way impact our operational funding or future requests for discretionary funding. . . . This denial will require DOES to use existing funding to complete the implementation of program improvements.”

The statement, which did not address the Labor Department’s criticism, noted that DOES had received $4.4 million in similar funding over the past three years.

But in his letter, a copy of which was obtained by The Washington Post, Martin said DOES “failed to provide accurate information” about the expenditure of that $4.4 million.

The Labor Department had no comment Monday.

In February 2012, the Labor Department, DOES and the offices of the city inspector general and the attorney general announced the discovery of the massive fraud and the termination of 90 city employees who received unemployment benefits while working. Another 40 employees faced disciplinary action for cashing unemployment checks. Some of the overpayments took place as early as 2009, under the previous mayoral administration.

‘High risk’ designation

About $800,000 in benefits had been distributed to employees before the fraud was detected. Many employees were prosecuted in an effort to recover funds.

The fraud contributed to DOES getting its “high risk” designation, according to Martin’s letter. The Labor Department could not review how the federal agency’s funds for unemployment insurance were being used “due to inadequate records,” he wrote.

An audit by the Labor Department inspector general earlier this year found that DOES should return $8.8 million in Labor Department grant money because of improper charges and poor record-keeping.

About $49 million of the employment services department’s $144 million annual budget comes from federal funding. Much of it goes toward unemployment and job training programs that Gray prioritized in his administration.

DOES administers one of Gray’s signature initiatives called One City One Hire, a program that aims to match District residents to jobs with a more targeted approach than in years past. Gray and DOES director Lisa Mallory have touted the initiative in several news conferences since launching it in September 2011 with a goal of getting 10,000 unemployed residents back to work in one year. About 7,000 residents had been matched to jobs, as of August, nearly two years into the initiative.

The agency has received high marks for its oversight of the Summer Youth Employment Program, which was highly criticized for mismanagement and millions of dollars in overspending during the administration of former mayor Adrian M. Fenty.