DOL Annual Report, Fiscal Year 2006
Performance and Accountability Report

Management's Discussion & Analysis

Performance Section

The diagram below illustrates the theoretical foundation of performance planning and evaluation structures, processes and results covered in this section of the Performance and Accountability Report. The outer circle represents the scope of the organization's resources and influence. At the core is its mission. Everything in between is in continuous motion, clockwise and counter-clockwise. Quadrants represent the planning elements that are tied to periodic budget documents. Spokes incorporate the actual processes that follow resource allocation decisions and translate theory into practice. These elements are managed on a real-time basis; emergent cost and results information ultimately closes the feedback loop via reporting documents and the next period's budget. A more detailed description of planning and evaluation processes follows the diagram.

Planning Cycle
Starting with the upper left quadrant and moving clockwise, budget formulation begins with definition and prioritization of desired outcomes, which are translated from mere notions into realistic program goals. Goals drive data collection needs (to determine success) through performance indicators. Performance indicators identify results of activities, inducing strategies. Cost estimates associated with pursuit of these strategies inform budget requests.

Evaluation Cycle
Starting with the same quadrant but this time moving counter-clockwise, the budget defines fiscal parameters for execution of strategies constrained by program authorization legislation. Strategies materialize as activities, the results of which are assessed using performance indicators. Data from the performance indicators demonstrate whether goals are achieved. Outcomes — in generic terms, demonstrated effectiveness at achieving goals — justify further budget requests.

Program Performance Overview

Fiscal Year (FY) 2006 marks the eighth year that the Department of Labor has reported program results under the Government Performance and Results Act (GPRA). Program goals that are key to the accomplishment of Departmental strategic and outcome goals as presented in the FY 2003-2008 Strategic Plan¹ were selected for inclusion in the Department's FY 2007 Performance Budget Overview.² These performance goals and their indicators provide the basis for assessments of the Department's effectiveness in this section.

This report includes performance goals from two different reporting periods in that Workforce Investment Act (WIA) programs are "forward-funded," meaning that their spending and performance goals are tracked on a cycle that lags the Federal fiscal year by nine months. This period is referred to as a Program Year (PY); such goals being reported on in this document cover July 1, 2005 to June 30, 2006 (PY 2005). PY 2006 goals will appear in the FY 2007 report.

The Department's goal structure has three levels. Strategic goals describe general aims that emerge from the Department's mission. Each of these goals in turn has several outcome goals that define general results DOL agencies can influence. These are long term objectives that in most cases involve more than one DOL agency. Finally, performance goals that support each outcome goal provide program-level clarity of purpose. Each performance goal has associated indicators and targets to measure our impact on a continuous basis.

DOL's four strategic goals — A Prepared Workforce, A Secure Workforce, Quality Workplaces and A Competitive Workforce — express outcomes associated with our mission, vision and theme, and serve to focus Departmental efforts on the links between activities and their higher purpose. The table below indicates FY 2006 program performance goal achievement by strategic goal. The Department of Labor measures goal achievement by a rule requiring that all indicator targets are reached to qualify as Achieved. Substantially Achieved, which recognizes results that were very close, requires that 80 percent of targets are reached or substantially reached.³

Of the 28 performance goals on which DOL is reporting in FY 2006, the Department achieved 14 and did not achieve 14. The percentage achieved or substantially achieved totals 50 percent — somewhat lower than the 60 percent total for FY 2005. A swing of three goals would account for this. Strategic Goal 2 accounts for two of them. Five of its six performance goals were achieved or substantially achieved last year but just three were this time. The other change occurred in Strategic Goal 3, where the goal count increased from six to eight but the count of goals achieved remained at three.

¹http://www.dol.gov/_sec/stratplan/main.htm
²http://www.dol.gov/_sec/Budget2007/overview-pb.htm#app1
³Substantially reached is defined as 80 percent of targeted year-on-year improvement.

Below is a breakdown, by strategic goal, of FY 2006 goal achievement. Tables present the goal number, responsible agency, goal statement, and result for each performance goal being reported on in this document. The first two digits of each goal number indicate the funding year. In this report, all "05" goals are reporting on the Program Year period defined above.

A tally of goals achieved, while providing an indication of whether DOL is on schedule with its plan, does not convey any actual performance information. To understand what was achieved in terms of benefits to the public, it is necessary to look not just at whether goals were achieved and targets were reached but also at whether observed results indicate positive program impacts. Summaries at the strategic goal level and separate performance goal narratives discuss significant trends and their implications.

Strategic Goal 1 — A Prepared Workforce
As indicated in the Program Performance Goal Achievement table below, DOL had six performance goals under this strategic goal in FY 2006, of which four were achieved or substantially achieved (67 percent) — above the Department wide average. The WIA Youth program achieved its goal of collecting baseline data for its two new common youth and lifelong learning performance measures for Federal employment and training programs. The Job Corps program, which uses the same two measures for placement and credentials, plus a third common measure for literacy/numeracy, did not achieve its goal. VETS' goal was achieved; all six targets were reached. The goal for Apprenticeship was achieved; retention and earnings results improved over FY 2005. ODEP achieved its goal by establishing baselines for policy-related documents and formal agreements and reaching its target for identifying effective practices. BLS' goal was not achieved, but four of its six targets were reached.

Strategic Goal 2 — A Secure Workforce
Of six performance goals, DOL achieved or substantially achieved three — matching the Departmental average of 50 percent. ESA's Wage and Hour Division achieved its goal by reaching all five targets, but the Office of Labor-Management Standards missed one of its three targets, preventing it from achieving the goal. The Unemployment Insurance system also missed one target and therefore did not achieve the goal. The goal of improving outcomes for injured workers covered by ESA's Office of Workers' Compensation Programs was achieved; all ten indicator targets for Return to Work, Reducing Program Expenses, and Customer Service categories were reached. DOL achieved its pension and health benefit security goal by reaching all four targets. The pension insurance services (PBGC) goal was not achieved because neither of its customer satisfaction targets was reached.

Strategic Goal 3 — Quality Workplaces
DOL achieved or substantially achieved three of eight performance goals (38 percent), which is below the Departmental average of 50 percent. MSHA did not achieve its fatality and injury reduction goal. The fatality rate rose and the injury rate declined, but not enough to reach the target. MSHA also failed to meet its health goal, despite reaching three of four targets. The all-industry occupational fatality rate decreased in FY 2006 but did not reach OSHA's target. The safety and health goal (days away from work) was achieved. Both Federal contractor equal employment opportunity targets were reached, thus ESA's Office of Federal Contract Compliance Programs performance goal was achieved. The Uniformed Services Employment and Reemployment Rights Act goal was not achieved, despite improvement in the comprehensive Progress Index. The Bureau of International Labor Affairs, or ILAB, achieved its child labor goal by exceeding its target for removing or preventing children from exploitive work and increasing targeted countries' capacity to address the issue. The goal to improve living standards and working conditions internationally was not achieved.

Strategic Goal 4 — A Competitive Workforce
Of eight performance goals, DOL achieved or substantially achieved four, equaling the Departmental average of 50 percent. The WIA Adult and One Stop employment services goals were achieved. In each case, all three targets were reached. However, entered employment and retention rates were slightly below PY 2004 results. The WIA Dislocated Worker (DW) and Trade Adjustment Assistance (TAA) goals were not achieved. For DW, entered employment reached the target, but retention dipped below the target and was three percentage points below the prior year's performance. The TAA program achieved targeted levels for retention and earnings but fell just shy of the target for entered employment. The Senior Community Service Employment Program (SCSEP) did not achieve its performance goal. None of its targets were reached — entered employment and retention due to unrealistic targets, and average earnings because baseline data were not collected. The Department achieved its performance goal for electronic tools, exceeding the target for increased dissemination of O*NET data and setting baselines for Career Voyages and America's Career InfoNet Web site page views. The Foreign Labor Certification goal was not achieved, but three of four targets were reached.

The Department's regulatory flexibility and benefits and flexible workplace goal was achieved. In the course of promulgating revised regulations, DOL agencies conducted cost benefit analyses to increase regulations' net benefits. They also updated obsolete, non-substantive references in the Code of Federal Regulations. The Women's Bureau's Flex-Options for Women project participation grew to six of ten Regional Offices and had its most successful year to date, with 23 companies implementing new, exemplary workplace policies and procedures.

The next table lists Program Year 2006 goals (July 1, 2006 — June 30, 2007) for which results will be reported in the FY 2007 Performance and Accountability Report. Due to restructuring of the Department's goals in the FY 2006-2011 Strategic Plan, identifying numbers have changed. The goals are listed according to their original nomenclature; the new labels are provided also, in bold type.

Total Net Cost⁴ of DOL activities for FY 2006 was $45.328 billion. As reflected in the table below, which provides an allocation based on the Department's goal structure, the second strategic goal, A Secure Workforce, is dominant — accounting for $35.920 billion, or 79 percent of the total. This figure consists in large part ($33.227 billion, or 93 percent) of mandatory benefit payments to unemployed workers or workers disabled as a result of work-related injuries or illnesses. The first goal, A Prepared Workforce, required $3.395 billion (7 percent) for employment-related services. Approximately $1.114 billion (2 percent) went toward the third goal, Quality Workplaces, to fund direct services (such as salaries of Federal employees) aimed at improving safety and health in the workplace. The fourth goal, A Competitive Workforce, accounted for $4.889 billion, 11 percent of the total, which went toward job training programs and other services aimed at building a demand-driven workforce system.

DOL's FY 2005 Performance and Accountability Report marked a milestone in accountability by featuring a statement of full costs at the performance goal level. This year's statement adds another level of detail — performance indicators — which is significant because only by linking cost to units of measurement is it possible to analyze efficiency and cost-effectiveness. For a variety of reasons, this was not possible in all cases; therefore, the statement includes a row for each performance goal labeled "Dollars not associated with indicators." Some of the difficulties will be resolved over time and lead to more complete allocations in future statements. Others, such as for job training program common measures,⁵ cannot be resolved without dropping indicators — a choice that may reduce the overall value of performance information. As indicated in the preceding paragraph, several programs make mandatory benefit payments that account for the majority of their costs. Because performance indicators and the Department's managerial cost accounting system that generates this information are designed to inform analysis and decision-making related to discretionary budgets and program management, such payments are shown separately and not included in allocation cost models.

⁴Net cost data are presented. Net Cost reflects the full cost of each program as assigned by DOL entities to the Department's outcome goals less any exchange revenue earned. Full cost consists of (a) both direct and indirect costs, and (b) the costs of identifiable supporting services provided by other segments within the reporting entity and by other reporting entities.
⁵Entered employment, employment retention and earnings change are measures of different outcomes for each individual participant, and program activities are not separable into categories associated with one or another of these measures. The statement indicates intentional combination of costs for these measures by merging cells.

⁶Costs reported in DOL's FY 2004 and FY 2005 Performance and Accountability Reports for outcome goal and strategic goal subtotals for Strategic Goals 1 and 4 are not valid for comparison to FY 2006 due to restructuring. This also applies at the performance goal level for ETA grant programs due to a change in allocation methodology. FY 2005 totals in this table have been restated to reflect these changes and facilitate comparison. The restructuring moved several performance goals that appeared in the FY 2005 table under Outcome Goal 1.1 to Outcome Goal 4.1 (WIA Adult, One-Stop, WIA Dislocated Worker and Other). All performance goals in the FY 2005 table under Outcome Goal 1.2 (WIA Youth, Job Corps, and Other) were moved into Outcome Goal 1.1 in FY 2006. The grant allocation change affected WIA Youth, Job Corps, WIA Adult, One-Stop, WIA Dislocated Worker, SCSEP, Etools and Other programs in Outcome Goals 1.1 and 4.1.
⁷Costs for Performance Goal 06-2.2D (PBGC) are not included because the corporation's financial statements are separate from those of the Department and are not included in this document.
⁸Costs for OSHA's two performance goals are combined because the same activities contribute to reductions in fatality and injury/illness indicators, i.e., their costs are not separable. Two indicators — one for each goal — account for all costs. Since no cost allocation is possible at that level, either, they are omitted.
⁹This is a new goal that was listed with Other in the FY 2005 table.
¹⁰Costs associated with this goal in FY 2004 were allocated to program performance goals in FY 2005. See the explanation in the Outcome Goal 4.2 narrative under Net Cost of Programs.
¹¹Total net costs in this table do not match total net costs in the Consolidated Statements of Net Cost as certain costs in this table are presented on a program year basis. All costs in the Consolidated Statements of Net Cost are on a fiscal year basis.

Charts that display net costs from FY 1999-FY 2006 to illustrate trends are provided in each outcome goal summary; brief explanations of significant changes since FY 2005 are provided, as well. FY 2005 was the first year for which DOL had the capability of reporting costs at the performance goal level — thanks to more sophisticated cost models in our managerial cost accounting system, Cost Analysis Manager (CAM), that describe relationships between resources, activities, outputs and performance goals.

Reporting Performance Results

The Performance Section of this report presents, by strategic goal, summaries of performance at each level. Each strategic goal section is introduced by an overview of the goal and a summary of results, net cost and future plans for its component outcome goals. Within each strategic goal section are individual performance goal narratives that present results, describe the program and its operating environment, analyze performance and briefly address relevant audits and evaluations, data quality and major management challenges. Appendix 1 contains performance goal histories and Appendix 2 summarizes significant audits and evaluations of DOL programs completed during FY 2006 that have implications for performance goals.

Performance measurement is inherently difficult, especially for a large, diverse organization like DOL that works to accomplish its mission indirectly — in partnership and by assisting others. The Department seeks continuous improvement in its selection of indicators and in policies and procedures for collecting and reporting program performance data so that managers and other decision makers can rely on them. However, each program must consider the costs and benefits of gathering and managing such information. Changes take time to implement and reporting requirements can impose considerable burdens on staff, partners, beneficiaries and regulated entities.

This report is published just six weeks after the end of the fiscal year. Because the Department receives a wide variety of performance data via diverse systems and agreements in cooperation with State agencies and grant recipients, it is not possible in all cases to report complete data for the reporting period. The Department requires each agency responsible for performance goals in this report to submit a Data Estimation Plan in February that identifies, for each indicator, whether complete data are expected by the deadline for clearance and final review of the report in early October. If the data will not be available by then, they must submit an acceptable plan to estimate results for the remainder of the year. Methodologies developed by agencies' program analysts are reviewed by the Department's Center for Program Planning and Results and Office of Inspector General. The most common methods are substitution or extrapolation of two or three quarters of data and — for data with significant seasonal variation — use of the missing period's results from the previous year. Estimates are clearly identified wherever they are used. With very few exceptions, final (actual) data are available by the end of the calendar year; these data will be reported in the FY 2007 Performance and Accountability Report.

New indicators often lack data needed to establish targets. For such indicators, the first year's target may be to establish a baseline, and thus the Department gives the program a positive rating for gathering the data as planned and establishing targets for the subsequent year.

The Office of Inspector General assesses the internal controls of DOL agencies — systems used to validate, verify and record data submitted by field staff and partners (e.g., grantees). These systems are identified as Data Sources in Appendix 1 at the bottom of each performance goal history. Lack of findings does not imply that data are factual.

Material inadequacies, if any, are disclosed in the Secretary's Message, which includes a statement on the adequacy of program performance data that is supported by signed attestations of each agency head responsible for a performance goal in this report. OMB Circular A-11defines a material inadequacy as a condition that significantly impedes the use of program performance data by agency managers and government decision makers. For Departmental management, this threshold is established at the performance goal level as data that are insufficient to permit determination of goal achievement. This is an unlikely occurrence for a goal with several indicators and historical data that allow reasonable estimation of results for most of them. Generally, if agency or program level managers do not trust their own data, they are not reported, because problems created by skewed targets and trends are much worse than a gap in the data.

The Department of Labor aspires to standards beyond adequacy, and to that end has created a new Data Assessment process that will help improve the quality of performance information that is being used more than ever for decision-making and accountability. The Data Quality and Major Management Challenges section of each performance goal narrative includes an overall rating of indicator data completeness and reliability (Excellent, Very Good, Good, Fair, or Unsatisfactory). Discussions summarize the rationale and, where applicable, improvement plans. Data assessments are based on seven criteria, of which two — accuracy and relevance — are threshold criteria that are weighted twice as much as the other five in the scoring system that determines ratings (see box below). If data do not satisfy the standards for both of these criteria, the rating is Data Quality Not Determined. This reflects the DOL policy that further assessments of quality are irrelevant if the information is not reasonably correct and worthwhile.

Data for five goals are rated Excellent; nine are Very Good, ten are Good, three are Fair, and one is Data Quality Not Determined. This was the baseline year for these assessments, which were conducted late in the fiscal year, so in many cases agencies have not yet formulated improvement plans. As FY 2007/PY 2006 indicators and targets are finalized and data collection for the new fiscal year gets under way, program managers will prioritize data quality issues and consider feasible policies and practices that would have significant and positive impact on the criteria. The FY 2007 report will include a follow-up assessment and a more robust discussion of how the Department intends to make progress in this area.

DOL Strategic Plan: FY 2006-2011
In September 2006, the Department published its Strategic Plan for Fiscal Years 2006 through 2011. The strategic plan serves as a roadmap for programs to define priorities, refine strategies, and measure performance. In the 2007 Performance and Accountability report, DOL will report its progress against four updated strategic goals: A Prepared Workforce provides training and services to new and incumbent workers and supplies high-quality information on the economy and labor market; A Competitive Workforce enhances the effectiveness and efficiency of the workforce development and regulatory systems that assist workers and employers in meeting the challenges of worldwide competition; Safe and Secure Workplaces ensures that workplaces are safe, healthful, and fair; provides workers with the wages due them; provides equal opportunity; and protects veterans' employment and re-employment rights; and Strengthened Economic Protections protects and strengthens economic security; ensures union transparency; and secures pension and health benefits.