DEPARTMENT OF LABOR Statement by Patricia A.
Dalton Acting Inspector General on Fiscal Year 2001 Budget Request
for Office of Inspector General March 28,
2000
Mr. Chairman and Members of the Subcommittee:
Thank you for inviting me to testify before you in my capacity as the
Acting Inspector General of the U.S. Department of Labor (DOL). I am pleased to
appear before you today to discuss our Fiscal Year (FY) 2001 appropriations
request and proposed activities.
BACKGROUND
The Office of Inspector General (OIG) was established at DOL by the
Inspector General Act of 1978, as amended (IG Act) to provide independent,
objective oversight of programs and operations. To carry out its mission, the
OIG conducts audits, investigations, and evaluations to identify potential
problems or abuses; develops and makes recommendations for corrective action;
reviews legislative and regulatory initiatives; and informs the Secretary and
the Congress of problems or concerns. The OIG at Labor is unique in that it is
also responsible for carrying out a criminal investigations program to
contribute toward the Government's effort to reduce the influence of organized
crime and labor racketeering in unions and the workplace. The OIG administers
its programs through four major components: the Office of Audit; the Office of
Investigations; the Office of Analysis, Complaints, and Evaluations; and the
Office of Management and Counsel. The OIG's FY 2001 budget request totals
$56,465,000 and 428 full-time equivalent (FTE) positions to carry out its
mission. I will focus my testimony today on the types of activities that we
propose to conduct in FY 2001, including areas where we plan to increase our
attention.
FY 2001 PROPOSED ACTIVITIES AND
ENHANCEMENTS
Mr. Chairman, as required for most Federal agencies, the context in
which the OIG program is administered is the Government Performance and Results
Act of 1993 (GPRA). Attached to my statement is a list of accomplishments for
FY 1999 that helps to illustrate how we are working to achieve our own goals
and work to support the goals established by the Secretary for the
Department.
Mr. Chairman, in FY 2001, we will focus our program activities on
audits, investigations, and evaluations that will provide quality information
regarding the effectiveness, efficiency, and integrity of key programs and
operations. Our primary goal is to ensure that the information provided to DOL
and Congress will be useful in their management or oversight of the Department.
In addition, we will provide technical assistance to help DOL management
address challenges and prevent problems from arising. Our proposal is to carry
out activities and special initiatives in the areas of departmental management,
employment and training, workplace safety, health and standards, worker
benefits, and labor racketeering. The following are examples of the types of
activities we propose to conduct.
A Prepared Workforce
To enhance performance and accountability of employment and training
programs, we will focus our resources on the Department's effectiveness in
implementing the Workforce Investment Act (WIA) program. For example, we will
examine provisions and practices developed among One-Stop partners to account
for the costs and outcomes of their combined efforts to determine if the
partners are bearing their fair share of the programs's financial inputs and
receiving equitable recognition for their contribution to program outcomes. We
will also audit the employment and training system's effectiveness at training
people with disabilities and successfully placing them in employment.
In addition, to assist the Department in effectively implementing the
$223 million in Youth Opportunity grants that were recently awarded, we will
conduct postaward surveys of selected grantees to determine their capability to
administer and deliver the program. We will use the same approach we applied in
assessing the readiness of the Welfare-to-Work competitive grantees to identify
implementation challenges and provide the Department with information on the
grantees in greatest need of technical assistance and monitoring. In addition,
we will continue to respond to requests for assistance from DOL management in
determining whether Requests for Equitable Adjustments (REAs) submitted by Job
Corps construction contractors meet the criteria for payment as specified in
the Federal Acquisition Regulation. OIG audit results have proven to be helpful
to the Department in resolving disputed claims and have the potential for
resulting in significant cost savings. Our request includes an additional
$500,000 to continue to meet such requests from the Department.
Quality Workplaces
In the area of safety, health, and workplace standards, we plan to
evaluate the effectiveness of certain aspects of mine safety and health
enforcement. Moreover, we will continue our focus on the integrity of those
individuals administering DOL's safety and health programs. We will also
evaluate the effectiveness of selected Office of Federal Contract Compliance
Program operations.
A Secure Workforce
To safeguard the integrity and efficiency of workplace benefit programs
we will provide oversight of initiatives to streamline the ERISA reporting
process and audit selected functions and operations of the FECA program to
identify improvements and potential cost savings to the Government. From an
investigative perspective, we will focus on fraud against the FECA, Black Lung,
and Longshore and Harbor Workers' Programs by claimants or medical providers.
In addition, we plan to continue increasing our effort to identify and
address fraud and weaknesses in the Unemployment Insurance (UI) Program. Over
the past few years, we have identified numerous fraud schemes and weaknesses
that affect the integrity of this critical multi-billion dollar program. In
most instances, the states are not in position or do not have the jurisdiction
to effectively address these weaknesses. Among our continuing concerns is the
proliferation of multi-state schemes to defraud state programs.
Maintaining a Strategic Management Focus
From a departmental management perspective, we will continue to
increase our audit attention in the areas of financial management and GPRA
performance systems and data validation. The OIG has to meet a number of
responsibilities in these two areas. For example, we will provide oversight of
work conducted by independent public accountants under the Single Audit Act
(SAA). This type of oversight is important because it provides the Department
and Congress with assurances that state-level audits are sufficient and
reliable. Further, decision makers are better able to determine whether funds
spent at the state and local levels are protected and used for their intended
purpose. Unfortunately, there are growing concerns regarding limitations in
agency financial statement audits' coverage of Federal financial assistance
programs. Similarly, there are concerns that inadequate coverage could
negatively affect the opinion on both the agency-level and government-wide
financial statements. In response to these growing concerns, the OIG will need
to expand the scope of the financial statement audits to include on-site
quality control reviews of audits conducted at the State level under the SAA.
To meet this costly and labor-intensive responsibility in FY 2001, the OIG is
requesting an additional $1 million.
With respect to GPRA, we will continue to provide oversight and
consultation to assist the Department in fully complying with the requirements
of GPRA. The OIG will provide consultation assistance to the Department in its
development of performance and cost accounting systems. We are now auditing the
FECA and MSHA systems. In a related area, we will identify potential uses of
data produced by the Bureau of Labor Statistics (BLS) for purposes of measuring
DOL agency and program performance as required by GPRA.
OIG Labor Racketeering Program
As I mentioned earlier, Mr. Chairman, unlike other Inspectors General,
the Department of Labor (DOL) OIG has a unique program responsibility for
investigating labor racketeering and organized crime influence or control in
employee benefit plans, labor-management relations, and internal union affairs.
The influence and control by traditional and non-traditional organized crime
figures in the workplace continues to have an adverse impact on the U.S.
economy and results in reduced competitiveness in affected industries, thereby
creating additional costs that are borne by American workers, businesses, and
consumers.
An area of focus in FY 2001 will be the financial transactions that
occur in the arena of individuals providing services to pension and benefit
plans (accountants, lawyers, investment brokers, etc.). Within our resources,
we will continue to identify, target and investigate investment brokers, plan
administrators, and union officials who have ties to organized crime or who
siphon excessive fees and/or commissions from union pension plans. We currently
have 29 open investigations in this area, involving $1.5 billion in pension
assets. In the health benefit plan arena, the OIG will continue its focus on
fraudulent health insurance schemes operated by "bogus labor unions," which are
created for the purpose of selling fraudulent health insurance. These unions do
not conduct legitimate collective bargaining and provide no representation for
their members. They merely serve as a vehicle for the sale of insurance and to
escape State regulation.
We will continue to conduct industry probes into organized crime
influence in the garment, maritime, and construction industries. During these
probes, which are conducted on a regional or national basis, all the segments
of a particular industry are examined to expose the corrupt relationships that
form the core of the criminal enterprise. With respect to internal union
affairs, we will continue to expose corruption in the four largest
international unions which have traditionally been influenced, if not
completely dominated, by organized crime families.
DEPARTMENTAL MANAGEMENT ISSUES
Mr. Chairman, I will now briefly discuss management issues faced by the
Department in the areas of financial management, grants management, performance
measurement and reporting, and information technology.
Financial Management
Mr. Chairman, financial management is an area where the Department has
made significant progress over the last several years. As you are aware, we
provided the Department with clean audit opinions on its financial statements
for the last three fiscal years. However, we have major concerns with
improvements that are needed at the agency level, as five important subsidiary
systems of the Department are not in substantial compliance with the Federal
Financial Management Improvement Act (FFMIA). These systems pertain to:
accounting for both back wages and civil money penalties by the Wage and Hour
Division; tracking mine safety and health penalties; accounting for Job Corps
personal property; and ETA's recording of grant costs. As we have for over a
decade, we are working with the Department to effect the needed changes in this
area.
Grant Accountability and Management
Mr. Chairman, grants management in DOL continues to be an area of
concern. The Department is faced with initiating and managing several new grant
programs. This increases the challenges already faced by the Department to
assure accountability over grant funds. For example, our just-issued audit
report on DOL's FY 1999 financial statements identified a number of accounting
and management deficiencies related to grants awarded by ETA, BLS and OSHA. Of
particular note is ETA's grant costs accounting system, which, as I mentioned,
we determined was not in compliance with FFMIA. This system is used to account
for almost $9 billion in ETA grant costs. Our audit found problems involving
hundreds of millions of dollars in grantee cost reports that were not entered
into ETA's accounting system, involving thousands of missing or improper
accounting entries. ETA has subsequently taken corrective actions to ensure
cost reports are recorded in a timely manner. However, a more comprehensive
long-term solution is needed.
Another area of concern for us involves the ability of the
International Labor Affairs Bureau (ILAB) to oversee the substantial amounts of
recently appropriated funds, which will be used for making grants to foreign
countries. To try to prevent accountability problems in the future, we are
working with ILAB and Office of the Assistant Secretary for Administration and
Management to assure sound grant management policies and practices are
instituted in ILAB.
Performance Measurement and Reporting
The Department has implemented its Strategic Plan and Annual
Performance Plan, per the requirements of GPRA. Like most agencies, DOL faces a
number of challenges, particularly in terms of measuring and reporting program
results. The Department's ability to produce useful information on the results
and full costs of its programs will be determined by its ability to establish
quality cost accounting and performance measurement systems and to verify
results data provided by states and other sources below the Federal level. The
Department has made progress in implementing new cost accounting requirements,
including establishing and reporting against 11 outcome goals for the Fiscal
Year 1999 Financial Statements. However, DOL needs to ensure that cost
accounting is made a routine component of management's ongoing oversight and
review function rather than a year-end exercise. Even with the good efforts
that we see under way now, it will take a number of years for the Department to
address these issues.
Information Technology Management
Mr. Chairman, information technology is a high-cost, critically
important resource. Information residing in DOL computers is used to pay
benefits, target enforcement efforts, compile labor statistics and make other
decisions that affect the health, safety, and economic security of Americans.
Information technology is also integrally linked to, and will be key to, the
success of GPRA. As the Department becomes more dependent on the use of IT
resources to carry out its mission and daily operations, effective stewardship
by the Chief Information Officer (CIO) over such resources will also need to be
ensured. This includes establishing an IT architecture for the Department as a
whole and identifying and mitigating risks to avoid cost overruns, delays, and
failures on IT projects. In addition, it is important to audit the life-cycles
of system development efforts to ensure they meet their intended objectives at
acceptable costs.
The OIG's FY 1999 Financial Statement Audit identified several concerns
regarding general controls and security over the IT systems that support the
financial statements of the Department. Improvements are needed in the areas of
the entity-wide security program planning and management structure, access to
computer resources, segregation of duties, and service continuity. The CIO has
developed a draft computer security handbook that addresses all of the
above-mentioned areas of concern. The handbook is in the approval process. In
addition, the CIO has committed to help agencies achieve compliance with the
handbook, once it has been approved and disseminated.
Mr. Chairman, these diverse areas - financial management, grants
management, performance measurement and reporting, and information technology
management - form the foundation of Management's stewardship over DOL funds.
The OIG has this year structured and increased its oversight activities in
these areas to maximize our impact in helping DOL achieve full accountability
over its resources and performance, as detailed in our budget justification. We
are also building our capacity to eventually provide comprehensive
opinion-level audit coverage of the key components of DOL accountability.
CONCLUSION
Mr. Chairman, this concludes my prepared statement. I would like to
thank you for the opportunity to present out budget request and performance
plan for FY 2001. I would be pleased to answer any questions you or the other
members of the Subcommittee may have.
Biography
EDWARD L. JACKSON
Director, Office of Budget
Edward L. Jackson was appointed Budget Director for the Department of
Labor in March 1998 where he is responsible for directing the Department's
broad program of budget formulation and justification for component
agencies.
Prior to this appointment, Mr. Jackson was Deputy Director of the
Departmental Budget Office, where he has served since 1988. In this capacity he
assisted in the formulation and justification of the Department's budget and
with early implementation efforts under the Government Performance and Results
Act of 1993.
Mr. Jackson joined the Department of Labor in 1970 as a Manpower
Development Specialist in the Manpower Administration. Since that time, he has
served in a variety of positions of increasing responsibility which include
policy, planning, management analysis and budget. During this period, he also
served as the Budget Officer for the Department Management appropriation.
Prior to joining the Department of Labor, Mr. Jackson worked for the
U.S. Postal Service and the D.C. Department of Human Resources.
Mr. Jackson is a native of Ford City, Pennsylvania. He served in the
U.S. Army from January 1963 through December 1965.
He attended D.C. Teachers College and later received a B.A. degree in
Psychology from Federal City College in 1970. He received a Masters of Public
Administration from the American University in 1974.
Mr. Jackson and his wife Thelma reside in Silver Spring, Maryland. They
have two children. Their daughter, Meeka, resides in Maryland and their son,
Douglas, resides in California.
Attachment
U.S. DEPARTMENT OF LABOR
OFFICE OF INSPECTOR GENERAL
FY 1999 ACCOMPLISHMENTS
OIG Goal 1: Optimize the use of funds appropriated for training
and employment programs by enhancing program performance and
accountability.
In the area of employment and training, the OIG focused
its audit resources in the Welfare-to-Work (WtW) and the Workforce Investment
Act (WIA) programs. The OIG audited numerous WtW grantees and found
implementation proceeding slowly in both competitive and formula grants. The
OIG determined that formula grantees were proceeding slowly because of
unforseen or unconsidered factors when the States developed their service and
outcome levels and spending estimates. We recommended that the Employment and
Training Administration (ETA) seek any needed legislative changes and continue
to assist States and local agencies. With respect to reviews of competitive
grants conducted during the early stages of their program implementation, we
found financial and program vulnerabilities. We recommended that ETA reinforce
its efforts to monitor grantee plans and program implementation schedules to
ensure the most efficient and effective use of WtW funds. In the WIA area, ETA
and the OIG collaborated on a survey of selected Job Training Partnership Act
(JTPA) recipients to assist ETA in finalizing the regulations governing WIA
administrative costs. We found that only two of the 13 recipients in our sample
would have been in compliance with the WIA 10 percent administrative cost
limitation. ETA is working to resolve this problem.
In the investigative area, the OIG continued to focus its investigative
resources on fraud involving DOL's foreign labor certifications. In one case,
an attorney was indicted on a 16-count indictment charging mail fraud,
encouraging an alien to remain in the United States unlawfully, visa fraud, and
aiding and abetting for his role in a scheme to attain visas and permanent
resident status for non-citizens. We also issued a report summarizing the
results of four audits conducted by the DOL and Education OIGs that focused on
the sustainability of State School-to-Work (STW) systems and found that
measures had been taken to contribute to this. We also recommended areas in
which the States could take action to increase the likelihood that their STW
systems will be sustained after Federal funding ceases.
OIG Goal 2: Safeguard workers' and retirees' benefit programs by
enhancing program performance and accountability.
In FY 1999, the OIG continued to identify schemes used to defraud the
various benefit programs administered by the Department. Our
efforts to identify and eliminate fraud in this area resulted in 363
investigations resulting in over $17.6 million in monetary accomplishments
including fictitious/fraudulent UI cases involving over $2.3 million. In one
case, conducted jointly with the Naval Criminal Investigative Service, a former
civilian employee with the U.S. Navy pled guilty to charges of making false
statements in conjunction with his receipt of FECA benefits. In another
investigation, the spouse of a Texas claimant was sentenced for fraud as a
result of his guilty plea to a scheme to continue receiving his late wife's
FECA compensation checks after her death. As a result of congressional
interest, the OIG conducted a review of the timeliness of claimant
reimbursement for out-of-pocket FECA medical expenses and requests for surgical
authorizations. Among our findings was that OWCP had not set performance
standards for responding to requests for non-emergency surgery. We recommended
that OWCP set performance standards to reduce claimant uncertainty about the
process. The OIG also reviewed OWCP's customer service surveys and found that
OWCP needed to improve their survey techniques in order to be able to improve
the quality of OWCP's customer services.
We audited the Department of Treasury's administrative charges to the
Unemployment Trust Fund (UTF) and found that Treasury
overcharged the UTF $48 million because the Internal Revenue Service's (IRS's)
estimated costs had not been adjusted to actual costs during FYs 1996, 1997,
and 1998. Our UI investigations focused primarily on identifying fictitious
employer schemes, counterfeit check scams and fraudulent claims involving
multiple states. One case resulted in fifteen people being indicted for
operating a fictitious employer scheme that defrauded Massachusetts of $352,120
in unemployment insurance funds. Another investigation performed in cooperation
with two other law enforcement entities, resulted in three individuals being
indicted and pleading guilty in a counterfeit check scam involving over $2
million drawn against the UI program. In response to a congressional request in
another area, we prepared a report jointly with the Social Security
Administration (SSA) OIG regarding Part B of the Black Lung Program. From the
study, we recommended that DOL and SSA study the feasibility of transferring
the entire Part B program to DOL. Both ESA and SSA concurred.
OIG Goal 3: Optimize the use of funds appropriated for worker
protection and workplace safety programs by enhancing program performance and
accountability.
The OIG also continued its efforts to investigate criminal misconduct by
those who are responsible for ensuring a safe work place,
completing fourteen MSHA and OSHA cases of wrongdoing by inspectors. One
investigation resulted in the sentencing of a mine owner and an employee for
falsely certifying that miners had received safety training. Another
investigation yielded the conviction of an inspector on one count of making
false statements concerning his official inspection notes and one count of
making false statements on his time and activity data forms. At the request of
MSHA, the OIG conducted an evaluation of two complaints involving MSHA's
regulation and procurement of self-contained self-rescue devices (SCSRs). Among
our conclusions was that MSHA's use of the sole-source process was not fully
justified and we recommended that procurement practices be reviewed to expand
the use of competitive bids and ensure conformance with DOL regulations.
OIG Goal 4: Assist DOL in maintaining an effective management
process.
The OIG audited the Department's consolidated annual financial
statements and issued DOL a "clean" audit opinion. Our report on internal
control reflects no material weaknesses, although we continued to note many
reportable conditions that need management's attention. Our review of the
Departmental agencies' strategic and annual performance plans concluded that
DOL's plans generally comply with the Government Performance and Results Act
(GPRA) and OMB Circular A-11. However, the plans could be enhanced to better
reflect the Department's planning and performance goals. We also responded to a
request from the Bureau of Labor Statistics (BLS) to audit activities
associated with an early release of sensitive economic data. During the audit
fieldwork, two additional security incidents occurred. Our audit focused on
physical and automated security practices and procedures in three specific
areas: information technology (IT), program survey offices, and administration.
In general, we found weak internal controls in these areas and that pervasive
problems existed in BLS' internal control structures. BLS is taking corrective
action.
OIG Goal 5: Combat the influence of organized crime and labor
racketeering in the workplace.
In its efforts to combat organized crime and labor racketeering in the
workplace, the OIG conducted a number of significant high-impact
investigations. During the year, we completed 54 employee benefit plan cases
involving over $19.4 million with 67 convictions in FY '99; 28 labor-management
cases, resulting in over $1.5 million in criminal monetary results, 35
convictions and 18 debarments; and corrupt union official cases resulting in 50
debarments. One joint investigation with the FBI and the New York Police
Department centered around the historical control of organized crime in New
York's garment center. Members of three organized crime families (Luchese,
Gambino and Genovese), directed by the acting boss of the Luchese family,
conspired to extort approximately $2.5 million from garment center businesses.
All 12 defendants have pled guilty to racketeering charges. To date six have
been sentenced to serve various jail terms and to pay fines. Another OIG
investigation resulted in the conviction of the former president and sole
shareholder of the Winston Hill Assurance Company on 18 counts of conspiracy,
mail fraud, and money laundering. The former president had laundered over $20
million in insurance premiums through his Bahamas-based company. When Winston
Hill collapsed, it owed its claimants at least $15 million in unpaid claims.
The former president was sentenced to 20 years incarceration and a $1,000,000
fine. As the result of an OIG/FBI joint investigation, two investment brokers
of an investment group were convicted on March 30, 1999, on charges of
conspiracy to pay a kickback, conspiracy to commit wire fraud, wire fraud, and
money laundering. They embezzled $9.3 million of pension fund assets along with
Teamsters Local 875's attorney, who was previously sentenced.
|