Management and Performance
Challenges
Management’s Response to the Inspector General’s
Statement
on the Top Management Issues at the U.S. Department of Labor
The Department has achieved significant progress during the past year
in overcoming the top management challenges identified by the Inspector General
in January 2002, and the President’s Management Agenda Scorecard and the
Inspector General’s January 2003 statement on the top management issues
offer clear recognition of DOL’s accomplishments. By the end of FY 2002,
the Department’s status ratings had improved to Yellow for four of the
five items on the President’s Management Agenda Scorecard, and progress
for the same items was rated as Green, placing the Department as the highest
rated Cabinet agency. The Inspector General’s January 2003 statement
removed one of the prior year’s challenges and indicated substantial
progress for others.
The Department anticipates that the results of initiatives to address
several management issues during FY 2003 and a reassessment of other issues
should enable the Inspector General to report even further progress in January
2004. In this regard, as referenced by the Inspector General’s statement,
many concerns first raised last year about the effectiveness of mine safety and
health programs have been fully addressed during FY 2002, and efforts are
underway to revise regulations as necessary to resolve all of the remaining
mine safety concerns. The expected completion during FY 2003 of a program that
will enable States to validate the quality of their performance data before
reporting the results of their job training programs to DOL should resolve the
Department’s data quality issues. The Inspector General’s statement
also repeats some challenges, particularly in the information technology arena,
that DOL has comprehensively addressed in prior years; a reassessment of the
responses should allow the Inspector General to close these issues or provide
specific guidance to the Department about the additional measures required.
Where a sustained effort is required by DOL over several years to
address a management issue that impacts a core program or management priority,
performance goals and strategies are targeted in the Department’s Annual
Performance Plan. For example, the Department’s Plan incorporates goals to
address the human capital management issues faced by DOL as well as to improve
the results of the job training programs identified in the Inspector
General’s statement. Several issues require legislative action or
otherwise fall outside of the Department’s jurisdiction, as explained in
management’s response. To improve the clarity of presentation, the
Department requests that the Inspector General segregate such items in future
years’ statements of management issues, directing the recommendations to
officials in a position to complete the required actions.
Each management challenge and the actions taken or planned by the
Department to address the conditions cited are discussed below.
DOL acknowledges that effective grants management and performance
accountability are a continuing challenge in managing grants programs at the
Federal, State, and local levels. DOL is pleased that the Office of Inspector
General (OIG) has recognized the Department’s efforts to improve the
effectiveness of our grants management systems through the implementation of a
comprehensive Contract/Grant Administration Plan. The Department has worked
with OIG on the development of this plan, and will continue to work with OIG
throughout its implementation.
Preaward/Award: OIG suggests that vulnerabilities associated
with DOL-funded grants stem primarily from the fact that funds are passed down
(often by formula) to second and third tier subgrantees and subcontractors, and
because many of the ultimate recipients of funds are small organizations. While
the first of the assertions is undoubtedly true, this decentralized system of
funding and performance accountability, as acknowledged later in OIG’s Top
Management Issues paper (see “Resolving Inconsistencies in WIA”), is
a key feature of the Workforce Investment Act (WIA). While DOL is working to
improve its oversight and monitoring capabilities, this must be accomplished
within the framework of the decentralized system prescribed by the
legislation.
Small and new grantees that are not accustomed to managing Federal
grant funds are only a small fraction of DOL grant funds — for example, of
the $17.5 million in grants under the faith-based initiative, $500,000 was
awarded to small, community-based organizations. A report released by the White
House Center for Faith-Based and Community Initiatives recommended that more
funds be made available to non-traditional grantees, and DOL is working both to
ensure that more funds are awarded to faith and community-based organizations
and to improve the capacity of these organizations to manage the funds.
Finally, as referenced by OIG, the grant to a Welfare-to-Work
competitive grantee that was the subject of a March 2002 audit was terminated
based on the OIG audit and subsequent work by DOL staff. This serves as an
example of effective monitoring and OIG/DOL cooperation.
Grant Execution: DOL has engaged in an extensive program to
provide training and technical assistance tools to grantees (particularly new
grantees) with respect to the statutory, regulatory and performance
requirements of their grants. Overall, DOL anticipates that this training will
be an effective tool to improve performance and minimize disallowed costs. DOL
is also implementing performance management and oversight strategies that
should further improve grantee performance. DOL will continue to work with OIG
and on the basis of our own monitoring to disallow costs, impose corrective
actions and, where appropriate, terminate grantees.
Reporting: DOL has been implementing internet-based financial
and performance reporting systems. These systems have built-in edit checks and
acceptance requirements that are designed to ensure timely and accurate
reporting. The Department has also recently begun to implement an extensive
performance reporting validation project to ensure that performance results
reported by grantees conform to the definitions and criteria established by the
applicable DOL program.
Oversight: The Employment and Training Administration (ETA),
DOL’s largest grantor agency, has identified accountability over grant
funding as a priority, as recognized by OIG in the discussion of this
agency’s Grant/Contract Administration Implementation Plan in the Top
Management Issues paper. As part of this effort DOL recently issued, with OIG
concurrence, clarifying guidance on the proper reporting of WIA obligations at
the local level. Consistent with its focus on grant and contract administration
in FY 2002, ETA established the requirement that at least half of all
formula-funded grants be monitored on-site.
The Department appreciates OIG’s recognition of the improvements
achieved by the Bureau of International Labor Affairs (ILAB) with respect to
accountability for grants issued. The Office of the Assistant Secretary for
Administration and Management (OASAM), the Office of the Chief Financial
Officer (OCFO), and ILAB will work together in FY 2003 to address further
improvements in the area of financial management to help assure that ILAB
receives pertinent and timely information. ILAB also plans to work with a
contractor to improve internal controls and security over its Activity Tracking
System — an internal system that serves as an unofficial tool for program
managers to track budgets, expenditures, and obligations.
The Workforce Investment Act has provided a significant opportunity and
challenge to create a new generation of workforce investment programs that
respond to the career development needs of Americans and the human resource
needs of America’s businesses. The Department has worked hard with the
States and localities to build this system, and has learned many lessons in the
process. The Department plans to incorporate these lessons into the process to
reauthorize the Workforce Investment Act that will occur in 2003. Among the
important areas in which the Department will propose changes is improving and
simplifying the performance accountability system, including financial
reporting.
Resolving Inconsistencies in WIA
Obligations and
Expenditures: The Department has sent out revised reporting instructions
recommended by the General Accounting Office (GAO) and the Inspector General to
clarify an immediate problem relating to reporting of local obligations, as
noted in OIG’s Top Management Issues paper. GAO has also suggested that
DOL concerns regarding the reliability of obligation data can be addressed by
new requirements to report obligations made at the point of service delivery,
rather than the current requirements that States report obligations reflected
in the accounting records at the State or local level. However, the Department
is concerned that such a requirement would be extremely burdensome and
expensive to implement nationwide. DOL will follow the suggestion made by GAO
to consult with the States on this recommendation when financial reporting
requirements are next reconsidered, but remains skeptical that the
recommendation can be implemented. This consultation will most likely occur as
part of discussions about WIA reauthorization. The Department is reluctant to
make major interim changes. DOL concurs with the recommendations to provide
guidance and technical assistance focused on accounting and reporting
requirements and to share information on effective practices. To date, the
Department’s concerns have been to identify the causes of low spending and
related low service levels and to address them. Ensuring that all States are
aware of requirements relating to the accounting of WIA funds will be a
priority for the coming year.
Definition of Credential: DOL and several other Federal agencies
are working with the Office of Management and Budget (OMB) to develop a core
set of performance measures that would apply to all Federally-funded job
training programs, including WIA title I formula programs. Under this proposal,
which is scheduled to take effect in FY 2004, the credential attainment measure
for adult and dislocated workers would be eliminated. While it would remain for
the youth program, DOL is working with the Department of Education’s
Office of Vocational and Adult Education to develop a definition that would
apply to all Federal youth employment programs. No interim changes to the
credential definition are anticipated.
The Department’s Office of the Chief Financial Officer works
closely with program agencies on financial management and compliance issues.
This partnership has resulted in DOL’s financial management status on
OMB’s scorecard for the President’s Management Agenda being upgraded
from Red to Yellow, and its progress score being upgraded from Yellow to Green.
The OCFO, however, believes that sound financial management goes well beyond
the ability to produce timely and accurate financial statements. The ultimate
goal of sound financial management is to provide DOL executives and program
managers with information needed to make management decisions on a day-to-day
basis. In FY 2003, the OCFO intends to work closely with each program agency to
identify its needs and develop the tools and processes that will provide
executives and managers with information that is essential for the effective
management of their programs and activities.
The OCFO is committed to fulfilling its responsibilities under the
Single Audit Act and intends to increase its involvement in the oversight of
grantor agency monitoring and evaluation activities.
The President’s Management Agenda Scorecard, as of September 30,
2002, rated DOL as Yellow for budget and performance integration and recognized
our progress in this area as Green, clearly reflecting the Department’s
commitment to this key milestone towards performance-based management. While
the full integration of performance and budget is a multi-year project, DOL has
made substantial strides during the past year that will culminate in the
presentation to Congress in February 2003 of a complete performance budget for
the Department for FY 2004. In addition, the Department has developed a plan to
further improve the performance budget presentation for FY 2005 and the years
beyond, as experience in this new approach to budgeting, more reliable
performance information, and the increased availability of cost accounting data
support more precise linkages between budget and performance.
Quality of Program Data: The Department has adopted proactive
measures to assure the quality of performance data that measure the results
achieved by DOL programs, exceeding the standards established by OMB. Guidance
included in OMB Circular No. A-11 defines performance data as acceptably
reliable, “when there is neither a refusal nor a marked reluctance by
agency managers or government decision makers to use the data in carrying out
their responsibilities.” In addition, Circular No. A-11 provides that
Federal agencies are not required to develop an independent capacity for
verifying or validating performance data received from non-Federal sources, and
instructs agencies to be mindful of the costs and anticipated benefits of
improving the quality of program information which meets decision-makers’
needs.
Notwithstanding OMB’s guidance, the Department has developed
approaches for ensuring the validity of key data submitted by a variety of
third parties, to improve the confidence of DOL management in the reliability
of performance data that supports decisions critical to the well-being of the
Nation’s workers. For example, both the Mine Safety and Health
Administration (MSHA) and the Occupational Safety and Health Administration
(OSHA) conduct audits of a selected number of mine operations and other
businesses respectively, to verify the accuracy of the employers’ data
pertaining to injuries, illnesses, and lost productive time. The Bureau of
International Labor Affairs relies on program evaluations to confirm the
performance results reported by local project administrators who receive DOL
grant funding through the International Labor Organization and other grantees,
where applicable. The Department’s OIG conducts selective audits to verify
performance data from internal Departmental systems as well as third parties.
With respect to the Department’s employment and training programs,
as OIG notes, DOL has mounted a data validity and verification program to
improve the quality of program data from States and other grantees that are
part of the workforce investment system. Development work has been
substantially completed and will be followed by training and assistance in
early 2003. Using this program, the States and grantees will be expected to
validate the performance data that will be included in the Department’s FY
2003 Annual Report for the employment and training goals.
Access to Data: The Department agrees that Unemployment
Insurance (UI) Wage Record information and the National Directory of New Hires
are important sources of information for determining program outcomes. The
Department believes that the current statutory authority in WIA has been
sufficient to provide needed access to UI wage record information for program
accountability reporting. The States and the Department have used UI wage
record information as the source for reporting on the WIA employment
indicators. The Department will propose to continue this authority with the
reauthorization of WIA. The Department also has plans to work with the
Department of Health and Human Services to explore mechanisms to combine
selected New Hire information with that in UI wage records to improve the
usefulness of these as data sources for economic and program performance
accountability information. In doing so, the Department will consider whether
statutory authorization may be required.
Managerial Cost Accounting: The Department supports the use of
managerial cost accounting for results-oriented decision-making and measurement
of program economy and effectiveness. In order to enhance the Department’s
managerial cost accounting efforts, the Office of the Chief Financial Officer
is in the process of forming a division within its Office of Financial
Integrity responsible for enhancing the Department’s managerial accounting
processes and facilitating the integration of performance and financial
information at the operational level. These activities will be coordinated with
OASAM’s efforts to integrate budget and performance.
Safeguards to Protect Pension Assets: Between 1991 and 1997, the
Department submitted legislative proposals calling for the repeal of the
limited-scope audit provision and calling for reforms to strengthen plan
audits. During that same period, the Department also proposed legislative
changes that would require the direct reporting of certain criminal violations
relating to employee benefit plans. Despite the Department’s continued
efforts, Congress has not enacted this legislation.
Absent Congressional action, the Department continues to take steps to
improve the audit process established by the Employee Retirement Income
Security Act of 1974 (ERISA). Program initiatives of DOL include cooperative
efforts with the accounting profession, such as referral of deficient
accountant work to State boards of accounting and to the American Institute of
Certified Public Accountants for appropriate remedial actions. In addition to
these on going program efforts, the Department’s Pension Welfare Benefits
Administration (PWBA) continues its active involvement with the Financial
Accounting Standards Board to develop accounting guidance for employee benefit
plans. DOL recognizes that the problem of deficient audits remains in spite of
the Department’s compliance initiatives and is considering approaches to
address these issues.
With respect to cash balance plans, OIG issued a report in 2002 of its
audit of PWBA’s oversight of cash balance plan lump sum distributions. In
its report, OIG recommended that PWBA direct more enforcement resources toward
protecting the benefits of cash balance plans’ participant benefits,
initiate specific action on the 13 plans identified by OIG in its audit report,
and work with the Internal Revenue Service (IRS) to develop improved guidance
for plan sponsors in calculating participant accrued benefits in cash balance
plans.
The Department’s regulatory and enforcement authority in this area
is limited. DOL cannot take any enforcement action or begin working with the
IRS on additional guidance until the IRS determines whether or not there were
violations of Internal Revenue Code and ERISA. Consequently, the Department
forwarded a copy of the OIG report and supporting work papers to the IRS for
its review and comments. We are currently awaiting IRS’ response, and will
provide assistance in developing new guidance if IRS determines this action is
warranted.
Pension Plan Enforcement: The Department recognizes that pension
funds represent a target for individuals with criminal intent and has responded
to that challenge with a strong enforcement program. PWBA’s enforcement
mission is to deter and correct violations of Title I of ERISA and related
criminal statutes. This is accomplished through civil and criminal
investigations of plans, plan sponsors, fiduciaries, and service providers.
During the past few years, there has been an increased commitment to our
criminal enforcement program. During FY 2002, there were 134 indictments issued
as a result of PWBA’s criminal investigations, and convictions or pleas
were entered in 49 different PWBA cases. PWBA criminal enforcement
investigations resulted in the recovery of over $2.3 million on behalf of
employee benefit plans or their participants and beneficiaries. In addition,
PWBA closed 4,925 civil investigations of which 58 percent or 2,877 were with
results. During this period, PWBA civil enforcement investigations had monetary
results of over $830 million, approximately 27 percent more than FY 2001 and a
record for the Agency.
PWBA will continue to target criminal cases in various ways that have
demonstrated successful results in the past such as analyzing computer data,
gathering information through civil investigations, leads from plan
participants, plan officials, informants, and media sources, and information
gained from other government agencies. The Department also maintains close
working relationships with other law enforcement agencies such as the U.S.
Attorneys, the Federal Bureau of Investigations, the Postal Inspectors, and
OIG. Finally, while not all fraud can be prevented, DOL is proactive in the
early detection and prevention of criminal behavior by, among other things,
aggressive outreach and education campaigns. Education campaigns create
knowledgeable consumers who can assist in “policing” their own
benefit plans. An informed public is a good source of early detection and
prevention of criminal activity and the Department continues to leverage the
knowledge of the public who may be in the best position to identify potential
fraudulent behavior.
The Department recognizes the importance of devoting appropriate
enforcement resources to the review of service providers to employee benefit
plans, including Taft-Hartley plans. In its Strategic Enforcement Plan,
published in April 2000, PWBA identified plan service providers as a national
investigative priority. Investigations of plan service providers offer the
opportunity to address abusive practices that may affect more than one plan,
and by focusing investigative resources on plan service providers, PWBA can
address violations involving many plans. Because such investigations generally
result in larger recoveries for more plans and more participants, this approach
allows PWBA to leverage its resources and obtain the maximum impact for the
benefit of plan participants and beneficiaries. As pointed out by the OIG, an
illustration of this investigative approach is PWBA’s Capital Consultants,
Inc. case in which, as a result of PWBA’s efforts, over $149 million have
been recovered to date. In addition, 27 trustees have been precluded from
involvement in employee benefit plans as fiduciaries or service providers. With
respect to the criminal investigation, which PWBA conducted jointly with OIG,
seven individuals have been indicted thus far. Four defendants have pled guilty
and one of these defendants is serving a 24-month prison sentence. PWBA
continues to investigate the trustees of other plans that invested with Capital
Consultants.
With respect to employer-sponsored 401(k) plans, PWBA has had a
national enforcement project since 1995 focusing on the failure of employers to
timely remit employee contributions to 401(k) plans. Since the beginning of the
project through September 30, 2002, PWBA has opened 8,000 civil investigations
and closed 6,538 civil investigations (4,428 with violations and monetary
recoveries). Also, 170 criminal cases have been opened. Thus far, these cases
have resulted in the criminal prosecution of 117 persons. PWBA has recovered
over $170 million nationwide through this project. The investigations opened
under this project are among the most successful for PWBA in terms of finding
and correcting violations, due in large part to PWBA’s use of strategic
targeting of resources. For example, in FY 2002, PWBA closed 1,351 civil cases
in this project, 1,062 of which (or 79 percent) resulted in corrected
violations. This compares favorably to the overall ratio of cases closed with
violations, which was 58 percent in FY 2002. A significant step occurred in
March 2002, when the Department announced a final Voluntary Fiduciary
Correction Program (VFCP). The VFCP enables 401(k) plan sponsors to
self-correct delinquent participant contributions by restoring losses,
including earnings, to plans. Applicants meeting the conditions of the VFCP are
granted relief from any applicable excise taxes under a VFCP Class Exemption
published. The Department has received 166 VFCP applications, most of which
address correction of 401(k) contributions. To promote use of the VFCP, in 2002
the PWBA’s Web site posted Frequently Asked Questions on calculating
earnings on delinquent 401(k) contributions under the VFCP.
Funding Concerns
The Department is dedicated to the highest
standards of financial stewardship and program integrity in administering funds
that provide critical benefits to the Nation’s workers. The funding
concerns identified by OIG are matters largely outside the Department’s
control. With respect to program integrity, we recognize that all Government
benefit programs are vulnerable to abuse. However, the minimal rates of fraud
and overpayments identified in systemic studies of the Federal Employees’
Compensation Act program, the Department’s initiatives to reduce erroneous
payments in conjunction with the President’s Management Agenda, and
aggressive corrective actions in response to OIG recommendations attest to the
Department’s vigilance in protecting these funds. The Department is aware,
however, that further protection of these funds is required and will continue
to seek out additional ways to combat fraud and minimize overpayments.
Unemployment Trust Fund: As noted by OIG, the Unemployment Trust
Fund paid $50.6 billion for “State Unemployment Benefits” for FY
2002. In addition, 30 States were reported as “not minimally solvent”
as of September 30, 2002, up from 21 for September 30, 2000, and 26 for
September 30, 2001. These increases are normal for an economic downturn because
of the counter-cyclical nature of UI funding. The Department provides technical
assistance to the States on issues relating to solvency.
The Department appreciates OIG’s assistance in facilitating an
agreement with the Department of the Treasury to develop a new methodology that
will more accurately charge the Unemployment Trust Fund for the collection and
processing of unemployment taxes and the administration of the fund. The
completion of an agreement should allow this issue to be removed from the
Department’s top management issues.
In addressing overpayment problems in the Unemployment Insurance (UI)
program, OIG notes that the Benefits Accuracy Measurement (BAM) system, which
was developed by the Department as a management tool to identify overpayment
problems, projected overpayments of $2.3 billion for FY 2001. Furthermore, OIG
states that, for FY 2001, actual overpayments identified through States’
Benefit Payment Control (BPC) activities–under which each State identifies
and investigates benefit overpayments, establishes receivables, and collects
overpayments–totaled $0.669 billion, or less than one-third of the amount
estimated by BAM activities. The Benefit Payment Control activities do not
establish a larger percentage of the dollars that the BAM program estimates as
overpaid for reasons particular to each of the two programs. BAM, for example,
includes in its estimates some overpayments that BCP can detect, but finds too
small to be cost beneficial to establish for collection, or which State law
deems non-recoverable. On the other hand, BAM estimates overpayments for
causes, such as failure to conduct a work search, that BCP would establish for
collection, but cannot detect with available resources. BAM is only able to
detect some overpayments because BAM investigators conduct an intense, rigorous
investigation of each sampled claim that is too costly to be applied in the
general administration of the UI program. Applying the BCP program attributes
to the $2.3 billion overpayments estimated by BAM in FY 2001 results in the
following: $1.235 billion are recoverable and detectable using BCP methods;
$0.566 billion are recoverable, but not likely to be detected by BPC; and
$0.484 billion are non-recoverable and thus out of the scope of the BPC
program. States now establish through BCP over 50 percent of the BAM estimate
of the kinds of overpayments that their current BPC methods are most likely to
be able to detect. The Department is taking steps to raise that percentage by
improving both the prevention and detection/recovery of overpayments. These
include encouraging and funding States to use Social Security Administration
data on-line to prevent overpayments due to misused social security numbers,
and to conduct crossmatches of benefit payments against the New Hire database
to detect unreported benefit year earnings.
The BAM estimate has been flat over the past 12 years because all
practical, cost-effective corrective actions that have been identified to date
were implemented during the first year or two of the BAM program when problems
were initially uncovered. The 8.5 percent national estimate is probably
reasonable given: (1) the definition of error currently used in BAM; (2) the
complexity of the UI program; and (3) the current funding levels. However, the
Department is continuing analysis and urging States to continue to explore
innovative ways to prevent overpayments from occurring, and to detect and
recover higher percentages of the overpayments the States could not
prevent.
As referenced by OIG, the Department has developed a performance
measure for FY 2003 to improve the accuracy of UI payments by establishing for
recovery 59 percent of overpayments the system could potentially recover, and
plans to adopt a measure in FY 2004 to target the recovery of those
overpayments. These performance measures support the financial management
initiatives of the President’s Management Agenda to reduce erroneous
payments in major benefit programs.
Black Lung Disability Trust Fund Deficit: This issue can only be
resolved by legislative action and the Department continues to seek such a
solution. Proposed legislation, which would restructure the existing
indebtedness and extend the current excise tax rates until the debt is repaid,
was approved by the Secretary on January 14, 2002, approved by OMB, and has
been transmitted by the Secretary to the Congress for its consideration.
Energy Employees Occupational Illness Compensation Programs: The
Department contracted with an actuarial firm for analysis of the Energy
Employees Illness Occupational Compensation Program’s data and a
projection of the liability for future payments as of September 30, 2002. The
results have been submitted to the OIG for audit.
Program Integrity
Unemployment Insurance: OIG
discusses a number of weaknesses that pose problems for the Unemployment
Insurance system and need to be addressed, including the loss of contributions
due to hidden wages and the misclassification of workers. Under the
Department’s guidance, the States are aggressively pursuing employers that
hide wages by misclassifying their employees. In the ten quarters since the
Department began keeping records on misclassified workers, State tax auditors
have completed 278,160 employer audits and found previously unreported wages of
$3.8 billion and 243,115 employees that were misclassified as independent
contractors.
To further identify hidden wages, the Department has worked with OIG
over the last three years in an effort to provide State UI agencies with a
1099-MISC Extract tape from the Internal Revenue Service that identifies
individuals who are being reported to the IRS as independent contractors. This
tape assists the States by providing leads for the selection of employers for
audit purposes. As of May 2002, a total of 20 State UI programs have begun to
receive this tape.
DOL has taken a number of recent actions and continues to work to
address fraud detection and investigation in the States, including:
- 1998 The Unemployment Insurance System distributed training
materials to States for the purpose of improving methods for detection and
investigation of overpayments including a CD-ROM for beginner training and a
set of five videos for advanced training.
- 1999 Distributed copies of the OIG study “Audit of
Benefit Payment Controls” that contained recommendations for strengthening
States’ overpayment detection procedures in their wage/benefit crossmatch
systems and espoused the advantages of employing the New Hires system for
detecting overpayments.
- 2000 Provided guidance reiterating the advantages of using the New
Hires system and further encouraged States to use it.
- 2001 Provided training to States through presentations and
workshops at a national conference on a variety of topics pertaining to benefit
payment control, internal security, and tax integrity.
- 2002 A guidance letter is in draft to invite States to submit
supplemental budget requests to obtain funding for the purposes of
implementing/operating/enhancing New Hires systems. The Department is currently
working with the Social Security Administration to develop a system for all
States that will address identity theft and the fraudulent use of Social
Security Numbers for filing Unemployment Insurance claims.
- 2003 A National Integrity Conference is planned. Workshops
will be directed towards State supervisors of benefit payment control
operations, and will include topics relating to prevention, detection, and
collection of overpayments.
Federal Employees’ Compensation Act (FECA): We believe that
the OIG’s audit work and fraud investigation experience demonstrate that
the internal controls instituted by the FECA program are generally effective
and reasonable.
Each year fewer than 100 individuals are prosecuted for FECA fraud, out
of a universe of more than 250,000 claimants receiving benefits and hundreds of
thousands of medical providers billing for services. In FY 1999, the total
amount of FECA benefits determined by outside auditors to have been overpaid,
for fraudulent and non-fraudulent reasons, was less than 3/4 of one percent of
total compensation payment made. The percentage of medical payments found to be
potentially inappropriate by the OIG-supervised audit was even smaller. While
some inappropriate payments do go undetected, the Office of Workers’
Compensation Programs’ (OWCP) major cost containment initiatives are
making significant progress in addressing those instances. OWCP has taken
numerous concrete steps to address its vulnerability:
- A proposed legislative solution to obtain automated cross-matches
with SSA, as recommended by OIG;
- Procedural changes for obtaining earnings information by requiring
submission of the authorization to obtain earnings data from SSA annually
instead of every three years;
- Periodic Roll Management reviews of long-term disability cases for
continuing entitlement to benefits, in place since 1992. (Note: OWCP devotes
more than 120 FTE to this function each year);
- The Quality Case Management (QCM) initiative, which ensures that new
disability cases are carefully reviewed, including by rehabilitation nurses, to
ensure appropriate care, early return to work, and avoidance of inappropriate
payments;
- The Corrective Coding Initiative review of medical bills (implemented
in response to OIG findings regarding improper medical provider bill coding
practices);
- Modernization of ADP systems to ensure that FECA payment systems are
designed to minimize vulnerability to fraud and abuse;
- Automated system relational edits to bills, in addition to Correct
Coding and fee schedule edits, to deny or suspend bills for services unrelated
to the diagnosis accepted in the case;
- Limited utilization review of high-cost and high-incidence medical
services, such as physical therapy and psychiatric services to ensure that
proper treatment regimens are followed for those medical services, initiated in
FY 2001. Funding sought in FY 2003 for an expansion to examine patterns of
unusual changes, to detect misbillings and potential fraud by medical
providers;
- Fiscal Operations Specialist position created with monitoring and
auditing responsibilities in each of FECA’s twelve district offices,
including identification of potential duplicate medical and compensation
payments and guarding against any potential compensation or medical fraud,
including internal fraud;
- The “OASIS” system, which entails electronic imaging and
handling of FECA case files, to greatly enhance program controls over incoming
mail;
- Continued refinement of existing improper payments controls, wherever
necessary, and design of new systems to minimize vulnerability. For example,
the initiative to receive some new claims and medical bills electronically,
carefully designed to maintain and enhance existing controls;
- Centralized medical bill processing (operations to begin in late FY
2003), provided under contract with ACS, Inc. which specializes in using
automated case review measures, including clinical guidelines for medical
treatment and fraud and abuse protection, identification of appropriate
clinical treatments, and improved tracking and prior authorization of requests
for medical services.
Security of IT Assets: The Department has been vigilant in
securing information technology (IT) assets. In FY 2002, the Department had 46
sensitive systems, and has prepared current risk assessments and system
security plans for each of these systems. Additionally, known vulnerabilities
for the 46 sensitive systems have been addressed through system level Plans of
Actions & Milestones that reflect the significant progress DOL has achieved
toward mitigating risks. The Department’s past performance in managing the
Plans of Actions & Milestones has been highly successful and cited as an
example by the Office of Management and Budget for completeness and
effectiveness. Additionally, the Department achieved 87 percent compliance with
the National Institute of Standards and Technology’s model described in
Special Publication 800-26 at Level Three and 85 percent compliance with Level
Four, demonstrating the Department has implemented security procedures and
controls, and the procedures and controls are tested and reviewed. The
Department is expanding its security program in FY2003 to cover an additional
36 sensitive systems, raising the total number of systems managed under the
security program to 82. Risk assessments and Plans of Actions & Milestones
to mitigate risks will be developed for the additional 36 sensitive systems
during FY2003. Additionally, the Department’s Annual Performance Plan for
FY 2003 provides further confirmation of DOL’s commitment to the security
of our information technology assets, with a performance measure to reduce
severe unauthorized intrusions by 50 percent.
OIG stated in the FY 2002 Annual Security Act Report that,
“…the Department is improving upon managing its information security
program through its related Plans of Action and Milestones, in accordance with
the Office of Management and Budget Memorandum 02-09.” The report further
states that, “These accomplishments are helping to ensure security issues
are being addressed throughout each phase of a system’s life-cycle.”
Additionally, the OIG concluded that the Department has established an
information security program that has an observed focus and commitment. These
factors should bring about assurances that DOL computer systems are reliable
and adequately safeguarded, and result in providing uninterrupted delivery of
benefits and services to the public.
Finally, the Department is pleased to report that, according to a
General Accounting Office report on Computer Security issued November 19, 2002,
Computer Security: Progress Made, But Critical Federal Operations and Assets
Remain at Risk, DOL was the highest ranked Cabinet level agency and the second
highest overall Federal agency, moving from a score of 56 in FY 2001 to a score
of 79 in FY 2002, with a report card grade of C+. This score is based on
information contained in agency reports submitted to OMB as required by the
Government Information Security Reform Act (GISRA). The GISRA focuses on
the program management, implementation and evaluation of agency plans and
procedures designed to protect the security of information technology systems
that support Federal operations and assets.
CIO Authority and Organizational Independence: The current
organizational alignment that assigns the responsibilities of the Chief
Information Officer (CIO) to the Assistant Secretary for Administration and
Management (ASAM) promotes operational effectiveness and efficiencies,
contributing to the successful record the Department has achieved in the area
of information technology management. The Department’s record also
demonstrates that the CIO has the necessary authority and organizational
independence from other agencies within the Department to manage DOL’s
information technology resources proficiently.
The integration of CIO responsibilities within the Assistant Secretary
for Administration and Management position affords distinct advantages in the
implementation of the Clinger Cohen Act. Effective management of
information technologies requires linking proposed IT investments to
Departmental missions, priorities, and strategies. It also requires a
close partnership with the Departmental Budget Center to control IT
investments. The ASAM is responsible for DOL strategic planning,
Government Performance and Results Act implementation, and Departmental budget
development and management and human resources management. As a result,
the ASAM is best positioned to ensure the integration of IT policies and plans
cohesively throughout the Department. It is worth noting that only 3 of 46
mission critical systems (less than 7 percent) fall within the Office of the
Assistant Secretary for Administration and Management and come directly under
the ASAM’s area of responsibility. Thus, the ASAM’s objectivity is
not hindered by the integration of CIO responsibilities or vice versa.
Under the continuing leadership of the Assistant Secretary for
Administration and Management, the Department has established a track record of
excellence in the information technology field, with FY 2002 accomplishments
described in this section — including recognition of effective performance
from the Congress, the General Accounting Office, the Office of Management and
Budget, and OIG itself. In addition, the Office of Management and Budget
designated DOL to serve as a “managing partner” to lead one of the 24
large-scale E-government initiatives, entitled GovBenefits. GovBenefits
was the first of twenty-four Federal-wide initiatives to offer services to the
public, launching Phase I on April 29, 2002. It is a partnership of ten
Federal agencies to provide improved, personalized access to government
assistance programs.
As a result of this and many other achievements, DOL is recognized as a
leader in Clinger Cohen Act implementation throughout the Federal
government. For example, the Director of the Office of Management and
Budget recognized DOL for its leadership as the only department with
centralized funding for some of its IT systems. The Office of Management
and Budget’s scorecard for the implementation of the President’s
Management Agenda cites effective enterprise architecture and capital planning
processes, two of the primary objectives of the Clinger Cohen Act. DOL
received a Yellow status rating and a Green rating for progress on the
September 30, 2002 President’s Management Agenda scorecard. The FY 2002
Budget Passback highlighted the efforts of the CIO in the development of an
E-government strategy and cited our customer value network process as
“best practice material.”
The Fiscal Year 2002 Annual Security Act Report referenced earlier also
states: “…The Department’s Office of the Chief Information
Officer is recognized for its leadership in tracking the performance level of
each security plan and how it has been able to integrate security performance
results within the Department’s Capital Planning and Investment Control
process and the Enterprise Architecture, including related budgetary decision
papers and exhibits.” The Department was recognized and received an award
in FY 2002 from The Performance Institute for Overall Performance
Management.
DOL’s sustained record of performance should allay OIG’s
concerns that the administrative functions of the Department divert the
Assistant Secretary for Administration and Management’s attention from or
conflict with his information technology responsibilities. While we agree with
OIG that the successes of the incumbent ASAM and Deputy CIO do not guarantee
that all future ASAMs will enjoy the same level of success, the existing
organizational structure supports their achievements. If a future leadership
team proves less successful, the causes of the diminished results should be
identified and addressed by the most suitable remedy. To undertake a disruptive
and costly organizational realignment at this time would be inappropriate.
Program Integrity in an Electronic Environment: As described in
the Management Responses to this OIG in the Department’s FY 2000 and FY
2001 Annual Reports, DOL and our program partners recognize that any
significant revision of benefits payment processes — including those
utilizing automation — must be designed and implemented such that
vulnerability to fraud and abuse is assessed, and appropriate controls are
developed to minimize or curtail that vulnerability. While posing potential new
risks to program integrity, electronic benefit payment also offers a wide array
of new methods for detecting and preventing fraud and abuse that were
unavailable in a less automated environment, and the Department and our
partners have fully exploited these tools to maximize the protection of program
assets.
The Department has provided detailed information in the past two
years’ reports regarding the comprehensive security and oversight
procedures DOL and our program partners have instituted to protect the
integrity of benefit payment processes in an electronic environment. Studies of
Unemployment Insurance (UI) claims discussed in the prior DOL Annual Reports
have identified no statistically significant differences in the incidence of
fraud in claims filed by traditional procedures versus those filed by
telephone, and OIG has identified a combined fraud and non-fraud overpayment
rate of less than one percent in the Federal Employees’ Compensation Act
program. Although OIG references recent casework in worker benefit systems and
the UI program as supporting its concerns, OIG has not provided sufficient
information to enable the Department to determine whether these acts of fraud
required an electronic environment, or simply made use of available automated
filing systems in lieu of paper forms to obtain benefits illegally.
Furthermore, in the Top Management Issues paper, OIG has neither acknowledged
the extensive measures for protecting electronic benefit payments discussed in
the Department’s prior Annual Reports nor offered insights on specific
inadequate or missing controls that could assist the Department and its
partners to fully meet the challenges of program integrity in an electronic
environment.
Program integrity is a primary consideration as the Department’s
Office of Workers’ Compensation Programs (OWCP) moves toward an electronic
environment. Current electronic initiatives are all performed with known and
trusted trading partners. The electronic receipt of claims for job related
injuries and illnesses is a joint effort of OWCP and the employing agencies of
the injured Federal workers. All records submitted electronically pass through
multiple data reviews — by the injured worker’s supervisor, by the
Human Resources office at the employing agency, and by OWCP district offices
— that significantly reduce the risk of fraud or abuse in the claims
submission process.
All medical bills submitted electronically are processed through
well-known commercial clearinghouses that verify the legitimacy of a medical
provider prior to allowing the provider to become a member of the
clearinghouse. Internally, OWCP continues to improve the editing and auditing
of medical bills to better detect instances of fraud or abuse.
As the Department develops new systems for the workers’
compensation programs, DOL will ensure continuing compliance with all relevant
government standards for security for internal automated procedures and
Internet communications.
The identification of fraud in the Foreign Labor Certification Programs
continues to be a significant challenge to DOL because of limited resources,
lack of knowledge on how much and where fraud takes place in the process, and
no enforcement authority. Additionally, as pointed out by OIG, the Department
lacks the authority to validate information on applications completed by
program participants in the H-1B program. DOL has procedures in place to alert
legitimate companies and corporations that permanent applications have been
filed on their behalf. These procedures have been successful in the past
because companies have responded and leads have been provided to OIG. The
examples of fraud cited by OIG are two cases in which DOL Regional Office staff
worked with OIG on fraudulently filed cases. To address this challenge during
FY 2003, DOL will be participating with the Immigration and Naturalization
Service in its development of an anti-fraud strategic plan, which focuses on
intelligence gathering, fraud assessment and enforcement experience. DOL will
analyze the results of this effort to identify additional improvements to
existing procedures and the use of technology to help reduce the incidence of
fraud.
DOL considers human capital management a top priority, and the
recognition the Department has received for achievements and innovations during
FY 2003 provides evidence of our success in meeting the challenges facing the
DOL workforce in the 21st Century. For example, the Office of Management and
Budget assessed DOL’s status as Yellow and progress as Green for Human
Capital Management on the President’s Management Agenda Scorecard as of
September 30, 2002. In addition, the Department was selected as a finalist for
the 2002 President’s Quality Award for its approach to strategic
management of human capital. The Department has also implemented numerous
initiatives supporting the specific human capital management issues detailed by
OIG. An overview of these initiatives is provided below.
The development and use of core competencies is a priority within DOL.
The Department is in the process of identifying core competencies for
DOL’s primary occupations, including front line staff, human resources,
and support staff, as well as leadership competency models. DOL uses its core
competencies in such functions as:
- Providing clarity for employees to manage their individual
professional development process;
- Providing a means for self-assessment;
- Providing a link to developmental and learning activities to improve
job performance;
- Developing organizational training programs; and
- Recruiting and hiring new employees with the necessary knowledge,
skills, and abilities.
DOL actively uses personnel flexibilities to both recruit and retain a
quality workforce. This is predominately accomplished using such flexibilities
as recruitment and retention bonuses at present, and the Department is
assessing the Student Loan Repayment Program as an additional incentive. DOL is
also broadening its use of special hiring authorities, such as the Career
Internship Program on which the recently launched MBA Outreach program,
designed to recruit and nurture the next generation of DOL leaders, is based.
Recruitment for the first class of MBA’s proved highly successful, with
approximately 250 candidates applying for 20 slots, and the Department may
expand the program to a second FY 2003 class.
DOL has implemented an aggressive succession management program. DOL
maintains an active Senior Executive Service Candidate Development Program, and
27 candidates are in training during FY 2003 for top executive positions in the
Department. Our first “Excellence In Leadership” Succession
Management Program class is currently being trained to fill critical future
leadership positions. In addition to the “Excellence In Leadership”
Program, DOL provides a Manager’s Mentoring Program, and a Leadership
Transition Program. Several DOL agencies have also initiated their own
management development programs to identify and train candidates for
advancement into the supervisory and managerial ranks.
In addition to the initiatives designed to build our leadership
strength, training is provided to the general workforce to increase
professional growth and to eliminate skill gaps. Courses are offered in
facilitation, consulting and conflict management, as well as many other skills.
Through DOL’s Performance Enhancement Resource Center, employees have the
opportunity to select from over 1,500 “available as needed” training
modules from their computers.
In response to the recommendation that the Department track and report
on telework participation, DOL will expand its current tracking of formal
telework arrangements to include informal, episodic telework. Further, the
Department is working with the Office of Personnel Management to develop
web-based telework training for Federal supervisors and employees.
In response to OIG recommendations on the Presidential Management
Internship (PMI) Program, DOL developed an action plan to improve the program.
The Department has prepared a PMI Handbook, desk aid, and training for
supervisors and will conduct its own PMI orientation program prior to the OPM
orientation. These actions will clarify responsibilities for all parties. DOL
will also sponsor a networking session so that new PMIs can meet and benefit
from the experience of former PMIs.
The Department’s Mine Safety and Health Administration (MSHA) is
taking action to further integrate enforcement and compliance assistance
activities by improving direction and guidance to district management on the
operation of program activities, and is studying the allocation and
distribution of enforcement and compliance assistance resources to determine
the combination of activities that will produce the greatest effects on mine
safety. DOL developed new performance goals with more meaningful outcomes
regarding the prevention of mining related fatalities, injuries and illnesses.
The Department is also identifying trends in mining injuries and fatalities,
studying features of current programs to identify elements that are most
successful in reducing injuries and fatalities, and will utilize these elements
to revise other MSHA enforcement and compliance assistance activities. MSHA was
not reviewed by the OIG in FY 2002. In FY 2001, OIG completed three
audits/evaluations of MSHA’s Metal and Nonmetal Mine Safety and Health
programs: a Study of Metal and Nonmetal Mining Enforcement and Compliance
Assistance Activities 1983-2000; an Evaluation of MSHA’s Handling of
Inspections at the W.R. Grace Mine in Libby, Montana; and an Evaluation of
Hazard Complaint Handling in MSHA’s Office of Metal and Nonmetal Mine
Safety and Health. As discussed in the following paragraphs, MSHA has initiated
a number of actions to address the findings and recommendations from these OIG
studies.
MSHA has developed and distributed a “Consistency Plan” for
Metal and Nonmetal Safety and Health Mining Districts to encourage safety and
health compliance specialists to uniformly enforce standards on a nationwide
basis. MSHA has also completed a review of statistical data to more effectively
identify injury and fatality trends at mining operations. The results of this
review will enable the Department to focus MSHA resources in areas where
problems are more likely to occur. An action plan resulting from the review is
under development and will be completed by March 2003.
In March 2002, MSHA began providing specific training on
asbestos-related matters to safety and health compliance specialists who visit
mines known to contain asbestos. MSHA also provides training on procedures for
air and bulk sampling where asbestos may be present. Several of the OIG
recommendations require rulemaking, including 1) lowering the permissible
exposure limit for asbestos; 2) use of Transmission Electron Microscopy in
initial analysis of fiber samples; and 3) addressing take-home contamination.
Advanced notice of proposed rulemaking was published in March 2002. Seven
public meetings were held across the country seeking input on these issues.
Until the regulation is finalized, MSHA is taking the following
actions: 1) encouraging mine operators to comply with the OSHA asbestos
standards, to educate operators to recognize that a “standard of
care” based on lower exposure will reduce the potential for illness and
liability; 2) using a contract laboratory to perform Transmission Electron
Microscopy to confirm the identify of asbestos fibers on samples exceeding the
OSHA limit; and 3) to address the take-home contamination issue, MSHA is
currently stressing compliance with existing standards regarding special
protective equipment and clothing.
MSHA formed a Hazard Complaint Committee to review, standardize, and
develop hazard complaint intake, inspection and reporting forms, which are now
integrated into a Hazard Complaint Procedures handbook. The Committee
established consistent policies and procedures for the processing of hazard
complaints by field office supervisors and inspectors, including appropriate
responses to hazard complaints deemed trivial and/or outside of MSHA’s
jurisdiction and guidance on incorporating hazard complaints into a regular
mine inspection. Following the publication of the handbook, headquarters staff
will update training and materials provided to inspectors. MSHA is also
developing a nationwide hazard complaint analysis system similar to the system
used by Metal and Nonmetal headquarters staff. The handbook, updated training,
and complaint analysis system are all scheduled for completion in January
2003.
Finally, MSHA is reviewing all violations related to Personal
Protective Equipment (PPE) for special assessment, developing cognitive
behavior approaches that will target risk taking and PPE use by management and
labor, and is tracking fatalities involving adequacy, availability, and use of
PPE. A Personal Protective Equipment workgroup is established and working with
the National Institute for Occupational Safety and Health to develop a plan for
increasing the use of such equipment to reduce fatalities, injuries, and
illnesses in the Nation’s mines.
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