As of March 31, 2021, the OIG has identified the following areas of significant concern that cause the Department to be at particular risk of fraud, mismanagement, waste, deficiencies, or abuse. The identified areas of concern reflect continuing matters as well as emerging issues. Most of these issues appear in our annual Top Management and Performance Challenges report.
Deploying Unemployment Insurance Benefits Expeditiously While Reducing Improper Payments
Over the years, the OIG has repeatedly reported significant concerns with DOL and State Workforce Agencies’ (SWA) ability to deploy program benefits expeditiously and efficiently while ensuring integrity and adequate oversight, particularly in response to national emergencies and disasters. The OIG has reiterated these concerns following the economic downturn created by the COVID-19 pandemic and the unprecedented levels of federal funding allocated to the Unemployment Insurance (UI) program, which is currently estimated at approximately $896 billion.
The extraordinary increase in UI funding has resulted in a proportional increase in our investigative work in the UI program. Since the start of the pandemic, the OIG has reviewed more than 15,000 investigative matters and has opened more than 2,600 complaints and investigations relating to UI benefits paid under the Coronavirus Aid, Relief, and Economic Security (CARES) Act and subsequent legislation. As a result of the surge in complaints, UI investigations now account for 76 percent of the OIG’s investigative case inventory compared with 12 percent prior to the pandemic.
For many years, the OIG has reported on the limitations of the Department’s ability to measure, report, and reduce improper payments in the UI program. Historically the UI program experienced some of the highest improper payment rates among federal government benefit programs. The reported improper payment estimate for the regular UI program has been above 10 percent for 14 of the last 17 years, falling to just over 9 percent during the first three quarters of Fiscal Year (FY) 2020. However, DOL has not estimated an improper payment rate for UI benefits provided in response to the COVID-19 pandemic. Assuming an improper payment rate of 10 percent or higher for extended federal benefits under the CARES Act and subsequent legislation, at least $89 billion of the estimated $896 billion in UI program funds could be paid improperly, with a significant portion attributable to fraud. The OIG’s initial pandemic audit and investigative work indicate UI program improper payments, including fraudulent payments, will be higher than 10 percent. For example, the alert memorandum we issued on February 22, 2021, identified $5.4 billion in potential fraudulent payments.
Our prior audit work revealed that the Department has not done enough to formally assess the various strategies available to combat improper payments. Furthermore, improper payments stemming from fraudulent activity continue to pose a significant threat to the integrity of the UI program, as identity thieves and organized criminal groups have found ways to exploit program weaknesses. For example, benefits paid via non-state-issued prepaid debit cards help provide anonymity to those who submit fraudulent claims. Such issues are exacerbated b y the significant funding increase in response to the COVID-19 pandemic, resulting in the need for greater oversight and scrutiny.
Under the Continued Assistance for Unemployed Workers Act of 2020, Congress did include additional provisions to mitigate the risk of improper payments, with applicants now being required to provide additional evidence to support their initial eligibility for UI benefits for the Pandemic Unemployment Assistance program. However, the Department needs to continue its ongoing work with states to implement strategies designed to reduce the CARES Act UI improper payments and share best practices identified among states. These strategies include:
In addition, the Department needs to provide timely oversight to ensure that states are effectively carrying out these critical responsibilities.
Providing the OIG Access to UI Claimant Data and Wage Records
The OIG’s lack of direct access to SWA UI claimant data and wage records is of significant concern because this deficiency directly and adversely impedes the OIG’s ability to combat fraud, waste, and abuse and provide independent oversight to help DOL reduce improper payments in employee benefit programs, including UI and Disaster Unemployment Assistance. For decades, OIG audits and investigations have been impeded by the lack of access to SWA UI claimant data and wage records. The COVID-19 pandemic and its detrimental consequences for U.S. unemployment greatly amplified that challenge to OIG work.
The OIG must have easy and expeditious access to state UI claimant and wage records to conduct appropriate oversight of UI funds. In support of OIG oversight activities, the OIG needs the authority to access SWA UI claimant data and wage records to verify claimants’ eligibility for UI benefits, including both initial eligibility (and amounts) and continuing eligibility. Direct and timely access to these records will permit the OIG to identify claimants who are receiving benefits while also earning wages. The OIG could also use those records to assess the outcomes of UI reemployment programs, as well as other training programs, such as YouthBuild and Job Corps, where employment and wage increases are important factors in determining a program’s success.
Granting the OIG access to SWA UI claimant data and wage records would provide the OIG with a valuable source of information for both audits and investigations. Similarly, sharing this information with DOL could help improve programmatic controls as well as the integrity of benefit payments.
Protecting the Safety and Health of Workers
The Occupational Safety and Health Administration (OSHA) is responsible for the safety and health of 130 million workers employed at more than 8 million establishments, and OSHA must ensure employers are providing the level of protection required under relevant laws and policies. The OIG remains concerned about OSHA’s ability to target its compliance activities to areas where it can have the greatest impact.
OSHA carries out its compliance responsibilities through a combination of self-initiated and complaint-based inspections. However, due to resource limitations, the program only reaches a fraction of the regulated entities. Consequently, OSHA must target the most egregious or persistent violators to protect the most vulnerable worker populations. For example, about 2 million construction workers in the United States are exposed to respirable crystalline silica at work. Employers are required to limit worker exposure to silica and to take other steps to protect workers. However, because of limited resources, OSHA faces challenges to ensure workplaces where workers are exposed are sufficiently covered.
Moreover, since the start of the pandemic, OSHA has received an influx of complaints. At the same time, OSHA has had to reduce the number of its inspections, particularly on-site inspections, as a way to reduce person-to-person contact. It received 15 percent more complaints in 2020, but performed 50 percent fewer (13,164 less) inspections compared to a similar period in 2019. Therefore, the risk that OSHA may not ensure the level of protection that workers need at various job sites has increased. OSHA’s on-site presence during inspections has historically resulted in timely mitigation efforts for at least a portion of the hazards identified. However, with most OSHA inspections done remotely during the pandemic, workplace hazards may remain unidentified and unabated longer, thereby leaving more employees vulnerable.
While OSHA has issued several guidance documents to enhance safety provisions during the pandemic, guidance does not carry the weight of OSHA rules or standards. Since the outbreak of COVID-19 more than a year ago, OSHA has not issued an emergency temporary standard for airborne infectious diseases that could protect employees’ health and safety at worksites.
Protecting the Safety and Health of Miners
The Mine Safety and Health Administration’s (MSHA) ability to complete mine inspections while safeguarding the health of miners and the agency’s staff during the COVID-19 pandemic is a concern for the OIG. At the same time, mine operators’ underreporting of occupational injuries and illnesses hinders MSHA’s ability to focus its resources on addressing concerns at the most dangerous mines. We are also concerned with the high incidence of powered haulage accidents in mines, which accounted for about half of all mine fatalities in 2017 and 2018 and a quarter of all mine fatalities in 2019. MSHA also needs to develop strategies to address lung disease in Appalachian coal mining states, in particular by updating regulations regarding quartz content in respirable dust. Quartz can cause deadly and incurable chronic diseases such as silicosis and black lung disease.
Improving the Performance Accountability of Workforce Development Programs
The OIG has concerns about the Department’s ability to ensure that its investment in workforce development programs is successful in advancing participants’ skills and placing them in suitable employment. The high unemployment rates caused by the pandemic make it more important than ever that the Department’s workforce development programs assist job seekers and employers in finding and filling available jobs and assist workers in developing the right skills to fill new job openings. Critical to this task is the Department’s ability to obtain accurate and reliable data to measure, assess, and make decisions regarding the performance of grantees, contractors, and states in meeting the programs’ goals.
The Department needs to ensure that its investments in credential attainment align with the needs of local employers and are having the desired impact on participants’ ability to obtain or advance in a job. In a 2018 audit that followed up on the employment status of a sample of Job Corps students 5 years after they left the program, we found that Job Corps faced challenges in demonstrating the extent to which its training programs helped those participants obtain meaningful jobs appropriate to their training.
Research suggests that opioid dependency has been a leading cause of workforce exits for workers ages 25 to 54. To date, the Employment and Training Administration (ETA) has approved up to $116 million in National Health Emergency Grants for 21 states and the Cherokee Nation to address the opioid crisis. It is vital that the Department monitor the performance of the discretionary grants it has awarded for the delivery of services to employers and workers affected by the opioid crisis.
Ensuring a Safe Return to On-Site Instruction at Job Corps Centers and Implementing Distance Learning During the Pandemic
The OIG is concerned about Job Corps’ ability to effect a safe return to in-person learning during the COVID-19 pandemic. Job Corps released a program instruction notice in September 2020 to help guide centers as they begin a phased reopening. Preventing outbreaks of COVID-19 at centers across the United States will pose a significant challenge for Job Corps. Job Corps centers are mostly residential, with students and some staff living on campus. Other residential educational institutions have had substantial difficulty containing and preventing outbreaks of COVID-19 due to students living, learning, and working in close proximity to one another. While Job Corps also plans to continue to improve its distance learning programs, the OIG is concerned with two issues related to this option. First, many Job Corps programs are intensively hands-on and may not successfully transition to a virtual training model. Second, many Job Corps students may not have access to the equipment or high speed Internet services they need in order to effectively participate in distance learning. Since the summer of 2020, Job Corps has procured and distributed laptops and mobile hotspots to students to participate in distance learning. According to ETA, as of March 2021, Job Corps centers have distributed less than half the available equipment; however, new enrollment has decreased and ETA estimates that the remaining devices will be utilized once enrollment returns to normal, virtual enrollment is initiated, and distance learning is fully implemented.
Ensuring the Safety of Students and Staff at Job Corps Centers
In addition to the safety challenges posed by the COVID-19 pandemic, controlling on campus violence and other criminal behavior remains a substantial challenge for Job Corps centers. OIG audits from 2015 and 2017 revealed that some Job Corps centers failed to report and investigate serious misconduct, such as drug abuse and assaults. The audits also disclosed that some Job Corps centers downgraded incidents of violence to lesser infractions, creating an unsafe environment for students and staff. The follow-up work we completed in December 2017, and our ongoing review of Job Corps’ corrective actions, showed that Job Corps has taken steps to improve center safety and security. However, the OIG has concerns with the process Job Corps uses to evaluate incoming applicants with respect to substance abuse and mental health issues. A March 2021 OIG audit report showed that the current process does not provide Job Corps centers the appropriate tools and resources to properly evaluate applicants as they enter the program. The OIG continues to monitor Job Corps’ various safety initiatives and actions to keep students and staff safe.
Ensuring the Integrity of the DOL Rulemaking Process
We are concerned about the Department’s procedures for issuing rules and guidance to promote the welfare of workers, job seekers, and retirees by safeguarding working conditions, health and retirement benefits, and wages. The Department’s rules and guidance should be transparent to American taxpayers, comply with DOL’s policies and procedures, and be applicable to federal laws and regulations.
The OIG has previously noted this concern for transparency in rulemaking. For example, in December 2020, the OIG issued its report on DOL’s 2017 Notice of Proposed Rulemaking (NPRM) to rescind portions of its 2011 regulations concerning tipped employees under the Fair Labor Standards Act. The report showed that DOL did not demonstrate it had followed a sound process in promulgating the 2017 NPRM and did not fully adhere to regulatory guidance. Consequently, DOL was not transparent and did not provide the public with complete information either to assess the potential impact of the proposed rule or to meaningfully participate in DOL’s rulemaking process.
DOL also faces the challenge of ensuring that it enters into rulemaking, rather than simply issuing guidance, when appropriate. For example, a 2019 OIG audit found that OSHA lacked a procedure to ensure it had considered and determined the appropriateness of issuing a document as guidance, rather than a rule. Issuing a document as guidance is appropriate if the document is interpretative or a general statement of policy, and if it does not create, modify, or revoke a standard. Between 2014 and 2016, OIG found that OSHA had not followed its existing procedures for 80 percent of sampled guidance.
DOL is aware of the challenges associated with its rulemaking process and continues to review its rulemaking policies and to update its rulemaking standard operating procedures. However, questions remain regarding the Department’s transparency with American taxpayers when it comes to the rulemaking process and its compliance with federal laws and regulations applicable to rulemaking.
Maintaining the Integrity of Foreign Labor Certification Programs
The DOL foreign labor certification (FLC) programs are intended to permit U.S. employers to hire foreign workers to meet their workforce needs while protecting U.S. workers’ jobs, wages, and working conditions. DOL’s administration of FLC programs under current laws has been an OIG concern for decades. OIG investigations have shown these visa programs, in particular the H-1B program for workers in specialty occupations, to be susceptible to significant fraud and abuse from perpetrators, including dishonest immigration agents, attorneys, labor brokers, employers, and, most often, organized criminal enterprises.
In 2003, OIG issued a White Paper1 outlining vulnerabilities that then existed in four - FLC programs, PERM, H-1B, H-2A, and H-2B, and, in 2020, we issued a similar report. We found that, although the post-2003 rules revamped the PERM, H-2A, and H-2B visa programs, as well as addressed some of the vulnerabilities cited in OIG and Government Accounting Office audits and investigations, those same rules created challenges regarding DOL’s responsibilities. Additionally, DOL continues to have limited authority over the H-1B and PERM program which challenges protecting the welfare of the nation’s workforce.
The statute limits DOL’s ability to deny H-1B applications. Specifically, DOL may only deny incomplete and obviously inaccurate H-1B applications and has only limited authority to conduct H-1B investigations in the absence of a complaint. The PERM program itself is persistently vulnerable to employers not complying with its qualifying criteria. Therefore, both the PERM and H-1B programs remain highly prone to fraud.
With various new DOL rules going into effect since 2003, there have been opportunities for the PERM, H-2A, and H-2B visa programs to change. For example, these new rules implemented employer attestation programs, which allow employers to agree to the conditions of employment without providing supporting documentation to validate their agreements. However, DOL has identified instances where the employer is not complying with the conditions of employment, reinforcing how susceptible these programs are to fraud.
Finally, DOL has not established a risk-based process to determine which H-2A and H 2B applications to audit. The current selection process does not use data analytics or account for risk when selecting applications to audit. Further, ETA has not documented any risk factors it considers before initiating an audit; thus, it is difficult to determine whether the applications audited were those most likely to result in violations eligible for debarment.
Protecting the Security of Employee Benefit Plan Assets
The OIG remains concerned over Employee Benefits Security Administration’s (EBSA) ability to protect the benefit plans of about 154 million plan participants and beneficiaries under the Employee Retirement Income Security Act of 1974 (ERISA). In particular, the OIG is concerned about the statutory limitations on EBSA’s oversight authority and inadequate resources to conduct compliance and enforcement. A decades-long challenge to EBSA’s compliance program, ERISA provisions allow billions of dollars in pension assets to escape full audit scrutiny. We have previously found that as much as $3.3 trillion in pension assets, including an estimated $800 billion in hard to value alternative investments, held in otherwise regulated entities such as banks, received limited-scope audits that provided few assurances to participants regarding the financial health of their plans. EBSA needs to focus its limited available resources on investigations that are most likely to result in the deterrence, detection, and correction of ERISA violations, particularly given the number of benefit plans EBSA oversees relative to the number of investigators it employs. Finally, EBSA lacks the authority under the Federal Employees' Retirement System Act (FERSA) to effectively oversee more than $500 billion in Federal employee Thrift Savings Plan (TSP) assets. FERSA requires EBSA to conduct regular compliance audits to determine whether the Federal Retirement Thrift Board (the Board), an independent agency, is fulfilling its fiduciary duties and properly safeguarding TSP participants’ assets.
Managing Medical Benefits in the Office of Workers’ Compensation Programs, Including Opioids
The OIG has concerns about the Office of Workers’ Compensation Programs’ (OWCP) ability to effectively manage rising home health care costs in the Energy Employees Occupational Illness Compensation Act (Energy Workers) program, as well as the use and cost of pharmaceuticals in the Federal Employees’ Compensation Act (FECA) program. The Department needs to make sure it has controls in place to ensure that the medical benefits it provides to energy workers and FECA program claimants are safe, effective, medically necessary, and the most cost-effective.
In the Energy Workers program, with an aging claimant population and an increased demand for home health-care services, there is a potential for providers to exploit these benefits through unauthorized or unnecessary billings. Since 2010, home health care costs paid by the Energy Workers program have grown from $100 million to more than $675 million, amounting to 74 percent of all medical benefits paid by the program in FY 2020. OWCP needs to continue its efforts to analyze home health-care billings for abusive practices and to identify and refer allegations involving potential fraud or abuse to the OIG for further investigation.
Past audits of the FECA program have identified internal control weaknesses related to OWCP’s management of pharmaceuticals. For example, OWCP allowed increases in billings for compounded drugs to go undetected and failed to identify the overuse of opioids. Given the high risk of fraud related to prescription payments, OWCP needs to analyze and monitor FECA program costs to promptly detect and address emerging issues before they manifest into material concerns.
Consistent with prior OIG audit recommendations, OWCP imposed restrictions on opioid prescriptions in September 2019, limiting all initial opioid prescriptions to 7 days with three subsequent 7-day refills, and requiring prior authorization to obtain opioids beyond 28 days. According to OWCP-provided data, OWCP’s efforts to address the opioid problem have resulted in declines in opioid use and new prescriptions. However, in response to the COVID-19 pandemic, OWCP has had to divert resources from focusing on claimants with opioid prescriptions to processing an influx of COVID-19 claims from federal workers, which has the potential to negatively impact the FECA program’s opioid user population. OWCP needs to balance program needs under this pandemic, all the while continuing its efforts to help identify claimants at risk of opioid dependence and determine the associated costs of addiction treatment.
Ensuring the Solvency of the Black Lung Disability Trust Fund
Miners and their dependent survivors receive lifetime benefits when awarded under the Black Lung Benefits Act. Mine operators pay these benefits when possible, and the Black Lung Disability Trust Fund (BLDTF) pays the benefits when a miner’s former employer does not or cannot assume liability. OIG’s primary concern is that the current annual income of the BLDTF (primarily from an excise tax on coal) is not sufficient to cover annual benefit obligations, to meet administrative costs, and to service past debt. According to DOL’s Agency Financial Report, as of September 30, 2020, the BLDTF was carrying close to a $6 billion deficit balance, which is projected to grow to nearly $15 billion (in constant dollars) by September 30, 2045.
The U.S. Energy Information Administration projects that coal production will generally decline through 2050, a downturn that has already resulted in several coal mine operators filing for bankruptcy. In some instances, the BLDTF will be responsible for benefit payments previously made by mine operators no longer able to cover their federal black lung liabilities.
In February 2020, the Government Accountability Office issued a report concluding that operator bankruptcies have placed a financial strain on the fund and that DOL’s insufficient oversight of coal mine operator self-insurance arrangements exposed the BLDTF to financial risk. Later that month, OWCP published a news release announcing reforms to the self-insurance process for coal mine operators to better protect the BLDTF.2 It stated, “[i]n part, the assessment involves reviewing actuarial estimates of the operators’ liabilities and setting security amounts based on those liabilities and the operators’ risk of default” (see Table 1).
|TABLE 1: SELF-INSURED COAL MINE OPERATOR BANKRUPTCIES AFFECTING THE BLACK LUNG DISABILITY TRUST FUND, FILED FROM 2014 THROUGH 2016|
|Coal Operator||Amount of collateral at time of bankruptcy||Estimated Transfer of benefit responsibility to the Trust Fund||Estimated number of beneficiaries for whom liability has been transferred to the Trust Fund|
|Alpha Natural Resources||$12 million||$494 million||1,839|
|James River Coal||$0.4 million||$141 million||490|
|Patriot Coal||$15 million||$230 million||993|
|Total||$27.4 million||$865 million||3,322|
The excise tax that funds the BLDTF is levied on domestic sales of coal mined in the United States (coal exports and lignite are not subject to this tax). From January 1 through December 31, 2019, the tax rates were reduced to the rates originally set when the trust fund was established in 1978: $0.50 per ton of underground-mined coal or $0.25 per ton of surface-mined coal. Even though this rate reverted to higher, pre-2019 levels effective January 1, 2020, the temporary tax rate reduction plus the reduction in coal production will result in decreased cash inflows to the BLDTF. The Congressional Research Service reported in 2019 that “the decline in the excise tax rates will likely put additional financial strain on a trust fund that already borrows from the general fund to meet obligations.”3 Moreover, the tax rate will once again revert to the lower, 2019 levels beginning in January 2022, putting further strain on the BLDTF.
Securing and Protecting Information Management Systems
We remain concerned about the Department’s ability to safeguard its data and information systems. While the Department is implementing a new IT governance model, we continue to report deficiencies in its efforts and ability to identify vulnerabilities, to protect information systems and data, and to recover from security incidents. The most recent deficiencies we identified were in four of the five information security functional areas as defined by the National Institute of Standards and Technology Cybersecurity Framework. These deficiencies continue to hinder the Department from identifying security weaknesses; protecting its systems and data; and detecting, responding to, and recovering from incidents. For example, DOL has not:
The Department’s agencies rely on IT systems to obtain and create vast amounts of information and data in carrying out their missions. Included in these data are the personally identifiable information and personal health information of the public and of federal employees. Securing these data is a concern because DOL’s data integrity is constantly at risk from external and internal threats, and we continue to identify deficiencies in the Department’s efforts to protect its information systems. In addition, we determined that the Department has not adequately planned or implemented the technology tools required to manage and monitor IT security. Moreover, DOL changed its work and IT landscape to significantly expand telework operations for its employees as well as to identify alternate methods for securing data that were previously required to remain onsite for security reasons.
As the Department is moving its information systems to a shared services model and expanding its use of cloud and third-party providers for its information infrastructure and services, we continue to identify deficiencies in the Department’s oversight of information systems managed by DOL’s program agencies and systems operated by a third-party on behalf of the Department. As the Department continues this transition, we are concerned with the Department’s ability to provide the oversight and to retain the specialized knowledge and expertise required to protect and manage its systems, including the contracted systems.
Since this issue was first identified in 2011, the Department has been unable to implement an effective asset management system. The Department maintains a significant number of desktops, laptops, tablets, and mobile devices for its employees. In addition, the Department maintains servers, routers, storage devices, and other IT hardware. The Department indicated it implemented an enterprise asset management system in FY 2020 and is in the process of ensuring data quality. However, the Department needs to provide evidence of such implementation, and more work needs to be done to effectively track and protect its assets through their life cycle. Without effective asset inventory processes, the Department is unable to account for and secure its data and equipment.
These deficiencies represent ongoing risks to the confidentiality, integrity, and availability of DOL’s information systems, which are necessary to support the Department’s mission. Our concern is whether DOL can implement the necessary strategies and tools to provide sufficient capability and effective security for the Department’s data and information systems as well as to support the execution of its mission. Finally, we continue to be concerned that the position of the Chief Information Officer does not report directly to the agency head. Realigning the organization to create a direct reporting relationship would provide the position with greater independence and authority to implement and maintain an effective information security program.
Improving the Job Corps’ Procurement Process
Job Corps spends about $1 billion on goods and services annually for approximately 120 centers nationwide and is currently transitioning center operations from cost reimbursement to fixed-price contracts. The Department believes this transition will lower government risk, reduce the administrative burden, generate more pre-award efficiencies, and encourage more participants to compete for contracts. Increased competition among contractors should lead to better contractor performance with fewer staffing shortages and improved services, including those for centers’ safety and security.
Prior OIG work in this area found that Job Corps’ procurement processes did not ensure the best value for taxpayers. As the Department moves to fixed-price contracting, the Department must continue to ensure that its contract requirements are well-developed, that contract competition is fair, that contractor payments align with performance metrics and related outcomes, and that sound post-award oversight is used to quickly ameliorate deficiencies and poor performance.