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.
Monitoring and Managing Pharmaceuticals in the FECA Program, Including Opioids
The OIG is concerned about the Department’s ability to effectively manage the use and cost of pharmaceuticals in the Federal Employees’ Compensation Act (FECA) program. While opioids comprised less than 20 percent of total pharmacy spend in FY 2018, the OIG’s data analysis shows that almost half of FECA’s monthly cases with pharmacy payments included opioid prescriptions. The prevalence of prescriptions for highly addictive opioids has the potential to lead to abuse. The Department needs to make certain it has controls in place to ensure that the treatment prescribed for FECA claimants is safe, effective, medically necessary, and the most cost effective. The Department also needs to develop quality information to help identify claimants at risk of dependence and the associated costs of addiction treatment.
The results of our improper-payment work show that the Department’s lack of comprehensive analysis of medical benefit payments in the FECA program allowed increases in billings for compounded drugs to go undetected. Given the high risk of fraud related to prescription payments, the Department needs to conduct comprehensive analysis and monitoring of FECA program costs to promptly detect and address problems. For example, in one compounded drugs case alone, the OIG identified potential fraud of nearly $158 million.
Ensuring the Safety of Students and Staff at Job Corps Centers
The OIG remains concerned about the ability of the Job Corps program to provide a safe environment for its students and staff. Controlling violence and other criminal behavior on campus has been a challenge for Job Corps centers for years. OIG audits from 2015 and 2017 disclosed that some Job Corps centers failed to report and investigate serious misconduct, such as drug abuse and assaults, or downgraded incidents of violence to lesser infractions, creating an unsafe environment for students and staff. Follow-up work completed by the OIG in December 2017 showed Job Corps was taking steps to improve center safety and security. However, the Department’s corrective action plan has not yet been fully implemented. The OIG continues to monitor Job Corps’ progress in completing its various safety initiatives.
Protecting the Safety and Health of Workers
More than 9 million establishments are under the oversight of the Occupational Safety and Health Administration (OSHA), and the OIG remains concerned with OSHA’s ability to target its compliance activities to those areas where they can have the greatest impact. OSHA carries out its compliance responsibilities through a combination of self initiated and complaint based investigations. However, the program can reach only a fraction of the entities it regulates. Consequently, OSHA must strive to target the most egregious and persistent violators and protect the most vulnerable worker populations. For this targeting to be effective, OSHA needs to address issues related to the under-reporting of injuries by employers.
The OIG is also concerned with OSHA’s ability to measure the impact of its policies and programs, as well as those of the 28 OSHA-approved state plans for occupational safety and health. In addition, we are concerned that some employers do not take adequate actions to correct hazards cited by OSHA.
Protecting the Safety and Health of Miners
The ability of the Mine Safety and Health Administration (MSHA) to effectively manage its resources to help ensure the safety and health of miners is a concern for the OIG. Mine operators’ under-reporting of occupational injuries and illnesses hinders MSHA’s ability to focus its resources on the most dangerous mines. In addition, we are concerned that MSHA lacks a consistent approach to logging, assessing, and responding to complaints of hazardous mine conditions, and the agency has not provided sufficient oversight to ensure that coal mine operators’ emergency response plans provide the critical information needed to help miners survive a mine catastrophe. MSHA also needs to develop strategies to address the increasing occurrence of black lung disease in Appalachian coal-mining states.
Departmental Procedures for Issuing Guidance and Rulemaking
The adequacy of DOL’s procedures for issuing guidance that accurately reflects its rules and policies is of significant concern to the OIG. The Department issues rules, which can be standards or regulations, and guidance documents that explain the rules. Both are intended to help reduce hazards and protect 121 million workers at 9 million worksites.
A recent audit found that OSHA lacked a procedure to determine the appropriateness of issuing a document as guidance rather than as 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. OSHA also did not follow procedures for 80 percent of sampled guidance; the lapses included failure to determine whether guidance was consistent with OSHA rules, to consider the anticipated reception of the guidance by significant stakeholders, and to obtain official approval to issue the guidance. As a result, OSHA risked issuing guidance that would create new rules or change existing rules in violation of laws requiring public notice and comment during agency rulemaking. Since October 2013, four OSHA guidance documents have been challenged in courts. The court ordered OSHA to rescind one document because it created a new rule. As part of negotiated settlements, OSHA also rescinded another document and withdrew some changes in the other two documents. In response to our report, OSHA agreed that significant lapses occurred in the guidance issuance process, and it is working to rectify its existing procedures.
Our audit coverage continues to address this area of concern. In particular, we are currently reviewing the rulemaking process used by the Wage and Hour Division related to its proposal to rescind portions of its tip regulations issued pursuant to the Fair Labor Standards Act.
Maintaining the Integrity of Foreign Labor Certification Programs
Foreign labor certification (FLC) programs are intended to permit U.S. businesses to hire foreign workers when necessary to meet their workforce needs while protecting the jobs, wages, and working conditions of U.S. workers. The Department’s administration of the FLC programs under current laws, has been an ongoing concern of the OIG for decades. OIG investigations have shown these visa programs, in particular the H-1B program, to be susceptible to significant fraud and abuse, often by dishonest immigration agents, attorneys, labor brokers, employers, and organized criminal enterprises. DOL is statutorily required to certify an H-1B application unless it determines that the application is “incomplete or obviously inaccurate.” Given this fact, it is not surprising that OIG investigations have revealed schemes in which fictitious companies or dishonest businesses seeking to acquire foreign workers filed fraudulent applications with DOL. Our investigations have also uncovered numerous instances of unscrupulous employers misusing FLC programs to engage in human trafficking, with victims often exploited for economic gain.
To combat abuse of the FLC programs, we issued two recommendations to strengthen the use and reporting of related suspension and debarment efforts. In August 2017, the Department initiated the public notice and comment process on significant proposed revisions to the H-1B labor condition application and worker complaint forms. The form revisions are intended to strengthen the Department’s ability to conduct effective application reviews and compliance enforcement, as well as enhance the OIG’s ability to conduct effective criminal investigations. In November 2018, the Office of Management and Budget approved these revisions. We also have a longstanding legislative recommendation to provide DOL with the statutory authority to ensure the integrity of the H-1B program, including the ability to verify the accuracy of information provided on labor condition applications.
In addition, as a result of our investigative work, the OIG recently issued an Investigative Advisory Report with six recommendations for enhancing forms used for H-2B nonagricultural temporary workers. The Department has already initiated changes to H-2B application forms based on the OIG’s recommendations.
Improving the Performance Accountability of Workforce Development Programs
The Department’s ability to ensure that its planned $5 billion investment in development programs is successful in advancing participants’ skills and placing them in suitable employment is another area of concern for the OIG. Critical to this task is the Department’s ability to obtain accurate and reliable data with which to measure, assess, and make decisions regarding the performance of grantees, contractors, and states in meeting the programs’ goals. In particular, the Department needs to ensure that its investments in credential attainment are aligned with the needs of local employers and are having the desired impact on participants’ ability to obtain or advance in a job.
A recent audit, which followed up on the employment status of a sample of Job Corps students five years after they left the program, found that Job Corps was challenged to demonstrate the extent to which its training programs helped participants obtain meaningful jobs appropriate to their training. In the YouthBuild program, grantees reported that 18,750 participants had successfully exited their programs from 2011 to 2016, but these reported “successful exits” included 1,155 participants (6 percent) who had not yet secured an industry credential or earned a high school diploma or equivalency degree, nor had they obtained employment or enrolled in another educational program.
Finally, recent research suggests that opioid dependency has been a leading cause of workers ages 25 to 54 leaving the workforce. The Department needs to develop an effective strategy for helping people affected by opioids become and remain employable.
Securing and Protecting Information Management Systems
For many years, we have reported on longstanding information security deficiencies, including weaknesses in third-party oversight, incident response and reporting, risk management, and continuous monitoring. For example, DOL has not:
These deficiencies represent ongoing, unnecessary risks to the confidentiality, integrity, and availability of DOL’s information within the information systems that support DOL’s mission. We have recommended that the Department place greater emphasis on these deficiencies and prioritize available resources to address them. We likewise recommended realigning the position of the Chief Information Officer (CIO) to report directly to the agency head. Such a realignment will provide the CIO with greater independence and authority to implement and maintain an effective information security program.
Improving the Black Lung Claims Process
The Black Lung program was created to provide monthly compensation and medical benefits to coal miners who are totally disabled due to pneumoconiosis (black lung disease) and to provide monthly compensation to their eligible survivors. Black lung disease is a debilitating condition that often leads to lung impairment, disability, and premature death. The challenge for the Black Lung program centers on the quality and timeliness of the Department’s disability claims decisions. Our 2015 review noted significant differences in the level of detail and comprehensiveness of documentation among medical reports, with the Department’s claims examiners stating that medical reports obtained by the Department were generally not as detailed or clearly written as those presented by mine operator–paid physicians. Timeliness issues primarily involved delays in conducting hearings and issuing decisions at the Office of Administrative Law Judges. While there remains work to do, the Department has made progress in reducing the pending black lung case backlog, from 46 months in 2014 to 22 months in 2018.
Ensuring the Solvency of the Black Lung Trust Fund
Miners and their survivors who have been awarded benefits as a result of Black Lung claims receive lifetime benefits. These benefits are paid by a mine operator when possible or by the Black Lung Disability Trust Fund (BLDTF) when the miner’s former employer does not or cannot assume liability. The BLDTF’s current annual income (primarily from an excise tax on coal) is sufficient to cover its current annual obligations to pay benefits and administrative costs. However, as of September 30, 2018, the BLDTF was carrying a $5.6 billion deficit balance, which is projected to grow to nearly $14.2 billion (in constant dollars) by September 30, 2043.
The excise tax that funds the BLDTF is levied on domestic sales of coal mined in the United States (coal exports and lignite, often referred to as brown coal, are not subject to the coal excise tax). For 2018, the tax rates on coal were $1.10 per ton of underground-mined coal or $0.55 per ton of surface-mined coal, limited to 4.4 percent of the sales price. These rates were established in 1986. As of January 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, limited to 2 percent of the sales price. The Congressional Research Service reports 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.” The U.S. Energy Information Administration also projects that coal production will decline through 2022. Both the reduced tax rate and the reduction in coal production will result in decreased cash inflows to the BLDTF. In addition, the downturn in the coal industry has resulted in several coal mine operators filing for bankruptcy. Although some have emerged from bankruptcy, others, along with their many subsidiaries, have gone out of business. In some instances, the BLDTF will be responsible for benefit payments previously made by former mine operators that were self-insured but are now no longer able to cover their federal black lung liabilities.
Protecting the Security of Employee Benefit Plan Assets
The OIG remains concerned with DOL’s ability to administer and enforce Employee Retirement Income Security Act (ERISA) requirements that protect the benefit plans of nearly 150 million plan participants and beneficiaries, particularly in light of statutory limitations on DOL’s oversight authority. One challenge the Employee Benefits Security Administration (EBSA) has been facing for decades is that ERISA allows billions of dollars in pension assets held in otherwise regulated entities, such as banks, 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, received limited-scope audits that provided few assurances to participants regarding the financial health of their plans.
In addition, given the number of benefit plans that the agency oversees relative to the number of investigators, EBSA needs to focus its available resources on investigations it believes will most likely result in the deterrence, detection, and correction of ERISA violations.
Finally, EBSA needs to improve aspects of its oversight of the $568 billion Thrift Savings Plan through more focused audits that result in meaningful changes to plan operations. Specifically, EBSA should improve the risk assessment process by which it chooses its areas of audit focus and, to the extent possible, seek additional legislative authority that would help it enforce audit findings.
Identifying and Reducing Improper Payments
The Department’s ability to measure, report, and reduce improper payments in its Unemployment Insurance (UI) and FECA programs continues to be a concern for the OIG.
UI program. For the reporting period July 1, 2017, through June 30, 2018, the UI improper payment rate increased to an estimated 13.0 percent, up from 12.5 percent in the prior-year reporting period, remaining above the 10 percent threshold set in the Improper Payments Elimination and Recovery Act (IPERA), as amended, for designation as a “high priority” program. Overall, the UI program had an estimated $3.7 billion in improper payments, a 10 percent decline from the prior-year reported estimate of $4.1 billion. The Department has implemented a strategic plan to work with states to address the primary root causes of improper payments, with specific attention given to those states with the highest improper payment rates. However, our prior audit work revealed that the Department has not done enough to formally assess the various strategies and determine what issues persist, due in part to a lack of reliable, state-reported data.
Further, 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, the payment of benefits using non-state issued prepaid debit cards provides anonymity to those who submit fraudulent claims.
FECA program. The OIG continues to have concerns regarding the Department’s ability to identify the full extent of improper payments in the FECA program. For one, DOL needs to examine the types of FECA improper payment issues identified by OIG investigations and estimate the extent to which these issues exist in the payment population. The lack of more comprehensive analyses of FECA improper payments hampers the Department’s ability to identify and prevent these payments. This is especially true with respect to payments for pharmaceuticals, as discussed above in the section related to monitoring and managing pharmaceuticals in the FECA program.
Additionally, while DOL’s estimation methodology has excluded both initial payments made in the first 90 days of compensation and payments made on older claims that originated before the FECA program implemented its electronic case management system, DOL had not determined and reported the full effect of those exclusions on its estimates. The Department recently informed the OIG that it has revised its FECA improper payment estimation methodology to include these previously excluded payment categories. The OIG will evaluate the revised methodology as part of our annual review of the Department’s compliance with IPERA.
Ensuring the Equitable Release of Economic Data
The Department issues a number of reports and statistics that include leading economic indicators, such as the UI Weekly Claims Report and the Producer Price Index. Because the data in these reports have the potential to move financial markets, the Department protects the information via an embargo, meaning the data cannot be disseminated or used in any unauthorized manner before they are released to the public. The Department provides approved news organizations prerelease access 30 minutes prior to the official release time, with the objective of improving the accuracy of initial news reports about the information. News organizations’ use of preformatting and data-queuing software to transmit the data enables their paying clients to trade on the data before the Department can post the information to its website for the general public to access once the embargo is lifted. Even fractions of a second can provide these clients with a significant trading advantage over individuals and other organizations that cannot access the embargoed data. To ensure an equitable release of this data, the Department must eliminate this competitive advantage by either changing or eliminating the lockup process. Since we first reported on this concern in January 2014, the Department has consulted with other federal agencies that conduct similar press lockups; however, no action has been taken to resolve this issue.
Providing Access to DOL Electronic Data
The Department’s ability to provide timely access to its many electronic data systems is a concern for the OIG. This challenge has been particularly acute for systems owned or operated by third parties. As the Department pushes its information to the cloud, the management and control of these systems and the data they contain become even more crucial. The Department needs to ensure that contract language for third-party systems specifically allows the Department, along with its Inspector General, to have timely access to those systems and the data they contain. It also needs to continue to facilitate the OIG’s access to all systems. To ensure that these changes are implemented throughout the Department, top leaders need to clearly communicate this requirement as critical to the Department’s efforts to combat fraud, waste, and abuse.