As of September 30, 2020, 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 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
The OIG has previously expressed concern with the Department’s ability to deploy program benefits expeditiously and efficiently while ensuring adequate oversight, particularly in response to national emergencies and disasters. The OIG has reiterated this concern in light of the COVID-19 pandemic and the unprecedented levels of funding for the unemployment insurance (UI) program, which has received hundreds of billions of dollars under recently enacted legislation. 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 opened more than 1,800 complaints and investigations relating to UI benefits paid under the Coronavirus Aid, Relief, and Economic Security (CARES) Act. As a result, UI investigations account for 70 percent of our investigative case inventory compared to 12 percent prior to the pandemic. The OIG has reported for many years on the Department’s ability to measure, report, and reduce improper payments in the UI program. The program is designated a "high-priority" program by the Office of Management and Budget, with an estimated improper payment rate of more than 10 percent. Conservatively, assuming improper payments continue at 10 percent, at least $36 billion of the $360 billion expended under the CARES Act, as of November 7, 2020, could be paid improperly, with a significant portion attributable to fraud.
Our prior audit work revealed that the Department has not done enough to formally assess the various strategies available to combat improper payments and determine which issues persist, due in part to a lack of reliable state-reported data. 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 by the significant funding increase in response to the COVID-19 pandemic, resulting in the need for greater oversight and scrutiny.
The Department needs to continue its ongoing work with states to implement strategies designed to reduce the UI improper payment rate, to include sharing best practices identified among states. The Department needs to continue providing guidance to states on how to deploy resources efficiently and expeditiously; establish performance measures for activities to ensure timely delivery of benefits to those in need; and, develop the required reporting to improve effectiveness and accountability. 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 Wage Records
The OIG’s lack of direct access to wage records to reduce improper payments and combat fraud in employee benefit programs, including UI and Disaster Unemployment Assistance (DUA), is of significant concern.
The OIG must have easy and expeditious access to the National Directory of New Hires (NDNH), state UI wage records, and Social Security Administration (SSA) wage records to conduct appropriate oversight of UI funds. The NDNH is a nationally consolidated database operated by the U.S. Department of Health and Human Services Administration for Children and Families that contains new hire, quarterly wage, and UI information. The NDNH cannot be used for any purpose not authorized by federal law. In 2004, the law was amended to allow the state workforce agencies to cross match UI claims against the NDNH to better detect overpayments to UI claimants who have returned to work but continue to collect UI benefits. However, the applicable law does not permit the OIG to obtain NDNH data directly, and the OIG cannot use its subpoena authority to obtain NDNH records.
Similarly, the OIG needs the authority to access state UI and SSA wage records to verify claimants’ eligibility for UI benefits, both for initial eligibility (and amounts), and for continuing eligibility. Access to these records will permit the OIG to identify claimants who are receiving benefits while also having reported wages. The OIG could refer these claimants to the state workforce agency to stop benefit payments determined to be improper and take other appropriate actions as necessary. The OIG can also use those records to assess program outcomes for 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 the NDNH, state UI wage records, and SSA wage records would provide the OIG with a valuable source of information for both audits and investigations. For example, OIG auditors could use these records to verify initial and continuing eligibility for unemployment compensation programs or to assess the effectiveness of training programs, such as the Job Corps program. In addition, OIG investigators could use these records to compare beneficiary UI compensation payments to the beneficiaries’ reported wages in the NDNH to identify potential fraudulent activity
Protecting the Safety and Health of Workers
As the Occupational Safety and Health Administration (OSHA) is responsible for the safety and health of 136 million workers employed at more than 9 million establishments, the OIG remains concerned about OSHA’s ability to target its compliance activities to areas where it can have the greatest impact. OSHA must ensure employers are proving the level of protection warranted to workers by relevant laws and policies.
OSHA carries out its compliance responsibilities through a combination of self-initiated and complaint-based inspections. However, the program can reach only a fraction of the entities it regulates due to resource limitations. 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 U.S. are exposed to silica at work. Employers are required to limit worker exposure to respirable crystalline silica and take other steps to protect workers. However, because of its limited resources, OSHA faces challenges in targeting workplaces where workers are exposed to silica dust.
Moreover, since the start of the pandemic, OSHA has received a sudden influx of complaints and reduced the number of its inspections, particularly on-site inspections. OSHA received 28 percent more complaints but performed 53 percent fewer inspections this year compared to a similar period in 2019. The decline in on-site inspections may be attributed, in part, to state mandated closures of ‘non-essential’ businesses. OSHA, in response to the pandemic, has used alternative or modified protocols to ensure worker safety, such as conducting inspections remotely and verifying the abatement of hazards through remote follow-up with employers. There is an increased risk that OSHA is not providing the level of oversight needed at various job sites.
Protecting the Safety and Health of Miners
The Mine Safety and Health Administration’s (MSHA’s) ability to continue completing all mandatory and non-mandatory 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 likewise 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 updating regulations regarding quartz content in respirable dust. Quartz can cause deadly and incurable chronic diseases such as silicosis and black lung disease.
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 to help guide centers as they begin a phased reopening. Preventing outbreaks of COVID-19 at centers across the U.S. will pose a significant challenge for Job Corps. Job Corps centers are residential in nature, where students and staff work and live in close quarters. Other residential educational institutions have had substantial difficulty containing and preventing outbreaks of COVID-19. 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 participate in distance learning. Job Corps has procured and began distributing laptops and mobile hotspots to students who need the equipment to participate in distance learning.
Ensuring the Safety of Students and Staff at Job Corps Centers
We continue to have concerns about the Job Corps program’s ability to provide a safe environment for its students and staff. Controlling on-campus violence and other criminal behavior is a long-standing 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 Department has not yet fully implemented its corrective action plan. The OIG continues to monitor Job Corps’ progress in completing its various safety initiatives.
Improving Job Corps’ Procurement Process
Job Corps spends about $1 billion on goods and services annually for its approximately 120 centers nationwide and is currently transitioning center operations from cost reimbursement to fixed-price contracts. The Department believes that 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’ procurements did not ensure the best value for taxpayers. As the Department moves to fixed-price contracting, the Department must ensure that its contract requirements are well developed; contract competition is fair; contractor payments align with performance metrics and related outcomes; and that sound post-award oversight is used to quickly ameliorate deficiencies and poor performance.
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 applicable to federal laws and regulations.
The U.S. Department of Labor (DOL) also faces challenges in ensuring that it enters into rulemaking when appropriate rather than issuing guidance. For example, an OIG audit on OSHA’s issuance of guidance found that OSHA lacked a procedure to ensure it had considered and determined 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. Between 2014 and 2016, OIG found that OSHA did not follow its existing procedures for 80 percent of sampled guidance. OIG identified shortcomings including the failure to document on standard clearance forms that OSHA and the Office of the Solicitor had: (1) determined whether guidance was consistent with OSHA rules, (2) considered the anticipated reception of the guidance by significant stakeholders, and (3) obtained official approval to issue the guidance.
DOL is aware of the challenges associated with its rulemaking process and is completing a comprehensive review and analysis of it, including evaluating enforcement and compliance assistance materials to ensure they are current, accessible, and easy to understand.
Improving the Performance Accountability of Workforce Development Programs
The OIG has concerns about the Department’s ability to ensure that its planned $5 billion investment in workforce development programs is successful in advancing participants’ skills and placing them in suitable employment. 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. For example, our March 31, 2020 report on the Face Forward grants, which help previously incarcerated youths to overcome employment barriers, found that reported performance outcomes for Face Forward participants were unreliable because the underlying performance data were incomplete.
The Department also 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. A 2018 audit followed up on the employment status of a sample of Job Corps students 5 years after they left the program. It found that Job Corps faced challenges in demonstrating the extent to which its training programs helped participants obtain meaningful jobs appropriate to their training.
Finally, 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 has approved up to $112 million in National Health Emergency Grants for 20 states and the Cherokee Nation to address the opioid crisis. The Department needs to monitor the performance of the discretionary grants it has awarded for the delivery of services to employers and workers affected by the opioid crisis.
Maintaining the Integrity of Foreign Labor Certification Progams
Foreign labor certification (FLC) programs are intended to permit U.S. businesses to hire foreign workers to meet their workforce needs while protecting the jobs, wages, and working conditions of U.S. workers. DOL’s administration of the 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. Dishonest immigration agents, attorneys, labor brokers, employers, and organized criminal enterprises often perpetrate the fraud and abuse.
DOL is statutorily required to certify an H-1B application unless it determines that the application is “incomplete or obviously inaccurate.” OIG investigations have revealed schemes in which fictitious companies or dishonest businesses seeking to acquire foreign workers filed fraudulent applications with DOL. Our investigations also have uncovered numerous instances of employers misusing FLC programs to engage in human trafficking, with victims often exploited for economic gain.
In addition, rising application numbers and seasonal spikes in employer workforce demands have resulted in delays in processing visa applications for the H-2B program, which employers use to hire foreign workers for temporary nonagricultural jobs. DOL needs to continue its efforts to process H-2B applications in time for employers to hire foreign workers by the start dates needed while also protecting the interests of U.S. workers.
Protecting the Security of Employee Benefit Plan Assets
The OIG remains concerned over DOL’s ability to administer and enforce Employee Retirement Income Security Act of 1974 (ERISA) requirements that protect the benefit plans of about 154 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 that are most likely to result in the deterrence, detection, and correction of ERISA violations. Finally, EBSA lacks the authority under the Federal Employees' Retirement System Act to enforce its oversight of more than $500 billion in Thrift Savings Plan (TSP) assets and to ensure the implementation of TSP audit recommendations.
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 manage effectively 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 certain 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 $610 million, comprising 73 percent of all medical benefits paid by the program in FY 2019. 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. The prevalence of prescriptions for highly addictive opioids in the FECA program has the potential to lead to abuse. While opioids accounted for less than 20 percent of total pharmacy expenditures in FY 2019, 43 percent of FECA’s claimants receiving pharmaceuticals were receiving opioid prescriptions in a given month. Additionally, 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.
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. OWCP needs to continue its efforts to help identify claimants at risk of opioid dependence and determine the associated costs of addiction treatment.
Recent actions taken by OWCP resulted in significant decreases in compounded drug costs — from more than $250 million in FY 2016 to less than $1 million in FY 2019 — underscoring the enormous monetary impact of failing to monitor rising costs and implement controls earlier.
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. The Black Lung Disability Trust Fund (BLDTF) pays the benefits when a miner’s former employer does not or cannot assume liability. The current annual income of the BLDTF (primarily from an excise tax on coal) is not sufficient to cover annual benefit obligations, meet administrative costs, and service past debt. According to DOL’s Agency Financial Report, as of September 30, 2019, the BLDTF was carrying a $5.8 billion deficit balance, which is projected to grow to nearly $15.3 billion (in constant dollars) by September 30, 2044.
The Department also needs to ensure 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. An audit in 2018 followed up on the employment status of a sample of Job Corps students 5 years after they left the program. It found that Job Corps faced challenges in demonstrating the extent to which its training programs helped participants obtain meaningful jobs appropriate to their training.
The U.S. Energy Information Administration projects that coal production will decline through 2022. The downturn has 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.1 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.” 2 Moreover, the tax rate will once again revert to lower pre-2020 levels beginning in January 2021, putting further strain on the BLDTF.
Securing and Protecting Information Management Systems
We are 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 modernization efforts and ability to identify vulnerabilities, protect information systems and data, and recover from security incidents. The most recent deficiencies we reported were identified in four of the five information security functional areas as defined by the National Institute of Standards and Technology Cybersecurity Framework. The 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 citizens and federal employees. Securing these data is a growing concern because DOL’s data integrity is at risk from external and internal threats. We continue to identify deficiencies in the Department’s efforts to configure and monitor its information systems as well as to identify and report security vulnerabilities. In addition, we determined that the Department has not adequately planned or implemented the technology tools required to manage and monitor IT security. Moreover, due to COVID-19, 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 on-site for security reasons.
The Department continues to move its information systems to a shared services model and expand its use of cloud and third-party providers for its information infrastructure and services. We have identified deficiencies that still remain 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 it continues this move, DOL will further require specialized knowledge and expertise in protecting and managing its systems including the contracted systems.
The Department has been unable to implement an effective asset management system since this issue was first identified in 2011. 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 protects 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 security for the Department’s data and information systems as well as support the effective 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 organizational chart to create such a direct reporting relationship would provide this position with greater independence and authority to implement and maintain an effective information security program.