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Secretary of Labor Thomas E. Perez
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DOL Annual Report, Fiscal Year 2006
Performance and Accountability Report

Management's Discussion & Analysis

Major Management Challenges

The table below lists management challenges the Department considers most important in terms of their impact on the accomplishment of goals in this report and their impact on the American workplace and taxpayers, overall. The achievement of all the Department's goals is influenced by the successful management of its performance and financial data, its procurement integrity, and its ability to develop and secure information technology systems.

The management challenge for Goal 1, A Prepared Workforce, pertains to ensuring the effectiveness of the Job Corps program. Management challenges for Goal 2, A Secure Workforce, include safeguarding unemployment insurance, improving the Federal Employees' Compensation Act (FECA) program, and improving the security of employee benefit plan assets. For Goal 3, Quality Workplaces, the OIG identified challenges to ensuring the safety and health of miners that the Department recognizes as important. For Goal 4, A Competitive Workforce, the GAO, OIG, and others identified challenges for the Foreign Labor Certification Program.

This year's list includes eleven items, each of which has been identified as a concern by the Department's Office of the Inspector General (OIG), the U.S. Government Accountability Office (GAO), DOL's Office of the Chief Financial Officer (OCFO), or some combination thereof:

  1. Improve Accountability for Performance and Financial Data
  2. Safeguard Unemployment Insurance
  3. Improve the Federal Employees' Compensation Act (FECA) Program
  4. Maintain the Integrity of the Foreign Labor Certification Program
  5. Security of Employee Benefit Plan Assets
  6. Improve Procurement Integrity
  7. Ensure the Safety and Health of Miners
  8. Develop and Secure Information Technology Systems and Protecting Related Information Assets
  9. Ensure the Effectiveness of the Job Corps Program
  10. Manage the Employment and Training Program to Meet the Demands for the Workforce of the 21st Century
  11. Real Property

Many of these challenges are continued from last year. Summaries of the issue, actions taken and actions remaining are presented for each challenge. More information on many of them may be found elsewhere in this report in discussions of program performance or in the Financial Section. At the end of the table are challenges X and XI from 2005 which are included to show their current status. The Department aggressively pursues corrective action for all significant challenges, whether identified by the OIG, GAO, OCFO or other sources within the Department.

Management Challenge/
Significant Issue

Actions Taken in FY 2006

Actions Remaining and Expected Completion Date

I. Improve Accountability for Performance and Financial Data — Progress assessment: Fair

Challenge first identified in FY 2000.
In order to manage DOL programs and integrate budget and performance, the Department needs timely financial data from a managerial accounting system that matches cost information with program outcomes, quality performance data, and useful information from single audits.
Affects all goals.

 

 

Managerial Cost Accounting System.
Ensure that managers integrate updated cost information into day-to-day decision making.

Further implemented Cost Analysis Manager (CAM); developed cost models for most major DOL agencies; and improved capabilities to integrate cost and performance information.

Automate workload and time distribution systems and begin developing CAM web portal — June 2007. Data collection tool — September 2007. Predictive planning capabilities — January 2008

Verified accuracy of non-financial data and implemented additional data validation systems.

Continue to implement additional procedures as necessary and as may be recommended by the OIG.

Reliable Performance Data. GPRA and the Budget and Performance Integration PMA initiative call for reliable performance data. DOL faces challenges because much of its data are generated by States. In FY 2006, GAO pointed out instances where DOL and States need to improve performance data quality.

 

 

 

Improve WIA data quality.

Implemented clear definitions for points of registration and exit.

Review WIA participant files to ensure validation is done correctly and hold states accountable for report and data element validation requirements.

 

Reviewed state validation results.
Developed a standard comprehensive monitoring tool and a supplement for regional use including data validation procedures for each program and trained staff in its use.

Investigate making a state's data validation results a criteria for incentive awards — December 2006.
Publish revised ETA Monitoring Guide for Data Validation — May 2007. Modify data validation software to allow Federal staff to sample records at the state level — July 2007.

Improve Apprenticeship Data Quality.
Make better use of DOL performance data for management oversight.

Established competency-based apprenticeships and interim credentials to allow niche employers to participate. The Secretary's Advisory Committee on Apprenticeship proposed regulatory revisions to incorporate the changes.

Implement strategies to allow niche employers to participate — October 2007.

Develop a cost-effective strategy for collecting data from council-monitoring states.

Two additional states agreed to participate in the Registered Apprenticeship Information System (RAIS), DOL's database for apprenticeship. Use of the Apprentice Electronic Registration process, which improves data integrity, increased.

Continue to negotiate with states to participate in RAIS.

Conduct regular reviews in states that regulate their own programs to ensure that state activities are in accord with DOL requirements.

Completed the remainder of the reviews in State Apprenticeship Agency (SAA) states.

Complete reviews of one-third of the SAA states for the next three years.

Offer substantive feedback to states after reviews.

Provided feedback (final reports of the SAA reviews).

Improve follow-up to ensure recommendations are implemented.

Improve Trade Adjustment Assistance (TAA) Data Quality.

Promoted state-developed models of integrated WIA and TAA systems.
Covered TAA under common measures.

Trained program officials in reporting.
Provided states with instructions, edit checks, and technical assistance.

Develop a monitoring guide for the Trade Program as an addendum to the ETA Core Monitoring Guide — December 2006. Field test the monitoring guide — March 2007.

Work with States to Improve Data Quality. Develop a more complete reporting system to provide greater comparability and clarity of performance data.

Completed feasibility study on final reporting design.

Implement reporting format to allow DOL to analyze performance across programs (Workforce Investment Streamlined Performance System) — July 2007.

Revised data collection systems for WIA, Wagner-Peyser, Veterans Employment and Training Service, and Trade Adjustment Assistance programs to incorporate common performance measures. Completed data validation and began monitoring states to ensure compliance with guidelines.

PY 2006 WIA Annual Report validation is due not later than October 2, 2006.

Identify best practices and technology solutions to collect and report customer information.

Revised Data Validation Reporting Software to allow states to calculate and validate common performance measures.

States calculate and submit Program Year reports using ETA Version 6.0 of the Data Validation Reporting Software.

Obtain Safety and Health Performance Data. While OSHA's voluntary compliance programs appear to have yielded many positive outcomes, much of the agency's data are insufficient for evaluation. GAO recommended that OSHA identify cost-effective methods of collecting complete and comparable data on program outcomes.

Completed evaluation of impacts of Voluntary Protection Programs (VPP) on sites' injury and illness rates from the inception of the decision to participate through to full VPP participation. Improved cooperative programs data management systems.

Identify cost-effective methods of collecting more complete and sufficient data on voluntary programs through voluntary program refinements and development of new OSHA Information System — September 2009.

Audit ETA Data Validation. Reliability of Audits conducted under the single audit act. DOL uses audits conducted under the Single Audit Act (SAA) conducted by independent public accountants or state auditors to provide oversight of the more than 90 percent of its expenditures spent by State and local governments and other non-DOL organizations.

Respond to recommendations from the report on the National Single Audit Sampling Project which is designed to determine the quality of Single Audits by providing a statistically reliable estimate of the extent that Single Audits conform to applicable requirements and standards. ETA is waiting for the OIG data validation audit.

OIG to audit ETA data validation.


Management Challenge/
Significant Issue

Actions Taken in FY 2006

Actions Remaining and Expected Completion Date

II. Safeguard Unemployment Insurance — Progress assessment: Good

Challenge first identified in FY 2000.
Unemployment Insurance (UI). The UI Program is one of the nation's largest wage replacement programs. In 2005, the estimated improper payments for UI were $3 billion. DOL is challenged to prevent improper payments, particularly during national emergencies or disasters. Impacts Goal 06-2.2A, Make timely and accurate benefit payments to unemployed workers.

Worked with the OIG and the Louisiana UI agency to facilitate investigations of potential fraud following Hurricane Katrina.

Complete investigations of possible overpayments related to hurricanes Katrina and Rita — August 2007.

Work with states to eliminate improper payments and insure payment integrity, especially during national emergencies and disasters.

DOL was authorized to require states to cross-match UI payments selected for Benefit Accuracy Measurement audits with the National Directory of New Hires to improve the detection of erroneous payments.

Coordinated with states and HHS to implement a process for matching with National Directory of New Hires (NDNH). Facilitated States' Use of the NDNH and issued a report on its use.

Collected information on the results of the Reemployment and Eligibility Assessment grants.

Publish regulation requiring states to cross-match UI payments selected for Benefit Accuracy Measurement audits with the National Directory of New Hires to improve the detection of erroneous payments — January 2008.

Contingent upon the appropriation of funds and the passage of the Integrity Act included in the DOL FY 2007 budget request, state UI agencies will increase efforts to prevent and detect fraudulent employment benefit claims.

Encourage additional states to implement NDNH cross matches and track implementation.

Report on the results of the Reemployment and Eligibility Assessment Grants — May 2007.

Safeguard the funds in the Unemployment Trust Fund (UTF). Administrative charges by the IRS to the UTF totaled $70 million for the first three quarters of FY 2006. The OIG has requested that the Treasury Inspector General audit the methodology for charging UTF administrative expenses.

 

Treasury OIG to audit IRS methodology for charging administrative expenses.

Review the states' monthly submissions of ETA form 2112 reports to detect and correct errors.

Implemented edit checks and reconciliation procedures for the ETA 2112.

Develop additional instructions for the UI reporting entities and implement procedures to more effectively review the data reported on the ETA 2112.


Management Challenge/
Significant Issue

Actions Taken in FY 2006

Actions Remaining and Expected Completion Date

III. Improve the Federal Employees' Compensation Act (FECA) Program — Progress assessment: Good

Challenge first identified in FY 2005.
Given the large volume of benefits delivered government-wide through the FECA Program, DOL is spearheading efforts to make FECA more cost-effective throughout the government through the Safety Health and Return to Work initiative and is working to improve the way the program is administered. Efforts are under way to address the findings below that encompass several areas for improvement. Impacts Goal 06-2.2B, Minimize the impact of work-related injuries.

 

 

Reduce Fraud.

With input from the IG community, DOL's OIG developed a protocol for use by IGs across the government to reduce fraud and overpayments.

 

ESA began developing written procedures that address accounting and financial reporting for FECA.

Issue and implement written procedures that address accounting and financial reporting for FECA — 2007.

Legislative Reform.
Seek legislative reforms to enhance incentives for injured employees to return to work; address benefit equity issues; discourage unsubstantiated claims; and make other improvements.

Drafted legislation. Estimated savings over ten years is $592 million.

Identify and work with a future sponsor to submit the proposed FECA reform legislation to the Congress — 2007.

Reduce Improper Payments.
FECA is one of three DOL programs classified as high risk for improper payments due to the amount of benefits paid. (The other two are UI and WIA.) In 2005, FECA's overpayment rate was only 0.13 percent and its estimated improper payments totaled $3.3 million. Ensure that current medical information for claimants is on file, so that payments are not made to those who are no longer disabled.

DOL met its improper payments reduction and recovery targets for the FECA program.

 

 

Integrated Federal Employee Compensation System (iFECS), which tracks due dates of medical evaluations, was fully deployed.

Monitor and adjust iFECS as necessary
— 2007.


Management Challenge/
Significant Issue

Actions Taken in FY 2006

Actions Remaining and Expected Completion Date

IV. Maintain the Integrity of the Foreign Labor Certification Program — Progress assessment: Fair

Challenge first identified in FY 2001.
Problems with the integrity of the labor certification process and fraud may result in economic hardship for American workers, the abuse of foreign workers, and may have national security implications when applications are not adequately screened. Impacts Goal 06-4.1A Address worker shortages through the Foreign Labor Certification Program.

Proposed regulatory changes to: 1) eliminate substitution of alien beneficiaries on applications and approved labor certifications; 2) implement a 45 day deadline to file approved permanent labor certifications in support of a petition with Homeland Security; 3) prohibit the sale, barter, or purchase of permanent labor certifications or applications; and 4) provide enforcement mechanisms to protect program integrity, including debarment with appeal rights. The regulation addresses many concerns of the OIG, OMB, and others.

Final publication of the revised regulation — April 2007.

Reduce Foreign Labor Certification Backlogs. 200,000 applications were backlogged as of August 2006. In 2006, DOL received 125,500 applications at the National Processing Centers in Atlanta and Chicago. In addition to reducing backlog, DOL is challenged to prevent new backlogs.

DOL automated permanent labor certification application processing

Backlog Elimination Centers eliminated over 50% of the permanent program backlog three weeks ahead of the September 30, 2006 goal.

Eliminate the backlogs and prevent new backlogs — September 2007.

GAO noted that DOL certified applications although the wage rate on the application was lower than the prevailing wage for that occupation and some certified applications had erroneous employer identification numbers.

 

Reduce the incidence of applications certified with wage rates on the application that are lower than the prevailing wage and erroneous employer identification numbers — March 2007.


Management Challenge/
Significant Issue

Actions Taken in FY 2006

Actions Remaining and Expected Completion Date

V. Security of Employee Benefit Plan Assets — Progress assessment: Excellent

Challenge first identified in FY 2000.
Pension Benefit Guaranty Corporation (PBGC) The PBGC experienced an increased workload in recent years as more companies dropped their plans, increasing the burden on the private pension insurance system. Impacts Goal 06-2.2D Improve pension insurance program.

The Pension Protection Act of 2006 will place PBGC on sturdier financial footing and should reduce the number of pension plans in default.

Implement the Pension Protection Act of 2006

Employee Benefits Security Administration (EBSA) areas of concern include strengthening employee benefit plan audits, investigating benefit plan fraud, corrupt multiple employer welfare arrangements, and underpayments from cash balance plans. This challenge affects Goal 06-2.2C, Secure pension, health and welfare benefits.

August 17, 2006 — The President signed the Pension Protection Act of 2006 which strengthens DOL's capabilities to protect pension benefits.

 

Strengthen Audits. Implement a CPA firm "inspection program."

Implemented a CPA firm inspection program and reviewed firms who audit approximately half of all employee benefit plan assets subject to audit.

Ongoing

Performed augmented reviews of 450 sets of audit work papers.

Ongoing

Referred 20 CPA firms to the American Institution of Certified Public Accountants (AICPA) Professional Ethics Division or a state board of public accountancy.

Ongoing

Benefit Plan Fraud. Continue to devote appropriate enforcement resources to the review of Taft-Hartley plans.

EBSA spent about 6 percent of its investigative resources on civil and criminal investigations of these plans and produced monetary results of over $23 million through Q3 FY 2006.

Ongoing

Corrupt Multiple Employer Welfare Arrangements (MEWAs.) Stopping abusive practices of corrupt MEWAs should be a top enforcement priority.

Worked closely with Department of Justice to prosecute these complex white-collar crimes. Obtained over $21 million in results from MEWA investigations in 2006.

Ongoing

Underpayments from Cash Balance Pension Plans. DOL's OIG conducted a study in 2002 on the accuracy of individual benefit payments in selected cash balance plans. EBSA referred the 13 problems identified by OIG to the IRS for guidance, but has not yet received any guidance.

The Pension Protection Act of 2006 modified how lump sum distributions are calculated and may eliminate or reduce the potential for underpayments.

These statutory changes are likely to correct prospective problems. In FY 2007, EBSA, SOL, and the OIG plan to resolve this matter.


Management Challenge/
Significant Issue

Actions Taken in FY 2006

Actions Remaining and Expected Completion Date

VI. Improve Procurement Integrity — Progress assessment: Good

Challenge first identified in FY 2005. Ensuring controls are in place to properly award, manage, and document procurements is a challenge to the Department. This challenge affects the attainment of all goals.

Hired management staff to provide on-the-job training and promote on-site and off-site training courses, online training, and continuing higher education; issued internal operating procedures to ensure standards of performance; and set target timelines for performance metrics.

 

Properly award, manage and document procurements.

Hired a supplemental specialist (contractor) to help process the workload in a timely manner.

Ongoing

Improved the E-Procurement System to increase visibility of actions being processed and better manage workload.

Ongoing

Met targets for satisfactory procurement management reviews, contracts awarded in compliance with customers' requests and requirements, and agencies compliant with policy. Completed all corrective actions. No audits with major findings.

Ongoing

Worked with agency representatives to promote agency staff understanding of sole source procurement criteria and proposed only properly documented cases. As a result, 91 percent of DOL's Procurement Review Board requests were approved.

Ongoing

There are several appropriated funds with procurement activities under the Chief Acquisition Officer (CAO); the Office of Procurement Services (full delegation); BLS (limited delegation); ETA (full delegation; regional offices (limited delegation); MSHA (full delegation). DOL's OIG has limited procurement authority. OIG audits of two DOL agencies in FY 2005 found that a lack of segregation of the procurement function allowed program staff to exert undue influence over the procurement process. OIG recommended reassigning the procurement authority for MSHA to be completely independent of the agency, removing the procurement function from OASAM, and establishing a completely independent Acquisition Office to report directly to the Deputy Secretary.

OIG recommendations to rescind and reassign MSHA's procurement authority to be completely independent of MSHA and to create an independent DOL Acquisition Office remained "unresolved and open."

DOL responded to a request by conferees to H.R. 4939 to report on the steps necessary to establish a unified chief procurement officer. Steps include re-designating a non-career employee official as the CAO; establishing a new career position to serve as the Acquisition Office Director, who would also serve as the Senior Procurement executive in line with the 2003 SARA legislation; and realigning procurement authority delegated to DOL agencies to the Acquisition Office Director.

Resolve the "unresolved and open" OIG procurement recommendations.


Management Challenge/
Significant Issue

Actions Taken in FY 2006

Actions Remaining and Expected Completion Date

VII. Ensure the Safety and Health of Miners — Progress assessment: Good

Challenge first identified in FY 2005.
The MINER Act of 2006 challenges MSHA and the mining industry to enhance mine safety training, improve safety and communications technology, enhance mine rescue teams and emergency capabilities, and enforce stronger civil and criminal penalties. Impacts Goals 06-3.1A, Reduce mine fatalities and injuries and 06-3.1B, Reduce mining-related illnesses.

Developed phased timetable to implement the MINER Act of 2006.

Implement the MINER Act in accordance with timetable.

Improve Safety and Health Performance Data and Monitoring. GAO stated that MSHA headquarters did not ensure that 6-month inspections of ventilation and roof support plans were being completed on a timely basis and that MSHA did not always ensure that hazards found during inspections are corrected promptly.

GAO is currently determining whether previous recommendations addressed safety and health issues at MSHA, including performance data and monitoring.

Address any new GAO recommendations.

Replace Retiring Mine Inspectors. In 2003, GAO reported that 44 percent of MSHA's underground coal mine inspectors would be eligible to retire within the next five years. With an 18-24 month lead time to fully train new inspectors, MSHA faces a challenge in reacting to its workload demands.

Launched a Career Intern Program for mine safety inspectors which included recruitment and screening sessions at mining locations nationwide; recruitment now takes 45 days compared to the 180 days it took in FY 2004. Recruited additional instructors to train new mine safety inspectors.

Continue with an aggressive job fair schedule to address the requirements identified for mine safety inspectors. Implement localized and targeted recruiting to increase the applicant pool.


Management Challenge/
Significant Issue

Actions Taken in FY 2006

Actions Remaining and Expected Completion Date

VIII. Develop and Secure Information Technology Systems and Protect Related Information Assets — Progress assessment: Excellent

Challenge first identified in FY 2002.
DOL relies heavily on Information Technology. Developing and maintaining efficient, effective and secure systems to perform is an ongoing challenge. This challenge affects all performance goals.

Created a DOL-wide Enterprise Architecture, conducted project management training, revitalized the Investment Control Review process, revised the IT Investment Management Quick Reference Guide, and began updating DOL's Systems Development Lifecycle Management manual.

Monitor emerging technologies through DOL's internal IT Governance process. Establish workgroups as necessary to use emerging technologies to support the DOL mission.

Strengthen Systems Development and Management of High Risk Systems.
Strengthen DOL IT system planning, project management and decision for its projects classified as high-risk.

Over 90 percent of major IT investments were managed within ten percent of planned cost, schedule, and performance goals and in compliance with the DOL target Enterprise Architecture. Developed documentation for performance measures to assess IT investment compliance with Systems Development Lifecycle Management requirements.

Monitor high risk investments through the IT Capital Planning Control Review process each quarter to assess actual activities and milestones and their costs compared to the planned baseline. Provide IT investments specific guidance and action items for strengthening performance. Conduct training on this process — March 2007.

Conduct quarterly reviews, Internal eGov reviews, and Federal Information Security Management Act (FISMA) reviews, Enterprise Vulnerability Management System reports.

Conducted internal IT investment Control Reviews and eGov reviews. Collected and reported IT investment earned value management data.

The OIG sampled five DOL IT systems as part of its recurring FISMA audit program: the Student Pay, Allotment, and Management Information System (SPAMIS), the BLS Employment Cost Index and Producer Price Index Systems, OSHA's Whistleblower Web Application, and the DOL Employee Computer Network/Departmental Computer Network. These audits are summarized in the OIG's Semiannual Report (http://www.oig.dol.gov/).

 

Maintain Information Technology Security. Be proactive in identifying and mitigating IT security weaknesses.

Major information systems achieved authority to operate based on FISMA requirements and were evaluated using vulnerability assessments and a security controls testing and evaluation program.

Strengthen security testing and evaluation to test a wider range of controls more frequently. Validate the mitigation of previously identified weaknesses.

Implement a Public Key Infrastructure (PKI) to support the Homeland Security Presidential Directive 12 (HSPD-12) requirements and Implement New Smart Card Requirements. The President directed a government-wide standard for secure and reliable forms of ID based on "smart cards" that use integrated circuit chips to store and process data. Agencies are challenged to meet the implementation deadline of October 27, 2006.

In support of the DOLHSPD-12 Implementation Plan, selected a contractor for PKI/HSPD -12 requirements. (PKI is a system of hardware, software, policies, and people that, when fully and properly implemented, can provide a suite of information security assurances.)

Issue PIV-2 HSPD-12 cards on a phased schedule starting with new employees and contractors in headquarters offices in October 27, 2006 and completing in October 27, 2008.


Management Challenge/
Significant Issue

Actions Taken in FY 2006

Actions Remaining and Expected Completion Date

IX. Ensuring the Effectiveness of the Job Corps Program

Challenge first identified in FY 2006. Promote Effective Regional Monitoring. Contractors operate 98 Job Corps Centers nationwide; the Departments of Interior and Agriculture operate another 28 centers via interagency agreements with DOL. These centers provide services to about 60,000 students annually. DOL Regional Offices monitor contractors to ensure DOL policies are implemented, and DOL is challenged to ensure that regional monitoring is effective. This challenge affects Goal 05-1.1B, Improve educational achievements of Job Corps students and increase participation of Job Corps graduates in employment and education.

 

 

Review Regional Reports of Monitoring Outcomes to hold the regions accountable for ensuring services provided by center operators comply with policies, requirements and contracts — June 2007.

Review Regional Reports of Monitoring Outcomes to ensure that centers implement policies for facilities maintenance, zero tolerance for drugs and violence, student background checks, and student accountability — June 2007.

Updated oversight policy and procedures (program assessment guide) to require regional offices to validate center performance data by sampling records and trained regional staff in the procedures.

Transferred Job Corps procurement responsibilities to the Office of the Assistant Secretary for Administration and Management to better ensure that qualified companies that offer the best value and service are selected.

Review reports of Regional Office Center Assessments to ensure that monitoring is effective in identifying manipulations of data on student absences and proper financial reporting — June 2007.

Update interagency agreements to define each agency's responsibilities — June 2007.


Management Challenge/
Significant Issue

Actions Taken in FY 2006

Actions Remaining and Expected Completion Date

X. Real Property — Progress assessment: Excellent.

Challenge first identified in FY 2004. Improving Management of Real Property Assets was previously discussed as a 2005 Major Management Challenge. FY 2004 financial audits revealed that Job Corps was not adequately accounting for real property and that DOL's property tracking system and State Workforce Agency real property system lacked sufficient controls.

DOL built upon FY 2005 efforts to strengthen control systems for real property in the Job Corps and State Workforce agencies. ETA reviewed its existing processes and restructured them to strengthen the property management system.

Challenge completed.


Management Challenge/
Significant Issue

Actions Taken in FY 2006

Actions Remaining and Expected Completion Date

XI. Manage the Employment and Training Program to Meet the Demands for the Workforce of the 21st Century — Progress assessment: Fair

Challenge first identified in FY 2000. GAO identified implementing the Work-force Investment Act (WIA) as one of DOL's major management challenges, but it is not listed because implementation of needed improvements is dependent on WIA authorization, which is still pending.

 

Awaiting WIA authorization.

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