oversight

Major Management Challenges and Program Risks: Department of Labor

Published by the Government Accountability Office on 2003-01-01.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

               United States General Accounting Office

GAO            Performance and Accountability Series




January 2003
               Major Management
               Challenges and
               Program Risks
               Department of Labor




GAO-03-106
               a
A Glance at the Agency Covered in This Report
The Department of Labor’s mission is to foster and promote the welfare of job
seekers, wage earners, and retirees of the United States by
●    improving their working conditions;
●    advancing their opportunities for profitable employment;
●    protecting their retirement and health care benefits;
●    helping employers find workers;
●    strengthening free collective bargaining; and
●    tracking changes in employment, prices, and other national economic
     measurements.


The Department of Labor’s Budgetary and Staff Resources


Budgetary Resources a, b                                               Staff Resources b
Dollars in billions                                                    FTEs in thousands

100                                                                    20
                                                  83                                                       17         17
                                                                             16        16        16
 75                                                                    15
                                        65
          52        55        52
 50                                                                    10


 25                                                                     5


    0                                                                   0
        1998      1999      2000      2001        2002                      1998      1999      2000      2001        2002
        Fiscal year                                                         Fiscal year
Source: Budget of the United States Government.

a Budgetary resources include new budget authority (BA) and unobligated balances of previous BA.

b Budget and staff resources are actuals for FY 1998-2001. FY 2002 are estimates from the FY 2003 budget, which
    are the latest publicly available figures on a consistent basis as of January 2003. Actuals for FY 2002 will be
    contained in the President’s FY 2004 budget to be released in February 2003.




This Series
This report is part of a special GAO series, first issued in 1999 and updated in
2001, entitled the Performance and Accountability Series: Major Management
Challenges and Program Risks. The 2003 Performance and Accountability Series
contains separate reports covering each cabinet department, most major
independent agencies, and the U.S. Postal Service. The series also includes a
governmentwide perspective on transforming the way the government does
business in order to meet 21st century challenges and address long-term fiscal
needs. The companion 2003 High-Risk Series: An Update identifies areas at high risk
due to either their greater vulnerabilities to waste, fraud, abuse, and
mismanagement or major challenges associated with their economy, efficiency, or
effectiveness. A list of all of the reports in this series is included at the end of
this report.
                                                    January 2003


                                                    PERFORMANCE AND ACCOUNTABILITY SERIES

                                                    Department of Labor
Highlights of GAO-03-106, a report to
Congress included as part of GAO’s
Performance and Accountability Series




In its 2001 performance and                         The Department of Labor has made progress in implementing actions to
accountability report on the                        address its management challenges, such as by improving some of its
Department of Labor, GAO                            performance measurement systems. However, future improvements will
identified major management                         increasingly demand more strategic management, more proactive support
challenges in increasing the                        for state and local entities, additional improvements in performance
employment and earnings of
America’s workforce, protecting
                                                    measurement systems, and greater attention to human capital issues.
the benefits of workers, and
fostering safe and healthy                          •   Manage employment and training programs to meet the demands
                                                                                        st
workplaces. The information GAO                         for the workforce of the 21 century. Labor has taken actions to
presents in this report is intended                     resolve some of the performance measurement problems that constrain
to help sustain congressional                           its ability to determine the success of employment and training
attention and a departmental focus                      programs—such as by establishing a new Office of Performance and
on continuing to make progress in                       Results. However, Labor must continue this progress in improving its
addressing these challenges and                         performance measurement systems and also address other areas. To
ultimately overcoming them. This                        develop effective strategies for addressing the worker and skills
report is part of a special series of
                                                        shortages the nation is projected to face in coming decades, Labor must
reports on governmentwide and
agency-specific issues.                                 take a more strategic, cross-program perspective, and work more closely
                                                        with other agencies. In addition, Labor needs to be more proactive in
                                                        facilitating state and local implementation of employment and training
                                                        programs under the nation’s new workforce development system, such
GAO believes that Labor should                          as by providing additional guidance and sharing information on
                                                        promising practices.
•    foster strategic management
     in addressing workforce                        •   Protect the pensions and benefits of workers. The financial
     issues and targeting efforts to                    collapse of Enron and other companies has highlighted Labor’s critical
     protect workers’ pensions                          role in protecting pensions and other employee benefit plans estimated
     and benefits, and be more                          to have assets in excess of $5 trillion. Labor agencies have begun to
     proactive in helping states                        address human capital issues that could constrain their efforts to protect
     and localities integrate                           these assets as the agencies face a surge in expected retirements within
     workforce development                              their workforces. However, weaknesses in Labor’s strategic targeting of
     programs;                                          its compliance efforts for protecting workers’ benefits and wages limit
                                                        Labor’s ability to maximize the impact of its limited resources.
•    continue to better position
     itself to measure program                      •   Foster safe and healthy workplaces. Labor’s enforcement agencies
     impact in both training and                        lack management information on the impacts of their various
     worker safety programs; and                        compliance activities that is essential for determining how to best
                                                        allocate compliance resources in protecting vulnerable populations,
•    continue taking steps to                           such as children who work and day laborers. Furthermore, Labor has
     comprehensively address its                        not always leveraged the impact of its limited resources by coordinating
     human capital issues.                              effectively with other agencies that also share responsibilities for
                                                        protecting workers, such as in enforcing safety regulations at hazardous
www.gao.gov/cgi-bin/getrpt?GAO-03-106.                  material facilities.
To view the full report, click on the link above.
For more information, contact Cynthia M.
Fagnoni at (202) 512-7215 or
fagnonic@gao.gov.
Contents



Transmittal Letter                                                                                                    1


Major Performance                                                                                                     2

and Accountability
Challenges

GAO Contacts                                                                                                         21


Related GAO Products                                                                                                 22


Performance and                                                                                                      25
Accountability and
High-Risk Series




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                       Page i                                                          GAO-03-106 Labor Challenges
A
United States General Accounting Office
Washington, D.C. 20548
                                                                                           Comptroller General
                                                                                           of the United States




           January 2003                                                                                           T
                                                                                                                  ransmL
                                                                                                                       ta
                                                                                                                        ileter




           The President of the Senate
           The Speaker of the House of Representatives

           This report addresses the major management challenges and program risks facing the U.S.
           Department of Labor (Labor) as it works to promote the welfare and economic security of the nation’s
           workforce and ensure that workplaces are safe and healthy. The report discusses the actions that
           Labor has taken and that are under way to address the challenges GAO identified in its Performance
           and Accountability Series 2 years ago, and major events that have occurred that significantly
           influence the environment in which the department carries out its mission. Also, GAO summarizes
           the challenges that remain and further actions that GAO believes are needed.

           This analysis should help the new Congress and the administration carry out their responsibilities and
           improve government for the benefit of the American people. For additional information about this
           report, please contact Cynthia M. Fagnoni, Managing Director, Education, Workforce, and Income
           Security issues, at (202) 512-7215 or at fagnonic@gao.gov.




           David M. Walker
           Comptroller General
           of the United States




                                                                                  GAO-03-106 Labor Challenges
Major Performance and Accountability
Challenges

              In our 2001 management challenges report, we identified the following
              specific performance and management challenges that the U.S. Department
              of Labor faced: (1) increase the employment and earnings of America’s
              workforce, (2) protect the benefits of workers, and (3) foster safe and
              healthy workplaces. To meet these challenges, we reported that Labor
              needed to improve its performance measurement, strategic planning, and
              organizational alignment.

              Since our January 2001 report, several events have altered the environment
              in which Labor carries out its missions. First, the September 11, 2001,
              attacks that claimed thousands of lives also helped exacerbate a recession
              that resulted in many workers being displaced from their jobs. While
              Americans responded swiftly and compassionately, the attacks showed the
              vulnerability of the economy to terrorist acts. Second, the financial
              collapse of Enron and other large corporations resulted in job
              displacement and the loss of retirement savings for workers in these
              corporations, which suggests certain vulnerabilities in private pension and
              savings plans that can affect the nation’s workers.

              Labor has taken steps to address some of the specific performance and
              management challenges that were identified in our January 2001 report,
              such as those related to improving performance measurement. For
              example, Labor is establishing a new unit within its Employment and
              Training Administration—the Office of Performance and Results—whose
              function will include coordinating efforts to identify and share promising
              approaches for resolving performance measurement issues. Labor’s
              Veterans’ Employment and Training Service implemented parts of its new
              performance management system in 2002, which includes new outcome
              measures to evaluate state performance. To improve customer service,
              Labor’s Office of Workers’ Compensation Programs opened a toll-free call
              center in June 2001 and arranged for a contractor to report extensive
              performance data on various service indicators. However, Labor continues
              to face important performance and accountability challenges in each of the
              three broad areas we identified in our 2001 report. We have revised the
              first challenge to more clearly highlight our focus on the challenges
              associated with managing employment and training programs to meet the
              demands for the workforce of the 21st century. Specifically, the major
              performance and accountability challenges that Labor continues to face are
              as follows.




              Page 2                                             GAO-03-106 Labor Challenges
                        Major Performance and Accountability
                        Challenges




                             Performance and
                             Accountability Challenges
                                 Manage employment and training programs to meet the demands for the
                                 workforce of the 21st century

                                 Protect the pensions and benefits of workers

                                 Foster safe and healthy workplaces




Manage Employment       Labor faces the challenge of being the principal agency responsible for
                        employment and training assistance to the nation’s workers and helping to
and Training Programs   meet employers’ demands for skilled workers. However, Labor has not
to Meet the Demands     strategically managed its own programs nor effectively integrated its
                        assistance with efforts carried out by other agencies to help meet the
for the Workforce of    demands for the workforce of the 21st century. Work by us and Labor’s
the 21ST Century        Inspector General has highlighted strategic management weaknesses,
                        limited support for state and local implementation of worker training
                        programs, performance measurement problems, and information security
                        weaknesses. Addressing these problems is critical to responding
                        effectively to the tremendous changes that are occurring in the U.S.
                        economy and population, such as the continuing growth of the high-tech
                        service economy that requires more high-skilled workers, the competitive
                        pressures of global markets, and the aging workforce together with slower
                        labor force growth. As the baby boomers age, the share of the population
                        age 65 and older is projected to grow from 12 percent in 2000 to about
                        20 percent in 2030. With the impending retirements of individuals in the
                        large baby boom generation, the growth of the labor force is expected to
                        slow considerably, becoming negligible by 2050. Thus, the United States is
                        projected to face growing shortages in both the overall number of available
                        workers and the number of workers with certain high skills, which could
                        threaten continued increases in our standard of living.



                        Page 3                                                    GAO-03-106 Labor Challenges
                        Major Performance and Accountability
                        Challenges




Addressing Emerging     To develop effective strategies for addressing the emerging issues related
Workforce Issues More   to potential labor and skills shortages, Labor needs to take a broader, cross-
                        program perspective. In some cases this requires coordinating more
Strategically           closely with other federal agencies. Our work has highlighted two areas in
                        which Labor could be more strategic in addressing emerging workforce
                        issues—enhancing training programs for developing skilled workers and
                        developing approaches to retain older workers in the workforce.

                        While several federal agencies—Labor, Commerce, the National Science
                        Foundation, and others—have independent programs to address the need
                        for high-skill workers, coordination across agencies is limited. Our
                        September 2002 report on high-skill training recommended that Labor be
                        proactive in building a comprehensive approach within the department and
                        across federal agencies to address high-skill workforce needs across the
                        country.1 Labor agreed with this recommendation. In other cases, Labor
                        needs to be more strategic in managing its own programs. Indicative of
                        Labor’s narrow focus and need to act more strategically is how it has dealt
                        with the apprenticeship program. Labor could help address emerging
                        needs for skilled workers by working to enhance the potential of its
                        registered apprenticeship program. While more than 360,000 apprentices
                        are enrolled in the program, Labor’s efforts to identify new occupations for
                        apprenticeship have been largely reactive, and, as a result, Labor has not
                        influenced the expansion of apprenticeships to industries in need of skilled
                        training.2 In our September 2001 report, we recommended that to expand
                        the apprenticeship program, particularly into occupations not traditionally
                        apprenticed, Labor must take the lead in coordinating and promoting the
                        development of such programs.3 Labor agreed with our recommendation
                        and has taken some actions. For example, Labor conducted national
                        forums with stakeholders and employers in new and emerging occupations
                        to gain feedback on how to expand the apprenticeship program, enhance
                        program quality, increase diversity, and develop stronger linkages. In July


                        1
                          U.S. General Accounting Office, High-Skill Training: Grants from H-1B Visa Fees Meet
                        Specific Workforce Needs, but at Varying Skill Levels, GAO-02-881 (Washington, D.C.:
                        Sept. 20, 2002).
                        2
                          Apprenticeship combines supervised on-the-job training with formal instruction and has
                        been used for decades in construction trades and some manufacturing occupations to
                        ensure that workers have the skills employers need.
                        3
                          U.S. General Accounting Office, Registered Apprenticeships: Labor Could Do More to
                        Expand to Other Occupations, GAO-01-940 (Washington, D.C.: Sept. 7, 2001).




                        Page 4                                                       GAO-03-106 Labor Challenges
                             Major Performance and Accountability
                             Challenges




                             2002, Labor held a conference to publicly discuss the results from these
                             forums and obtain feedback from participants.

                             Another example of where Labor needs to be more strategic in helping
                             meet the demands for the workforce of the 21st century is developing
                             approaches to retain older workers in the workforce. With the impending
                             retirements of members of the large “baby boom” generation, the possible
                             loss of many experienced workers could create shortages in skilled worker
                             and managerial occupations, with adverse effects on productivity and
                             economic growth. The challenge is to develop the policies, programs, and
                             employment arrangements necessary to extend the work life of the
                             growing number of older workers in a manner that balances the
                             competitive imperative of business with the life realities of older workers.
                             While Labor has a central role in this area, many of the attendant issues are
                             beyond the range of Labor’s authority and therefore a collaborative
                             approach is needed. In our November 2001 report, we recommended that
                             the Secretary of Labor convene an interagency task force to develop
                             legislative and regulatory proposals addressing the issues raised by the
                             aging of the labor force.4 Labor is continuing to study the issues raised by
                             our report and has not implemented our recommendation.



Proactively Facilitating     To help establish a workforce development system better able to meet the
Implementation of Worker     needs of job seekers and employers, Labor needs to be more proactive in
                             helping to implement employment and training programs under the
Training Programs by State
                             Workforce Investment Act of 1998 (WIA). This can be accomplished by
and Local Entities           providing additional guidance and by sharing information on promising
                             practices. WIA represents a major change in the nation’s workforce
                             development system and state and local entities have encountered many
                             obstacles in working to integrate their employment and training services.
                             In the past, the job training system was fragmented, consisting of
                             overlapping programs that did not serve job seekers or employers well.
                             Congress passed WIA, in part, to create a system connecting employment,
                             education, and training services to better match workers to labor market
                             needs. Among other things, WIA requires state and local entities who carry
                             out a number of specified federal programs to participate in local one-stop
                             centers that offer job training and placement assistance for workers and
                             opportunities for employers to find workers. While WIA gave state and

                             4
                               U.S. General Accounting Office, Older Workers: Demographic Trends Pose Challenges for
                             Employers and Workers, GAO-02-85 (Washington, D.C.: Nov. 16, 2001).




                             Page 5                                                     GAO-03-106 Labor Challenges
Major Performance and Accountability
Challenges




local entities more flexibility in administering employment and training
programs, Labor has struggled to define its new role under WIA.

To help this system better meet the workforce demands of the 21st century,
Labor needs to be more proactive in disseminating information to help
state and local agencies implement employment and training programs.
For example, state and local one-stop partners have encountered various
programmatic and financial concerns that have affected their level of
participation, as well as their ability to better coordinate their services at
the one-stops. These concerns included fears that participation in one-stop
centers could lead them to serve individuals otherwise ineligible for their
services, and resource constraints, such as having a lease on an existing
facility that they could not break. Our October 2001 report recommended
that Labor, along with other federal agencies, explore the concerns
identified by state and local agencies and identify specific ways in which
these concerns could be addressed.5 Our February 2002 report on WIA-
funded services for dislocated workers found that guidance concerning
basic program requirements had been limited, resulting in some confusion
for state and local workforce officials responsible for implementing the
program.6 We recommended that Labor provide additional guidance on
implementation issues and information on best practices to facilitate
implementation of the program and assist local officials in using the greater
flexibility afforded by WIA to design programs and services. State and
local agencies have also encountered problems coordinating WIA services
for serving low-income families receiving Temporary Assistance for Needy




5
  U.S. General Accounting Office, Workforce Investment Act: Better Guidance Needed to
Address Concerns Over New Requirements, GAO-02-72 (Washington, D.C.: Oct. 4, 2001).
6
  U.S. General Accounting Office, Workforce Investment Act: Better Guidance and Revised
Funding Formula Would Enhance Dislocated Worker Program, GAO-02-274 (Washington,
D.C.: Feb. 11, 2002).




Page 6                                                     GAO-03-106 Labor Challenges
Major Performance and Accountability
Challenges




Families (TANF). Program differences between TANF and WIA, and
different information systems used by welfare and workforce agencies,
have inhibited state and local coordination efforts. Our July 2002 report
recommended that Labor and the Department of Health and Human
Services (HHS) work together to jointly develop information on promising
practices for coordinating services for TANF clients through one-stops to
help states more effectively address some of these obstacles to
coordination.7

While Labor did not respond directly to any of the recommendations made
in our October 2001 report on the implementation of WIA, the department
generally agreed with the recommendations we made in the reports on
serving dislocated workers and TANF clients. Moreover, Labor has taken
some actions to implement our recommendations. For example, Labor
convened a one-stop readiness workgroup that included representatives
from Education, HHS, and the Department of Housing and Urban
Development. This group has developed a set of suggested strategies for
addressing major WIA implementation issues and plans to disseminate a
national issuance, signed by the heads of all the federal partner agencies,
that would emphasize the commitment of these federal partners to the one-
stop system. In addition, Labor has awarded a grant to the state of Illinois
to create and maintain an on-line database of promising one-stop practices.
Regarding the issues we raised about serving dislocated workers, Labor is
currently finalizing guidance for state and local areas on services for
dislocated workers.




7
  U.S. General Accounting Office, Workforce Investment Act: States and Localities
Increasingly Coordinate Services for TANF Clients, but Better Information Needed on
Effective Approaches, GAO-02-696 (Washington, D.C.: July 3, 2002).




Page 7                                                    GAO-03-106 Labor Challenges
Major Performance and Accountability
Challenges




Our work has also highlighted the need for Labor to be more proactive in
helping to implement the H-1B skill grant program that prepares workers
for high-skill jobs.8 U.S. employers who use foreign workers that enter the
United States with H-1B visas to work in specialty occupations must pay a
fee for each worker they employ under the program.9 Fifty-five percent of
the funds are provided to Labor for technical skill grants to increase the
number of workers in occupations identified as needing more workers and
Labor awards these grants to local workforce investment boards. While
these skill grant programs have increased coordination, grantees have had
limited opportunities for sharing information on best practices or how they
overcame challenging problems. Our September 2002 report on the skill
grant program recommended that Labor establish mechanisms to share
successful strategies among grantees and encourage networking.10 Labor
agreed with this recommendation and noted that it has provided grantees
with two studies that include information about grantees’ best practices.




8
  To help U.S. employers in information technology and other industries meet their needs for
high-skilled workers, the H-1B visa program allows employers to temporarily (for up to 6
years) fill needs in specialty occupations with foreign workers.
9
  In 1998, the law set the fee at $500 (later raised to $1,000) for each foreign worker for
whom they applied.
10
     GAO-02-881.




Page 8                                                           GAO-03-106 Labor Challenges
                           Major Performance and Accountability
                           Challenges




Improving Measurement of   Our work has also highlighted performance measurement problems for
Program Performance        Labor that affect its ability to determine the success of employment and
                           training programs under the one-stop system established by WIA. These
                           problems are relevant to one of the five areas for governmentwide reforms
                           identified in the President’s 2002 Management Agenda: integrating
                           performance measures in the federal budget process so that resource
                           allocation is linked to specific outcomes. The problems we identified
                           affect programs overseen by Labor’s Employment and Training
                           Administration (ETA) and Veterans’ Employment and Training Service
                           (VETS). For example, we reported in February 2002 that ETA’s
                           performance measurement system may not provide a true picture of WIA-
                           funded program performance because data are not comparable across
                           states, data are not timely, and there are no measures to gauge the
                           performance of the one-stop system as a whole.11 VETS also faces
                           performance measurement issues in managing its employment and training
                           programs for veterans. For example, we reported in September 2001 that
                           VETS lacks sufficient performance data on these programs, does not
                           communicate a consistent message to states on expected performance, and
                           often does not monitor states’ performance in a consistent manner.12
                           Because of these problems, ETA and VETS lack essential data for providing
                           a true picture of how well employment and training programs are
                           performing.

                           Our February 2002 report also highlighted the problem of counter-
                           productive incentives created by WIA’s performance measures and the
                           potential negative impact on job seekers. Because states see the current
                           WIA performance levels as too high for the current economy, states and
                           localities sometimes choose not to serve those job seekers who may be
                           helped by their services, but who may not help in achieving their negotiated
                           performance levels. For example, officials in each of the five states we
                           visited told us that local areas are not registering many WIA participants
                           largely because of concerns by local staff about meeting performance


                           11
                             U.S. General Accounting Office, Workforce Investment Act: Improvements Needed in
                           Performance Measures to Provide a More Accurate Picture of WIA’s Effectiveness, GAO-02-
                           275 (Washington, D.C.: Feb. 1, 2002).
                           12
                             U.S. General Accounting Office, Veterans’ Employment and Training Service:
                           Flexibility and Accountability Needed to Improve Service to Veterans, GAO-01-928
                           (Washington, D.C.: Sept. 12, 2001); and Veterans’ Employment and Training Service:
                           Proposed Performance Measurement System Improved, But Further Changes Needed,
                           GAO-01-580 (Washington, D.C.: May 15, 2001).




                           Page 9                                                    GAO-03-106 Labor Challenges
Major Performance and Accountability
Challenges




levels. Unless the performance levels can be adjusted to accurately reflect
the differences in economic conditions and the populations served, local
areas will continue to be discouraged from serving some job seekers that
could be helped.

We have made recommendations to improve performance measurement by
both ETA and VETS. Our February 2002 report made several
recommendations to Labor, such as developing ways for states to share
promising approaches in addressing the difficulties of using
Unemployment Insurance data in measuring outcomes and developing
optional performance measures for the one-stop system. To eliminate
possible disincentives to serve some job seekers, we recommended that
Labor expedite the release of guidance on revising negotiated performance
levels and allow states to immediately begin the process of renegotiation.
In September 2001 we recommended that the Secretary of Labor direct
VETS to specify performance goals and expectations for serving veterans,
implement a performance measurement system that holds states
accountable and meets other objectives, and update oversight guidelines
and improve staff training.

Labor generally agreed with our recommendations in these two reports and
has taken some actions in line with these recommendations. For example,
Labor is establishing a new unit within ETA—the Office of Performance
and Results—whose function will be to coordinate efforts to identify and
share promising approaches in such areas as the use of supplemental data
sources to close gaps in Unemployment Insurance data. In addition, Labor
implemented our recommendation to expedite the release of guidance on
revising negotiated performance levels. VETS has developed performance
measures to establish outcome goals for grant programs offering services
to veterans13 and expects to implement these measures this fiscal year. In
addition, VETS and ETA have created a new joint reporting system that
they are working to implement.




13
 These are the Disabled Veterans’ Outreach Program and the Local Veterans’ Employment
Representative program.




Page 10                                                   GAO-03-106 Labor Challenges
                        Major Performance and Accountability
                        Challenges




Improving Information   Labor also faces problems pertaining to information security, which is an
Security                important aspect of effective performance management systems. In 2002,
                        Labor operated 82 mission-critical applications and general support
                        systems that were used to perform functions such as monitoring and
                        analyzing the nation’s labor market and economic activities, managing
                        workforce services, and protecting and compensating American workers.
                        In summarizing the results of its reviews of these information systems,
                        Labor’s Office of the Inspector General has acknowledged significant
                        improvements in Labor’s information security program. For example, the
                        Inspector General notes that Labor has established an information security
                        program that adopts recognized guidelines and complies with federal
                        requirements and direction from the Office of Management and Budget,
                        and if maintained, should lead to assurances that Labor’s computer systems
                        are reliable and adequately safeguarded. However, recent audits by the
                        Inspector General have revealed some specific vulnerabilities in computer
                        security and the protection of assets. For example, the Inspector General’s
                        assessment of Labor’s core financial system identified significant system
                        security vulnerabilities, including information that was inappropriately
                        placed on the public Internet and password policy and settings with
                        inadequate controls. Audits by the Inspector General have also identified
                        repeated system security vulnerabilities and other weaknesses in several
                        areas, such as entity-wide security program planning and management,
                        access controls, and system software. Despite these vulnerabilities, the
                        Inspector General has concluded that Labor is making progress toward
                        developing a fully integrated and comprehensive security program. 14



Protect the Pensions    While Labor has key responsibilities for protecting workers’ benefits and
                        wages, our work has highlighted weaknesses in strategically targeting its
and Benefits of         compliance efforts, which limit Labor’s ability to maximize the impact of its
Workers                 limited resources. In addition, we found that Labor agencies responsible
                        for protecting pensions have not adequately addressed their human capital
                        issues, which could constrain their efforts to protect pensions as these
                        agencies face an expected surge in retirements within their workforces. It
                        is critical that these weaknesses be addressed because of Labor’s wide area
                        of responsibilities. Labor works to safeguard the economic interests of
                        more than 150 million people in an estimated 6 million employee benefit


                        14
                         U.S. Department of Labor, Office of the Inspector General, Semiannual Report to the
                        Congress: April 1, 2002-September 30, 2002, Volume 48 (Washington, D.C.: 2002).




                        Page 11                                                    GAO-03-106 Labor Challenges
                            Major Performance and Accountability
                            Challenges




                            plans—pension, health, and other plans with assets in excess of $5 trillion
                            protected under the Employee Retirement Income Security Act of 1974
                            (ERISA)—and also enforces federal provisions pertaining to wage
                            protections, such as ensuring that eligible workers receive at least the
                            federal minimum hourly wage and overtime pay. The financial collapse of
                            Enron and other corporations suggests certain vulnerabilities in private
                            pension and savings plans that can affect the nation’s workers. Although
                            such vulnerabilities may be cyclical in nature, these events nonetheless
                            underscore the importance of maintaining a well-managed enforcement
                            program.



Fostering Strategic         Labor has not strategically managed its efforts to protect employees’
Management to Better        benefit plans and provide wage protections for certain vulnerable
                            populations, such as workers with disabilities and day laborers. For
Target Compliance Efforts
                            example, we reported in March 2002 that Labor’s Pension and Welfare
                            Benefits Administration (PWBA) has not systematically estimated the
                            nature and extent of employee benefit plans’ noncompliance with ERISA
                            provisions.15 Therefore, PWBA cannot ensure that it is accurately
                            identifying the areas where it needs to focus to most efficiently and
                            effectively allocate its limited resources. Moreover, although PWBA has
                            taken steps to modernize its technology, most investigative staff still do not
                            have sufficient and timely access to automated information for researching
                            and selecting plans for investigation. Finally, PWBA’s performance
                            measurement system provides limited assurance of the overall
                            effectiveness of its ERISA enforcement program because the performance
                            measures generally focuses on program outputs, such as the number of
                            specific investigations conducted, rather than PWBA’s impact on improving
                            the plans’ overall compliance with ERISA. We made several
                            recommendations to PWBA to improve its management of the enforcement
                            program, such as developing a cost-effective strategy for assessing the level
                            and type of ERISA noncompliance among employee benefit plans and
                            coordinating the sharing of best practices among regions relating to the
                            optimum and most productive techniques for selecting and conducting
                            investigations. In response, PWBA acknowledged the need for more
                            effective oversight and quality controls, and the need to address the
                            internal management issues we raised. PWBA has identified planned


                            15
                              U.S. General Accounting Office, Pension and Welfare Benefits Administration:
                            Opportunities Exist for Improving Management of the Enforcement Program, GAO-02-232
                            (Washington, D.C.: Mar. 15, 2002).




                            Page 12                                                 GAO-03-106 Labor Challenges
Major Performance and Accountability
Challenges




actions to address several of our recommendations. For example, PWBA
plans to establish parameters for identifying long-term projects to develop
a cost-effective strategy for assessing the level and type of ERISA
noncompliance among employee benefit plans.

Data gaps have affected Labor’s ability to strategically manage wage
protections for disabled workers. Labor’s Wage and Hour Division (WHD)
of the Employment Standards Administration carries out the oversight of
section 14(c) provisions of the Fair Labor Standards Act that allow
employers to pay individuals less than the minimum wage if they have a
physical or mental disability that impairs their earning or productive
capacity.16 However, we reported in September 2001 that Labor had not
effectively managed the special minimum wage program to ensure that
14(c) workers receive the correct wages because Labor lacks the data
necessary to manage the program and determine what resources are
needed to ensure compliance by employers.17 We recommended several
actions that Labor should take to obtain the data needed to properly
manage the 14(c) program, such as improving the accuracy of its data on
the number of 14(c) employers and workers, tracking the number of staff
hours devoted to various program activities, and using these data to
manage the program. Labor generally agreed with our recommendations to
strengthen management of the 14(c) program for disabled workers and has
taken actions to address all but one of the recommendations we made.




16
   In 2001, more than 5,600 employers paid special minimum wages to about 424,000
workers.
17
  U.S. General Accounting Office, Special Minimum Wage Program: Centers Offer
Employment and Support Services to Workers With Disabilities, But Labor Should
Improve Oversight, GAO-01-886 (Washington, D.C.: Sept. 4, 2001).




Page 13                                                     GAO-03-106 Labor Challenges
                      Major Performance and Accountability
                      Challenges




                      WHD also faces difficulties in targeting its efforts to protect individuals
                      working as “day laborers,”18 who may be eligible for wage protections
                      provided under federal laws. Because WHD is unable to obtain complete
                      information about where day laborers work and what violations they may
                      face, it is hard to focus resources on them. Moreover, day laborers are
                      generally reluctant or unaware of their right to complain to authorities
                      about not being paid promised wages. While current efforts to collect
                      additional data on day laborers have promise, such efforts can be
                      expanded. To strengthen protections for day laborers, our September 2002
                      report recommended that WHD obtain better information concerning the
                      presence of and potential for violations involving day laborers, through
                      such actions as expanding contact with temporary staffing agencies or
                      other agencies that work with day laborers.19 WHD agreed with our
                      recommendations regarding its oversight of day laborers.



Ensuring Adequate     The Pension Benefit Guaranty Corporation (PBGC) and PWBA must
Investment in Human   address human capital issues that could imperil their efforts to protect
                      workers’ benefits. We identified human capital as a high-risk
Capital
                      governmentwide management challenge in January 2001 and the
                      President’s 2002 Management Agenda cited strategic management of
                      human capital as one of its five areas for governmentwide reforms. Labor
                      has estimated that over 27 percent of its entire workforce and 47 percent of
                      its supervisors will be eligible to retire in the next 5 years.




                      18
                        Day laborers is a term that generally refers to individuals who work and get paid on a daily
                      or short-term basis. Day laborers have an informal relationship with the labor market, often
                      working for different employers each day, being paid in cash, and lacking key benefits such
                      as health or unemployment insurance.
                      19
                       U.S. General Accounting Office, Workers Protection: Labor’s Efforts to Enforce
                      Protections for Day Laborers Could Benefit from Better Data and Guidance, GAO-02-925
                      (Washington, D.C.: Sept. 26, 2002).




                      Page 14                                                         GAO-03-106 Labor Challenges
Major Performance and Accountability
Challenges




Faced with significant growth in the number of large pension plan failures
beginning in the mid-1980s, PBGC began to contract for services rather
than seek additional federal staff during a period of government
downsizing. Because PBGC’s focus was on obtaining necessary services
quickly, it did not adequately link its contracting decisions to long-term
strategic planning considerations and their human capital implications. As
a result, PBGC could not be assured that it had a cost-beneficial mix of
contractor and federal employees, as federal policy requires, and risked
being unprepared for future workload changes. In addition, we identified
underlying management weaknesses in PBGC’s overall approach to
selecting and managing contractors. Inadequate oversight of these human
capital resources could result in contractor performance problems and
deterioration of service to pension plan participants. In our September
2000 report, we recommended that PBGC’s executive director conduct a
comprehensive review of its future human capital needs and strengthen its
contract oversight role by developing the capacity to centrally compile and
monitor field office performance data.20 PBGC agreed with our
recommendations and has taken actions to implement them. For example,
PBGC engaged the National Academy of Public Administration (NAPA) to
examine human capital issues and conduct a strategic workforce planning
study. PBGC has completed its review of NAPA’s study and has begun to
develop a six-step workforce planning model as recommended by NAPA.
In addition, PGGC has begun to centrally compile field office performance
data and develop an approach to comparing the performance of field
offices.

More recently, our work has highlighted human capital issues at PWBA.21
PWBA has given limited attention to key human capital issues, which could
undermine the continuity and effectiveness of its enforcement programs,
because by fiscal year 2006, 21 percent of its employees and 55 percent of
its senior managers will be eligible to retire. In addition, PWBA faces
recruitment and retention issues. In fiscal year 2001, PWBA’s rate of
attrition was 9.7 percent compared with Labor’s overall rate of 7.6 percent.
In our March 2002 report, we recommended that PWBA improve its human
capital functions by conducting a comprehensive review of its future
human capital needs, including the size and shape of the workforce; the


20
 U.S. General Accounting Office, Pension Benefit Guaranty Corporation: Contracting
Management Needs Improvement, GAO/HEHS-00-130 (Washington, D.C.: Sept. 18, 2000).
21
     GAO-02-232.




Page 15                                                 GAO-03-106 Labor Challenges
                     Major Performance and Accountability
                     Challenges




                     knowledge, skills, and abilities needed; succession planning challenges;
                     and staff deployment issues. In response to our recommendation, PWBA
                     cited various current and planned activities related to human capital
                     management and succession planning. However, the activities PWBA cited
                     are primarily stand-alone efforts and are not linked to an agencywide
                     assessment of potential changes in PWBA’s future workload and
                     workforce.



Foster Safe and      Labor continues to face major management challenges in fostering safe and
                     healthy workplaces. Labor’s effectiveness in achieving this objective is
Healthy Workplaces   fundamentally dependent on the effectiveness of the enforcement and
                     compliance strategies that it employs. However, two of Labor’s primary
                     enforcement agencies—the Occupational Safety and Health Administration
                     (OSHA) and WHD—lack performance measurement systems that provide
                     program managers with sufficient information to gauge the impacts of their
                     enforcement and compliance activities. Furthermore, Labor has not
                     always leveraged the impact of its limited resources by coordinating
                     effectively with other agencies that also share responsibilities for
                     protecting workers.




                     Page 16                                           GAO-03-106 Labor Challenges
                           Major Performance and Accountability
                           Challenges




Improving Measurement of   OSHA and WHD lack management information on the impacts of their
Program Performance        various compliance activities that is essential for determining how to best
                           allocate their compliance resources. For example, OSHA has substantially
                           increased funding in recent years for its Consultation Program, which is a
                           free, confidential service that helps small employers in hazardous
                           industries identify and eliminate hazards to employee safety. Yet OSHA
                           made this commitment without establishing the performance measurement
                           system needed to determine how well the Consultation Program promotes
                           agency goals for workplace safety and health. As a result, OSHA does not
                           know to what degree it can rely on consultation activities to achieve these
                           goals or the extent to which it should use consultations in combination
                           with its enforcement activities. To strengthen its ability to assess the
                           Consultation Program’s progress toward key agency goals, our October
                           2001 report recommended that OSHA take several actions, including
                           requiring that state consultation programs collect and forward to OSHA
                           data on injuries and illnesses from employers participating in the
                           Consultation Program, for use in analyzing the outcomes of the program.22
                           OSHA generally agreed with our report recommendations and has taken
                           actions to strengthen its performance measurement systems. For example,
                           OSHA started collecting data on injuries and illnesses from sites that
                           received consultation visits and has contracted with the National Council
                           on Compensation Insurance, Incorporated, to analyze compensation data
                           from 40 states to assess the impact of the consultation program on injury
                           and illness rates.




                           22
                             U.S. General Accounting Office, Workplace Safety and Health: OSHA Should Strengthen
                           the Management of Its Consultation Program, GAO-02-60 (Washington, D.C.: Oct. 12,
                           2001).




                           Page 17                                                  GAO-03-106 Labor Challenges
Major Performance and Accountability
Challenges




WHD also faces performance measurement issues in its efforts to
adequately enforce child labor laws. According to a recent report by Labor,
over 200,000 children are injured on the job each year and about 70 die
from their injuries. While WHD has taken some steps toward developing a
sound performance measurement system, it continues to lack performance
goals for industries in which children have high rates of injuries and
fatalities. Moreover, its performance measurement system does not allow
managers to fully assess the impact of its child labor compliance efforts.
As a result, WHD lacks a sound basis for determining the extent to which it
should devote resources to child labor investigations versus its education
and outreach and other compliance assistance activities. Our September
2002 report recommended a number of actions that Labor should take to
strengthen its ability to evaluate the effectiveness of its child labor
compliance efforts.23 These included establishing additional specific,
measurable goals for its child labor compliance efforts for the industries in
which most children work and in which they are most likely to be injured
or killed, and developing methods of measuring the success of its child
labor compliance efforts, including its education and outreach activities.
Labor disagreed with both of these specific recommendations.




23
 U.S. General Accounting Office, Child Labor: Labor Can Strengthen Its Efforts to Protect
Children Who Work, GAO-02-880 (Washington, D.C.: Sept. 27, 2002).




Page 18                                                     GAO-03-106 Labor Challenges
Major Performance and Accountability
Challenges




In some cases, OSHA’s performance measurement system can be enhanced
to help the agency better respond to emerging issues in workplace safety.
For example, OSHA’s efforts to provide health and safety protections for
day laborers have been hampered by a lack of information about where day
laborers work and what violations they may face. Congressional
representatives, researchers, and advocacy groups have raised concerns
that day laborers may be used for the most hazardous work but not be
provided safe working conditions. OSHA has sought to obtain better
information in this area. For example, OSHA implemented a temporary
pilot procedure in 2002 to collect additional national data that would
provide a better understanding of the extent to which day laborers are
involved in workplace fatalities. However, unless OSHA refines and
permanently implements its pilot data collection procedure for fatality
investigations, it may not get a complete picture of the number or
characteristics of day laborers killed on the job. Our September 2002
report made several recommendations to OSHA to strengthen protections
for day laborers, including enhancing the education and outreach
procedures it uses to reach day laborers, finalizing its current effort to
collect data on fatalities and catastrophes, and refining this data collection
effort to explicitly identify day laborers involved.24 OSHA agreed with our
recommendation to enhance the education and outreach procedures it uses
to reach day laborers, but did not express its views on the other report
recommendations.




24
     GAO-02-925.




Page 19                                              GAO-03-106 Labor Challenges
                              Major Performance and Accountability
                              Challenges




Coordinating Enforcement      Labor also faces difficulties in effectively coordinating its activities with
Efforts with Other Agencies   other agencies involved in workplace safety. For example, OSHA and three
                              other federal agencies25 play distinct roles in federal efforts to protect the
                              health of workers at hazardous materials work places and these agencies’
                              functions overlap in a number of areas. We found that, in many cases,
                              agencies either did not have or did not make use of existing mechanisms to
                              properly coordinate their activities—especially in the areas of incident
                              investigation, training, and emergency response procedures. Managers at
                              hazardous material facilities told us that this situation not only leads to
                              unnecessary burden and duplication for employers, but also potentially
                              weakens the protections afforded to workers. Our October 2000 report
                              recommended various actions that Labor should take to enhance worker
                              protection and reduce the compliance burden associated with the
                              hazardous material statutes and associated regulations, such as working
                              with other relevant federal agencies to establish a general protocol that
                              sets forth the framework under which multiagency incident investigations
                              shall be conducted.26 Although Labor agreed that it is important to
                              coordinate with other agencies at such investigations and have clear lines
                              of jurisdiction, Labor has not implemented this recommendation.




                              25
                                These agencies are the Environmental Protection Agency; the Department of the
                              Treasury’s Bureau of Alcohol, Tobacco and Firearms; and the Chemical Safety and Hazard
                              Investigation Board.
                              26
                                U.S. General Accounting Office, Worker Protection: Better Coordination Can Improve
                              Safety at Hazardous Material Facilities, GAO-01-62 (Washington, D.C.: Oct. 26, 2000).




                              Page 20                                                    GAO-03-106 Labor Challenges
GAO Contacts




               Subject(s) covered in this report   Contact person
               Employment and training             Sigurd Nilsen, Director
                                                   Education, Workforce, and
                                                   Income Security Issues
                                                   (202) 512-7215
                                                   nilsens@gao.gov
               Retirement                          Barbara Bovbjerg, Director
                                                   Education, Workforce, and
                                                   Income Security Issues
                                                   (202) 512-7215
                                                   bovbjergb@gao.gov
               Worker protection                   Robert Robertson, Director
                                                   Education, Workforce, and
                                                   Income Security Issues
                                                   (202) 512-7215
                                                   robertsonr@gao.gov




               Page 21                                            GAO-03-106 Labor Challenges
Related GAO Products



Performance and         Major Management Challenges and Program Risks: A Governmentwide
Accountability Series   Perspective. GAO-01-241. Washington, D.C.: January 2001.

                        Major Management Challenges and Program Risks: Department of
                        Labor. GAO-01-251. Washington, D.C.: January 2001.

                        High-Risk Series: An Update. GAO-01-263. Washington, D.C.: January
                        2001.



Manage Employment and   Workforce Investment Act: States’ Spending Is on Track, but Better
Training Programs       Guidance Would Improve Financial Reporting. GAO-03-239. Washington,
                        D.C.: November 22, 2002.

                        High-Skill Training: Grants from H-1B Visa Fees Meet Specific
                        Workforce Needs, but at Varying Skill Levels. GAO-02-881. Washington,
                        D.C.: September 20, 2002.

                        Unemployment Insurance: Increased Focus on Program Integrity Could
                        Reduce Billions in Overpayments. GAO-02-697. Washington, D.C.:
                        July 12, 2002.

                        Workforce Investment Act: States and Localities Increasingly Coordinate
                        Services for TANF Clients, but Better Information Needed on Effective
                        Approaches. GAO-02-696. Washington, D.C.: July 3, 2002.

                        Workforce Investment Act: Youth Provisions Promote New Service
                        Strategies, but Additional Guidance Would Enhance Program
                        Development. GAO-02-413. Washington, D.C.: April 5, 2002.

                        Workforce Investment Act: Better Guidance and Revised Funding
                        Formula Would Enhance Dislocated Worker Program. GAO-02-274.
                        Washington, D.C.: February 11, 2002.

                        Workforce Investment Act: Improvements Needed in Performance
                        Measures to Provide a More Accurate Picture of WIA’s Effectiveness.
                        GAO-02-275. Washington, D.C.: February 1, 2002.

                        Older Workers: Demographic Trends Pose Challenges for Employers and
                        Workers. GAO-02-85. Washington, D.C.: November 16, 2001.




                        Page 22                                          GAO-03-106 Labor Challenges
                          Related GAO Products




                          Workforce Investment Act: Better Guidance Needed to Address Concerns
                          Over New Requirements. GAO-02-72. Washington, D.C.: October 4, 2001.

                          Veterans’ Employment and Training Service: Flexibility and
                          Accountability Needed to Improve Service to Veterans. GAO-01-928.
                          Washington, D.C.: September 12, 2001.

                          Registered Apprenticeships: Labor Could Do More to Expand to Other
                          Occupations. GAO-01-940. Washington, D.C.: September 7, 2001.

                          Veterans’ Employment and Training Service: Proposed Performance
                          Measurement System Improved, But Further Changes Needed.
                          GAO-01-580. Washington, D.C.: May 15, 2001.



Protect the Benefits of   Worker Protection: Labor’s Efforts to Enforce Protections for Day
Workers                   Laborers Could Benefit from Better Data and Guidance. GAO-02-925.
                          Washington, D.C.: September 26, 2002.

                          Private Pensions: Participants Need Information on the Risks of
                          Investing in Employer Securities and the Benefits of Diversification.
                          GAO-02-943. Washington, D.C.: September 6, 2002.

                          Pension and Welfare Benefits Administration: Opportunities Exist for
                          Improving Management of the Enforcement Program. GAO-02-232.
                          Washington, D.C.: March 15, 2002.

                          Private Pensions: Key Issues to Consider Following the Enron Collapse.
                          GAO-02-480T. Washington, D.C.: February 27, 2002.

                          Special Minimum Wage Program: Centers Offer Employment and
                          Support Services to Workers With Disabilities, But Labor Should Improve
                          Oversight. GAO-01-886. Washington, D.C.: September 4, 2001.

                          Pension Benefit Guaranty Corporation: Contracting Management Needs
                          Improvement. GAO/HEHS-00-130. Washington, D.C.: September 18, 2000.



Foster Safe and Healthy   Workplace Safety and Health: OSHA Can Strengthen Enforcement
Workplaces                through Improved Program Management. GAO-03-45. Washington, D.C.
                          November 22, 2002.




                          Page 23                                          GAO-03-106 Labor Challenges
Related GAO Products




Child Labor: Labor Can Strengthen Its Efforts to Protect Children Who
Work. GAO-02-880. Washington, D.C.: September 27, 2002.

Worker Protection: Labor’s Efforts to Enforce Protections for Day
Laborers Could Benefit from Better Data and Guidance. GAO-02-925.
Washington, D.C.: September 26, 2002.

Workplace Safety and Health: OSHA Should Strengthen the Management
of Its Consultation Program. GAO-02-60. Washington, D.C.: October 12,
2001.

Worker Protection: Better Coordination Can Improve Safety at
Hazardous Material Facilities. GAO-01-62. Washington, D.C.:
October 26, 2000.




Page 24                                         GAO-03-106 Labor Challenges
Performance and Accountability and High-
Risk Series

              Major Management Challenges and Program Risks: A Governmentwide
              Perspective. GAO-03-95.

              Major Management Challenges and Program Risks: Department of
              Agriculture. GAO-03-96.

              Major Management Challenges and Program Risks: Department of
              Commerce. GAO-03-97.

              Major Management Challenges and Program Risks: Department of
              Defense. GAO-03-98.

              Major Management Challenges and Program Risks: Department of
              Education. GAO-03-99.

              Major Management Challenges and Program Risks: Department of
              Energy. GAO-03-100.

              Major Management Challenges and Program Risks: Department of
              Health and Human Services. GAO-03-101.

              Major Management Challenges and Program Risks: Department of
              Homeland Security. GAO-03-102.

              Major Management Challenges and Program Risks: Department of
              Housing and Urban Development. GAO-03-103.

              Major Management Challenges and Program Risks: Department of the
              Interior. GAO-03-104.

              Major Management Challenges and Program Risks: Department of
              Justice. GAO-03-105.

              Major Management Challenges and Program Risks: Department of
              Labor. GAO-03-106.

              Major Management Challenges and Program Risks: Department of State.
              GAO-03-107.

              Major Management Challenges and Program Risks: Department of
              Transportation. GAO-03-108.




              Page 25                                       GAO-03-106 Labor Challenges
Performance and Accountability and High-
Risk Series




Major Management Challenges and Program Risks: Department of the
Treasury. GAO-03-109.

Major Management Challenges and Program Risks: Department of
Veterans Affairs. GAO-03-110.

Major Management Challenges and Program Risks: U.S. Agency for
International Development. GAO-03-111.

Major Management Challenges and Program Risks: Environmental
Protection Agency. GAO-03-112.

Major Management Challenges and Program Risks: Federal Emergency
Management Agency. GAO-03-113.

Major Management Challenges and Program Risks: National
Aeronautics and Space Administration. GAO-03-114.

Major Management Challenges and Program Risks: Office of Personnel
Management. GAO-03-115.

Major Management Challenges and Program Risks: Small Business
Administration. GAO-03-116.

Major Management Challenges and Program Risks: Social Security
Administration. GAO-03-117.

Major Management Challenges and Program Risks: U.S. Postal Service.
GAO-03-118.

High-Risk Series: An Update. GAO-03-119.

High-Risk Series: Strategic Human Capital Management. GAO-03-120.

High-Risk Series: Protecting Information Systems Supporting the
Federal Government and the Nation’s Critical Infrastructures.
GAO-03-121.

High-Risk Series: Federal Real Property. GAO-03-122.




Page 26                                        GAO-03-106 Labor Challenges
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