oversight

Department of Labor: Challenges in Ensuring Workforce Development and Worker Protection

Published by the Government Accountability Office on 1997-03-06.

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

                          United States General Accounting Office

GAO                       Testimony
                          Before the Subcommittee on Human Resources,
                          Committee on Government Reform and Oversight, House
                          of Representatives


For Release on Delivery
Expected at 1:30 p.m.
Thursday, March 6, 1997
                          DEPARTMENT OF LABOR

                          Challenges in Ensuring
                          Workforce Development
                          and Worker Protection
                          Statement of Carlotta C. Joyner, Director
                          Education and Employment Issues
                          Health, Education, and Human Services Division




GAO/T-HEHS-97-85
Department of Labor: Challenges in
Ensuring Workforce Development and
Worker Protection
             Mr. Chairman and Members of the Subcommittee:

             We are pleased to be here today to discuss the challenges faced by the
             Department of Labor in carrying out its mission in a cost-efficient and
             effective fashion.

             With a budget of about $34 billion and about 16,000 staff in fiscal year
             1997, Labor’s mission is to foster, promote, and develop the welfare of U.S.
             wage earners; improve their working conditions; and advance
             opportunities for profitable employment. Over the past several years, the
             U.S. work environment has changed in such a way that achieving this
             mission is more difficult. For example, the strength of international
             competition has made us increasingly aware of the need for a skilled labor
             force. At the same time, large numbers of individuals in this country
             remain unprepared for such employment. Also, changes in
             employer/employee relations, such as increased use of part-time and
             contract employees, pose new challenges for worker protection. In
             addition, the public is demanding more accountability from government
             agencies such as Labor—more assurance that their tax dollars are not
             being wasted and that government is operated according to sound
             business practices.

             Today, I would like to discuss two major challenges Labor faces in
             achieving its mission: first, providing effective employment training
             programs that meet the diverse needs of its target populations in a
             cost-efficient manner and, second, ensuring worker protection within a
             flexible regulatory structure. In addition, I want to discuss how Labor’s
             ability to meet these challenges would be enhanced by the improved
             management envisioned by recent legislation.

             In summary, although Labor has historically been the focal point for
             workforce development activities, it faces the challenge of meeting those
             goals within the context of an uncoordinated system of multiple
             employment training programs operated by numerous departments and
             agencies. In previous testimony before this Subcommittee,1 we reported
             that, in fiscal year 1995, 163 federal employment training programs were
             spread across 15 departments and agencies (37 programs were in Labor),
             with a total budget of over $20.4 billion. Although we have not recounted
             the programs and appropriations, we are confident that the same problem
             still exists. Rather than a coherent workforce development system, we

             1
              Department of Labor: Rethinking the Federal Role in Worker Protection and Workforce Development
             (GAO/T-HEHS-95-125, Apr. 4, 1995).



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continue to have a patchwork of federal programs with similar goals,
conflicting requirements, overlapping target populations, and questionable
outcomes. As you know, comprehensive legislation that would have
addressed this fragmentation was considered but not passed by the 104th
Congress. In the absence of consolidation legislation, Labor has gone
ahead with some reforms, such as planning grants for one-stop career
centers, but the actions it has taken have not been enough to fix the
problems. Now, passage of the recent welfare reform legislation puts even
greater demands on an employment training system that appears
unprepared to respond.

A second major challenge for Labor is to develop regulatory strategies that
ensure the well-being of the nations’ workers in a less burdensome, more
effective manner. Labor has made some changes since we last testified,
which are perhaps best illustrated by actions at the Occupational Safety
and Health Administration (OSHA), such as its partnership initiatives with
companies. But OSHA’s actions have not been without controversy, and
substantial challenges remain there and at other Labor components with
worker protection responsibilities. Congressional action poses new
challenges in the worker protection area as well. Labor has committed to
redesigning its Davis-Bacon wage determination process with additional
funds appropriated by the Congress. Labor also must issue and enforce
regulations to implement the new health insurance portability law.

In meeting these mission challenges, Labor will need to become more
effective at managing its organization. The Department of Labor, like other
federal agencies, is confronted by management problems that impede its
ability to carry out its mission efficiently and effectively. Major pieces of
legislation that provide a statutory framework for improving agency
operations and accountability include (1) the 1993 Government
Performance and Results Act (GPRA), which requires agencies to focus on
results as they define their missions and desired outcomes, measure
performance, and use that performance information; (2) the expanded
Chief Financial Officers (CFO) Act of 1990, which requires agencies to
prepare financial statements that can pass the test of an independent audit
and provide decisionmakers reliable financial information; and (3) the
1995 Paperwork Reduction Act and the 1996 Clinger-Cohen Act, which are
intended to help agencies better manage their information resources and
make wiser investments in information technology. Labor has made
progress in response to each of these initiatives, but work remains to be
done before the goal of improved management is reached.




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             Labor, established as a Department in 1913, administers and enforces a
Background   variety of federal labor laws guaranteeing workers’ rights to a workplace
             free from safety and health hazards, a minimum hourly wage and overtime
             pay, family and medical leave, freedom from employment discrimination,
             and unemployment insurance. Labor also protects workers’ pension rights;
             provides for job training programs; helps workers find jobs; works to
             strengthen free collective bargaining; and keeps track of changes in
             employment, prices, and other national economic measures. Although
             Labor seeks to assist all Americans who need and want to work, special
             efforts are made to meet the unique job market problems of youths, older
             workers, economically disadvantaged and dislocated workers, and other
             groups.

             In fiscal year 1997, Labor has an estimated budget of $34.4 billion and is
             authorized 16,614 full-time-equivalent (FTE) staff-years. About
             three-fourths of Labor’s budget is composed of mandatory spending on
             income maintenance programs, such as the unemployment insurance
             program. The administration’s fiscal year 1998 budget request is $37.9
             billion in budget authority and 17,143 FTE staff. The budget request
             includes $12 billion for Labor’s major budget themes—an increase of $1.7
             billion over fiscal year 1997. Included in the request for fiscal year 1998 is
             $750 million in mandatory funding for a new welfare-to-work jobs
             program.

             Labor’s many program activities fall into two major categories: enhancing
             workers’ skills through job training and ensuring worker protection.2
             Figure 1 shows the organizational structure of the Department.




             2
              Labor also is responsible for developing economic statistics, such as the Consumer Price Index (CPI).
             Labor’s fiscal year 1998 budget requests $17.5 million to update and improve its key economic
             reporting systems, of which $2.1 million is for the first year of a multiyear initiative to revise and
             upgrade the CPI.



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Figure 1: Department of Labor Organization Chart

                                                                                                                                            Administrative Review Board
                                                                                                          Appellate Activities
                                                                                 Office of the
                                                                              Secretary of Labor                                         Office of Administrative Law Judges
                 Executive Secretariat
                                                                                 Office of the
                                                                               Deputy Secretary                                        Employees' Compensation Appeals Board
      Office of Small Business and Minority Affairs                               of Labor

                                                                                                                                               Benefits Review Board


                                                                              Program Agencies
                                                                     Employment                Mine Safety            Occupational            Pension and               Veteran's
    Bureau of                          Employment                       and                       and                  Safety and               Welfare                Employment
      Labor                             Standards                     Training                   Health                  Health                 Benefits                & Training
    Statistics                        Administration                Administration            Administration          Administration         Administration              Service




                                                                         Program Related Organizations

                                                                Bureau of
                                                              International                               Women's
                                                              Labor Affairs                                Bureau




                                                                 Departmental Staff and Support Activities
   Office of the                                                                 Office of A/S for
Assistant Secretary            Office of the            Office of the           Congressional and              Office of the               Office of                    Office of
for Administration          Assistant Secretary        Chief Financial          Intergovernmental               Inspector                   Public                        the
 and Management                  for Policy                Officer                    Affairs                    General                    Affairs                     Solicitor




                                                              Labor’s workforce development responsibilities are housed in the
                                                              Employment and Training Administration (ETA) and the Veterans’
                                                              Employment and Training Service. Together, they have a fiscal year 1997
                                                              budget of about $6.5 billion and 1,595 FTEs. Labor’s employment training
                                                              programs include multiple programs authorized by the Job Training
                                                              Partnership Act (JTPA), such as those for economically disadvantaged
                                                              adults and youth and workers who lose their jobs because of plant
                                                              closings or downsizing and Job Corps, an intensive residential program for
                                                              severely disadvantaged youth. Table 1 shows Labor’s appropriations and
                                                              staff-year spending for fiscal year 1997.

                                                              Labor has four units responsible for most of its worker protection
                                                              programs: the Employment Standards Administration, the Pension and
                                                              Welfare Benefits Administration, OSHA, and the Mine Safety and Health




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                                Administration. Together, these units have 9,020 FTEs and a budget of
                                $915 million for fiscal year 1997.

Table 1: Department of Labor
Appropriations and Staff-Year                                                     Fiscal year 1997
Spending, Fiscal Year 1997                                                       appropriations (in       Full-time-equivalent
                                Category                                                  millions)                 staff-years
                                Unemployment insurance and
                                other income maintenance
                                                                                                                                  a
                                expenses                                                    $26,467
                                                         b
                                Employment training                                               6,460                    1,595
                                Worker protection                                                  915                     9,020
                                     Employment Standards
                                     Administration                                                316                     3,942
                                     Pension and Welfare Benefits
                                     Administration                                                 77                       639
                                     Occupational Safety and Health
                                     Administration                                                325                     2,241
                                     Mine Safety and Health
                                     Administration                                                197                     2,198
                                Pension Benefits Guaranty
                                Corporation                                                         10                       731
                                Bureau of Labor Statistics                                         361                     2,544
                                Departmental management                                            165                     2,274
                                Office of Inspector General                                         47                       450
                                Total                                                       $34,425                       16,614
                                a
                                    Included under employment training.
                                b
                                    Includes ETA and Veterans’ Employment and Training Service.

                                Source: Department of Labor.




                                Our work has demonstrated that the federal government has a patchwork
Workforce                       of job training programs characterized by overlap and duplication,
Development Mission             resulting in the potential for wasted resources and reduced service quality.3
Is Challenged by                We have also noted in past work the limited information available on
                                employment training program outcomes and effectiveness.4 Further, it is
Multiple Programs
                                3
                                 Multiple Employment Training Programs: Information Crosswalk on 163 Employment Training
                                Programs (GAO/HEHS-95-85FS, Feb. 14, 1995) and Multiple Employment Training Programs: Major
                                Overhaul Needed to Reduce Costs, Streamline the Bureaucracy, and Improve Results
                                (GAO/T-HEHS-95-53, Jan. 10, 1995).
                                4
                                 Multiple Employment Training Programs: Basic Program Data Often Missing (GAO/T-HEHS-94-239,
                                Sept. 28, 1994) and Multiple Employment Training Programs: Most Federal Agencies Do Not Know if
                                Their Programs Are Working Effectively (GAO/HEHS-94-88, Mar. 2, 1994).



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                                         uncertain how this fragmented system will be able to meet the
                                         employment demands of those affected by the recent welfare reform
                                         legislation.


Multiple Employment                      A major challenge for Labor is to facilitate workforce development within
Programs With Limited                    the context of a conglomeration of programs operated by Labor and 14
Information                              other federal departments and agencies. Table 2 shows the number of
                                         different employment training programs that existed in fiscal year 1995,
                                         their target groups, and fiscal year 1995 appropriations. For example, we
                                         found that 9 programs targeting economically disadvantaged individuals
                                         had similar goals; often served the same categories of people; and
                                         provided many of the same services using separate, often parallel, delivery
                                         structures.


Table 2: Number of Employment Training Programs and Fiscal Year 1995 Appropriations, by Target Group
                                         Employment training programs
                                                                  At other agencies     Fiscal year 1995 appropriations
                                                                         (number of               (in millions)
Target groups                             Total          At Labor             agencies)           Total             Labor
Youth                                       19                  7                 12 (5)         $2,848             $2,441
Veterans                                    16                  4                 12 (2)          1,092               175
Dislocated workers                          10                  8                  2 (2)          1,647              1,574
Native Americans                            10                  1                  9 (3)            121                   64
Economically disadvantaged                   9                  3                  6 (4)          3,220               947
Women/minorities                             6                  0                  6 (3)             69                    0
Migrants                                     5                  1                  4 (1)            100                   86
Homeless                                     5                  1                  4 (3)             11                    0
Older workers                                4                  2                  2 (1)            562               463
Refugees                                     4                  0                  4 (1)            109                    0
Not categorized                             75                 10                65 (10)         10,635              1,094
Total                                      163                 37                  126          $20,414             $6,844

                                         Consolidating federal employment training programs could probably
                                         reduce the cost of providing job training services because of the
                                         efficiencies achieved through eliminating duplicative administrative
                                         activities. Although the amount of money spent administering employment
                                         training programs cannot be readily quantified and is generally not even
                                         tracked by program, we believe it is substantial. For that reason, we
                                         identified consolidation of job training programs as an option the




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Congress could consider to reduce the deficit.5 Alternatively, the Congress
could spend the same amount of money and serve more people.

Further, consolidating similar employment training programs could result
in improved opportunities to increase effectiveness in service delivery. For
example, consolidating programs could improve the assistance provided
to the target populations because individuals would be more likely to
receive the mix of services needed to achieve training or placement goals.
And, getting needed services might be less confusing and frustrating to
clients, employers, and administrators.

In anticipation of federal consolidation legislation, and to improve their
local service delivery, many states are moving ahead with their own
consolidation plans.6 Labor has engaged in several efforts to assist states
in these consolidation efforts. For example, Labor has promoted the
development of “one-stop career centers.” These centers are designed to
transform an array of employment training programs into an integrated
service delivery system for job-seekers and employers. Labor expects
them to identify the jobs that are available, the skills they require, and the
institutions that have proven track records of preparing people for new
work. This information will probably be available largely through
computer links. As of February 1996, 54 states and jurisdictions had
received planning or implementation grants to establish one-stop centers.

In addition, Labor and the Department of Education jointly administer the
school-to-work program—a program designed to build integrated learning
and employment opportunities for youth. The proposed fiscal year 1998
budget includes $200 million for each agency to ensure that “seed capital”
grants to states and communities continue.

Not only are Labor’s employment training programs part of a fragmented
system but, despite spending billions of dollars each year, many federal
agencies operating these programs do not know if their programs are
really helping people find jobs. From our past work, a common theme has
emerged: Most agencies lack very basic information needed to manage
their programs. In one of our reviews, we found that 60 percent of the 77
programs could not provide current and complete information on how
many people were served in fiscal year 1993. Programs also lack outcome

5
  Addressing the Deficit: Updating the Budgetary Implications of Selected GAO Work (GAO/OCG-96-5,
June 28, 1996).
6
 The 104th Congress considered legislation to reform and consolidate federal employment training
programs. Measures were adopted in both the House and Senate; but, after extended consideration, a
conference report was not agreed upon.



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data. In our review of 62 programs for which the economically
disadvantaged individuals were eligible, we found that less than half of the
programs obtained data on whether or not participants obtained jobs after
they received services.

To its credit, Labor has collected much basic information, including
outcome data, on its major employment training programs, such as Job
Corps and other programs funded under JTPA. It has also conducted some
evaluations to assess the impact of its programs. However, our reviews
have shown that existing performance measures and studies still do not
provide the kind of information that would provide confidence that funds
are being spent to the greatest advantage of participants. Our reviews of
the Job Corps program illustrate some of the weaknesses in current data
collection and evaluation efforts.7

Job Corps is a national employment training program that provides
severely disadvantaged youth with comprehensive services, generally in a
residential setting, at a cost of about $1 billion a year to serve about 66,000
participants. Job Corps has a list of performance measures on which the
over 100 individual centers are ranked each year. Moreover, to
demonstrate the effectiveness of Job Corps, Labor cites the positive
results of a national impact study. We have raised questions, however,
about how valuable the information from these sources is in determining
whether the high costs are justified by program outcomes.

Jobs Corps reported that, nationally, 59 percent of its students obtained
jobs in fiscal year 1993. However, when we surveyed a sample of
employers identified in Job Corps records, we were left with serious
concerns about the validity of reported job placement information.
Despite Job Corps placement verification procedures, we found that about
15 percent of the reported placements in our sample were potentially
invalid. In addition, we found that about half of the jobs obtained by
students from the sites we visited were low-skill jobs—such as fast food
worker—unrelated to the training provided by Job Corps.

The last comprehensive study of the effectiveness of the Job Corps
program, which supported the cost-effectiveness of the program, was
published more than 15 years ago. More recently, audits by Labor’s
Inspector General, media reports, and congressional oversight hearings
have surfaced issues about the quality of training and outcomes. In 1994,

7
 Job Corps: High Costs and Mixed Results Raise Questions About Program’s Effectiveness
(GAO/HEHS-95-180, June 30, 1995).



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                           Labor initiated a major impact evaluation of the Jobs Corps program. This
                           study, the initial results of which are expected to be available in 1998,
                           should be extremely useful to inform decisions about the future of the
                           program.


Welfare Act Work           The passage of the recent welfare reform legislation is likely to have an
Requirements Pose          impact on the structure and delivery of employment training programs at
Challenges for Workforce   the state and local levels.8 Because of the work requirements imposed by
                           that legislation, many individuals formerly on welfare will be needing job
Development Programs       assistance and training services. The responsibility for service delivery lies
                           with state and local offices, yet Labor has an important role because of its
                           expertise and experience. Labor can encourage and facilitate, as
                           appropriate, the integration of employment training services that may be
                           required to meet the needs of the welfare population.

                           How to serve those individuals transitioning from welfare to work, while
                           at the same time meeting the service needs of dislocated workers and
                           other client populations, is a challenge for Labor. Concerns have been
                           raised about the availability of appropriate jobs, the level of training and
                           skills required for jobs, the impact of competition for low-skilled jobs on
                           the wages of low-skilled workers, and the extent to which the current
                           employment training system can absorb and provide needed services to
                           the expanded welfare population.

                           In addition, it is critical that Labor and other agencies providing services
                           consider the employment training needs of welfare clients in the process
                           of providing job placement assistance. Our work on promising
                           employment training practices shows that providing occupational skills
                           alone is not the answer. Equally, or perhaps even more, important are
                           employability skills—the ability not only to get a job but to keep a job.9
                           Concerns have been raised that in the rush to place welfare clients in jobs,
                           if the appropriate mix of skills is not provided, many clients potentially
                           will lose their jobs and go back on welfare.

                           It is too early to determine the direction or magnitude of the changes that
                           will occur as a result of these pressures. At the same time, Labor can begin

                           8
                            Personal Responsibility and Work Opportunity Reconciliation Act of 1996.
                           9
                             Employment Training: Successful Projects Share Common Strategy (GAO/HEHS-96-108, May 7, 1996).
                           In addition to improving employability skills, we identified three other key features that successful
                           projects incorporated in their strategy: (1) ensuring participant commitment to training and getting a
                           job, (2) removing barriers that might limit a client’s ability to finish training and get and keep a job, and
                           (3) linking occupational skills training with the local labor market.



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                           to monitor the situation and be responsive to the needs of states and
                           localities as they transition individuals from welfare to work. For example,
                           our work on identifying strategies used by successful employment training
                           projects is the type of information that can be shared with states to assist
                           their efforts.


                           When we testified before this Subcommittee almost 2 years ago about the
Opportunities Exist to     overall federal role in worker protection,10 we stressed the need for Labor
Improve Labor’s            to change its approach to one that was more service oriented and made
Worker Protection          more efficient use of agency resources. Some evidence exists that Labor
                           has moved in that direction, especially in OSHA. But this change has not
Efforts                    been without controversy, and further opportunities exist to develop
                           alternative regulatory approaches.

                           In addition to the overall need to consider alternatives to current
                           regulatory approaches, Labor faces regulatory challenges in two specific
                           areas: (1) redesigning the wage determination process under the
                           Davis-Bacon Act and (2) as a result of recent legislative action, developing
                           and enforcing regulations regarding portability of employer-provided
                           health insurance.


Implementing Alternative   Labor, like other regulatory agencies, is faced with balancing the emphasis
Regulatory Approaches      it places on different strategies for carrying out its mission. These
                           strategies include (1) establishing workplace standards that directly set
                           the terms and conditions of employment and relying on Labor’s
                           enforcement efforts, in combination with judicial review, to enforce these
                           standards and (2) encouraging the direct resolution of workplace
                           problems by the parties themselves. In a June 1994 report11 describing
                           actual employer and employee experiences with worker protection
                           regulations, we summarized the concerns of both employers and unions
                           that agencies change their approaches toward regulation. They urged
                           agencies to develop a more service-oriented approach: improving
                           information access and educational assistance to employers, workers, and
                           unions and permitting more input into agency standard setting and
                           enforcement efforts. Responding to these concerns would put more
                           emphasis on giving parties the tools to resolve problems themselves, as

                           10
                            Department of Labor: Rethinking the Federal Role in Worker Protection and Workforce Development
                           (GAO/T-HEHS-95-125, Apr. 4, 1995).
                           11
                            Workplace Regulation: Information on Selected Employer and Union Experiences
                           (GAO/HEHS-94-138, Vol. 1, June 30, 1994).



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well as make enforcement less of a “gotcha” exercise and more one that
recognizes good faith compliance efforts. These changes would also have
the potential for improving the way limited agency resources are used for
regulatory purposes.

Changes in OSHA’s regulatory approach illustrate Labor’s action in this
direction. In May 1995, the administration announced three regulatory
reform initiatives to “enhance safety, trim paperwork, and transform
OSHA.” This action was considered necessary because, despite OSHA’s
efforts, the number of workplace injuries and illnesses was still too high,
with over 6,000 workers dying each year from workplace injuries and
6 million suffering nonfatal workplace injuries. In addition, the
administration acknowledged that the public saw OSHA as driven too often
by numbers and rules, not by smart enforcement and results. The first
initiative, the “New OSHA,” called for OSHA to change its fundamental
operating paradigm from one of command and control to one that
provides employers a real choice between partnership and a traditional
enforcement relationship. The second initiative, “Common Sense
Regulation,” called for a change in approach by identifying clear and
sensible priorities, focusing on key building block rules, eliminating or
updating and clarifying out-of-date and confusing standards, and
emphasizing interaction with business and labor in the development of
rules. The third initiative, “Results, Not Red Tape,” called for OSHA to
change the way it works on a day-to-day basis by focusing on the most
serious hazards and the most dangerous workplaces and by insisting on
results instead of red tape.

OSHA  has continued to operate with this approach, but it has not done so
without criticism. For example, the administration’s fiscal year 1998
budget request includes an increase of $8.4 million for OSHA’s partnership
initiatives. These initiatives include such activities as cooperative
compliance programs, which build on the “Maine 200 program,” initiated
as a pilot in 1993. Cooperative compliance programs offer companies with
high numbers of workplace injuries or illnesses a chance to conduct
self-inspections to identify workplace hazards and develop worksite safety
and health action plans. In return for such participation, these companies
may have a lower priority on the primary target inspection list. For
employers who decline the offer of a partnership, the traditional
enforcement approach is used. According to trade news press, while many
people have praised the partnership initiatives, others have raised
questions such as the following:




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                            •   What data should be used to identify companies with high numbers of
                                injuries (workers’ compensation claims, claims rates, or other data)?
                            •   Has the effectiveness of the pilot effort been demonstrated well enough to
                                extend it nationwide?
                            •   Has the emphasis on partnerships been at the expense of effective
                                enforcement actions against companies continuing to violate the
                                standards?

                                Further opportunities exist for OSHA to leverage its resources and
                                demonstrate “smarter” enforcement. For example, in a recent study, we
                                found that the federal government awarded $38 billion in federal contracts
                                during fiscal year 1994 to at least 261 corporate parent companies with
                                worksites where OSHA had proposed significant penalties for violations of
                                safety and health regulations.12 We pointed out that agencies could use
                                awarding federal contracts as a vehicle to encourage companies to
                                improve workplace safety and health or—if companies refuse to improve
                                working conditions—debar or suspend federal contractors for violation of
                                safety and health regulations. One of our recommendations was that OSHA
                                work with the General Services Administration and the Interagency
                                Committee on Debarment and Suspension on policies and procedures
                                regarding how safety and health records of federal contractors could be
                                shared to help agency awarding and debarring officials in their
                                decisionmaking. Labor recently told us that some discussions have
                                occurred between OSHA and the Interagency Committee, but final decisions
                                have not been reached on any new policies and procedures.13


Improving the Davis-Bacon       The Wage and Hour Division within Labor’s Employment Standards
Wage Determination              Administration has responsibility for administering the Davis-Bacon Act.
Process                         This act requires that workers on federal construction projects in excess
                                of $2,000 be paid the wages and fringe benefits that the Secretary of Labor
                                determines to be “prevailing” in their locality for their class of worker. The
                                act itself has been controversial throughout its more than 60 years of
                                existence. Much of the controversy has hinged on whether Labor sets




                                12
                                 Occupational Safety and Health: Violations of Safety and Health Regulations by Federal Contractors
                                (GAO/HEHS-96-157, Aug. 23, 1996).
                                13
                                  Several newspaper accounts, however, have reported that in a Feb. 18, 1997, meeting with
                                A.F.L.-C.I.O. leaders, the Vice President announced that the administration is developing guidance
                                requiring a company’s record on labor laws and violations of safety and health laws to be considered in
                                awarding federal contracts.



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                   prevailing wage rates that are, in fact, higher than those prevailing in the
                   area—thus artificially inflating federal construction costs.14

                   Labor has acknowledged weaknesses in its wage determination process
                   that call into question the integrity and accuracy of some of its wage
                   determinations. For this reason, it requested funds to develop, evaluate,
                   and implement alternative reliable methodologies or procedures that
                   would yield accurate and timely wage determinations at a reasonable cost.
                   Labor’s fiscal year 1997 budget request included $3.7 million for that
                   purpose. The conference report accompanying the Department’s
                   appropriation requested that we review these implementation activities to
                   determine whether they will achieve their goals. We will do so and report
                   our findings to the Appropriation Committees, as requested, when Labor
                   has completed its work.

                   Labor took some actions that we recommended in our May 1996 report as
                   a short-term solution to reduce its vulnerability to the use of fraudulent or
                   inaccurate data in the wage determination process. These actions,
                   including increased verification of information provided by employers, will
                   at least reduce some of the vulnerabilities of the existing process. The
                   larger challenge facing Labor, however, is to examine and substantially
                   improve the overall process.


Health Insurance   Labor’s Pension and Welfare Benefits Administration (PWBA) has
Portability        significant new regulatory, interpretive, enforcement, and disclosure
                   responsibilities associated with implementing the Health Insurance
                   Portability and Accountability Act of 1996 (HIPAA). These responsibilities
                   stem from Labor’s role in enforcing and administering the Employee
                   Retirement Income Security Act of 1974 (ERISA), which regulates the
                   2.5 million private sector, employment-based health benefit plans that
                   cover an estimated 125 million workers and their families. HIPAA amended
                   ERISA to provide for improved portability and continuity of health
                   coverage. The HIPAA portability provisions are designed to improve the
                   availability and portability of health insurance coverage by (1) limiting
                   exclusions for preexisting conditions and providing credit for previous
                   coverage, (2) guaranteeing availability of health coverage for small
                   employers, (3) prohibiting discrimination against employees and
                   dependents on the basis of health status, and (4) guaranteeing
                   renewability of health coverage for employers and individuals. These


                   14
                    Davis-Bacon Act: Process Changes Could Raise Confidence That Wage Rates Are Based on Accurate
                   Data (GAO/HEHS-96-130, May 31, 1996).



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                        provisions will make it much easier for workers to change jobs and
                        maintain health care coverage. And, according to Labor, millions more
                        who have been unwilling to leave their job for a better one out of concern
                        that they would lose their health care coverage would also benefit.

                        The Congress set a very short timeframe for implementing these
                        protections: Although the act was only signed into law on August 21, 1996,
                        the regulations to carry out the portability provisions must be issued by
                        April 1, 1997. Labor is working with the Department of Health and Human
                        Services and the Treasury Department to meet that date because these
                        provisions—called “shared provisions”—involve overlapping
                        responsibilities of the three departments. In a statement before the Senate
                        Committee on Labor and Human Resources in February of this year, the
                        Assistant Secretary of Labor for PWBA said the three departments are “on
                        track” to meet that goal.15 The regulations issued by April 1 will target the
                        preexisting condition limitation and certification of previous health
                        coverage portions of the portability provisions. The regulations will reflect
                        comments received in response to a December notice in the Federal
                        Register and will be fully effective when issued. Nevertheless, Labor
                        intends to ask for public comments after they are issued and consider the
                        need for any changes on the basis of the comments. Work will continue on
                        other portions of the portability provisions after publication of the first set
                        of regulations.


                        Adopting improved management practices can help Labor become more
Statutory Framework     effective in achieving its mission of improving workforce skills and
for Improving Labor’s   protecting workers. Recognizing that federal agencies have not always
Management              brought the needed discipline to their management activities, recent
                        legislation provides a framework for addressing long-standing
Practices               management challenges. The centerpiece of this framework is the 1993
                        Government Performance and Results Act. Other elements are the 1990
                        Chief Financial Officers Act, the 1995 Paperwork Reduction Act, and the
                        1996 Clinger-Cohen Act. These laws each responded to a need for
                        accurate, reliable information for executive branch and congressional
                        decision-making. Labor has begun to implement these laws which, in
                        combination, provide a powerful framework for developing (1) fully
                        integrated information about Labor’s mission and strategic priorities,
                        (2) performance data to evaluate the achievement of those goals, (3) the
                        relationship of information technology investments to the achievement of

                        15
                         Statement of Olena Berg, Assistant Secretary of Labor, PWBA, before the Senate Committee on Labor
                        and Human Resources, Feb. 11, 1997.



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                          performance goals, and (4) accurate and audited financial information
                          about the costs of achieving mission outcomes.


Improving Mission         GPRA is aimed at improving program performance. It requires that agencies
Performance and Results   consult with the Congress and other stakeholders to clearly define their
                          missions. It also requires that they establish long-term strategic goals, as
                          well as annual goals linked to them. They must then measure their
                          performance against the goals they have set and report publicly on how
                          well they are doing. In addition to ongoing performance monitoring,
                          agencies are expected to perform discrete evaluation studies of their
                          programs, and to use information obtained from these evaluations to
                          improve the programs.16

                          In moving toward an increased emphasis on program performance and
                          results, Labor has begun developing an agencywide plan that describes its
                          mission, goals, and objectives. According to the Office of Management and
                          Budget (OMB), developing an overall mission and goals is a formidable
                          challenge for Labor because of the diversity of the functions performed by
                          its different offices. OMB officials have told us that the different offices in
                          Labor have developed draft strategic plans that describe their respective
                          goals and performance indicators. For example, ETA’s plan describes its
                          mission, its strategies for achieving its employment training objectives,
                          and the measures it will use to assess program outcomes. These plans
                          were submitted to OMB with the Department’s most recent budget
                          submission. Although Labor is not required to submit the strategic plans to
                          the Congress and OMB until September 1997, this year’s early submission
                          was used to obtain informal review and feedback on the draft plans.

                          According to OMB, Labor is committed to developing a strategic approach
                          that includes measurable outcomes. OMB’s review of Labor’s plans
                          indicated that some parts of the Department are doing better than others,
                          especially in identifying measures to assess results. At the same time, OMB
                          recognizes that developing such measures may be more difficult for some
                          offices than for others because of the differences in the specificity of goals
                          and difficulty of quantifying some outcomes.17




                          16
                           Executive Guide: Effectively Implementing the Government Performance and Results Act
                          (GAO/GGD-96-118, June 1996) and Managing for Results: Using GPRA to Assist Congressional and
                          Executive Branch Decisionmaking (GAO/T-GGD-97-43, Feb. 12, 1997).
                          17
                            By June 1997, we will be reporting on the prospects for governmentwide compliance with GPRA.



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                      According to Labor, it is continuing to make progress in meeting GPRA
                      legislative mandates. Over the next few months, Labor officials will
                      continue discussions with OMB as well as consultations with the Congress
                      and the stakeholders.

                      OSHA,  as one of the GPRA pilot agencies, has been involved in a number of
                      activities geared toward making the management improvements
                      envisioned by the act. It has developed a draft strategic plan that identifies
                      its performance goals and measures, and it has been working to develop a
                      comprehensive performance measurement system that will focus on
                      outcomes to measure its own effectiveness. OSHA and state representatives
                      have discussed the application of this comprehensive system to OSHA’s
                      monitoring of state safety and health programs. Although we have not
                      reviewed the quality of OSHA’s performance measures, these types of
                      planning and assessment efforts are consistent with those set out in GPRA
                      to promote a results orientation in reviewing programs. This system, when
                      fully implemented, will also be responsive to recommendations we made
                      in a February 1994 report.18

                      Labor’s decentralized organizational structure makes adopting the better
                      management practices described in GPRA quite challenging. Labor has 24
                      component offices or units, with over 1,000 field offices, to support its
                      various functional responsibilities. Establishing departmental goals and
                      monitoring outcome measures is a means by which the Department can
                      ensure that its operations are working together toward achieving its
                      mission.


Improving Financial   The CFO Act was designed to remedy decades of serious neglect in federal
Reporting             financial management operations and reporting. It created a foundation
                      for improving federal financial management and accountability by
                      establishing a financial management leadership structure and
                      requirements for long-range planning, audited financial statements, and
                      strengthened accountability reporting. The act created chief financial
                      officer positions at each of the major agencies, most of which were to be
                      filled by presidential appointment. Under the CFO Act, as expanded in 1994,
                      Labor, as well as all other 23 major agencies, must prepare an annual
                      financial statement, beginning in fiscal year 1996.

                      18
                        In Occupational Safety and Health: Changes Needed in the Combined Federal-State Approach
                      (GAO/HEHS-94-10, Feb. 28, 1994), we recommended that OSHA emphasize measures of program
                      outcome and evaluations of the effectiveness of specific program features as it assesses both its own
                      activities and those of the state-operated occupational safety and health programs it is statutorily
                      responsible for overseeing.



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                            Since 1986, Labor has produced audited departmentwide financial
                            statements, thus complying with this requirement of the CFO Act.
                            Producing audited financial statements that comply with the act involves
                            obtaining an independent auditor’s opinion on the Department’s financial
                            statements, report on the internal control structure, and report on
                            compliance with laws and regulations. By meeting these requirements,
                            Labor has been instilling accountability and oversight into its financial
                            activities. Labor also has a chief financial officer, in compliance with the
                            act.


Improving Information       The Paperwork Reduction Act of 1995 is the overarching statute dealing
Management and the Use      with the acquisition and management of information resources by federal
of Information Technology   agencies. The Clinger-Cohen Act of 1996 reinforces this theme by
                            elaborating on requirements that promote the use of information
                            technology to better support agencies’ missions and to improve program
                            performance. Among their many provisions are requirements that agencies
                            set goals, measure performance, and report on progress in improving the
                            efficiency and effectiveness of information management generally—and
                            specifically, the acquisition and use of information technology.

                            The Paperwork Reduction Act is based on the concept that information
                            resources should support agency mission and performance. An
                            information resources management plan should delineate what resources
                            are needed, as well as how the agency plans to minimize the paperwork
                            burden on the public and the cost to the government to collect the
                            information. The Clinger-Cohen Act sets forth requirements for
                            information technology investment to ensure that agencies have a system
                            to prioritize investments. Clinger-Cohen also requires that a qualified
                            senior-level chief information officer be appointed to guide all major
                            information resource management activities.

                            Labor has made some efforts to improve its information management
                            systems; for example, it has appointed a chief information officer. OMB, in
                            1996, raised a question regarding this individual’s also serving as the
                            Assistant Secretary for Administration and Management. The
                            Clinger-Cohen Act requires that information resources management be the
                            primary function of the chief information officer. Because it is unclear
                            whether one individual can fulfill the responsibilities required by both
                            positions, OMB has asked Labor to evaluate its approach and report back to
                            OMB in a year.




                            Page 17                                                      GAO/T-HEHS-97-85
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In past work, we have identified weaknesses in Labor’s information
management practices. For example, our review of Labor’s field offices
demonstrated the lack of centrally located information on key
departmental functions, such as field office locations, staffing, and costs.
We eventually identified 1,074 field offices,19 having constructed a profile
of information about these field offices from information Labor provided.20
 But constructing this profile was difficult. In response to our request for
this information, Labor’s Office of the Assistant Secretary for
Administration and Management queried the individual components and
assembled a list of 1,037 field offices. We identified other offices using
documents Labor provided, which brought the total to 1,056. When Labor
reviewed a draft of the report, it amended the list again to add 18 more
offices and bring the total to 1,074. Consequently, we had to report as a
limitation of our findings that there was no assurance that all the
information provided used consistent definitions and collection methods.

In our report on Labor’s Davis-Bacon wage determination process,21 we
also identified limited computer capabilities as a reason for the process’
vulnerability to use of fraudulent or inaccurate data. We found a lack of
both computer software and hardware that could assist wage analysts in
their reviews. For example, Labor offices did not have computer software
that could detect grossly inaccurate data reported in Labor’s surveys to
obtain wage data. And the hardware was so outdated that the computers
had too little memory to store historical data on prior wage
determinations, which would have allowed wage analysts to compare
current data with prior recommendations for wage determinations in a
given locality.

The OIG cited areas in which Labor needs to improve its information
management practices, especially those used to support financial
accounting systems. For example, the OIG reported on ETA’s system for
accounting for the Job Corps program’s real and personal property. The
OIG noted that ETA’s systems were insufficient, relying primarily on manual
spreadsheets; were not integrated with Labor’s general ledger; and were




19
  We defined a “field office” as any type of office other than a headquarters office—for example, a
regional office, district office, or area office—established by a Labor component.
20
 Education and Labor: Information on the Departments’ Field Offices (GAO/HEHS-96-178, Sept. 16,
1996).
21
  GAO/HEHS-96-130, May 31, 1996.



Page 18                                                                           GAO/T-HEHS-97-85
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             not reconcilable to Job Corps contractor reports. As a result, there was
             insufficient accountability for Job Corps real property expenditures.22

             This year, we added two new areas to our “high-risk” issues, both of which
             apply to Labor as well as to all other government agencies.23 The first area,
             information security, generally involves an agency’s ability to adequately
             protect information from unauthorized access. Ensuring information
             security is an ongoing challenge for Labor, especially given the sensitivity
             of some of the employee information being collected.

             The second area involves the need for computer systems to be changed to
             accommodate dates beyond the year 1999. This “year 2000” problem stems
             from the common practice of abbreviating years by their last two digits.
             Thus, miscalculations in all kinds of activities—such as benefit payments,
             for example—could occur because the computer system would interpret
             00 as 1900 instead of 2000. Labor, along with other agencies that maintain
             temporal-based systems, is faced with the challenge of developing
             strategies to deal with this potential problem area in the near future.


             Labor’s programs touch the lives of nearly every American because of the
Conclusion   Department’s responsibilities for employment training, job placement, and
             income security for workers when they are unemployed, as well as
             workplace conditions. Labor’s mission is an urgent one. Each day or week
             or year of unemployment or underemployment is one too many for
             individuals and their families. Every instance of a worker injured on the
             job or not paid legal wages is one that should not occur. Every employer
             frustrated in attempts to find competent workers or to understand and
             comply with complex or unclear regulations contributes to productivity
             losses our country can ill afford. And every dollar wasted in carrying out
             the Department’s mission is one we cannot afford to waste.

             Labor currently has a budget of about $34 billion and about 16,000 staff to
             carry out its program activities. Over the years, however, our work has
             questioned the effectiveness of these programs and called for more
             efficient use of these substantial resources.



             22
              Office of Inspector General, U.S. Department of Labor, Semiannual Report to the Congress
             (Washington, D.C.: U.S. Department of Labor, Apr. 1-Sept. 30, 1996).
             23
              High-Risk Series: Information Management and Technology (GAO/HR-97-9, Feb. 1997). See also,
             High-Risk Series: An Overview (GAO/HR-97-1, Feb. 1997) and High-Risk Series: Quick Reference Guide
             (GAO/HR-97-2, Feb. 1997).



             Page 19                                                                       GAO/T-HEHS-97-85
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                   Like other agencies, Labor must focus more on the results of its activities
                   and on obtaining the information it needs for a more focused,
                   results-oriented management decision-making process. GPRA and the CFO,
                   Paperwork Reduction, and Clinger-Cohen Acts give Labor the statutory
                   framework it needs to manage for results. Labor has begun to improve its
                   management practices in ways that are consistent with that legislation, but
                   implementation is not yet far enough along for it to fully yield the benefits
                   envisioned.

                   We are hopeful that the changes Labor is making in its approach to
                   management will help it better address the two challenges we have
                   identified:

               •   developing employment skills through programs that meet the needs of a
                   diverse workforce in the most cost-effective way and
               •   effectively ensuring the well-being of the nations’ workers while reducing
                   the burden of providing that protection.


                   Mr. Chairman, this concludes my prepared statement. I will be happy to
                   answer any questions that you or Members of the Subcommittee might
                   have.


                   For more information on this testimony, call Harriet C. Ganson, Assistant
Contributors       Director, at (202) 512-9045. Joan Denomme and Jacqueline Harpp also
                   contributed to this statement.




                   Page 20                                                     GAO/T-HEHS-97-85
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Page 22                              GAO/T-HEHS-97-85
Page 23   GAO/T-HEHS-97-85
Related GAO Products


                    Employment Training: Successful Projects Share Common Strategy
Workforce Skills    (GAO/HEHS-96-108, May 7, 1996).

                    Job Corps: High Costs and Mixed Results Raise Questions About
                    Program’s Effectiveness (GAO/HEHS-95-180, June 30, 1995).

                    Multiple Employment Training Programs: Information Crosswalk on 163
                    Employment Training Programs (GAO/HEHS-95-85FS, Feb. 14, 1995).

                    Multiple Employment Training Programs: Major Overhaul Needed to
                    Reduce Costs, Streamline the Bureaucracy, and Improve Results
                    (GAO/T-HEHS-95-53, Jan. 10, 1995).


                    OSHA: Potential to Reform Regulatory Enforcement (GAO/T-HEHS-96-42,
Worker Protection   Oct. 17, 1995).

                    Davis-Bacon Act: Process Changes Could Raise Confidence That Wage
                    Rates Are Based on Accurate Data (GAO/HEHS-96-130, May 31, 1996).


                    Managing for Results: Using GPRA to Assist Congressional and Executive
Management Issues   Branch Decisionmaking (GAO/T-GGD-97-43, Feb. 12, 1997).

                    Information Technology Investment: Agencies Can Improve Performance,
                    Reduce Costs, and Minimize Risks (GAO/AIMD-96-64, Sept. 30, 1996).

                    Information Management Reform: Effective Implementation Is Essential
                    for Improving Federal Performance (GAO/T-AIMD-96-132, July 17, 1996).

                    Executive Guide: Effectively Implementing the Government Performance
                    and Results Act (GAO/GGD-96-118, June 1996).

                    Executive Guide: Improving Mission Performance Through Strategic
                    Information Management and Technology (GAO/AIMD-94-115, May 1994).




(205342)            Page 24                                                   GAO/T-HEHS-97-85
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