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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Department of Labor: Challenges in

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Worker Protection

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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Department of Labor: Challenges in

Ensuring Workforce Development and

Worker Protection

Background Labor, established as a Department in 1913, administers and enforces a

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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Department of Labor: Challenges in

Ensuring Workforce Development and

Worker Protection

Figure 1: Department of Labor Organization Chart

Administrative Review Board

Executive Secretariat

Departmental Staff and Support Activities 

Office of the


Assistant Secretary


for Administration


and Management

Office of the


Secretary of Labor


Office of the


Deputy Secretary


of Labor

Program Agencies

Program Related Organizations

Employees' Compensation Appeals Board

Office of Administrative Law Judges

Benefits Review Board

Office of the


Assistant Secretary


for Policy

Office of the


Chief Financial


Officer

Bureau of


International 


Labor Affairs

Women's


Bureau

Office of A/S for


Congressional and


Intergovernmental


Affairs

Office of the 

Inspector 


General

Office of 


Public


Affairs

Office of


the 


Solicitor

Bureau of 


Labor


Statistics

Employment


Standards


Administration

Employment


and


Training 


Administration

Mine Safety


and


Health


Administration

Occupational


Safety and


Health


Administration

Pension and


Welfare


Benefits


Administration

Veteran's


Employment


& Training


Service

Appellate Activities

Office of Small Business and Minority Affairs

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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Department of Labor: Challenges in

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Worker Protection

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

Spending, Fiscal Year 1997

Category

Fiscal year 1997

appropriations (in

millions)

Full-time-equivalent

staff-years

Unemployment insurance and

other income maintenance

expenses $26,467 a

Employment trainingb 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

aIncluded under employment training.

bIncludes ETA and Veterans’ Employment and Training Service.

Source: Department of Labor.

Workforce

Development Mission

Is Challenged by

Multiple Programs

Our work has demonstrated that the federal government has a patchwork

of job training programs characterized by overlap and duplication,

resulting in the potential for wasted resources and reduced service quality.3

We have also noted in past work the limited information available on

employment training program outcomes and effectiveness.4

 Further, it is

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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Worker Protection

uncertain how this fragmented system will be able to meet the

employment demands of those affected by the recent welfare reform

legislation.

Multiple Employment

Programs With Limited

Information

A major challenge for Labor is to facilitate workforce development within

the context of a conglomeration of programs operated by Labor and 14

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

Fiscal year 1995 appropriations

(in millions)

Target groups Total At Labor

At other agencies

(number of

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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Department of Labor: Challenges in

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Worker Protection

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.

Page 7 GAO/T-HEHS-97-85
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Worker Protection

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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Worker Protection

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

Requirements Pose

Challenges for Workforce

Development Programs

The passage of the recent welfare reform legislation is likely to have an

impact on the structure and delivery of employment training programs at

the state and local levels.8

 Because of the work requirements imposed by

that legislation, many individuals formerly on welfare will be needing job

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.

Opportunities Exist to

Improve Labor’s

Worker Protection

Efforts

When we testified before this Subcommittee almost 2 years ago about the

overall federal role in worker protection,10 we stressed the need for Labor

to change its approach to one that was more service oriented and made

more efficient use of agency resources. Some evidence exists that Labor

has moved in that direction, especially in OSHA. But this change has not

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

Regulatory Approaches

Labor, like other regulatory agencies, is faced with balancing the emphasis

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

10Department of Labor: Rethinking the Federal Role in Worker Protection and Workforce Development

(GAO/T-HEHS-95-125, Apr. 4, 1995).

11Workplace 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

Wage Determination

Process

The Wage and Hour Division within Labor’s Employment Standards

Administration has responsibility for administering the Davis-Bacon Act.

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

12Occupational Safety and Health: Violations of Safety and Health Regulations by Federal Contractors

(GAO/HEHS-96-157, Aug. 23, 1996).

13Several 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

Portability

Labor’s Pension and Welfare Benefits Administration (PWBA) has

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

14Davis-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.

Statutory Framework

for Improving Labor’s

Management

Practices

Adopting improved management practices can help Labor become more

effective in achieving its mission of improving workforce skills and

protecting workers. Recognizing that federal agencies have not always

brought the needed discipline to their management activities, recent

legislation provides a framework for addressing long-standing

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

15Statement 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

Performance and Results

GPRA is aimed at improving program performance. It requires that agencies

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

16Executive 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).

17By 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

Reporting

The CFO Act was designed to remedy decades of serious neglect in federal

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.

18In 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

Management and the Use

of Information Technology

The Paperwork Reduction Act of 1995 is the overarching statute dealing

with the acquisition and management of information resources by federal

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.

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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

19We 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.

20Education and Labor: Information on the Departments’ Field Offices (GAO/HEHS-96-178, Sept. 16,

1996).

21GAO/HEHS-96-130, May 31, 1996.

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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.

Conclusion Labor’s programs touch the lives of nearly every American because of the

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.

22Office 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).

23High-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.

Contributors For more information on this testimony, call Harriet C. Ganson, Assistant

Director, at (202) 512-9045. Joan Denomme and Jacqueline Harpp also

contributed to this statement.

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

Workforce Skills Employment Training: Successful Projects Share Common Strategy

(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).

Worker Protection OSHA: Potential to Reform Regulatory Enforcement (GAO/T-HEHS-96-42,

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).

Management Issues Managing for Results: Using GPRA to Assist Congressional and Executive

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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