department of labor: 2006annualreport

8/14/2019 Department of Labor: 2006annualreport

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Office of Inspector GeneralU.S. Department of LaborThe Office of Inspector General (OIG) at the U.S. Department of Labor

(DOL) is pleased to submit our FY 2006 performance report detailing our

accomplishments. This report also assesses the OIGs progress in achieving

the goals as presented in its Strategic Plan.

OIG Goals

Goal 1Optimize performance and accountability ofemployment and training programs

Goal 2Safeguard and improve worker and retiree benefitprograms

Goal 3Optimize the performance and accountability of workerprotection and workplace safety programs

Goal 4Assist DOL in maintaining an effective strategicmanagement process

Goal 5Combat the influence of organized crime and labor

racketeering in the workplace

About the OIG

The OIG is an independent agency within DOL and was created by the

Inspector General Act of 1978. The OIG is responsible for conducting

audits, investigations, and evaluations of DOL programs and operations;

identifying actual and potential problems or abuses; developing and makingrecommendations for corrective action; and informing the Secretary and the

Congress of problems or concerns. The OIG is also responsible for carrying

out a criminal investigations program to eliminate the influence of

organized crime and labor racketeering on employee benefit plans, labor-

management relations, and internal union affairs.


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OIG Mission Statement

The Office of Inspector General serves the American worker and taxpayer by

conducting audits, investigations, and evaluations that result in

improvements in the effectiveness, efficiency and economy of Departmental

programs and operations. We detect and prevent fraud, waste, and abuse in

DOL programs and labor racketeering in the American workplace. We

provide advice to the Secretary and the Congress on how to attain the highest

possible program performance.

OIG Vision Statement

To be a world-class agency that is sought after:

By the Congress for objective, relevant information;

By the Administration for expert advice and reliable assessments; and

By talented professionals for careers in an agency that recognizes

outstanding public service.

F o r d e t a i l e d i n f o r m a t i o n a b o u t w o r k , v i s i t o u r

webs i te : www.o ig . do l . gov

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Ho w Ach i evemen ti s Measu red

Achievement of OIG strategic goals is measuredin terms of how well our work products effectpositive change in DOL programs; reduce

vulnerabilities that make programs susceptible toabuse; produce a positive return on investedresources; and reduce criminal activity in theform of fraud and labor racketeering. Indicatorsto measure outcomes include the number ofaudits and investigations conducted, thepercentage of recommendations agreed to andimplemented, and convictions that result fromOIG investigations.

In order to demonstrate the impact of our work,

we also measure the monetary results of OIGinvestigations and questioned costs and fundsput to better use recommendations that arecontained in our audits.

F Y 2006 Se l ec ted S ta t i s t i cs

InvestigationsMonetary Impact ...................... $118.5 millionCases Opened ............................................ 684Cases Closed .............................................. 512Indictments................................................ 520Convictions................................................ 503

AuditsNumber of Audit Reports Issued................ 125Questioned Costs...........................$97 million

Si g n i f i can tAcco mp l i sh men ts

In FY 2006, the OIG conducted a number ofsignificant audits and investigations, highlights ofwhich follow.

2005 Hu r r i can es

When the OIG initially established targets for FY2006, the Hurricanes had not yet devastated theGulf Coast area. As a result of the Hurricanes, theOIG diverted significant resources to ensure thatDOL funds used for Hurricane response werebeing spent appropriately. DOLs responseconcentrated on its state partners payment ofunemployment benefits to individuals whobecame unemployed as a result of the hurricanes,and on DOLs funding of National EmergencyGrants (NEGs).

The OIG assessed risks and identifiedvulnerabilities that might hinder the effectivedelivery of services and benefits. We providedadvice to DOL and the states on how to mitigate

potential fraud risks. Audit work led to theidentification of significant vulnerabilitiesincluding:

evacuees who were found to be receivingunemployment benefits from a state affectedby the disaster could obtain employment inanother state while continuing to receiveunemployment benefits.

finding that $1.8 million in NEG funding was

used to cover the educational expenses of over500 students who were mass enrolled inNEG-funded college courses, even thoughthey were already attending college. Moreover,the State of Mississippi accepted eligibilityself-certifications without later verifying thestudents eligibility for training.

With respect to the investigative efforts of theOIG, the OIG initiated a two-phased approach.The first phase focused on addressing thousandsof possible cases of fraudulent claims forUnemployment benefits. The OIG openedhundreds of investigations and had much successin obtaining convictions of those found guilty ofdefrauding these programs. For example,

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The owner and operator of an Indiana-basedlabor leasing company was charged with mailfraud and failure to account for and remit


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employee withholding taxes relating to itsdisaster reconstruction work.

A former contractor at the Baton RougeCareer and Job Center pled guilty for his rolein filing approximately 80 fraudulentunemployment benefit claims with Louisiana.

He assisted in the filing and processing ofclaims for people he knew were not qualifiedto receive such assistance.

An individual pled guilty to charges of falseuse of Social Security numbers for his schemeto obtain Louisiana DUA debit cards. Hefraudulently submitted 11 different claims forLouisiana DUA. At the time of the arrest, 29weeks of DUA benefits had been credited toeach of the 11 cards, resulting in a total loss of

approximately $28,420.

The second phase of the OIGs investigative workbegan in May 2006 and is concentrating on laborracketeering schemes in reconstruction and debrisremoval. We expect that these types ofinvestigations will continue over the next fewyears as billions of dollars for reconstruction arespent.G

G o a l 1

O pt imize per fo rmance anda c c o u n t a b i l i t y o f e m p l o y m e n tand t ra in ing p rograms

oaIn FY 2006, DOLs foreign labor certification(FLC) and Job Corps programs were two majorareas of concern within this goal. As a result ofour increased attention in these two areas, wesurpassed both its audit and investigative goals.

From an investigative perspective, we completed

64 investigations, surpassing our target of 40.Moreover, we set a goal to produce a convictionrate of 85% of cases that resulted in indictmentand achieved 100%. For example:

A company owner was sentenced to 44months in prison and three years probationfor his leading role in a large-scaleimmigration fraud ring. The investigationfound that the defendants assisted aliens in

obtaining green cards through the PermanentFLC program and profited by more than$4.5 million by charging the aliens as much as$120,000 to pursue their visa applications.

A company owner pled guilty to charges ofsponsoring himself for a green card using an

alternate identity and of labor certificationsubstitution. He used counterfeit forms toapply for at least 250 green cards via the FLCprogram and made profits of at least$2.1 million from the sale of the counterfeitlabor documents.

From an audit perspective, we completed 58audits, surpassing our goal of 53. We alsoachieved a majority of our goals regarding thepercentage of recommendations resolved and

implemented.Significant audit work in for Goal 1 includedseveral Job Corps audits. Based on our past andongoing work, in FY 2006 we identified anumber of challenges, including performance-based contracts, safety and health, procurement,and student attainment. Many of these issues arelongstanding concerns for the OIG. Forexample, one audit showed that a Job Corpscenter significantly overstated its employmentand educational placement outcomes. A second

audit identified several conditions that posedhealth and safety risks to a Centers student andstaff population that warranted immediatecorrective actions.l G

G oa l 2Sa feguard and improve

worker and re t i reeb e n e f i t p r o g r a m s

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In Goal 2, we continued to focus on schemesthat defrauded the DOLs worker benefitsprograms. We set a target to complete 175investigations, and completed 277, an increasewhich can be contributed to our extensive workin the Gulf Coast area following the Hurricanes.

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Moreover, we set a goal to produce a convictionrate of 85% of cases that resulted in indictmentand achieved 94%. In addition, we continued to


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focus on high-impact, multi-state UI fraudschemes involving multiple defendants andorganized crime groups. Highlights of our workin this area include:

Two individuals sentenced for their roles in anUI identity theft scheme. The OIG

investigation found that they used more than200 stolen identities and filed 222 UI claims,obtaining more than $693,000 in UI benefits.

Two cases, one in Michigan and one in Texas,involving state employees who assistedindividuals in obtaining UI benefits to whichthey were not entitled. One allowed morethan 250 fraudulent claims to be approved,which resulted in approximately $500,000 inillegal payments. The second caused $143,479

in fraudulent benefit checks to be issued.

From an audit perspective, our target in Goal 2 was to complete 19 audits. In FY 2006, weexceeded our target and completed 21 audits. Wedid not meet all of our goals for the percentage ofrecommendations resolved and implemented;most of which related to information technologysecurity work. We expect a number of theserecommendations to be implemented in FY2007. Highlights of our work include:

An audit of the Office of WorkersCompensation Programs procedures forensuring that contract nurses with the NurseIntervention Program were properly licensedand that their access to confidential medicalrecords was restricted to only assigned cases. While DOL generally had adequateprocedures in place, we found additionalaction is needed to periodically verify nurselicenses and further restrict unnecessary accessto confidential records.

On March 22, 2006, DOLs OIG and theDepartment of Commerces OIG, hosted asymposium to address issues relating to theFECA program, a $2.4 billion program thataffects employees and agencies acrossGovernment. The goal of the symposium wasto engage the inspector general community ina more coordinated and collaborativeapproach to doing work related to the FECA

program. As part of this symposium, the OIGcommunity is developing a comprehensivelong-term plan to address this complex issue.

G oa l 3O pt imize the per fo rmance

a n d a c c o u n t a b i l i t y o f w o r k e r p ro tec t ion and workp lace

sa fe ty p rograms

oaOur target in Goal 3 was to complete 6 audits;we exceeded our target and completed 7 audits.We achieved nearly all of our targets related tothe percentage of recommendations that wouldbe resolved and implemented. Highlights of ourwork include:

An audit of the hazardous conditioncomplaint process in Mine Safety and Health Administrations (MSHAs) Office of CoalMine Safety and Health, which founddeficiencies in the process for receiving anddocumenting complaints that were routed toHeadquarters through a contractor-runanswering service.

A review of allegations by several undergroundanthracite coal mine operators that they were

treated unfairly by MSHA. The review foundno indications or corroborating evidence tosupport the allegations of harassment andunwarranted enforcement of MSHA safetystandards. However, we did identify severalregulatory areas where MSHA needed toaddress anthracite mining.

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An audit of a settlement agreement with Wal-Mart relating to allegations that the companyviolated child labor provisions of the Fair

Labor Standards Act. While the agreement didnot violate Federal laws or regulations, wefound serious breakdowns in the process fordeveloping settlement agreements. Theagreement gave significant concessions to Wal-Mart in exchange for little commitment onthe companys part. Also, significant portionsof the agreement were written by Wal-Martattorneys, and the Departments solicitor wasnot consulted during the negotiation process.


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Ralphs Grocery pleading guilty for its role ina labor dispute and agreeing to pay $50million in restitution to current and formeremployees and a $20 million fine. Ralphsillegally rehired approximately 1,000 locked-out workers during a labor dispute, whichundermined the financial integrity of the

union and its affiliated benefit plans.

G o a l 4A ss is t D O L in ma in ta in ing

a n e f f e c t i v e s t r a t e g i cm a n a g e m e n t p r o c e s s

oaMost of our work in support of this goal involves

auditing DOLs financial statements andconducting work to ensure that DOLs ITsystems are secure. In FY 2006, our goal was toconduct 20 audits in support of this goal. Weexceeded this goal by conducting 37 audits.

Eight high-ranking officials of the LIUNALocal 91 pleading guilty or being sentencedfor their roles in a conspiracy to commitviolations of the Hobbs Act. Through theirviolent scheme, Local 91 officials extortedboth local and out-of-town businesses of theirright to hire and retain workers of their choiceat construction projects.

We achieved our goals of obtaining concurrencefrom DOL on recommendations for monetarysavings and percentage of recommendationsresolved. We did not meet our targets for thepercentage of recommendations implementedand are working with the DOL to address them.Examples of our work in this area include:

The former financial secretary-treasurer of aunion local being sentenced to 18 months injail and three years probation and was orderedto pay $192,494 in restitution. Theinvestigation found that he wrote fraudulentchecks drawn on the unions bank account.

Issuing an unqualified opinion on DOLsfinancial statements for the tenth year. We didnote 10 reportable conditions, none of whichwas considered material weaknesses.

The former president of AdministrativeServices of North America being sentenced to15 years in prison and ordered to pay$837,000 in restitution. He divertedparticipant premiums from an employee

benefit plan to his personal accounts.

Completing 4 audits of critical informationsystems and performing an evaluation of theDOLs protection of sensitive agencyinformation.

G o a l 5C ombat the in f luence o f

o rgan ized c r ime and labor racke tee r ing in the workp lace

A former president and vice president offinance being convicted of multiple chargesrelated to their embezzlement scheme thatsent their company into bankruptcy. Part ofthe scheme involved embezzling $325,000from the companys pension plan. They alsodeducted $110,000 of health carecontributions from employee wages and failedto remit those funds to the third-party health

care plan administrator. More than 700employees lost their jobs as a result.

oaUnlike other Inspectors General, the DOL OIGhas a unique program responsibility forinvestigating labor racketeering and organizedcrime influence or control in unions, employee

benefit plans, and the workplace. In support ofthis responsibility, the OIG established Goal 5 tocapture our work in this area. In FY 2006 ourgoal was to complete 106 investigations. Wesurpassed our goal and completed 114. Moreover,we set a goal to produce a conviction rate of 85%of cases that resulted in indictment. We exceededthis goal by achieving a 94% conviction rate.Significant work in support of this goal includes:

Per fo rman ce T ab l es

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Following are the detailed performance tables foreach of the OIGs five goals. They show ourbaseline year of 1998 and our achievements forFYs 2003-2006.


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A Prepared Work ForceO IG G oa l #1 : O p t imize per fo rmance and accountab i l i t y o f emp loymentand t ra in ing p rogramsOutcome 1.1: Improve the effectiveness of programs in increasing long-term employment, earnings, and

self sufficiency of, and reducing social payments to, program participants.

Annual PerformanceGoals/Objectives

Baseline DataFY 1998

FY 2003Actual

FY 2004Actual

FY 2005Actual

FY 2006Target

FY 2006Actual

Conduct performance,financial and complianceaudits of DOLemployment and trainingprograms

Actual33

Evaluations0

OIG Audits27

Single Audits6

Actual43

Evaluations6

OIG Audits40

Single Audits3

Actual35

Evaluations1

OIG audits16

Single Audits19

Actual54OIG Evaluations

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OIG audits19

Single Audits35

Target: 53 Actual58

OIG audits26

Single Audits32

1998=72 Achieved inFY 2001

2003=131 Achieved 73%(95 of 131)

Achieved 85%(111 of 131)

Achieve 80% Achieved 92%(120 of 131)

2004=90 Achieved 92%(83 of 90)


Work with DOLmanagement to resolveaudit recommendationsand items identified bymanagement challenges.

(% of recommendationsresolved)

2005=149 Achieve 50% Achieved 83%(123 of 149)

1998=72 Achieved 96%(69 of 72)


Achieved 96%2

(69 of 72)Achieve 99% Achieved 96%

(69 of 72)

2003=144 Achieved 56%(71 of 131)

Achieved 74%2


(97 of 131)

2004=90 Achieved 68%(61 of 90)


Work with DOLmanagement to ensureimplementation of auditrecommendations

(% of recommendationsimplemented) 2005=149 Achieve 50% Achieved 64%

(68 of 149)

Conduct investigationsinto allegations of fraudagainst DOL employmentand training programs

45 46 42 49 40 64

Produce qualityinvestigations that result inconvictions (Convictionrate for cases thatresulted in indictment)

91% 100% 100% 97% 85% 100%

1All program evaluation work is now included in the number of audits performed. This applies to all OIG goals.

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2These outstanding recommendations have been resolved, but not yet fully implemented.


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Worker and R e t i ree B ene f i t sO IG G oa l #2 :Sa feguard and improve worker and re t i ree bene f i t sp rogramsOutcome 2.1: Improve the integrity and cost efficiency of the DOLs unemployment insurance program.Outcome 2.2: Improve the integrity and cost efficiency of the DOLs disability compensation programs.Outcome 2.3: Improve the safeguards afforded to pension and health and welfare benefit programs.



FY 2003Actual

FY 2004Actual

FY 2005Actual

FY 2006Target

FY 2006Actual

Conduct audits of DOLworker and retiree benefitsprograms and functionsand provide consultation

Actual18

Evaluations1

Actual16

Evaluations0

OIG Audits12Single Audits4

Actual22

Evaluations1


Actual21

OIG audits14

Single Audits7

Target: 19 Actual21

OIG audits17

Single Audits4


2003=144 Achieved 53%(77 0f 144)

Achieved 60%3(87 of 144)


2004=120 Achieved 52%(62 of 120)


Work with DOLmanagement to resolveaudit recommendations

(% of recommendationsresolved) 2005=146 Achieve 50% Achieved 79%

(116 of 146)


2003=144 Achieved 11%(16 of 144)


Achieve 80%3 Achieved 35%(50 of 144)

2004=120 Achieved 10%(12 of 120)

Achieve 75%3 Achieved 66%(79 of 120)


(% of recommendationsimplemented)


Conduct investigations intoallegations of fraud againstDOL worker benefitprograms

210 238 222 200 175 277

Produce qualityinvestigations that result in

convictions orcivil/administrative action

94%

(111 cases)

98%Increased by 0%

over 1998 base,the # of cases

resulting insuccessful

civil/admin action(110 cases)

90%

(82 cases)

92% 85% 94%

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3Recommendations in this category relate primarily to IT security work on which corrective action has not yet been fully implemented.


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Workp lace Sa fe ty , H ea l th , and Workp lace R igh tsO IG G oa l #3 : O p t imize the per fo rmance and accountab i l i t y o f worker p ro tec t ion and workp lace sa fe ty p rogramsOutcome 3.1: Improve the effectiveness of DOL safety and heath programs in reducing workplace injuries,

illnesses, and fatalities.Outcome 3.2: Improve the effectiveness of DOLs worker protection programs in fostering equal opportunity

and fair wages.

Outcome 3.3: Improve the integrity of DOLs worker protection and workplace safety programs.

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FY 2003Actual

FY 2004Actual

FY 2005Actual

FY 2006Target

FY 2006Actual

Conduct workplace safety,health, and standardsaudits of DOL programsand provide consultationand assistance to thoseprograms

Actual6

Evaluations4

Actual4

Evaluations0

Actual7

Evaluations0

Actual8 Target: 6 Actual7

OIG audits6

Single Audits1


2003=83 Achieved 89%(74 of 83)



2004=36 Achieved 75%(27 of 36) Achieve 75% Achieved 100%(36 of 36)

Work with DOLmanagement to resolveaudit recommendations



1998=8 Achieved 62%(5 of 8)




2003=83 Achieved 57%(47 of 83)



2004=36 Achieved 0%(0 of 36)



(% of recommendationsimplemented) 2005=38 Achieve 50% Achieved 63%

(24 of 38)

Conduct investigations intoallegations of corruption or

misconduct by safety andhealth inspectors andDavis-Bacon Cases

10 5 13 20 10 17

Produce qualityinvestigations that result inconvictions (conviction ratefor cases that resulted inindictment)

100% 100% 83% 100% 85% 94%


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D epar tmenta l M anagementO IG G oa l #4 : A ss is t D O L in ma in ta in ing an e f fec t ive managementprocessOutcome 4.1: Determine the validity of DOLs annual consolidated financial statements prepared.Outcome 4.2: Improve the financial and performance accountability of DOL and its grantees and

contractors.Outcome 4.3: Provide audited program cost and performance date.

Outcome 4.4: Identify systemic weaknesses that may result in abuses, criminal conduct, ormismanagement.



FY 2003Actual

FY 2004Actual

FY 2005Actual

FY 2006Target

FY 2006Actual

Conduct audits andprovide technicalassistance regardingDOL financial andinformation technologysystems, programperformance, andoperations

Actual5

Evaluations2Actual32

Evaluations2


Actual49

Evaluations0


Actual56


Target20 Actual37


1998=49 Achieved in

FY 20012003-323 Achieved 96%


(323 of 323)

2004=367 Achieved 71%(262 of 367)


Work with DOL

management to resolveaudit recommendations



1998=49 Achieved 88%(43 of 49)



Achieve 99% Achieved 88%4(43 of 49)

2003=323 Achieved 58%(188 of 323)



2004=367 Achieved 19%(71 of 367)


Work with DOL to ensureimplementation of auditrecommendations

(% of recommendationsimplemented)

2005=252 Achieve 50% Achieved 46%

(210 of 252)1998=56 Achieved in

FY 2001

2003=89 Achieved 83%(74 of 89)



2004=44 Achieved 73%(32 of 44)


Work to achieveconcurrence from DOLmanagement onrecommendations formonetary savings(questioned costs, fundsput to better use andother monetary findings)


Produce qualityinvestigations that resultin convictions or civil/administrative (Convictionrate for cases that

resulted in indictments)

92%(19 cases)

100%(19 cases)

100%(19 cases)

21 20

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4These recommendations relate to either our IT work, all of which have been resolved but corrective action has not been fully implemented, or ourfinancial statement work, which will be addressed during the most recent financial statement Audit.


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Labor R acke teer ingO IG G oa l #5 : C ombat the in f luence o f o rgan ized c r ime and labor racke tee r ing in the workp lace

Annual PerformanceGoals/Objective

Baseline DataFY1998

FY 2003Actual

FY 2004Actual

FY 2005Actual

FY 2006Target

FY 2006Actual

Conduct investigations oforganized crime influence

and labor racketeering inthe workplace

139 144 115 106 106 114

Carry our initiative toincrease investigativeattention to criminal activityby pension plan serviceproviders (Number ofinvestigations)

13 18 20 14 645 63

Produce qualityinvestigations that result inconvictions (conviction ratefor cases that resulted inindictment)

95% 99% 85% 86% 85% 94%

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5In FY 2006, we modified the types of investigations to include all benefit plan service providers, not just pension plan service providers.


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department of labor: 2006annualreport

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