Semi-Annual Report of the Inspector General

October 1,1979 - March 31,1980 U.S. Department of Labor Office of Inspector General

,_%

SEMI-ANNUAL OCTOBER OFFICE U.S. i, 1979 OF

REPORT - MARCH 31, 1980

INSPECTOR OF

GENERAL LABOR

DEPARTMENT

TABLE MESSAGE CHAPTER CHAPTER CHAPTER CHAPTER FROM I. II. III. IV. THE INSPECTOR GENERAL

OF

CONTENTS I 9 CRIME AND RACKETEERING 59 63 INTERNAL AFFAIRS 75 79

PROGRAM OFFICE

AGENCIES OF ORGANIZED

DEPARTMENTAL

MANAGEMENT OIG

EMPLOYEE INTEGRITY, AND THE HOTLINE

APPENDICES

MESSAGE Pursuant pleased ments

FROM THE INSPECTOR to the provisions to transmit

GENERAL: of the Inspector concerning General Act of 1978, I am

this report during

the activities

and accomplish31, 1980.

of this Office

the period

of October

i, 1979 - March

It is my second that I will May 2. my

report

as Inspector

General.

It is also the last one this Office, as of

issue

in view

of my decision

to leave

This message

thus provides

a final

opportunity

for me to express

thoughts

on the role learned

of the Inspector my tenure

General

and the lessons

that I have

during

in this job.

The long-term in general,

success

of this Office,

and of the Inspector about

General

movement

is dependent

on a new way of thinking that the efforts change,

government and of the other in which

accountability. Inspectors Federal

It is clear

of this Office, the ways

General,

to bring about

to affect

programs

are designed

and managed,

and to create

a commitment nor easily

to the IG concept achieved.

in its broadest

sense are not quickly be planned

This kind of change ways:

must

and reinforced of senior managers; planning approaches; operating

in many different aggressive, an effective policies.

through

careful

selection

well-designed organizational

training

programs;

creative

structure;

and specially-tailored

While we have pursued is that the most

active

audit

and investigative during

programs,

my view period the

important

accomplishments

this reporting selecting

have been remainder to insure envisioned opportunity

in completing

our organizational

development, a solid

of our senior managers that we are able by the Inspector to discuss

and creating

IG framework of initiatives

to undertake General Act.

effectively I would

the kinds

like to take this

these accomplishments

in some detail.

First,

in terms of organizational structures

development, components

we now have approved of this Office. prelude to hiring

organization

for all major

They are important senior management

not only because people

they are a necessary

to run these components,

but because about

they reflect to

the organizational design major

philosophies

of our top managers For example,

how best

and implement program

our activities. (the Office

all three of our the Office have program as well the increased in as of desks

components

of Investigations, and Prevention) coordination agencies.

Audit and the Office which are designed facilitate

of Loss Analysis

to enhance with

intra-Office DOL program these

coordination

Further, will create

division-level emphasis

structures

within

components

on internal

audits, area.

on training,

and on capacity-building

the loss prevention

Second,

with

respect

to senior

level

recruitment,

we made

considerable

progress.

Our Assistant

Inspector

General

for Investigations,

-2-

A.M.

Statham,

joined manager

our who, has

staff

during of

this his

period. work with in

He the the

is

a top-notch Postal collar of

investigative Inspection crime area

because

U.S. white

Service, and

considerable inspections Mr. He

experience using has the

in managing

combined made in

skills

auditors

and

investigators. to this case Office.

Statham has

already

substantial implementing for

contributions an

been

instrumental

investigations and city

tracking

system,

in designing priorities, in

a system

analyzing quadrant leadership

assigning and team

investigative approaches and to

establishing and in providing

field

activities, projects.

to joint

audit

investigative

A

second

new our

senior as

level Chief

appointee of the

is Walter

McDonough

who

recently Staff. management of personnel,

joined Mr. field budget, tive

staff

Administrative in the

Management administrative in the areas

McDonough's will

specialized our Office

experience with

provide

leadership ADP

training,

internal

communications,

management

and

administra-

services.

Our

capability has been

in

the

Office

of

Organized by the

Crime

and

Racketeering of OOCR the New York

(OOCR)

greatly offices

enhanced (which

reorganization 30% lead of the the new

Metropolitan and the

area

contain to U.S.

personnel) Ms. Fields,

appointment Strike and Force

of Rhonda and

Fields

office.

a former experience

Assistant to the new

Attorney,

brings

considerable

expertise

position.

-3-

Finally, on the

in one

order hand,

to

achieve

fully

the

goals effort

of

this

Office, our

we

have, to the Department

expended

considerable and on

within thinking to create

Office

re-orient best an of

traditional each discipline, of

audit

investigative the other, and

to utilize within We the

and, unique an

understanding and put and

our

role

responsibilities. to complement process. the bv for

have support

designed our

into have

place

infrastructure a new IG

and

programs,

initiated in

planning

These working the the training Office of

accomplishments relationships programs Loss we we have

are

reflected developed by

a number within the

of ways--by Department, have we begun have

have

initiated, Prevention,

the and

plans the

we

Analysis be

and

projects

already

undertaken,

_¢hich will

described

below.

The

only

major our been to

stumbling plans has

block been the

which

prevents we

this have and the

Office had has in

from

aggressively

pursuing Ihis our has

difficulty of

staffing. hampered the the in

a constant do our

source as

frustration, advised and

severely and

ability

work,

I have

Secretary

Assistant personnel classifying Presidential on this

Secretary process new is

for

Administration complex Added and to

Management. slow,

Apparently, especially is the

both

painfully these may of system impact its

positions.

problems especially

hiring which

limitations is in the

_hich midst

harshly recruitment.

Office,

first

substantial

It our

should top

be

noted

that

a

disturbingly occupied with

high

percentage _ith our

of

the

time

of

managers involving

has

been

dealing of

internal

affairs they

matters,

the

integrity

of members

staff.

_ile

-4-

constitute effort

only a small percentage, is disproportionate

these

employees numbers,

consume but made

time and necessary nature This

which

to their

both by our commitment of the procedures area of Internal

to complete

integrity,

and the consuming problems.

established Affairs

to deal with more

personnel fully

is reviewed

in the body of the

report.

Despite fronts° Prior

these difficulties, The development

we have moved

ahead

on a number program

of substantive

of our loss prevention of the Office of pilot more

has continued. and Prevention These have

to the establishment

of Loss Analysis

(OLAP), we undertook projects, focused

a series

loss prevention elsewhere Program,

projects.

which are described

fully

in this report, the Department's Program, and Health audit

on the Redwood Management CETA

Employee

Protection

Personnel

System,

the Black

Lung Benefit Safety

contracting, Since we were reporting General General

eligibility,

and the Mine established have been

Administration. this

unable

to get OLAP

and staffed directed

during

period,

these projects Coordination

by an ad hoc Inspector Inspector

Function

Committee Inspectors

made

up of the Deputy

and the two Assistant

General.

OLAP will be assuming

lead responsibility program.

for designing

and managing and

the OIG loss prevention the implementation demonstrated have

The establishment loss prevention

of this Office projects

of several

pilot

have all I

our commitment convinced

to a strong

loss prevention overall

posture.

long been

that the OIG's

effort must program

be focused and system

on the identification

and elimination

of fundamental

-5-

weaknesses believe

and that

vulnerabilities "pro-active" improved of

to waste, approach in

fraud will the In

and

abuse. this

I firmly Office's enable us

this to

enhance Department, addition and

contributions to make bility system the better for

management resources. projects assuming existing report,

and to its

use

scarce

responsisupport

loss

prevention will be

in

program

management for ann

areas,

OLAP of of

responsibility regulations maintaining

coordinating legislation, with the GAO, state

analysis

proposed the

and

preparation and local

semi-annual and

liaison and to

governments, on technologies program.

non-governmental methodologies

entities, applicable

conducting the loss

research prevention

and

During which two

this $34

reporting in

period, costs were

168

final

audit

reports In

were

issued, there First, are we

in

million audit the

questioned. I would like to

addition,

special that of into

initiatives Secretary's

highlight. has has

are

pleased review input the audit backlog audit believe made of

Audit audit

Review process. that lead to

Committee The the OIG

completed had

its

the the if

Department's report. We

extensive contained in the in the

believe will

recommendations

report,

implemented, process and

significant in major also

improvements reductions an in

resolution of review that

will

result We

unresolved of the the

audit 1979

reports. Youth review its

conducted Program that that

extensive We program

Summer of this

Employment indicate and

(SYEP). 1979

results in

the the

major

progress will

achieving in even

goals,

recommendations of the 1980

the

report

result

better

administration

program.

-6_-

Given to

the

complexity that much

and of

magnitude audit regular are

of and

ETA

programs,

it

stands is directed ETA that our is critical

reason

our A

investigative between and very to

activity OIG and and

toward to

these

programs. that are

dialogue

insure

both

issues

discussed I am agreed SYEP job into Service OIG

resolved, pleased action Also, data. false

OIG relationship

recommendations with ETA has

implemented. ETA has

with on ETA

how all

developed. stemming validation an OIG

take

of OIG's to

recommendations improve resulted developed state work the

from process

our for

review. placement alleged and

plans

This

recommendation statistics of a

from by

investigation Employment ETA be and

placement conviction audit and

a State

subsequent

official. groups

Finally, will

have and

established resolving

investigations issues.

which

identifying

interagency

We

can

be

proud It sum

of

what come

this

Office

has that

accomplished the whole a real that of IG

since the

its is and greater spirit

creation. than within to build the

has of

to realize and I am of

Office

its

parts,

I perceive confident

identity Office

our on

organization. its record

this

will

continue

accomplishment.

This the of

report Department

first

reviews

our

work

in connection

with

the

programs then the work involving

administers, of Organized OIG

and Crime

Departmental and

management, and

the

Office

Racketeering, and the

then

matters

Employee

Integrity,

Internal

Affairs

Hotline.

MARJORIE Inspector

FINE

KNOWLES

General

-7_

CHAPTER A. The THE

I.

PROGRAM AND

AGENCIES TRAINING ADMINISTRATION (ETA) those (CETA). administers authorized This Act several by was the amended Act the Youth

EMPLOYMENT and

Employment and

Training

Administration including Act and

employment Comprehensive by of the

training Employment of the

programs, and

Training Jobs

addition the

Emergency Jobs

Unemployment Act of

Assistance 1976, The and

1974,

Emergency

Program Projects of

Extension Acts of

Employment in 1978 by

and the

Demonstration CETA Amendments

1977. 95-524).

Act

was

re-authorized

1978

(P.L.

Under of

the

Act, units

as

amended,

all

states of

and

cities, or more work At

counties receive

and

combinations Federal training 473 projects

local

with and

populations administer needs units with of

i00,000

direct and are

grants programs such

to design to serve and or

comprehensive their areas.

experience there

the

present, which such

state

local contract are

called other

"Prime groups for

Sponsors", to provide

operate services. that do

themselves Generally, the

states

responsible to in receive same

programs

in areas

not

meet

population grantees (Native

criterion serve American)

Federal capacity

funds as

directly. Sponsors

In addition, in operating

certain Indian

the and

Prime

Migrant

Programs.

Under are

the Act unemployed and

as

amended

in 1978,

economically get

disadvantaged upgrading, them for The

persons

who

or underemployed other services and

can

training, to qualify

retraining, jobs. 1978 Programs

education, include

designed public

work-experience

service

employment.

__9 m

amendments ways

to CETA also provide private industry

for a demonstration in providing jobs

program

to test sector for

to involve

in the private for obtaining

for the disadvantaged, people on welfare.

and to test new approaches

jobs

Generally,

the new CETA provide

serves

only economically to people

disadvantaged

persons. in

Some programs getting speaking work,

services

who have special persons with

problems

such as Native

Americans, There

limited

Englishpeople--

ability,

and veterans.

are programs

also for young Adult

both in school Corps,

and out--such Youth

as the Job Corps, Program

the Young

Conservation

the Summer

Employment

and the Youth

Incentive

Entitlement

Projects.

ETA also administers Employment Service

the employment

security

programs

through

the U.S.

and the Unemployment Agencies

Insurance

Service. over

The affiliated local it, along

State Employment offices with to serve

Security

(SESA's)

operate

3,000

those seeking eligible

employment

and those providing benefits.

serving

persons

for unemployment

Local (JS).

employment

offices

in most

states are now identified

as the Job Service

The

largest

single

benefit

program

operated

by the State

Employment Insurance to unemployed and

Security (UI).

Agencies

or directed temporary

by the U.S. DOL is Unemployment income as partial jointly compensation

UI provides

workers. Training

UI programs

are administered Unemployment

by the Employment Service

Administration's

Insurance

and the individual

-I0-

states.

The Federal

Government

establishes under

guidelines

and pays administraUnemployment of

tive costs from funds collected Tax Act (FUTA).

provisions

of the Federal

The states have direct

responsibility

for operation

UI programs.

UI programs weeks

are financed

from three

sources.

The basic payrolls

benefits

for 26

are financed

by state taxes on employers' in the Federal also contribute Unemployment

that are maintained In three extensions funds and 50

in state accounts states, beyond percent employees

Trust

Fund.

to that fund. 50 percent

Benefit

the 26th week are financed from the FUTA account.

from state

Payments

for former

Federal

civilian of

employees,

veterans,

and individuals

who lost their jobs

as a result disaster,

the nation's made

trade policies, Federal

or as a result of a natural funds. Despite

are

from general

revenue

variations payments

in financing, for most

the state agencies programs

take applications of state

and administer laws.

under provisions

State and Local CETA Program During this reporting period, which

Audits the OIG issued took exception are responsible though 48 audit reports on state It should for all

and local CETA programs be noted CETA

to $22.5 million. to the Department

that prime sponsors

funds granted subgrantees.

to them even Unresolved

the program audit

may be administered exceptions, improper or

through

subsponsor

allocation

of administrative

charges,

and ineligible eligibility

participants

the lack of documentation remained the major reasons

to support

of participants, costs or recommending

for questioning

program

-ii-

disallowance resulted

of costs.

Many

of the unresolved

subsponsor

audit

exceptions required

from ineligible eligibility.

participants

or a lack of documentation

to support

A summary

of the major

reasons

for the exceptions Amount of Exceptions

is shown

below:

Audit

Exception Audit

No. of Reports with Exception

Unresolved Subsponsor Exceptions

$ 9,309,222

20

Improper Allocation of Administration Charges Insufficient Ineligible Participant of Annual Documentation Participants Wages Rate in Excess

1,249,028 4,002,436 666,891

7 19 18

199,994

2

Reported Expenditure in Excess of Recorded Expenditures Bidding Budget Errors Other Procedures Exceeded on Close Out Report Not Followed

4,741,757 667,820 65,376 224,691 1,441,956 $22,569,171

4 1 3 1 29

The illustrative the reporting

examples

presented

below

are typical

findings

during

period.

_12-

An

examination

of

195

randomly

selected made to

public ineligible to

service

employment

wage Using

payments statistical an

disclosed

6 payments it is

participants. with period 95%

principles, wage

possible during

project, audit

accuracy,

ineligible and 6.5%.

payments

rate

the

of between

1.1%

One

audit

recommended of: lack of

disallowances contract

of

approximately duplicate fringe

$1.3 charges;

million excess

as

a result fringe

approval; wages The and

benefits; audit system A double

ineligible exceptions. lacked entry the

benefits; that

and, the

unresolved grantee's in by the

subsponsor accounting grantee. Other hand; failure wage

audit checks,

disclosed a finding has now

internal accounting grantee were

concurred been

system erroneously not

implemented. zero cash basis; practices; retirement and some in the on a

findings grant

were:

reported on

closeout

reports for

submitted poor $i0,000 the none CETA of

a timely

to account to

unclaimed

checks;

procurement per year;

payments were

participants in

exceeded of

benefits

cbarged were

violation Also, been

regulations; costs

participants prior audit,

ineligible. had

the

questioned

$957,238,

resolved.

We

found

in another from used the

audit of

that: original

the

sponsor an

had

not

prepared basis controls our audit, for of

financial accounting in effect over the $72

reports was for not

books the

entry;

accrual were time no of

during to

audit

period; and, been

there at the

advances in of

subcontractors; had not

million practice made

subcontracts questioning by this audit.

audited. of

The

reason

audit is

costs The

because sponsor

inadequate

documentation control

clear

failed

to adequately

-13-

cash hooks 1978. other

advances reflected However, than

made

to

subcontractors. of the $1.5 million

The

"advance"

account on

on

the 30,

a total because advances,

outstanding was used

September

advance

account

for

transactions the total As of a

cash

it was major choice

impossible

to determine of the

advances result, million.

receivable the auditors

without had no

reconstruction but to question

accounts.

disbursements

$1.5

In another the

audit, of

a review excessive a loss

of

the cash

grantee's balances to

cash during the

management the audit

disclosed period. of As

maintenance there

a result,

was

of

interest calculation

Federal based on

Government average

approximately balances times

$106,297. the average

The

was

monthly

monthly

interest

rates.

Weaknesses identified. pre-audit and were

in

the The

purchasing bookkeeper invoices, in

system performed check the

at

the all

same the

sponsor

were

also

following

functions: of office invoices, memoranda

of

vendor

preparation, of

cancellation While and

recording prepared for

transactions detailing purchase the of

books

account. cost the

description, supplies were fraud and

quantity, equipment, These

appropriate were

approval discarded are an

memoranda

when

orders to

placed. and

weak

internal

controls

open

invitation

abuse.

Another management activities

audit

revealed

that of

the

sponsor

did

not

maintain and

a

financial results of grant

system during

capable the

providing period.

accurate Records

complete were used

audit

which

to prepare

-14-

Federal

reports were

not reconciled

to depository

balances. from

When the sponsor's

a comparison reports

of the constructed to a cash basis

cash balance

obtained

adjusted

was made with

the actual

cash on hand, This sponsor wages.

an unaccounted also charged These charges limitations; permitted $400,000 fringe

for difference employers were made and

of $402,250

was disclosed.

for a portion

of their CETA

employees'

for two reasons:

(I) because

of budgetary maximum

(2) for CETA wages regulations.

in excess

of the $i0,000 received

under Federal during

The sponsor

approximately wages and

fiscal year paid

1978 from employers

representing

benefits

to CETA participants However,

in excess were

of budgetary deposited

and

regulatory account sponsor

limitations.

the refunds

in a separate the

and were not used did not report

for CETA program of these remained were

purposes. funds

Furthermore,

the receipt

to the U.S. DOL/ETA. Withdrawals they were used

As of September from the account

30, 1978, $345,482 which totaled

in the account. questioned

$54,071

because

by the sponsor questioned

to close out non-CETA pending

grants.

In addition, of all refunds reports.

the auditors to the sponsor's

$345,482 account

the restoration

CETA program

and the correction

of Federal

Review

of the Summer Youth Employment of Departmental Employment

Program interest in the CETA a major in progress, reviews

As the result Summer Youth review

and Congressional (SYEP),

Program

the OIG undertook operations were

of the FY 1979 SYEP program. from our Office of Audit,

While

auditors

and from 13 CPA firms

conducted

-15-

at 28 Prime Sponsors.

Primes

were

selected

for review cities,

from a spectrum rural and suburban

of all types and sizes--large counties, consortia

and medium-sized

of local governments

and Balance

of State recipients.

The objectives --

of this

special

review were

to determine Sponsors

whether: exposed "world

SYEP worksites participants of work";

used by the 28 Prime to work situations

resembling

the real

--

Required

monitoring

of SYEP worksites and their

was accomplished

by the Prime -Corrective visits; -Payments

Sponsors

subrecipients; of the monitoring

action was

taken as a result

were made

only

to bona

fide participants. at 2,230 worksites, of monitoring disclosed interviews

The review which with participants and observation

included

on-site

observations

and their supervisors, of 711 worksite payroll

analysis

activities, that:

distributions

Of the 2,230 worksites visited by OIG, 1,871 participants with work situations where: ---meaningful work and sufficient enforced,

(84%) provided

work was performed, and supervised.

rules were

participants

were adequately

Of the 13,900 participants assigned to the 2,230 worksites, 71 percent of the participants were assigned to these 1,871 worksites.

-16-

Over 35,000 monitoring visits were performed 28 Primes and their subrecipients.

by the

No instances of fraudulently-drawn SYEP paychecks were noted in the worksite payroll distributions observed during the review. Corrective actions including reassignments of participants, closure and restructuring of worksites, and reassignment of supervisory responsibilities were promptly taken on many of OIG's observations. The success of worksites in providing SYEP participants with real life work situations ranged from Lane County, Oregon, where no problems were noted to the District of Columbia where only 42 percent of the worksites visited by OIG met the review criteria. The Administrator favorably criteria receiving greater for the ETA Office of Youth Programs commented to one of the were ratio

on our review.

He did, however, whether

take exception participants

used in considering adequate

worksite

supervision,

namely

participant with

to supervisor

than ten to one.

Of 104 worksites unacceptable

supervision

problems, of that criterion.

only five were considered

solely

on the basis

We concluded with made

that the high percentage work situations

of worksites

providing

participants visits in

real-life

was partially and their would

due to the monitoring However,

by the 28 Prime Sponsors the same benefits visits improved through more

subrecipients.

our opinion monitoring function,

have been obtainable planning

with fewer

effective instruments

of the monitoring worksite agreements.

monitoring

and detailed

-17.-

To further require:

improve

future

SYEP Programs,

we recommend

the Department

Worksite agreements specifying the names and locations of the worksite, the work rules and hours of work for each position funded, the numbers and type of positions funded, job description for the positions funded, and the names of the individuals who will directly supervise the SYEP participants. All monitoring plans (Prime and subrecipients) writing with specific, measurable objectives. be in

Monitors to use monitoring instruments which capture objective information showing whether the worksite is meeting the SYEP objectives. Standardization of the methods of selecting and timing of worksite visits by monitors to (a) eliminate excessive reviews and (b) assure reviews are performed in a manner which provides time to redefine objectives and take corrective action early in the program. We have been informed that ETA is taking steps to, in some manner, implement

all of the recommendations.

Migrant During Migrant began

and Seasonal the reporting and Seasonal

Farmworker period

Program

Audits were issued concerning Programs

26 audit

reports

Farmworker as a part

program

grantees.

The Farmworker

in the 1960's

of the Economic

Opportunity

Act and were are

administered both

by the Office

of Economic

Opportunity. based,

The grantees

state organizations by the various

and community states. through

non-profit programs

corporations transferred with Employment

chartered

Farmworker

were

to the Department the Community and Training

of Labor

a Memorandum prior under

of Understanding

Services

Administration continued

to the Comprehensive

Act and were

that legislation.

-18_

These programs annually. compliance

currently

receive

approximately

$81 million

in CETA funds and

Some of the grantee audit reports

problems

disclosed below.

in the financial

are described

One of the major grantees fiscal

problems

for Migrant

and Seasonal proper

Farmworker

program and ETA

that must

be addressed

to insure

grant management organization.

responsibility grantees

is that of the multi-funded to obtain as many grants

encourages

as possible.

We understand Migrant

that approximately grantees Title in recent

95% of these grantees years have become

are multi-funded.

administrators and other grants

of not only CETA seasonally employed agencies, are staff

III Section

303 funds for migrant

farmworkers, including responsible

but have sought

and received

from other

other CETA prime

sponsors,

HEW, CSA and USDA. often

Grantees without

for administering to manage

as many as 26 grants,

skills needed insufficient unacceptably many

these complicated

organizations.

Frequently in an

funds are allocated low quality

to the fiscal area personnel.

resulting

of administrative periods

In the all too sources takes numerous,

instances

where grant

are short and funding systems

the development

of comprehensive of grant

administrative proposals.

a back

seat to the preparation

-19-

Many of the migrant or control personal which entities

grantees created Typically

in the Western for the purpose the property

and Southwestern of holding is acquired title

states

own

to real and/or loans

property.

through

are repaid

by charging

rent to the various the grantees funds

government

grants.

By the creation regulations

of such entities, to limit

are able

to circumvent property

designed

grant

paid for grantee-owned

to either depreciation

or two percent

of acquisition

cost per year.

The process difficult proposed

of controlling in which

grantee

administration

is made

all the more in the

in cases grant.

subcontracts

are not documented

We have

concluded

that current

reporting

requirements the production

for grantees

are

insufficient information activity.

in that necessary Grantees

they do not compel for DOL grant tend to design

of the type of monitor around ongoing the

managers their

to adequately systems

accounting to prepare. to control to prepare The costs would

types of reports when the required

that they are required reports are inadequate system used

The result receipts and

is that

expenditures, usually

the accounting for proper

the reports

is also

inadequate

control.

incurred be more

in utilizing than offset of funds.

an adequate by better

accounting

and reporting

system

internal

controls

and a reduction

in the misuse

-20-

Exceptions during this

taken

in

the

samples are

examined

for

the below: of

26 audit

reports

issued

reporting

period

summarized

Amount Audit Ineligible Insufficient Exception Participants Documentations

No. with

of

Reports

Exceptions $ 559,862 1,186,593

Exception 25 25

Improper Allocation of Administrative Charges Overbilling Conflict Budget of of Costs

1,534,289 153,354 165,963 39,267

22 1 1 4

Interest

Exceeded Staff's Salaries, Fringe Benefits

Unqualified Wages and Other

653,904 522,014 $4,815,246

5 25

A more of the

complete financial the period

picture data 1976 Total

of

grant

problems in the

may

be

had

through of 44

an grants

analysis awarded

contained through

audit

reports

during

1978. Total Subject Audit $20,117,926 42,969,330 27,060,057 $90,147,313 Costs to Costs i/ Questioned $ 4,775,139 1,967,870 10,440,551 $17,183,560 $ Costs Rec° for Disal. 631,858 1,961,299 747,496 $3,340,653 2/

Geo. Area Eastern Midwest Western

No. of Grants i0 16 18 44

Grants Budgets $ 26,591,847 61,916,589 32,614,109 $121,122,545

i/ Questioned costs are expenditures without sufficient documentary evidence to enable the auditor to make a decision as to allowability. _/ Costs recommended for judges, based on available of the grant. disallowance evidence, are to be expenditures unauthorized which under the the auditor terms

-21-

It should

be noted arise

that the amounts

questioned

or recommended

for as part on the

disallowance

from the examination If these

of specific were

transactions based

of a statistical error rate

sample.

figures

projected increase

found in the sample,

the amounts

would

significantly.

Of 143,848 sampled

participants

enrolled

in 38 grants eligibility.

audited, Of those

5,068 were sampled, 30% were

to evaluate

participant

determined

to be ineligible 1,207). from

or questionable Problems related

(ineligible, to participant

303; eligibility eligibility

not determinable, generally result

inadequate

intake procedures

and are exacerbated

by poor record

retention

by the grantee.

There

are significant Many

problems because

in indirect

cost charges

to the migrant or expertise, concept have

grants.

grantees, indirect

of a lack of knowledge In fact,

not implemented indirect cost

cost plans.

the basic

of using We

rates does not seem belief on behalf with

to be understood of grantees that

by many grantees. indirect expenditures

found a general do not have

to comply

Federal

cost principles.

Examples paid

of the inappropriate bonuses

expenditures

are numerous--one staff which

grantee all salary

salary

to its administrative and in some cases

exceeded

guidelines Member

of grantee

CETA regulations;

a Board compensated charged

of one grantee

who was not an employee travel expenses;

and not directly another grantee

for his time had unacceptable

-22-

all administrative collecting revenues

costs to its various cost revenue

grants

as direct grants

costs, while such

the indirect

from other

and using

in violation

of Federal

cost principles.

Native Fifteen audits

American

Program

Audits issued for the Native American The Program. major These

audit reports took exception

were

to approximately documentation

$1.9 million. and poor

problems practices.

continued

to be inadequate of exceptions

record-keeping

The amounts

are shown below. Amount of Exceptions $ 106,820 778,675 45,935 No. of Reports with Exception 13 15 1

Audit Ineligible Insufficient Budget

Exception Participants Documentation

Exceeded

Improper Allocation of Administrative Charges Other ,b

629,719 38.8.,335 $1,949,484

7 Ii

Job Corps Program Sixteen period

Audits audit reports were issued during the reporting for the

Job Corps Cente_ which

took exceptrion to $2.9 million.

The major

reasons

exceptions

are shown beiow.

-23-

Audit Bidding

Exception not Followed

Amount of Exceptions $ 651,147

No. of Reports with Exception i0

Procedures

Lack of DOL Approval for Capital Improvements, Training Projects, Budget Exceeded Documentation Staff Qualifications Accounting Records

etc.

419,243 71,109 776,008 779,284 43,629 189,088 $2,929,508

9 6 14 6 2 2

Insufficient Inadequate Inaccurate Other

--

One report because

took exception

to approximately

$765,000

primarily

a number

of instructors

and counselors

did not meet

employment proposal licensing unexplained payroll

qualifications

established

by the contractor's certification The report or

or they had not obtained for the positions costs reported

proper

they held. to DOL,

also noted for

a lack of documentation charges.

costs and other

unallowable

--

A second

report

disclosed

that the contractor services, and capital

was unable items were

to

demonstrate purchased met

that goods,

at the best available and experience

prices

or that staff

employees

educational

requirements.

The contractor licensed

may have

hired professionals

who were

not properly

or certified.

-24-

In

addition,

prior capital

DOL

approval which

was

not

obtained

before amount

purchasing or before

items

exceeded and, and there

a specified was

renting for in this

equipment; staff report travel

insufficient actions. The

documentation exceptions

personnel about

totaled

$346,000.

Office During funded

of National the period,

Prosrams/Office OIG issued either in the 36 the

of audit

Policy reports

Evaluation on grants Act or

and and

Research contracts The

Audits

largely

through

Older are

Americans shown Amount

CETA.

exceptions

identified

reports

below. of No. with of Reports

Audit Ineligible Insufficient Budget

Exception Participant Documentation

Exceptions $ 834 173,424 56,270

Exception 1 13 6

Exceeded

Improper Allocation of Administrative Charges Other

347,269 80,899 $658,696

8 i0

Cash For

Manasement some time,

Audit we have

Review been concerned the CETA at about program. Prime the effectiveness Initial Sponsors Treasury survey with of work cash has

management disclosed for

practices excess cash

within

balances the

CETA

a potential Disbursing

improvement

in both

method

by which

Regional

-25-

Offices Prime both

transfer Sponsor

funds

and

cash We and

management are

practices

within

the local

individual impediments,

organizations.

presently nature,

identifying to effective

of

an

organizational of CETA program

statutory

cash

management

funds.

We in in

hope DOL

that cash

our

next

report

will

contain which, costs

suggestions when to

for

improvement will result

management savings

practices in interest

implemented, the U.S.

significant

Treasury.

State OIG

Employment issued five

Security financial SESAs

Agency and during

Audits

and

Reviews reports period. and six ADP

compliance the

audit

reviews

concerning

reporting

One

audit

disclosed (UC) monies Act Tax

that funds

an

agency

had

improperly management

expended incorrectly costs under

Unemployment believed provisions

Compensation that of such

because

agency for

were which Act

available makes (FUTA) In

administrative funds for collected

under the of

the

Reed

excess

Federal the Employment the state Reed

Unemployment Security expended Act funds. (ES) all

available this in case, the UC

administration in March

Program. the state then UC

beginning Fund, $34.7 loan in

1972,

funds borrowed

including million

unobligated from the

They to pay until

another This repaid UC

Federal to

Government $137 Reed million Act

benefits. loan was for

balance December, and An

steadily 1978.

increased Consequently were of not

the

funds for by

were ES the

expended

benefits

therefore exception

available was taken

administrative auditors.

expenditures.

$765,873

-26-

An ADP application Design Center

system

survey

of the Unemployment that the design

Insurance concept

System has merit. as little

(UISDC)

concluded

center

However, a bona

the survey also

found that the UISDC entity. The survey

did not really

exist

fide independent

also found

that there was

or no cost benefit projects. UISDC

analysis

performed

in conjunction

with

any of UISDC's plans exist for the as a

Additionally,

it was found recommended

that no long-range that UISDC should

existed.

The report

completely Agency further

independent

entity

free of any State Employment including fiscal management. be performed

Security It was on all Service

operations recommended

and control,

that cost-benefit by the national being assigned also

analyses

development prior

projects

office Unemployment to UISDC

Insurance

to the projects The report

for development remain

and implea true

mentation. design

recommended

that the UISDC

center with

full research Service,

and development in cooperation

capability with UISDC,

and that the develop

Unemployment long-range

Insurance

(e.g. 5 year) work

plans.

A technical

security

report

of ADP

systems

and facilities

in a that provides were

State Employment

Security

Agency

(SESA) and the state that grantee i.e.,

agency

it with ADP services, vulnerable destruction

concluded

data and systems

to unauthorized and disclosure

access, of data,

to unauthorized accidentally

modification, or billions that

either

intentionally. of dollars

This particular through

SESA distributes

and collects

annually number

its ADP systems. actions

The report

recommended respect to

a significant

of mandatory

be taken with

-27_

external access

and internal

controls, trails

authorization/authentication to improve the security actions

of the user of our

process

and audit

posture

grantee's

systems.

The Agency

has initiated

to implement

recommendations.

Gaps There

in Audit

Coverage large gaps in audit Security Agencies. subject coverage of programs operated by (UI) As

have been

State Employment Program has been

The Unemployment to gaps in audit

Insurance coverage.

especially

a result,

the Office

of Audit state

conducted or Federal

a survey auditors.

to review

the extent obtained

of UI audits in the survey Our principal to vigorously (CFR Title

by either

Information

was provided conclusion implement

to the Unemployment

Insurance

Service. together audits

was that OIG and ETA needed requirements including

to work

for recipient-procured necessary funding

41 Part

29-70),

for additional

state audits

that would

adequately

cover

UI operations.

Our survey agencies agencies

reviewed

the extent years

to which

audits 1979.

had been made

covering UI

UI

for fiscal included

1977 through

Of the fifty-four (50%) had not been state

in our survey,

twenty-seven

audited coverage UI

by the states. did receive agencies

Four of the UI agencies coverage.

not receiving there were coverage.

audit

some Federal

Thus,

twenty-three

which had not received

any audit

blost of the work Unemployment contributions. determining

done by

state Trust

auditors Fund

was

in auditing which

the states' included employer for wages

Compensation However,

transactions, less audit conducting

considerably

work was performed between

claimants'

eligibility,

cross-matches

-28-

and benefits, example,

and reviewing

fraud/overpayment covering

detection

procedures. either

For

only 45% of the audits eligibility

FY 1977 included

a determination

of claimants'

for benefits procedures.

or a review of the agencies' For FY 1978 only 38% of the audits fraud/overpayment programs detection are not

fraud/overpayment covered claimant

detection eligibility Federal

and 42% covered unemployment

procedures.

Special

benefit

which

funded by the state were

generally

not reviewed

by the state

auditors.

The most viable and compliance

method, audit

in our opinion,

for improving

the basic programs

financial seems

coverage

of UI and related enacted

benefit

to be implementation audits. However,

of the recently

requirements will

for recipient to be a

funding

for additional

audits have

continue

major hurdle. audits

SESA's

do not currently

funds

available

for obtaining areas or

and funds will be available grants by ETA.

only from

savings

in other

additional

OIG Interest

in Benefit

Payment

Control to the OIG in the UI programs to the systems to detect used by State of unemployment due is

One of the major areas of interest benefit payment control which

refers (SESA's)

Employment benefits. both

Security

Agencies

overpayments

For the year ended June

1979,

overpayments

detected,

to fraud and non-fraud,

totaled

about

$127.5 million benefits

or 1.4% paid under Federal programs.)

of the approximately state programs. The primary

$8.6 billion

of unemployment benefits fraud

(This does not include

paid under

responsibility

for controlling

and overpayments

-29-

rests with

each SESA.

DOL's

Employment

and Training

Administration

(ETA) allocated benefit payment

2,020 positions control programs

to the SESA's

for FY 1979 to administer states.

in the various

The SESA's such

use a variety include

of techniques investigating

to detect anonymous

overpayments. leads

While

techniques the most

and suspicious technique is believed

items,

productive

and cost-effective payment

detection with

to be the crossmatch information system which

of benefit

records

individual a model

wage

for the same quarter. uses a formula

ETA has developed cases

UI crossmatch

to select

for further

investigation.

Only

the 42 state agencies

which

maintain

quarterly system

wage

records

can use utilized Eleven

the crossmatch. in 12 states, other states other states

The ETA model with 8 states

UI crossmatch

is presently

in the process about

of adopting

the system. Still Many

have made utilize

inquiries

obtaining

the system. system.

an in-house states

developed

crossmatch what wage

of

the request-reporting check". payments It involves

have substituted of base-year claim

is called information overlaps

a "back-to-back with benefit

comparison recent According

from the most payment. system.

prior

to detect

in wages any

and benefit crossmatch

to ETA, two states

are not utilizing

ETA,

the National

Commission of Employment

on Unemployment Security

Compensation, are making

and the Intera study of

state Conference UI benefit

Agencies

overpayments.

The major

objective

of the study

is to produce

-30-

a valid specific New York

estimate

of

the

amount

and

rate

of

overpayments, occurring Salt of 1979 "key

in

total in

and

by

categories City, The study

(i.e.,

fraud

vs.

non-fraud), City, on

Buffalo, City, paid" 30, 1980. and

Pittsburgh, estimates

Oklahoma will be based period also

Nashville, a sample i, to

Lake weeks

Phoenix. in The for more can the

cities of the

during study

the will

October be suited

through

March

findings improving will

develop the OIG

recommendations believes of much

benefit to be

payment done

controls. a valid

However, nationwide

have

before

estimate

overpayments

be made.

ETA

has

aided on

the

SESA's

in recovering recovery Five on and SESA's the

overpayments an automated are system.

established, overpayment the system

by

providing

a handbook keeping four the and

overpayment system.

recordand of records, overpayment; request; reports.

billing

operating The

have system

requested are: all of a

information of

main

features

maintenance transactions complete of

up-to-date have of

individual

overpayment to the

containing production automatic

which printout

occurred

relative records

overpayment and

upon and

user

billing

overpaid

claimants;

statistical

management

Plans OIG of

for plans

Additional to review designed of state or

OIG ETA's to

Initiatives study produce of

in

State

Employment

Security and any

Agencies recommendations and rate of

benefit

overpayments estimate We of will the

the

study

a valid

amount up

overpayments action thereby the state planned reduce and on

unemployment by ETA to

benefits. improve of

follow

on any and

taken and

benefit

payment

control

fraud Federal

overpayments

unemployment audit will

benefits of to be

in both SESA's with

programs. benefit

Improving programs

coverage

emphasis OIG

unemployment

continue

a primary

concern.

-31-

Review Program The

of Eligibility (REPP)

Abuse

within

the

Redwood

Employee

Protection

newly-created a loss the by

Office

of

Loss

Analysis

and

Prevention to

(OLAP)

recently qualification is

completed abuses

vulnerability Redwood in

assessment

relating

eligibility (REPP),

within

Employee conjunction

Protection with the

Program Labor

which

administered Administration.

ETA,

Management

Services

The 1978. the

basis

for

REPP

is Public the by

Law

95-250,

enacted Park

by

Congress of and to 1968 Del

on by

March

27,

This Redwood

law

amended

Redwood 48,000 Law at of

National acres 95-250 the

Act

expanding

National California. of who park may

Park

in Humboldt was designed time as

Norte the

Counties, preservation for park workers

Public land be

achieve

while

same

providing a direct

protections result of the

deprived

employment

expansion.

Title

II of

the In

Act

provides it

for

government that

paid any

benefits who 1980,

for is

covered laid who off has

employees. during five the

substance, May of 31,

provides through with

worker 30,

period years

1977

September an "affected payment

and

or more is

employment to a weekly any In the period case

employer" equal

(statutorily

defined), former

entitled during 1984. period Title vacation

benefit the of until

to his/her through older In workers, to

earnings 30,

worker

is on

lay-off of

September this cash and

specific

categories 30,

benefit benefits, credits,

is extended II also

September for

1989. pension and

addition rights

provides

continuing retention

replacement

benefits,

accrual

-32-

of seniority ment

rights,

continuation

of health

and welfare

benefits,

employ-

services,

retraining

services,

job search allowances, (including

job relocation

allowances, for losses

and return incurred

relocation

allowances

reimbursement

in the sale of a residence).

With

respect

to eligibility will

for REPP benefits, if registered

the Act provides with

that an and

affected Training

employee Service,

be eligible

the Employment

and is eligible Code.

for unemployment

insurance eligible

(UI) under for REPP

the California benefits for REPP.

Insurance

Thus a worker

becomes

by successfully

establishing

eligibility

for UI and then applying

The California responsible benefit

Employment

Development operations. with EDD,

Department DOL's

(EDD) is the Agency for REPP administra-

for local REPP and liaison

ETA is responsible LMSA has overall

funding

and DOL's

tive authority

for the program.

Although displaced

it was the stated by the Redwood

intent

of Congress

to provide

benefits

to workers

Park

expansion,

it became were

obvious

soon after for REPP, through

the program and would September

began that nonaffected for benefits Such apparently basically

workers to cover

qualifying

be eligible 30, 1984.

any periods

of layoff

unintended many

eligibility non-park fires,

qualification expansion etc.). related Because

took a number

of forms,

involving

types of layoffs of the generous pressure

(maintenance, benefits

routine

shut downs,

involved

(100% of salary), and great

there was great on employers to

for employees

to qualify,

pressure

-33-

help

them qualify.

One of the major

abuses

reported

was that senior workers layoffs, in order

were being to qualify

laid off first, were for REPP.

in fact actively

seeking

In addition abuses

to adverse

public

and press financial

relations, impact

REPP

eligibility assets

have had a significant for the displaced estimated

on the Federal

intended

worker.

At the time the bill was enacted, of 1500 workers dollars would be covered life at

the legislators

that a maximum

by REPP, at a maximum of the Program. a cost in excess on the number contrived

cost of about estimates

40 million

over the total

Current

are now closer

to 3000 employees, that,

of i00 million

dollars.

It has been noted shut-downs,

depending

of maintenance

and other

short-term

and "voluntary" who were on

and collusive of affected period"

layoffs, employers

the majority during become

of all workers

the payroll 1980 "window

the May eligible

31, 1977-September for REPP.

30,

may possibly

The original design ways

purpose

of the study was to evaluate REPP vulnerability employee layoffs.

and attempt

to relating

to counteract order

to eligibility However, based

abuse on the

to out-of-seniority determination eligibility to address analysis, enabling

that this problem qualification

was but one manifestation the scope

of abuse

in

practices, benefit

of the analysis Based

was expanded on this the

program-wide we identified

eligibility

weaknesses.

the "conclusive

presumption" cause

clause

within

REPP legislation

as the underlying

of eligibility

abuse.

-34-

This clause employee

provides

that any partial

or total

layoff of a covered September 30, 1980 (other

during

the period May 31, 1977 through disqualify presumed

than for a cause that would insurance) expansion. support non-Park layoffs is conclusively

the employee

for unemployment to the Redwood there Park

to be attributable presumption concerning

Based on this conclusive coverage

clause,

is no legal

for DOL to deny REPP expansion layoffs.

maintenance

and other

In addition,

the REPP ACt does not prevent that, although displaced the stated by the

out of order of seniority. intent was to provide this clause makes related

We concluded benefits

legislative Park

for workers

expansion,

it legitimate layoffs.

for employees

to qualify

on the basis of non-Park DOL review groups

We also found

that two prior clause as

had identified

the conclusive However,

presumption

the underlying to Congress

symptomatic

factor.

DOL has not recommended

that the Act be amended.

We believe which

that when

legislation

is enacted

creating

a benefit

program

is designed

so as to be extremely of this problem. Branch

vulnerable

to abuse,

the Congress of both the

must be informed Congress problems Inspector

It is the responsibility to deal with significant

and the Executive

loss prevention the

such as that created General,

by the REPP legislation. Executive Branch,

Not only

but the entire

has an important discussions

responsibility with interested

in this regard. offices within

We have begun the Executive

preliminary Branch

on this subject.

-35-

CETA Eligibility Determination and Proposed Enhancements The the and Office task of of Loss Analysis CETA and

and

Verification

Programs

-

Evaluation

Prevention

(OLAP)

has

recently and

undertaken systems, This

evaluating

eligibility for our

determination program abuse, some the

verification

developing is

recommendations in response to

nationwide with of

improvement. and

analysis in the

concern systems data

error CEIA

inefficiency Although of agree-

eligibility is little

determination comprei_ensive causes of and it is

grantees. and is may

there various ment causal

concerning

nature there

extent general be

underlying

eligibility administrative deemed

problems,

that

mismanagement Ii_us, for in

inefficiency to

significant improve, and other

factors.

desirable

evaluate,

and

accountability problem areas

agency

eligibility

determination systems.

_roblems,

eligibility

determination

Uhis of

0EAF

i-:_'ro\e:uent project CETA eligil'ili[v

is designed

to and

assess

the

relative

integrity identify effective scale

select

determination and orocedures the

verification prove of to be

programs, the more wide

those

progra m applications -<odels, of 0LAP of such will

that

o:-erational reolication :!<is work, its =e Office be

a::d determine models, be or

feasibility aspects

proposing

select

thereof. with

In undertaking ETA, is oarticularlv

working

in close

coooeration major

}:anagement in August

Assistance. !9SO.

Ibis

project

scheduled

com_'leted

-36-

Investigations During 152 the

Involving October cases we

ETA i,

Programs 1979 to March ETA to the 31, 1980, and this closed for Office 199 opened cases.

period

investigative this period, 112

involving referred

programs, U.S.

During

Attorney

criminal and training have the cases

prosecution related resulted are When to for the either cases or

cases

involving These cases and

CETA and 15

and

other

employment

violations. in 26

others

referred The

previously balance for of

indictments further by

convictions. or have been

pending are

action the

declined they or are

prosecution. referred

declined

U.S. for

Attorneys,

either

state

local

authorities action. of cases

prosecution showing

to program by

officials region, the of reporting

administrative current are status in the

Tables referred

a breakdown, Attorneys

to U.S.

during

period

Appendix.

Monetary in in

results

due

to

investigative in in by savings, claims. region.

activities $5,277.88 */ The

amounted

to

$714,129.34 $13,294.62 shows a

recoveries, fines, and of

$638,522 $1,231,002 these data

in collections, following table

breakdown

*/ Fines are the sums of money imposed as a penalty upon defendants after an administrative hearing, civil suit, or criminal prosecution; recoveries include the restoration, restitution, or recovery of money or property of known value that was lost through a crime, mismanagement, etc.; collections are the receipt of payments of an indemnity to end a civil transaction, suit or proceeding; savings are the prevention of dollar value losses to the Government; claims are the dollar value of indemnities which have been administratively determined by a DOL agency. For example, if a state loses $i0,000 in CETA property, and an OIG investigation determines that the loss the DOL program agency administratively state for $i0,000. was attributable to negligence, estimates a claim against the

-37-

0 0

0 0

0 0

,g m

,g -..1-

_ o

oq ,.o_

0 0

cw _0
,

w-4 <D

_.

_

.
-38-

The more period

significant

convictions to March

and indictments

during

the are

October

i, 1979

31, 1980 involving

ETA programs

described

below.

--

A former West West

Virginia Virginia

public

employment

service

official false

was

convicted

in Charleston, data

of conspiracy

and causing of Labor. false

job placement

to be submitted

to the U.S. Department of anyone

This represents placement data

the first known prosecution under the Labor

for filing

Department-funded

state employment that during placement

services 1977

program.

The conviction directed

was based on findings to submit false Administration

the defendant to the Department's summer employees

a conspiracy

data

Employment

and Training

(ETA) concerning

hired by the Union Carbide

Co. in Charleston.

During

the trial the importance decision-making testimony

of the false placement was demonstrated officials

data quite

to the Labor vividly. that the

Department's For example, placement Security

process

by Labor

Department

revealed

data provided

by the West

Virginia

Department

of Employment plans and budgets. is

was used in formulating of funds each state

Labor

Department services

policy, agency

The amount heavily in jobs.

employment

receives applicants

influenced

by the agency's

performance

in placing

As a result

of this investigation, and is also Employment

ETA is changing validation

the emphasis including

of the placement the initiation Validation

formula

increasing Security

efforts,

of special

Automated

Reporting

Systems

Surveys

in selected

states.

-39-

--

A

former to

Executive 6 months on 13 in

Director prison

of

a Religious by 18

Foundation months of CETA ii, CETA

in Texas He

was

sentenced was 1979 a

followed

probation. funds

indicted and

counts to

of misappropriation one count on January

on November This

6,

pleaded had

guilty

1980. grant

organization, defendant

subgrantee,

received excess

a $500,000 of count $30,000.

one-year This

and

the

misappropriated the Texas the first major

in

investigation down in wide

represents that district in of

multiple CETA

indictment indictment and funds. its should As

handed

involving press and

fraud.

The

received serve as

attention

television of

media, DOL

a deterrent of and this

against investigation, its

further the City

misapplication of Dallas staff. has

a direct

result

modified

monitoring

program

increased

investigative

--

A

school

teacher to ten

pleaded counts

guilty of of a

in U.S.

District count funds.

Court,

Boston,

Massachusetts, charging holds willful

thirty-three $3,500 and in CETA was

indictment This as an individual "English-asBalance 19, 1978,

embezzlement Degree in

a Masters

education, for During II0

employed of the

a Second of State

Language" Prime

teacher

a subgrantee the CETA for period

Massachusetts 2, 1977

Sponsors. converted was

November

to July to

this own the This one The

individual use. student case person various She

participant reporting distributing for one the

allowance time their and

checks

her for

responsible and

attendance checks.

participants illustrates to have

then

weekly

a serious control in over taking

potential more than

abuse--allowing phase of the the payroll data to process. payroll,

functions

attendance,

reporting

-40-

distributing be kept functions

checks,

and securing

signatures to mandate

for receipt

of checks must of these

separate.

Recommendations monitor

the separation

and closely

compliance

have been made.

--

A Dallas

County

CETA Coordinator of CETA forms

was indicted funds.

by a Federal

Grand

Jury on

nine counts charged with

of misapplication falsifying intake

This individual applicants

was in return of over

for ineligible resulted

for payments. $400,000

The false placements

in a misapplication

in CETA funds.

--

Three

individuals

were

indicted

by a Federal twenty

Grand

Jury at Hartford,

Connecticut, of CETA

on a total of one hundred false statements, October

counts

of misapplication disclosed

funds,

and conspiracy. 12, ].976 to June

Investigation

that during converted

the period

28, 1978 these men One individual two

at least $35,874

in CETA funds

to their own use. Consortium

was a job counselor were accomplices checks

with a CETA Subprime

and the other fraudulent

in the scheme. which

They conspired

to issue

to CETA participants account.

the job counselor held

forged and deposited with various for

to his own business CETA Prime Sponsors

The Consortium

contracts

in Connecticut

to provide

training

and placement

CETA participants.

-41-

--

The

former along vendor by

Property with of the

and

Procurement Property and

Officer and a

for

CETA,

Atlanta, Officer, a were

Georgia, private indicted false

Assistant and

Procurement CETA

goods

supplies Jury on

former

participant, of conspiracy, that CETA

a Federal and

Grand

twenty-six

counts

statements were

extortion. with were this

Investigation applicants and time an

disclosed and

payrolls Funds It is and

padded

ineligible also is

non-existent were

individuals.

equipment that

misapplied first

kickbacks extortion

obtained. has been

believed in a CETA

the

charge

used

indictment.

--

In Los

Angeles, were

California,

the

Director to their with

of

a CETA

subgrantee

and

three

co-subjects of CETA

sentenced The four and

pursuant were Charged

convictions

for misapplication to misapply DOL. the As books who was later part of checks convicted of

funds. CETA

conspiring to on

a $263,199 the were on to to all scheme issued

Grant

to make was

false

statements carried The

part and

a "ghost" to this of in

employee non-existent

created, employee.

Director, of funds, was

had

been

five three

counts years and

conspiracy prison years guilty, and

and

misapplication $2,500. The $i,000

sentenced suspended

fined

Sentence other fines three and

45 days of whom

four

probation. received One of

co-conspirators, varying entered received prison into illegally.

pleaded

sentences a

with

probation. agreement

these

defendants of

also monies

court-approved

to make

restitution

-42-

B.

THE EMPLOYMENT

STANDARDS

ADMINISTRATION (ESA) administers compensation, programs and equal through

The Employment concerned employment with

Standards employment

Administration standards,

workers

opportunity

by Federal

contractors of Workers

and subcontractors, Compensation Programs

three component (OWCP), the Wage

offices--the of Federal

Office

Programs (OFCCP), and

the Office

Contract

Compliance

and Hour Division. of Workers claims Compensation under Programs (OWCP) is responsible Compensation for

The Office

administering Under

the Federal

Employees'

Act. white

this Act,

coverage employees.

is now available Amendments

to over 3 million still

Federal

and blue collar of workers volunteers. Compensation injured under

have brought

other

groups

the Act such as members

of the Peace

Corps

and VISTA Worker's

OWCP also administers Act of 1927. upon

the Longshoremen's

and Harbor

This Act now covers waters docks

all maritime

workers

or killed working

the navigable piers,

of the U.S., and terminals. of the Act. Benefits

as well as A number The Black of

employees other

on adjoining

groups

are included authorized

through

extension

Lung

Benefit

Program,

by the Black

Lung

Act,

is

the third major program monthly totally payments disabled

administered

by the OWCP. are provided (black lung) Monthly

Under

this program,

and medical

treatment

to coal miners from their are also made

from pneumoconiosis

arising

employment to surviving The Office in 1965

in the nation's dependents.

coal mines.

payments

of Federal

Contract Executive

Compliance Order

Programs

(OFCCP) was established calls for

to administer

11246.

The Order

government-wide using color, public

efforts

to assure

that Federal against

contractors employees

and subcontractors because of race, take

funds do not discriminate or national origin,

religion,

and requires

that such contractors

-43-

affirmative the sex. all Executive In its

action Order the

to

hire

and

promote to also was

protected prohibit further in

groups.

In

1967, based on

was

amended

discrimination amended

1978,

Executive enforcement

Order

to consolidate of Labor.

operational

activities

the

Department

OFCCP

also

administers Act of 1974

section and

402

of 503

the of

Vietnam the

Era

Veterans' Act

Readjustment of 1974.

Assistance Section 402

section

Rehabilitation subcontractors

requires action to

government employ, of the

contractors and advance era. in

and

to

take disabled

affirmative veterans contractors qualified and

employment, 503 and

qualified requires advance

veterans to take

Vietnam action

Section

government in employment,

affirmative individuals.

to employ,

handicapped

The which Today Hour which

Wage

and

Hour

Division

administers overtime are also unfair

the pay

Fair and

Labor

Standards labor law.

Act,

includes nearly Division's protect

minimum 60 million

wage, people

child by the

provisions. The Wage and

protected includes

responsibility workers against

other

laws

and

regulations

employment

practices.

Investigations During 65 cases the

Involving October 98

ESA i,

Programs 1979 to March 31, 1980, this Office opened violations.

period closed

and

cases this in

concerning period due

ESA/workers to

compensation

Monetary amounted in

results to

during

investigative in A table

activities savings, showing, $13,962.57 by region,

$29,300.34 and these

recoveries,

$2,387,208.49 */

collections, of

$2,259,271.26 data follows.

in claims.

a breakdown

*/ Recoveries include the restoration, restitution, or recovery of money or property of known value that was lost through a crime, mismanagement, etc.; collections are the receipt of payments of an indemnity to end a civil transaction, suit or proceeding; dollar value losses to the Government; potential future overpayment involved of the future rate at which benefits benefits savings are the prevention of claims, in OWCP cases, are the in the case. This is an estimate claim lifetime computed of such on the a claim.

on a fraudulent compensation are paid and the actuarial

-44-

o_

_

_

E

_

g

-&_-

During

the period

October

i, 1979 to March

31, 1980,

this Office involving and others

referred

to the U.S. Attorney workers

for criminal

prosecution

24 cases cases

compensation-related resulted

violations.

These

referred of

previously

in 4 indictments pending further

and 2 convictions. action or have

The balance for

the cases are either prosecution. officials

been declined

In these instances,

the cases Tables

are referred showing,

to program a breakdown

for administrative indictments,

action.

by region,

of referrals, Appendix.

convictions,

and declinations

are in the

Examples violations described

of prosecutions during below.

and indictments October

relating

to ESA/workers

compensation

the period

I, 1979 to March

31, 1980 are

--

A former

postal

employee

was sentenced

to six months for workers

probation disability

for making

false statements compensation. employed receiving employee.

in connection Investigation basis

with his claim

determined performing for a back

that the defendant heavy injury physical sustained

was gainfully

on a full-time disability

labor while while a postal

payments

--

An Unemployment

Insurance

Claims

Fraud

Investigator claims

for the State and false

of

New Mexico statements revealed and would

was indicted to obtain

on eight

counts

for false disability over

temporary

workers

compensation. in benefit

Investigation payments

that

the defendant eligible

had received for almost

$56,000

have been

a quarter

of a million

future

-46-

disability noted

payments

had the fraud not been uncovered. of the New Mexico Employment

It is also Security of Labor.

to be the

that as an employee

System,

defendant's

salary was underwritten

by the Department

FECA Form Revision

Pro)ect experience, Offices many declinations of prosecution have been

Based on our investigative

on the part of U.S. Attorneys' due to the poor design claims and receive claimants of FECA

concerning

FECA cases

forms used by claimants These forms have

to establish ineligible

benefits.

permitted

to use ambiguous in meeting

data

in their

application

thus frustrating willful falsification.

the government

its burden

of demonstrating

OIG's proposals

were used by a joint The new forms

OIG/OWCP should

planning

group

in revising what

many of these forms. is required facilitate

clarify

and simplify

to be reported demonstrating

by claimants

and in the case of falsification,

intent

to defraud.

FECA

Investigative

Pro_ect the potential rolls cost to the government per year, for each with an

OWCP officials claimant average

estimate

on the FECA periodic actuarial

to be $i0,000 This means

life of 24 years. the government or other

that an average $240,000 factors. without

fraudulent considering

claim costs inflationary

approximately

cost increasing

The number

of FECA claims total

has increased claims

since

the law was liberalized to 80,000 claims to

in

1974, from 12,000 in 1976 to more

injury

in that year,

than i00,000

claims

by the end of 1979.

According

-47-

OWCP FECA

officials, periodic

as rolls

of

January

1980, whose

there

were

47,624

claimants they

on are

the

(claimants

prognosis

indicates

permanently

disabled).

The

Office

of

Investigations its

has

been

conducting Federal

a series

of

exploratory The need

conferences for means lead OWCP of joint to

with

counterparts efforts utilize project, back

in other has been

agencies. as the

investigative effectively for this

recognized

only

viable As the analysis the the

available the

investigative will will provide provide while field

resources. data from

agency

OIG/DOL and

computerized

charge

system case

a review

and

selected

OWCP/FECA will

claimant be

records, for the

investigators investigation

from

claimant to their

agency

responsible

pertaining

employees.

A on of

profile length injury,

which of

meets on

investigative the periodic of

requirements roles, yearly age

is being pay

developed location, When role

based type

time

limits,

and

minimum

amount

benefits of

received. all periodic Further

the beneficiaries

profile should should The Naval in

parameter be reduced the

is completed, to a workable profile

the size

universe of about

8,000. 375

refinements region. Investigations, interest

reduce

universe U.S.

to

about Force

claimants of

per Special

Postal

Inspection

Service, Service,

Air

Office

Investigative in

OIG/HEW,

and and

OIG/DOT

have

expressed project.

participating

this

investigative

monitoring

-48_

Black Lung Project Another project conducted by the OIG which and analytic project involves resources the combined is focusing use on the Black

of our investigative, Lung Benefit Program. appropriate

audit, This

is designed

to identify measures.

loss vulnerabilities

and develop

prosecutive

and preventive

The Black Lung Benefit as identified benefit

Program

has grown level

significantly

in recent

months, in

by an expenditure medical

of approximately for the period

$670,000,000

and related i, 1979. with

payments

of January will

I, 1979 continue increasing

to November to expand, over

It is anticipated volume

that the program I00,000

the current

of about level

claimants There

the next year

to a projected

of 200,000.

is presently and abuse.

some concern

that this program

may be vulnerable and the fact

to fraud

On the basis of this concern, and organizational the OIG special of this project, Pikeville, ongoing component changes

that recent control

legislative and error identification,

may affect

quality

project begun

was initiated. in January with

The investigative the review

component in the

of case files to identify work

Kentucky

District

Office,

is designed

and combat

fraud and abuse within of the plan has been investigation

the program. completed,

Field

on this targets

and a list of potential to the Office

for criminal

has been

referred

of Investigations.

-49_

It the

should Office

be of

noted

that

this

was

an

important Black

learning Lung Project

experience was were one asked

for of to which the

Inspector in which We in

General. our

The

first work will within working

projects together. enable the us

investigators that we have

and learned all

auditors valuable

believe the of future the

lessons in

to marshall General

disciplines in

offices

Office

Inspector

together

a productive

relationship.

The

second

aspect which

of

the

Black

Lung by

Project staff

is

a loss to

analysis OLAP.

and The and

prevention goals

project, of this

is being

conducted project Black

detailed are to

recently

initiated within and to the

component Lung Benefit

identify payment

assess

loss

vulnerabilities and or operations, minimize of ESA's

Program

systems

develop hazards. and Benefit in

appropriate During

countermeasures this loss be prevention in

to eliminate review, the

identified Loss Analysis Lung

Office with

Prevention Project September (i)

will

working The Some of if status (2)

close is

cooperation currently

Black to of be

officials. 1980.

project the the

scheduled objectives system changes

completed project

specific present other the

this

include: claimant and of

determining

effectively affecting and

processes eligibility effectiveness for

independent rates;

and

pa_ent a

determining system;

availability (3) assessing

reapplication

control

a need

a field

application

investigatory capability on a

component select

to case

supplement basis; (4)

basic

documentation if, on

verification a select and (5) basis,

determining would be

a face-to-face the

recertification and

capability adequacy of

effective; Black Lung

assessing Program

availability

various

Benefit

computerized

systems.

-50-

Wa_e-Hour

Division

Audit Division (Atlanta, was conducted Chicago, data Dallas in five Wage-Hour offices

An audit of the Wage-Hour located in four regions

and San Francisco). conclusions could

Its purpose

was to obtain

sufficient

from which

be drawn pertaining account

to the Wage-Hour

system nationwide.

(These offices performed

for over 60 percent year 1978.) Area Offices

of the 71,161 compliance operations

actions

in fiscal Wage-Hour

In addition, were

in twenty of the ninety investiga-

reviewed. from

A sample of 160 employer than 15,000

tion cases,

randomly

selected

the more

cases contained

on the fiscal review

year 1978 computer operations. due to 1,775

files,

was used as a data base for the contained $268,378 total findings of wages actually

of Area Office in wages

The 160 cases employees, with

of $318,047 paid

to 1,760 employees.

The audit greater

revealed

that considerable

improvements

were

necessary

to provide

control

and consistency were

in the processing disclosed:

of back wages.

Specifically, --Cash

the following receipts were

not deposited were delinquent

in a timely manner; in making existed their back

Numerous wage

employers

payments. of time;

Some delinquencies

for extended

periods --

In litigated in the method to employees. received

cases,

the Regional

Offices

were

inconsistent distributions some individuals

and frequency There were

of making

back wages delays

inordinate

before

their money; Offices employers often performed unnecessary with payroll functions

--

Regional because

did not conform

the terms

of the court

judgments; -51-

--

Documentation amount of

existed

to

support back

only

about

two

thirds

of

the

administrative internal visited; locate

wage

payments

to employees; in all of

--

Significant the offices to

control

weaknesses

existed

--

Efforts

employees resulting

by

the

various

Area

Offices of

varied program

substantially, effectiveness; -The results of

thus and

in different

degrees

operations, were

as

reported and of

in

the

management a picture activities.

information which

system, the

misleading

presented

overstated

effectiveness

Wage-Hour

The of

review unclaimed wages

also

disclosed wages.

other With in clerks

inconsistencies respect to

in

the

ultimate some cases the were

disposition unclaimed the funds

back were

litigated while

cases,

back were of to

deposited with In the

the of

Treasury, the court,

in other on wages

deposited judgment.

depending unclaimed

language returned

the

administrative

cases,

employers.

Several policies accounting

general should for at and

conclusions be back the developed wage

can for

be

drawn

from back

the wage be

review.

Uniform The

making

distributions. centralized be and

distributions level. deal with A

should policy

computerized uniformly wages.

regional

should

established of

to back

consistently

the

ultimate

disposition

The

review

permitted of ESA. offices,

us Such

to

make

numerous

detailed pertaining

recommendations specifically

to to

the

management the regional

recommendations,

include:

-52-

------

Daily

deposit on

of back delinquent to of to

wages; cases;

Follow-up Timely

payment

employees; the the payment Wage-Hour process; Office, by-passing the Regional

Computerization Direct payment

Solicitor's --Timely

Office; of unclaimed installment wages to the Treasury; payroll processing.

transfer in

Reductions

cases

requiring

Recommendations -------

pertaining receipt third maximum only logs

to

the and

Area

Offices

were: functions;

Centralize Require Apply Report Require Require and

disbursement to

party effort

documentation to locate actually of back

support

payments;

employees; paid; received; related to receipt

back be

wages kept

wages of

adequate

segregation

functions

disbursement.

Management that they

generally intend in its the to

concurred take

with

the

specific on most

findings, of the

and

indicated

positive Wage-Hour

action

recommendations that, as most a of

contained result the of

report. to

management Wage-Hour were

suggested

plans noted

improve the

overall review

performance, being

problems

during

currently

addressed.

-53_

In reference considered

to the general

conclusions

outlined

above, governing

ESA essentially back wage that back ESA

the existing

policies

and procedures regard

distributions

to be adequate.

With

to the recommendation regionally,

wage distributions disagreed involved because

be centralized of what

and computerized

it considered

to be the logistical with respect

problems

in such a centralization. legislation pertaining

Finally,

to the matter wages,

of possible

to the disposition however,

of unclaimed

ESA did acknowledge to pursue wages.

the problem; where

they indicated

a reluctance unclaimed

those situations

the only unresolved

issues were

Review of Federal Employees' Management in Process An audit of Federal is being performed. in five district and in accordance on determining for payment to receive

Compensation

Act Periodic

Roll

Case

Employees' A random

Compensation sample

Act periodic files

roll case management reviewed properly placed

of 185 case if cases

is being managed is being

offices with

to determine

are being Emphasis

applicable claimants

procedures.

whether

met the initial

eligibility

criteria

of compensation compensation.

and whether

they continue

to be eligible

-54-

C.

THE MINE SAFETY AND HEALTH ADMINISTRATION Mine Safety and Health Amendments all mines Act, which was signed

The Federal

into law in 1977, brought ground and surface, program.

in the U.S.--more facilities--under single miners. mine

than 20,000 undera single safety

coal and noncoal It is the first 500,000

and health

safety and health On March

measure

to cover all of the nation's bility for administering

9, 1978, responsiwas transferred

and enforcing of Interior

safety and health

from the U.S. Department The Act created headed

to the U.S. Department Administration

of Labor. (MSHA)

a new Mine

Safety and Health of Labor.

by an Assistant

Secretary

The approximately inspections

2,000 MSHA mine

inspectors

are required

to make

four

of each undergroun d mine and two inspections to determine mine operator compliance with

of surface Federal health

mines annually

and safety regulations. that poses an immediate is to be ordered various closed

Should an inspector threat until to miners, the condition

find a condition

or practice

the affected

area of the mine There are

is corrected.

civil and criminal

penalt_ies for violations.

MSHA

Project investigative/audit review of MSHA is currently being

A comprehensive undertaken proceeding i.

by the OIG. as follows: Reviewing collusion,

The inspections

portion

of the plan is basically

complaints

and allegations

of misconduct, in the mines. inspection reports.

and lack of safety mine accident

enforcement with MSHA

2.

Comparing

reports

-55-

3.

Comparing violations.

any

disparity

of

assessment

fines

for

similar

4.

Analyzing personnel ultimate

and

evaluating

disciplinary of

action provable

taken

against and

MSHA

including disposition.

a comparison

offenses

After will

the be

target

area with

is defined, the

an

intensive being problems the

audit

and

investigation of positive activity. and

conducted

objective

collection

information To date, the

concerning project functions.

programmatic has focused on

and/or inspection,

criminal

MSHA's

testing,

procurement

-56-

D.

THE OCCUPATIONAL

SAFETY

AND HEALTH ADMINISTRATION (OSHA) is responsible Safety their and Health Act with of for

The Occupational for administering

Safety

and Health Administration the Occupational to provide

and enforcing

of 1970. This Act requires safe and healthful Labor about working

employers conditions,

employees

and directs safety

the Secretary standards

to set and enforce 5 million business

occupational establishments the individual and health

and health

with over 62 million states

workers. their

The Act also authorizes own occupational by the Secretary. states Safety

to set and enforce under state plans

standards

approved to assist

Fifty percent approved

matching state

grants

are provided and health

in administering

job safety the right either

programs.

The law gives the Department without notice

of Labor time,

to make

inspections

at any reasonable

acting

on its own or at If an inspector

the request

of employees, violation,

or authorized DOL will

representatives.

finds an alleged correcting There

issue a citation

and a date for contested.

the violation,

which will become

final unless

are various

civil and criminal

penalties

for violations.

A project with

similar

to that being done of OSHA to ensure

in the MSHA

area will

be explored

the management

that its concerns

are addressed

in the project

design.

OSHA Audits During the reporting were period 12 audit reports which took exception identified to in

$429,051

issued on OSHA grants. are shown below:

The exceptions,

the samples

examined,

-57-

Audit Insufficient Budget Other

Exception Documentation

Dollar Amount Exceptions $409,144 15,512 4,395 $429,051

of

No. of Reports with Exception 8 6 2

Exceeded

Two of the more $340,000,

significant

OSHA audit

reports,

questioning were

approximately by

disclosed

that wages

paid to employees

not supported

time distribution

records.

-58-

CHAPTER Through

II.

OFFICE

OF ORGANIZED

CRIME AND RACKETEERING statements and implementation of

the establishment the Office designed

of mission

strategies, a program

of Organized

Crime and Racketeering of syndicate

(OOCR) has begun of

to effect

the existence will

infiltration

labor unions. allocation selection in-Charge papers, join

The mission

statements

also facilitate

the effective rational Agents-

of precious of cases. have

resources

and investigative

time through Special

Since the last semi-annual drafts of their mission intelligence

report,

submitted

statements analysts

and strategy is about to

the first of three criminal

the staff, and the New York metropolitan

field

offices

have been

reorganized.

Investigations of Justice

by the OOCR are conducted Force Program

as a part of the Department by the participation

Strike

and are enhanced

and guidance

of the attorneys SUMMARY

in the 14 field

offices. MATTERS

OF INVESTIGATIVE OCTOBER

AND PROSECUTIVE 31, 1980

i, 1979 - MARCH

Cases Opened Cases Closed Referred

- 52 - 68 No. of indictments - 17 9 Individuals - 23 - 32

to DOJ - 36 for Prosecution

Accepted Declined Pending

Indicted - 16

No. of Convictions

- i0

Some

of the significant

cases are briefly

described

below.

-59-

U.S.A.v. A New

William

Feeney

and

Hugo

Germar was indicted in for receiving a loan Department assets. are awaiting To of a 10% nearly had date, sentencing.

Jersey in

Laborers return the for

Union using

official his

kickback $500,000 previously two

influence Pension to protect of

securing The

from

Union-affiliated a civil been suit

Fund. the

brought

Plan's and

individuals

have

convicted

felonies

U.S.A.v. A joint

David

Friedland by one

and OIG

Jacob and FBI

Friedland resulted amd one in the conviction public of of two

investigation attorneys,

New The in

Jersey

a current that

a former

official. $360,000

investigation return for

disclosed their

they

accepted as legal the

a kickback counsel approval were

using

influence, Fund, to

to a Teamster of over $4 million with The fund's

Union-affiliated in pension fund

Pension loans.

insure the

In

addition, the suit

suspects

charged

attempting Department losses.

to corruptly had initiated

influence a civil

testimony to recover

of witnesses. the pension

U.S.A.v. Also of

Joseph

P.

Uzzalii_, a joint

Joseph OIG-FBI

A.

Uzzalino

and

Joseph

A. in the

Mendola the indictment

in New

Jersey,

investigation who are also

resulted Trustees by three of

three

Teamster Plans, and The

Union guilty

Officials pleas to

Union-affiliated Company

Benefit

informations that from the the of they

Trucking used for

executives. their

indictment to receive

charges $i0,000 the

union company

officials in return

positions and owed of the

delaying, which the

hindering company tions

obstructing the benefit

collection and that

approximately embezzled

$80,000 cash

plans

contribu-

benefit

plans.

-60-

U.S.A.v.

Vincent

Meli, James

Russo

and Ruby

G. Smith by agents of OIG and the IRS and two Detroit after syndicate $120,000

In Detroit, resulted trucking

a joint investigation

conducted

in the convictions company

of a Teamster

union

official

executives--one with violating

a reported

high ranking

member--charged was diverted

the Hobbs Act and conspiracy employees to the Company.

from the Company's

U.S.A.v.

Charles

Cohen in New York Wholesale resulted in the indictment of a former Union

An OIG investigation official

of the Retail,

and Department

Store Workers funds.

for embezzlement

of $21,000

from welfare

plan and union

U.S.A.v.

George Wuagneux in Miami, Florida, resulted with in the indictment counts of a

An OIG investigation major building

developer

who was charged benefit

three

of embezzlement

of union-affiliated fraud by wire, bank part,

employee fraud

plan funds,

income

tax violations, charges, in

and racketeering.

The indictment

that he embezzled

over $190,000

from the benefit

plan and defrauded

the benefit

plan of an additional

$185,000.

U.S.A.v.

Charles

Stanfield in New Orleans Food resulted in the indictment International of an Union. and

An OIG investigation official

of the United

and Commercial with Violating

Workers

He was indicted

and charged

the Racketeer

Influenced

pr

-61-

Corrupt

Organizations

Statute

and the Taft-Hartley $131,00 sweetheart

Act.

It is alleged representatives

that the union to insure

official

solicited

from ten employer contracts.

labor peace and grant

U.S.A.v. An OIG-FBI

George

Snyder in Brooklyn, New York resulted of more in the indictment

investigation Union

of a Teamster dollars

Official

for embezzlement funds.

than one million repayment

from pension

and welfare

A judgment

ordering

was entered

in a civil

suit brought

by the Department.

U.S.A.v.

Howard

Norman

Garfinkle

and Bernard

Tolkow of an Independent pleas to accepting

In Brooklyn, Union

an OIG investigation estate developer

of an official resulted

and a real

in guilty fund.

kickbacks

and filing

false reports

to a welfare

U.S.A.v. Also

Sante Nicolia an executive false reports of a construction with a Teamster supply company pleaded pension and

in Brooklyn, to filing

guilty welfare

Union-affiliated

fund following

an OIG investigation.

-62-

CHAPTER Review

III.

DEPARTMENTAL

MANAGEMENT System for loss prevention reviews of management and for promoting support systems

of the Personnel

Management

In the belief economy

that responsibility requires

and efficiency sense,

(in a very real agencies management as follows: i. build

the structural

steel upon which

the program personnel

their towers)

we undertook

a review of the Department's management study were

system.

The purposes

of the personnel

To develop

a methodology efficiency

for Inspector

General of

studies

of the economy, management 2. To ascertain

and effectiveness

support

systems; to which the personnel system

the degree

and Government, support

DOL, agency program

and local practices managers and program

departmental

objectives; 3. To assess management 4. To analyze systems waste, the effectiveness planning what of DOL's internal personnel

and evaluation

mechanisms; management

aspects

of the personnel vulnerable

are particularly fraud and abuse.

to losses due to

The basic

study approach

was to focus

on four

important,

complex to which

and controversial the personnel

programs

and to determine

the degree

system,

and the way in which

it is used by DOL

-63-

managers

and personnel

officials,

contributes

to, or detracts were

from, the CETA (OSHA),

the achievement program

of mission

objectives.

The four programs compliance (OWCP-ESA), Geographical

(ETA), the Occupational Employee Compensation Program

and Health Program

program

the Federal Contract national

and the Federal coverage included

Compliance offices

(OFCCP-ESA).

of ETA, OSHA and ESA plus visits in the following Atlanta, locations:

to regional Chicago,

offices

and field activities Philadelphia, Houston. Reading,

Cleveland, and

Jacksonville,

Dallas,

Ft. Worth

The methods i.

used were: of previous CSC/OPM and DOL personnel management

Review studies

and evaluations; of general program studies and evaluations; statistics and

2. 3.

Review Review

of personnel survey

management

program

attitude 4. A _riori

data; of the personnel to waste, and work system from the stand-

analysis

point of vulnerability 5. 6. Observation Interviews personnel 7. Review of processes with

fraud and abuse; settings; middle managers and

top program

managers,

administrators; presently being worked upon in and

of staff projects with Civil

connection other major

Service

Reform

implementation

changes.

-64-

With

respect

to the first study objective personnel

we have concluded

that it is investigators

possible

for non-specialist analysts support

who are skilled studies

auditors,

and systems management

to conduct

insightful

of highly

technical to

systems,

but that in some cases available as a resource

it is necessary person.

have a technical

specialist

It is not as easy to summarize the personnel moved system

our conclusions delivery.

concerning We found

the impact of that DOL has for system improvements These

on DOL program

out smartly

to take advantage by Civil

of the opportunities Reform

improvement

provided

Service

and that major

in departmental are commendable

personnel

management

leadership

have been made.

accomplishments. manager

On the other training,

hand we found weaknesses management with and the

in the areas of staffing, manpower requirements structure

occupational

analysis

as well as problems administration. major

associated

Department's areas,

for personnel has already

In some of these management improvement

the Department In others,

undertaken

efforts.

we have

suggested

additional

possible

improvements.

We found the Department's effective, ensure but recommend

personnel that more

management rigorous

evaluation

system

to be to

methods

be developed which

that agencies action.

comply with

departmental

findings

require evaluation

corrective program

We also recommend contemplated.

a somewhat

more ambitious

than is presently

-65-

Personnel hire

management

in DOL is big business, wage bill apparatus of about involving

involving

22,000 direct and and

personnel,

an annual

$500,000,000 600 people

a personnel costing

administration

$20,000,000 complex,

per year. involving

The Federal many decision weighed.

personnel

system costs

is highly

points where these

and benefits

must be carefully

Given

conditions, as well as

it is inevitable occasional

that there will be some waste fraud.

and abuse

willful

We looked following inadequate

at several conclusions. system

normally

weak

junctures

in the system

with

the have an

The Department

and its agencies requirements.

presently

to determine planning

manpower

We have been advised over the last year to address this prewhose

that a workforce and is now being problem. employment incumbents

system has been developed in the agencies care

implemented

to begin

We also feel background

that greater information

should be taken hired

to obtain

on personnel

for positions

are particularly and complex

susceptible

to being

compromised.

In anything there must IG and a view

as expensive

as the DOL personnel study and improved

management management

system, practices

are areas where management produce significant

economies.

Our recommendation concentrate mission

is that future areas with appear

other DOL studies to recouping understaffed

of the system

on these areas which

resources

to address

to be

at present.

-66-

One final, talked with

somewhat scores

somber,

thought.

In the course

of our study we altogether too much the

of people who seem to be spending to do rather simple which

time and energy incredibly has become. subsumed required normally

trying

things working

through

complex

instrumentality

the Federal that,

personnel

system

We could not escape

concluding

useful

as the changes changes enough are

under Civil Service before

Reform

are, many additional

that system will be simple and sensible honest high and hard working people

so that

intelligent,

can use it as a service to

real aid in providing the public.

quality,

timely and cost effective

Audit

of Departmental

Payroll

System Payroll

Completed System was completed. This audit procedures employees) D.C.

An audit of the Departmental consisted (as well of reviewing

and testing relating

the payroll

and personnel departmental

as ADP Operations

to payrolling units

in all ten regions The OIG contractor of the seventeen actions,

and seven administrative selected an initial units

in Washington,

sample

of 50 employees 6,217

at each

administrative

and reviewed

personnel for both critical

1,700 time and attendance and earnings

cards,

and 850 employees The audit

leave balances

and deductions.

disclosed

error rates ranging -Personnel

from two percent actions missing,

to forty-six or inadequate

percent

as follows:

documentation

of administrative increases (2%);

pay increases

and within-grade

-67-

--

Time

and attendance

documentation

of leave not by Standard

initialed Form --Error

by the employee

or not supported

71 (5%); in annual and sick leave balances differing (37%); and

Earnings

and deductions file

from the authorizations

in the employee

(46%).

The many

detailed

recommendations

contained

in this report

can be consolidated Secretary most of the timing--

into three comprehensive for Administration problems described

recommendations should First,

that the Assistant consider a change to correct

and Management in the report.

in pay period eliminate:

to allow more --

time to prepare

accurate hours

payrolls--would

Estimation more)

of regular

for the last two (or

days of the pay period; time and attendance checks. records; and

---

Use of amended Numerous manual

Second, accurate payroll

training

of timekeepers

and payroll

clerks would

result records,

in more and other

preparation forms.

and processing

time and attendance

Third,

a formal periodic and controls Payroll

monitoring are properly compared

program

would

assure

that the following

procedures -----

functioning: to employee payroll files;

deduction

Leave hours Overtime

properly

supported; and of error reports

properly review

supported;

Supervisory changes.

and approval

-68-

Management's report

response

to most

of the recommendations action would

contained

in the

indicated

that corrective

be taken. We will periodically

follow-up

on the status

of such action.

Review

of Selected

Property

Management

Practices General

and Procedures Services

The OIG was requested Administration management. ----

by the Inspector

of the General review

to participate The objectives

in an inter-agency

of property whether:

of the review were were properly

to determine justified; acquired;

Furniture

acquisitions accounted

DOL properly Useable

for all property disposed

furniture

was being

of or declared

excess without -Federal

proper

approval

or justification; were adequate.

Property

Management

Regulations

Our first finding

was that the need for new furniture documented. Of fiscal

purchased

was for

often not adequately furniture $876,000, totaling

year 1979 obligations totaling

$991,000,

we reviewed

254 requisitions for $339,000

and found that 177 requisitions Management officials

had no Justifiable

documentation. documentation require

agreed with issued

the need for better instructions to

and on December

4, 1979,

strong

justifiable

documentation

on all future

requisitions.

Another $514,000

finding

dealt with year-end

spending.

Fifty-two

percent

or

of the $991,000

of furniture $398,000

obligations were

occurred

in September.

Of the September

obligations,

for "systems

furniture"

-69-

for which

feasibility

studies

had been

started

in May and June.

However,

two out of the three feasibility until open September. space layouts "Systems

studies

required

had not been completed associated with

furniture"

is the furniture cost-benefit

and requires

specific

justification. could not

Accepting

management's

explanation

that "systems

furniture"

have been obligated or 23 percent during plan

before

September, non-systems

we still are concerned furniture purchases,

that $116,000, were made

of the annual

the last month

of the year.

We have

recommended

that DOL agencies year-end

furniture will

acquisitions be avoided.

so that potentially

unjustified

spending

It should

also be noted were

that during

fiscal year

1979,

four agencies furniture

in for

the Department 621 persons was acquired officials

authorized

by GSA to procure Since most

systems

at a cost of $478,000. for existing staff,

of the systems

furniture

it was suggested requiring

to us by DOL management program to assure

that GSA should

consider

a control

that conventional be fully utilized and we intend furniture

furniture

made excess

by systems

furniture

acquisition suggestion, conventional

and not discarded.

We think

this is a good of the replaced

to follow

up on the utilization

in DOL.

Our examination property surplusing

of the DOL warehouse awaiting Also,

showed

that almost

two thousand scrapping, excess to

items were

disposition

action--rehabilitating, already declared

or selling.

some furniture

-70-

GSA was Still being stored ascertain action, the length

in the DOL warehouse.

While

we did not disposition over

of time all the property that some

was awaiting

we were

informed

items had been in the warehouse according to warehouse

18 months. personnel, agencies hallways

We were

shown some

items which,

had been awaiting property

GSA disposition

for over a year. were storing

Some DOL it in items

with

in excess

of their needs

and offices

because

at the time of the audit, to the warehouse.

the excess Although

had not been scheduled informed of recent

for turn-in

we were

action

to rehabilitate

an accumulation

of wooden determinations since,

furniture,

we are still concerned

that delays

in disposition

can lead to unnecessary

new furniture listings

acquisition,

particularly

at the time of our audit, We are also concerned up surplus furniture

of warehouse for quicker

property action

were not available. by GSA to pick

about from

the need

the DOL warehouse.

Based upon our review we think better

of property Property

management Management

in the Department Regulations reduce would

of Labor, provide for

that the Federal to Federal

guidance

agencies, if changes

and would were made

the potential

mismanagement i. More

of property, criteria

in the following the stock use; and surveys

areas: level

specific

or guidance

for determining for future

or pool 2. More

of furniture

that can be kept

specific

instructions

on how often

to conduct

in order

to fully utilize documentation.

excess property,

and a requirement

for survey

-71-

When we observed considerable file cabinets

the Department's of certain

pool or reserve

of furniture,

we noted 76 only

quantities

items--approximately officials

125 desks, could provide

and 325 chairs. criteria

Departmental

very general maintained GSA would stockpiled

or justification By providing

for the quantity agencies with

of furniture or standards,

in the pools. have greater for future

criteria

assurance use.

that excessive

furniture

is not being

Audit

of the Departmental

Property

Manasement

System

In Progress System the OIG, was to documents,

A nationwide

audit of the Departmental

Property

Management contract

(DPMS) has been performed, and a draft report determine:

by a CPA firm under The purpose over

with

has been issued.

of the audit

(i) the adequacy

of controls

input and output of property is adequately there

and the integrity (2) whether to prevent applicable access

of processing

accountability system

documents; safeguarded with

to the computerized use;

unauthorized

and (3) whether and procedures.

is compliance

laws, regulations,

Significant

weaknesses

were noted we found:

in property

management

controls

and

ADP controls.

In summary

Prop.erty Management -Failure

Controls to adequately control and prepare input

documents; --Inaccuracies in DPMS inventory listings; and to

Lack of annual properly

certified

inventories

and failure

tag property

items.

-72-

Automated --

Data Processin$ Failure

Controls control and prepare input/output

to adequately

documents;
\

--

Lack

of appropriate management

separation

of functions

between

property -Lack

and ADP functions; of functions between programming and

of separation duties; program

operational --Inadequate National Property

maintenance

procedures_ reliance

and on Departmental of DPMS

Office

agencies' Office

excess

Management

for the processing of agency

transactions during

and the commingling

transactions

the data conversion

process.

Recommendations each finding on April

have been made

to Departmental and their

Management

on

in this draft

report

comments

are due

4, 1980.

-73-

CHAPTER Employee

IV.

EMPLOYEE

INTEGRITY_

OIG INTERNAL Affairs

AFFAIRS

AND THE HOTLINE

Integrity

and OIG Internal

It is imperative of integrity

that the Office

of Inspector

General

be itself a model Affairs

and efficiency.

We have

established standards.

an Internal This

(IA) staff to ensure responsible inspection

that we meet

those

staff will be

for planning, of OIG's

developing

and implementing and systems

the internal and making recommendations

programs,

operations staffing

for improvement. Internal Affairs

The immediate Chief assisted

plan for IA provides

for an

by detailees

from each OIG component. investigations of of

The IA Chief will alleged

also be responsible misconduct

for conducting

or suspected

by OIG employees, by which

and the orientation conduct

all employees themselves.

to the high standards

OIG staff must

The inspection to determine administrative

function

will with

require

periodic

reviews

of each IG office policy directives, whether

compliance

operating

requirements, of conduct;

procedures

and standards

to establish

the work of the office and to determine and prevent

is being

administered procedures

efficiently

and effectively; to detect

whether

internal

are sufficient

waste,

fraud and abuse.

To date, several staff members resulted

Internal

Affairs

inyestigations These

have been conducted investigations have

by

on detail

to this function. including

in a number

of changes,

administrative

removal.

-753

We are also review

in the process

of conducting

an extensive

pro-active

of our own audit contracting is the management from Certified those areas

procedures. of OIG's

The subject contracting for

of this project audit services is to identify Field work obtained

extensive

Public Accounting contracting complete,

firms.

Our purpose can be improved. on results

in which is almost

procedures and, based result

on this project

to date, we expect

that the report will procedure which

in recommendations competition

for changes

in the contracting

will

enhance

for, and lessen should quality also

the cost of, OIG audit in improvements

contracts.

The recommendations used to identify

result

in the criteria

audit

contractors.

Employee During

Integrity

Investigations October i, 1979

and Hotline to March

Complaints this Office referred

the period

31, 1980,

to the U.S. Attorney employee

for criminal

prosecution Three

four cases of these

involving declined

integrity-related

violations.

cases were

for prosecution The remaining period, $1,254

and subsequently case is awaiting opened

referred prosecutive

for administrative decision. 7 cases, During

action. the same a

this Office monetary

12 cases,

closed

and recorded

collection.

A significant months partner

prosecution

in a related probation

area was

the sentence

to six

in prison

and two years D.C.

on February

27, 1980 of a services for the

in a Washington,

CPA firm which auditor.

performed A criminal

Department

of Labor as a contract

information

-76-

was filed against and concealing when he applied

him on January

3, 1980 charging

him with misrepresenting of his audit to overcharge staff DOL

the true qualifications for a DOL contract totaling

and experience

and of attempting

by submitting done outside

invoices

$827,750.88

for unauthorized guilty

audit work to one count

the scope of his contract. This investigation with

He pleaded

on January

ii, 1980.

was initiated

by this Office

and subsequently

concluded

FBI investigative

assistance.

During

the period

October

i, 1979

to March

31, 1980,

the Department Seven DOL. of

of

Labor OIG Hotline these complaints were walk-in mail.

complaint were

system received

86 complaints.

from DOL sources

and 79 from outside and 34 were referred

Three in the agencies

complaints,

49 by telephone, received,

received

Of the 86 complaints action,

56 were

to program

for administrative

17 were closed

and 13 retained

for OIG action.

During

the reporting Office

period

October

i, 1979 to March

31, 1980,

the General

Accounting These

(GAO) referred

195 hotline

summaries

to this Office. branches they are

summaries

are screened After

and sent to the various chiefs review

OIG program

(ETA, ESA, either

etc.).

the branch

the summaries

referred

to OIGRegional agencies

Investigative

Offices

or sent directly action. Of the ESA

to the program 195 summaries matters, were

for appropriate 126 concerned employee

administrative ETA matters, matters.

received,

38 concerned

and 31 involved

integrity

The vast majority action.

referred

to the program

agencies

for administrative

-77-

Vulnerability The Office design

Identification

and Control and Prevention to solicit

Outreach

Prosram engaged in the

of Loss Analysis

is currently

of an Outreach program

Program

from DOL employees

information and abuse

concerning and, where Employees should

and systems

vulnerabilities

to fraud, waste action.

possible,

recommendations

for corrective about

who are very knowledgeable source

DOL systems

and procedures weaknesses weaknesses.

be an invaluable possible

of assistance

in identifying

and suggesting The Program An account report.

solutions.

The focus will within

be on systems the next

is scheduled

for implementation will be provided

few months.

of its progress

in the next

semi-annual

_78_

APPENDICES

Summary

of Investigative

Activities

- October

I_ 1979 to March

31, 19.80

Cases Closed

Opened

-

236 i/ 305 511 140 46 30 17 $13,294.62 $743,430.28 $20,494.45 _/ _/ _/ _/ i/

Pending Referred to U.S. Attorney

-

Declinations Indictments Convictions Fines Recoveries Collections Claims Savings

$3,490,273.26 $3,025,730.49

i/

Includes program investigations, employee integrity, and other matters, but excludes cases handled by the Office of Organized Crime and Racketeering. Fines are the sums of money imposed as a penalty upon defendants an administrative hearing, civil suit, Or criminal prosecution. after

2/

_/

Recoveries include the restoration, • restitution, or recovery of money property of known value that was lost through a crime, mismanagement, Collections are the receipt of payments transaction, suit or proceeding. Claims are the dollar value determined by a DOL agency. Savings are the prevention Of an indemnity to end a civil

or etc.

_

5/

of indemnities

which

have been administratively

6/

of dollar

value

losses

to the Government.

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