Semiannual Report of the Inspector General

U.S. Department of Labor Office of Inspector General April 1, 1980-September 30, 1980

,_

SEMIANNUAL APRIL

REPORT 30, 1980

i, 1980 - SEPTEMBER OF INSPECTOR

OFFICE

GENERAL

U.S. DEPARTMENT

OF LABOR

TABLE

OF CONTENTS

Page

MESSAGE

FROM THE ACTING

INSPECTOR

GENERAL

i

CHAPTER

I

PROGRAM

AGENCIES

AND DEPARTMENTAL

MANAGEMENT

1

A. B. C. D. E.

The Employment The Employment The Mine Safety

and Training Standards

Administration

1 25 35 39 41

Administration Administration Administration

and Health Safety

The Occupational Departmental

and Health

Management

CHAPTER

II

ORGANIZED

CRIME AND RACKETEERING

43

CHAPTER

III

EMPLOYEE

INTEGRITY,

OIG INTERNAL

AFFAIRS 47

AND THE HOTLINE

APPENDICES - Audit Resolution - Status - Summary - List Activity Audits Issued 50 51 52 53 Activities 64 65

of Unresolved

of Audit Reports

of Audit Reports of Investigative

- Summary

- Cases Referred

to the U.S. Attorneys

MESSAGE

FROM THE ACTING

INSPECTOR

GENERAL

Pursuant

to the provisions

of the Inspector

General

Act of 1978,

I am pleased of

to transmit this Office

this report concerning during the period April

the activities

and accomplishments 30, 1980.

I, 1980 - September

I suppose any other, covered

that every good message ties together the major The clear

must

have a theme--one occurred

which, more

than

events which choice

in the period has been the chalin

by the report.

in this period

lenge of conducting the context

the operations

of the Office freeze.

of Inspector

General

of a government-wide

hiring

In the case of our Office, sonnel to undertake

which

is virtually

entirely

dependent

upon per-

its responsibilities, For this reason,

the freeze

limited

us to 80 percent

of authorized

strength.

our anticipated

levels of audit of Loss However, we

and investigative Analysis recently With

activity

could not be met and our new Office adequately staffed.

and Prevention have received

could not become some relief

from the limitations to this relief, those

of the freeze. we should be able of the Office of

the increased

staff hired

pursuant

to significantly Loss Analysis

upgrade

our efforts--particularly

and Prevention.

There very

is another

side to the freeze.

For,

in a way,

it can symbolize

the

goals this Office was created of trying to provide

to promote. essential

It is a symbol with

of "belt-

tightening", for ways

services

less, of looking programs. new

to enhance

the efficiency

and productivity a premium We have

of current

To this extent, approaches investment

the freeze has placed management. I would

on creative regarded

planning,

and enlightened in our future.

this

time as an to.high-

like to take this opportunity

light some of these efforts.

In the investigative to better target

area, we have made much resources.

progress Within

in developing our Office

ways

our investigative

of Organized

Crime and Racketeering, for each field office. problem

mission These

and strategy

papers

have been

developed crime and

documents

analyze

the organized

racketeering to have

in the area, impact

assess how OIG resources an investigative fraud area,

could be used for meeting

the greatest

and outline

strategy

operational gations

objectives.

In the program a system

the Office

of Investi-

has established

for prioritizing

case workload.

In both analytic gative maximum

of these investigative training program and help which

programs, should

we have

launched

a specialized of investiwith

result

in better

targeting

resources

insure

that investigations

are conducted

efficiency.

In the audit area, our Office initiatives nerabilities of significant and other increased including

of Audit

has moved

ahead

with

a number

of

the selection

of audit

targets

based

on risks, vul-

and potential findings

weaknesses,

and the prospects that will we have impact audit

for development financial and To plan and have effort. A

and recommendations

improve

operations.

As part of the process, to internal

revitalized audits. plan, audit

our commitment

and special

this effort, intensified comprehensive to sharpening we have arrange

we are developing the allocation auditor

a two-year

internal

of resources

to the internal

training

and professional

development

program

geared and

and broadening

auditor

skills has also been developed, audit strategy whereby

implemented

a new grantee-procured thus freeing

grantees activities.

for their audits,

OIG auditors

for other

audit

In the loss prevention and Prevention vulnerabilities to prevent (OLAP)

area, we established to provide us with and abuse

the Office

of Loss Analysis to analyze systemic

the capability and to design

to fraud, waste

countermeasures

or minimize

loss occurrence/recurrence.

I am pleased we completed J. La Barbera

to announce our senior

that during

the latter with

part

of this reporting

period,

staff recruitment of the Office

the appointment

of Mr. Salvatore

as Director

of Loss Analysis

and Prevention.

ii

Mr. La Barbera

is uniquely

qualified

to lead this asset

important protection

new OIG Office programs and

and has had extensive in related

experience

directing

areas of internal

security

and fraud and criminal

investigations.

Prior York

to coming

to the Labor Department, including Director

he held

numerous

positions

in New in

City government

of Loss Analysis of Corruption

and Prevention Analysis

the Human Resources vention

Administration,

Director

and Preof

in the Department Criminal

of Investigation Council.

and Chief

of Project

Review

the Mayor's

Justice

During

this reporting

period,

a number

of OLAP assignments

have been

substan-

tially completed, Employment Black Lung.

including Act,

those conducted the Federal

in the area of the Comprehensive Compensation that OLAP Act, and is central

and Training

Employees'

As I have previously of the OIG,

indicated,

I believe

to the mission to reduce

and offers

the Department

a unique

opportunity loss

fraud and abuse in DOL programs For this reason, we have made

by identifying

and blocking

opportunities. by the progress

I am particularly since

pleased

and encouraged

in this area

our last report.

Two of our projects a multi-Departmental Act Program. This

deserve project

special

note.

We have

initiated

and are leading Compensation a profile

relating

to the Federal in which

Employees' developed

is a pilot project By comparing possible

we have

of a high risk claimant. sources, agencies great we will will determine

the profile

data with

income-reporting

unreported

income.

The participating This project shows

follow up with

appropriate

investigations. will

promise.

We are hopeful

that this_ project

result

in significant are enthusiastic.

savings I should findings are also

and programmatic also mention

recommendations. project,

Participating which

agencies

the MSHA which

is continuing.

Preliminary

of this project, significant.

are discussed

in the text of this report,

In addition,

the OIG has developed

cooperativ_

working

relationships efforts.

with

all parts of the Department. ticular, I note the cooperation

I am pleased we have

by all these

In parrelief

received

in terms

of obtaining

iii

from the hiring we have developed

freeze. with

Also

of special

note

is the working

relationship (ETA). the

the Employment

and Training

Administration

We recently working agreement issues

signed

a Memorandum between

of Understanding

with ETA establishing matters. principally

relationship

ETA and OIG on investigative draft. This will

A similar address

in audit matters from

is in final

arising

the issuance

of audit

reports

and resolution hard

of audit re-

findings. solve audit

I should add that while findings,

ETA is working of unresolved

to more promptly remains.

a huge backlog

findings

On an OIG-wide ments. program,

basis,

we have

implemented

a number

of management an employee profiles

improveorientation

The OIG task force on training has coordinated categories the development

has designed of training

for all major develop-

OIG occupation ment planning

and has initiated Also,

a program we have

of individual

for all OIG employees. management meetings which

established

a system in

of quarterly identifying a collective and operating suances

have been extremely planning

effective

problem

areas,

in designating

initiatives

and in achieving management policy is-

sense of direction. procedures,

We are working

to streamline of major

and to complete

development system.

and establishment

of an OIG directives

Additionally, complete. strengthen already

our evaluation

of OIG audit

contracting

procedures

is nearly will

Implementation and improve

of the recommendations contracting

of the evaluation Based

the audit

procedure. the cost

on changes to the

implemented revised

for one of our procurements, scoring weights could

savings Since

OIG using agencies

be significant. used,

most Federal that

use the same scoring will have

weights

we previously impact.

I expect

our findings

government-wide

Thus,

despite

the hiring

limitations, of which

we have maintained we can be proud,

a level and have

of audit undertaken to

and investigative a number make

activities

of important

management

initiatives.

This Office's

ability

this progress

is, I believe, thanks

a real tribute

to all OIG employees.

They have my

sincere

and appreciation.

RONALD Acting

GOLDSTOCK Inspector General iv

CHAPTER

I.

PROGRAM

AGENCIES

AND DEPARTMENTAL

MANAGEMENT

A.

THE EMPLOYMENT

AND TRAINING

ADMINISTRATION

The Employment largest program

and Training

Administration the Department

(ETA)

constitutes

by far the of funding. ETA is responprograms apprentice-

agency within

of Labor annual

in terms budget.

It receives

over 90 percent

of the Department's employment

sible for formulating and systems. ship, work insurance

the Nation's

and training

policies,

It is also responsible work experience, In formulating to the needs

for administering employment

the Nation's

training, programs.

services,

and unemployment ETA and

and administering

its programs, unemployed

gives special underemployed.

emphasis

of the disadvantaged,

The largest

of the employment

and training

programs Employment

administered and Training

by ETA Act (CETA) 473 prime of local

are those authorized and subsequent sponsors, government grants.

by the Comprehensive to this Act.

amendments

Under

the Act,

as amended,

which are state and local governments, units with populations of i00,000

and combinations receive

or more,

direct Federal their

These prime sponsors

use CETA grants and training

to design programs

and operate to meet

own comprehensive

work experience

local needs.

The prime sponsors groups to provide

operate work

the projects

themselves,

or contract

with

other states

experience

or training

services.

Generally,

are responsible sponsors.

for programs

in areas

that are not served by local prime of National Programs (ONP) provides with special capa-

In addition,

ETA's Office

funds to a wide bilities provide

range of public employment

and private and training to Native

organizations services. Americans, particular

to provide special

These

ONP grants and seasonal

Federal

assistance

migrant

farmworkers,

older workers,

and others with

job disadvantages.

Under

CETA, economically can obtain

disadvantaged upgrading,

persons

who are unemployed education,

or underpublic service

employed

training,

retraining,

2

employment over

and other

services were

to qualify

them

for jobs.

During programs

FY 1980, provided jobs

3.5 million Almost

persons 400,000

served under were

the various employed designed of high

by CETA. •

individuals

in public to provide

service

under Title Vl--a jobs for unemploYed

countercyclical workers were during

program periods

temporary Approximately ll--which many of

unemployment. CETA Title unemployed,

1.6 million consists whom

persons

also served

last year under

of programs

designed

to aid the structurally have inadequate provide

lack necessary

job skills, These

education

or who face other training Supportive

labor market and upgrading, services services.

barriers. classroom

activities

for on-the-job experience.

and skill

training

and work

also are included

such as transportation,

child

care and medical

CETA under

also serves

disadvantaged training Pilot

youth--approximately and employment efforts.

1.4 million

in FY 1980

five separate Entitlement Projects,

They are the Youth Conservation and

Incentive Improvement

Projects,

the Youth

Community

the Youth

Employment

and Training

Programs, Title

the Summer of CETA

Youth Employment provides

Program

and the Job Corps. Conservation

In addition, administered

VIII

for a Young Adult

Corps,

by the Departments

of Agriculture

and Interior.

Finally,

in an effort

to gain greater programs,

participation a Private VII.

of the private Initiative Industry

sector

in employment (PSlP) been were

and training

Sector Private

Program Councils have

has been established

under Title sponsors

set up for most prime served under

and in FY 1980 approximately

85,000 persons

this activity.

In cooperation administers cipients to work.

with

the Department Incentive

of Health

and Human which

Services,

ETA also to help re-

the Work

(WIN) program

is designed (AFDC) move

of Aid to Families

with Dependent

Children

from welfare is shared

At the local level, responsibility (usually the public

for WIN operations agency

by the WIN sponsor and the public

employment

or Job Service)

welfare

agency.

3 In conjunction ETA administers with the affiliated State Employment programs. Employment local Security Under Service offices Agencies (SESAs),

two kinds

of Federal-State the State

the direction Agencies (or

of the U.S. Employment Job Service) in filling operate

Service,

a network

of over 3,000

tO assist employers including programs The states out

job vacancies

and to serve persons benefits.

in need

of employment compensation Service.

those eligible are administered have direct

for unemployment through

Unemployment Insurance

the U.S. Unemployment for operating a payroll

responsibility through

UI programs

and pay benefits The Federal from funds

of funds collected ment establishes

tax on employers.

governcollected

guidelines

and pays administrative Unemployment by the SESAs for involuntary who

costs

under provisions single benefit income

of the Federal operated

Tax Act (FUTA). is UI which job loss.

The largest temporary

program

provides Under

as partial

compensation

other programs, of foreign

benefits imports

are also provided Or natural

to persons

lose their

jobs by reason

disasters.

4

Audit

Effort

Involving

ETA Programs

-

State and Local

CETA Program

Audits

During

this reporting

period,

the OIG audits

issued 65 audit took exception insufficient

reports

on state

and local CETA programs. Unresolved bursement gible solved subsponsor

These

to $47.2 million, i/ documentation, reim-

audit exceptions, wages in excess

of participant

of the allowable problem from areas.

rate and ineliof the unreparticipants

participants subsponsor

continue audit

to be major

Many

exceptions required

resulted

ineligible

or a lack of documentation

to support

eligibility.

In an effort corrective begun

to help minimize

these problems,

the audit noted.

reports

included OIG has

recommendations

for each weakness

In addition,

development include

of a two year plan broader review

for internal

and special areas

impact audits

that will

of specific

problem

in CETA operations.

OIG projects verification

such as evaluation system

of the CETA eligibility carried

determination

and

are also being

out by the Office

of Loss Analysis

and Prevention.

i/ Throughout

this report,

audit

exceptions

include

both questioned costs

costs

and costs recommended without sufficient

for disallowance. evidence Costs judges,

Questioned to enable

are expenditures to make are to be a

documentary

the auditor

conclusion expenditures unauthorized

as to allowability. which the auditor

recommended based

for disallowance evidence,

on available

under the terms of the grant.

5

A summary

of the major

reasons

for audit

exceptions

is shown below:

Amount Audit Exception Unresolved Subsponsor Exceptions Audit

of

No. of Reports With Exceptions

Exceptions

$ 8,492,317

41

Improper Allocation of Administrative Charges Insufficient Ineligible Documentation Participants

870,759 14,543,170 3,595,766

14 31 32

Reimbursement of Participant Wages in Excess of Allowable Rate Reported Expenses in Excess of Recorded Expenditures Nepotism Budget Exceeded Indirect Accrued Costs Expenses

6,150,804

16

1,119,502 381,320 2,093,524 1,620,095 5,777,988

7 3 8 6 2

Unallowable Unallowable Unallowable Activities Unallowable Benefits Other

Subcontractor 522,054 Charges for Fringe 487,589 1,558_975 Total $47,213,863 i 21 4

The illustrative typical problem

examples areas

presented

below

highlight

significant period.

findings

and

identified

during

the reporting

-

One audit recommended determination would

disallowances

of approximately ETA stated

$7 million.

In

an initial $5 million

sent to the grantee, under

that approximately on: excess

not be allowed

the regulations

based

reimbursement transfers, audit

of salary payments indirect costs,

for public ineligible

service

employees,

excess

cash

excess

participants

and subsponsor

exceptions.

-

In another

report,

the auditors

recommended

for disallowance amounts

approxito ETA

mately

$1.6 million

because

of differences Status which Reports" could

between

reported

as costs on the "Financial grantee financial records,

and amounts

included

in the by

not be explained

or documented

the sponsor's

staff.

-

In the audit of one major The major reason benefits

grantee,

over $6 million

was recommended for in

for

disallowance. wages

was that accruals

of over $5 million not reversed

and fringe

as of September October

30, 1976 were I, 1976.

the subsequent

period,

beginning

The grantee

thus claimed

and was reimbursed

twice

for the same costs.

-

The auditors,

in another

report,

stated

that the grantee

was six months system bank

behind

in reconciling

its cash balance several

for CETA

to the city accounting were not performing

cash balance. reconciliations.

Additionally,

subgrantees

-

Follow-up

Review

of the Summer Youth

Employment

Program

During Youth

this reporting Employment

period,

OIG initiated This

a follow-up

review

of the Summer at

Program

(SYEP).

follow-up

review was conducted and at 116 work Chicago, Denver

the Office

of Youth Programs

in the National in Washington, the actions made during

Office D.C.,

sites and San

of four prime sponsors Diego. Programs review Its purpose

located

was to assess

taken by the Office the initial

of Youth SYEP

on OIG's recommendations

comprehensive

conducted

in FY 1979 at 2,230 work

sites.

Specifically,

in its follow-

up OIG focused

on:

(i) the adequacy (2) the adequacy (3) the currency (4) the adequacy

of comprehensive of training and adequacy of work

planning, to work site supervisors,

provided of work

site agreements, and supervision, instruments, actions, and

site screening

(5) the utilization (6) the promptness (7) the eligibility

of standardized and effectiveness of participants

monitoring

of corrective at the work

sites.

The field work port

for this follow-up

review

was performed

in August

and a rein

is being prepared. Semiannual

The results Report.

of this review will

be discussed

the subsequent

Cash Management

Audit Review

The last Semiannual assess During study, effectiveness

Report

discussed

the initial practices

survey being within

performed

to

of cash management period,

the CETA program. and depth of its months.

this reporting

OIG has expanded

the scope

and as a result,

the effort will

not be completed for improved

for several CETA

OIG anticipates

significant

recommendations

cash management.

-

Native

American

Program

Audits

During

the reporting took

period,

three Native

American

audit

reports reasons

were for

issued which

exception

to $2.6 million.

The major

the exceptions

are shown below.

Amount Audit Exception Unallowable Contract Costs and

of

No. of Reports With Exceptions 3

Exceptions $1,189,161

Improper Contracting Procurement Ineligible Improper

837,305 245,554 209,325 110,472 2,485 484 Total $2,594,786

2 3 i 3 3 i

Participants of Costs

Allocation

Insufficient Overbilled

Documentation Costs Costs

Misclassified

9

- Migrant

and Seasonal

Farmworkers

Program

Audits

During

the reporting

period,

ten audit

reports

were

issued

concerning

Migrant to

and Seasonal over

Farmworker

program

grantees.

These

reports

took exception

$6 million.

The major

reasons

for the exceptions

are shown below.

Amount Audit Exception Improper Allocation Staff Participants Documentation and of Costs

of

No. of Reports With Exceptions. . 6 2 9 9

Exceptions _3,232,534 746,188 604,207 581,461

Unqualified Ineligible Insufficient

Improper Contracting Procurement Overbilled Unallowable Misclassified Other Total Costs Contract Costs

426,607 246,043 Costs 150,215 23,470 12,643 $6,023,368

4 7 4 2 5

i0

- Job Corps Program

Audits

Eighteen period

Job Corps Center

audit

reports

were

issued

during

the reporting reasons for the

which

took exception

to over $5 million.

The major

exceptions

are shown below.

Amount Audit Exception Not $

of

No. of Reports With Exceptions

Exceptions

Bidding Procedures Followed

544,539

i0

Lack of DOL Approval for Capital Improvements, Training Projects, etc. Insufficient Inadequate cation Inaccurate Nepotism Overpayments Total Documentation Staff Qualifi-

808,279 1,724,133

14 12

1,995,871 Accounting Records 33,850 42,328 62,268 $5,211,268

12 2 2 8

Two problems, two percent

noted

at most

of the centers These

audited,

together

represent that:

seventy-

of the audit

exceptions.

two problems

were

- instructors tablished

and counselors

did not meet proposal,

the minimum

qualifications

esthe proper

in the contractor's or licenses and

or they had not obtained as required

certifications regulations,

for their

positions,

by Federal

- files maintained the allowability employment purchase

by the contract of costs.

centers

did not adequately there frequently

document

For example,

were missing missing

applications

and other

critical

personnel

documents,

invoices

and receiving

reports

and undocumented

bid procurements

and purchases.

ii

- Office

of National

Prosrams/Office Prosram Audits

of Policy

Evaluation

and Research

and Other National

During

the period,

OIG issued 98 audit funded largely

reports

on a variety

of National Act Con-

contracts or CETA.

and grants This

through

either

the Older American Agency

includes

21 reports

that the HEW Audit to us.

and Defense

tract Audit Agency

(DCAA) provided

The reports

were

issued

to: Programs and 20 59

Office

of National

Office of Policy Research

Evaluation

-Office of Cost Determination (Indirect Cost Audits) Other Federal Agencies j/-

i0 9 98

Fifty-eight exceptions

of these reports

pertain below

to DOL-funded according

programs

and contain

audit

that are summarized

to major

category

of exception.

Amount Audit Exception Ineligible Insufficient Budget Participants Documentation

of

No. of Reports With Exceptions 8 44 21

Exceptions $ 265,221 6,725,451 929,798

Exceeded

Improper Allocation of Administrative Charges Overpayments Other Total

194,637 89,169 370,983 $ 8,575,259

12 16 19

/

i/ The reports

issued

to other Federal

agencies

were

the result of audits the majority of the funding

of these agencies' was from the DOL.

funds at grantee

locations

where

12

One of the more lion

significant

reports

questioned through

approximately of more

$1.4 milthan 20 or,

in a project

that was operated The subcontractors "Service

a series many

subcontractors. as they were supported

established

"businesses"

termed

Projects,"

for the purpose with particular

of providing difficulty

jobs

for groups

of individuals of special

in obtaining

jobs because

employability

problems.

The auditors and issued

could not issue an opinion opinion

on the financial accounting

statements and administrapoor

an adverse procedures

on the internal The controls

tive control

in use.

were particularly

in some of the subcontractors for the disposition purchased,

and service

projects,

and no plan existed assets

of supported

work businesses

and capital

at such time as the program

is terminated.

13

- State Emplo_ent

Security

Asenc_

Audits

and Reviews

OIG issued The reports ceptions

six audit reports took exception

concerning

SESAs

during

the reporting reasons

period. for the ex-

to over $7 million.

The major

are presented

below.

Amount Audit Exception Insufficient Documentation

of

No. Of Reports With Exceptions 3

Exceptions $ 3,996,731

Unresolved CETA Subsponsor Audit Exceptions Unallowable Ledgers Costs Closed Out

338,568 2,343,258 212,424 113,713

I 4 i i

Not;Properly

Non-Federal

Share Not Provided Charged to

Current Obligations Prior Year Ineligible

31,700 21,091 3,361 $7,060,846 significant problem areas

i i I

Participants Training Total

Inappropriate

Highlights

of some of the more were

are presented

below:

--In one case, auditors of one state agency's tration. They

unable

to render

an opinion

on the reliability and Training Adminis-

financial

reports

to the Employment

pertained payments.

to Federal Accurate

unemployment

compensation checks

and CETA wage could not be prein its agency

and allowance

lists

of outstanding differences Federal

pared by the agency--which reconciliation resulted thousand cedures work papers.

was carrying Also,

totaling

$613,420

excess

cash held by the state government the state

in computed

interest

lost to the Federal In addition,

of more than $60 agency lacked pro-

over a seven-month to ensure

period.

that data entering

the cost accounting

system are complete, sources. Finally, to perform

accurate,

fully documented,

and reconcilable

with external prime

the state agency--as audits of about

the CETA balance which

of state had costs

sponsor--failed

125 subsponsors

of over $i00,000

a year.

14

--A second

report

disclosed

that cash balances

had not been reconciled that numerous receipts

between

the employment made

service

and the central of credit

organization,

errors were

in recording

letter

and miscellaneous

in the general reconciliations generated cost data--

ledger and in many were not made

individual

fund ledgers,

and that monthly subsystem--which

between

the time distribution

and the actual

payroll.

--In another required

SESA,

the financial

system was not centralized had not been prepared, period

for maximum

control,

Federal

financial

statements costs

and documentation destroyed prior

for benefits

and allowances

for a 19-month three-year

had been period.

to the expiration

of the required

retention

--After

a limited-scope

review

in another

state

agency,

we reported for CETA

on (I) the subgrant awarded contract

use of holding_ledgers expenditures to the agency period, system lations which were

to temporarily in excess

transfer

and account

of amounts sponsors

in budgets, made after through

(2) contracts the designated

by various

CETA prime

(3) duplicative to the wrong or contract

costs charged

indirectly

the cost accounting by regu-

fund ledger,

and (4) charges

for items not allowed

specifications.

As reported coverage This

in the last Semiannual operated

Report,

there have

been large

gaps in audit (SESAs). period.

of programs

by State

Employment evident

Security during

Agencies

lack of audit coverage instances,

was especially

this reporting limited

In some reviews. gaps

the six reports

which were

issued

reflected

scope

Thus, even

in some of the six state remain.

agencies

reviewed,

significant

in audit

coverage

We previously weaknesses

reported

that one avenue

for alleviating

these

audit

coverage

would

be the increased of necessary

use of grantee-procured to SESAs

audits by SESAs such audit activ-

and the provision ities. mental budget

funding

to undertake

The Employment approval, request

and Training

Administration

(ETA) has obtained

Depart-

and is seeking to be allocated

OMB approval,

for $6 million

in its FY 1982 to pay for

to some of the 54 SESAs would be consistent

in order

SESA-procured Attachment years.

audits.

Approval

with OMB Circular A-102, at least every two

P, which

requires

that grantees

be audited

15

An area of continuing payment control, which

interest refers

to the OIG in the UI programs to the systems

is benefit to detect in this Comand

used by the SESAs

overpayments Office's mission Improper

of unemployment

benefits.

The issue was discussed report

last Semiannual on Unemployment Payments

Report.

An interim (NCUC),

for the National Overpayments is being

Compensation

"Estimating Program,"

in the Unemployment

Insurance

prepared.

The purpose ments

of this study is to estimate payments

the rates

and amounts

of overpayin selected states

and improper

in the unemployment in seven cities

insurance

program

cities.

The study was conducted

in six different during

based on a sample of unemployment October i, 1979 through March

compensation

payments,

the period

30, 1980.

One major payments

limitation

to the NCUC

study

is that information in strict confidence

related which

to overmakes areas

in any individual

city is held

the study somewhat in those respective were Thus, not randomly the findings

less valuable cities. selected

to us in identifying the cities sample

specific selected

problem

In addition,

for analysis

from a nationwide

of UI jurisdictions. cities. of over-

of the study are valid

only

for the six project nationwide estimate

Much more needs payments. generate cially

to be done to develop the preliminary

a valid

However, concern

findings

of this study will

probably espe-

and serve to emphasize

the serious audit

vulnerabilities, of SESAs.

given

the current

gaps in external

coverage

16

-

OIG/ETA

Audit Resolution

Activities

The need which

for prompt

and careful frequently

resolution by GAO,

of audit

findings

is a major

issue

has been

raised

the Congress,

OMB and the Department area has recently Review Committee, audit audit audit followrecomreso-

of Labor.

The need

to seek improvements

in this critical Audit

been highlighted and in OMB's up. Both

in the report

of the Department's to Circular A-73

issuance

of revisions stress

concerning of resolving track

of these documents expeditiously,

the importance systems

mendations

of developing

that will

lution progress, on corrective agency's audit

of establishing needed,

procedures

for settling periodic

internal

differences of the

action

and of undertaking

evaluations

follow-up

system.

We,

in the OIG,

continue

to be concerned of audit

about

the high

level

of unresolved in the

audit reports. appendices progress audit

A comparison

resolution

statistics

included

of this report, in some areas. continues reports

with

similar

data in previous dollar

reports,

demonstrates

However, to climb. dollar

the overall

total

of unresolved there were reso-

findings

As of September findings

30, 1980,

over 987 audit lution. About

with

of $283 million

awaiting

$185 million

has been outstanding

over one year.

ETA and OIG established problems

a special

task group of mutual

to address

audit

resolution have

and other other matters concerning be finalized both

concern.

Draft

procedures

been developed These should

issuance Once

and resolution implemented,

of audit these

reports. should

shortly.

procedures

facilitate

audit resolution. in reducing

But in themselves, the backlog.

revised

procedures

will must estab-

not be successful lish a timetable would mental

Rather,

ETA management Such

for the resolution with

of open audit contained July

reports.

a timetable

be consistent Appropriations audits

the language

in Section

305 of the Suppleall pending by

Act of 1980, dated

8, 1980,

requiring

unresolved September within

of appropriations Additionally,

covered

by the Act

to be resolved costs

30, 1981.

any new questioned of the audit report.

are to be resolved

six months

after issuance

17

Investigative

Effort

Involving

ETA Programs

The mission

of the Office investigative

of Investigations program

is to administer

an independent internal, detecting,

and objective contract

in the Department

covering

and grant activity as a deterrent

with the objective to criminal

of preventing, program

and serving In carrying

activity,

fraud and abuse. within the Office and A much

out this mission, is allocated

the majority

of resources

of Investigations abuse within smaller

to investigating programs

allegations funded

of fraud CETA.

ETA programs,

particularly

under

portion

of the investigative

resources

allocated

to ETA programs statistics by

is devoted

to investigating security

allegations offices.

of false

placement

state employment

During

the period April

i, 1980 to September

30, 1980,

this Office

opened

ii0 investigative During cution

cases involving we referred

ETA programs,

and closed

167 cases. proserelated investi-

this period,

to the U.S. Attorney employment

for criminal and training

47 cases involving Between resulted April

CETA and other I and September

violations. gations have

30, 1980, ETA related

in 13 indictments

and ii convictions. are either pending

The balance further action

of the cases referred or prosecution Attorneys, prosecution tive action Inspector promote

to the U.S. Attorney declined. referred officials When

has been

cases

are declined or local

by the U.S. for their

they are either or to program

to state

authorities action.

for administrative since

Administraof the

is taken when cases are prosecuted, Act is not only to prevent Tables

the purpose

General

fraud

and abuse but also to by region, the re-

economy

and efficiency. status

showing

a breakdown,

of the current porting period

of cases referred

to U.S. Attorneys

during

are in the appendix.

18

Monetary

results

due to investigative in savings,

activities in fines

amounted

to $49,795

in

recoveries,

$359,232

$12,000

and $262,925

in claims.-

i/

The following

table shows a breakdown

of these

data by region.

i/ Fines

are the sums of money hearing,

imposed

as a penalty

upon

defendants

after

an administrative include

civil

suit, or criminal or recovery

prosecution; of money

recoveries of

the restoration, that was

restitution,

or property etc;

known value

lost through

a crime, mismanagement, to end a civil value

collections suit

are the receipt or proceeding; ment; tively claims

of payments savings

of an indemnity

transaction, losses

are the prevention

of dollar

to the Govern-

are the dollar value by a DOL agency. and an OIG

of indemnities For example,

which

have been administraloses $i0,000

determined

if a state

in CETA property, tributable

investigation

determines agency

that the loss was atestimates

to negligence,

the DOL program

administratively

a claim against

the state for $i0,000.

19

o
0 0 I _ I I 0 E--t < I I I I I

o
0 0 I I ! I I I

o
0 0 I

I-,-,4

,--I I Z 0 I.-I

I

I

I

I

I

r_.

I

I

O_

Z )-I ,,< Z Z

OI

'_

_

-.'r

Z .<

z

_

N
0 4-I .M

Z 0

_ 0

0 _

_ m

¢_ _

_ _

_ _

_ m

_ •

_ _

_-_ -_.

0

Z

20

The more 1980

significant

convictions

and indictments ETA Programs

during

the period

April

I,

to September

30, 1980 involving

are described

below.

--

In Houston,

Texas,

a Federal

Grand

Jury

indicted

the Executive

Director,

the Comptroller of CETA funds.

and a supervisor The Executive

of a well-known was

organization

for the misuse of false was inindividual

Director

indicted

on six counts the Comptroller The third

statements dicted was

and misapplication

of CETA funds, while of CETA

on two counts

of misapplication

funds.

indicted

for perjury.

Both

the Executive indicted losing

Director

and the Comptroller time sheets

of this organization and threatening benefits

were

previously workers engage

for falsifying

CETA-paid

with

their jobs or losing other activities. false After

if they did not the Comptroller two individuals

in political

a five day trial, The other

was convicted

of submitting trial.

statements.

are still awaiting

--

A Kansas

City, Missouri

business

owner, who was a CETA of CETA

subcontractor, counts to operate operafor CETA

was convicted of filing a combined tions.

of one count of misapplication This individual

funds and seven subcontract in machine

false statements. Classroom

had a CETA

Training/On-The-Job scheme

Training

Program

Part

of this individual's instructors

was to bill rental

the prime

sponsor

non-existent participants

and false machine to make

time. were

Additionally, then sold

were being used

products

which

for the benefit

of the company.

--

In Dallas, a visa

Texas,

an illegal This

alien was arrested also used Certificate

and charged

with

ob-

taining documents

by fraud.

individual of Labor

false and fraudulent for Alien Employment.

to obtain

a Department

The U.S. Attorney's with the Immigration This

Office

moved

to dismiss

this charge based to undertake

on an agreement deportation

and Naturalization

Service

action.

is the first case of this type

investigated

by OIG.

21

--

A Boston,

Massachusetts

CETA Counselor

was sentenced

to one year imof proba-

prisonment

with

the first three months This

to be served

and the remainder on two years This

the sentence

suspended. to make indicted guilty

individual

was also placed

tion and ordered vidual had been

restitution on 47 counts

in the amount

of $9,063. of CETA

indi-

of embezzlement of embezzlement.

funds and

later had pleaded disclosed

to ten counts

The investigation August 24, 1979, personal

that, during

the period July

24, 1978 through

126 CETA participant use. By manipulating registers, Since

checks had been

converted

to this individual's and forging students

time and attendance former students this person

records

signatures were carried

on payroll

and non-working

on the rolls. checks,

also had charge

of distributing

payroll This case con-

he was able to forge endorsements the vulnerability

and cash the checks. proper

again illustrates

of CETA funds when

payroll

trois are not established

and followed.

--

A former Dallas

County

CETA Coordinator charging

pleaded

guilty of CETA

to one count funds. applicants This in

of a nine individual return

count indictment had falsified

misapplication forms

CETA intake

for ineligible

for payments.

It is estimated in kickbacks Coordinator

that this individual for the past three for Dallas after

had received In a related to

at least $800 per month case, another

years.

former CETA

County was sentenced guilty

90 days in jail and 15 months count of filing indicted on nine

probation This

he had pleaded

to one been

a false statement. counts

individual of CETA

had previously funds.

of misapplication

--

A former Executive agent

Director

of a non profit

organization, Texas,

which

was guilty

a delivery

for the City

and County

of Dallas,

pleaded

to four counts mitted

of misapplication in fraud

of CETA funds. on this contract.

This

individual

has ad-

to over $50,000

--

In Dallas,

Texas,

the former President in prison and 54

and Director fine.

of a CETA subgrantee The sentence was This individual informa-

was sentenced reduced

to five years

and a $5,000 months

to six months waived

in prison indictment

probation.

has previously tion which

and pleaded

guilty

to a one count

charged

the theft of Government

funds.

22 This conviction of political hundreds HUD, was the result of an OIG investigation and Federal of Federal Officials. into allegations The case involved from

corruption

by County

of thousands

of dollars

funds

and included This case

funds

HEW, DOL, USDA,

CSA, and the State audit approach and their

of Texas.

is a good example and State

of the need

for a unified

to safeguard

Federal

funds in CETA prime

sponsors

subgrantees.

--

Three

individuals

pleaded

guilty

in Federal

court

at Hartford,

Connecticut,

to one count violations been charged

of misapplication indictment

of CETA

funds.

They had previously of CETA funds, fraudulent to a personal

in a multi-count

with misapplication to issue

false statements checks business

and conspiracy. which

They had conspired were then forged

to CETA participants account. At

and deposited to their

least $35,875

was converted

own use.

These which

convictions is expected

are only the initial to produce additional

results

of a joint The case

investigation is significant who had received a number of

results.

in that several CETA

it resulted million

in the breakup

of a government

contractor,

dollars

in contracts,

and who was defrauding

prime

sponsors.

-- The former Georgia,

Property

and Procurement to five years This

Officer in prison

for the CETA on each

program

in Atlanta,

was sentenced

of three been

counts, indicted and extortion

to be served

concurrently. counts guilty which

individual

had previously false

on 26 criminal and had pleaded

included

conspiracy, counts.

statements

to three of these

23

-

OIG/ETA

Memorandum

of Understanding

In order to enhance of representatives tablished. policies Some

coordination

between

OIG and ETA, a work group

consisting

from the Office

of Investigations meetings

and from ETA was esto establish uniform

The work

group has had several which would included

and procedures

be of mutual reporting

benefit

to both agencies. allegations

of the areas covered through

and investigating feedback

received

ETA Incident

Reports;

providing

to ETA requests coordinating

for investigations matters of mutual

and Ol referrals concern,

for administrative or handling

action;

such as training of OIG requests

of GAO Hotline assist-

Summaries;

and the handling expertise.

from ETA for information,

ance and program

A Memorandum Implementation

of Understanding

between will

OIG and ETA has recently improve between and consolidate the agencies.

been signed. an already

of this agreement working

well-established

relationship

Loss Analysis

and Prevention

Effort

Involving

ETA Programs

-

Evaluation

of the CETA Eligibilit_. Determination

and Verification

Programs

The

Office

of

Loss

Analysis

and

Prevention

(OLAP)

has

nearly

completed

the

task of evaluating cation This systems,

a number

of CETA eligibility recommendations

determination for program that, with

and verifi-

and developing

improvement. respect to of

analysis

is in response

to a general

belief

abuse,

error and inefficiency systemic

in the eligibility and administrative efforts have

determination weaknesses

process

some CETA grantees, cant causal uating within factors.

are often towards

signifieval-

Thus, OLAP's eligibility

been directed systems

and improving those systems.

determination

and problem

areas

24

-

Review

of Migrant

Farmworker

Housing

Conditions

The Office tary's

of Loss Analysis conducted

and Prevention, of migrant

at the request farmworker

of the Under

Secre-

Office,

a review

housing

conditions

in selected

areas

of Virginia,

Maryland,

and North

Carolina.

A total of effective-

of 72 migrant ness

camps were

inspected

in order

to assess

the degree

of present

DOL regulatory

operations.

Although

not part of the original observations

scope

of the review, to interagency which

OLAP noted coordination,

a number operating on

of supplementary procedures, the overall

relating

and migrant inspection

employer effort.

perceptions

may have

an impact

The

findings

and recommendations Secretary's Office.

contained

in the report

have been provided

to the Under

In response with

to the OLAP

report,

the Employment Safety sites

and Training and Health identified

Administration, is

assistance

from the Occupational review of those

Administration, as having

conducting problems.

an in-depth

significant

25

B.

THE EMPLOYMENT

STANDARDS

ADMINISTRATION

The Employment the Office Compliance regulations sation

Standards

Administration

(ESA)

through

its three

components-Contract

of Workers' Programs

Compensation

Programs,

the Office

of Federal

and the Wage

and Hour Division--administer standards, provide Federal

laws and compenand

that establish

employment

workers'

to those injured

on their equal

jobs and require employment

contractors

subcontractors

to provide

opportunity.

The Office Employees' employees

of Workers' Compensation and certain

Compensation

Program

(OWCP)

administers benefits

the Federal for Federal diseases under

Act, providing other groups

compensation

who suffer still Corps

job-related

injuries, of workers

and deaths. the Act,

Amendments

have brought of the Peace

other groups and Vista

such as members

Volunteers.

OWCP also Act,

administers

the Longshoremen's workers

and Harbor or killed

Workers'

Compensation waters and of

covering

all maritime

injured working

upon navigable piers, docks

of the U.S., as well terminals. the Act. A number

as employees

on adjoining

of other groups

are included

through

extension

Black Lung benefits by OWCP. miners

under the Black monthly

Lung Benefits payments

Act are also administered treatment to coal from their

The Act provides disabled

and medical (black

totally

from pneumoconiosis coal mines.

lung) arising

employment for monthly

in the Nation's payments

Additionally,

the Act also provides

to the miners'

surviving

dependents.

The Office

of Federal

Contract Executive

Compliance Order

Programs Under

(OFCCP) was established the Executive and ethnic Order groups,

in 1965 to administer

11246.

and two laws, minorities, handicapped persons

women,

members

of religious

and veterans

are protected

from job discrimination.

Government and promote

contractors members

are also required groups.

to take affirmative In 1978,

action

to hire was

of protected

the Executive

Order

26

further

amended

to consolidate of Labor.

all its operational

enforcement

activities

in the Department

The Wage Fair

and Hour

Division Act

was established

in 1938 to administer minimum 1938, wage,

the landmark pay,

Labor Standards

(FLSA) which

includes

overtime

record-keeping Division's protecting

and child labor provisions. has grown unfair

Since

the Wage

and Hour

responsibility workers against

to include

other

laws and regulations

employment

practices.

These

include Act;

the wage garnishment the Service Contract,

provisions Public

of the Consumer

Credit

ProActs,

tection which

Contracts

and Davis-Bacon contract that

require

that prevailing Contractor and others including

wages'be

paid on government Act, which

work; farm of before

and the Farm Labor labor contractors migrant workers,

Registration observe

requires

certain with

rules

in the employment of Labor

registration

the Department

contracting

begins.

Investigative

Effort

Involving

ESA Programs

During

the period

April

i, 1980 to September

30, 1980 this Office compensation

opened violations. amounted and $500

71 cases and closed Monetary results

82 cases concerning this period, $1,790,568

ESA/workers'

during

due to investigative in savings, page $77,503

activities in claims

to $94,886 in fines.-i/

in recoveries,

The table on the following

shows

a breakdown

of these data

by the region:

l/
-Recoveries include the restoration, that was restitution, or recovery of money or property etc.; of known value lost through a crime, mismanagement, to end a civil

collections

are the receipt

of payments savings

of an indemnity

transaction, losses have

suit or proceeding; claims,

are the prevention value

of dollar value which

to the Government; administratively penalty

are the dollar by ESA; after

of indemnities

been

determined

fines are the sums of money hearing, civil

imposed

as a

upon defendants

an administrative

suit or criminal

prosecution.

27

0 I I _ I I I I I I

0

I

I

I

I

I

I

I

I

I

0 0

0 0

Z 0 < r_ [-I

_

I

I

I

I

I

I

I

I

I

I

I

"_

I

I

I

I

I

I

I

Z 0

_ to-

O c'_ D-_ c_ _

0 oO _

u'_ .-,T -,,1-

oo oo -,,1"

C_

<

bt Z

r.r-1

_ • ,-_ _ _ 0 _=._ .0 1,4 _ _ _ _ _.. 0 _ _

I>, .,.4

u m 0 _ _)

_

_

0

>

28

During

this reporting 14 cases

period, involving

OIG referred workers'

to the U.S. Attorney

for criminal

prosecution These

compensation-related resulted either in seven

violations. indictments further action

cases and others

previously

referred cases

and five convictions. or have been the cases Tables declined

The remaining for prosecution. to program

are pending

When prosecution

has been declined, action. convictions

are referred

officials

for administrative indictments,

showing

a regional

breakdown

of referrals,

and declinations

are in the appendix.

Some of the highlights result of ESA-related

of the indictments investigations

and convictions below.

obtained

as a

are shown

-- An Unemployment New Mexico pleading workers' $56,755

Insurance

Claims

Fraud

Investigator

for the State

of

was sentenced

to three years

in prison

and fined $4,000 to obtain

after

guilty

to filing false claims compensation. benefit

and statements suit is being

temporary

disability

Civil

brough t to recover by this employee.

in disability

payments

fraudulently

obtained

-- A former FAA Air Traffic on two counts for workers' he failed period, for providing disability

Controller false

was

indicted

in Denver,

Colorado,

statements

in connection

with his claim determined During that a 12-month disability.

compensation.

Our investigation as required.

to report

earnings

from employment $43,500

the defendant

received

in compensation

for temporary

-- A former filing

contractor/employee

pleaded

guilty

in Seattle, and Harbor

Washington,

to

a false claim under Our investigation disability

the Longshoreman's determined

Workers' employed

Compensawhile

tion Act. collecting

that he was fully

payments.

The defendant

was sentenced

to six months years pro-

and fined $500. bation

The sentence

was reduced

to 30 days

plus three

on the condition

that he pay the fine.

29

-- A former Department Georgia, ability to filing

of the Army

employee

pleaded

guilty

in Atlanta, of disthe

a false statement

in connection determined

with his receipt

compensation.

Our investigation while collecting

that he concealed benefits. and ordered

fact that he was employed The defendant tution was placed

disability

on five years

of probation

to make

resti-

in the amount

of $22,768.

-- A former TVA employee ment charging him with

pleaded

guilty

in Atlanta,

Georgia,

to an indictcompento

filing

a false

statement

to obtain

disability

sation benefits. report fendant earnings

Our investigation from employment

determined collecting

that the employee benefit

failed

while

payments. to make

The derestitution

was sentenced

to five years

of probation

and ordered

in the amount

of $35,033.

-

FECA Forms

Revisio n Project

A joint Office grams

of the Inspector

General/Office

of Workers'

Compensation

Pro-

(OIG/0WCP)

task force was established benefits under

to review

all forms used by claimants Compensation forms

to apply for and receive Act were (FECA), because

the Federal

Employees'

complaints

from the field the forms were that claims were

had indicated criticized

that many

inadequate.

Specifically, information processed,

because

they reinjuries

quested

such general

filed

for work-related worded

could not be properly mitted ineligible

so ambiguously benefits, injuries

that they perclaimant_ who

claimants recovered

to receive from their

permitted to remain claimants

had sufficiently rolls rather

on the compensation to falsify continue or

than return

to work,

and permitted

conceal'employment benefits.

information

in order

to fraudulently

to receive

30

As a result

of the efforts

of the joint OIG/OWCP were implemented

task force,

the following period:

task force recommendations

during

this reporting

I.

Two

forms were revised District

and are being

sent

to all FECA beneficiaries

by OWCP

Offices.

a.

Form CA-I049 first placed of the amount bility

is issued

in duplicate rolls.

to claimants The

when

they are individuals

on the benefit of money

form advises

they are to receive when sufficiently

and of their responsirecovered to do so. any OWCP

to seek employment

The form also specifically employment Office or earnings

instructs

claimants

to report

from any source to prevent payment

to the servicing overpayment.

immediately,

in order basic

The CA-I049

was revised and to have thereby

to include

computation

information

the claimant

sign and return

a copy of the form, and acceptance

documenting

the claimant's under which

understanding

of the conditions

compensation

may be received.

b.

Form CA-I032 FECA benefit

is routinely recipients that

issued

once a year by OWCP

to all rolls.

who are on the automatic the claimant notify OWCP

payment

The form requests and pay/earnings of any dependent benefits cation notice

of any employment

and any change claimed

in address affect

or of the status the amount include of the a clarifi-

that might

received.

Revisions

to the CA-I032 a correction

regarding

self employment,

to the penalty

and expansion

of the certification

statement.

2.

A new form CA-838 was devised provided covery

(Notice

to Recipients

of Disability frequent

Compensation), basis than that upon re-

to remind

claimants,

on a more

by forms CA-I049

and CA-I032,

to seek employment This

and to report

any employment with

or earnings.

form will disyear.

be released ability

semi-annually

the third and ninth that is issued

periodic

compensation

roll check

each payroll

31

The OIG will continue problems with OWCP

to meet

at regular

intervals

with

0WCP

to discuss

any

forms being used to establish

claims

or receive

benefits.

-

FECA

Investisative

Pro_ect

The Office project Office

of Investigations

has been involved federal employees

in an ongoing receiving

investigative from the Employees'

aimed at disclosing of Workers'

benefits

Compensation while

Programs

(OWCP) under

the Federal other

Compensation earnings.

Act (FECA),

simultaneously

receiving

undisclosed

This

investigative

project

is a joint

effort

involving

the Postal Naval

Inspection

Service, Service,

U.S. Air Force Office OIG/Health and Human

of Special Services,

Investigations,

Investigative

OIG/Department

of Transportation, As the lead claimant of

OIG/Veterans agency which time

Administration

and OIG/Department developed

of Agriculture.

for the project, meets investigative

we have

a profile

of a high-risk

requirements

and which rolls,

is based

on the length

the claimant

is on the periodic amount

age limits,

pay location, A comparison

type of

of injury

and minimum

of yearly

benefits

received. has

this profile a significant ployment

with records number

available

to the OIG/DOL who have

thus far disclosed earnings for unem-

of FECA

claimants

reported

insurance

purposes.

An analysis

of selected

OWCP/FECA

claimant

case records

will be conducted for the field will also assist defiunits.

by the participating investigations OIG/DOL

agencies

who will

thenbe

responsible This review

pertaining

to their

employees.

and the participating either

agencies

in identifying injury

any procedural compensation

ciencies,

at D0L or within

the agencies'

32

Loss Analysis

and Prevention

Effort

Involvin$

ESA Programs

-

District

Office

25 Review

At

the request

of ESA management, a survey

the Office

of Loss Analysis Employees'

and Prevention Compensation D.C.

(OLAP)

initiated

of the Division at District

of Federal Office

(DFEC) bill

payment

operations

25 in Washington,

The review

involved

evaluating

the systemic through

weaknesses

which

recently

resulted

in a substantial proposing security bill measures survey

loss of funds to preclude

embezzlement

at the District

Office;

recurrence; potential

and performing areas

a preliminary in the counter-

to identify

other

of vulnerability suggesting aspects data

payment

operations

of the Office,

including various

possible

actions. system

The scope of the study bill processing,

covered bill

of the bill payment entry preparation, and payment

including

examination, system

data entry and transmission, reconciliation

automated

jobs and processes,

and audit control.

Results security, trols.

of the analysis computer

revealed

a number

of significant processes

weaknesses

in data con-

security,

bill payment

and bill payment

A number

of the weaknesses

identified

involved:

i.

Computer control, oversight, tional

and terminal physical

security

relating logging

to risk analysis, procedures, physical

access

surveillance, of terminal

supervisory and organiza-

rotation

operators,

location

of terminals,

and key issuance

and control.

2.

Bill-payment document accepted by-pass with

processing

and control integrity; report,

relating

to logging

of bills; with and

control; condition, utilization

document medical review password

payment-clerk markup,

conformance

pay authorization

requirements; security;

monitoring

of conformance profiles;

requirements;

provider/claimant to payment

and availability

of data-entry

functions

clerks.

33

During

the conduct

of the analysis,

DFEC

management

proposed

revisions

to

bill payment tiated which should

procedures. of control

In addition, enhancements. as well

District

Office

25 management

ini-

a number have been

OLAP believes

that the controls approval,

implemented, address

as those which

are pending

adequately

a number

of identified

vulnerabilities.

However,

based on a threat-risk profiles

analysis

conducted

by OLAP,

a number

of

penetration controls

were developed,

relating

to methods were

by which

system oppor-

could

still be defeated. or event detection for DFEC evaluation.

The profiles

then analyzed,

tunity-blocking tions proposed need to:

countermeasures These

designed,

and recommendato the

recommendations

related

conduct

a validity

determination Number

against

the Employer file;

Identification

Number/Social

Security

Master

Index

2.

verify

claimants'

Federal

status;

3.

have

the capability

to effect

computerized

claimant

and provider

utilization

surveillance;

4.

maintain

a file of claimant

and provider

signatures;

and

5.

supply

a service

utilization

statement

to claimants

and providers.

The report

also observed

that:

I.

at the time of the review recent

there was no reason

to believe

that the

loss event was indicative in District Office

of more pervasive

fraud and abuse

activity

25 operations;

2.

there appeared among District

to be a significant Office operating

lack of loss prevention

awareness

personnel;

34

3.

there was

substantial

need

for security

orientation

and training;

4.

the management with and

of the District issues

Office

appears

to be resolved corrective

to deal action;

asset protection

and take appropriate

5.

the overall should

loss prevention to improve

posture

of District

Office

operations

continue

significantly.

-

Black

Lung Program

Review

The Office

of Loss Analysis

and Prevention

has recently activities

undertaken

a review the

of the Black Lung medical potential areas: for loss through

and benefit fraud

payment

to determine major

and abuse

in the following

program

I. 2. 3. 4.

payment payment

of diagnostic of treatment

bills, bills, payments, and monthly benefits.

computation payment

of benefit

of lump sum and regular

A number

of problem

areas and system vulnerabilities have been designed. in draft

have been

identified the findings to

and corrective

measures

The report and will

containing

and recommendations management in detail upon

is currently

form,

be forwarded

completion.

The results Report.

of this study will

be discussed

in the next

Semiannual

35

C.

THE MINE

SAFETY AND HEALTH

ADMINISTRATION

The Federal

Mine Safety

and Health

Amendments

Act, which

was signed

into and pro-

law in 1977, brought surface, gram.

all mines

in the U.S.--more

than 20,000 safety

underground and health

coal and non-coal

facilities--under safety

a single

It is the first single 500,000 miners. safety

and health measure

to cover

all of the

nation's

On March

9, 1978,

responsibility

for administering

and enforcing of Interior Safety

mine

and health

was transferred

from the U.S. Department a new Mine Secretary

to the UoS. Department Administration

of Labor. (MSHA) headed

The Act created by an Assistant

and Health

of Labor.

Approximately

2,000 MSHA mine

inspectors

are required

to make

four inspections mine annually to

of each underground determine tions. mediate closed mine Should threat

and two inspections compliance with

of each

surface

operator

Federal

health

and safety regulathat poses an im-

an inspector to miners,

find a condition

or practice

the affected is corrected.

area of the mine There

is to be ordered civil and crimi-

until the condition

are various

nal penalties

for violations.

OIG's

Special

MSHA Task Force

In November,

1979, a comprehensive The project purposes

review

of select both

program

areas within and audit

MSHA was undertaken. expertise.

incorporates of the project procedure§

investigative

The overall

are to develop

guidelines and enforcing

for (i) reviewing the Mine Safety

the established

for administering proactive

and Health Safety

Act and (2) conducting and Health

investigations and

into the Coal Mine Health Divisions

and Metal/Nonmetal

Mine Safety

of MSHA.

36

Of primary health

concern

to the OIG are problems of miners. in a report

which

impact adversely

upon

the

and safety

The significance

of the health Commission March

and safety probon Coal, entitled

lem is underscored "Recommendations comments abling coal. mining abling

of the President's released

and Summary

Findings,"

3, 1980. than

The report 18,000 distons of

that, in 1979, there were 144 fatalities resulting from the mining accident of more

and more

injuries

than 750 million

Continuation would result

of current

rates

in surface

and underground than 25,000 dis-

in an expected

200 fatalities

and more

injuries

in 1985, when production

is estimated

to be above

one billion

t_ns per year.--

i/

To improve

safety

and reduce

the number

of fatalities Safety

and disabling

injuries,

the Commission (MSHA) increase

recommended

that the Mine

and Health activities

Administration in those mines rates consistently

its inspections

and enforcement accident

identified

by the Commission above

as having

and fatality

and substantially

the National

averages.

The OIG Task Force including The health

is giving major

emphasis

to MSHA's

inspection activity

function

the identification and safety

of patterns

of criminal

or mismanagement.

of miners

are impacted performed

by the quality by the Office ground

of MSHA accident Support

investigations (OTS). dust

and the activities administered

of Technical

Programs

by OTS include and laboratory

control,

roof control,

control

and other surveys, gas,

analysis

of air mixtures, of mine explosions). of mine and certification

including OTS

CH4 or methane

(which

is the leading approval, by MSHA

cause

is also responsible products.

for the testing, employed

and post audit in the approval

safety

The procedures

--

1/

President's March

Commission

on Coal: 12.

Report

on Recommendations

and Summary

Findings,

3, 1980, page

37

of mine Programs

safety

products

and the effectiveness being examined

of MSHA's

Quality

Assurance of in-

are currently and special

by the Task Force. in selected offices

A review within

spections Metal

investigations districts

the Coal,

and Nonmetal

MSHA

will

also be accomplished.

In all of these areas, warranted, support refer cases

the Task Force

will vigorously of Justice assistance

investigate, for prosecution. has been

and where To from

to the Department

the OIG/MSHA

Task Force Project, through

requested

the Department rals

of Justice,

various

U.S. Attorneys' reforms will

Offices.

Referto the

for administrative Secretary

action

and program

also be made

Assistant

for MSHA.

Additional MSHA within gations contracts

areas of concern the assessment

to the OIG are potential and procurement areas.

abuses In-depth

and mismanagement audits

by

and investi-

of the assessment

process

and procedures

for awarding within

and monitoring two quarters

will be initiated

by the MSHA Task Force

the first

of FY 1981.

In December

1979, the Task Force began whether

a review items

of MSHA

procurement

practices

for FY 1978 to determine supplier,

selected

purchased

from a single MSHA could have of this

in this case a manufacturer at a lower cost

of mine

safety products, suppliers. savings

been purchased analysis, possible. management.

from alternate

As a result

the task force believes This matter

that substantial

may have been future with MSHA

will be discussed

in the immediate

-

Investigative

Effort

Involvin_

MS HA

Among

the highlights

of OIG's

investigative

activity charges,

relating

to MSHA was Coal Mine The Inspector County,

the indictment Inspector

on June

13, 1980, on bribery MSHA

of a Federal Office.

assigned

to the Monroeville surface

Sub-district within

was responsible Pennsylvania,

for inspecting area.

mines

the Westmoreland

38

This

indictment

resulted

from a joint OIG Special

investigative Agents

effort

by the Federal Region, in Pittsand was

Bureau

of Investigation,

from the Philadelphia

and a Grand Jury burgh,

Investigation

directed

by the U.S. Attorney's his position District

Office

Pennsylvania. convicted

The Inspector of bribery

resigned

with MSHA,

subsequently

in a Federal

Court.

39

D.

THE OCCUPATIONAL

SAFETY AND HEALTH ADMINISTRATION

The Occupational administering

Safety

and Health

Administration

(OSHA)

is responsible

for

and enforcing employers

the Occupational to provide their

Safety

and Health Act of 1970. with safe and healthto set and enforce business establishthe

This Act requires ful working occupational ments

employees

conditions, safety more

and directs

the Secretary

of Labor

and health

standards

for five million

employing

than 63 million

workers. their

The Act also authorizes safety

individual standards grants safety to make

states under

to set and enforce approved states

own occupational

and health matching

state plans

by the Secretary. in administering

Fifty approved

percent

are provided and health

to assist

state job the right acting

programs. without

The law gives notice

the Department time,

of Labor either

inspections

at any reasonable

on its own or at the request If an inspector a date

of employees violation, which

or authorized DOL will

representatives. a citation unless and

finds an alleged

issue

for correcting

the violation,

will become

final

contested.

There are various

civil and criminal

penalties

for violations.

OIG Audit

Effort

Involving

OSHA

During which

the reporting took exception

period, to over

five audit $39,000.

reports The major

were

issued

on OSHA grants,

reasons

for the exceptions

are shown below.

Amount Audit Excessive Unallowable Travel Salary Program Costs Incorrectly Charged TOTAL Charged Exception Expenditures Reported

of

No. of Reports with Exceptions i 2 i I

Exceptions $ 7,561 824 978 30,052 $ 39,415

Advance

Improperly

40

In addition periods held

to the dollar

exceptions state

above, agency

two reports

indicated

that--for

up to two years--the in Federal

responsible

for the OSHA program of the state interest pro-

over $63,000

cash in excess resulted

of the needs in computed

grams. potential

These excess investments

cash balances of about

loss on

$11,300.

Investisative

Effort

Involving

OSHA

Within gations

the OIG Office assumed

of Investigations, duties on July

the Director 28, 1980.

of MSHA/OSHA

investi-

official

Since

that time, procereports of fraud, and abuse

dures have been other

established OSHA

to review to determine which

preliminary if there warrant

investigative are patterns initiation projects

data concerning related

or integrity project

offenses

would

of a National currently compliance under and

similar

to that underway

in MSHA. a review

Potential

consideration inspection

by the OIG include

of the assessment, staff

procedures.

Consultation

with OSHA

involved

in compliance

and enforcement

will be an ongoing

process.

41

E.

DEPARTMENTAL

MANAGEMENT

Departmental that provide

Management policy

includes

those

agencies

or areas

of the Department assistance a number of

direction

or technical

and administrative It includes Office

to the programs major

administered

by the Department.

organizations

such as Office Labor Affairs

of the Secretary, the Office

of the Solicitor, Secretary of adjudithat

the International for Administration cation affect

Bureau,

of the Assistant and a number

and Management,

the Women's This section

Bureau also

and other organizations. or involve here. several

includes

activities most

DOL agencies

and are,

therefore,

appropriately

discussed

During

this reporting

period,

OIG was

involved

in one such review

dealing flexi-

with potential time system.

vulnerabilities

in the administration

of the employee

Loss Prevention

Effort

Involving

Departmental

Management

-

Flexitime

Recordkeeping

Procedures

Study

The Department (flexible a recently representing expanding work

has recently schedules)

initiated

experiments

in the use of flexitime Additionally, union

for a portion between

of its employees. DOL management

negotiated National

contract Office

and the employee

staff

has committed

the Department program.

to greatly in view

employee

participation widespread

in a flexitime

Therefore,

of its potentially from top management to suggest information

implementation,

and in response a review

to a request of flexitime management

in the Department, methods

OLAP conducted

appropriate needs.

of timekeeping

that would

satisfy

In its report, where employees

OLAP

recommended

establishment

of a daily

log in each unit order, the time

would

sign in, and record

in chronological

of their arrival maintain

and departure. weekly

Additionally,

OLAP recommended would

that employees serve as the

a personal

or bi-weekly

time sheet which

42

basis

for timekeeper

action

upon

certification would

by the supervisor. supervisory auditing

Implementa-

tion of these two recommendations as well toring as provide activities. a basis

maintain payroll

accountability moni-

for adequate

and related

43

CHAPTER

II

ORGANIZED

CRIME AND RACKETEERING

The primary

emphasis

of the Office

of Organized

Crime

and Racketeering

(OOCR)

is to concentrate exists

its resources

on the areas where

the greatest labor unions. mission

potential Each of and crime

to have an impact

on syndicate-infiltrated has finalized an updated

the 14 OOCR Field Offices implemented control gation, strategies

statement

designed

to affect

the existence

of organized method

or influence limited

of labor unions. are being Also, OOCR

Through

this planned through

of investiselection

resources projects.

allocated

the rational

of investigative initiated

the investigative in major,

team concept complex

is being

and is enabling

to engage

investigations.

SUMMARY

OF INVESTIGATIVE April

AND PROSECUTIVE 30, 1980

MATTERS

i, 1980 - September 59 32 24 Ii 12 9 12 21

Cases

Open to DOJ for Prosecution

Referred Accepted

Declined Pending Number of Indictments Indicted

Individuals Number

of Convictions

Some of the more

significant

cases

are briefly

described

below, i/

-- U.S.A.

vs. John Gibson,

Herbert

Schiffman

and James

Stamos

A U.S. District Treasurer

Judge

in Cincinnati, and Restaurant

Ohio,

sentenced

the General

SecretaryInternational

of the Hotel

Employees'

and Bartenders'

-- When OIG was established to OIG cases from LMSA. resulted Following

l/

in October additional

1978,

a number

of cases were from OIG,

forwarded

investigation

some of these

in indictments

and convictions.

44

Union ment

to four months

imprisonment

following

conviction

on two counts of embezzleOther defendants

of union funds and one count trial.

of conspiracy

to embezzle.

are awaiting

The investigation

was conducted

by OIG and the FBI.

-- U.S.A.

vs. George

Wuagneux

The defendant ordered Pension

was sentenced restitution

to I0 years of $191,654 Judge

incarceration, to a Laborers'

fined

$20,000" and Union

to make

International

Fund by a U.S.

District

in Miami,

Florida.

The jury found from the and

the defendant, Laborers'

a major building Fund, bank

developer,

guilty fraud,

of embezzling

Pension

fraud, mail

income

tax violations (RICO)

of violating Statute.

the Racketeer

Influenced

and Corrupt by OIG,

Organizations FBI and IRS.

The investigation

was conducted

-- U.S.A.

vs. Eugene

Boffa,

Francis

Sheeran,

et al.

An investigation figure Local

conducted

by OIG resulted leasing

in an indictment

of the principal of Teamster The indictment, consisting for The and

in a nationwide 326, Wilmington,

labor

corporation, other

the President individuals.

Delaware,

and three

in part, charges of a group the purpose indictment violated

that the defendants associated

participated

in an enterprise leasing

of individuals of making

in the vehicle other

business

money

and obtaining

financial committed

benefits. mail fraud

also charges the Taft-Hartley

that those

individuals

Act (prohibited

employer

payment

to or receipt

by a union official) to the detriment by various violating

to assure

the continuing corporation's

operation employees

of the enterprise who were represented with

of the leasing

Teamster

Local Unions. Influenced

The defendants and Corrupt

are also charged

the Racketeer

Organizations

(RICO) Statute.

-- U.S.A.

vs. Raymond

J. Silva

A U.S.

District

Judge in Providence, Longshoremen's probation

Rhode

Island,

sentenced Union

the President im-

of an International prisonment

Association after union

Local

to one year

and six months

finding funds.

him guilty

of violating was

the Taft-Hartley conducted by OIG.

Act and embezzling

The investigation

45

-- U.S.A.

vs. William

Feeney

and Hugo Germer

The defendants respectively, a return Union

were

sentenced

to seven years Judge

and six years

of imprisonment following Laborers in return

by a U.S. District verdicts

in Newark, Feeney,

New Jersey,

of guilty

by the jury. of receiving

the New Jersey kickback

official,

was convicted

a ten percent

for using his influence union-affiliated a New Jersey pension

in securing and welfare

a mortgage funds.

loan of $425,000 defendant,

from the Germer, act. had pre-

The other

realtor,

aided and abetted by OIG.

in committing The Department the pension

the illegal of Labor

The investigation viously brought

was conducted a civil

suit to protect

fund's

assets.

-- U.S.A.

vs. David Friedland

and Jacob

Friedland

A U.S. District

Judge

in Newark,

New Jersey, to two years returned

sentenced

David

Friedland

to

seven years and Jacob Friedland $35,000 Jersey following attorneys. a guilty

imprisonment

and fined

each

verdict

by a jury against public were

the two New official convicted and of

One of the defendants official.

was a current The defendants

the other was a former public obstruction for a number a result previously of justice

and income union

tax violations.

Both have been

attorneys was had

of Teamster

locals

in New Jersey.

The conviction of Labor

of a joint OIG/FBI brought

investigation. to recover

The Department plan losses

a civil suit

and for other relief.

-- U.S.A.

vs. John Crowley

Following

a joint OIG/IRS Boilermakers

investigation, Local Union

the former business

manager

of

a New Jersey ment

was sentenced guilty

to six months felony

of imprisoninformatax

and fined $5,000 him with

after pleading falsely

to a one count

tion charging return.

subscribing

to his 1977 Federal against him under

income

Additionally, of the RICO

a judgment Statute

was entered

the civil from

provisions holding

which

permanently

enjoins

the defendant of a

any union office,

influencing benefit

in any manner plan and also

the activities

labor organization employee

or employee with

from representing local union.

any

in any dealings

the New Jersey

Boilermaker's

46

In the civil RICO • of $250,000 of prohibited

complaint,

the defendant

admitted

receiving

in excess Act (acceptance

from three employers payment).

in violation

of the Taft-Hartley

-- U.S.A.

vs. Charles

Stanfield

An OIG investigation Food and Commercial

of an officer Workers Union

of a New Orleans resulted

local

of the United

in a guilty

plea to one count charged with vioA 30 placed to

of violating lating month

the RICO Statute.

Additionally

he had been $128,000

the Taft-Hartley prison sentence

Act for soliciting was suspended.

from employees. $7,500,

Stanfield

was fined

on probation devote

for five years,

and for a period public

of one year service.

is required

one day per week

to meaningful

47

CHAPTER

III.

OIG INTERNAL THE HOTLINE

AFFAIRS, PROGRAM

EMPLOYEE

INTEGRITY

INVESTIGATIONS

AND

OIG Internal

Affairs

As noted

in the last Semiannual affairs capability

Report, will

the establishment to insure activities

of a permanent is

OIG internal itself include

help

that this Office

a model

of integrity.

The planned

of such a capability misconduct

the conduct

of investigations

of alleged

or suspected

by OIG employees

and a program

of regular

inspections

of OIG offices.

Unfortunately, was assigned

largely

because

of the hiring during

freeze,

no permanent

staff

to this activity on detail affairs

the reporting

period.

By utilizing

other employees several internal

to this function, investigations including

we have been have

able to undertake in a number our review An deficiencies by the that they

which

resulted

of administrative of this office's interim report

actions,

removal.

Additionally, is nearly

audit contracting

procedures which

completed.

has been developed recommendations.

identifies

administrative instituted indicate

and makes DOL Office will

various

Preliminary

changes

of Procurement in significant

based on these savings

recommendations

result

in the OIG audit should

contracting

program.

Implementation criteria used

of the recommendations in selecting audit

also improve Until

the technical resources

contractors.

additional

become available, the OIG will be unable to undertake an_active inspections program and priority internal affairs investigations will continue to be handled on a detail-assignment basis.

Employee

Integrity

Investigations

During

the period employee

April

i, 1980 to September

30, 1980, 22 investigations were opened. DOL agency Five of these

involving

integrity-related referred

violations

investigations tive action

were

to the appropriate were

for administrainvestigations

after the investigations

completed.

Fifteen

48

were closed of $22,897.

during Eight

the period. cases remain

The investigations under active

resulted

in recovery

investigation.

A particularly

significant

employee

integrity

case was a prosecution has resulted

related

to the theft of $53,005 count felony conviction.

of DOL program To date,

funds which

in a three

$22,300

of the funds have sentence,

been recovered years probain an Other were

and the subject tion and ordered this report, analysis

was given

an 18 month

suspended

three

to pay $i,000

in restitution.

As discussed

earlier

OIG's Office

of Loss Analysis measures

and Prevention to preclude

conducted

of the loss and proposed vulnerable areas were

recurrence.

potentially suggested.

also identified

and countermeasures

Hotline

Program

During

the period April complaint were

1 - September received

30, 1980, a total

the Department

of Labor Six of

OIG Hotline

system

of 72 complaints. from outside received,

these complaints and 32 were phone

from DOL sources, Of the total the mail.

34 were

the Department

anonymous.

complaints

40 were by tele-

and 32 were

through

OIG forwarded action,

45 of the complaints referred one complaint

to DOL program to an agency that

agencies

for administrative

outside

the DOL, retained

23 for OIG action

and determined investigation.

the remaining

three complaints

should be closed without

During ferred termine

the same reporting 56 hotline whether

period,

the General These

Accounting were

Office

(GAO) reto de-

summaries

to OIG.

summaries

screened

they involved

criminal

matters

requiring

OIG attention, agencies

or whether

they should be referred administrative

to the respective

DOL program

for appropriate referred volved 34 were

action.

Of the total number 17 pertained

of summaries

by the GAO,

37 pertained matters.

to ETA,

to ESA and two insummaries received,

employee referred

integrity

Of the 56 hotline and 22 were

to program

agencies

retained

for OIG action.

49

Outreach

Program

The previous Program

Semiannual

Report

discussed

OIG's

plans

to implement information or abuse knowledge

an Outreach to OIG

that would encourage weaknesses recognizes

DOL employees allow

to provide fraud, waste extensive

about program This program programs systems Once

that could

to occur. of DOL

that employees

have

and often are in an excellent or procedures which facilitate

position

to identify

operations, activity. can take the

fraud, waste

and abuse

OIG is alerted,

the Office

of Loss Analysis

and Prevention

steps to devise vulnerabilities identifying devising

alternative and prevent

procedures such losses will

or measures

that can minimize

from occurring.

DOL employees to assist OLAP in

systemic

weaknesses safeguards.

also be encouraged

appropriate

The current during

hiring

freeze has limited period,

implementation

of the Outreach are now being Report.

Program developed

this reporting

but implementation

plans

and a status

report will be included

in the next Semiannual

APPENDICES

SO

.51
P'_ 00D .,1-

I"-(_I

u'_

',0 ,--4

I

I
,--4

52 SUMMARY OF AUDIT DURING THE CURRENT During the current semiannual September 30, 1980, we issued Department of labor REPORTS ISSUED REPORTING PERIOD period April l, 1980 reports as follows: to

reporting 211 audit

Employment CETA

and

Training

Administration

Sponsors: 65 3 lO 59 and Research Grantees 20 18 Security and Agencies Administration 5 Statistics 3 Determination Reviews Administration 1 for Administration and Management 2 lO 6

State and Local Prime Sponsors Native American Grantees Migrant and Seasonal Grantees Other Office Job National of Policy Centers Programs Evaluation

Corps

State

Employment Safety

Occupational OSHA Bureau BLS Office

Health

Sponsors of Labor

Contracts of Cost Cost

Indirect Employment Internal Assistant Internal Other Federal

Standards Audit Secretary Audit

Agencies 7 l 1 211

Health and Human Services Housing and Urban Development Transportation Total Reports Issued

54

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64

Stm_nary of Investigative

Activities

- April

I, 1980 through

September

30, 1980

Cases Closed

Opened

i/

232 304 441

Pending Referred to U. S. Attorney by U. S. Attorney for administrative agency than Federal) action

61 32 48 4 5 21 17 $ 12,500 144,681 500 343,303

Case Declined Referred Referred Referred

to DOL agency to another

investigative

for local prosecution

(other

Indictments Convictions Fines 2/ 3/ 4/

Recoveries Col lections Claims Savings 5/ 6/

$ $ $

$ 2,149,800

i/

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

2/ -3/

Recoveries include the restoration, restitution or recovery of money or property of known value that w_s lost through a crime, mismanagement, etc. Collections are the receipt of payments civil transaction, suit or proceeding. of an indemnity to end a

4/

5/

Claims are the dollar value of indemnities _hich have administratively determined by a DOL agency.

been

6/

Savings are the prevention of dollar value losses to the C_vernment. This amount includes actual savings for the reporting period in contracts and grants, and projected savings in benefit payments based on program agency data.

65

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