Semi-Annual Report to Congress for the Period of October 1, 2001 to March 31, 2002

[Excerpt] It is an honor to transmit to the Secretary and the Congress the 47th Semiannual Report of the U.S. Department of Labor (DOL) Office of Inspector General (OIG). During the period October 1, 2001, through March 31, 2002, the OIG continued to direct its audit, evaluation, and investigation resources to activities that support its goals of effecting positive change and reducing vulnerabilities in departmental programs and operations, producing a positive return on invested resources, and providing quality services to stakeholders. Our work is intended to assist the Department in its efforts to improve the economic prospects of the unemployed and underemployed; protect the lives, health, and rights of workers; provide appropriate benefits to injured or unemployed workers; and ensure accountability over taxpayer dollars invested in departmental programs. Among our most significant audit work during this period was our audit of cash balance pension plan conversions. Through this audit, we determined that employees may be losing millions of dollars as a result of mistakes by employers. We also began a comprehensive review of audits conducted by independent accountants under the Single Audit Act on the billions of dollars spent below the Federal level. Our work is demonstrating that these audits are often inadequate and, therefore, cannot be relied upon by the Department to determine whether funds have been appropriately spent. Our audit and evaluations work resulted in over $18 million in costs that were questioned and in funds that were recommended be put to better use. During this reporting period, the OIG has worked with DOL’s largest grantor agency, the Employment and Training Administration (ETA), to help assess weaknesses in its grant accountability procedures and to draft potential solutions. ETA provides approximately $9 billion in grants each year, and the way that ETA manages these grants impacts both program performance and financial accountability. To this end, we have identified the most serious weaknesses that, if addressed, offer the greatest potential for improving the stewardship of grant monies and the effectiveness of the programs that they fund. It is the opinion of the OIG that ETA needs to improve the award, grant execution, reporting, oversight, and audit resolution processes. The audit work detailed in the employment and training section of this report is illustrative of the weaknesses that need to be corrected. ETA has indicated that it has established internal goals for improving grants management in FY 2002. The OIG is very encouraged by the Department’s efforts in this area, and we will continue providing technical assistance to ETA and audit oversight as needed. In the investigative area, our work resulted in nearly $66 million in investigative recoveries, restitutions, fines, and penalties; 218 indictments; and 131 convictions. Among our most significant investigative work during this period was our work in the labor racketeering area. For example, U.S. Congressman James A. Traficant Jr. was convicted on racketeering charges after a joint investigation revealed that he sought bribes from businesspeople in exchange for his political influence. In another case, former labor union official John Serpico and two associates were sentenced on charges related to a multimillion-dollar scheme to defraud several Chicago-based union pension plans and a labor organization. In another joint investigation, our work led to the guilty pleas of the owners of a major construction company in New York after our investigation revealed that they made payoffs to Luchese Organized Crime Family members and union officials of the construction trade unions. As a result, the State of New York Department of Transportation cancelled an $85 million contract with that company. In addition to our traditional investigative work, the OIG supported the FBI’s investigation following the September 11th attacks by conducting evidence search and recovery, interviewing witnesses, and investigating leads. During this reporting period, the OIG also issued its annual report on what we consider to be the most serious management challenges facing the Department of Labor. The following issues constitute the report, which was included in the Department’s FY 2001 Accountability and Performance Report. These issues are detailed in the appendix of this report. • Effectiveness of employment and training programs • Financial performance • Accountability: budget and performance integration • Security of pension assets • Protection of worker benefit funds • Information technology and electronic government challenges • Integrity of foreign labor certification programs • Effectiveness of mine safety and health programs • Rapid expansion of the Bureau of International Labor Affairs program • Human capital management The OIG is continuing to work with the Department to resolve management issues and areas of concern. My staff and I look forward to continuing to work constructively with the Secretary and the DOL team to further our common goal of ensuring the effectiveness, efficiency, and integrity of the programs that serve and protect the American workforce