Black Lung Benefits Program: Financing and Oversight Challenges Are Adversely Affecting the Trust Fund

Since 2009, GAO has produced a body of work on the Black Lung Benefits Program. In 2018, for instance, GAO reported that the Trust Fund, which pays benefits to certain coal miners, faced financial challenges due, in part, to the coal tax rate decrease that took effect in 2019 and declining coal production. Trust Fund finances could be further strained by coal mine operator bankruptcies, as they can lead to benefit liabilities being transferred to the Trust Fund.

This testimony describes Trust Fund finances through 2050 and provides preliminary observations from ongoing work for this committee regarding the Department of Labor's (DOL) oversight of coal mine operator insurance.

To describe Trust Fund finances, in its 2018 report GAO developed simulations through 2050 based on various assumptions related to future coal production and the number of future black lung beneficiaries. To develop preliminary observations from its ongoing work, GAO analyzed DOL documentation and data on black lung beneficiaries and coal mine operators. GAO also reviewed relevant federal laws, regulations, policies, and guidance and interviewed DOL officials, insurance carriers, and coal mine operators, among others.

GAO reported in 2018 that Black Lung Disability Trust Fund (Trust Fund) expenditures have consistently exceeded revenue. The Trust Fund borrowed from the Department of the Treasury's (Treasury) general fund and hence from the taxpayer almost every year since 1979, its first complete fiscal year, causing debt and interest to accumulate. Federal law does not limit the amount the Trust Fund may borrow as needed to cover its expenditures. Trust Fund revenue will be further limited by the coal tax rate decrease of about 55 percent that took effect in 2019, and declining coal production, according to GAO's simulation. Specifically, Trust Fund revenue may not be sufficient to cover beneficiary payments and administrative costs, from fiscal years 2020 through 2050. Therefore, the Trust Fund could need to continue borrowing to cover its expenditures—including the repayment of past debt and interest—and the Trust Fund's simulated outstanding debt could exceed $15 billion by 2050 (see figure). However, as GAO reported in 2018, various options, such as adjusting the coal tax and forgiving debt, could improve the Trust Fund's financial position.

GAO's preliminary observations indicate that Trust Fund finances will be further strained by coal operator bankruptcies. Since 2014, an estimated black lung benefit liability of over $310 million has been transferred to the Trust Fund from insolvent self-insured coal mine operators, according to DOL data. Federal law generally requires that operators secure their black lung benefit liability. To do so, operators can self-insure if they meet certain DOL conditions. As of June 2019, there are 22 operators that are self-insured and actively mining coal, according to DOL officials. GAO's preliminary analysis indicates that DOL did not regularly review these operators so that it could adjust collateral as needed to protect the Trust Fund. As a result, the amount of collateral DOL required from some of these operators is tens of millions less than their most recent estimated black lung benefit liability.

GAO will be considering recommendations, as appropriate, when ongoing work is finished.

I am pleased to be here today to highlight GAO’s prior and ongoing work  on Black Lung Disability Trust Fund (Trust Fund) solvency, and the  Department of Labor’s (DOL) oversight of coal mine operator insurance  given recent operator bankruptcies.

The Black Lung Benefits Program provides medical and cash assistance  to certain coal miners who have been totally disabled due to  pneumoconiosis, also known as black lung disease. Their surviving  dependents may also receive assistance. Black lung benefits are  generally to be paid by liable coal mine operators. However, the Trust  Fund pays benefits in certain circumstances including in cases where no  responsible mine operator could be identified or when the liable mine  operator does not pay. The Trust Fund is financed primarily by a tax on  coal produced and sold domestically, which we refer to in this statement  as the coal tax.

In 2018, we reported that the Trust Fund faced financial challenges and  borrowed about $1.3 billion in fiscal year 2017 from the Department of the  Treasury’s (Treasury) general fund to cover its expenditures. Beginning in  2019, the rate of the coal tax—the Trust Fund’s primary revenue source— decreased by about 55 percent. The Trust Fund may also be affected by  declining future coal production, as we reported in 2018. With less  revenue from the coal tax, increased federal funding will likely be needed.  Under federal law the Trust Fund borrows from Treasury’s general fund  when necessary to cover its expenditures. Federal law does not limit the  amount the Trust Fund may borrow from Treasury’s general fund—and  hence from the taxpayer—as needed to cover its relevant expenditures.  However, various options, such as adjusting the coal tax and forgiving  interest or debt, could reduce future borrowing and improve the Trust  Fund’s financial position (see GAO-18-351).

In my testimony today, I will (1) discuss the future solvency of the Trust  Fund given the coal tax rate decrease and declining coal production, and  (2) provide preliminary observations based on ongoing work for this  committee regarding DOL’s oversight of coal mine operator insurance  given recent operator bankruptcies.

To address our first objective we drew directly from our 2018 report. In  that report we simulated, among other things, how Trust Fund debt may  change through 2050 given the coal tax rate decrease and declining coal  production. Our simulations were based on various assumptions and  simulated Trust Fund revenues and expenditures from fiscal years 2016  through 2050. To develop these simulations, we used actual and  projection data from (1) DOL for fiscal years 2015 through 2040; (2)  Treasury’s Office of Tax Analysis for fiscal years 2011 through 2015; (3)  the Department of Energy’s Energy Information Administration (EIA) for  calendar years 2015 through 2050; and (4) the Office of Management and  Budget (OMB) for fiscal year 2017. We ran each simulation multiple times  using different sets of assumptions about the number of future black lung  beneficiaries and future coal production. Doing so provided a range of  estimates about the Trust Fund’s future borrowing needs and provided  insight on the sensitivity of its overall financial position relative to its  revenues and expenditures. In this testimony, as we did in our report, we  generally present the results of a moderate set of assumptions for each  simulation. We assessed the reliability of the data used to develop our  simulations by interviewing knowledgeable agency officials and reviewing  relevant supporting documentation describing the inputs and assumptions  used, if applicable. We also reviewed DOL, Treasury, EIA, and OMB data  for outliers, obvious errors, or missing data. We determined that the data  were sufficiently reliable for the purposes of our report.

Our preliminary observations regarding DOL’s oversight of coal mine  operator insurance given recent operator bankruptcies are based on  ongoing work for this committee. In conducting this work, we obtained  DOL documentation and data on black lung beneficiaries and coal mine  operators. We also reviewed relevant federal laws, regulations, policies,  and guidance and interviewed DOL officials, insurance carriers and  associations, and coal mine operators, among others.

We conducted the work on which this statement is based in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives.

Black lung benefits include both cash assistance and medical benefits.  Maximum cash assistance payments ranged from about $660 to $1,320  per month in 2018, depending on a beneficiary’s number of dependents.  Miners receiving cash assistance are also eligible for medical benefits  that cover the treatment of their black lung-related conditions, which may  include hospital and nursing care, rehabilitation services, and drug and  equipment charges, according to DOL documentation. DOL estimates  that the average annual cost for medical treatment in fiscal year 2018 was  approximately $9,667 per miner.

There were about 25,600 total beneficiaries (primary and dependents)  receiving black lung benefits during fiscal year 2018 (see fig. 1). The  number of beneficiaries has decreased over time as a result of declining  coal mining employment and an aging beneficiary population, according  to DOL officials. Black lung beneficiaries could increase in the near term  due to the increased occurrence of black lung disease and its most  severe form, progressive massive fibrosis, particularly among  Appalachian coal miners, according to National Institute for Occupational  Safety and Health (NIOSH) officials.

Black lung claims are processed by the Division of Coal Mine Workers’  Compensation in the Office of Workers’ Compensation Programs  (OWCP) within DOL. Contested claims are adjudicated by DOL’s Office of  Administrative Law Judges (OALJ), which issues decisions that can be  appealed to DOL’s Benefits Review Board (BRB). Claimants and mine  operators may further appeal these agency decisions to the federal  courts. If an award is contested, claimants can receive interim benefits,  which are generally paid from the Trust Fund according to DOL officials.  Final awards are either funded by mine operators—who are identified as  the responsible employers of claimants—or the Trust Fund, when  responsible employers cannot be identified or do not pay. In fiscal year  2018, black lung claims had an approval rate of about 34 percent,  according to DOL data.

In 2009, we reported on the benefits adjudication process and made  several recommendations for DOL that could improve miners’ ability to  pursue claims. An April 2015 DOL Inspector General (IG) report  followed up on DOL’s progress on our recommendations and found  continuing problems and raised new concerns about the black lung claims  and appeals process. For instance, the IG reported that OALJ needed  to address staff shortages, improve communication between its  headquarters and district offices, and upgrade the training provided to  judges and law clerks. To further expedite claim adjudication, the IG  recommended, among other things, that OALJ begin hearing more cases  remotely using video or telephone hearings to reduce judges’ travel costs  and time. In fiscal year 2018, OWCP reported that it took about 335  days on average to issue a decision on a claim. This is an increase from  the average of 235 days that OWCP had reported to the DOL IG for fiscal  year 2014.

Trust Fund revenue is primarily obtained from mine operators through the  coal tax. The current coal tax rates, which took effect in 2019, are $0.50  per ton of underground-mined coal and $0.25 per ton of surface-mined  coal, up to 2 percent of the sales price. Coal tax revenue is collected from  mine operators by Treasury’s Internal Revenue Service and then  transferred to the Trust Fund where it is then used by DOL to pay black  lung benefits and the costs of administering the program.

Trust Fund expenditures include, among other things, black lung benefit  payments, certain administrative costs incurred by DOL and Treasury to  administer the black lung benefits program, and debt repayments. When  necessary for the Trust Fund to make relevant expenditures under federal  law, the Trust Fund borrows from the Treasury’s general fund. When this  occurs, the federal government is essentially borrowing from itself—and  hence from the taxpayer—to fund its benefit payments and other  expenditures.

Trust Fund Borrowing Will Likely Continue to Increase through 2050

As we reported in 2018, Trust Fund expenditures have consistently  exceeded revenue. The Trust Fund borrowed from Treasury’s general  fund almost every year since 1979, its first complete fiscal year. We  noted in our 2018 report that Trust Fund borrowing would continue to  increase through 2050 due, in part, to the planned coal tax rate decrease  of about 55 percent that took effect in 2019 and declining coal production.

We simulated the effects of the tax rate decrease on Trust Fund finances  through 2050, and reported the results of a moderate case set of  assumptions related to future coal production and prices and the number  of new black lung beneficiaries. These simulations were not predictions  of what will happen, but rather models of what could happen given certain  assumptions.

Our moderate case simulation suggested that Trust Fund revenue may  decrease from about $485 million in fiscal year 2018 to about $298 million  in fiscal year 2019, due, in part, to the approximate 55 percent decrease  in the coal tax rate. Our simulation, which incorporated EIA data on  future expected coal production, also showed that annual Trust Fund  revenue would likely continue to decrease beyond fiscal year 2019 due, in  part, to declining coal production. Domestic coal production declined from  about 1.2 billion tons in 2008 to about 775 million tons in 2017, according  to EIA. Based on these projections, our moderate simulation showed  that Trust Fund annual revenue may continue to decrease from about  $298 million in fiscal year 2019 to about $197 million in fiscal year 2050.

Future simulated Trust Fund revenue would likely be insufficient to cover  combined black lung benefit payments and administrative costs,  according to our moderate case simulation. Specifically, revenue may not  be sufficient to cover beneficiary payments and administrative costs from  fiscal years 2020 through 2050 (see fig. 2). For instance, in fiscal year  2029, simulated benefit payments and administrative costs would likely  exceed simulated revenue by about $99 million. These annual deficits  could decrease over time to about $4 million by fiscal year 2050 due, in  part, to the assumed continued net decline in total black lung  beneficiaries.

If Trust Fund spending on benefit payments and administrative costs  continues to exceed revenues each year, then the Trust Fund would need  to continue borrowing from Treasury’s general fund to cover those costs,  as well as borrowing to cover debt repayment. Our moderate simulation  suggested that the Trust Fund’s outstanding debt could increase from  about $4.2 billion in fiscal year 2019 to about $15.4 billion in fiscal year  2050 (see fig. 3). While our moderate case simulated a $15.4 billion Trust  Fund debt in 2050, the amount could vary from about $6 billion to about  $27 billion depending, in part, on future coal production and the number  of new beneficiaries. Even if the Congress were to completely eliminate  black lung benefits as of fiscal year 2019, the Trust Fund’s outstanding  debt in fiscal year 2050 could still exceed $6.4 billion, according to our  simulation. Eliminating black lung benefits, however, would generally  mean that coal tax revenue would be collected solely to fund the  repayment of Trust Fund debt. As we reported in 2018, other options  such as adjusting the coal tax and forgiving interest or debt, could also  reduce future borrowing and improve the Trust Fund’s financial position  (see GAO-18-351).

Preliminary Observations Raise Concerns About DOL’s Oversight of Coal Mine Operator Insurance

Federal law generally requires that coal operators secure their black lung  benefit liability. Operators can purchase commercial insurance for this  purpose or may self-insure if they meet certain DOL conditions. For  example, self-insurers must obtain collateral in the form of an indemnity  bond, deposit or trust, or letter of credit in an amount deemed necessary  and sufficient by DOL to secure their liability.

DOL officials said that the collateral they required from the five self- insured operators that filed for bankruptcy between 2014 and 2016 was  inadequate to cover their benefit liabilities. For example, the collateral  DOL required from Alpha Natural Resources was about 6 percent of its  estimated benefit liability. As a result, approximately $185 million of  estimated benefit liability was transferred to the Trust Fund, according to  DOL data. We reviewed DOL documentation related to the five operator  bankruptcies. Table 1 shows the bankrupt operators; the amount of  collateral each operator had at the time of bankruptcy; estimated benefit  liability at the time of bankruptcy; and estimated benefit liability and  number of beneficiaries that transferred to the Trust Fund, if applicable.  Overall, three of these bankruptcies affected the Trust Fund, and two did  not according to DOL. DOL officials told us that the bankruptcies of Arch  Coal and Peabody Energy did not affect the Trust Fund because their  benefit liabilities were assumed by the reorganized companies after  emerging from bankruptcy.

As of June 2019, there are 22 operators that are self-insured and actively  mining coal, according to DOL officials. To ensure that the collateral  they required from these operators was adequate to protect the Trust  Fund, DOL officials said that they periodically reauthorized them which  entailed, among other things, reviewing their most recent audited financial  statements and claims information. DOL officials said that they prepared  memos documenting these reviews and communicated with coal  operators about whether their financial circumstances warranted  increasing or decreasing their collateral. Table 2 provides information on  the 22 self-insured operators including the date of each operator’s most  recent DOL reauthorization; the amount of DOL required collateral; and  the operator’s most recent estimated black lung benefit liability. Should  any of these operators file for bankruptcy, they could also affect the Trust  Fund because the amount of an operators’ benefit liability that is not  covered by collateral could also become the responsibility of the Trust  Fund.

Preliminary analysis from our ongoing work indicates that DOL did not  regularly monitor self-insured operators. Agency regulations state that  DOL may adjust the amount of collateral required from self-insured  operators when experience or changed conditions warrant. We reviewed  DOL’s most recent reauthorization memos for each of the 22 operators.  While some of these operators had been reauthorized more recently, we  found that others had not been reauthorized by DOL in decades. One  operator in particular had not been reauthorized by DOL since 1988.  Additionally, for most of these operators, DOL either did not have  estimates of their benefit liabilities, or the estimates were out of date (see  table 2).

Beginning in summer 2015, DOL officials said that they stopped  permitting any new coal mine operators to self-insure as the agency  worked with auditors, economists, and actuaries to develop new  procedures for self-insurance. At the same time, DOL generally stopped  reauthorizing the 22 self-insured operators. Earlier this year, two of  these operators have filed for bankruptcy—Westmoreland Coal Company  and Cloud Peak Energy—according to DOL officials. Additionally, due to  deteriorating financial conditions, DOL recommended revoking another  operator’s self-insurance authority (Murray Energy). However, Murray  appealed this decision and DOL postponed responding to the appeal until  their new self-insurance procedures are implemented, according to DOL  officials.

DOL’s new self-insurance procedures are currently being reviewed by  OMB, and DOL officials said they did not know when they would likely be  implemented. Until such procedures are implemented, DOL cannot  ensure that the collateral it has required from self-insured operators is  adequate to protect the Trust Fund should these operators become  insolvent.

Chairwoman Adams, Ranking Member Byrne, and Members of the  Subcommittee, this concludes my prepared statement. I would be happy  to respond to any questions you may have at this time.

If you or your staff has any questions concerning this testimony, please  contact me at (202) 512-7215. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement. In addition to the contact named above, Blake  Ainsworth (Assistant Director), Justin Dunleavy (Analyst in Charge),  Angeline Bickner, Alex Galuten, Courtney LaFountain, Rosemary Torres  Lerma, Kate van Gelder, Catherine Roark, and Almeta Spencer made key  contributions to the testimony. Other staff who made key contributions to  the reports cited in the testimony are identified in the source products.

Black Lung Benefits Program: Options to Improve Trust Fund Finances,  GAO-18-351 (Washington D.C: May 30, 2018).

Mine Safety: Basis for Proposed Exposure Limit on Respirable Coal Mine  Dust and Possible Approaches for Lowering Dust Levels, GAO-14-345  (Washington, D.C.: April 9, 2014).

Black Lung Benefits Program: Administrative and Structural Changes  Could Improve Miners’ Ability to Pursue Claims, GAO-10-7 (Washington,  D.C.: October 30, 2009).

Federal Compensation Programs: Perspectives on Four Programs for  Individuals Injured by Exposure to Harmful Substances, GAO-08-628T  (Washington, D.C.: April 1, 2008).

Mine Safety: Additional Guidance and Oversight of Mines’ Emergency  Response Plans Would Improve the Safety of Underground Coal Miners,  GAO-08-424 (Washington, D.C.: April 8, 2008).

Mine Safety: Better Oversight and Coordination by MSHA and Other  Federal Agencies Could Improve Safety for Underground Coal Miners,  GAO-07-622 (Washington, D.C.: May 16, 2007).

This is a work of the U.S. government and is not subject to copyright protection in the  United States. The published product may be reproduced and distributed in its entirety  without further permission from GAO. However, because this work may contain  copyrighted images or other material, permission from the copyright holder may be  necessary if you wish to reproduce this material separately.

The Black Lung Benefits Program helps coal miners who have been totally disabled due to black lung disease. Coal companies found liable or the Black Lung Disability Trust Fund pay these benefits. The trust may pay if, for example, a company goes bankrupt. A domestic coal tax is the trust’s primary funding source.

We reported in 2018 that the trust faces financial challenges and that its debt could increase each year through 2050, due in part to a 2019 coal tax cut and declining coal production. We testified on our preliminary observations from ongoing work, which suggests coal company bankruptcies are further straining the trust’s finances.


EEOC's Management Directive 715 requires that, to attract and retain top talent, federal agencies are to identify EEO barriers in their workforces and deficiencies in their EEO programs, execute plans to address them, and report annually to EEOC. GAO reported in 2009 on DHS's opportunities to address barriers to EEO in its workforce and in 2019 on DHS's challenges to ensuring EEO in its workforce.

GAO was asked to testify on the steps DHS has taken to (1) identify and address barriers to EEO in its workforce, (2) identify and address EEO program deficiencies, (3) address areas of noncompliance in its EEO program identified by EEOC, and (4) oversee and support components' EEO programs. To do so, GAO summarized the findings discussed in its July 2019 report on DHS's EEO efforts and reported on DHS's actions taken to address recommendations. To obtain updates on actions taken by DHS, GAO reviewed relevant documentation and interviewed DHS EEO officials.

The Department of Homeland Security (DHS) uses multiple information sources to identify potential barriers to equal employment opportunity (EEO), but lacks performance metrics for tracking its progress towards eliminating identified barriers. DHS generally uses the information sources that the Equal Employment Opportunity Commission (EEOC) guidance recommends, such as employee survey results, to help identify potential barriers. While DHS reports some improvements in employee engagement and representation of minorities and women from fiscal years 2014 through 2018, it does not have complete performance metrics, such as the retention rate of women in law enforcement positions. Using performance metrics could help DHS assess its progress in eliminating barriers.

DHS and its components have identified various deficiencies in their EEO programs, but lack policies and procedures for developing action plans and formal staffing models to address deficiencies. For example, in each of the fiscal years 2015 through 2018, DHS reported that senior managers at DHS components did not successfully implement EEO action plans and incorporate EEO action plan objectives into agency strategic plans. Further, DHS components lacked action plans to address nearly half (179 out of 369) of the deficiencies self-reported by all components from fiscal years 2014 through 2017. For example, in fiscal year 2017, four DHS components did not have action plans to ensure that their EEO directors report directly to their agency heads, as required by EEOC guidance. Developing policies and procedures to help ensure components' EEO programs have action plans for addressing deficiencies could help DHS components better comply with EEOC requirements.

In addition, developing and using formal staffing models—a tool to determine the number of staff required—for their EEO programs could help DHS and its components to identify, request, and obtain the staff they need. For example, DHS and its components reported that staffing challenges contributed to some of their program deficiencies, and acknowledged they did not have formal staffing models for their EEO programs.

DHS has plans to address nine areas of noncompliance in its EEO program identified by EEOC. In its July 2017 review of DHS compliance with EEOC requirements, EEOC found that DHS did not provide complete demographic data on new hires and promotions in its fiscal year 2016 report to EEOC. DHS reported to EEOC that it had collected and analyzed such demographic data beginning in fiscal year 2019.

DHS's EEO and human capital offices assist and support DHS components in identifying and addressing EEO barriers. However, DHS's EEO office lacks policies and procedures to ensure components respond timely and completely to areas of noncompliance identified in EEOC feedback letters. Additionally, DHS EEO officials said they lack authority to ensure components' compliance with EEOC requirements. Without addressing these issues, DHS may not be effectively positioned to manage its EEO program.

In its July 2019 report, GAO recommended that DHS take six actions, including develop performance metrics for the department's EEO program; develop DHS and component formal staffing models; and analyze options for granting additional authorities to the most senior official for EEO and Diversity. DHS concurred with the six recommendations and described actions the department plans to take to address them.

Thank you for the opportunity to be here today to discuss our work on the  Department of Homeland Security’s (DHS) efforts to ensure equal  employment opportunity (EEO) in its workforce. Since DHS began  operations in 2003, we designated implementing and transforming the  agency as high risk because it had to transform 22 agencies—several  with major management challenges—into one department. In 2013, we  narrowed the scope of this high-risk area and focused on DHS’s  continued need to strengthen and integrate its management functions,  including human capital management.

DHS must attract, develop, and retain a high-quality workforce that can  deliver security and results for the American people, and ensure the  continued growth and prosperity of the nation. Federal agencies,  including DHS, must make full use of our nation’s talent by promoting  workplaces that provide a fair and level playing field and the opportunity  for employees to achieve their fullest potential. Equal Employment  Opportunity Commission’s (EEOC) Management Directive 715 (MD-715)  requires that, to attract and retain top talent, federal agencies are to  identify EEO barriers in their workforces and deficiencies in their EEO  programs, execute plans to address them, and report annually to EEOC.

In 2009, we reported that DHS had opportunities to better identify and  address barriers to EEO in its workforce. Specifically, we found that DHS  was not regularly including employee input in identifying potential barriers.  We also found that it had not yet met most of its target completion dates  for planned activities to address barriers. We recommended that DHS (1)  develop a strategy to regularly include employee input in identifying  potential barriers to EEO, and (2) establish interim milestones for  completing planned activities to address identified barriers. By 2013, DHS  had responded to our recommendations by including a strategy to  regularly use employee input to identify barriers, and by identifying  essential activities and establishing interim milestones to address barriers  identified in its MD-715 reports.

This testimony is based primarily on our report that we recently issued  entitled, Equal Employment Opportunity: DHS Could Better Address  Challenges to Ensuring EEO in Its Workforce. It also includes selective  updates we obtained in February 2020. I will discuss steps DHS has  taken to (1) identify and address barriers to EEO in its workforce, (2)  identify and address EEO program deficiencies, (3) address areas of  noncompliance in its EEO program identified by EEOC, and (4) oversee  and support components’ EEO programs. For the report, we reviewed  DHS’s and its components’ policies, procedures, practices, and reports  for their EEO programs for fiscal years 2014 through 2018; interviewed  DHS and its component EEO officials; and assessed DHS employee  survey results. We also reviewed EEOC’s feedback on DHS’s and its  components’ EEO programs, and interviewed EEOC officials. Our report  contains a more detailed discussion of our objectives, scope, and  methodology. For the updates, we reviewed documentation from DHS  and interviewed Office for Civil Rights and Civil Liberties (CRCL) officials  on the actions DHS has taken to implement the recommendations from  our July 2019 report. We also added information from DHS’s fiscal year  2018 MD-715 report to reflect the most current fiscal year data and status  of the department’s EEO efforts.

We conducted the work on which this statement is based in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe the evidence obtained provides  a reasonable basis for our findings and conclusions based on our audit  objectives.

DHS Uses Multiple Information Sources to Identify Potential EEO Barriers

DHS generally uses the information sources that EEOC guidance  recommends to help identify potential barriers. As directed by EEOC  guidance, DHS analyzes its workforce data to help identify triggers or  indicators of potential EEO barriers by comparing the racial, national  origin, gender, and disability profiles of its total workforce, and for various  occupational categories to relevant civilian labor workforce data. In  addition to analyzing workforce data, in each of the fiscal years 2014  through 2017, DHS utilized the U.S. Office of Personnel Management’s  Federal Employee Viewpoint Survey and DHS’s employee exit survey  results to help identify and address barriers.

To further help identify barriers, EEOC guidance states that agencies  must solicit input from agency employee and advocacy groups, and union  officials. During our small group discussions, DHS employee groups told  us that through the MD-715 report development process, they helped  identify and address triggers and barriers. For example, Special  Emphasis Program Managers we spoke with told us that DHS  components conduct climate surveys to obtain input from employees on  workforce practices every 1 or 2 years. Further, several DHS  components’ MD-715 reports referenced soliciting employee input, such  as obtaining Disability Employment Program Managers’ input via  quarterly disability employment advisory council meetings where they  share best practices and discuss issues and topics including barriers.

DHS Reports Some Improvements in Employee Engagement and Representation of Minorities and Women, but Lacks Performance Metrics for Tracking Progress

DHS reports some improvements in employee engagement and  representation of minorities and women. DHS’s employee engagement  scores in the Federal Employee Viewpoint Survey increased from 54  percent in 2014 to 62 percent in 2019. In addition, our review of DHS’s  workforce data from fiscal years 2014 through 2017 showed that every  minority group as well as individuals with disabilities and individuals with  targeted disabilities had been trending in a positive direction since fiscal  year 2014. Further, DHS officials told us that minority representation  was up 3 percent and female representation was up 2 percent from 2015  to February 2019.

According to EEOC, one important tool in examining the fairness and  inclusiveness of an agency’s recruitment efforts is applicant flow data.  EEOC guidance states that having department-wide applicant flow data  could aid in analyzing differences in selection rates among different  groups for a particular job. In July 2017, EEOC informed DHS that the  agency’s applicant flow data were incomplete, which makes it difficult to  pinpoint barriers. DHS has reported challenges in collecting department- wide data because the department does not have a consolidated  applicant flow data system. According to DHS, four of its components use  one system (USA Staffing), while five other components use a different  system (Monster Government Solutions).

CRCL officials told us that DHS is developing a new system to integrate  applicant flow data department-wide. However, the officials could not give  us a time frame for when the system is expected to be completed. In its  fiscal year 2018 MD-715 report, DHS reported that it continues to work  towards developing a central repository for all applicant flow data. As a  work-around, DHS officials said that it obtains these data directly from  each component that uses Monster Government Solutions. In its fiscal  year 2018 MD-715 report, DHS reported that it used applicant flow data to  complete analyses, but it also reported a number of limitations, including  that data were not available. In February 2020, CRCL officials told us that  they plan to report complete applicant flow data in DHS’s fiscal year 2019  MD-715 report.

DHS does not have complete performance metrics or mechanisms for  tracking progress towards eliminating its identified EEO barriers, such as  workplace satisfaction of white females or the retention rate of women in  law enforcement positions. According to CRCL officials, they are not  required to establish performance metrics or mechanisms for tracking  progress towards eliminating barriers beyond what is included in the  department-wide MD-715 report. However, Standards for Internal Control  in the Federal Government states that management should establish  specific and measureable objectives, and ways to assess progress  including performance metrics and milestones. Further, EEOC guidance  states that agencies are not prevented from establishing additional  practices that exceed its requirements. Implementing performance  metrics could help DHS assess its progress in eliminating EEO barriers.

Accordingly, our July 2019 report included a recommendation that the  Secretary of Homeland Security should develop performance metrics for  the department’s EEO program including a mechanism for tracking  progress towards eliminating barriers. DHS concurred with the  recommendation and stated that it would implement it by April 30, 2020.  In February 2020, CRCL officials told us they are working with DHS’s  Management Directorate to develop a potential overarching performance  metric that, if approved, would be implemented beginning in fiscal year  2021.

DHS and Its Components Have Identified Various Deficiencies in Their EEO Programs, but in Some Cases Lack Action Plans to Address Them

Our analysis of DHS’s MD-715 reports found that the department-wide  EEO program did not meet about a quarter of the compliance measures  for a model EEO program for each fiscal year from 2014 through 2017.  For example, in each of the fiscal years 2015 through 2018, DHS  reported that senior managers at DHS components did not successfully  implement EEO action plans and incorporate EEO action plan objectives  into agency strategic plans. In addition, our analysis of components’ MD- 715 reports showed that component EEO programs did not meet 9  percent of the compliance measures for a model EEO program from fiscal  years 2014 through 2017.

DHS components did not have action plans to address nearly half (179  out of 369) of the deficiencies self-reported by all components from fiscal  years 2014 through 2017. For example, in fiscal year 2017, four DHS  components did not have action plans to ensure that their EEO directors  report directly to their agency heads. EEOC guidance requires that for  each deficient measure, agencies are to develop an action plan for  correcting the deficiency.

CRCL officials told us that DHS and its components’ MD-715 reports met  EEOC requirements for action plans for fiscal years 2014 through 2017  by providing explanations for, or briefly stating plans to address, the  majority of their deficiencies rather than developing action plans  identifying how each deficiency would be addressed. Developing policies  and procedures to help ensure components’ EEO programs have action  plans for addressing deficiencies could help DHS components better  comply with EEOC requirements.

DHS and its components lack adequate staffing to address EEO program  deficiencies, in part, because CRCL and component EEO officials told us  that they do not have formal staffing models to assess appropriate  staffing of their EEO program sections. CRCL officials said that each  component EEO program section is unique with its own assessments and  measures by the leaders in charge of their funding and staffing resources.  However, EEOC MD-715 guidance states that an agency must provide its EEO program with sufficient budget and staffing to be able to successfully  implement various activities. Developing and utilizing formal staffing  models—a tool to determine the number of staff required—for their EEO  programs could help DHS and its components to identify, request, and  obtain the staff they need.

Thus, in our recently issued report, we recommended that (1) DHS  component EEO Directors, in consultation with the Deputy Officer for  EEO and Diversity, should develop policies and procedures to help  ensure that their component EEO programs have action plans for  addressing deficiencies in their MD-715 reports, and (2) the Deputy  Officer for EEO and Diversity should develop a formal staffing model for  its EEO program. DHS concurred with the recommendations and stated  that it would implement them by April 30, 2020. In February 2020, CRCL  officials told us that they are developing policies and procedures for  components to consider. They also told us that they are collaborating with  the DHS Management Directorate to develop a formal staffing model for  DHS’s department-wide EEO program.

In addition, we recommended that DHS component EEO Directors, in  collaboration with the Deputy Officer for EEO and Diversity, develop  component formal staffing models. DHS concurred with the  recommendation and stated that it would implement it by July 31, 2020. In  February 2020, CRCL officials told us that the DHS Management  Directorate plans to work with components to develop formal staffing  models for their individual EEO programs after the agency develops a  formal staffing model for the department-wide EEO program.

DHS Has Plans to Address the Nine Areas of EEOC Identified Noncompliance

DHS has plans to address the nine areas of noncompliance in its EEO  program identified by EEOC. For example, in its July 2017 review of DHS  compliance with EEOC requirements, EEOC identified that DHS did not  provide complete demographic data on new hires and promotions in its  fiscal year 2016 report to EEOC. In April 2019, DHS officials told us that  the department plans to report the data by collecting complete data from  DHS components in fiscal year 2019. In its fiscal year 2018 MD-715  report, which DHS sent to EEOC in July 2019, DHS stated that it had  collected and analyzed demographic data on new hires and promotions.

DHS’s EEO and Human Capital Offices Use a Variety of Means to Oversee and Support Components in Identifying and Addressing EEO Barriers, but Need to Strengthen Oversight Efforts

DHS’s EEO and human capital offices assist and support DHS  components in identifying and addressing EEO barriers. For example,  CRCL meets with each component to obtain updates on their EEO efforts  and provide verbal feedback as they develop their MD-715 reports. DHS  components told us that they are generally satisfied with CRCL’s  collaboration practices to identify and address EEO barriers. For  example, all nine components required to submit MD-715 reports told us  that CRCL regularly meets with them and provides guidance on  identifying and addressing barriers.

From fiscal years 2014 through 2017, EEOC found areas of  noncompliance in DHS and its components’ EEO programs. We found  that DHS components had not responded timely and completely to areas  of noncompliance identified in EEOC feedback letters. According to  CRCL officials, CRCL does not have policies and procedures to ensure  that components have addressed EEOC’s feedback letters in a complete  and timely manner. However, EEOC MD-715 guidance states that an  agency’s EEO Director ultimately is responsible for ensuring equal  opportunity throughout the entire agency. In addition, Standards for  Internal Control in the Federal Government states that management  should implement control activities through policies. Developing policies  and procedures for responding completely and timely to EEOC’s  feedback letters may help the department comply with EEOC guidance.

CRCL officials said they lack authority to ensure components’ compliance  with EEOC requirements. Standards for Internal Control in the Federal  Government states that an effective management practice includes  periodically evaluating the agency’s organizational structure to ensure  that it meets its objectives. DHS has not taken steps—in consultation  with EEOC and other agencies as relevant—to analyze options to  address EEO program management weaknesses. Specifically, it has not  analyzed alternatives for granting additional authorities to the Deputy  Officer for EEO and Diversity to ensure DHS components comply with MD-715 guidance, or assessed benefits and trade-offs of each  alternative. Without addressing these issues, DHS may not be effectively  positioned to manage its EEO program.

In our report, we recommended that the (1) Deputy Officer for EEO and  Diversity develop policies and procedures for responding in a complete  and timely manner to EEOC’s feedback letters, and (2) the Secretary of  Homeland Security—in consultation with CRCL and EEOC, and other  agencies and components, as relevant—analyze options for granting  additional authorities to the Deputy Officer for EEO and Diversity to  ensure DHS components comply with MD-715 guidance, including the  authority of the Deputy Officer for EEO and Diversity to certify  components’ MD-715 reports.

DHS concurred with the recommendations and stated that it plans to  implement them by April 30, 2020. In February 2020, CRCL officials told  us they are developing policies and procedures for responding in a  complete and timely manner to EEOC’s feedback letters. They also told  us that a cross-component working group, with input from EEOC subject- matter experts, is developing a report benchmarking best practices at  similar federal agencies that it expects to complete by the end of March  2020.

In conclusion, as the third largest U.S. government department, the  challenges DHS has faced to fully implement effective EEO programs  may result in widespread negative consequences such as (1) monetary  expenses borne by the agency in connection with workplace disputes and  (2) decreased morale and productivity resulting from ineffective and  inefficient use of human capital resources. We found areas for  improvement in DHS and its components’ EEO programs that could help  ensure success and compliance with MD-715. The commitment of DHS’s  leadership is essential to successfully addressing these issues. By  focusing leadership attention on developing performance metrics, policies  and procedures, and staffing models, DHS and its components can help  improve their EEO programs by making progress towards eliminating  barriers, obtaining sufficient staffing, and addressing areas of  noncompliance.

Madam Chairwoman Torres Small, Ranking Member Crenshaw, and  Members of the Subcommittee, this completes my prepared statement. I  would be pleased to respond to any questions you may have at this time.

If you or your staff have any questions about this testimony, please  contact Yvonne D. Jones at (202) 512-6806 or jonesy@gao.gov, or  Christopher P. Currie at (404) 679-1875 or curriec@gao.gov. Contact  points for our Offices of Congressional Relations and Public Affairs may  be found on the last page of this statement. Individuals making key  contributions to this testimony include Clifton G. Douglas, Jr. (Assistant  Director), Luis E. Rodriguez (Analyst-in-Charge), Andrew Howard, Kate  Lenane, Steven Putansu, and Rachel Whitaker.

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We testified about the Department of Homeland Security’s efforts to ensure equal opportunity in employment at DHS.

For example, DHS uses things like employee surveys to help identify potential barriers and reported some improvements in representation of minorities and women from FY 2014 through 2017. However, it lacks performance metrics for tracking its progress.

Last year, we made 6 recommendations to DHS, including that it develop performance metrics for its equal employment program. DHS has agreed with our recommendations and has described its plans to address them.