PROPOSED NEW CHARGES TO THE UNEMPLOYMENT TRUST FUND

The Department's budget as approved includes the following items which are to be financed from the subject trust fund:

1. Costs incurred in connection with carrying out the Department's responsibilities under Public Law 414 relating to both permanent and temporary admissions: $2,957,400.

2. Costs incurred in effectuating the Department's responsibilities under the Civil Rights Act: $212,000.

3. Costs incurred in connection with the administration of the Farm Labor Contractor Registration Act: $230,000.

Title IX of the Social Security Act makes the funds covered into the employment security administration account available for (1) assisting the States in the administration of their unemployment compensation laws as provided in title III, including the costs incurred in connection with the administration of the various unemployment compensation laws; and (2) for costs in connection with the establishment and maintenance of public employment offices in accordance with the Wagner-Peyser Act.

Justification for charging item 1 to trust fund

While in a strictly technical sense the Department's responsibilities under the Immigration and Nationality Act are independent of those imposed upon it under the Wagner-Peyser Act, the Department carries out its responsibilities under the former act through the facilities of the public employment office.

The basic function which the Department performs under the Immigration and Nationality Act is testing the availability of labor. In this sense the Department, in fact, undertakes through the public employment office to find domestic workers for employers who have placed job offers with the public employment office. While it is true that the employer may seek to obtain a visa for an immigrant or nonimmigrant, the cost factor is in major portion related to a function which the public employment office normally performs. For this reason the cost should be truly assessed as a cost of operating the public employment offices and carrying out its responsibilities for finding jobs for domestic workers. The certification which is given for the admission of either nonimmigrant or immigrant aliens is merely a byproduct of the search for domestic workers. Justification for charging item 2 to trust fund

Insofar as the costs incurred in giving meaning and effect to titles VI and VII of the Civil Rights Act are concerned the Department's regulations, issued under the Wagner-Peyser Act, prohibit discriminatory practices in the operations of the public employment offices. The funds thus expended by the Department in giving effect to these titles of the Civil Rights Act are in essence to give meaning and effect to standards of efficiency under which the public employment offices are required to operate.

For this reason it would appear that any costs incurred in the enforcement of the Department's policy and regulations against discriminatory practices in the maintenance and operation of the public employment offices are in connection with policies that are coextensive with the requirements of the Civil Rights Act. Accordingly, costs incurred in connection therewith can reasonably be construed as costs incurred in administering the Wagner-Peyser Act. Justification for charging item 3 to trust fund

The farm labor service is established pursuant to the provisions of section 3 of the Wagner-Peyser Act. Its basic responsibility is to recruit farm laborers to meet the labor needs of the agricultural producers of the country and conversely to locate jobs for unemployed workers designed to find agricultural employment.

In carrying out this responsibility the farm labor service, through the facilities of the nationwide system of public employment offices, established under the Wagner-Peyser Act, schedules successive employment for farmworkers in a number of States. A very significant phase of the farm labor force moves in the migratory labor stream.

Through the annual worker plan and through other recruitment programs the public employment offices, working with crew leaders and other labor contractors, are instrumental in arranging for the migration of workers from area to area, State to State, and region to region.

In carrying out these responsibilities the public employment offices, as governmental instrumentalities, have a legitimate concern in assuring that they do not participate in programs characterized by serious abuses and exploitation of migratory agricultural workers. While the registration of crew leaders and other labor contractors is provided for under a separate statute, designed to provide safeguards against such abuses and exploitation, it is a function so inter-related with the total migratory worker program, including the recruitment, job development, and scheduling of workers into interstate employment, all of which are programs conducted by the public employment offices, it would appear appropriate to assess the entire cost of the total farm labor service functions, including such registration, to a single appropriation source.

COMMENTS ON GENERAL ACCOUNTING OFFICE REPORTS TO CONGRESS

Wage rates for federally financed building construction improperly determined in excess of the prevailing rates for similar work in New England areas GAO criticisms.-GAO review of the determinations by the Department of the minimum wage rates to be paid mechanics and laborers employed on construction of federally financed building projects in selected New England areas disclosed that many of the rates were improperly established at the higher rates negotiated by labor organizations and building contractors rather than at the lower wage rates prevailing on private construction in the project area. The review showed that these unrealistic determinations were based on inadequate information obtained by the Department on wage rates in these areas. GAO believes that the Department has not complied with either its own regulations or the intent of the Davis-Bacon Act that wage determination be based on the wage rates prevailing for similar construction in the locality.

GAO recommendation.-GAO recommends that the Department institute onthe-site surveys of both union negotiated rates and other wage rates being paid on comparable private construction in an area. Sufficient data should be gathered firsthand in the locality of the construction site to afford a basis for appropriate wage determinations.

Department of Labor response.-There is a basic difference in statutory interpretation between the Comptroller General and the Department. The Comptroller General construes the Davis-Bacon Act as restricting the Department to consideration of only wages paid on "private" construction in finding prevailing wage rates. The Comptroller General apparently excludes consideration of Federal construction, or construction assisted by Federal loans, grants, or insurance which is subject to the Davis-Bacon Act or its related statutes. The Department does not agree with this exclusion.

The Department is going to redouble its efforts to obtain a larger volume of payment evidence. Further, the Department is now requiring contracting agencies to furnish payment evidence with their requests for wage determinations. Wage rates for federally financed housing construction improperly determined in excess of the prevailing rates for similar work in the Dallas-Fort Worth, Tex., area

GAO criticisms.-GAO review of the determinations by the Department of the minimum wage rates to be paid to mechanics and laborers employed on certain federally financed housing construction in the Dallas-Fort Worth, Tex., area disclosed that the minimum hourly wage rates were improperly established at the higher union-negotiated rates paid principally on commercial-industrial-type building construction rather than the lower wage rates prevailing in the project area on private housing construction similar in character to the federally financed housing projects. GAO believes that the Department by not obtaining wage-rate data on similar private housing construction has not complied with the intent of the Davis-Bacon Act that wage determinations be based on the wage rates prevailing for similar construction in the locality. GAO feels that the higher wage rates determined by the Department increased the project costs by about $1.1 million on a $15 million contract.

GAO recommendation.—GAO recommends that the Department institute onthe-site surveys of both union-negotiated and other wage rates being paid on similar private construction in the area. Sufficient data should be gathered first hand in the locality of the construction site to afford a basis for appropriate wage determinations for federally financed housing projects.

Department of Labor response.-There is a basic difference in statutory interpretation between the Comptroller General and the Department. The Comptroller General seems to read the Davis-Bacon Act as requiring the Departmnt to use exclusively wages paid in the "private" sector of the economy in finding prevailing wages. The Department interprets the act as requiring consideration of wages paid on all projects of a character similar, regardless of whether the projects are in the "private" segment of the economy or its "public" segment. In addition to trying to obtain a larger volume of payment evidence, the Department has established three field offices. The field representatives will work closely with representatives of management and labor and with public officials in an effort to obtain more reliable support for wage determinations.

Unnecessary procurement of office furniture

GAO criticism.-The GAO review disclosed that new office furniture costing about $1 million was procured by the bureaus and offices during fiscal years

1962 and 1963 to replace furniture which was still usable. Inadequate consideration had been given to the economy of retaining and, if necessary, reconditioning the replaced furniture, contrary to regulations of GSA.

GAÓ found that the Department's system of property management, including related budgetary and accounting controls, was inadequate in that there was no overall departmental review of the procurement and utilization of furniture and other nonexpendable property by the bureaus. GAO states that for the most part budget estimates did not specifically provide for the procurement of replacement furniture. Rather, the Department financed the furniture by reprograming unused funds budgeted for other purposes.

GAO recommendations.-GAO recommends that the Secretary call to the attention of the heads of bureaus and offices the need to limit the procurement of new furniture and related equipment to properly justified requirements. GAO also recommends that all valid equipment requirements be described separately as part of the basis for requesting the appropriation of funds.

Department of Labor response.-Except for the need for more effective control, the Department does not agree with the report, nor with the implication of the report that $1 million was reprogramed for the acquisition of office furniture. The expenditures for equipment were reported to Congress as a part of the regular appropriation process.

The Department recognizes the need for the further improvement of its property management and related fiscal practices and is currently engaged in so doing.

Uneconomical use of Federal funds in the reorganization and expansion of the Chicago Employment Offices, Illinois State Employment Service

GAO criticism.-GAO states that Bureau of Employment Security did not require Illinois State Employment Service to formulate plans and establish, in advance, work priorities and time schedules or appraise its capabilities for carrying out the reorganization. Their view disclosed that (1) time standards allowed for making routine short-time placements were excessive and encouraged overstaffing, (2) reports made to the Congress overstated the effectiveness of the employment service because of inadequate disclosure that a significant portion of the placements reported pertained to short-time employment rather than to permanent employment, and (3) unnecessary costs were incurred by providing certain nonessential services to an employer.

GAO estimates that several hundred thousand dollars were ineffectively spent. principally in fiscal years 1962 and 1963 because the Federal Government was prematurely committed to the financing of this undertaking which would increase annual costs of operation by about $2 million without commensurate benefits.

GAO recommendations.—GAO is recommending that a review be made of the Chicago area employment service with the objective of further reducing the staff of the Chicago offices, especially the professional office, to levels consistent with realistic estimates of workloads pertaining to essential public services, that future reorganizations and expansions of State employment service programs be approved only on the basis of realistic goals and detailed working plans, and that the present policy which resulted in overstaffing be revised accordingly. GAO also recommends that the Department reconsider its plans to eliminate work measurement standards and, because of their usefulness in measuring staff needs and performance, seek to establish more realistic standards, particularly for day-labor offices.

GAO recommends further that short-time placements be reported to the Congress separately from permanent placements. Also, GAO is recommending that consideration be given to the need for guideline for State agencies concerning the use of Federal funds for personnel and other services which are normally provided by the employer.

Department of Labor response.-The Department has consistently followed a policy that the public employment service should provide the maximum service possible to all employees and all those seeking work regardless of whether or not they are employed or unemployed or regardless of their occupational aptitudes.

In dealing with 50 State agencies it is not possible to develop and proceed with a preciseness of plans which would result in the absolute of efficient and economical expenditures. The initiation of the expansion and improvement of employment service operations in the States was preceded by a host of studies of past accomplishments, worker commuting patterns and potential needs for services to the public. Based on these studies, goals were set on a tight time schedule in order to get fast action. The program is under the most careful kind of

scrutiny. For example, the position allocations for Chicago have been reduced by nearly 70 positions. In retrospect, therefore, some expenditures may now appear to have been less necessary than circumstances indicated at the time.

The Bureau is currently engaged in the development of standards which will provide a relationship to staff needs.

Placements are presented to Congress in total and by occupational category. Data are available on the total number of short-time placements. The worth of any placement must be determined on the basis of the individual transaction. No yardstick has been evolved which will accurately measure the effectiveness of one placement or group of placements against another, whether they are of short-time or permanent duration.

Unnecessary costs incurred as a result of preferential treatment of Federal retirees in connection with payments of unemployment compensation GAO criticisms.-The employment security agencies of five States: Alabama, Iowa, Michigan, South Dakota, Tennessee, give preferential treatment to Federal retirees both civilian and military, because these Federal retirees are allowed both unemployment compensation and retred pay. Private industry retirees and Federal civilian retirees in other States having similar laws are allowed unemployment compensation only to the extent that the compensation exceeds retired pay. GAO estimates that this practice results in the payment of additional unemployment compensation of as much as $282,000 annually.

GAO recommendations.-GAO recommended that the Congress consider amending the Federal unemployment compensation law to specifically provide that Federal civilian and military retirees who retired for reasons other than disability receive unemployment compensation based on Federal service only in the amount by which the unemployment compensation rate exceeds the retired pay rate.

Department of Labor response.-Three of the State agencies Alabama, Michigan, and Iowa do not reduce unemployment compensation because of prohibitory provisions in the State unemployment compensation laws. The remaining two States Tennessee and South Dakota stated that they would change their current applications of State law when accumulated Federal cash contributions exceed 50 percent of the total cash contributions to the retirement fund.

Section 1502 of title XV clearly indicates that Congress intended that unemployment benefits be paid to former Federal civilian employees under the same terms and conditions of State unemployment compensation laws applicable to claims filed by private industry claimants. Adoption of the Comptroller General's recommendation would be contrary to the expressed intent of Congress and would require South Dakota and Tennessee to treat Federal civilian employees differently from private industry claimants. Consequently, the Department does not agree that the current provisions of section 1502 of the Federal law should be revised.

Alabama and Michigan have indicated they would recommend modifications of existing State laws which would permit unemployment compensation only to the extent that the compensation exceeds the retired pay.

The Iowa law specifically excludes the deduction of military retirement payments from ex-servicemen's title XV benefits. The State agency reports that any attempt to remove the exclusions would result in vigorous opposition from the veterans' groups.

Failure to adequately consider the financial advantages of purchasing over leasing automatic data processing systems used by the Bureau of Labor Statistics GAO criticism.-GAO states that since 1958, when the Department installed its first computer in the Bureau of Labor Statistics, the Bureau has consistently leased the computer systems used for data processing and has not given adequate consideration to the financial advantages of purchasing such equipment. GAO states that the savings available through purchsing the computers in operation in 1964 would range from about $458,000 to $1,381,000 for the first 5 years of ownership, the amount depending on how much use is made of the machines. GAO recommendation.-GAO recommends that the Department adequately consider the relative cost advantages of leasing and purchasing such computer systems and that the equipment be purchased when a financial advantage to the Government can be shown.

Department of Labor response.-The Department's Bureau of Labor Statistics did consider the advantages of purchase but arrived at a different recommendation. The lease decision was made in accordance with the Bureau of the Budget criteria. The anticipated savings shown in the Comptroller General's report should be considered as hypothetical estimates rather than facts. The expected savings are based on assumptions 5 years in the future.