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entitled 'Workplace Safety and Health: OSHA's Oversight of Its Civil 
Penalty Determination and Violation Abatement Processes Has 
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Report to the Secretary of Labor:

United States Government Accountability Office:

GAO:

August 2004:

Workplace Safety and Health:

OSHA's Oversight of Its Civil Penalty Determination and Violation 
Abatement Processes Has Limitations:

GAO-04-920:

Contents:

Letter:

Appendix I: Briefing Presented on July 7, 2004:

Appendix II: Comments from the Department of Labor:

Abbreviations:

FIRM: Field Inspection Reference Manual:

IMIS: Integrated Management Information Systems:

OEA: Office of Evaluations and Audit Analysis:

OSHA: Occupational Safety and Health Administration:

United States Government Accountability Office:

Washington, DC 20548:

August 13, 2004:

The Honorable Elaine L. Chao: 
Secretary of Labor:

Dear Madame Secretary:

This report presents the findings of our study of the Department of 
Labor's Occupational Safety and Health Administration's (OSHA) 
determination of civil penalties and abatement of violations. The 
objective of the study was to assess the extent of OSHA's oversight of 
the civil penalty determination and the violation abatement processes. 
In addition, we developed a statistical model, known as a multivariate 
analysis, to better understand factors that influenced variation in 
penalty amounts. On July 7, 2004, we briefed Labor officials on the 
results of our study. This letter report formally conveys the 
information we presented at that briefing (see app. I).

OSHA penalties are a critical enforcement strategy meant to deter 
employers from violating safety and health standards. In fiscal year 
2003, OSHA proposed civil penalties that totaled over $114 million and 
conducted inspections across approximately 40,000 employers. In 
determining the penalty amount, OSHA inspectors must apply four factors 
identified in the Occupation Safety and Health Act of 1970:[Footnote 1] 
(l) the gravity of the violation, (2) the size of the business, (3) the 
employer's history of previous violations, and (4) the good faith of 
the employer.[Footnote 2] OSHA's Field Inspection Reference Manual 
(FIRM) contains the criteria inspectors should use in applying each of 
these four factors. For example, in assessing gravity, the manual 
instructs that the inspector consider two elements, severity and 
probability, which are then to be analyzed on a scale of high to low. 
Application of the gravity criteria results in an initial base penalty 
amount. The other factors, as described in the manual, may then be used 
to reduce the amount if applicable and can result in up to a 95 percent 
reduction in the base penalty amount.[Footnote 3] Given this approach 
for establishing penalty amounts, it is essential that inspectors apply 
the criteria for the four factors accurately and consistently.

OSHA has delegated authority for overseeing its enforcement and program 
activities to the 10 regional offices. The regional offices oversee 
operations of 80 area offices. OSHA requires that regional offices 
conduct annual audits of area offices' adherence to proper procedures 
for penalty calculation, penalty collection, and abatement of safety 
and health hazards found at work sites. OSHA allows regional offices to 
conduct these audits in several ways, including reviewing area offices' 
statistical reports or inspection case files and by administering 
questionnaires to the area offices. In addition, every 2 years regional 
offices are required to conduct on-site audits at all area offices. 
Each area office is responsible for responding to recommendations for 
improvements that arise from these regional audits. Moreover, regional 
offices are responsible for sharing the results of their audits with 
OSHA's national office.

To assess the extent of OSHA's oversight of the civil penalty 
determination and violation abatement processes, we (1) reviewed 2002 
and 2003 regional audits from the five regions with the most 
inspections, (2) visited one of these regional offices and one area 
office within this region to interview officials and review documents 
and procedures, (3) conducted telephone interviews with the four 
remaining regional offices and one area office within each of those 
regions, (4) interviewed OSHA officials to identify relevant policies 
and procedures, and (5) reviewed relevant policies and procedures. In 
addition, we explored another possible oversight technique--a 
quantitative multivariate analysis to better understand factors that 
influence variation in penalty amounts. We calculated differences in 
final penalty amounts for serious violations and analyzed what might 
account for those differences. Using our statistical model, we first 
estimated how the gravity of the violation and size of the employer, 
two of the variables used to calculate penalties, affected penalties. 
We then added other variables to the model, such as industry type and 
region, to assess if and how other variables not formally used in 
calculating penalties affected penalty amounts. We based our 
multivariate analysis on inspection and violation data (fiscal years 
1999 to 2002) from OSHA's Integrated Management Information System 
(IMIS). We assessed the completeness of these data by reviewing OSHA's 
documentation on how the data were collected and performed electronic 
tests to look for outliers, missing values, or duplicate records. On 
the basis of these reviews and tests, we found the data sufficiently 
reliable for our purposes. We conducted our work between October 2003 
and May 2004 in accordance with generally accepted government auditing 
standards.

In summary, we found that OSHA's oversight for ensuring that penalties 
are correctly determined and violations are properly abated has 
limitations. While the national office receives copies of the regions' 
annual audits, it does not review them or use them to monitor the 
extent to which penalties are calculated correctly and violations are 
properly abated. The national office's underutilization of audit 
results may be problematic because audit results identified significant 
problems. For example, audits found that some area offices 
miscalculated penalties and failed to conduct required follow-up 
inspections to ensure the proper abatement of violations. Even if OSHA 
were to use the results of annual audits for oversight purposes, the 
information these audits provide may not always be complete. In fact, 
four of the five regional offices we reviewed did not conduct audits in 
full accordance with OSHA procedures during fiscal years 2002 and 2003. 
For example, one region did not routinely conduct any on-site audits, 
while two regions failed to include all of their area offices in their 
audit reviews.

OSHA has recently taken a significant step to improve its oversight 
efforts by establishing an Office of Evaluations and Audit Analysis 
(OEA) to focus on ways to better use data from regional audits. The OEA 
is in the initial planning stages. As the formation of OEA continues, 
officials may want to consider incorporating the use of multivariate 
analysis into efforts to better understand the factors that influence 
variation in civil penalty amounts. Such a statistical model would 
allow OSHA officials to determine how much of the variation in penalty 
amounts is due to established factors and how much is due to factors 
that are not used in penalty calculations. To explore the viability of 
such an analysis, we calculated how gravity of violation and employer 
size affected penalty amounts and found that these two factors 
explained 48 percent of the variation that existed among proposed 
penalty amounts for serious violations. Using final penalty amounts, we 
found that the model explained 36 percent of the variation.[Footnote 4] 
When we expanded this model to include factors beyond those explicitly 
used in the penalty assessment process, we found that these factors 
explained some, but far less, of the variation in final penalties than 
the two factors above. For example, even after we controlled for 
differences in gravity and employer size, some industries were assessed 
penalties that averaged $257 more than others. Overall, this model 
explained 39 percent of the variation for final penalties. We recognize 
this model captures only some of the factors that influence penalty 
amounts and understand that area directors are given discretion in 
determining final penalties in response to employers' efforts to ensure 
abatement and improve the safety of their workplaces. Nevertheless, we 
think that with additional data on factors like employer history and 
good faith, models like this could provide OSHA with insight into the 
extent to which penalties are being assessed correctly (including the 
degree that unexpected variables are affecting penalty amounts).

In a recently published GAO report, we recommended that OSHA create a 
system to ensure that regions complete audits and that OSHA use audit 
results to improve the consistency of the complaint process.[Footnote 
5] Consistent with those recommendations and on the basis of the 
findings presented here, we are recommending that the Secretary of 
Labor direct the Assistant Secretary for Occupational Safety and Health 
to:

* ensure that regions complete audits in accordance with OSHA's 
required audit procedures and:

* monitor audit results in their overseeing of the civil penalty 
determination and violation abatement processes.

In addition, we are recommending that the Secretary of Labor direct the 
Assistant Secretary for Occupational Safety and Health to:

* evaluate the feasibility of using statistical modeling to help OSHA 
determine if penalties are being assessed correctly and identify if 
unanticipated factors are influencing penalty amounts.

OSHA provided written comments on a draft of the briefing slides (see 
app. II). We incorporated the agency's comments, including oral 
comments we received during the briefing, into the briefing slides and 
this letter as appropriate. In general officials agreed with our first 
two recommendations regarding the better use of audit results, although 
they questioned how we arrived at these recommendations. In particular 
they were uncertain about which regions we reviewed and the magnitude 
of the problems we identified. As documented in both the slides and 
this letter, we based our findings on the key results of OSHA regional 
audits conducted in the five regions with the most inspections during 
fiscal years 2002 and 2003. We reported on problems that appeared 
across regions and years but did not report on the magnitude of the 
problems because the audits did not always identify error rates or the 
total number of case files reviewed. We commend OSHA for recognizing 
that more useful information can be gathered from the audit reports.

Concerning the third recommendation, OSHA officials stated during the 
briefing that the multivariate model could be useful but raised some 
concerns in their oral and written comments. First, OSHA officials 
questioned the validity of the model, given the fact that two of the 
factors used in calculating penalty amounts could not be included. 
Specifically, OSHA believed that these two missing factors would 
explain additional variation among penalties and would decrease the 
amount of variation we found attributable to nonstatutory variables. 
Though we recognized that IMIS could not provide us with data on all 
four factors, we pursued developing the model to test its potential 
value as an oversight tool for OSHA. Based on the test, we believe that 
with additional data, such as the two missing factors of history and 
good faith, this type of modeling could provide OSHA with insight into 
the extent to which penalties are being assessed correctly and the 
degree to which unexpected variables are affecting penalty amounts.

OSHA was also concerned that the results of our model on final penalty 
amounts did not appropriately capture the adjustments made by area 
directors to proposed penalty amounts when employers abate their 
violations and improve the safety of their workplaces. Currently, 
OSHA's database does not capture area directors' negotiations of final 
penalties. If OSHA chooses to explore the feasibility of using 
statistical modeling, it may wish to consider the value of developing 
such a variable. On a related issue, OSHA suggested that in this letter 
we provide the results of the model for proposed penalty amounts, in 
addition to final penalty amounts, to get a better sense of how 
consistently inspectors applied the penalty factors. We added these 
results, which also showed a sizeable amount of unexplained variation 
in initial penalty amounts. Finally, OSHA was concerned about the 
resources required to collect additional information to make the model 
more robust. However, it is unclear at this time how large the 
additional cost of this task would be, since the good faith and history 
data are currently collected by the area offices and stored in the same 
local data system from which other IMIS data are retrieved. As 
requested by OSHA, we will be sharing our statistical model and 
accompanying database with the agency so that it may further explore 
the model's oversight potential.

We are sending copies of this report to the respective congressional 
committees and to other interested parties and will make copies 
available to others upon request. In addition, the report will be 
available at no charge on GAO's Web site at http://www.gao.gov.

If you have any questions about this report, please contact me on (202) 
512-9889 or Brett Fallavollita on (202) 512-8507. Mikki Holmes and 
Linda Stokes, as well as Catherine Hurley, Julian Klazkin, Luanne Moy, 
and Douglas Sloane, made significant contributions to this report.

Sincerely yours,

Signed by: 

Robert E. Robertson: 
Director, Education, Workforce, and Income Security Issues:

[End of section]

Appendix I: Briefing Presented on July 7, 2004:

[See PDF for images]

[End of slide presentation]

[End of section]

Appendix II: Comments from the Department of Labor:

U.S. Department of Labor:

JUL 28 2004:

Assistant Secretary for Occupational Safety and Health: 
Washington, D.C. 20210:

Mr. Robert E. Robertson:
Director, Education, Workforce and Income Security Issues:
United States Government Accountability Office: 
441 G Street NW, Room 5930:
Washington, DC 20548:

Dear Mr. Robertson:

The Occupational Safety and Health Administration (OSHA) has received 
your summary of the oral comments in response to the briefing provided 
by Government Accountability Office (GAO) officials on July 7, 2004. I 
thank you for the opportunity to respond on behalf of the Agency.

The Agency recognizes the extensive work conducted by GAO on this study 
and the utility of some of the information presented to OSHA. However, 
the Agency would like to point out some of the shortcomings of your 
methodology and findings.

As you note in your presentation, the Agency does see the merits of the 
regions completing audits in accordance with Agency audit procedures, 
and the need to monitor audit results in the regional offices. However, 
OSHA is unclear about how GAO arrived at these recommendations. For 
instance, there is some discussion of visiting five regional offices to 
review case files, but it is unclear to the Agency which regions were 
visited; further, the magnitude of problems discovered in each of the 
regional offices is difficult to assess without knowing the error rate 
or the total number of case files reviewed. Given that OSHA examines 
the penalty determination and violation abatement processes both 
locally and regionally, GAO's finding that OSHA provides limited 
oversight of these processes is perhaps far too generalized statement. 
Nevertheless, the Agency recognizes that more useful information could 
be gathered from the audit reports and OSHA has started to look at how 
best to do that.

OSHA's main policy goal has always been to reduce injuries and 
illnesses through the elimination of workplace hazards, not to assess 
or collect penalties. To meet the demands of the possible application 
of over 3,000 standards to more than seven million workplaces covered 
by the Occupational Safety and Health Act, the Agency must employ its 
enforcement resources with maximum efficiency. While OSHA has delegated 
its authority for overseeing its enforcement and program activities-
including penalty assessment-to the regional offices, this is not a 
complete delegation of authority.

The Agency needs some flexibility in assessing final penalties to 
reward the willingness of some employers to abate a hazard quickly and 
produce a safer workplace. Using a statistical model to measure the 
variance in final penalties does not adequately recognize the policy 
reasons for the variance. Moreover, OSHA would point out that GAO's 
statistical model, even with the addition of data on history and good 
faith, would not determine whether penalties are being assessed 
correctly, as suggested in the study summary; instead, the model simply 
identifies factors associated with variance in penalty amounts.

As you have noted, the Agency applies four factors to the determination 
of appropriate penalty amounts before penalties are assessed. The 
absence of two of those four factors from your multivariate regression 
model raises strong concerns about the validity of the results produced 
by your model, and, therefore-due to the prominence of your statistical 
model in the study - the validity of your study. The Agency questions 
whether you would find the same variations in penalty amounts if your 
statistical model contained good faith and history, which lead to a 
prescriptive variance in penalties due to the Agency's policy goal of 
producing a safer workplace.

(Furthermore, focusing the statistical model on measuring the variance 
in final penalties instead of initial proposed penalties resulted in 
less explained variance.) Because GAO did not control for all of the 
penalty-calculation factors along with the other non-statutory factors 
identified for its statistical model, OSHA is unsure how GAO can 
conclude that non-statutory factors had "significant effects" on final 
penalty amounts. Moreover, it is difficult to assess how significant 
the variations are without the benefit of reviewing the entire 
distribution of proposed penalty amounts and final penalty amounts; 
however, GAO seems to recognize that OSHA cannot eliminate all 
variations due to what can be termed non-statutory factors.

For the reasons stated above, OSHA has requested a copy of the database 
used for this study for further examination. The Agency would 
appreciate a mention of this request in the report to accompany the 
presentation slides and requests that this letter be printed in full in 
GAO's final report.

Thank you for the opportunity to comment on your study. If you have any 
further questions, feel free to contact me at 693-2400.

Sincerely,

Signed by: 

John L. Henshaw: 

[End of section]

FOOTNOTES

[1] Under the Occupational Safety and Health Act, OSHA is authorized to 
issue citations for violations of the act and propose penalties. 
Appeals are heard by the Occupational Safety and Health Review 
Commission, an independent federal agency, which has the authority to 
assess penalties. If a penalty is deemed proper, the commission 
considers a number of factors to determine the amount of the 
assessment. Citations and proposals that are not appealed become final 
decisions of the commission. 29 U.S.C.§§ 658, 659 (2000). Because most 
citations and proposed penalties are not appealed to the Commission, we 
refer only to OSHA's enforcement activities in this report.

[2] 29 U.S.C. § 666(j). 

[3] For example, according to the FIRM, good faith of an employer 
refers, among other things, to the extent to which an employer has 
implemented a safety and health program.

[4] For our research, final penalty is defined as an assessed penalty 
in a case that has been closed. 

[5] See U.S. General Accounting Office, OSHA Complaint Response 
Policies: OSHA Credits Its Complaint System with Conserving Agency 
Resources, but the System Still Warrants Improvement, GAO-04-658 
(Washington, D.C.: June 18, 2004).

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