SEKRI could lose government contracts

A Corbin-based non-profit company created to help severely disabled workers find employment could lose approximately $80 million in government contracts if it is not in compliance with federal regulations by early next year.
Federal regulators say Southeast Kentucky Rehabilitation Industries, Inc. (SEKRI) misrepresented the number of direct labor hours being worked by severely disabled employees in fiscal year 2005, and expects that the company will also be out of compliance with rules regarding the issue this year as well.
SEKRI participates in the Javits-Wagner-O’Day (JWOD) program – a federal law that awards contracts to organizations that hire a high percentage of disabled workers. Companies receiving JWOD contracts must have at least 75 percent of their direct labor hours worked by individuals with certified severe disabilities.
In March, SEKRI Executive Director Tom Fields maintained the company was in compliance with all JWOD regulations. In April, staff members from the Committee for the Purchase from People Who Are Blind or Severely Disabled visited SEKRI and determined that wasn’t true and that the company’s labor ratio was only about 55 percent for the first quarter of 2006, adding that SEKRI was out of compliance for all of fiscal year 2005. The Committee, whose members are appointed directly by The President, is in charge of oversight and enforcement of rules for all JWOD companies.
Bob Hartt, manager of Legislative Affairs and Program Outreach for The Committee, said he doesn’t think SEKRI executives purposefully fudged the numbers. Nevertheless, the company was placed on probation and representatives from SEKRI must go to Washington, D.C. next spring and convince Committee members not to remove the company from the program. Absent it’s government-backed JWOD contracts, SEKRI would likely be forced to layoff a significant portion of its workforce and close most of its manufacturing facilities, unless private sector work could be obtained to fill the void.
“There are all sorts of sanctions and conditions,” Harrt said. “The Committee takes it on a case-by-case basis on how much of a discrepancy there is and the circumstances surrounding it. That’s what we always try to look at when we are doing the compliance, to see what the problems are.”
While on probation, Hartt said The Committee would only consider new contracts for SEKRI if the new work would result in improvement in the company’s direct labor ratio.
According to compliance reports and memorandum obtained by the News Journal through the Freedom of Information Act, SEKRI had only $8.6 million in JWOD sales in 2001 and 371 certified severely disabled employees. By fiscal year 2005, that number had ballooned to $73.4 million in sales and, reportedly, 1,932 severely disabled employees at the company’s eight facilities. SEKRI specializes mainly in producing apparel for the U.S. Armed Forces.
Hartt said much of SEKRI’s compliance issues could be blamed in lax record-keeping and recent purchase of a new production facility in Paris, Kentucky. JWOD regulations require a strict accounting of an employees’ disability and why it precludes them from competitive employment in private industry.
During a March site visit, regulators found that out of 234 employee files reviewed, only 14 had adequate documentation regarding the extent and nature of supposed disabilities. At the time, the company had 755 total severely disabled employees and 295 non-severely disabled. In an after-visit report, officials questioned how employees hired by a temporary employment agency, VOLT, were counted in reports regarding labor hours worked, and said that employees no longer even working for SEKRI were sometimes counted.
In a follow up memorandum dated April 19, regulators reviewed employee files from all SEKRI facilities with varying results. The Corbin plan had only nine files out of 50 that were inadequate, but the Paris facility had only six out of 50 files that were acceptable. The other plants varied from 40 to 60 percent acceptable.
The report also raised some suspicion about the files reviewed.
“It became apparent that in moving files for our review that the stacks we were told were OK contained files that belonged in other stacks and this condition was most frequently seen in the Cumberland files,” the memo states. “It was also obvious that SEKRI personnel had been rushing to accomplish as much as possible before our arrival.”
SEKRI had been told in June 2005 of its inadequate documentation procedures. According to the memo, one company official said he misunderstood what changes needed to be made in order to be in compliance.
In another report, Committee members expressed concern about the number of SEKRI employees declared as “severely disabled” because they were diagnosed with anxiety or depression.
“Southeast Kentucky may well have a higher incidence of these disorders, but they must guard themselves from equating the simple presence of depression or anxiety as evidence of the individual being severely disabled and not competitively employable,” wrote Louis R. Bartalot, Director of Analysis and Evaluation.
Baralot was also worried the company might conduct a mass screening of the entire workforce for “active or latent anxiety and/or depression as a means to meeting the severely disabled requirement.”
SEKRI executives refused to be interviewed regarding recent compliance issues, accepting only written questions instead. The News Journal submitted numerous questions to the company regarding compliance issues, current JWOD sales, employment numbers, up-to-date labor ratios, etc. None of the questions were answered.
In a two-page letter, SEKRI Public Relations Director Veronica Reid said The Committee recently “revised the definition of documentation procedures as it relates to the determination of a severe disability.”
“SEKRI has made exceptional progress toward meeting the new JWOD requirements for evaluation and documentation. The organization will meet the goal of maintaining a workforce of 75 percent of direct labor employees with severe disabilities within the deadline set forth by The Committee for Purchase.”
Hartt said The Committee regulations regarding documentation of severely disabled employees “have been pretty clear and the same for many years.”
He added, though, that The Committee is currently working on a document to help clarify similar issues among its non-profit agencies.