This document is a summary of a printed document. The printed document may contain charts and photographs which are not reproduced in this electronic version. If you require the printed version of this document, contact the Freedom of Information Act Officer, Office of Inspector General, U.S. Department of Labor, Washington, DC 20210, or call (202) 693-5116.
This report reflects the findings of the Office of Inspector General at the time that the audit report was issued. More current information may be available as a result of the resolution of this audit by the Department of Labor program agency and the auditee. For further information concerning the resolution of this report's findings, please contact the program agency.
OIG has started using Acrobat 4.0 to prepare it's latest Audit reports. If you are experiencing problems downloading some of the larger PDF files, you may want to download the latest version of the Adobe Acrobat Reader by clicking the link provided below.
The Workforce Investment Act (WIA) program will supersede the Job Training Partnership Act (JTPA) and become effective July 1, 2000. The administrative cost limitation for local areas under WIA is 10 percent, which is a significant reduction from similar JTPA programs, which were allowed to operate at 20 percent. The WIA administrative cost limitation for Indian and Native American (INA) grantees will be established by grant agreement. Under JTPA, INA grantees were limited to 20 percent.
In a collaborative effort, the Employment and Training Administration (ETA) and the OIG undertook a special survey of selected JTPA recipients to assist ETA in finalizing the regulations governing administrative costs under the new Workforce Investment Act (WIA). In accordance with a Memorandum of Understanding between the two agencies, ETA provided funding and overall direction for the project, and the OIG engaged an independent accounting firm to apply agreed-upon procedures designed to meet the project objectives.
The purpose of the project was to evaluate the potential impact of WIA’s administrative cost provisions by reclassifying and restating Job Training Partnership Act (JTPA) Program Year 1997 costs using WIA regulatory definitions. The survey was carried out at 13 JTPA recipients, representing 10 service delivery areas and 3 Section 401 Native American grantees, which ETA selected from a pool of entities that volunteered for the special review.
Briefly, notwithstanding the unknown effect of WIA requirements (including designation of local areas, establishment of a one-stop delivery system and other provisions) on program operators’ administrative costs, the survey found that:
Only two of the SDAs, as currently configured and operating under JTPA, would be in compliance with the WIA administrative cost limitation (10 percent of allocation), even after the cost classification requirements and definitions contained in the WIA interim final rule were applied.
Application of the WIA interim final rule cost classification requirements and definitions had a negligible effect on the classification of administrative versus program costs for the surveyed entities.
For the majority of the surveyed entities, program officials stated they intended to seek a waiver of the WIA statutory administrative cost limitation.
Similarly, a majority stated they intended to change their mode of operations in order to comply with the statutory cost limitation.
From the OIG’s perspective, these final two points raise concerns about possible unintended consequences of the WIA administrative cost limitation. First, ETA may find itself inundated with requests from local areas for waivers of the statutory 10 percent limitation. Efforts to treat all such requests equitably could potentially result in a majority of local areas operating under waivers, in which case "the exception" (waivers) would effectively become more common than "the rule" (the 10 percent limit). Second, while none of the program officials in the survey indicated they intended to change how they contract in order to comply with the administrative cost limitation, the OIG believes there is a risk that the WIA administrative funding and definitions may affect how local areas deliver services.
To assist ETA in developing the final
rule on administrative costs, the independent accountants’ report detailed
suggestions and comments made by grantee officials with respect to the WIA
administrative cost limitations and definitions.
Report No.
20-99-006-03-390
