State of Texas - Employment Security Program; Real Property Issues Related
to Federal Equity Properties
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Margin: Cost Issues Related to Federal Equity in Real Property
Some State Employment Security Agency (SESA) local offices in which DOL has
Federal equity are no longer being used 100 percent for the states' employment
security program -- unemployment insurance (UI) and employment service (ES). Some
"one-stop centers" (one-stops) mandated by the Workforce Investment Act (WIA) are
beginning to collocate with UI/ES offices in existing SESA local offices, thereby
reducing the UI and ES programs' occupancy in these buildings to less than 100
percent. Because DOL retains equity in some SESA local offices, the OIG performed a
limited procedure review of SESA real property issues in the State of Texas.
The WIA allows one-stops to use UI/ES Federal equity property for WIA purposes as
long as the UI or ES program has a presence in the property. When the WIA one-stops
occupy space in these properties, the one-stops must pay their fair share of the costs,
whether this is only operations and maintenance (O&M) costs for fully amortized
property, or WIA's fair share of the costs for property which is not fully amortized.
OIG audit report, "U.S. Department of Labor Equity in SESA Real Property," (06-97-056-03-325, issued September 30, 1997) reported that as of September 30, 1996, 47 of
the 53 SESAs had $380 million in Federal equity (at cost basis) in 458 properties. Also,
21 SESAs were continuing to amortize up to another $61 million on 132 of these 458
properties. Since our 1997 report, some states have disposed of, or are planning to
dispose of Federal equity properties. In our opinion, the issues noted below have a
nationwide impact which ETA should address through establishment of national policy.
ISSUES AND RECOMMENDATIONS
Issue 1: Do shared facility agreements between the Texas Workforce Commission
(TWC - the State of Texas SESA)) and the local Workforce Investment Boards (Board)
for one-stops require the one-stop to pay more than O&M costs when the properties'
costs have not been fully amortized against UI/ES grant funds?
Recommendations: ETA instruct the TWC to immediately revise the shared facility
agreements, effective July 1, 2001, for properties that are still being amortized. TWC
should charge the one-stops their pro rata share for office space amortization plus O&M
costs.
ETA should immediately issue national policy to address this issue because, otherwise,
the UI and ES programs nationwide will probably incur unallowable costs.
Issue 2: Do shared facility agreements between TWC and the Board require the one-stops to pay more than O&M costs when the property is a lease/purchase property, with
TWC as the lessee obtaining title and DOL accruing equity rights when the lease is paid
off?
Recommendation: ETA instruct the TWC to continue with their arrangement that
requires one-stops to pay their full share of the lease cost and when the leases are paid
off document DOL equity in the properties.
ETA should also immediately issue national policy to also address this issue to protect
the potential Federal equity in lease/purchase properties nationally.
Issue 3: Can a local Board which is not a one-stop occupy rent-free space in an UI/ES
amortized property when TWC staff occupies only 2 percent of the property?
Recommendation: ETA request a legal opinion as to whether WIA, Section 193, is
broad enough to include any use in support of the one-stop delivery system or is it only
to be applied to the "use as a one-stop delivery center."
Issue 4: Can the States use the proceeds from sold Federal equity properties to obtain
ES and/or UI program properties regardless of the proportion of the acquisition costs of
the sold property each program funded.
Recommendation: ETA request a legal opinion as to whether "same program" referred
to in 29 CFR 97.32(c)(1) is broad enough to allow the states to reinvest Federal equity
real property sales proceeds in any employment security property regardless of the
properties' original funding source (ES or UI).
TWC officials agree with our recommendations. On June 21, 2001, we requested ETA
respond to the recommendations by July 16, 2001. ETA has not yet responded.
(Management Letter Report No. 06-01-003-03-325; issued Sept. xx, 2001)
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