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ABBREVIATIONS                                                                                       iii
 

EXECUTIVE SUMMARY                                                                             1
 

BACKGROUND                                                                                           3
 

SCOPE AND OBJECTIVES                                                                         5
 

ASSISTANT INSPECTOR GENERAL FOR AUDIT'S REPORT                     6
 

AUDIT RESULTS                                                                                       8

1.  While the number of participants enrolled decreased significantly
from PY 95 to PY 96, the program costs increased significantly;
yet, the 2-year average cost per participant appears reasonable                                                                                         9

2.  The number of enrollees completing training was significantly lower
than planned, but the claimed number of OJT participants placed in
unsubsidized employment was closer to the planned placement rate                                                                                                   10

3.  Most participants in our audit sample showed some attachment
to the labor market after program completion/termination                                                                       12

Schedule I: Schedule of Costs Claimed                                                       15
 

Appendix I: The Arc's Response to Our Draft Report                                   16
 
 

Arc             Association for Retarded Citizens
 

CBO           Community Based Organization
 

DOL           U.S. Department of Labor
 

ETA            Employment and Training Administration
 

NETP          National Employment Training Program
 

OJT            On-the-job Training
 

SESA          State Employment Security Agency

We conducted a financial, compliance, and performance audit of the noncompetitive Title IV Disability Program Grant No. F-5563-5-00-80-60 between the U.S. Department of Labor (DOL), Employment and Training Administration (ETA), and The Arc of the United States for the period July 1, 1995, through June 30, 1997. The grant was administered by The Arc's National Employment Training Program (NETP) division. The purpose of the grant was to provide on-the-job training (OJT) opportunities to individuals with IQS of 70 or below to enhance their opportunities to attach to the labor market.

Our audit objectives were to determine if grant costs were allowable and properly reported and to evaluate the grant program's outcomes.
 

Financial and compliance results

Our draft report included two financial related administrative findings. Based on information provided at our audit exit conference and additional information provided in response to the draft report, we removed the findings from this final report. We found the grantee's costs to be allowable and supported.
 

Performance results

Generally, we found that the cost per enrollee for our 2-year audit period appeared reasonable based on the program outcomes. While the percentage of participants who completed training was significantly less than planned, according to The Arc's records, of those enrollees for whom OJT employers received some reimbursement of costs, 76 percent were placed in unsubsidized employment. While the number of participants completing training is an important output and, assuredly, contributes to the participants' ability to maintain a job with the OJT employer, in our opinion, post-program attachment to the labor market is a more important measure of grant accomplishment.

Our audit showed that the vast majority of the participants we evaluated obtained unsubsidized employment, had significant earnings, and showed some attachment to the labor market after completing or terminating from the OJT program.

While we did not perform independent confirmation of all The Arc's reported placements, our independent analysis of post-program wages for a sample of 300 participants supports The Arc's claimed 76 percent placement rate for participants for whom the OJT employer received some reimbursement for OJT costs. In fact, we found 81 percent of our sample had some wages in one or more of the three quarters following the quarter they completed or were terminated from the OJT program. Furthermore, 36 percent of those participants with post program earnings had wages with one or more non-OJT employers, 47 percent had wages in all three quarters, and 81 percent had wages in at least two quarters.

Grantee's Response

The Arc's response to the draft report was appreciative of the message in the audit report about the positive results of their grant performance. The grantee's response is included as Appendix I in this report.
 
 

The Arc (formerly the Association for Retarded Citizens of the United States) was incorporated in 1950 as a private nonprofit organization devoted to promoting the welfare of people with mental retardation. It is the nation's largest volunteer organization solely devoted to improving the lives of all children and adults with mental retardation and their families through programs of research, treatment, job development, and training services and public awareness. It now consists of 1,200 state and local chapters representing nearly 140,000 members. The Arc also fosters research and education regarding the prevention of mental retardation in infants and young children. The Arc is committed to securing for all people with mental retardation the opportunity to choose and realize their goals of where and how they learn, live, work and play. The Arc is further committed to reducing the incidence and limiting the consequence of mental retardation through education, research, advocacy and the support of families, friends and community.

The U.S. Department of Labor has been entering into grant agreements with The Arc since 1966 to promote OJT opportunities for individuals with mental retardation. The Arc is currently being funded by the U.S.Department of Labor, U.S Department of Education, U.S. Department of Justice, the Corporation for National Service, endowments, and other private funds.

Our audit was limited to the DOL Title IV Disability Program Grant No. F-5563-5-00-80-60. The grant period was July 1, 1995, through June 30, 1998. During our 2-year audit period July 1, 1995, through June 30, 1997, The Arc received annual grant funding of $1,135,000.

Details of this Title IV Disability Program are as follows:
 

                            Modification         Grant/Modification         Costs Through
  Term                     Number                 Amount                         6/30/97
 

7/1/95 - 6/30/96                                  $1,135,060                     $ 828,317
7/1/96 - 6/30/97          1                      1,135,060                    1,139,338
Total                                                  2,270,120                  $1,967,655

The Title IV Disability Program grant funds were provided to The Arc's National Employment and Training Program (NETP) to annually enroll 900 individuals with mental retardation into OJT opportunities throughout the U.S. and its territories. The grant annually provides that a minimum of 765 participants (85 percent) will successfully complete their training and enter into unsubsidized employment. The Arc conducts the major operations of this program from its official headquarters in Arlington, TX, and three regional offices: Washington, DC; Arlington, TX; and Las Vegas, NV.
 
 

• $1,261 per enrollee (900) and
• $1,483 per OJT completer/placement into unsubsidized employment (765).

We conducted a financial, compliance, and performance audit of the noncompetitive Title IV Disability Program Grant No. F-5563-5-00-80-60 between the U.S. Department of Labor (DOL), Employment and Training Administration (ETA), and The Arc of the United States for the period July 1, 1995, through June 30, 1997. The grant was administered by The Arc's National Employment Training Program (NETP) division. The purpose of the grant was to provide on-the-job training (OJT) opportunities to individuals with IQS of 70 or below to enhance their opportunities to attach to the labor market.
 

Our audit objectives were to determine if grant costs were allowable and properly reported and to evaluate the grant program's outcomes.
 
 

We have audited the accompanying schedules of costs claimed ⁽¹⁾ (Schedule 1) of The Arc of the United States for the period July 1, 1995, through June 30, 1997, under JTPA Title IV grant number F-5563-5-00-80-60. Costs claimed are the responsibility of The Arc's management. Our responsibility is to express an opinion on the schedule of costs claimed based on our audit.

We conducted our audit in accordance with generally accepted auditing standards and the Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the costs claimed are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the schedules. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall schedule presentation. We believe that our audit provides a reasonable basis for our opinion.

The schedules of costs claimed were prepared in conformity with the accounting practices prescribed or permitted by the U.S. Department of Labor and Office of Management and Budget (OMB) Circular A-122, the cost principles applicable to non-profit organizations for determining costs claimed under Job Training Partnership Act grants.

In our opinion, the schedule of costs claimed referred to above presents fairly, in all material respects, the allowable incurred costs for the periods July 1, 1995, through June 30, 1997, in conformity with the aforementioned basis of accounting.

1. We compiled the Schedules of Costs Claimed from the Arc's grant documents (for amounts available), the Financial Status Reports (for total expenditures), and financial records (for expenses by cost category).

As part of obtaining reasonable assurance about whether the Arcs' schedule of costs claimed are free of material misstatement, we performed limited tests of The Arc's compliance with certain provisions of laws, regulations, and grants, noncompliance with which could have a direct and material effect on the determination of amounts claimed. However, providing an opinion on compliance with those provisions was not an objective of our audit, and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be reported under Government Auditing Standards.
 

Internal Controls

In planning and performing our audit, we considered The Arc's internal control structure over financial reporting in order to determine our auditing procedures for the purpose of expressing our opinion on the schedule of costs claimed and not to provide assurance on the internal controls over financial reporting. Our consideration of the internal control structures would not necessarily disclose all matters in the internal control structures that might be material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their functions. We noted no matters involving the internal controls over financial reporting and its operations that we considered material weaknesses.
 

This report is intended solely for the information and use of the U.S. Department of Labor and the Arc's management and should not be used for any other purpose. This restriction is not intended to limit the distribution of this report which, when issued, is a matter of public record.
 

This report is dated July 15, 1998, which represents the last day of our fieldwork.
 
 

JOHN J. GETEK
Assistant Inspector General
    for Audit
July 15, 1998
 
 

Generally, we found that the cost per enrollee for our 2-year audit period appeared reasonable based on the program outcomes even though costs were significantly higher in PY 96 than PY 95 while performance was significantly down.

While the number of participants who completed the 320 hours of OJT was significantly less than planned, based on The Arc's participant dBASE file, 76 percent of those enrollees for whom OJT employers received some reimbursement of costs were placed in unsubsidized employment.

While we did not perform independent confirmation of these reported placements, we did evaluate post-program wage files for a sample of 300 participants for whom OJT employers received some reimbursement of costs and found that 81 percent had post-program earnings in one or more of the three quarters following their completion/termination from the program. Many of these participants had post-program wages with employers other than the OJT employer.

In evaluating The Arc's grant program outcomes we performed two different analyses.

• We analyzed The Arc's participant dBASE file of all participants enrolled under the grant during the period July 1, 1995, through June 30, 1997, to determine those participants who 1) incurred OJT costs, 2) completed training, and, 3) were placed in unsubsidized employment. We also analyzed The Arc's grant costs for the 2-year audit period to assess costs per participant served.
  
  
• We analyzed the post-program earnings for a sample of 300 participants to evaluate participants' attachment to the job market after completion/termination from the OJT program.

 

With a decrease in participants served from PY 95 to PY 96, one would expect the grant costs to also decrease; yet, costs were significantly higher in PY 96. The following table displays information from The Arc's general ledgers (expenditures) and participants' dBASE files for the grant we reviewed. The cost per enrollee is an OIG computation.
 
 

PY	Participants		Expenditures			Costs Per Enrollee
	Enroll	Compl(2)	OJT	Other	Total	OJT	Other	Total
95	990	469	$233,051	$595,266	$ 828,317	$235	$601	$836
96	853	383(3)	347,091	792,247	1,139,338	$407	$929	$1,336
Total	1,843	852	$580,142	$1,387,513	$1,967,655
Avg						$315	$753	$1,068

As the above table shows, only 29 percent of the 2-year grant costs was spent on OJT wage costs ($580,142); the remaining 71 percent was spent on other grant costs ($1,387,513).

Also, the table shows that while the number of enrollees decreased by 14 percent from PY 95 to PY 96 (990 to 853):

• OJT wage reimbursements increased by 49 percent ($235,051 to $347,091),
• OJT costs per enrollee increased by 73 percent ($235 to $410),
• other grant costs increased by 33 percent ($595,266 to $792,247),
• total grant costs increased by 37 percent ($828,317 to $1,139,338), and
• cost per enrollee increased by 60 percent ($836 to $1,336).

2. We considered completers as any enrollee who completed 320 hours of training -- the OJT contract period -- per The Arc's dBASE participant file.

3. As of November 1997, The Arc's dBASE file shows 336 completers (320 hours of training) and 98 participants enrolled during PY 96 without a termination date. To estimate the number of completers for PY 96 enrollees we calculated the percentage of completers to terminated participants [336 / (853 - 98)] and applied the resulting percentage (45%) to all enrollees (853). The result is an estimate of 383 completers.

2. The number of enrollees completing training was significantly lower than planned, but the number of OJT participants claimed placed in unsubsidized employment was closer to the planned placement rate.
 

While the number of participants who completed training was significantly less than planned, according to The Arc's records, 76 percent of those enrollees for whom OJT employers received some reimbursement of costs were placed in unsubsidized employment. While the number of participants completing training is an important output and, assuredly, contributes to the participants' ability to maintain a job with the OJT employer, in our opinion, post-program attachment to the labor market is a more important measure.
 

The grant plan was to annually enroll 900 individuals of which a minimum of 765 participants (85 percent) were to successfully complete training and enter into unsubsidized employment.
 

Our analysis of The Arc's participant dBASE file disclosed the following:
 
 
 

PY	Enrollees		Completers	Annual Costs	Cost per Enrollee
	Total	With  OJT  Costs	Completed  Training		Total	With  OJT  Cost	Completers
95	990	736	469	$828,317	$836	$1,125	$1,176
96	853	627(4)	383	$1,139,338	$1,336	$1,818	$2,974
Total	1,843	1,363	852	$1,967,655
Avg					$1,068	$1,143	$2,309

Based on the annual budgets for our audit period, the planned average cost per participant was:

• $1,261 per enrollee (900); and
• $1,483 per OJT completer/placement into unsubsidized employment (765).

 

 
4. As of November 1997, The Arc's dBASE file shows 555 of the 853 enrollees with OJT costs; however, 98 participants enrolled during PY 96 did not have a termination date (all 98 showed no OJT wages). To estimate the number of PY 96 enrollees who incurred OJT costs, we calculated the percentage of terminated enrollees with OJT costs [555 / (853 - 98)] and applied the resulting percentage (73.5%) to all enrollees (853). The result is an estimate of 627 enrollees who incurred OJT costs.

The cost ($1,754) per individual reported by The Arc as being in unsubsidized employment (1,122) exceeded the plan ($1,483) by only 18 percent as opposed to the 56 percent per OJT completer. While the reported 64 percent placement rate (1,122 placements/1,744 terminations) is significantly lower than planned, assuming that The Arc's participant dBASE file relating to OJT costs and placement information is accurate, we believe a more accurate measure of placements is 76 percent. The following discussion illustrates our conclusion.

The Arc enrolled 1,843 participants during PYs 95 and 96, of which 99 had not been reported as terminated on the participant dBASE file as of November 1998. Consequently, 1,744 participants were terminated. Of these terminated participants, the OJT employers received some reimbursement of costs for only 1,291 participants. In our opinion, these 1,291 are the truly valid OJT participants against which placements should be measured. Of these 1,291 participants, The Arc reported 975 (76 percent) of them as placed in unsubsidized employment.

While we did not attempt to independently validate this total number of claimed placements, we did attempt to validate placements -- through post-program wage earnings -- of 300 of these participants. From this sample we found a significant post-program attachment to the labor market, including many participants who had wages with other than their OJT employer. (See finding 3.)
 
 

Our analysis of post-program wages for a sample of 300 participants supports The Arc's claimed 76 percent placement rate for participants for whom the OJT employer received some reimbursement for OJT costs. In fact, we found that 81 percent of our sample had some wages in one or more of the three quarters following the quarter they completed or were terminated from the OJT program. Furthermore, 36 percent of those participants with post-program earnings had wages with one or more non-OJT employers.

As stated earlier, in our opinion, attachment to the labor market is a more important outcome than the number of participants who completed the 320 hours of OJT. Nevertheless, we found that of the participants who had post-program wages, 68 percent completed the training. Likewise, of the participants who did not have post-program earnings, 63 percent did not complete training. Therefore, OJT training completion plays a major role in whether or not participants remained attached to the labor market after termination from the program.

We also found that of those who had post-program earnings in one or more of the three quarters we examined, 47 percent had wages in all three quarters, and 81 percent had wages in at least two quarters.

To evaluate the program outcomes from this grant (i.e., enrollees attachment to the labor market after program termination), we selected 300 participants enrolled under the grant in 21 states for which we had ready-access to those states' State Employment Security Agency (SESA) wage files. These 300 participants represented all enrollees in these 21 states who were terminated from the program between October 1, 1996, and June 30, 1997, and for whom The Arc incurred OJT wage reimbursement costs. We chose this time period because we had access to active SESA wage files for the period October 1, 1996, through March 31, 1998. Therefore, we had a minimum of three quarters of post-program wage files available for all 300 participants (i.e., participants who terminated as late as June 30, 1997, had wage files available for the period July 1, 1997, through March 31, 1998).

We analyzed the NETP dBASE file for these 300 participants and evaluated these individuals' earnings records for the quarter of program termination/completion and the three quarters following completion/termination from the OJT to assess the participants' to the labor market.

We wanted to determine how many enrollees:

• completed the OJT (320 hours), and

 
• earned wages (how much and for how many quarters) in the three quarters after OJT completion/termination.

• 186 (62 percent) completed OJT (320 hours).
  
  
• 114 (38 percent) did not complete OJT.

 
• 57 (19 percent) did not have any earnings in the three quarters immediately following the quarter of their OJT completion/termination.

 
• 21 (37 percent) completed OJT.
  
  
• 36 (63 percent) did not complete OJT.

• 243 (81 percent) earned wages in one of more of the three quarters immediately following the quarter of OJT completion/termination.

 
• 165 (68 percent) completed OJT.

• 78 (32 percent) did not complete OJT.

• 155 had wages with only their OJT employer.

• 22 with wages in one quarter
  
  
• 46 with wages in two quarters
  
  
• 87 with wages in three quarters

• 38 had wages with only non-OJT employer(s).
• 13 with wages in one quarter
  
  
• 14 with wages in two quarters
  
  
• 11 with wages in three quarters

• 50 had wages with OJT and other employer(s).

• Average total wages per participant (based on all 300 participants, including the 57 who had no earnings) for the three quarters immediately following the quarter of OJT completion/termination were:
  
  
• $2,143 of wages with OJT employer,
  
  
• $559 of wages with non-OJT employer(s), and
  
  
• $2,702 of wages with all employers.

Annualized, the three quarters of average earnings approximate $3,600.

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