U.S. Department of Labor
Office of Inspector General

Audit Report

WELFARE-TO-WORK
COMPETITIVE GRANTS
POSTAWARD SURVEY RESULTS

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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.

Report Title:  Welfare-to-Work Competitive Grants Postaward Survey Results

Report Number:  05-99-008-03-315

Issue Date:  March 24, 1999

The Balanced Budget Act of 1997 authorized the Secretary of Labor to provide Welfare-to-Work (WtW) grants to states and local communities to move hard-to- employ welfare recipients into unsubsidized jobs and economic self-sufficiency.  The Act authorized $3 billion for WtW grants in fiscal years 1998 and 1999.  Of this amount, 25 percent, or $711.5 million, will be awarded through a competitive grant process.  The first round of $199 million (announced on May 27, 1998) was awarded to 51 competitive grant recipients.  The Employment and Training Administration (ETA) administers the WtW program at the Federal level.

Additional Policy and Technical Assistance Will Help Achieve
WTW Legislative Intent and Improve Program Administration

We performed an early assessment of program implementation for 35 grants awarded during the first round of WtW competition.  We found that the grantees reviewed possessed the capability to adequately deliver their WtW competitive grant programs.  However, we have developed findings and identified issues in these areas of concern:  financial management, policies and procedures and programmatic compliance.
 

Summary Matrix of Findings

Financial Management Policies and Procedures Programmatic Compliance
Finding 1 Finding 2 Finding 3 Finding 4 Finding 5 Finding 6
Inadequate Internal Controls Over Cost Limitations Incomplete/ Inadequate Management Information Systems Inadequate Internal Controls Over Financial Reporting Lack of Formal Agreement with TANF Agencies Lack of Formal Eligibility Procedures  Lack of Written Policies and Procedures Potential Violations of the Fair Labor Standards Act Non-compliance with the "Work- First" Requirement Start-up Costs and Venture Capital Appears Improper Single Unit Billings Circumvent Administrative Cost Limitations
22 11 16 14 12 27 3 5 2 1
63% 31% 46% 40% 34% 77% 9% 14% 6% 3%

The Summary Matrix of Findings depicts the:  (1) area of concern, (2) finding number in the audit report, (3) specific issue(s) within each finding, (4) number of grantees (out of 35) associated with each issue, and (5) percentage of grantees (out of 35) associated with each issue.

We believe that immediate attention to the issues identified during our audit is critical to successful WtW program implementation.  Compliance with the Fair Labor Standards Act (FLSA), adherence to the WtW "work-first" requirement, use of WtW funds for business start-up operations/venture capital, and allowability of single unit price billings are the programmatic compliance issues we identified.  In addition, there must be a way to ensure that adequate internal controls govern grantee financial and management information systems, and grantee policies and procedures.  Further, because these issues also pertain to the formula program--a
program three times the size of the competitive grant set-aside program--the potential impact of our findings could be magnified.  We believe that action should be taken to provide definitive guidance to achieve WtW legislative intent and improve program administration.

To improve the administration of the Welfare-to-Work competitive grants, we
recommended that the Assistant Secretary for Employment and Training:

ETA generally agreed with our findings and recommendations.  The Assistant Secretary for Employment and Training was pleased with our overall assessment that the grantees we reviewed possess the capability to deliver their WtW programs.  He also stated that the postaward surveys were helpful in identifying issues needing attention, such as the use of WtW funds for start-up costs and venture capital.  As a result of this issue surfacing during our audit, the ETA regional office initiated an action which resulted in one of the WtW grantees being
directed to terminate its inappropriate contracts and reprogram approximately $3.5 million into new projects that meet WtW requirements.

We concur with the corrective actions being planned and consider all of our recommendations to be resolved, but not closed, pending implementation of corrective action plans, with two exceptions.  The exceptions are the recommendations to:  (1) include FLSA wage provisions in the grant solicitations and approved grant agreements, and (2) define "work-first" requirements.

On the "work-first" issue, ETA disagreed with our assertion that their policy guidance suggests that the number of work hours a grantee establishes should be consistent with local TANF work requirements.  However, the OIG will continue to emphasize the need to clarify requirements with specific policy guidance and instructions to fully define WtW's "work-first" requirement and to incorporate into program guidance a suggested number of work hours as the basis for meeting the "work-first" criteria.

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