Welfare-to-Work - Second Round

U.S. Department of Labor
Office of Inspector General

Audit Report

Second Round Welfare-to-Work Survey Identified Areas Needing Additional Policy and Technical Assistance to Achieve WtW Legislative Intent and Improve Program Administration

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Report Title:   Second Round Welfare-to-Work Survey Identified Areas Needing
                        Additional Policy and Technical Assistance to Achieve WtW
                        Legislative Intent and Improve Program Administration

Report Number: 05-99-020-03-386

Issue Date: September 20, 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. Competitive grants are designed to encourage communities to develop innovative, results-oriented ways to help long-term welfare recipients gain a secure foothold in the labor market. After awarding $199 million to 51 first round grant recipients in May 1998, the Employment and Training Administration (ETA) in November 1998, awarded an additional $273 million to 75 second round grantees in 44 states.

Overall, we found that the 12 grantees surveyed possessed the capability to adequately deliver their WtW competitive grant programs, except for the findings noted in our report. It is not surprising to us that the vulnerabilities found in the second round survey mirror the financial management, policy and procedures vulnerabilities found in the 35 grantees surveyed during the first round of competitive grants. In both cases, our postaward visits to mainly non-traditional Department of Labor (DOL) grantees were made shortly after their grant awards and before substantive actions were initiated by them to establish an infrastructure for grant operations. For instance, in the first round surveys, we reported that only 17 of the 35 grantees (49 percent) were operational at the time of our review. Likewise, our survey of second round grantees found only 5 of the 12 grantees (42 percent) were operational.

In both rounds, our work alerted the grantees and ETA to the risks associated with impaired operational systems. Finding 1 compares findings of the second round survey with identical findings from the first round. The charts below shows the critical issues in findings 1 through 4, the number of grantees, and the percentage of the 12 second round grantees related to each finding.

Grantee Finding 1

Inadequate Internal Controls Over Cost Limitations

Inadequate Management Information Systems

Inadequate Internal Controls Over Financial Reporting

Lack of Formal Agreements with TANF Agencies

Lack of Formal Eligibility Procedures

Lack of Written Policies and Procedures
Grants Need to Comply with Work First and FLSA Requirements

Total Second Round Grantees Per Finding 8 4 5 5 6 9 3

Percent of 12 Second Round Grantees 67% 33% 42% 42% 50% 75% 25%

Total First Round Grantees Per Finding 22 11 16 14 12 27 6

Percent of 35 First Round Grantees 63% 31% 46% 40% 34% 77% 17%

Financial Management				Policies and Procedures		Programmatic Compliance
Finding 2				Finding 3		Finding 4
Cost Allocation Plans for Multi-funded Grantees	Cash Management Issues & Other Fiscal Integrity Concerns	Inadequate Time and Attendance Systems	Reporting Program Costs without a Basis	Lack of Formal Agreements with Subrecipients and Service Providers	Lack of Written Oversight and Monitoring Procedures	Grants Include Evaluation Studies Which May Not Be An Allowable Activity	Other Grant Provisions Need to Be Modified	Start-up Activities to Provide Child Care and Transportation Services Are Not Fully Developed
8	7	5	7	4	3	3	7	2
67%	58%	42%	58%	33%	25%	25%	58%	17%

We believe ETA should reinforce its efforts to monitor grantee plans and program implementation schedules to ensure the most efficient and effective use of WtW funds, and to secure compliance with program requirements. Third round competitive grantees should benefit from the lessons learned by grantees in rounds one and two.

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

obtain approval of cost allocation plans to allocate common costs and expenditures to the 70/30 percent cost categories, as well as to reportable program activities;
follow prescribed cash management requirements;
comply with time and attendance requirements in the Office of Management and Budget (OMB) circulars;
report expenditure allocations only after establishing a proper basis for the allocation;
develop formal agreements with subrecipients and service providers, and establish written oversight and monitoring procedures to ensure effective and efficient program operations;
submit requests for grant modification to ensure up-to-date and accurate implementation schedules, budget summaries and other provisions, including the removal of unallowable evaluation studies;
comply with prohibitions against using Federal funds for construction; and
establish timely implementation of child care and transportation services to ensure that current WtW grant participants benefit from these costs.

The Assistant Secretary for Employment and Training was in agreement overall with our findings, which were reinforced by issues identified during ETA's interactions with the grantees. The Assistant Secretary also provided an update on some of the technical assistance efforts being undertaken partly in response to issues identified during our postaward surveys. The efforts included issuing policy guidance and corrective actions for new issues, reemphasizing compliance with current policies, following up on specific issues and inappropriate evaluation components to ensure corrective actions, and development of a Technical Assistance Guide that will be the basis for WtW financial management training.

We concur with the Agency's ongoing and planned corrective actions.

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Grantee	Finding 1
Grantee	Inadequate Internal Controls Over Cost Limitations	Inadequate Management Information Systems	Inadequate Internal Controls Over Financial Reporting	Lack of Formal Agreements with TANF Agencies	Lack of Formal Eligibility Procedures	Lack of Written Policies and Procedures	Grants Need to Comply with Work First and FLSA Requirements
Total Second Round Grantees Per Finding	8	4	5	5	6	9	3
Percent of 12 Second Round Grantees	67%	33%	42%	42%	50%	75%	25%
Total First Round Grantees Per Finding	22	11	16	14	12	27	6
Percent of 35 First Round Grantees	63%	31%	46%	40%	34%	77%	17%