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At the request of the New York Regional Administrator, Employment and Training Administration (ETA), we performed an audit of the New York State Department of Labor (NYSDOL) Job Training Partnership Act (JTPA) Title III program expenditures covering the period April 1, 1999 through June 30, 1999. The audit objectives were to determine the reason for the large increase in program expenditures during the last quarter of PY 1998, and if these costs were allowable.
NYSDOL was awarded $35,511,680 for PY 1998 under JTPA Title III, Governor’s Reserve funding after the 2 percent Workforce Investment Act (WIA) set aside. For the three quarters ending March 31, 1999, NYSDOL reported expenses of $7,526,048. Expenditures significantly rose in the fourth quarter of PY 1998 by $15,776,284 and expenditures were $23,302,332 for the year ended June 30, 1999.
NYSDOL transferred expenses from various cost centers to the JTPA Title III program to avoid recapture of PY 1998 allotments. As a result, expenditures reported on the Title III Worker Adjustment Formula Financial Report (WAFFR) for the year ended June 30, 1999, were overstated by $6,102,478.
- Personnel services were overstated by $5,023,129. Adjusting entries were made to transfer personnel service costs from other cost centers to the JTPA Title III program. NYSDOL officials did not have adequate documentation to support adjusting entries and stated that costs were transferred to increase JTPA Title III expenditures, and avoid recapture and reallotment procedures.
- Expenditures for the Labor Exchange (LEX) system were overstated by $1,079,349. NYSDOL allocated the preponderance of LEX system costs to JTPA Title III program before June 30, 1999. Officials explained that the up-front charging of costs was to increase JTPA Title III expenditures to meet the 80 percent spending requirement.
We recommended that the Assistant Secretary for Employment and Training ensure that NYSDOL reduce June 30, 1999, reported JTPA Title III expenditures by $6,102,478 for personnel service and LEX system costs, and begin recapture and reallotment procedures if required. We also recommend that the Assistant Secretary require NYSDOL to allocate personnel service costs to appropriate programs based upon after-the-fact distribution of actual activity of each employee, and develop a basis for cost distribution of the LEX system based upon relative benefits received.
NYSDOL responded to our draft report on August 15, 2000. NYSDOL disagreed with the findings and recommended reduction of $6,102,478 as presented in the draft report. In its response, NYSDOL stated it has provided documentation to support both the personnel service and LEX system adjusting entries. Moreover, NYSDOL disagreed that adjustments were made to avoid recapture and reallotment procedures.
On three separate occasions, including the entrance conference
signaling the beginning of the audit, NYSDOL representatives stated that
costs were transferred to the Title III program to avoid losing program
funds. While a portion of personnel service and the LEX system costs may
be allocable to the JTPA Title III program, it is NYSDOL’s responsibility
to adequately document that costs were allocated to a particular cost
category to the extent that benefits were received. The transfer of costs
from one grant to another should be made consistently among all programs
and should not be done for one grant to overcome fund deficiencies, or to
avoid restrictions imposed by law or terms of an award.
(Report No. 02-00-214-03-340, issued September 28,2000)
