Workforce Investment Act

U.S. Department of Labor
Office of Inspector General
Office of Audit

WORKFORCE INVESTMENT ACT ADMINISTRATIVE COSTS

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At ETA's request, we arranged for independent public accountants to assess whether the percentage charged to administrative costs would have been lowered if the program had been operated using ETA's proposed revised definition for WIA administrative costs. Using the revision, which had not been officially circulated or reviewed outside the Department of Labor, the administrative costs for four Job Training Partnership Act (JTPA) Service Delivery Areas (SDAs) averaged 8.39 percent of their total allocations. Under WIA, administrative costs are limited to 10 percent of total program expenditures. This is a significant reduction from similar JTPA programs that were allowed to operate at 20 percent.

In an earlier OIG audit entitled Impact of Workforce Investment Act Administrative Cost Limitations on JTPA Recipients (OA Report No. 20- 99-006-03-390, issued September 24, 1999), we reclassified the program year 1997 administrative costs of 13 selected JTPA recipients using the Interim Final Rule definition (interim definition) of administration, found at 20 CFR 667.220. For the 10 JTPA SDAs included in the earlier audit, the administrative costs averaged 16.38 percent of their total allocation, which exceeds the percentage allowed under WIA. Only two of the JTPA recipients would have been in compliance with WIA administrative cost limitation using the interim definition. Because it appeared that the proposed revised definition would permit programs to operate well within the 10 percent limitation, we recommended that the cost category definitions be further amended to classify as administration all salaries and related costs of WIA executive directors at the state, direct recipient, and One-Stop operator levels. We believe such "front office" costs are inherently administrative and should be classified as such.

ETA is considering the follow-up results in finalizing the regulations governing the classification of WIA administrative costs.
(OA Report No. 20-00-001-03-390, issued December 30, 1999).

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