Workforce Investment Act
Interim Report on Status of Spending and States' Available Funds Gao ID: GAO-02-1074 September 5, 2002The Workforce Investment Act (WIA) of 1998 made sweeping changes to federal employment and training programs. The act sought to unify previously fragmented programs and create a more comprehensive workforce investment system by bringing together most federally funded employment and training services into a single service delivery system known as the one-stop center system. The administration has twice proposed reducing the program's budget, citing the large amounts of unexpended funds that states carried over from the prior year. State and local workforce officials, however, have requested more funding in light of current economic conditions. GAO found that the Department of Labor lacks accurate information on states' WIA spending because of reporting inconsistencies--all states do not report expenditures or commitments in the same way. To determine how states manage their spending, Labor has established its own spending benchmarks, using them to access whether states are on track with their spending, to target technical assistance, and to formulate budget requests. Several factors affect when expenditures occur or are reported. State officials said that cumbersome processes to get spending approval, lengthy contract procurement procedures, and untimely billing by key service providers, especially community colleges, all delayed the timing of expenditures, sometimes by as much as 8 months.
GAO-02-1074, Workforce Investment Act: Interim Report on Status of Spending and States' Available Funds
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Report to Congressional Requesters:
United States General Accounting Office:
GAO:
September 2002:
Workforce Investment act:
Interim Report on Status of Spending and States‘ Available Funds:
Workforce Investment Act:
GAO-02-1074:
Contents:
Letter:
Appendix I: Overview of Congressional Briefing:
Appendix II: Nine Selected States:
Appendix III: List of States that Received Letters from Labor:
Related GAO Products:
Letter:
September 5, 2002:
The Honorable Edward M. Kennedy
Chairman, Committee on Health, Education
Labor and Pensions
United States Senate:
The Honorable Howard P. ’Buck“ McKeon
Chairman, Subcommittee on 21st Century Competitiveness
Committee on Education and the Workforce
House of Representatives:
With the enactment of the Workforce Investment Act of 1998 (WIA), the
Congress made sweeping changes to federal employment and training
programs. WIA sought to unify previously fragmented programs and create
a more comprehensive workforce investment system by bringing together
most federally funded employment and training services into a single
service delivery system known as the one-stop center system. In July
2002, most states had just completed their second full year of
implementation. With a program year 2002[Footnote 1] authorization of
about $3.6 billion, WIA serves the nation‘s adults, dislocated workers,
and youth. Twice the administration has proposed reducing the program‘s
budget--proposing a $359 million reduction for fiscal year 2002 and
$343 million in 2003. In both cases, the administration has cited
states‘ large amounts of unexpended funds carried over from the prior
year. However, state and local workforce officials have expressed a
need for more funding in light of current economic conditions.
To more fully assess whether the Department of Labor‘s spending
information is a true reflection of states‘ available funds, you asked
us to determine (1) whether Labor has accurate information on states‘
WIA spending, (2) what Labor does to determine how states are managing
their WIA spending, and (3) what affects states‘ WIA expenditure rates.
To respond to these questions, we analyzed the most recent available
spending data from Labor and the 50 states. We also interviewed state
workforce officials in nine states and local officials in at least one
area in seven of the states, along with officials at Labor
headquarters, five regions, and four national associations. In
selecting the states, we focused primarily on those with the larger WIA
allocations. These states were geographically dispersed, included
states with single and multiple workforce areas, and represented a
range of expenditure rates and experience levels in implementing WIA.
In selecting local areas, we chose from among the largest local areas
in the state. We conducted our work from April to August 2002 in
accordance with generally accepted government auditing standards.
On August 15 and 22, 2002, we briefed your staffs on the results of our
analysis. This report formally conveys the information provided during
those briefings.
In summary, we found that Labor does not have accurate information on
states‘ WIA spending due to reporting inconsistencies--all states do
not report expenditures or commitments in the same way. Lacking
accurate information on funds that have been committed by the states
and local areas, Labor overestimates the funds that states have
available to spend. Even if expenditures are understated, however,
Labor‘s data show that WIA funds are being spent within the authorized
3-year timeframe. In fact, as of March 31, 2002, states had spent
essentially all of their program year 1999 funds within the 3 years
allowed, and 83 percent of their program year 2000 funds in under 2
years.
To determine how states manage their spending, Labor has established
its own spending benchmarks, using them to assess whether states are on
track with their spending, to target technical assistance, and to
formulate budget requests. However, some state officials told us they
did not understand why Labor assessed spending based on these annual
benchmarks when states had three years in which to spend their funds.
Moreover, the benchmarks were often not communicated to the states. In
addition, some state officials remained confused by some of the
financial reporting requirements because Labor‘s guidance and
assistance has not been clear and definitive.
Several factors affect when expenditures occur or are reported. State
officials told us that cumbersome processes to get approval to spend
funds, lengthy contract procurement procedures, and untimely billing by
key services providers, especially community colleges, all delayed the
timing of expenditures, sometimes by as much as 3 to 8 months.
Fluctuations in funding levels also affected many states‘ and local
areas‘ willingness to commit funds for the long term and inhibited
their ability to plan comprehensive workforce investment systems.
Finally, funds held by the state for statewide activities and for
responding to mass layoffs and plant closings are often spent at a
slower rate, causing overall expenditures to appear lower. To overcome
some of these factors, some states and local areas are implementing
such strategies as frequent monitoring and recapturing of unspent funds
from one local area to another, requiring expedited billing as part of
contract specifications, and initiating the procurement process before
the receipt of funds so that contracts are in place by the time funds
become available.
In conclusion, it appears that states are spending their funds within
the timeframe allowed under WIA - in fact, nationwide, many states are
spending far faster than the 3 years the law allows. Because Labor
lacks reliable data on obligations, it uses expenditure data to gauge
budgetary need. In doing so, Labor fails to take into account longer
term commitments made to customers and service providers, and
underestimates budgetary need. In addition, states we visited told us
that they want to spend their funds wisely and manage spending
judiciously, and they are seeking help and guidance from Labor.
We provided a draft of this briefing to officials at Labor for their
technical review and incorporated their comments where appropriate.
We are sending copies of this report to relevant congressional
committees and other interested parties and will make copies available
to others upon request. In addition, the report will be available at no
charge on the GAO Web site at http://www.gao.gov. If you or your staff
have any questions about this report, please contact me or Dianne Blank
at (202) 512-7215. Meeta Sharma, Kim Reniero, Rebecca Woiwode, Bill
Keller, and Patrick DiBattista also made key contributions to this
report.
Sigurd R. Nilsen
Director, Education, Workforce,
and Income Security Issues:
Signed by Sigurd R. Nilsen:
[End of section]
Appendix I: Overview of Congressional Briefing:
[See PDF for image]
[End of section]
Appendix II: Nine Selected States:
[See PDF for image]
[End of section]
Appendix III: List of States that Received Letters from Labor:
[End of section]
Related GAO Products:
Workforce Investment Act: States and Localities Increasingly Coordinate
Services for TANF Clients, but Better Information Needed on Effective
Approaches. GAO-02-696. Washington, D.C.: July 3, 2002.
Workforce Investment Act: Coordination of TANF Services Through One-
Stops Has Increased Despite Challenges. GAO-02-739T. Washington, D.C.:
May 16, 2002.
Workforce Investment Act: Youth Provisions Promote New Service
Strategies, but Additional Guidance Would Enhance Program Development.
GAO-02-413. Washington, D.C.: Apr. 5, 2002.
Workforce Investment Act: Coordination between TANF Programs and One-
Stop Centers Is Increasing, but Challenges Remain. GAO-02-500T.
Washington, D.C.: Mar. 12, 2002.
Workforce Investment Act: Better Guidance and Revised Funding Formula
Would Enhance Dislocated Worker Program. GAO-02-274. Washington, D.C.:
Feb. 11, 2002.
Workforce Investment Act: Improvements Needed in Performance Measures
to Provide a More Accurate Picture of WIA‘s Effectiveness. GAO-02-275.
Washington, D.C.: Feb. 1, 2002.
Workforce Investment Act: New Requirements Create Need for More
Guidance. GAO-02-94T. Washington, D.C.: Oct. 4, 2001.
Workforce Investment Act: Better Guidance Needed to Address Concerns
Over New Requirements. GAO-02-72. Washington, D.C.: Oct. 4, 2001.
FOOTNOTES:
[1] A program year begins July 1 and ends June 30.
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