This is the accessible text file for GAO report number GAO-02-1074 entitled 'Workforce Investment Act: Interim Report on Status of Spending and States' Available Funds' which was released on September 05, 2002. This text file was formatted by the U.S. General Accounting Office (GAO) to be accessible to users with visual impairments, as part of a longer term project to improve GAO products’ accessibility. Every attempt has been made to maintain the structural and data integrity of the original printed product. Accessibility features, such as text descriptions of tables, consecutively numbered footnotes placed at the end of the file, and the text of agency comment letters, are provided but may not exactly duplicate the presentation or format of the printed version. The portable document format (PDF) file is an exact electronic replica of the printed version. We welcome your feedback. Please E-mail your comments regarding the contents or accessibility features of this document to Webmaster@gao.gov. 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. GAO’s Mission: The General Accounting Office, the investigative arm of Congress, exists to support Congress in meeting its constitutional responsibilities and to help improve the performance and accountability of the federal government for the American people. 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