Audit finds NC Dept of Commerce division not compliant with federal, state law

The N.C. Department of Commerce, Division of Workforce Solutions (DWS), didn’t design and implement procedures to ensure that federal funds tied to workforce programs were spent in accordance with program requirements and federal and state law. That’s according to an audit from the N.C. Office of State Auditor.

The program in question was the Workforce Innovation and Opportunity Act (WIOA), a law enacted in 2014 from a bill sponsored by Rep. Virginia Foxx, R-NC5, that replaced the previous Workforce Investment Act of 1998.

It’s designed to help job seekers access employment, education, training, and support services to succeed in the labor market and to match employers with the skilled workers they need to compete in the global economy. 

The audit found that there was an increased risk that local workforce development boards could have spent the funds for purposes other than allowable WIOA program activities meant to help job seekers and did not provide services that met the needs of program participants without timely detection and correction when necessary.

DWS received and spent approximately $158 million of WIOA funds from the U.S. Department of Labor (DOL) to administer four core WIOA programs: Adult Program, Dislocated Workers Program, Youth Program, and National Dislocated Worker Grants from July 1, 2020, through June 30, 2022, and reported providing services to approximately 21,000 participants.

DWS is responsible for the oversight of 23 local workforce development boards and the state administration of WIOA programs. 

Auditors reviewed relevant state and federal laws and regulations, the N.C. WIOA Unified State Plan for 2020-23, interviewed DWS personnel and reviewed DWS policies and procedures for processes on allocating and monitoring WIOA funds to local workforce development boards. 

They disclosed that due to the test nature and other limitations, the audit would not necessarily disclose all performance weaknesses or lack of compliance.

However, auditors found that DWS did not monitor $128 million (81%) of the $158 million local workforce development board spending. 

Specific findings that DWS didn’t perform include:

· Examine payment vouchers, local board accounting records, canceled checks, and other documentation to ensure WIOA funds were used for allowable purposes meant job seekers in need.

· Review the written procedures of local workforce development boards on reimbursing NCWorks Career Centers to determine if procedures were adequate to safeguard and manage funds to prevent fraud, waste, and abuse and to ensure WIOA funds were used on allowable activities. 

· Assess how local workforce development boards conduct oversight of NCWorks Career Centers, Youth activities, and Adult and Dislocated Worker employment and training activities. 

· Assess the local workforce development boards’ steps for reviewing performance and the procedures to address performance deficiencies as they occur. 

Auditors determined that DWS did not perform monitoring reviews on most local workforce development boards’ spending (81%). DWS only completed 12 of the 60 (20%) monitoring reviews required of the 23 local workforce development boards during Program Years 2020 and 2021. Specifically, DWS only completed 5 of 23 (22%) required monitoring reviews in Program Year 2020, and 7 of 37 (19%) required monitoring reviews in Program Year 2021. 

For example, DWS could not ensure that local workforce development boards spent $54 million on allowable activities for the Dislocated Worker Program that include items such as supplementing transportation costs for individuals who have been laid off; providing heat, shelter, food, and clothing; assisting survivors in locating missing family members; and helping with filing claims for Disaster Unemployment Assistance. 

DWS also could not ensure that participants obtained the correct education or training based on the participant’s assessment. 

DWS management told auditors it did not monitor 100% of local workforce development board activities and spending because limited staff hindered its ability to promptly schedule the annual reviews. They only had one employee trained to perform annual reviews. In previous years, they had three. Instead, DWS management stated that it performed annual reviews as scheduling permitted. Federal law requires DWS to monitor programs on an annual basis.

Auditors recommended DWS management should monitor local workforce development board activities and spending of WIOA grant funds in a timely fashion and do so timely to ensure that WIOA programs funds are being spent to help job seekers. Also, DWS management should allocate the necessary resources to monitor WIOA activities and grant funds in accordance with federal law. 

Although the Department of Commerce agreed with the findings, auditors say the response included misleading statements, minimizing the importance of the findings. 

The response from Commerce Secretary Machelle Baker Sanders’ office said, “Monitoring and oversight both of a fiscal and programmatic nature can take many forms and may include remote or desk monitoring.”  

Auditors say this statement is misleading because it implies the department wasn’t required to do monitoring during the pandemic when it was required to do so by federal law. The department did not perform on-site, remote, or desk monitoring reviews during the period covered by the audit. 

The Department of Commerce also stated there wasn’t any evidence that DWS failed to take prompt action where violations were identified. Auditors say this response clouds the issue presented in the audit report, which found that the department did not perform federally required monitoring reviews on $128 million (81%) of local workforce development board spending. 

Further, in its response, the department discussed several other activities it performed when it did not perform federally required monitoring reviews on $128 million (81%) of local workforce development board spending. While the activities performed by the department were necessary, the procedures were limited in their ability to ensure that federal funds were used correctly. 

The auditors concluded that the governor, legislators, and the citizens of North Carolina should consider these clarifications when evaluating the department’s response to this audit’s findings and recommendations. 

In her letter to Wood’s office, Sanders added that many of the audit’s recommendations have already been implemented or will be implemented.

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