[Senate Hearing 113-454]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 113-454
 

    JOB CORPS BUDGET SHORTFALL: SAFEGUARDING WORKFORCE TRAINING FOR
                      AMERICA'S DISCONNECTED YOUTH

=======================================================================

                                HEARING

                               BEFORE THE

            SUBCOMMITTEE ON EMPLOYMENT AND WORKPLACE SAFETY

                                 OF THE

                    COMMITTEE ON HEALTH, EDUCATION,
                          LABOR, AND PENSIONS

                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                                   ON

    EXAMINING JOB CORPS BUDGET SHORTFALL, FOCUSING ON SAFEGUARDING
          WORKFORCE TRAINING FOR AMERICA'S DISCONNECTED YOUTH

                               __________

                             MARCH 12, 2013

                               __________

 Printed for the use of the Committee on Health, Education, Labor, and
                                Pensions




      Available via the World Wide Web: http://www.gpo.gov/fdsys/

                         U.S. GOVERNMENT PRINTING OFFICE

80-092 PDF                       WASHINGTON : 2014
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Printing
  Office, Internet: bookstore.gpo.gov. Phone: toll free (866) 512-1800;
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC,
                          Washington, DC 20402-0001


          COMMITTEE ON HEALTH, EDUCATION, LABOR, AND PENSIONS

                       TOM HARKIN, Iowa, Chairman

BARBARA A. MIKULSKI, Maryland            LAMAR ALEXANDER, Tennessee
PATTY MURRAY, Washington                 MICHAEL B. ENZI, Wyoming
BERNARD SANDERS (I), Vermont             RICHARD BURR, North Carolina
ROBERT P. CASEY, JR., Pennsylvania       JOHNNY ISAKSON, Georgia
KAY R. HAGAN, North Carolina             RAND PAUL, Kentucky
AL FRANKEN, Minnesota                    ORRIN G. HATCH, Utah
MICHAEL F. BENNET, Colorado              PAT ROBERTS, Kansas
SHELDON WHITEHOUSE, Rhode Island         LISA MURKOWSKI, Alaska
TAMMY BALDWIN, Wisconsin                 MARK KIRK, Illinois
CHRISTOPHER S. MURPHY, Connecticut       TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts


           Pamela J. Smith, Staff Director and Chief Counsel

                 Lauren McFerran, Deputy Staff Director

               David P. Cleary, Republican Staff Director

                               __________

            Subcommittee on Employment and Workplace Safety

                ROBERT P. CASEY, Pennsylvania, Chairman

PATTY MURRAY, Washington             JOHNNY ISAKSON, Georgia
AL FRANKEN, Minnesota                RAND PAUL, Kentucky
MICHAEL F. BENNET, Colorado          ORRIN G. HATCH, Utah
SHELDON WHITEHOUSE, Rhode Island     TIM SCOTT, South Carolina
TAMMY BALDWIN, Wisconsin             LAMAR ALEXANDER, Tennessee (ex
TOM HARKIN, Iowa (ex officio)        officio)


                       Larry Smar, Staff Director

                Tommy Nguyen, Republican Staff Director

                                  (ii)


                         C O N T E N T S

                               __________

                               STATEMENTS

                        TUESDAY, MARCH 12, 2013

                                                                   Page

                           Committee Members

Casey, Hon. Robert P., Jr., Chairman, Subcommittee on Employment
  and Workplace Safety, opening statement........................     1
Isakson, Hon. Johnny, a U.S. Senator from the State of Georgia...     3
Hatch, Hon. Orrin G., a U.S. Senator from the State of Utah......     5
Murphy, Christopher, S. a U.S. Senator from the State of
  Connecticut....................................................    23

                               Witnesses

Oates, Jane, Assistant Secretary of Employment and Training
  Administration, U.S. Department of Labor, Washington, DC.......     6
    Prepared statement...........................................     7
Dixon, Antoine L., National Director of Job Corps for the U.S.
  Forest Service, Golden, CO.....................................    10
    Prepared statement...........................................    11
Lewis, Elliot P., Assistant Inspector General for Audit, U.S.
  Department of Labor, Washington, DC............................    13
    Prepared statement...........................................    14

                          ADDITIONAL MATERIAL

Statements, articles, publications, letters, etc.:
    Brian Kennedy, U.S. Department of Labor, letter..............    35
    Response by Jane Oates to questions of:
        Senator Casey............................................    38
        Senator Isakson..........................................    41
        Senator Murray...........................................    42
        Senator Murkowski........................................    45
    Response by Elliot P. Lewis to questions of:
        Senator Casey............................................    47
        Senator Murray...........................................    50

                                 (iii)



 
    JOB CORPS BUDGET SHORTFALL: SAFEGUARDING WORKFORCE TRAINING FOR
                      AMERICA'S DISCONNECTED YOUTH

                        TUESDAY, MARCH 12, 2013

                                       U.S. Senate,
           Subcommittee on Employment and Workplace Safety,
       Committee on Health, Education, Labor, and Pensions,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 2:35 p.m., in
room SD-430, Dirksen Senate Office Building, Hon. Robert Casey,
chairman of the subcommittee, presiding.
    Present: Senators Casey, Murphy, Isakson, and Hatch.

                   Opening Statement of Senator Casey

    Senator Casey. Good afternoon. Our hearing will come to
order. I'm sorry that I'm running late and didn't have a chance
to greet our witnesses inside the anteroom. But we'll maybe try
to catch up afterwards. I want to thank everyone for being
here, and I appreciate the work that's been done by a number of
folks on both my staff and Senator Isakson's staff to make this
hearing possible. And, of course, I appreciate the appearance
of our witnesses.
    We're here to discuss a critically important program and
some fundamental problems with it and what we can do to resolve
that. This is the first hearing of this subcommittee since the
time that I was named chair, and I want to thank Senator
Isakson for his work to make sure that we do this work on the
subcommittee in concert with one another and with our staffs.
    I know he's always worked that way with me and with others,
and I especially appreciate it today, not only in the context
of this subcommittee hearing, but more broadly. So I want to
commend and salute that effort that he's made.
    I start today as well with three groups of Americans that I
and I'm sure this entire room is most concerned about when it
comes to Job Corps. And that is, in particular, and first and
foremost, taxpayers who, through their tax dollars, pay for
everything we do here, pay for the Department of Labor, pay for
the operations of the executive branch and the legislative
branch. All that we see here is a result of tax dollars. So
each of us, I think, has a special obligation, especially those
of us who are elected or appointed officials, to focus on those
dollars and what taxpayers get for those dollars and doing
everything we can to meet the reasonable expectations that when
they send their tax dollars to us, those dollars will be well
spent and that we'll achieve some measure of a result,
especially in a program like this.
    Second, we think, of course, today about the students that
are impacted, mostly in a positive way, sometimes in an adverse
way, I think, with respect to the enrollment freeze which is in
place due to the shortfalls that have occurred. A lot of
students will be affected if that freeze were to endure over
time. So we're very concerned about what happens to those
students and the results that we hope for them as they focus on
their careers and a job and contributing to our economy.
    Then, finally, the individuals who are employed through the
Job Corps and all the people that have done such good work.
When we consider the program, which has been in place for
decades, we have to consider what the purpose of that program
is. I noticed in the testimony today there are various
descriptions of what this program means to a student, what it
means to the economy, and what it means for our country. I
won't recite all those. I might refer to them later.
    Basically, what this program is all about is helping young
people to surmount or overcome difficult barriers in their
lives, the barrier of poverty or the barrier of a lack of
education or not the right training, in other words, helping to
put young people, who face particularly difficult
circumstances, on the right path. And, of course, a lot of that
has to do with the skills that they can have by way of the
training and the focus of the program.
    I was struck by something that was sent to us regarding the
University City District in Philadelphia, which is an example
of what Job Corps means to at least one community in my home
State of Pennsylvania. We have four sites, one of the four
being Philadelphia.
    The University City District, which partners with
Philadelphia Job Corps, said as follows with regard to--and I
saw this myself, some of the training that's done to prepare
young people to go into the field of long-term care so they can
be certified nurses aids or direct care workers, the numbers
for which are staggering. We need tens and tens of thousands
that we don't have right now.
    They said, according to one program director,

          ``Job Corps candidates stand out. They are poised,
        polished, and professional. They approach our programs,
        our training, and the opportunities afforded to them by
        our employers with the utmost respect and from a
        posture of willing learners, that makes them a pleasure
        to have in the program.''

    I think that same description, the kind of young people
that are positively benefited by Job Corps, could be recited in
connection with sites across the country.
    So what is the problem? The problem is a shortfall, which
amounted to $39 million in program year 2011, and then $61.5
million in program year 2012. And that led to a number of
actions which culminated in an enrollment freeze, which is one
of the main reasons people on both sides of the aisle in the
Senate have been concerned about this, have written to the
Department, and one of the reasons we're gathered here today.
    The Department of Labor at various times has acknowledged
the problem and has sent us information about what they've done
in response to the problem. But here's among the more
disturbing conclusions, that at one point the Department of
Labor identified, ``serious weaknesses in the program's
financial management processes.'' It goes on to detail how
there weren't enough internal controls, how you control
spending, how you monitor it, how you report it, and then,
ultimately, how you can project spending over time.
    At one level, I want to be very clear in terms of my own
point of view. This is very basic budgeting that every single
public agency has to do every day of the week and has to do it
well if you're going to fulfill your obligation to those
taxpayers that I spoke of earlier. And if you fall short of
that, you have some explaining to do, and that's among the many
questions that we'll pose today.
    The freeze itself--here's the impact by one measurement.
Each week of the freeze will affect 1,000 students. That alone
should give us pause, and that alone should compel us to do
something about fixing this problem.
    We have today three witnesses with us. First, in order of
presentation, will be Jane Oates. Jane is the Assistant
Secretary of the Employment and Training Administration.
    Jane, it's good to have you here.
    Second is Antoine Dixon, who is the National Director of
Job Corps for the U.S. Forest Service, which has 28 Job Corps
centers. And then, third, Elliot Lewis, Assistant Inspector
General for Audit at the Department of Labor.
    It's good to have all three of you here.
    But I will keep coming back to this basic issue from which
flows a lot of tough questions, questions to which we need
answers to. We'll get them today. If we don't get them today,
we'll get them somewhere. Today is just the beginning, the very
beginning, of an inquiry that I will undertake and I'm sure
many others of the House and the Senate will as well.
    But it is, in the end, about basic budgeting and making
sure you can account for public dollars that are spent, and you
can make accurate or reasonably accurate projections about
spending within the context of a fiscal year or, in this case,
within the context of a program year. The other thing we're
going to talk about today is, in light of the problems and in
light of the current status of this program, what, if any,
accountability has been brought to bear in terms of those who
have been engaged in this work, and I think that's a very
important set of questions.
    I'll stop here, because I want to get to our witnesses and
give some time for our Ranking Member, Senator Isakson, to make
his opening remarks.

                  Opening Statement of Senator Isakson

    Senator Isakson. Well, thank you, Chairman Casey, and thank
you for the kind remarks. We welcome you as chairman of the
subcommittee, and I really appreciate your commitment to
oversight which is precisely what this hearing is all about.
    I welcome all our guests in the audience and, particularly,
those from Atlanta and Brunswick, GA, who are with Job Corps
and came up for this hearing today. I welcome all our
witnesses, especially Jane Oates, who I had the privilege of
working with in 1999--well, the year 2000 and 2001 on No Child
Left Behind was when we first met, and I've enjoyed that
relationship ever since. I'm a big believer in the Job Corps
program, a big supporter of the program, and I'm hopeful that
we'll get some answers to some troubling questions, some of
which have been referred to by Chairman Casey.
    The Job Corps opened its doors in 1965 and since that time
has provided needed services to underprivileged youth,
including high school diplomas, GEDs, vocational and trade
skills, and counseling to become productive members of the
workforce. During times like these with such high sustained,
long-term unemployment, programs like Job Corps become critical
to help thousands of young people get the education and
training needed to get off and stay off unemployment.
    In February, the Bureau of Statistics published the
following numbers. For young people age 16 to 24, 16.3 percent
were unemployed. And I would challenge everybody to think that
number is probably doubled when you come to underemployment.
Nearly 30 percent of African-Americans in the same group were
unemployed, and those age groups make up 51 percent of the
typical Job Corps students. So we have a lot of people to serve
and we're not serving as many as we should.
    The President recently went on tour touting his plans to
create a new middle-class jobs program. I think he needs to
take a good look at Job Corps and existing ones like this
program today. In 2011, I was troubled to learn that the Job
Corps was facing a $39 million funding shortfall. The
Department of Labor and its contracting partners were able to
agree on a cost-savings measure in addition to transferring of
funds from other DOL accounts, which meant to have minimal
impact on Job Corps students, enrollment, and employees.
    Unfortunately, this was a very short-lived victory. The
funding shortfall at Job Corps not only followed the program
into its program year, but also nearly doubled to $61.5
million. The Department has responded to this by first deciding
to reduce the number of onboard strength slots at seven of the
Nation's largest Corps centers, one of which happens to be in
Albany, GA, which I am very familiar with and have visited,
only to rescind this plan several days later.
    The Department then decided that in order to address the
shortfall it would have to suspend enrollments of new students
for the remainder of the year until June 30. Not only is this
an unfortunate disservice to the target population served by
Job Corps, but this will also result in the layoff of thousands
of Job Corps contractors nationwide.
    The Department's mismanagement of Job Corps could
ultimately cost as many as 30,000 struggling youth the
opportunity to better their future and potentially 10,000 staff
jobs supporting these students. This one-two punch by the
Department on our economy is not what the economy deserves and
not what we should have.
    What is most discouraging to me is that after
correspondence with the Department earlier this year, I remain
unsatisfied that the Department understands the causes of the
shortfall that originated in 2011 and appeared to continue
through 2012. Both accounting measures and management systems
have failed to assure the permanent stability of this program
whose purpose is to help rebuild lives and educate people.
    Further, I remain disappointed that the Department is still
unsure of how much is saved through the suspension of new
enrollments. I am sure that there were other alternatives
designed to help address the shortfall, and I look forward to
hearing from the Department as to why those were not used or
seriously considered.
    I look forward to having an open discussion with our
witnesses today as we look for ways to fix Job Corps fiscal
management issues. As long as the Department's mismanagement
fails to fill the leadership void on this issue, thousands of
young adults will be losing out on the opportunity of their
lifetime to change their lives for the better. During tough
times like these, we cannot and we must not afford to leave
them stranded.
    With that, Mr. Chairman, I yield back and look forward to
the testimony and questions of our witnesses.
    Senator Casey. Thank you, Senator Isakson.
    Senator Hatch.

                       Statement of Senator Hatch

    Senator Hatch. Thank you, Mr. Chairman. I appreciate you
holding this hearing. But I'm extremely disappointed by this
shocking shortfall, lack of oversight, and poor decisionmaking
within the national Job Corps program that has resulted in
hurting our young people by denying them opportunities.
    Let me just share a quick story about a young man named
Jeremiah who has dyslexia and other learning challenges. He had
gotten involved in drugs, and he joined the Job Corps because
he wanted to stay out of trouble. He completed his high school
diploma on the Clearfield Job Corps campus and was placed in
the graphic design trade with a career pathway in digital arts
and design.
    Jeremiah went on to enroll at Weber State University in
Ogden, UT. He graduated with a bachelor of arts degree and is
now working as a full-fledged web designer. Jeremiah called
just the other day to say how Job Corps changed his life. He
continues giving back to other youth in after-school reading
programs, a value he said he learned while studying at the
Clearfield Job Corps Center.
    I remember each of my visits to the Clearfield Job Corps in
my State of Utah where over 1,000 students are acquiring trades
and often, for the first time in their lives, are looking
forward with hope to the future. The 200 youth at the Weber
Basin Job Corps Civilian Conservation Center in Ogden, UT,
shared their enthusiasm for designating their careers to
working in the outdoors.
    The Management and Training Corporation, or MTC, which is
headquartered in my State of Utah, operates 18 centers
nationwide and holds some contracts on three additional
centers. They are contracted to serve 9,666 students during
this contract year. But with the imposition of the student
freezes, they will only be able to serve 4,867. Now, they have
assured me that they are ready to work with ETA to find cost
savings and are flummoxed by the delays in initiating cost-
saving measures.
    Let me just say that I remember back in the Reagan
administration, Stockman, who was the head of OMB at the time,
wanted to knock Job Corps out. I happened to be chairman of
this committee at that time, and I just said, ``That isn't
going to happen.'' And it didn't happen, and Reagan became an
enthusiastic supporter of Job Corps. We had to fight for it,
but it was saved at that particular time, and it has done an
awful lot of good work for thousands and thousands of young
people over the years. That was back in 1981.
    I appreciate you folks appearing here today, and I just
hope we can straighten this ship out. Naturally, I look forward
to hearing your testimony here today, and, hopefully, we can
find some way of really straightening the mess out.
    Thank you, Mr. Chairman.
    Senator Casey. Senator Hatch, thank you.
    We'll start with the testimony. What we can do in terms of
time is to try to keep your opening remarks to 5 minutes, and
each of your statements will be made a part of the record. So
we'll start with Assistant Secretary Oates.

STATEMENT OF JANE OATES, ASSISTANT SECRETARY OF EMPLOYMENT AND
TRAINING ADMINISTRATION, U.S. DEPARTMENT OF LABOR, WASHINGTON,
                               DC

    Ms. Oates. Good afternoon, Chairman Casey, Ranking Member
Isakson, Senator Hatch, and Senator Murphy. Thank you for the
opportunity to discuss the budgetary challenges currently faced
by Job Corps. As Assistant Secretary for the Employment and
Training Administration, I am responsible for Job Corps, and I
take your concerns very seriously. I, too, love this program
and have seen how it has changed lives.
    Today I'm here to discuss the causes of the current
situation and share what we're doing to address the issues and
how we're working to strengthen the Job Corps program. Job
Corps provides a unique opportunity for disadvantaged young
people age 16 to 24 in both residential and non-residential
settings, offering both academic and vocational classes,
allowing students to earn industry-recognized credentials, and
when it does its job well, as it usually does, get them a good
job, get them into the military, or get them into post-
secondary education.
    ETA administers Job Corps through 147 contracts for the
program's 125 centers and their educational and vocational
programs. Private contractors operate 97 centers, and my
friends at Agriculture run the remaining 28.
    Several factors contributed to the financial problems Job
Corps faced in program year 2011, including growth in student-
related expenditures and serious weaknesses in Job Corps'
financial management processes. For example, Job Corps opened
three new centers in program year 2010 and 2011 on a delayed
funding schedule, and we did not appropriately plan for the
increased cost resulting from opening those centers when we
did. In other words, we used the money and didn't realize in
subsequent years that we wouldn't have enough when the centers
were fully operational at full onboard strength.
    As a result of those efforts, in program year 2011, 77.3
percent of Job Corps students were able to earn 39,000
credentials in 157 program areas, reflecting a significant
increase from program year 2010, which means we were doing
better to improve the program, not realizing that we were
headed for this shortfall. Our targeting of industry-recognized
credentials meant that even in the worst economy in my
lifetime, our operators were able to put kids into good jobs.
    I think that the quality of the program is there, and we
need to make sure we're doing more on our end to ensure that
the program is sustainable by watching that fiscal spending in
a much better way. While these and other costs increased--by
the way, the credentialing project cost us about $13 million.
Some of that will be ongoing expenses, like taking assessments
for those industry-recognized credentials. Some, we think, will
be one-time costs, we hope, getting instructors and the
equipment up to industry-recognized standards.
    But while these and other costs increased during 2011, the
extent of Job Corps' fiscal difficulties really did go
unrecognized. This is largely because Job Corps lacked
appropriate program monitoring tools and control protocols
which, in turn, led to inadequate spending projections for the
operations account.
    Job Corps operates primarily through cost reimbursement
contracts, not fixed price contracts. Therefore, as long as a
cost is allowable and allocable, I have to pay those costs
whenever a vendor submits them. That means it's critically
important that my staff is professionally developed to the
point to make sure that vendors are timely in submitting their
costs due.
    I want to be clear at this point. There was no wrongdoing
by contractors, and I don't want to say anything that would
lead you to believe that. I want to be up front and say this
was inadequate staffing and monitoring on the part of the Job
Corps program and, therefore, on the part of ETA.
    To control costs in 2011, we implemented a variety of
administrative and programmatic changes. These included
negotiating across-the-board cost savings targets with each Job
Corps center and suspending enrollments for new students in the
month of June. We also implemented several initiatives to
strengthen and coordinate existing controls and create new
controls. And I'll be happy to answer any questions about that.
    Going into 2012, we knew we had a shortfall. We knew the
amount of the shortfall, and we started to take measures
immediately in July 2012 to, hopefully, make our obligations
align with our appropriation. We created a new Office of
Financial Administration with the position of a senior level
comptroller. That was the first time that ETA had a
comptroller, something that I'm sure business people on the
committee will find questionable.
    We eliminated a contract for accounting services within the
Job Corps operations account and replaced them with Federal
employees. We reduced our cost to USDA, our partner, and we
negotiated with contractors.
    Seeing that my time is up, my testimony is part of the
record, and I'll be happy to answer any questions on the
specifics of this. Thank you.
    [The prepared statement of Ms. Oates follows:]
                    Prepared Statement of Jane Oates
    Good afternoon, Chairman Casey, Ranking Member Isakson, and
distinguished members of the subcommittee. Thank you for this
opportunity to discuss the budgetary challenges currently faced by Job
Corps. As Assistant Secretary for the Employment and Training
Administration (ETA), I am responsible for the Job Corps program and
take your concerns very seriously. Today, I will offer some context for
the current situation, discuss some of the causes, share what we have
learned, what we are doing to address these issues, what we could have
done better, and how we are working to strengthen the Job Corps program
moving forward.
    Job Corps provides a unique opportunity for disadvantaged young
people to take control of and steer their lives in a positive
direction. Students ages 16 to 24 in both residential and non-
residential settings attend academic and vocational classes, earn
industry-recognized credentials, and learn critical life skills in
preparation for a good job, continued education or military service.
Job Corps has helped improve the lives of almost 1.5 million students
since the program began nearly five decades ago. Today's competitive
job market and unemployment rates among young adults ages 16 to 24 make
Job Corps more important than ever.
    ETA administers Job Corps through 147 contracts for the program's
125 centers and educational and vocational programs. Private
contractors operate 97 centers and the U.S. Department of Agriculture
(USDA) runs the remaining 28 centers.
    Although Job Corps has faced financial pressures, it experienced
particular problems in program year 2011. Several factors contributed
to the problems in program year 2011, including growth in expenditures,
such as student-related expenditures and those associated with the
opening of three new Job Corps centers in program year 2010 and program
year 2011, and serious weaknesses in Job Corps' financial management
processes that led to a failure to identify and adjust for rising costs
in a timely manner. In program year 2012, Job Corps is again
experiencing financial difficulties because the initial cost-savings
measures we took were not sufficient to allow the program to stay
within its appropriated amount without additional actions.
    Growth in expenditures during this period occurred in several ways.
For example, Job Corps opened three new centers in program year 2010
and program year 2011 on a delayed schedule. Funding that had been
provided to Job Corps to cover the costs of operating these centers in
prior years was no longer dedicated to these sites as a result of the
delays, and we did not appropriately plan for the increased costs
resulting from opening these centers when we did.
    Additionally, ETA invested approximately $13 million in program
year 2011 to turn Job Corps into a training program where students gain
the industry-recognized credentials they need to meet the demands of
the 21st century employer. In order to make the credentialing
initiative successful, there was substantial investment in one-time
costs, such as faculty training, books, accreditation, and other
industry-
related costs. As a result of these efforts, in program year 2011, 77.3
percent of Job Corps students earned over 39,000 credentials in 157
programs areas. This reflected a significant increase from program year
2010, in which 46.8 percent of students earned an industry-recognized
credential.
    While these and other costs increased during the course of program
year 2011, the extent of Job Corps' financial difficulties went
unrecognized. This is largely because Job Corps lacked appropriate
program monitoring tools and control protocols, including those to
sufficiently analyze contractual spending trends. In turn, this led to
inadequate spending projections for the Operations account.
Furthermore, Job Corps operates primarily through cost-reimbursement
contracts which require close, ongoing oversight by Job Corps in order
to manage or predict costs for future periods. The weaknesses in Job
Corps program monitoring tools and protocols combined with its heavy
reliance on cost-reimbursement contracts contributed to the challenges
we faced and continue to face in addressing these difficulties.
    As you know, Congress provided ETA with authority in program year
2011 to transfer up to $26.2 million in funds from the Job Corps
Construction, Rehabilitation and Acquisition account to the Operations
account. In April 2012, I concluded that Job Corps would need to
transfer this full amount in order to finish the program year within
the budget. At the end of May 2012, I notified the then-Secretary of
the need to transfer the funds. It also became apparent that this
transfer would not be sufficient to meet program year 2011 operating
needs.
    Thus, ETA obtained approval from the Office of Management and
Budget in June 2012 to transfer up to an additional $5.37 million from
the Training and Employment Services and State Unemployment Insurance
and Employment Service Operations accounts to the Job Corps Operations
account. The Department notified the Appropriations Committees of its
intent to transfer these funds. In the end, only $2.2 million of this
initial request was transferred to Job Corps' Operations account.
    In addition to two funding transfers in program year 2011, we
implemented a variety of programmatic changes to control costs. These
changes focused on non-mission critical administrative expenses to
ensure that student academic, career technical training, and post-
graduation placement activities were not affected. These included
negotiating across-the-board cost-savings targets with each Job Corps
center to de-obligate program year 2011 funds and suspending enrollment
for new students in the month of June, except for homeless youth. We
also conducted additional oversight on travel by requiring center
operators to report all bus and airfare travel directly to the national
office prior to arranging travel with ticketing agencies. This allowed
for real-time accounting of travel costs for the month of June. We also
required Job Corps center operators to submit their financial reports
every 3 days during the month of June.
    At the same time, we implemented several initiatives to strengthen
and coordinate existing controls and created new controls that where
appropriate, to track contractor expenditures and ensure adequate
funding throughout the rest of program year 2011. On May 22, 2012, the
Department established a Job Corps working group within DOL to provide
weekly oversight of the remediation efforts during the end of program
year 2011. In addition, in June 2012, then-Secretary Solis requested
that the Inspector General perform a comprehensive review of the Job
Corps financial control system. That review is ongoing and we look
forward to receiving the results.
    We understood at the outset of program year 2012 that we needed to
take measures to ensure that program obligations remained within Job
Corps' appropriated levels. Even before the program year started, we
began to develop a comprehensive plan for cost-cutting measures, which
we updated throughout the program year.
    Given our strong interest in not reducing student services and
minimizing disruption to the Job Corps program, we proceeded cautiously
in evaluating and implementing cost saving measures in program year
2012. In retrospect, it is clear that we did not act as quickly or
decisively as circumstances required.
    Although they ultimately were insufficient, we took several
significant steps throughout program year 2012 to gain better control
of Job Corps' expenses. For example, in August a newly created Office
of Financial Administration (OFA) within ETA, headed by a Senior
Executive Service-level Comptroller, began operating. OFA oversees the
now-centralized budget and financial operations of Job Corps and works
with ETA's Office of Contracts Management (OCM) to ensure that Job
Corps accounts in a more timely and accurate way for costs incurred in
its cost reimbursement contracts. After OFA began operating, we
developed initial targets for both savings and what we believed would
be a sufficient reserve for the Job Corps program. We also eliminated a
contract for accounting services within the Job Corps Operations
account, reduced USDA costs, and negotiated with contractors to
identify additional cost-savings measures. The added cooperation
between OFA and OCM has resulted in significant improvements in the
financial oversight of Job Corps and helped Job Corps identify
potential funding concerns at an earlier stage than last year.
    In September 2012, the then-Secretary approved several additional
measures for program year 2012: reducing new student biweekly stipend
and transition pay to graduates, suspending enrollments in late
November and December, centralizing student transportation costs, and
reducing select national academic support contracts and career
technical support contracts. In October 2012, we issued guidance
informing the Job Corps community that we would be suspending
enrollment from November 26 through December 31, 2012.
    Despite these cost-cutting measures, our analysis of data in
November showed that Job Corps would need to implement additional
savings because costs were again exceeding budgeted amounts. Therefore,
in December, we took additional steps, including eliminating the
student stipend for days when a Job Corps student is not present for
duty, which took effect immediately, and reducing the student clothing
stipend, effective January 1, 2013. We reduced Job Corps' national
media buy by $4 million for program year 2012. In mid-December, we
increased the student to teacher ratio from 15:1 to 18:1 in order to
save costs, while properly accounting for the special academic needs of
at-risk youth.
    In January 2013, we also issued guidance to reduce health care-
related costs, including by modifying the current health staffing
requirements, adjusting the hours for center physicians, dentists and
Training Employee Assistance Program specialists based on center usage,
and requiring applicants to provide a current record of immunizations
in order to eliminate duplicative care. We continued our work to cut
administrative costs. Among other things, we have issued a solicitation
that we anticipate will help Job Corps right-size its career technical
training programs and we are exploring the best way to centralize
utility and other procurements.
    As you may know, the Department has initiated a process to close a
small number of chronically low-performing Job Corps centers in program
year 2013. This process was initiated as part of a larger reform effort
to improve program outcomes and increase accountability. While we
expect some savings as a result of these closures, until we know which
centers will be closed, we will not be able to determine how much money
may be saved as a result.
    Notwithstanding these efforts to reduce costs for program year
2012, as of the beginning of January 2013 we continued to project
insufficient cost savings to remain within budgeted levels for the
program year. On January 18, 2013, Job Corps instructed all centers to
temporarily suspend outreach and admission activities, effective
January 28, except for runaway, homeless and foster care candidates.
The length of the suspension will be determined by the time it takes to
achieve the necessary savings. Among other things, we will need to
determine and maintain sustainable levels of enrollment and program
delivery going forward.
    The decision to temporarily freeze Job Corps enrollment nationwide
was extremely difficult. It came after we implemented many alternative
cost-savings measures, albeit insufficient ones. We also considered
other alternatives (e.g., an abbreviated program year) before deciding
to implement the temporary enrollment freeze, but ultimately rejected
these and other options because of their more harmful effect on the Job
Corps program and the students that it serves as well as the
insufficient savings we would have obtained. Our conclusion was that
the most certain and least detrimental savings Job Corps could achieve
for the remainder of program year 2012 was from the temporary
suspension of enrollment. Savings from this measure primarily will be
achieved through modifications to center operations and Outreach and
Admissions contracts. As those negotiations are currently ongoing, we
do not yet have final cost savings figures. We anticipate that the
results of these negotiations will be reductions in center expenses and
the costs for Outreach/Admissions contracts for program year 2012. We
will also achieve savings in student stipend and transportation costs.
    Notwithstanding the temporary enrollment suspension, as of March 1,
Job Corps continued to serve over 39,000 enrolled students--down from
44,268 that were enrolled on January 28. With the suspension of new
enrollments, Job Corps will be able to keep its commitment to students
who are already in the program.
    In closing, the Department deeply regrets the current situation
facing the Job Corps program. I personally take responsibility for not
acting more quickly to ensure that the program was operating within its
appropriated levels. The decision to temporarily suspend enrollment at
all centers is a balanced and efficient way to achieve the savings
needed to ensure we stay within our program year 2012 budget. We
recognize that a comprehensive review of the Job Corps program,
contracting, budget, and management is needed, and are undertaking such
a review. We are committed to improving and strengthening the Job Corps
program, and aligning it with its appropriated funding. I would like to
reiterate our priority of working with the committee and the contractor
community to place the Job Corps program on strong fiscal footing. I
continue to believe that Job Corps is an important program, and I would
note that Administrations from both parties have supported the Job
Corps program over many years because it provides needed training and
guidance to troubled youth. It is disheartening to report these
challenges, but I believe we can do better and we must. I appreciate
the opportunity to share information with you and I look forward to
your questions.

    Senator Casey. Thank you, Assistant Secretary Oates.
    Mr. Dixon.

 STATEMENT OF ANTOINE L. DIXON, NATIONAL DIRECTOR OF JOB CORPS
            FOR THE U.S. FOREST SERVICE, GOLDEN, CO

    Mr. Dixon. Chairman Casey, Ranking Member Isakson, Senator
Hatch, and Senator Murphy, thank you for the opportunity to
appear before you today regarding the financial situations
faced by Job Corps.
    Job Corps is a national education and training program
primarily administered by the Department of Labor. The Job
Corps Civilian Conservation Centers are operated on public land
under an interagency agreement between the Department of Labor
and the USDA Forest Service. The Forest Service currently
operates or administers all 28 of the Job Corps Civilian
Conservation Centers throughout the country in 18 States. The
Forest Service serves approximately 6,200 students per year
through the Job Corps program.
    Through the years, the Forest Service has learned that
hands-on training has strengthened the program and Job Corps
CCCs have given back to the communities and to the public
through community projects, natural resource work on national
forest system lands, maintaining public recreation areas, and
doing wild land firefighting. The Forest Service Job Corps
program is completely funded by the Department of Labor
appropriations. The Department of Labor provides funds
transfers on a quarterly basis to the Forest Service.
    In response to DOL's efforts to address the Job Corps
financial issues in program year 2011 and program year 2012,
the Forest Service implemented internal cost-saving measures as
well as all of the DOL mandated cost-saving measures. These
cuts have been made at all 28 of our Job Corps CCCs as well as
our national office to ensure the sustainability of the
program. The Forest Service efforts have contributed to Job
Corps saving over $10 million in program year 2011 and $16
million in program year 2012, which resulted in the Forest
Service receiving a budget in program year 2011 of $183
million, and in program year 2012 we received a budget of $180
million.
    In program year 2012, savings were obtained by
implementing, as I've mentioned, the DOL mandatory cost-saving
measures related to personnel; clothing allowances; center
vehicles; and reductions in travel, conferences, training, and
communication. In addition to that, based on our approved
budget, we also did not fill more than 100 positions, equating
to over $5 million in cost savings.
    In closing, the Job Corps Civilian Conservation Centers
have allowed young people to reclaim their lives and build
careers for almost 50 years. Job Corps Civilian Conservation
Centers assist young men and women in becoming employable
citizens, helping recover some of the billions of dollars in
wages, taxes, and productivity that is lost when young
Americans fail to complete their education. Job Corps CCC
students volunteer thousands of hours to maintain the health
and diversity of our national forests and our grasslands. They
can be quickly mobilized to assist with natural disasters like
floods, wildfires, and hurricanes.
    Job Corps CCCs are an integral part of the Forest Service
history, and the work that occurs each and every day by our Job
Corps CCC students and the staff showcase our Nation's wise and
continuing investment in the conservation of America's natural
resources, not just our land, but the lives of young Americans.
    Thank you for your time and attention, and I will be
pleased to answer any questions you might have.
    [The prepared statement of Mr. Dixon follows:]
                 Prepared Statement of Antoine L. Dixon
    Mr. Chairman, Ranking Member Isakson, and members of the
subcommittee, thank you for the opportunity to appear before you today
regarding the financial situation faced by the Job Corps.
                              introduction
    Beginning in 1933 with Camp Roosevelt, the first Civilian
Conservation Corps (CCC) camp located on the George Washington National
Forest, the Forest Service has had a long and vital association with
youth and young adult conservation corps. Indeed, the Forest Service
Job Corps Program, authorized by Congress in 1964, is modeled after the
CCC of the 1930(s). From 1930-38 over 3 million CCC enrollees worked in
a diversity of boots-on-the-ground projects. Eighty years later, we
commemorate the CCC's contributions to much of the earliest
infrastructure for the Forest Service, and for the millions of
seedlings they planted.
    Job Corps is a national education and training program primarily
administered by the Department of Labor (DOL). The Job Corps Civilian
Conservation Centers (CCC) are operated on public land under an
interagency agreement between DOL and USDA Forest Service. The Forest
Service currently oversees or administers all 28 Job Corps CCCs
throughout the country in 18 States. These centers provide training to
youth in a natural environment. Students obtain work-based learning,
including to conserve, develop, manage and enhance public national
resources and public recreational areas, as well as to develop
community projects in the public interest. The connection youth have to
the Forest Service's conservation mission is unique and has sustained
the Job Corps CCC program for almost 50 years.
             forest service management of job corps centers
    Current authorization for the Civilian Conservation Centers within
the Job Corps program is found in Section 147(c) of the Workforce
Investment Act of 1998 (Public Law 105-220).
    The student capacity for a Forest Service Center ranges from 168 to
300, and, in total, the Forest Service serves approximately 6,200
students per year through the Job Corps program. Through the years, the
Forest Service has learned that hands-on training has been the strength
of the program and Job Corps CCCs have given back to the communities,
and to the public, through community projects, natural resource work on
National Forest System lands, maintaining public recreation areas, or
fighting wildland fires.
   usda responses to job corps program year 2011 and 2012 financial
                              difficulties
    The Forest Service Job Corps Program is completely funded by DOL
appropriations; DOL provides fund transfers on a quarterly basis to
Forest Service prior to obligation or disbursement.
    In response to DOL efforts to address Job Corps financial issues in
Program Year 2011 and 2012, the Forest Service has implemented internal
cost-cutting measures as well as DOL's mandated cost-saving measures.
These cuts have been made at all 28 Job Corps CCCs as well as the
National Office to ensure the sustainability of the program. The Forest
Service efforts contributed to Job Corps' savings of over $10 million
in program year 2011 and over $16 million in program year 2012,
resulting in a total Forest Service budget of $183 million in program
year 2011 and $180 million in program year 2012. A great deal of the
savings achieved in program year 2011 was obtained by implementing
DOL's requested spending plans and by not filling staff vacancies. In
program year 2012, savings were obtained by implementing the DOL
required cost cutting measures related to personnel, clothing
allowances, center vehicles, travel, conferences, training, and
communications. In addition, based upon OJC's approved budget we did
not fill more than 100 vacant positions, equating to more than $5
million in salary savings.
                               conclusion
    The key to improving a young person's life tomorrow depends on what
we do today. Job Corps Civilian Conservations Centers have allowed
youth to reclaim their lives and build careers for almost 50 years. Job
Corps Civilian Conservation Centers assist young men and women in
becoming employable citizens, helping recover some of the billions of
dollars in wages, taxes, and productivity that is lost when young
Americans fail to complete their education.
    Job Corps CCC students volunteer thousands of hours to help
maintain the health and diversity of our national forests and
grasslands. The Job Corps CCC program maintains a cadre of young people
with skills and abilities who can be quickly be mobilized to address
national emergencies including wildfires, floods and hurricanes. Job
Corps CCC students conduct work that enhances wildlife habitat,
revitalizes wildfire-damaged landscapes, restores watersheds, and
improves recreational resources for the benefit of all Americans. The
stewardship projects Job Corps CCC students undertake are valuable,
hands-on work experiences while providing exposure to career pathways
in the areas of conservation, preservation, and resource management.
These work experiences instill lasting and meaningful connections
between the youth of America and the great outdoors. Through Forest
Service Job Corps CCC, USDA is working across all boundaries, including
in rural, economically challenged communities, to provide underserved
youth with the training and the tools they need to enter today's
economy. By integrating the Forest Service mission with that of other
USDA agencies, Job Corps CCC can work arm-in-arm to give underserved
youth expanded opportunities and pathways to prosperity, target
training for potential future employees, deliver services to USDA
clients, and highlight USDA's leadership role in educating and training
underserved youth and promoting rural prosperity.
    Job Corps CCC is an invaluable resource that has produced past and
present Forest Service leaders, including district rangers, forest
supervisors, and regional foresters. The Forest Service is facing
critical workforce shortages and Job Corps CCC is an ideal source from
which to recruit and improve the skill and diversity of our permanent
workforce.
    The Forest Service intends to employ all the financial and
programmatic resources available to continue providing services to our
Nation's most vulnerable youth. Job Corps CCC is an integral part of
the Forest Service's history and the work that occurs each and every
day by our Job Corps CCC students and staff showcases our Nation's wise
and continuing investment in the conservation of America's natural
resources . . . not just our land, but the lives of young Americans.
    Thank you for your time and attention and I would be pleased to
answer any questions you may have.

    Senator Casey. Thank you, Mr. Dixon.
    Mr. Lewis.

 STATEMENT OF ELLIOT P. LEWIS, ASSISTANT INSPECTOR GENERAL FOR
        AUDIT, U.S. DEPARTMENT OF LABOR, WASHINGTON, DC

    Mr. Lewis. Chairman Casey, Ranking Member Isakson, and
members of the subcommittee, thank you for the opportunity to
discuss the Office of Inspector General's past and ongoing
audit work related to the Job Corps program.
    We have several audits underway, including one looking into
the recent budget overruns experienced by Job Corps, to examine
whether internal controls over funds and expenditures have been
properly designed and implemented. Specifically, we're looking
at why the budget overrun happened, what control weaknesses
allowed it to happen, what changes the Department has already
made, and what additional changes may still be needed to ensure
this does not happen again. Barring any unforeseen
circumstances, we expect this work to be completed in May.
    As requested by the subcommittee, I will now discuss
program financial management, procurement, and safety and
health issues which we have reported on in the past. Recent
audits of program performance have identified issues with the
accuracy and reliability of performance results reported by Job
Corps' contractors with respect to training placements.
    In 2011, we found that approximately 18 percent of some
17,000 training-related placements either did not relate or
were poorly related to the vocational training that students
received while in Job Corps. For example, students trained in
office administration and placed in fast food restaurants were
reported as job training matches.
    We've also reported on the need to improve Federal
oversight of center-academic and center-career technical
training programs. We found that Job Corps issued required
performance improvement plans for less than 13 percent of the
510 underperforming career technical training programs for a
recent 3-year period. Not surprisingly, many of these programs
that did not receive improvement plans continued to
underperform in subsequent years.
    A critical aspect of financial management for a billion-
dollar-plus Federal program such as Job Corps is to measure the
cost of its outcomes. In a 2011 audit, we reported that Job
Corps understated its cost per student measure by not including
administrative costs in the calculation. We recommended
additional cost efficiency metrics to provide decisionmakers
more information on program success and efficiency.
    In terms of procurement, we looked at procurement at seven
centers run by five different contractors recently and found
that none of the operators consistently ensured best value to
the Federal Government when awarding subcontracts and purchase
orders. In total, we question whether the Government received
the best value for $17 million in contracts issued by these
centers.
    Ensuring the safety and health of students is of utmost
importance. While Job Corps has a zero tolerance policy against
violence and drugs, past audits have found that Job Corps needs
to enforce student disciplinary policies. In a series of audits
covering 10 centers run by six contractors, we found that
centers did not always address suspected serious misconduct of
students, allowing them to remain at the centers. This
potentially places other students and staff at risk.
    Over the past several years, we have also found that Job
Corps faces a number of challenges in keeping its facilities
safe, including conducting required inspections, correcting
identified deficiencies in a timely manner, and managing their
maintenance funds. For example, a recent report identified
hundreds of deficiencies that had been funded for at least 2
years but had not been corrected, and that nearly $16 million
in funding had been allowed to expire. The inability of Job
Corps to expend these funds represents a lost opportunity to
fund critical repairs and ensure safe conditions at those
centers.
    In closing, Mr. Chairman, Job Corps is an important part of
the Department's efforts to serve at-risk youth and young
adults, and we continuously initiate audits to identify ways to
improve the program. We appreciate the opportunity to testify
on our past and ongoing work and will provide the subcommittee
our report on the budget overrun once it is completed.
    I'd be pleased to answer any questions that you or any
members of the subcommittee may have.
    [The prepared statement of Mr. Lewis follows:]
                 Prepared Statement of Elliot P. Lewis
                                summary
    Job Corps is the Nation's only federally operated residential
training program for at-risk youth and young adults, and is a critical
component of the Department's workforce development program. Ensuring
the effectiveness of the Job Corps program is one of the major
management challenges faced by the Department of Labor. The Office of
Inspector General (OIG) has focused significant audit efforts toward
identifying necessary improvements in the program and over the past 5
years, the OIG has issued 32 reports that provide recommendations to
improve various aspects of Job Corps' operations. Overall, Job Corps
has been generally responsive to audit findings, and has implemented
corrective actions in response to our recommendations.
    Currently, the OIG has several audits underway. One audit is
looking into the recent budget overruns experienced by Job Corps to
determine whether Job Corps' internal control processes over funds
management and expenditures, including contracting activities, have
been properly designed and implemented. Specifically, the audit will
determine why the budget overrun happened, what control issues allowed
this to happen, what changes the Department has made and what
additional changes are still needed to ensure this does not happen
again.
    The OIG testimony discusses program and financial management issues
related to program performance, procurement activity, and student and
staff safety and health. These audits have identified issues with the
accuracy and reliability of reported performance by Job Corps'
contractors related to on-board strength, job training match, and
student eligibility. We have also found lax Federal oversight of
student eligibility and center academic and career technical training
programs, and reported on issues relating to procurement activities
within the program. In addition, we have reported that Job Corps needs
to make improvements in enforcing its student disciplinary policies,
and in ensuring that its facilities are properly maintained.
                                 ______

    Good afternoon, Mr. Chairman, Ranking Member, and members of the
subcommittee. Thank you for the opportunity to discuss our past and on-
going audit work related to the Job Corps program, including work
related to Job Corps' recent budget shortfalls. As you know, the Office
of Inspector General (OIG) is an independent entity within the
Department of Labor (DOL); therefore, the views expressed in my
testimony are based on the findings and recommendations of the OIG and
are not intended to reflect the Department's position.
    Job Corps is the Nation's only federally operated residential
training program for at-risk youth and young adults, and is a critical
component of the Department's workforce development program. The Job
Corps program provides residential and non-residential education,
training, and support services to approximately 60,000 disadvantaged,
at-risk youths, ages 16-24, at 125 Job Corps centers nationwide. The
goal of this $1.7 billion program is to offer an intensive intervention
to this targeted population as a means to help them turn their lives
around and prevent a lifetime of unemployment and dependence on social
programs. Ensuring the effectiveness of the Job Corps program is one of
the major management challenges faced by the Department, and the OIG
has focused significant audit efforts toward identifying necessary
improvements in the program. Over the past 5 years, we have issued 32
reports containing 175 recommendations to improve various aspects of
Job Corps' operations. Job Corps has been generally responsive to our
audit findings, and has implemented corrective actions in response to
our recommendations.
    Currently, we have several audits underway, including one looking
into the recent budget shortfalls experienced by Job Corps. Former
Secretary Solis informed the OIG last summer of budget overruns in Job
Corps' program year 2011 appropriations, and requested that we perform
a review of the internal controls in place over Job Corps' contract
operations. In response to the request, we are currently conducting an
audit to determine whether Job Corps' internal control processes over
funds management and expenditures, including contracting activities,
have been properly designed and implemented. Specifically, the audit
will determine why the budget shortfall happened, what control issues
allowed this to happen, what changes the Department has made and what
additional changes are still needed to ensure this does not happen
again. We expect the work to be completed in May, barring any
unforeseen issues encountered.
    As requested by the subcommittee, I will now discuss program and
financial management issues related to program performance, procurement
activity, and student and staff safety and health, issues on which we
have reported concerns as a result of our audit work.
                          program performance
    Job Corps uses output and outcome performance information to make
critical program decisions. Having reliable data regarding the number
of students enrolled in the program, the number who earn a high school
diploma or GED, the number who complete vocational training, and the
number who obtain employment and/or vocational training related
employment is needed to enable Job Corps to determine if the program is
working and is cost-efficient. Also, given that more than 75 percent of
Job Corps centers are operated by private contractors, reliable
performance information is needed by Job Corps when making decisions to
exercise contract option years or to award new contracts for center
operations.
    Our body of work includes several audits related to program
performance. These audits have identified issues with the accuracy and
reliability of reported performance by Job Corps' contractors related
to on-board strength, job training match, and student eligibility. Our
audits have also identified weaknesses in Federal oversight of center
operators.
                           job training match
    A recent audit identified concerns about the reliability of Job
Corps' metrics for job training match. Not only is the purpose of Job
Corps to help students find employment, but it is also to provide
specialized vocational training that will result in training-related
employment, that offers the potential for better wages. A 2011 audit
found that 3,226 of the 17,787 training-related placements reported for
the periods we reviewed either did not relate, or poorly related, to
the vocational training received. For example, students trained in
office administration, but placed in fast food restaurants were
reported as job training matches. We also found that 1,569 students who
completed vocational training were placed in jobs that required little
or no previous work-related skills, knowledge or experience, such as
parking lot attendants, janitors, and dishwashers. As a result of these
findings and the importance of maximizing the success of Job Corps, we
are conducting an audit this year to assess the effectiveness and
efficiency of Job Corps' services in helping its students to gain
necessary skills and employment. Specifically, this audit will evaluate
the status of students prior to enrolling in Job Corps, the training
they received, their initial job placements, and their job retention 6
and 12 months after leaving Job Corps.
                 federal oversight of center operators
    We have also found and reported on lax Federal oversight of center
academic and career technical training programs. Tools used by Job
Corps to provide oversight of these programs include Regional Office
Center Assessments--a week-long compliance assessment designed to cover
all aspects of center operations--and the development of Performance
Improvement Plans for centers that do not meet expected levels of
performance.
    An audit issued last year found that Job Corps did not place
sufficient emphasis on assessing career technical training programs
during its Regional Office Center Assessments. For example, we found
that Job Corps identified and addressed program weaknesses for only 7
of the 510 (1.4 percent) career technical training programs that
underperformed during program years 2008 to 2010. Additionally, we
found that during fiscal years 2007 through 2011, 89 of the 120
required Regional Office Center Assessments were not completed timely.
This lack of adequate or timely oversight hindered Job Corps' efforts
to ensure its students were being taught the skills they needed to find
meaningful jobs.
    Moreover, during program years 2008 to 2010, Job Corps issued
Performance Improvement Plans for just 12.6 percent of the 510
underperforming career technical training programs. Not surprisingly,
many of the underperforming programs that did not receive Performance
Improvement Plans continued to underperform in subsequent years.
    We also found that Job Corps could use Performance Improvement
Plans to improve its oversight of center academic programs. We found
that 11 percent of Job Corps centers did not meet their high school
diploma/GED attainment performance goals in program years 2008 through
2010. At the time of our audit, Job Corps stated that it had not
developed policies and procedures to issue Performance Improvement
Plans for underperforming academic programs because the Workforce
Investment Act does not require them. While Performance Improvement
Plans are not required, the Act specifically provides the Department
with the latitude to develop and implement such plans as needed.
Issuing Performance Improvement Plans to centers with underperforming
academic programs could enhance the oversight provided by Job Corps and
may help eliminate problems hindering centers' performance for this
very significant program outcome.
    Finally, a critical aspect of financial management for a billion-
plus dollar Federal program such as Job Corps is to measure the cost of
its outcomes. A 2011 audit found that in program year 2009, Job Corps'
calculated its cost per student by dividing a portion of its
appropriated expenses by the number of new enrollees over the course of
a program year. However, Job Corps did not include administrative costs
when calculating that measure, thus the cost per student was
understated. Additionally, we found that establishing other cost
efficiency metrics, such as cost per student training slot utilized or
cost per job placement, could provide decisionmakers with more
information to measure and manage the program's costs, successes, and
areas where cost efficiencies are necessary.
                           on-board strength
    Job Corps assesses how well a center operator is utilizing center
capacity through a measure called ``on-board strength.'' A recent audit
of two centers operated by the same contractor found the contractor did
not always separate students for excessive unexcused absences as
required by Job Corps' policy. As a result, on-board strength
performance was overstated for these two centers. Overstatements of a
center's onboard strength, such as those disclosed in our audit,
subjects the contractors to liquidated damages under the terms of their
contracts. Moreover, by allowing students with excessive absences to
remain in the program, Job Corps may be excluding more committed
students from admission to the program.
                          student eligibility
    It is also critical for Job Corps to ensure that it serves only
those students who meet its low-income eligibility requirements. Our
September 2011 audit of Job Corps' controls for ensuring Job Corps
contractors only enrolled eligible students found that inadequate
enrollment procedures allowed ineligible students to take slots
intended for at-risk and low-income youth. Job Corps' policy allowed
most potential students to self-certify their family income levels.
Admissions counselors were required to obtain income documentation from
potential students only if the information provided verbally was
questionable, or if the potential students' social security number
ended in one of five, two-digit sequences. This sampling methodology
resulted in requiring documentation from just 5 percent of student
applicants. No documentation, such as paycheck stubs or proof of public
assistance, was required for the other 95 percent of Job Corps'
recruits. At the time of the audit, we estimated that Job Corps
enrolled 472 ineligible students in the program in March 2011 at a
projected expenditure of about $14 million to train them. We
recommended that Job Corps reassess the eligibility of all active
students where Job Corps' system showed recorded family incomes above
the established income thresholds and take appropriate action, such as
terminating the student and recovering costs from the outreach and
admissions contractor. Also, for the 153 ineligible students we
identified during our testing of a sample of admitted students, we
recommended that Job Corps recover from its outreach and admissions
contractors the approximately $2.3 million it had already sent to train
these students.
                          procurement activity
    Job Corps currently trains more than 60,000 students at 125 centers
nationwide, of which 28 are federally operated by the U.S. Department
of Agriculture's Forest Service. The other 97 centers are operated by
contractors, who carry out the bulk of Job Corps' sub-contracting
procurement activity. From a financial management perspective, our most
recent audit work has focused on the Department's procurement
activities to obtain contractors to operate Job Corps centers and
perform other needed program services. We have also looked at the
procurement activities of contractors who themselves procure center
services from subcontractors.
    Our work in this area has consistently identified procurements that
did not ensure the best value for the taxpayers. For example, our
review of Job Corps center contractor procurements found that the
Department awarded a 5-year contract for $37.5 million to continue
operation of a center and by the end of the fifth year, 13
modifications had increased the total contract cost by 22 percent to
$45.7 million. Most troubling was the fact that, while the cost of the
contract increased significantly, there were no modifications for
additional goods or services.
    In another instance, we identified a $2.4 million contract that the
Department awarded without competition, citing ``only one responsible
source will satisfy agency requirements.'' However, Job Corps market
research indicated that there were 18 other contractors capable of
doing the work. Absent competitive bids on such contracts, the
Department cannot be assured it receives a fair price for services.
    Recently, we issued a series of audit reports on the procurement
activities at seven centers operated by five different contractors.
These centers served 4,447 students and managed about $29 million in
subcontracts during program years 2010 through the first quarter of
2012.
    Our audit determined that none of the seven center operators
consistently ensured best value to the Federal Government when awarding
sub-contracts and purchase orders. In aggregate, we questioned whether
the Government received the best value for $17.1 million in contracts
issued by the seven centers. For example, one center operator allowed
an executive vice president to award a sole source contract to a
company owned and operated by a subordinate vice president. In addition
to conflict of interest concerns, the lack of competition for the
contract meant that the center operator could not demonstrate it had
paid a fair price for the services it procured. We found that center
operator policy guidance regarding center procurement activity was
inadequate and, as a result, the seven center operators did not
consistently comply with Federal and contractual requirements
applicable to their procurement activities.
                  student and staff safety and health
    Providing students and staff a safe and healthy environment so that
students can take full advantage of the resources Job Corps provides is
critical to the success of the program. Our past audits have found that
Job Corps needs to make improvements in enforcing its student
disciplinary policies, and in ensuring that its facilities are properly
maintained, including promptly addressing any hazardous conditions.
              enforcement of student disciplinary policies
    In order to provide the safest possible learning environment, Job
Corps has a Zero Tolerance Policy against violence and drugs. Students
who break this policy are to be dismissed and not allowed to re-enter
the program. Other serious misconduct that could lead to dismissal
includes persistent disobedience of center rules, repeated or prolonged
absences from classes, improper use of center facilities and equipment,
and leaving the center without permission.
    In a series of audits issued in 2009 and 2010 covering 10 centers
operated by six contractors, we found that four centers did not always
convene Fact Finding Boards and Behavior Review Panels as required for
students suspected of serious misconduct. For example, from a sample of
188 events identified in security records at the four centers, we
identified 29 events requiring a Fact Finding Board for which none was
held. These students were allowed to remain at the center without
consideration of appropriate disciplinary action, including removal
from the center, thus potentially placing other students and staff at
risk. Based on a sample of the 268 students at one center who were
separated for disciplinary reasons, we found that 16 percent had
committed earlier infractions for which a Fact Finding Board or
Behavior Review Panel should have been convened, but was not.
    In addition to not properly investigating serious misconduct, the
same series of audits identified six centers where properly
investigated misconduct was not reported to Job Corps as required. We
determined that 40 percent of 235 significant incidents occurring at
the six centers during our audit period were not reported to Job Corps.
These incidents included physical assault, weapons possession,
narcotics possession or sales, and other events that indicated a
student was a danger to himself or others. Although these centers may
have investigated and taken appropriate disciplinary action, not
reporting these events to Job Corps impacts Job Corps' ability to
ensure that centers take appropriate actions regarding the incidents
being reported or to analyze trends to support management and policy
decisions at a national level.
                          facility management
    Over the past several years, OIG audits have found that Job Corps
faces a number of challenges to keep its facilities safe, including
conducting required inspections, correcting identified deficiencies in
a timely manner, and maintaining accountability over its maintenance
funds.
    Job Corps center operators are required to conduct weekly safety
inspections of food handling and recreation areas, and to perform
monthly safety and occupational health inspections of other areas.
Centers are to correct identified deficiencies promptly, and document
and maintain records of inspections and corrective actions. Our audits
at individual Job Corps centers found that some centers were unable to
demonstrate that they had conducted all of the required inspections. As
a result, students and staff at those centers were exposed to safety
and health hazards that could have been identified and abated, such as
locked emergency exit doors and improperly stored flammable liquids
observed at one center. Past OIG audits have also found other unsafe
and unhealthy conditions that had not been addressed, such as: (1)
extensive mold in a culinary arts storage room; (2) potential asbestos
hazards; (3) multiple tripping hazards; and (4) hanging and exposed
ceiling tiles in student areas.
    Another issue involves Job Corps' ability to correct identified
deficiencies in a timely manner. Even though Job Corps has directed all
regions and center operators to take ``immediate action to repair all
funded deficiencies in order to ensure a safe and healthy learning
environment,'' a recent OIG report identified hundreds of deficiencies
that had been funded for at least 2 years but had not been corrected.
    Past OIG audits have also identified Job Corps' challenge to ensure
accountability over its maintenance funds. During program years 2009-
11, Job Corps received about $108 million per year in appropriations to
pay for new center construction, rehabilitation of existing centers,
land acquisitions, and necessary maintenance to keep its centers in
acceptable condition. One of our audits showed that Job Corps had
allowed an estimated $9 million in maintenance funds that had been set
aside for 149 repairs to expire without the repairs having been made.
In response to our audit, Job Corps stated that in fact $15.8 million
had expired, but that this represented 1.2 percent of total
Construction, Rehabilitation, and Acquisition funding for program years
2002 through 2011, which it stated ``is below average for the
Department.'' The inability of Job Corps to expend these funds
represents a lost opportunity to fund critical repairs and ensure safe
conditions at those centers.
                           current audit work
    As previously stated, Job Corps is an important part of the
Department's efforts to serve at-risk youth and young adults, and we
continuously initiate audits to identify ways to improve the program.
    In addition to our audit looking into the program year 2011 and
program year 2012 budget overruns, our current reviews include an audit
to determine if Job Corps' contracts for nationwide services, totaling
approximately $95 million annually, were properly awarded. We are also
looking at the expenditure of student travel funds.
    Thank you for the opportunity to testify on our past and ongoing
work. I would be pleased to answer any questions that you or any
members of the subcommittee may have.

    Senator Casey. Thank you, Mr. Lewis.
    I'll start with a predicate from part of the record to
begin my questioning. I have a letter dated July 2012, directed
to Senator Harkin, Chairman of the Committee on Health,
Education, Labor, and Pensions, and Senator Shelby, the Ranking
Member of the Committee on Appropriations. It is a 5-page
letter that was signed by Brian Kennedy, and he is from the
Office of the Assistant Secretary for Congressional and
Intergovernmental Affairs at the Department of Labor. I'll make
that letter part of the record.
    [The information referred to can be found in Additional
Material.]
    I want to highlight some statements he made in that letter
to set forth a timeline of some important developments. He
says,

          ``Since July 2011, Job Corps anticipated that it
        would be necessary to use a substantial portion of the
        authority provided by Congress in Public Law 112-10 to
        transfer funds between Job Corps' CRA account, and its
        operations account.''
          ``However, Job Corps did not recognize the full
        amount of the transfer needed for program year 2011
        operations until April 2012. At that point, Job Corps
        concluded it would need to exercise its full transfer
        authority to transfer $26.2 million from the CRA
        account to the operations account.''

    He goes on from there on the same page to document the
transfers of dollars from one account to another.
    Then he says,

          ``The full extent of the potential shortfall in the
        operations account went unrecognized''--that's the same
        word he used earlier--``through most of program year
        2011 in large part because Job Corps lacked program
        monitoring tools, No. 1, and internal controls to
        sufficiently analyze contractual spending and trends
        developing during the course of the program year. In
        turn, this led to inadequate spending projections for
        the operating account.''

    I focus on that as a predicate because there are at least
three basic problems he identifies there. No. 1 is lacking
program monitoring tools. No. 2 is lacking internal controls.
And then three is lacking the ability to project spending in a
way that is appropriate. I think it comes down, really, to one
fundamental issue or one fundamental position within the
Department of Labor, and that's a comptroller.
    Anyone who knows anything about running a public agency
knows that you're in a lot better shape if you have a
comptroller who can watch your spending, can put controls in
place, can blow the whistle when people are misspending, can do
periodic reporting, and because of all that work can actually
make a reasonably accurate projection.
    Now, I know, Assistant Secretary Oates, you started in the
Department in April 2009. Is that correct?
    Ms. Oates. I was confirmed in June 2009.
    Senator Casey. June 2009. The new position that was created
to be filled by a comptroller was not put into effect until
August 2012. Is that correct?
    Ms. Oates. Actually, he started with us in May 2012. But
you're correct in terms of 2012, sir, yes.
    Senator Casey. The first question I have is between the
time you started, from June 2009 to 2012, when that comptroller
began, on whom did you rely for these kinds of assessments,
program monitoring, internal controls, spending projections? On
whom did you rely in the Department?
    Ms. Oates. Senator, if I could answer your question, I
relied on a senior executive service person, an SES, who was in
charge of my budget functions at that time. But I did not take
Job Corps back into ETA until October 2010. So just so we're
clear, I had ETA, which is a large enough budget, especially
with the Recovery Act. We had a large budget but no
comptroller.
    Senator Casey. So from October 2010 until what month in
2012?
    Ms. Oates. He came on in May 2012.
    Senator Casey. In May. So in that time period, you relied
upon that----
    Ms. Oates. Senior executive service.
    Senator Casey. And tell us what that is, that person.
    Ms. Oates. That's a senior career person, sir. But my
person who was running that shop did not have adequate fiscal
and financial management experience the way a comptroller
would.
    Senator Casey. When did you make that assessment of what
they lacked?
    Ms. Oates. Well, when Job Corps came back into ETA in
October 2010, the first thing I did was open a procurement
office, because I lacked a senior level person who could do
procurement. Job Corps at that time was $1.7 billion. The rest
of my budget was $12 billion. And in order to take that back, I
felt like I needed someone to focus on procurement. So the
first year of Job Corps was really focusing on doing a more
adequate monitoring of our procurement.
    The second year was the re-engineering of our financial
house, which involved first moving our accounting services from
pure contract into Federal service and attracting a
comptroller. I needed to get a new SES position for that--
government mumbo-jumbo--I'm sorry, Senator, to go with that,
but I have only a certain number of SES. And what I could have
done is just move another SES in there, but what I wanted to do
was wait until I had an SES that I could recruit, a new
position where someone would have those qualifications.
    Senator Casey. In addition to your office, does the
Department of Labor have a comptroller now in place?
    Ms. Oates. The Department of Labor has a chief financial
officer, similar to a comptroller, yes.
    Senator Casey. But not one in place for Job Corps----
    Ms. Oates. In ETA, at that time, we did not have our own.
    Senator Casey. I've got other questions for when I get back
to my time. I'm over time. But in light of what you've
testified to--and in your prepared testimony, you talked about
``serious weaknesses in Job Corps financial management
processes.'' That's a direct quotation from your testimony.
``Job Corps lacked appropriate program monitoring tools and
controls.'' Third, you said that there were inadequate spending
projections.
    Based upon all of those problems which undergirded the
difficulties we're here to examine today and which has led to
this enrollment freeze, you've been very clear about where
responsibility lies. My question is--and I think this is a
question taxpayers ask--who in the Department, if any, has been
held accountable for these problems?
    Ms. Oates. I'm being held accountable today and have been
every day since I've started working with the staff on this
committee and other committees when we had the problem. We've
had frequent meetings with your committee. It's my
responsibility.
    But if you're talking about positions that have changed,
there have been a number of position changes within my
organization to better address the needs of what I consider and
I hope you would consider adequate budget controls. We have a
new budget officer for ETA. We have the comptroller. We have a
new SES position in procurement. We have two GS-15s, which are
high level career functions, one who oversees procurement
outside of Job Corps and one who oversees procurement in Job
Corps.
    Senator Casey. I think there's a good bit of skepticism on
this committee among Senators in both parties, because we've
been hearing for years now, several years, that the problem was
recognized, the problem has been diagnosed, and there are
corrective action efforts in place and this won't happen. And
we thought we were there in maybe the middle or summer of 2012,
and then we entered this year and we hear about enrollment
freezes.
    So I think you can understand the high degree of skepticism
that this problem has been fixed, contained, dealt with,
however you want to describe it. So I'm over time, but I'll
come back to it.
    Senator Isakson.
    Senator Isakson. Thank you, Senator Casey.
    Secretary Oates, as of today, March 12, what is the current
budget shortfall of the Job Corps program?
    Ms. Oates. Senator, we started with $61.5 million. I can
give you some numbers that we've saved. But right now, we're in
negotiations with contractors. The bulk of the savings will
have to come from the contractors. And I can't discuss a number
with you in terms of what we need right now because my
attorneys and my procurement people tell me that would
negatively impact negotiations with the contractors. But as
soon as I can, I will share those numbers as soon as the
negotiations are done. We are hoping they will be finished in
March so that by the end of March, I will be able to come back
to the committee and give your staff and each of the members an
adequate accounting of where we are.
    Senator Isakson. I appreciate that answer, because it plays
right into the next two questions that I have. How much money
are you saving per week or per month with the current
enrollment freeze?
    Ms. Oates. Again, I can give you some hard numbers. I can
tell you what I'm saving on student stipends. Last year, for
instance, we spent just under $100 million on student stipends,
both the money students get biweekly and the money they get as
transition pay going out. So I can give you a hard number on
what I'm saving on that every week. I can tell you an
approximation of what I'm saving on things like travel.
    But I think Senator Hatch painted a picture of a student
with tremendous disabilities that had an amazing outcome.
There's no one-size-fits-all in Job Corps. One kid could cost
me X because they already had a high school diploma and just
needed a vocational certificate, and another kid could cost me
three times X.
    So I don't know what I'm saving in terms of anything else
but the accountables, like what we spend on work clothes, what
we spend on stipends. The rest of that will all come from
contractors. I'll be honest with you. I never dreamed until I
saw the things coming out that there was one employee for every
three kids at Job Corps.
    I'm assuming that we're going to see tremendous savings in
these negotiations. Sadly, that means reduced employment,
either less hours or losing their job altogether. But I won't
know that until my procurement people finish their negotiations
with the contractors.
    Senator Isakson. Is that answer the reason for your
reference in your written statement that said you
underestimated the allowable costs for contractors on student
services?
    Ms. Oates. I really think, Senator, that personnel could be
part of it. I also want to be very clear that we have something
called a program handbook that is, in my opinion, overly
prescriptive, and we need to take some of the must-dos out of
that in order to get the Job Corps program, at the same high
quality it is, into a spending level that fits our
appropriation.
    It could be utility costs. It could be food costs going up.
It could be personnel. But, quite frankly, in my opinion, we
have too many things in the handbook that they have to do that
may be duplicative. And the working group that we put together
with contractors and some staff from this committee late summer
or early fall brought to light two of those.
    One, we gave more flexibility away from the overly
prescriptive nature of our healthcare staffing requirements,
and the second we did in terms of student-teacher ratio in GED.
I can't tell you yet what savings those will produce. I haven't
seen anything yet. I'm hoping the contractors will articulate
those as they negotiate.
    Senator Isakson. Let me make an observation here that $61.5
million is 4 percent of the Job Corps budget. Apparently, you
never asked the contractors to meet that shortfall through
their costs. You immediately went and cut enrollment to cut
costs. Is that right?
    Ms. Oates. No, sir, that is not right. Last July, we began
negotiations with the contractors, letting them know that we
had a shortfall, asking them to help us cut costs.
    Senator Isakson. What about 2011?
    Ms. Oates. In 2011, Senator, quite frankly, I didn't know
we had a problem until the last week of April 2012.
    Senator Isakson. Let me ask one more question before my
time runs out, and this is an important one. The continuing
resolution that was introduced last night and the Senate will
begin debating through the bipartisan efforts of the
Appropriations Committee includes an anomaly that would allow
your Department the statutory authority to transfer up to $30
million from other accounts into the operating account. If this
becomes law, can you commit to this subcommittee that you'll
suspend the current enrollment freeze and allow centers to
restore operation to their contract budget?
    Ms. Oates. I can commit to this committee that I will come
back to you after we have the negotiations with the contractors
and tell you how we would do that before we do it.
    Senator Isakson. Are you aware of the $30 million item in
this current CR that we're getting ready to----
    Ms. Oates. I have seen it, sir. I know that it's there.
    Senator Isakson. I think one of the reasons that that
question is so important is if you transfer within an agency
money from other operating accounts to make up a shortfall and
continue to not allow students to be enrolled, who are the
purpose of the program, it seems like it's a backward way to go
about doing it. The first people to benefit ought to be the
people who are being denied enrollment. That's the way it looks
to me. So I just want to make that observation.
    Thank you, Mr. Chairman.
    Ms. Oates. And, sir, let me just say to you that we want to
suspend this enrollment freeze as soon as possible. But,
clearly, it was a draconian choice, suspend enrollment and
continue the commitment to the kids we already have enrolled
there, or risk getting close to the end of the program year and
having to, without warning suspend the program. We will do
everything we can to suspend this enrollment freeze as soon as
possible. That's in all of our best interests. We all care
about these kids.
    Senator Isakson. That's what I wanted to hear. Thank you.
    Senator Casey. Thank you, Senator Isakson.
    Senator Murphy.

                      Statement of Senator Murphy

    Senator Murphy. Thank you, Mr. Chairman, very much for
allowing me to sit in on this hearing.
    Secretary Oates, could you just give me a little bit deeper
understanding of why your counsel says you can't share with
this committee the data surrounding the amount of money that
you have in shortfall for the rest of the year? I'm a new
member of this committee, but that's tough to hear. When we're
hearing these dire stories coming from our centers and from the
kids that aren't going to receive services, it's tough to then
turn around and tell them I don't really have an answer for
them because I can't get the numbers to look for myself as to
whether the cost savings that you're suggesting are actually
going to meet the shortfall.
    Ms. Oates. Senator, first let me try to explain why they
say that. Each negotiation is done independently with each
contracted center. So if a contractor runs 18 centers, we
negotiate with them 18 times for each of the centers. And if
they knew I needed to save a dollar, they would divide that
instead of saying, ``What are the real cuts I can make?'' That
is the impression of the folks that lead my procurement. They
think that it would limit what they could talk to the
contractors about as real savings. So I understand the position
you're in.
    Second, I think that everyone wants to know when we can end
this enrollment freeze, including me. That's something we talk
about at the Department every day. I have a daily meeting on
this, not only with my internal people, but with the CFO and
with the departmental budget office. But we have to be sure of
them because of ADA violations. I have to be certain. I can't
hope that they will come with a conclusion. I have to have that
defined term.
    Senator Murphy. I'll just respectfully disagree. I
certainly understand that keeping that data secret helps your
negotiations. But you've got to weigh that against
transparency, and you're at a moment right now where a lot of
people are crying out for help and help from this body. I mean,
frankly, before this crisis happened, these centers knew
exactly how much money you had to negotiate with.
    I guess you could argue that that's a negotiating
advantage, that they knew ahead of time what your budget was.
I'm not necessarily sure knowing what the new budget is is
necessarily that much of a greater advantage. I would just hope
that you'd rethink that and take a look at sharing that
information with this committee.
    Ms. Oates. We hope to get that to you no later than the
beginning of April.
    Senator Murphy. Second, you talked a little bit about
working with these centers rather than imposing an arbitrary
freeze on enrollment. Can you talk a little bit about that?
I've heard from some of the centers that I've talked to that
that hasn't necessarily happened, that in this program year, if
they were given a budget target, they could find savings other
than an enrollment freeze that would get you to or close to
where you need to get to.
    They believe that the enrollment freeze is going to far
surpass the amount of money that you actually need to save and
that if there was some flexibility allowed to these program
operators, they could find the savings other places. Can you
talk a little bit about the flexibility that you've allowed or
the negotiations separate and aside from the enrollment freeze
that you've had with these program operators?
    Ms. Oates. I'm very optimistic. A number of operators had a
meeting with our chief financial officer yesterday, and they
have been very willing recently to come to the table and talk
about this. But, Senator, one of the things I have to prove to
everyone is that I'm sure that we're going to meet those
numbers.
    And many of the things that have been floated by members of
this committee in our discussions about ideas to cut this just
don't meet a fiscal standard. In fact, quite frankly, they meet
the fiscal standard that got me into this problem in the first
place.
    People have suggested that I just take the overruns from
the first quarter, the under-runs, and take the savings there
and put them in for the rest of the year. Well, I can't do that
with a cost reimbursable contract, because, basically, if they
go over in the last three quarters of the year, if the costs
are allowable and allocable, I have to pay them.
    So I can't pretend--it's like a shell game. The second
one--and I won't go through the whole list. The second one they
said, basically, was to say that we could transfer the money,
the 15 percent authority I have, up front from CRA. I could do
that. But what if I don't have enough money at the end, and
what about the construction projects?
    When I come to you and say I want to fix the problem, I
don't want to mask the problem. I don't want to hide behind
anything. I want to have hard numbers that my comptroller can
live with.
    Senator Murphy. Because of the way your contracts are
structured, you don't have the ability to go to a program
operator and say, ``Instead of the enrollment freeze, here's
your target number of savings that I need between now and the
end of the year. You find a way to get those savings,'' rather
than implementing the across-the-board enrollment freeze.
    Ms. Oates. Senator, I did that in July 2012, and by
November 2012, as I've told the committee staff in a number of
meetings, I was 3.2 percent above what our work plan had been,
which translated into about $36 million. That's why I hit a
crisis point.
    When I knew by the end of November I wasn't sticking with
the plan that I thought we had negotiated, I knew we had to do
something more drastic. That's when we decided to cut student
stipends. That's when we looked at other options, and that's,
unfortunately, how we came to January 28 when we had to
temporarily suspend enrollment.
    Senator Murphy. Thank you, Mr. Chairman.
    Senator Casey. Thank you, Senator Murphy.
    Senator Hatch.
    Senator Hatch. Thank you, Mr. Chairman.
    Welcome back to the committee.
    Ms. Oates. Thank you, Senator. I wish it were under more
pleasant circumstances.
    Senator Hatch. We all do. What is the ETA's policy for
reimbursing vendors at a higher rate than contracted? And can
you help me understand how improving contract modifications
significantly higher than the negotiated rate were allowed?
    Ms. Oates. I think the audit that Elliot referenced was
done before Job Corps came to ETA. So I couldn't really
adequately address that. But let me give you some examples. We
run on a thing called onboard strength, how many people you can
have. You said at Clearfield, it's 1,000.
    In the past, we've let Job Corps centers run at 103 percent
of onboard strength. And because of the way we did programming,
the same person was in charge of the program as was in charge
of procurement, and they were like, ``That's great that you
have so many kids.'' And nobody was saying, ``How are you going
to pay for it?'' So I think the higher levels of procurement--
if I give you a $5 million contract, and you tell me that
utility costs went up or food costs went up or you had a
greater onboard strength, those are all allowable costs and I
have to reimburse you at the higher level.
    Senator Hatch. Isn't the nature of the cost reimbursement
contract designed to prevent these negotiations at a
significantly higher rate?
    Ms. Oates. I think that's why we have to have better--and I
believe we do now, but certainly the IG will tell me that for
sure. I think we have better trained people in place so that
they're, first of all, talking to contractors about what the
problem is.
    I know we have better checks and balances in place, because
now that person can't make that decision without talking to
someone that's a contracting officer. That contracting officer
has to bring it up at the national office level, and three sets
of eyes, procurement, program, and our comptroller, all go on
that before a decision like that is made. But the investigation
that the IG is doing right now is going to tell us what I can
do to better improve that system.
    Senator Hatch. On the new centers cost overruns, I'm not
sure I understand from your statement how they impacted the
operations budget. Why were new centers delayed, and what
proportion of the cost overrun is attributable to the new
centers?
    Ms. Oates. The three new centers, Pinellas, Ottumwa, and
Milwaukee--the way the funding cycle works in the
appropriations world is they're built and equipped, and then we
begin putting extra money in the operations budget for them. I
believe--and I think the IG will be able to tell you more
factually--that the reason we didn't see this problem the first
18 months that Job Corps was in ETA was because there was extra
money there, and those new centers were not fully at onboard
strength.
    So if there were supposed to be 300 beds in the Ottumwa
Center, the 300 beds weren't filled until program year 2011,
which ended last year. But I'm looking for people to do the
investigation to tell me whether that assumption is correct. So
we had that fungible money so we didn't see this problem.
    As Senator Isakson points out, it's 4 percent of the
budget. It would be very easy for a little extra money to cover
what was a flaw for years and was just uncovered when those
three centers were fully at onboard strength and we no longer
had any additional funds. It showed the problem.
    Senator Hatch. Thank you.
    Thank you, Mr. Chairman. I appreciate it.
    Senator Casey. Thank you, Senator Hatch.
    I want to ask a question that would relate both to
Assistant Secretary Oates as well as Mr. Lewis.
    Secretary Oates, in your testimony you say,

          ``In addition, in June 2012, then-Secretary Solis
        requested that the inspector general perform a
        comprehensive review of the Job Corps financial control
        system. That review is ongoing, and we look forward to
        receiving the results.''

    So the request was made in June 2012. Is that correct?
    Ms. Oates. Yes, sir.
    Senator Casey. And it's really a question for both. When
will we see that?
    Mr. Lewis. We expect right now, and as it said in our
testimony, barring any unforeseen circumstances, we expect to
be done with the work in May, to have a report to you in May.
    Senator Casey. I don't understand. Why does it take a year?
    Mr. Lewis. Even though the request did come in in June, it
was followed up shortly after that from the CFO's office, who
had requested more time to reconcile the Job Corps accounts for
that program year and asked us to wait, that it thought it
would be more effective for us to start the audit in the fall.
At that time, we thought that was a reasonable request, so the
audit actually started in the fall.
    Ms. Oates. And, Senator, if I may, the original request
from Secretary Solis was to just look at the problem from last
year, so ending June 30. I think in our discussions with the
CFO and subsequently with the IG, we asked them to extend that.
So they're actually looking up until November of this year.
    So we may have caused some of that delay, because once I
saw I still had the problem in July, I needed them to look
further and said,

          ``Did anything improve, any of the things that we
        thought we put in place in June, which may not have
        been evidenced yet? Could you see any change in those
        in November?''

    So I think by extending their look to November, I may have
put Mr. Lewis and Mr. Petrole in that situation. I take the
responsibility for that, Elliot.
    Mr. Lewis. We did modify the job twice, because when we got
into it, we didn't have the problem with 2012. Once that became
apparent, we expanded the look into it.
    Senator Casey. I'll tell you, the program would be better
off, and this committee would be better informed, and I think
taxpayers would have a better sense of what happened if you can
expedite that.
    Mr. Lewis. We fully understand that.
    Senator Casey. I realize you do a lot of these, but I think
there ought to be a way to expedite that, at least by a month
or two, especially since we're in a budget season now. Next
week, the Senate will be considering the 2014 budget, and it
would be very helpful if we had some indication as to the
origin of this specific problem on controls and projections and
those basic questions.
    I wanted to highlight as well, Mr. Lewis, some of your
testimony as it relates to determinations you've made. And I
realize that in the course of your written testimony you
couldn't set forth conclusions about the current ongoing audit.
That wouldn't be appropriate. But I think that you highlighted
and summarized in a fairly detailed fashion what the results
were of other audits that you've outlined. And I want to look
at a couple of those right now.
    You say in your testimony regarding procurement activity--
and that was the subject of one of your audits. You say in the
second paragraph under that, ``Our work in this area has
consistently identified procurements that did not ensure the
best value for the taxpayers.''
    Mr. Lewis. Correct.
    Senator Casey. To your knowledge--and I'd ask Secretary
Oates this same question--has that problem been rectified? Is
there a corrective action strategy in place, or is that still
an ongoing problem?
    Mr. Lewis. Well, it's been a longstanding problem. We've
certainly seen changes and improvements to it. More recently,
we have seen change in personnel and ETA procurement that's
encouraging. But, again, we've seen, over many years, and we
just cite some of the most recent work in the testimony on
various issues with procurement, whether it's at the ETA level,
ETA procurement that they're conducting, or it's procurement
that's being conducted out at the Job Corps centers themselves.
They engage in a lot of procurement in this program.
    We've seen improvement, but we continue to see problems.
That's one of the areas we have a current audit going on to try
to verify how much have we improved.
    Senator Casey. Just on procurement.
    Mr. Lewis. Just on procurement.
    Senator Casey. I want to move to another one, Secretary
Oates, unless you have something to say on this.
    Ms. Oates. I think that the OIG's work is really important
to us, because what he's really been unearthing since 2002 is
problems in subcontracting. We don't have anything to do with
the Federal Government. FAR doesn't apply there. We don't have
anything to do with that. But we do have a responsibility to
our contractors to provide them with professional development
and information. So his work has been very helpful in helping
our procurement people figure out how we can help them follow
the rules, and we intend to continue to do that.
    Senator Casey. I'll just cite--because we're running low on
time, your report Mr. Lewis, which says,

          ``We questioned whether the Government received the
        best value for $17.1 million in contracts issued by
        seven individual centers.''

    You also say,

          ``In a series of audits issued in 2009 and 2010
        covering 10 centers operated by six contractors, we
        found that four centers did not always convene fact-
        finding boards, and behavioral review panels, as
        required for students suspected of serious
        misconduct.''

    I'm just giving you kind of a series of problems that have
been identified. Ultimately, this is going to affect the
efforts that can be made here in the Senate and the House to
make sure that we can continue to provide funding at the level
that it should be.
    I would say to the Assistant Secretary that I would hope
that all of these determinations that have been made by the
auditors are the subject of intense--not just review, but
intense action to correct these problems, because the best way
to undermine a good program is to have management problems, to
have cost problems, and to have some of the problems identified
in the audit.
    Finally, in this segment--I know I'm over by a bit.
Assistant Secretary Oates, I'm trying to get a sense of when--
let me just ask it this way. You don't contest the statement I
read from Mr. Kennedy's letter of July 20, 2012 where he said,
``Since July 2011, Job Corps anticipated it would be necessary
to use a substantial portion of the authority to transfer
funds.'' You don't contest that that's the time period or the
timeframe within which the Department and you were aware that
there was a problem.
    Ms. Oates. I do contest that, sir, basically, that we were
given the 25 percent transfer authority in that budget in the
program year. I did not know we were going to have to use that
money until the last week of April in 2012.
    Senator Casey. Tell me when you knew that there was a
substantial problem which we know now is the 2011 $39 million
shortfall. When did you know that?
    Ms. Oates. April 27, I believe, of 2012.
    Senator Casey. You didn't know that until 2012.
    Ms. Oates. That's right, sir. That's the 2011 program year.
    Senator Casey. Right. So you didn't know in July 2011.
    Ms. Oates. I did not, sir, no.
    Senator Casey. Once you were aware that there was a
problem, what did you do next? If you can, just outline the
series of steps you took after that.
    Ms. Oates. Sir, I found out when my then national director
went to the Deputy Assistant Secretary. They came into my
office with the procurement person, and we immediately began to
look into the problem and then within 48 hours made sure that
everybody else, including the Secretary and the Deputy
Secretary, were aware that we had a problem.
    My new budget person had been on the job for 2\1/2\ weeks.
We tried to get him to give us some modeling, and he began
looking at things, and we began to try to figure out how we
were going to respond to the program.
    Senator Casey. When you say a new budget person, who is
that?
    Ms. Oates. I have a new budget director. My former budget
director was--we changed jobs, and I got someone who had run a
budget at Energy. He's been with me--Ron Sissel--for almost a
year now.
    Senator Casey. But that's not the comptroller we spoke
about.
    Ms. Oates. No. That's right.
    Senator Casey. Senator Isakson.
    Senator Isakson. Thank you, Mr. Chairman.
    Mr. Dixon, you said, I believe, the Forest Service
implemented internal cost-cutting measures beyond those
required by the Department of Labor. What exactly were those,
and did you share them with the Department of Labor?
    Mr. Dixon. Yes, we did share our efforts with the
Department of Labor. Primarily, they included not filling many
of our vacant positions. That's where we were able to get the
greatest amount of savings to help with this particular
problem.
    Senator Isakson. And that was your own initiative at the
Department. Is that right?
    Mr. Dixon. Yes. Based on our discussions with the
Department of Labor, looking at what types or levels of funding
they were going to appropriate to the agency, we needed to
figure out how we could get within that limit. And that was the
best way to be able to do it with the time constraints that
were provided.
    Senator Isakson. So as a contractor, which--in effect, you
are a contractor.
    Mr. Dixon. Another Federal entity, but, in fact, we operate
Job Corps centers just like other contractors under the same
rules and regulations.
    Senator Isakson. But the Department asked you to find
savings and you found them.
    Mr. Dixon. Exactly.
    Senator Isakson. Secretary Oates, I understand that the
National Job Corps Association published a list of $59 million
in savings that the program could realize, one of them being,
and I'm quoting here,

          ``Every Job Corps operation currently has budget
        under-runs as a result of ETA implementing a hiring
        freeze and stopping student enrollment in June and July
        2012.''

    Did you accept that $20 million back? Did you take it?
    Ms. Oates. We did not, sir. The reason is that----
    Senator Isakson. Why not?
    Ms. Oates. Well, an under-run in one quarter doesn't
necessarily give me savings at the end of the year, because
they could--because these are cost reimbursable contracts, I
would have to meet their demands if they had overruns in
second, third, and fourth quarter. And that's when I run the
danger of an ADA.
    Senator Isakson. So you're saying that you didn't accept it
because in the next quarter you might incur the cost?
    Ms. Oates. That's correct. In my simple math mind, if you
think of an under-run as being $100 and you only spent $90, the
next quarter, they could spend $110 and I would have to
reimburse that. So I would have no savings.
    Senator Isakson. Well, I understand what you're saying. But
if you had spent money, $20 million, that was not earned by the
contractors, and they were willing to pay it back to you,
although it was a one-time occurrence, it might not be long-
term savings, but it's short-term relief until you get your
program put together to not realize the cost overruns that you
had.
    Ms. Oates. Yes, sir. But I have to achieve the savings in
the same program year, and none of them were willing to tell me
they wouldn't overrun in other quarters.
    Senator Isakson. Mr. Dixon's department at the Forest
Service, in answer to the request from DOL to reduce costs, did
not fill vacancies as they occurred in the department. Is that
correct?
    Mr. Dixon. Yes, Senator.
    Senator Isakson. And they told you that's what they were
doing to meet the goals you had given them. Did you at the
Department consider doing that?
    Ms. Oates. Many of the private contractors did the same
thing. They didn't backfill positions.
    Senator Isakson. What about Department of Labor employees?
    Ms. Oates. That's a different operating budget. But, yes,
we also have not filled--remember, Job Corps comes to us in
three buckets, construction, operations, and PA. PA is the only
account that I can use for employees, either in the regional or
national office. And we have not, like with all ETA, backfilled
positions. We're on a position management system where a
position is not necessarily filled until we make sure we have
the money to fill it.
    Senator Isakson. So you can do $30 million in transfers
from the operating account for savings or to help with a
program. But you can't do it in terms of attrition?
    Ms. Oates. I can't do any transfers without congressional
authority and----
    Senator Isakson. Which is in this current CR.
    Ms. Oates. Well, whatever comes out of the CR, but last
year, I could transfer up to 25 percent from construction to
operations, no PA.
    Senator Isakson. And PA stands for----
    Ms. Oates. The payroll accounts.
    Senator Isakson [continuing]. Payroll accounts?
    Ms. Oates. For my own staff.
    Senator Isakson. So you can from a maintenance and
operation transfer, but you couldn't freeze employment within
the Department to realize savings.
    Ms. Oates. That's correct. I couldn't transfer anything I
saved in my payroll account into operations. That's correct,
Senator.
    Senator Isakson. So you've got stovepipes in terms of those
three sources of revenue.
    Ms. Oates. Yes, sir.
    Senator Isakson. Thank you very much, Madam Secretary.
    Ms. Oates. Thank you, Senator.
    Senator Casey. Mr. Dixon, I wanted to ask you about how you
see the program going forward. You've had probably a more
direct exposure to the workings of this program than most
people. Do you feel confident now that sufficient reforms have
been undertaken for the program to move forward, or do you have
any concerns going forward about what's in place at this stage?
    Mr. Dixon. I don't necessarily have any concerns about what
has taken place at this stage. I think there's still a lot of
uncertainty about how we move forward. We're going to be
working very closely with the Department of Labor to ensure
that the Federal working relationship is intact and we
understand the implications of any changes to the program. We
don't know that to date, but we've made a commitment as Federal
agencies to continue to work together closely to ensure that we
do that in an effective way.
    Senator Casey. Assistant Secretary Oates, I wanted to ask
you about some of the underpinning of your decision on the
enrollment freeze. Prior to making that decision to institute
an enrollment freeze, which I know you didn't want to do, did
you or anyone in the Department engage in a kind of--for lack
of a better word, kind of a systematic or systemic review of
options? How did you approach that? How did you come to the
conclusion to institute an enrollment freeze?
    Ms. Oates. The decision was made because we had already
made several cuts to students. We told you we cut the student
stipends. We cut the separation pay, and we made changes to the
clothing allotment. I think we were, all of us, career and
political, sure that we couldn't hit kids one more time. We
couldn't cut the kids.
    We had done a number of things that we could do. We cut our
leases. We worked on our leases. We centralized the GSA fleet.
We did a number of things. We cut our media----
    Senator Casey. What does that mean when you say you
centralized----
    Ms. Oates. Each center has vehicles.
    Senator Casey [continuing]. Vehicles.
    Ms. Oates. And in program year 2011, each center did their
own operations and their own contract with GSA to manage that
fleet. We centralized that so we could better be sure of the
cost for program year 2012. So we pulled these things together.
We cut the media buy by $4 million. We had gotten everything we
could that we had control over.
    Basically, there were two things that we could do, Senator,
two options that we had. One was to shorten the year, end Job
Corps early. At that time, the decision was that we probably
could, with that shortfall, keep Job Corps going until the end
of April or early May instead of to June 30. Or we could freeze
enrollment.
    While neither of those is a good decision, we came to the
decision to freeze enrollment, because we thought we had to
stand to our commitment to students who were already enrolled.
And, clearly, if we had to abruptly end the year prior to June
30, kids would be in the middle of getting their GED, would be
2 weeks from getting their vocational credential. We thought
that was much more draconian than this draconian choice.
    Senator Casey. Can you make a determination or make an
estimation for the committee as to how long you think the
enrollment freeze will be in effect or needs to be in effect? I
know there's a date attached to it, but what's your current
assessment?
    Ms. Oates. That is really determined by how our
negotiations go with the contractors. As I said, I'm very
optimistic that the contractors have a renewed willingness to
work with us and cut costs the way Ag did. And I think that if
we're able to come up with sufficient costs, I can come to you
as a former auditor and say, ``Do you think this is real, or is
this imagined, or is this a shell game?'' Between the IG and
the OCFO and my departmental budget office and my comptroller,
they have to think the numbers are real to get me to June 30.
As soon as we're at that place, we'll begin enrollment again.
    And enrollment will begin first with the outreach in
admissions. Contractors have to staff up and start enrolling
kids, and then the kids will go to contracts. But I can't do
that until I'm sure I have enough money to get to June 30.
    Senator Casey. We have, I think, some limited time to
rectify this in order to get young people enrolled in a program
which they should be. I guess the program is normally 60,000
per year per student program and is now down below what--the
current number is under 40,000, some 35 to 30?
    Ms. Oates. When we suspended enrollment January 28, we had
44,000 kids and change, and we've dropped to about 6,000 right
now. So we haven't dropped any kids, but we haven't filled
6,000 slots that normally would have been filled. I think you
were correct. One of the Senators said we're losing about 1,000
a week. That's about correct.
    Senator Casey. One of the things that is particularly
disturbing about this is not simply the impact, but the fact
that there didn't seem to be an expert who could make accurate
budget forecasts or projections, couldn't do kind of a real
time assessment of how money was spent. And it's disturbing for
a department, but I'm afraid there's probably some other
departments that don't have this in place as well.
    It's kind of stunning to try to comprehend that
comptrollers aren't everywhere in an agency like Labor or any
other department. I don't know how you can function without a
comptroller. So this is going to lead to other questions about
other departments.
    But in the meantime, we're going to have to think of ways
in the next couple of days to get an even more real time
assessment of where things are. And, look, I understand these
contract negotiations have to be subject to some appropriate
secrecy. But there ought to be a way to inform people in a
confidential way as to where things stand. That whole process,
I think, is unacceptable when we're talking about taxpayer
money.
    We should explore that further. We don't have time today.
We should explore that further, and maybe Senator Isakson and I
cannot only work on that issue but work on others as well,
because this is a problem that is affecting people right now,
as you know, and we need to cure it.
    Senator Isakson, do you have anything else?
    Senator Isakson. I just have a closing comment. I
appreciate all the witnesses' testimony and appreciate what
they've done. I think this is a process oversight and
management problem, from what I've heard, and I think Mr. Lewis
referred to some of it. In one case, Mr. Lewis, you said there
were no apparent guidelines for contractors bid or procurement
policies.
    You said, Ms. Oates, that you underestimated the allowable
expenses of contractors. There were cases where we didn't take
$20 million we could have. There were recommendations on
attrition that we didn't take or couldn't take. It seems like
to me the answers probably lie in some of the answers to the
questions. We just need to implement the changes that allows
those things to take place.
    I will say this about the answer on the $20 million, and I
understand your answer. But your answer portends that you're
going to have a permanent $61 billion shortfall. And if you
couldn't take a short-term payback of $20 million and then
calculate for that in future contracting, even if it was a
partial cut down in the program, I think you missed a chance to
help remedy your problem and make it less bad, if you will.
    We want to work with the Department of Labor and work with
you, Ms. Oates, in making sure that we get the type of systems
in place in oversight and management disciplines. And,
hopefully, Mr. Lewis' report that comes out in May--is that
right? Hopefully, you're going to do some recommendations and
make some best practices observations that will help us to do
that.
    But I think the meeting has been very helpful, and I
appreciate the chair calling it.
    Senator Casey. Thank you, Senator Isakson. And just as a
little amendment, if you can move that up, that would help
everyone, if you can expedite that ongoing audit work. And we
appreciate all of you being here today. It's not easy. These
are tough issues, and you have difficult jobs. But we all work
for taxpayers. Sometimes we need a little reminder of that
around here.
    What we'll do is leave the record open for a number of days
for other members to submit questions for the record. I know I
will have a number of those. All we expect is promptness in
responding to those questions in a reasonable timeframe.
    Thank you very much.
    We're adjourned.
    [Additional material follows.]

                          ADDITIONAL MATERIAL

                          U.S. Department of Labor,
                                      Washington, DC 20210,
                                                     July 20, 2012.
Hon. Tom Harkin,
U.S. Senate,
Washington, DC 20510.

Hon. Richard Shelby,
U.S. Senate,
Washington, DC 20510.

    Dear Senator Harkin and Senator Shelby: Thank you for your letter
to Secretary Solis concerning funding for the Job Corps program in
program year 2011, July 1, 2011-June 30, 2012. The Department of Labor
(Department) appreciates the opportunity to respond to the questions
that are raised in Senate Report 112-76.
    As explained by Departmental officials from Job Corps and its
parent agency, the Employment and Training Administration (ETA), during
briefings for congressional staff on June 18, 2012, and on July 12,
2012, the Department has implemented the measures necessary to avoid a
funding shortfall in the Job Corps Operations account in program year
2011. We are committed to putting in place the organizational,
structural and personnel components to ensure that such a situation
does not arise again. As we move into program year 2012, the leadership
team from across the Department is continuing a full review of the
circumstances that led to this situation, and is in the process of
identifying and correcting weaknesses in Job Corps' and ETA's financial
management processes.
    The program year 2012 appropriation for Job Corps is
$1,702,947,000. This includes funding for the Operations; Construction,
Rehabilitation and Acquisitions (CRA); and Administration accounts.
While some efficiencies will be required, the Department believes this
funding level is sufficient to meet the needs of the Job Corps program
in the coming program year. The increased management and oversight of
the Job Corps program, as described below, will help ensure that
program obligations remain within the appropriation level.
    The Department regrets any delay in congressional notification.
Information related to the shortfall was evolving, and the Department
was hoping to provide a complete and accurate picture when notifying
congressional committees, Job Corps Center operators and students.
           the program year 2011 operations account shortfall
    The Department has identified programmatic, budgetary, and
managerial factors which combined to produce a potential shortfall in
the Job Corps program year 2011 operating budget that exceeded the
transfer authority provided by Congress in Public Law 112-10. Among
these factors was significant growth in student-related expenditures
resulting from an increase in the average time students reside at Job
Corps facilities, as well as student success in surpassing goals for
attaining industry-recognized credentials. In addition, the Department
opened three new Job Corps centers in program year 2010 and program
year 2011 and faced a $3 million reduction in its operating budget
below the 2010 level.
    Since July 2011, Job Corps anticipated that it would be necessary
to use a substantial portion of the authority provided by Congress in
Public Law 112-10 to transfer funds between the Job Corps CRA account
and its Operations account. However, Job Corps did not recognize the
full amount of the transfer needed for program year 2011 operations
until April 2012. At that point, Job Corps concluded that it would need
to exercise its full transfer authority to transfer $26.2 million from
the CRA account to the Operations account.
    In the following weeks, as ETA further analyzed the financial
situation, the estimated range of the potential shortfall in its
Operations account continued to increase. At the end of May, it became
apparent that the additional $26.2 million might not be adequate to
meet program year 2011 operating needs. A subsequent re-analysis of
financial operating plans against spending rates uncovered the need for
Job Corps to take immediate steps to prevent a potential funding
shortfall. Job Corps center operators were notified via a conference
call on May 31, 2012, that they would be required to submit revised
June spending plans. Job Corps sent operators written confirmation of
this notification on June 1, 2012.
    On June 4, 2012, the Office of Management and Budget (OMB) approved
the transfer of $26.2 million from the Job Corps CRA account to the
Operations account under the authority provided by Congress in Public
Law 112-10. By that point, the Department had already alerted the
Senate and House Committees on Appropriations of the possible funding
shortfall and the intention to transfer funds from the Job Corps CRA
account to the Operations account previously authorized in Public Law
112-10.
    To ensure continued program operations within appropriated funding,
the Department continued to collaborate with program contractors to
identify additional potential cost savings. ETA reached out to Job
Corps center operators and Outreach and Admissions/Career Transition
Services contractors on June 8, 2012, via telephone conference to
discuss opportunities for additional savings. Both ETA and the
contractors agreed that an additional 2 percent reduction of the June
2012 spending plans was feasible. Contractors then submitted revised
June spending plans.
    Because the Department recognized that the CRA transfer might not
completely bridge the shortfall in the Job Corps Operations account,
the Department sought and obtained approval from OMB to transfer up to
an additional $5.37 million from the ETA/Training and Employment
Services (TES) and ETA/State Unemployment Insurance and Employment
Service Operations (SUIESO) accounts to the Job Corps Operations
account. The Department notified the Appropriations Committees on June
12, 2012, of OMB's approval to transfer these funds, providing the 15-
day advance notice required under the Department's general transfer
authority.
    The full extent of the potential shortfall in the Operations
account went unrecognized through most of program year 2011, in large
part, because Job Corps lacked program monitoring tools and internal
controls to sufficiently analyze contractual spending trends developing
during the course of the program year. In turn, this led to inadequate
spending projections for the Operating account.
    Ultimately, the Department only needed to transfer $2.237 million
from the Dislocated Worker National Reserve Account in the TES
appropriation. Sufficient funds remained in the National Reserve
Account to meet National Emergency Grant needs for the remainder of
program year 2011.
              program year 2011 operations account balance
    Through coordination and cooperation from program contractors, ETA
saved $10.4 million, as a result of either deobligating or reducing
contracts fully funded through June.
    There remained $7.5 million in the Operations account at the
conclusion of Program Year 2011. ETA exercised prudent management to
determine this amount, which is comprised of $1.8 million in funds
remaining from the CRA transfer, which will expire June 30, 2013.
Additionally, it consists of $5.6 million, which is funding that
expired on June 30, 2012, but does not immediately return to the
Treasury and remains available as an ``expired account'' for 5 more
years. During the 5-year period, the expired amount may be used to
liquidate obligations properly chargeable to program year 2011.
    As a result of the transfer from the TES appropriation to the
Operations account, the savings generated by the reduction in spending
by contractors, and other actions, the Department has completed the
program year 2011 closeout process for Job Corps without a funding gap.
specific steps taken in june to address the program year 2011 shortfall
          while minimizing the impact on students and centers
    The Department took a number of steps to minimize the effects that
the program year 2011 shortfall mitigation measures had on new and
continuing students in Job Corps programs. Each Job Corps center
operator was provided with the same across-the-board cost-savings
targets. The cost savings measures were focused on non-mission critical
administrative expenses to ensure that student academic, career
technical training, and post-graduation placement activities were not
affected. In June, nearly 1,700 students completed their career
technical training program or earned their high school diploma or GED,
and over 3,100 students graduated from the program. These
administrative cost savings did not affect center performance, which is
based on the achievement and placement of students. ETA' s Contracting
Officers and Contracting Officer's Representatives discussed the
development of the revised June spending plans with each Job Corps
center operator. Operators that could not meet the savings in targeted
areas were given the flexibility to achieve approved cost savings in
other areas, assuming those savings did not affect personnel or
negatively impact services to students.
    The Department implemented several additional cost-savings and
oversight measures during June 2012:

     Modification of contracts to trim spending temporarily in
non-mission critical areas such as administrative expenses, purchasing,
and staff travel. This action included the $10.4 million in
deobligations cited above, along with reductions in contracts that were
not fully funded through June 30, 2012.
     Instructions to all Job Corps center operators not to
enroll new students in the month of June, just prior to the annual
summer break, while allowing exceptions for homeless students to enter
the program. This was communicated to operators in Program Instruction
Notice 11-28 on June 2, 2012.
     Adjustment of the start of the summer break for current
students by 3 days so that it would commence in early July instead of
June. This eliminated student transportation costs at the end of
program year 2011. This adjustment was communicated to Job Corps
contractors nearly 30 days prior to the original summer break start
date, and had minimal impact on students. The Department believes this
cost saving measure has particular merit and will be considered again
in program year 2012.
     Enrollment of new students after the summer break. The
traditional practice of enrolling students just a few weeks before the
summer break is very expensive, given the need to provide
transportation for those students to return home and then back to their
Center very shortly after admission. Instead, those students are
enrolling after the summer break. In addition to cost savings, Job
Corps will be reviewing whether this change may improve program
retention.
     Department leadership appointment of a Job Corps
Remediation Task Force within ETA to provide daily oversight of a
vigorous remediation effort during the end of the program year. In
addition, this team will provide ongoing oversight during fiscal year
2012.
     Notice from Secretary Solis to Acting Inspector General
Daniel Petrole regarding this situation. The Secretary requested that
the Office of Inspector General review the internal controls currently
in place within the Job Corps program and make recommendations for how
these processes can be improved.
     Instructions to Job Corps center operators regarding
additional oversight on travel expenses throughout the remainder of
program year 2011, including reporting all bus and airfare travel
directly to the National Office of Job Corps, prior to arranging travel
with ticketing agencies, to allow for full, near real-time accounting
of June's travel costs. This was communicated to operators in Program
Instruction Notice 11-33 on June 12, 2012. Closer monitoring of student
travel ensured the most efficient use of funds.
     Requirement that Job Corps center operators increase the
frequency of their submission of financial reports to allow the
Department to more quickly compare accrued expenditures with the Job
Corps centers' revised June spending plans.
        long-term improvements in management and fiscal controls
    Even before ETA encountered the estimated program year 2011
Operations account shortfall, it had begun to integrate Job Corps
budget and accounting functions into ETA's agency financial management
structure, had implemented several initiatives to strengthen and
coordinate existing internal controls, and had created new controls.
For example:

     ETA created a centralized Office of Contracts Management
(OCM) in October 2010 to improve oversight of procurement and contract
activities in Job Corps and the other programs in ETA. ETA' s plan is
to concentrate all ETA procurement authority and activities in OCM's
national office operations, and to institutionalize uniform contract
oversight practices across its national office and six regional
offices.
     In fiscal year 2011, ETA initiated a financial management
improvement plan that includes transfer of the stand-alone accounting
and budget activities for the Job Corps program to ETA's Budget and
Accounting Offices, and to fully integrate those activities within ETA.
Before the projected shortfall was known, ETA completed several steps
in the plan, such as assigning final obligation approval authority to
the ETA Budget Office.
     In April 2012, the Department created a new senior
executive service-level position of ETA Comptroller. In June 2012, ETA
filled the position and expects to complete the establishment of an
Office of the Comptroller later this calendar year. This Office will
enable ETA to improve monitoring of critical contract award and
administration responsibilities through enhanced internal controls, as
well as ensure consistent budget execution oversight.
     ETA has begun reevaluating the number of program slots and
the level of student services the Job Corps budget will support in
future program years to right size Job Corps' Career Technical Training
program.

    The steps the Department has already taken to date to prevent the
recurrence of a shortfall in the Job Corps Operations account will be
supplemented even further by management and oversight improvements and
program efficiencies that the Department is in the process of
identifying. The Department is committed to ensuring that Job Corps
continues to meet its important mission. If you have questions or need
technical assistance with respect to information necessary for the
process of the annual appropriations bill, you can contact Teri Bergman
of my office at 202-693-4608.
            Sincerely,
                                          Brian V. Kennedy.
                                 ______

   Response to Questions of Senator Casey, Senator Isakson, Senator
              Murray, and Senator Murkowski by Jane Oates
                             senator casey
    Question 1. How is Job Corps funding allocated/suballocated?
Geographically, by function, or some combination?
    Answer 1. The Employment and Training Administration (ETA)
allocates Job Corps operations funding at the national and regional
level. The regional allocations are broken down between each of the six
regions in the Department of Labor. The regional allocations are
provided for center operations based on the contract value and
projected costs for each center contract. The national office
allocation is used for items such as student payroll and travel,
national training center (NTC) contracts, the Job Corps Data Center,
and other academic support type contracts.

    Question 2. How does the Department of Labor currently track the
pace of obligations and expenditures as compared to its budget
projections?
    Answer 2. The Office of Financial Administration (OFA) within ETA,
established in August 2012, headed by a senior executive service-level
comptroller, oversees the now-centralized budget and financial
operations of Job Corps. OFA works with ETA's Office of Contracts
Management (OCM), established in 2010, to ensure that Job Corps
monitors costs incurred, and is continuing to improve the timeliness
and accuracy of the reporting. The added cooperation between OFA and
OCM has resulted in significant improvements in the financial oversight
of Job Corps. Together, OFA, OCM and the Office of Job Corps (OJC)
provide a system of checks and balances on expenditures and obligations
in the Operations account.
    In program year 2012, the Department used a control process for
obligations that compared the actual obligations recorded in the
Department's financial systems of record and a projection based on Job
Corps history and current operating decisions to stay within the
appropriation level. This comparative analysis was conducted monthly by
the national office. In program year 2013 this process of comparing
actuals versus educated projections will continue, but ETA has also
established budget targets for each center (in conjunction with the
reduced student slot levels), and also for each national office
contract prior to the start of the program year. This further
refinement of the measurement of obligations and projections is a
significant improvement that will allow Job Corps to start the program
year with its total commitments for program year 2013 within the
appropriation.
    In addition, during program year 2012, the Department implemented a
new control process for expenditures. At the start of a contract year,
center contractors are required to submit to ETA spend plans aligned
with the value in their contracts. Each contractor then submits monthly
expense reports for the center on the Job Corps Contract Center
Financial Report (Report 2110), which is comprised of 29 different
expense categories. The submitted monthly center financial reports are
analyzed by OFA in the national office against the center's overall
budget to ensure that they are within the contractor submitted spend
plans. When OFA identifies a budget discrepancy, OFA requests the
contracting officer (CO)--acting under the direction of the OCM at the
national office and the contracting officer's representative (COR) at
the OJC regional level--investigate the discrepancy and highlight any
issues for the national office. In addition, CORs--who are officially
responsible for monitoring one or more contracts, including the
financial aspects of those contracts--compare the spend plan against
the actual expenditures and monitor the centers' expenses on a monthly
basis to ensure expenses are valid under the contract. The COR then
compares this information with payment vouchers submitted by the
contractor and either certifies the voucher for payment or returns it
for correction. It is returned if it does not coincide with the
information the COR sees on the financial report or if the voucher
itself has unallowable or otherwise inappropriate costs. When a
contractor unjustifiably exceeds its budget in any of its contracted
budget lines, CORs are trained to alert their CO, so that the CO can
address the matter with the contractor. This entire control process
coordinated between the three offices--OJC, OFA and OCM--provides
assurances that spend plans submitted by contractors are aligned with
the center's budget, the actual valid expenses, and the payments made
to contractors.
    Together, these controls allow Job Corps not only to more
effectively plan contracts and obligations at the beginning of the year
to match its appropriation, but also to monitor spend rates throughout
the year so that OJC is more able to respond should unpredicted changes
occur.

    Question 3. What costs in program years 2011 and 2012 exceeded
projections? When was the Department able to detect these shortfalls?
    Answer 3. Although Job Corps has faced financial pressures in the
past, it experienced particular problems in program year 2011. Several
factors contributed to the problems in program year 2011, including
growth in expenditures, such as student-related expenditures and those
associated with the opening of three new Job Corps centers in program
year 2010 and program year 2011. While these and other costs increased
during the course of program year 2011, the extent of Job Corps'
financial difficulties went unrecognized because of serious weaknesses
in Job Corps' financial management processes that led to a failure to
identify and adjust for rising costs in a timely manner. This is
largely because Job Corps lacked appropriate program monitoring tools
and control protocols, including those to sufficiently analyze
contractual spending trends. In turn, this led to inadequate spending
projections for the Operations account. Furthermore, Job Corps operates
primarily through cost-reimbursement contracts. Cost-reimbursement
contracts require close, ongoing oversight by Job Corps in order to
manage or predict costs for future periods.
    The weaknesses in Job Corps program monitoring tools and protocols
combined with its heavy reliance on cost-reimbursement contracts
contributed to the challenges we faced and continue to face in
addressing these difficulties. In April 2012, we became aware that we
did not have sufficient funds in the Operations account to finish the
program year ending June 30, 2012 within appropriated levels. After
identifying the problem, Job Corps quickly implemented several cost-
saving measures and transferred funds from the CRA account into the
Operations account to address the program year 2011 financial
difficulties.
    In program year 2012, Job Corps is again experiencing financial
difficulties because the initial cost-savings measures taken were not
sufficient to allow the program to stay within its appropriated amount
without additional actions. At the outset of program year 2012, we
understood that we needed to take measures to ensure that program
obligations for the entire program year remained within Job Corps'
appropriated levels. Even before the program year started, we began to
develop a comprehensive plan for cost-cutting measures, which we
updated throughout the program year. From September 2012 to November
2012, we implemented several cost-savings measures to reduce Job Corps'
expenses although they ultimately were insufficient, so we implemented
additional measures from November to December. Notwithstanding these
efforts to reduce costs for program year 2012, in January 2012, we
continued to project insufficient savings for program year 2012
spending to remain within budgeted levels for the program year. The
decision to temporarily suspend enrollment at all centers, beginning
January 28, 2013, was seen as a balanced and efficient way to achieve
the savings needed to ensure we stay within our program year 2012
budget. The decision was extremely difficult and came after we
implemented many alternative cost-savings measures and examined other
alternatives. In the end, this difficult decision was made to ensure
that we would be able to keep our commitment to students who are
already in the program.

    Question 4. What cost-savings has the Department implemented in the
Job Corps program, both in the short-term to address the shortfalls,
and in the longer-term? Do you anticipate a shortfall in program year
2013?
    Answer 4. In program year 2011, the Department implemented a
variety of programmatic changes to control costs. These changes focused
on non-mission critical administrative expenses to ensure that student
academic, career technical training, and post-graduation placement
activities were not affected. Among other things, these included
negotiating across-the-board cost-savings targets with each Job Corps
center to de-obligate program year 2011 funds and suspending enrollment
for new students in the month of June, except for homeless youth. At
the same time, we implemented several initiatives to strengthen and
coordinate existing controls and created new controls where appropriate
to track contractor expenditures and ensure adequate funding throughout
the rest of program year 2011.
    At the outset of program year 2012, we understood that we needed to
take measures to ensure that program obligations remained within Job
Corps' appropriated levels. Even before the program year started, we
began to develop a comprehensive plan for cost-cutting measures, which
we updated throughout the program year. After OFA began operating in
August 2012, we developed initial targets for both savings and what we
believed would be a sufficient reserve for the Job Corps program. From
September 2012 to December 2012, we implemented several cost-
savings measures including reducing new student biweekly stipend and
transition pay, suspending enrollments in late November and December (a
period of the lowest student retention), centralizing student
transportation costs, reducing select national academic support
contracts and career technical support contracts, reducing health care-
related costs, reducing the clothing stipend, and increasing the
student-to-teacher ratio. We also eliminated a contract for accounting
services within the Job Corps Operations account, reduced USDA costs,
and negotiated with contractors to identify additional cost-savings
measures. Notwithstanding these efforts to reduce costs for program
year 2012, as of the beginning of January 2013, we continued to project
insufficient cost savings to remain within budgeted levels for the
program year. The decision to temporarily freeze enrollment was
extremely difficult and came after we implemented many alternative
cost-savings measures, albeit insufficient ones. The decision to
temporarily suspend enrollment at all centers is a balanced and
efficient way to achieve the savings needed to ensure we stay within
our program year 2012 budget and is sustainable in program year 2013
and beyond.
    To date, we have realized significant savings from cost-cutting
initiated during the current program year, including: $4 million from
reducing Job Corps' national media buy, $600,000 from eliminating a
contract for accounting services within the Job Corps Operations
account, $500,000 from reducing the Job Corps data center contract, and
over $1.2 million from ending stipend pay when a student is on leave.
In addition, we are currently negotiating cost reductions to the Job
Corps contracts resulting from the various cost savings measures that
have been implemented, including the enrollment suspension. The
Department is currently evaluating the proposals from the various Job
Corps contractors, and we will be happy to provide more detailed
information about the savings associated with these measures once
negotiations are complete.
    With the added cooperation between OFA and OCM beginning when OFA
was created in August 2012, the Department has established an improved
system to align contract values to the appropriated dollars and to
improve the quality of the management of those contracts. Job Corps
administers 147 contracts, most of which are cost-reimbursement
contracts. These contracts are multi-year contracts with a 2-year base
period with up to 3 additional option years. Although Job Corps
operating costs are incurred by contract year, Job Corps funding
operates on a program year schedule that begins July 1. These
complications make it more important to have multiple checks and
balances on financial and contract maintenance. We believe that we have
put in place a system that will provide much greater protection against
shortfalls in the future.
    The Department will also actively engage the Job Corps community in
discussions about their suggested changes to the Policy and
Requirements Handbook (PRH). Over the years, the PRH has become the
basis of Job Corps operations and the foundation for contract activity.
We believe that there may be requirements in the PRH that force
contractors to expend funds in ways that are not directly related to
the health and safety of students or the implementation of a high-
quality academic and career and technical education program. We intend
to examine suggestions for both cost-savings and improved management
and quality and make changes to the PRH where appropriate. As these
efficiencies are realized, they will be invested back into the Job
Corps program.
    In addition, for program year 2013 we have negotiated a reduced On-
Board Strength (OBS) for each center contract that will ensure that we
are operating within our appropriations until we can find additional
efficiencies that will allow us to explore the possibility of growing
the program.

    Question 5. Do these cost-savings include the closure of low-
performing centers? What cost-savings do you project from these
closures?
    Answer 5. The initiative to close a small number of chronically
low-performing centers is part of a broader reform effort to improve
program quality and strengthen accountability--it was not a response to
the financial problems in this program. Until a final decision
identifies which centers will be closed, we will not be able to
determine how much money will be saved as a result of closure.

    Question 6. What steps is the Department taking to improve its
financial monitoring and controls to prevent unanticipated spending and
respond to potential shortfalls more quickly?
    Answer 6. Through the joint work of the Office of Job Corps (OJC)
and the Office of Financial Administration (OFA) there is now a process
established to better track expenditures. For example, this process
allows Job Corps to match on a monthly basis, or more frequently if
needed, expenditures against the contractually agreed spend plan.
Expenditures such as utilities or food often experience an
unpredictable cost increase, but the improved monitoring will allow the
Job Corps program and procurement staff to identify and discuss how to
adjust for those unexpected costs. The Department and the Office of
Contracts Management (OCM) has improved both the training and the
supervision of contracting officer's representatives (CORs), who are
the direct liaisons to Job Corps contractors. CORs are now trained to
alert their contracting officer (CO) when a contractor unjustifiably
exceeds its budget in any of its contracted budget lines so that the CO
can address the matter with the contractor. OFA adds another layer of
oversight by assessing the impact of any additional spending across the
entire Operations budget. Weekly updates are provided by all three
offices' senior executives in meetings with the Assistant Secretary.
    Recognizing that this is a new system of financial management and
control, the leadership of OJC, OCM, and OFA also engage in regular
meetings with DOL's Office of the Chief Financial Officer (OCFO) and
the Departmental Budget Office (DBO), so that we gain the insight and
advice of other budget and finance experts.

    Question 7. Would these new monitoring tools have prevented the
2011 and 2012 shortfalls?
    Answer 7. While it is not possible to say that our structural
improvements could have prevented the problems in program year 2011 or
program year 2012, we believe that the improvements would have allowed
us to identify the program year 2012 concerns at an early enough stage
where less disruptive actions could have been taken to address the
problem.
                            senator isakson
    Question 1. What caused the delays in the three centers that were
scheduled to begin construction in program year 2010 and 2011? You
stated that those delays further complicated your financial situation.
Why and how was that not properly accounted for?
    Answer 1. In program year 2010 and program year 2011, Job Corps
opened three new centers on a delayed schedule, which contributed to
the financial problems the program faced in program year 2011. Funding
from the Operations account that had been provided to Job Corps to
cover the costs of operating these centers in prior years was no longer
dedicated to these sites as a result of the delays, and we did not
appropriately plan for the increased operations costs resulting from
opening these centers when we did. Serious weaknesses in Job Corps'
financial management processes led to a failure to identify and adjust
for these rising costs in a timely manner. This is largely because Job
Corps lacked appropriate program monitoring tools and control
protocols, including those to sufficiently analyze contractual spending
trends. In turn, this led to inadequate spending projections for the
Operations account. The weaknesses in Job Corps program monitoring
tools and protocols combined with its heavy reliance on cost-
reimbursement contracts that were not adequately managed contributed to
the challenges we faced.

    Question 2. In a February 19, 2013, correspondence to our
subcommittee you stated that several factors contributed to the
financial problems with Job Corps in program year 2011, including
``growth in expenditures such as student-related expenditures and those
associated with the opening of three new Job Corps centers in program
years 2010-11 . . .'' If this was the case, why did the program year
2012 or 2013 budget requests not reflect the true costs of the program?
In fact, if there were such cost growth to warrant two transfers of
funds into the program, why did the Department ask for a reduction in
both operations and construction funding in fiscal year 2013?
    Answer 2. When the budget request was submitted in February 2012
for fiscal year/program year 2013, the full extent of Job Corps'
financial problems were not known.

    Question 3. What happens to students who have been on waiting lists
for months to begin their training programs at Job Corps?
    Answer 3. Now that regular enrollment has resumed, we will work
with our Outreach and Admissions contractor community to review waiting
lists and then begin an orderly process of enrolling eligible students,
including those on waiting lists.

    Question 4. I support the Department's efforts to hold Job Corps
centers more accountable through performance measures as indicated in
your proposed center closure methodology. What troubles me is that it
seems as though these metrics would be simply used to close centers for
simple budgetary reasons rather than lack of performance. Your
testimony mentions that you ``expect savings'' from center closures.
Does that mean that you have assumed that some centers will be closing
immediately upon final rulemaking? Why has the Department not spent
more time on considering center improvement plans to help them improve
performance for the sake of our students? Closing centers may help your
budget but will ultimately hurt the students they are aimed at serving.
    Answer 4. The initiative to close chronically low-performing
centers is part of a broader reform effort to improve program quality
and strengthen accountability--it was not a response to the financial
difficulties in this program. While the majority of centers meet
program standards, some centers are chronically low-performing and have
remained in the bottom cohort of center performance rankings for
multiple years despite extensive DOL interventions including corrective
measures. Given the resource intensiveness of the Job Corps model, DOL
has determined that it can no longer continue to expend resources on
the small number of chronically low-
performing centers. We intend to begin to implement the selection and
closure process by program year 2013, following the legislatively
mandated activities pertaining to center closure required by the WIA
and as stipulated in the DOL/USDA Interagency Agreement. We estimate
that it will take a minimum of 6 months to execute closure of a center.
In addition, until a final decision identifies which centers will be
closed, we will not be able to determine how much money will be saved
as a result. Once low-performing centers are identified for closure,
the Department will work on a transition plan for each center. As
additional resources are recaptured from this process, they will be
reinvested into the program.
                             senator murray
    Question 1. Can you assure me today that the causes for the
financial shortfall have been clearly identified, are being fixed, and
that there will not be another shortfall in upcoming years? And if not,
what has to happen to provide that assurance?
    Answer 1. The Department has established an improved system to
align contract values to the appropriated dollars and to improve the
quality of the management of those contracts. Job Corps administers 147
contracts, most of which are cost-reimbursement contracts. These
contracts are multi-year contracts with a 2-year base period with up to
3 additional option years. Although Job Corps operating costs are
incurred by contract year, Job Corps funding operates on a program year
schedule that begins July 1. These complications make it more important
to have multiple checks and balances on financial and contract
maintenance. We believe that we have put in place a system that will
provide much greater protection against shortfalls in the future.
    The Department will also actively engage the Job Corps community in
discussions about their suggested changes to the Policy and
Requirements Handbook (PRH). Over the years, the PRH has become the
basis of Job Corps operations and the foundation for contract activity.
We believe that there may be redundant requirements in the PRH that
force contractors to expend funds in ways that are not directly related
to the health and safety of students or the implementation of a high-
quality academic and career and technical education program. We intend
to examine suggestions for both cost-savings and improved management
and quality and make changes to the PRH where appropriate. As these
efficiencies are realized, they will be invested back into the Job
Corps program.
    In addition, for program year 2013 we have negotiated a reduced On-
Board Strength (OBS) for each of center contract that will ensure that
we are living within our appropriations until we can find additional
efficiencies that will allow us to explore the possibility of growing
the program.
    We are also committed to reviewing the contracting approaches for
the program, and determining what type of contracts will allow us to
deliver services at the lowest risk and best value to the Federal
Government.

    Question 2. What alternatives are there for the current use of
cost-reimbursable contracts, and what are the relative tradeoffs of
switching to a new model of contract? I understand there are
discussions about a hybrid-contract. What are the details of such a
contract model? When and how might it be introduced on a pilot basis?
    Answer 2. Under cost-reimbursement contracts, ETA bears all the
risks of changes to contract costs, such as increased food or utility
costs. Generally, costs incurred by contractors that are ``allowable,
allocable or reasonable'' must be reimbursed to the extent prescribed
in the contract. These contracts establish an estimate of total cost
for the purpose of obligating funds and establishing a ceiling that the
contractor may not exceed (except at its own risk) without the approval
of the contracting officer. We also recognize that prior to award of a
cost reimbursement contract or order, adequate government resources
must be available to award and manage a contract other than firm-fixed-
priced. This includes appropriate government monitoring during
performance to provide reasonable assurance that efficient methods and
effective cost controls are used and designation of at least one
qualified contracting officer's representative has been made prior to
award of the contract or order.
    On the other hand, in a fixed-price contract, the contractor bears
maximum risk and full responsibility for all costs and resulting profit
or loss. It provides maximum incentive for the contractor to control
costs and perform effectively and imposes a minimum administrative
burden upon the contracting parties. We have converted three Outreach
and Admissions contracts from cost-reimbursement to fixed-price
contracts. We are tracking these actions carefully to evaluate cost
impact and are analyzing if there are appropriate opportunities to
consider such conversions.
    We are also looking at hybrid models, as a possible approach to our
center operations contracts. In that scenario, certain line items may
be priced on a fixed-price basis and others may be priced on cost-
reimbursement, to attain a better level of certainty and predictability
on our Job Corps contracts.
    Any changes in contract type will have to be phased in as contracts
expire, as modifying existing contracts is more difficult.

    Question 3. To what extent has the Department of Labor coordinated
with the Department of Agriculture to address the shortfall?
    Answer 3. USDA's operation of 28 Job Corps centers provides a
unique opportunity for young people to learn about good jobs in the
forestry sector. In addition, these young people get to provide
critical service on our public lands as they learn employment skills.
    Since Job Corps returned to ETA in October 2010 we have had several
conversations with USDA leadership on both center quality issues and on
budgetary issues. USDA has worked with us on the program improvement
plans for the lowest performing USDA centers and in conversations about
the impacts of their reduced budget on program quality. USDA will be
involved in all discussions on efficiencies and cost-savings moving
forward and all discussions focusing on student outcomes.

    Question 4. Generally, how are funds apportioned within the three
Job Corps accounts: administration, operations, and construction? Once
funds have been apportioned by OMB, does DOL allocate and suballocate
funds for contract centers by region and/or center, by functional
category, or some combination of the two? Is information available on
apportionments for these three accounts for fiscal year 2011 and fiscal
year 2012? Did DOL and/or OMB monitor the pace of obligations and
expenditures for the three Job Corps accounts against the levels that
had been apportioned?
    Answer 4. All apportionments are approved by the Office of
Management and Budget (OMB). The quarterly apportionment for Operations
is based on the aggregate value of center contracts and Outreach and
Admissions/Career Transition Services contracts. The Office of
Financial Administration (OFA) monitors its quarterly funding of Job
Corps center contracts throughout the program year to ensure funding is
consistent with the level of funding appropriated. This control was
instituted in program year 2012.
    The annual CRA appropriation is apportioned using facility surveys
for each center that document the condition of facilities, identify
deficient conditions, and provide recommendations and estimates for
correction and long-term plans for rehabilitation and expansion. The
annual apportionment for Program Administration is based on prior staff
salaries and travel.
    The Office of Financial Administration (OFA) within ETA,
established in August 2012, headed by a senior executive service-level
comptroller, oversees the now-centralized budget and financial
operations of Job Corps. OFA works with ETA's Office of Contracts
Management (OCM), established in 2010, to ensure that Job Corps
monitors costs incurred, and is continuing to improve the timeliness
and accuracy of the reporting. The added cooperation between OFA and
OCM has resulted in significant improvements in the financial oversight
of Job Corps. Together, OFA, OCM and the Office of Job Corps (OJC)
provide a system of checks and balances on expenditures and obligations
in the Operations account.
    In program year 2012, the Department used a control process for
obligations that compared the actual obligations recorded in the
Department's financial systems of record and a projection based on Job
Corps history and current operating decisions to stay within the
appropriation level. This comparative analysis was conducted monthly by
the national office. In program year 2013 this process of comparing
actuals versus educated projections will continue, but ETA has also
established budget targets for each center (in conjunction with the
reduced student slot levels), and also for each national office
contract prior to the start of the program year. This further
refinement of the measurement of obligations and projections is a
significant improvement that will allow Job Corps to start the program
year with its total commitments for program year 2013 within the
appropriation.
    In addition, during program year 2012, the Department implemented a
new control process for expenditures. At the start of a contract year,
center contractors are required to submit to ETA spend plans aligned
with the value in their contracts. Each contractor then submits monthly
expense reports for the center on the Job Corps Contract Center
Financial Report (Report 2110), which is comprised of 29 different
expense categories. The submitted monthly center financial reports are
analyzed by OFA in the national office against the center's overall
budget to ensure that they are within the contractor submitted spend
plans. When OFA identifies a budget discrepancy, OFA requests the
contracting officer (CO)--acting under the direction of the OCM at the
national office and the contracting officer's representative (COR) at
the OJC regional level--investigate the discrepancy and highlight any
issues for the national office. In addition, CORs--who are officially
responsible for monitoring one or more contracts, including the
financial aspects of those contracts--compare the spend plan against
the actual expenditures and monitor the centers' expenses on a monthly
basis to ensure expenses are valid under the contract. The COR then
compares this information with payment vouchers submitted by the
contractor and either certifies the voucher for payment or returns it
for correction. It is returned if it does not coincide with the
information the COR sees on the financial report or if the voucher
itself has unallowable or otherwise inappropriate costs. When a
contractor unjustifiably exceeds its budget in any of its contracted
budget lines, CORs are trained to alert their CO, so that the CO can
address the matter with the contractor. This entire control process
coordinated between the three offices--OJC, OFA and OCM--provides
assurances that spend plans submitted by contractors are aligned with
the center's budget, the actual valid expenses, and the payments made
to contractors.
    Together, these controls allow Job Corps not only to more
effectively plan contracts and obligations at the beginning of the year
to match its appropriation, but also to monitor spend rates throughout
the year so that OJC is more able to respond should unpredicted changes
occur.

    Question 5. To what extent would DOL's proposal to close a number
of ``chronically low-performing centers'' achieve cost savings for the
programs? Please include any cost projections prepared by DOL related
to the closures.
    Answer 5. The initiative to close a small number of chronically
low-performing centers is part of a broader reform effort to improve
program quality and strengthen accountability--it was not a response to
the financial problems in this program. Until a final decision
identifies which centers will be closed, we will not be able to
determine how much money will be saved as a result.

    Question 6. How does Job Corps' financial management program
conform to standards promulgated by the Federal Accounting Standards
Advisory Board (FASAB), OMB guidance, and other Federal standards,
rules and procedures? What procedures are in place to ensure that
objectives of internal controls are met?
    Answer 6. The Office of Financial Administration (OFA) within ETA,
established in August 2012, headed by a senior executive service-level
comptroller, oversees the now-centralized budget and financial
operations of Job Corps. OFA works with ETA's Office of Contracts
Management (OCM), established in October 2010, to ensure that Job Corps
accounts in a more timely and accurate way for costs incurred in its
cost reimbursement contracts. Financial management practices
implemented by OFA adhere to the requirements of all Federal financial
regulations and practices including OMB guidance, FASAB, and the
Federal Acquisition Regulation, and reflect the guidelines set forth in
the Job Corps Policy and Requirements Handbook (PRH). Both OFA and OCM
ensure the rules and regulations applicable to cost reimbursement
contracts are adhered to in order to account for costs incurred. The
added cooperation between OFA and OCM has resulted in significant
improvements in the financial oversight of Job Corps and helped Job
Corps identify potential funding concerns at an earlier stage than last
year. ETA has also enlisted the partnership of the Office of the Chief
Financial Officer (OCFO) and the Departmental Budget Office (DBC) to
act as another level of oversight. OCFO and DBC meet with ETA staff
weekly to review financial developments and provide advice to ETA
offices.
    In addition, in June 2012, then-Secretary Solis requested that the
Inspector General perform a comprehensive review of the Job Corps
financial control system. That review is ongoing and we look forward to
receiving the results.

    Question 7. Does each contract center have its own financial
management system, or does each use a standard, common system that is
integrated with DOL's financial management system? Does the financial
management system track expenditures against contract budgets to
determine whether funds are used appropriately?
    Answer 7. Each center contractor maintains its own financial
management system. Contractors are required to submit a spend plan
detailing their annual budget. During program year 2012, we implemented
a new control process for expenditures. At the start of the contract
year, center contractors were required to submit spend plans aligned
with the value in their contracts. Each contractor then submits monthly
expense reports on the Job Corps Contract Center Financial Report
(Report 2110) for their center, which is comprised of 29 different
expense categories. Contracting officer's representatives (CORs) at the
OJC regional level, who are officially responsible for monitoring one
or more contracts including the financial aspects of those contracts,
monitor the centers' expenses on a monthly basis. The submitted monthly
center financial reports are analyzed against the center's overall
budget to ensure that they are within the spend plans and expenses are
valid in accordance with the contract. The COR then compares this
information with payment vouchers submitted by the contractor and
either ``certifies'' the voucher for payment or returns it for
correction if it does not coincide with the information the COR sees on
the financial report or if the voucher itself has invalid costs. CORs
are trained to alert their contracting officer (CO) when a contractor
unjustifiably exceeds its budget in any of its contracted budget lines
so that the CO can address the matter with the contractor. This entire
control process provides assurances that ``spend plans'' submitted by
contractors are aligned with their actual valid expenses and payments
made to contractors are accurate.
                           senator murkowski
    Question 1. As result of funding shortfalls that you acknowledged
were the result of Department mismanagement in a letter dated February
19, 2013, Job Corps Centers around the country were ordered to suspend
all new enrollments beginning January 28, 2013 (see, Directive: Job
Corps Program Instruction No. 12-25 re: Temporary Suspension of New
Student Enrollments dated January 18, 2013). Exceptions from the
enrollment suspension included homeless individuals. It is my
understanding that the definition of homeless as it is being applied by
Job Corps includes students ``living in uninhabitable conditions or
staying in a shelter.'' This narrow definition nearly prevented the
Alaska Job Corps Center from assisting a homeless teen because that
individual was not actually in a homeless shelter. This individual was
couch-surfing from friend's home to friend's home without a fixed,
regular nighttime residence. This was neither an ``uninhabitable
condition'' nor a ``shelter.'' There are no homeless shelters in the
area where the Alaska Job Corps Center is located. The nearest homeless
shelter is in Anchorage, AK, more than 40 miles away. Through a large
concerted effort, the teen was transported to a shelter in Anchorage to
meet the admission criteria for Job Corps. But this solution will not
be available in every situation. In Alaska, and I'm sure in many other
less urban areas around the country, homelessness is a real problem
regardless of the availability of and access to shelters. Why is Job
Corps applying such a narrow definition of homelessness to its
admissions guidelines and not, for example, the McKinney-Vento Homeless
Assistance Act of 1987, as amended (42 U.S.C.  11301 et seq.), which
takes homeless shelters into consideration but is not required, in
light of Job Corps mission? This seems especially problematic during
enrollment suspensions. Will you amend the definition applied by Job
Corps so that it is more in line with other Federal definitions and
takes other forms of homelessness into consideration?
    Answer 1. Homeless youth, in addition to foster and runaway youth,
were exempted from the temporary suspension of enrollment lifted on
April 22, because of our concern for these vulnerable populations. In
determining whether an applicant meets homeless eligibility
requirements, the Office of Job Corps references existing criteria
included in the Policy and Requirements Handbook, as well as Federal
definitions of homeless such as McKinney-Vento. To ensure that the Job
Corps program is following Federal standards for defining homelessness,
we have revised the PRH to incorporate the McKinney-Vento homeless
definition.

    Question 2. In light of a 2-year budget management problem
experienced by the Job Corps program, why did ETA build new centers
when funding was limited while making decisions to close other centers?
    Answer 2. Funding for the new construction of the New Hampshire and
the Wyoming centers was appropriated in the Construction,
Rehabilitation, and Acquisition account in fiscal year 2009 and fiscal
year 2010, respectively, while the separate Operations account which
provides the funding necessary to operate Job Corps centers has been
the account in which costs have exceeded budgeted amounts. The
Administration and the Department continue to believe that having a
center in every State is an important goal. However, our top priority
in the very near term is to address the current funding situation. The
changes we are initiating are to ensure that we build a Job Corps
program that has the financial controls and tools to operate within its
appropriation moving forward.
    While the program changes we are initiating are to ensure that we
build a Job Corps program that has the financial controls and tools to
operate within its appropriation moving forward, the initiative to
close a small number of chronically low-performing centers is part of a
broader reform effort to improve program quality and strengthen
accountability--it was not a response to the financial problems in this
program.

    Question 3. The Office of Job Corps' operations budget has remained
level since fiscal year 2009 based on estimates made in the
Department's budget request. However, during this 4-year period, two
new centers have opened and two more are under construction. Why don't
the Department of Labor's budget requests reflect additional operations
funding for new centers?
    Answer 3. In program year 2010 and program year 2011, Job Corps
opened three new centers on a delayed schedule, which contributed to
the financial problems the program faced in program year 2011. Funding
from the Operations account that had been provided to Job Corps to
cover the costs of operating these centers in prior years was no longer
dedicated to these sites as a result of the delays, and we did not
appropriately plan for the increased operations costs resulting from
fully enrolling these centers.

    Question 4. The Senate's fiscal year 2013 funding bill includes
additional funding for the Job Corps. If approved and signed by the
President, what will be done to ensure the budget mismanagement
problems that have plagued Job Corps for the past 2 program years will
not continue? In other words, what steps are you taking to solve this
problem so that Job Corps is not in this same situation in a few months
when the next program year begins?
    Answer 4. The Department has established an improved system to
align contract values to the appropriated dollars and to improve the
quality of the management of those contracts. We believe that we have
put in place a system that will provide much greater protection against
shortfalls in the future.
    The Department will also actively engage the Job Corps community in
discussions about their suggested changes to the Policy and
Requirements Handbook (PRH). Over the years, the PRH has become the
basis of Job Corps operations and the foundation for contract activity.
We believe that there may be requirements in the PRH that force
contractors to expend funds in ways that are not directly related to
the health and safety of students or the implementation of a high-
quality academic and career and technical education program. We intend
to examine suggestions for both cost-savings and improved management
and quality and make changes to the PRH where appropriate. As these
efficiencies are realized, they will be invested back into the Job
Corps program.
    In addition, for program year 2013 we have negotiated a reduced On-
Board Strength (OBS) for each center contract that will ensure that we
are living within our appropriations until we can find additional
efficiencies that provide greater financial assurance that we can grow
the program.

    Question 5. After the fiscal year 2013 funding bill with this
additional funding becomes public law, when do you expect to begin re-
enrolling new students?
    Answer 5. The Department appreciates the authority included in the
enacted Continuing Resolution to transfer unobligated funds available
to ETA from other programs to Job Corps Operations. The transfer
authority allowed us to lift the partial stop work order on outreach
and admission contracts executed on January 28, 2013 before its
expiration date on April 28 and to take the steps necessary to resume
enrollment. With the support from Congress to help us address our
funding challenges, we were able to lift the suspension of enrollment
on April 22, 2013.

    Question 6. It is my understanding that the Alaska Job Corps Center
will soon reduce the number of trades available to trainees. Was that
decision based on labor market information, comparison of performance
of available trades, or other reasons? Please describe the process that
was used to reach the decision within the National Office of Job Corps.
For example, was the decision to eliminate training in some trades at
the center made in consultation with employers of trainees or other
stakeholders?
    Answer 6. As part of our overall costs savings efforts, we reviewed
all of our national training contracts, including those at the Alaska
Job Corps center, for possible financial savings, and eliminated
unnecessary programs across the country. Factors considered in
reviewing these programs for elimination included assessing whether a
center had more training slots than students, duplication of programs
at a center, needs for facility rehabilitation, whether there were
multiple trade instructors for a program, proximity of similar programs
at nearby centers, and the success of the program in placing students
in employment. We will continue to work with the Alaska center to make
sure that there are sufficient training slots in areas where there are
jobs in the local economy.
       Response to Questions of Senator Casey and Senator Murray
                           by Elliot P. Lewis
                             senator casey
    Question 1. Please describe the scope and methodology of the audit
presently underway into the Job Corps budgetary shortfalls.
    Answer 1. The audit scope will cover obligations and expenditures
of Job Corps' operational, construction and administrative funds during
program year 2011 (July 1, 2011 through June 30, 2012) and the first 5
months of program year 2012 (July 1, 2012 through November 30, 2012),
including focused efforts on the root causes which led to the
Department's need for a budget transfer request during program year
2011.
    To accomplish the audit objective of determining whether the
Department has implemented a properly designed system of internal
controls over Job Corps funds and expenditures, including contracting
activities, we are:

     Obtaining and reviewing (a) ETA policies and procedures
applicable during the period July 1, 2012 through November 30, 2012
regarding Job Corps funds management, contracting activities, and
expenditure/payment processes and (b) currently available documentation
related to DOL's Office of Management and Budget (OMB) Circular No. A-
123, Management's Responsibility for Internal Control, activities over
Job Corps funds and expenditures.
     Identifying processes and relevant internal controls
related to funds management and expenditures, including contracting
activities. These include, but are not limited to understanding:

          Involvement of various DOL offices in the funds
        management, expenditures and contracting activities;
          Competence of individuals performing manual controls;
          Assessment of risks;
          Preparation and review of SF-132s;
          Preparation and review of recording of apportionment;
          Preparation and review of allotments;
          Factors involved in determining any potential
        transfers between accounts;
          Funding of Job Corps contracts;
          Preparation and review of Job Corps contracts;
          Preparation and review of obligations associated with
        Job Corps contracts;
          Reconciliation of Job Corps contracts recorded in
        various applicable systems;
          Monitoring of Job Corps cost overruns;
          Preparation and approval of payments/expenditures;
          Reconciliation of actual costs to estimated costs;
        and
          Monitoring controls.

     Conducting interviews with DOL officials, including high
ranking officials, to determine when officials were made aware of the
insufficient funding that led to the budget transfer requested during
program year 2011, who they told, and what actions were taken.
     Evaluating audit evidence gathered to determine the root
cause which led to DOL's need for a budget transfer request during
program year 2011 and comparing the design of internal control
processes over Job Corps funds and expenditures, including contracting
activities, to the stated criteria and assessing whether they were
placed in operation during the first 5 months of program year 2012.

    Question 2. What previous audits have you conducted with regard to
the Federal oversight of the performance of Job Corps centers? What
conclusions did these audits reach?
    Question 3. How has the Department responded to your previous
audits? What steps have they taken to taken to respond to the
recommendations made in your prior audits?
    Answer 2 and 3. Summarized below are the results of Job Corps
audits the OIG has conducted during the period October 1, 2011 through
March 31, 2013.
    The Department's responses and corrective actions planned or taken
in response to our recommendations follow the findings outlined in the
summaries below.
 summary report of sub-contracting at six privately operated job corps
      centers--report no. 26-13-001-03-370 (november 8, 2012) \1\
---------------------------------------------------------------------------
    \1\ http://www.oig.dol.gov/public/reports/oa/2013/26-13-001-03-
370.pdf.
---------------------------------------------------------------------------
    From March 31, 2011, through June 22, 2012, we issued a series of
performance audit reports on sub-contracting for six Job Corps centers
operated by private contractors. For all six centers audited, we found
that the center operators did not always ensure best value to the
Federal Government when awarding sub-contracts and purchase orders.
Additionally, two centers did not support claimed costs by consistently
obtaining required documentation. In aggregate, we identified $8.7
million in questioned costs--the total value of the sub-contracts and
purchase orders awarded without ensuring best value. These conditions
occurred because the center operators were not aware of the Federal and
contractual requirements applicable to their procurement activities and
did not establish the necessary controls to ensure compliance with
their own standard operating procedures for procurement. Additionally,
Job Corps did not effectively enforce the center operators' adherence
to the procurement requirements for Job Corps centers and did not
provide adequate oversight of their sub-contracting practices.
    The Department generally agreed with our findings and
recommendations and indicated it has made programmatic changes to
improve guidance and oversight over center sub-contracting. These
changes comprise updating its policy handbook to address sub-
contracting responsibilities and procedures, including procedures for
administration of cost reimbursable contracts and their associated sub-
contracts. The Department also stated it has provided guidance and
training to its contracting officers on proper oversight and monitoring
of contractors purchasing systems, including ensuring contractors are
held accountable for managing sub-contracts. During center assessment
and monitoring visits, the Department stated it will review sub-
contracts for FAR compliance. In certain cases, the Department has
withdrawn the approval of center operators' contracting purchasing
systems and now requires the contractor to obtain Departmental approval
before awarding any sub-contracts. Finally, the Department has
disallowed $443,064 of contractor claimed sub-contracting costs.
     conflict of interest complaint on a job corps center operator
subcontract award had merit--report no. 26-12-004-03-370 (september 28,
                               2012) \2\
---------------------------------------------------------------------------
    \2\ http://www.oig.dol.gov/public/reports/oa/2012/26-12-004-03-
370.pdf.
---------------------------------------------------------------------------
    The Department referred to the OIG an anonymous complaint
concerning a subcontract to provide academic and career technical
training services at the Homestead Job Corps Center, which is operated
by ResCare, Inc. Our audit found that ResCare did not advertise or open
the subcontracting opportunity for competition to other subcontractors,
and did not justify the sole source procurement as required. Moreover,
we found that ResCare allowed an executive vice president to award the
subcontract to a company owned and operated by a subordinate, which
represented a significant conflict of interest.
    In response to our recommendations, the Department directed ResCare
to repay the Government $76,431 in disallowed costs. ResCare has repaid
the disallowed costs, terminated the subcontract in question, and
awarded a new sub-contract to a different company. The Department
stated that it may seek to suspend or debar both companies involved in
the procurement including the principal individuals involved. The
Department also revoked ResCare's purchasing system approval, and
stated it would conduct a full Contractor Procurement System Review of
ResCare and provide Job Corps program staff with tools to spot check
ResCare's purchasing activities during center assessments and
monitoring visits. Finally, the Department sent a memorandum to all Job
Corps operators informing them of the consequences of the actual
occurrence, or the appearance of a conflict of interest in
subcontracting and stated it will require all Employment and Training
Administration prime contractors to include a non-conflict of interest
certification statement in all subcontracts awarded.
job corps must strengthen controls to ensure low-income eligibility of
    applicants--report no. 26-11-005-03-370 (september 30, 2011) \3\
---------------------------------------------------------------------------
    \3\ http://www.oig.dol.gov/public/reports/oa/2011/26-11-005-03-
370.pdf.
---------------------------------------------------------------------------
    Secretary Solis requested an audit of the Office of Job Corps'
outreach and admissions process after the Department found that a
service provider had admitted ineligible students at the Gadsden Job
Corps Center in Alabama. Our audit found that Job Corps did not ensure
outreach and admissions service providers enrolled only eligible
students because of significant and systemic control weaknesses at both
the Job Corps and contractor levels. Job Corps policy allowed potential
students to self-certify their family income levels. Further, admission
counselors obtained income documentation from potential students only
if what students provided verbally was questionable or the potential
student's social security number ended in one of five two-digit
sequences. The latter criterion resulted in requiring documentation
from only 5 percent of applicants to verify reported income. As a
result of these insufficient enrollment procedures, ineligible students
took slots intended for at-risk and low-income youth. Based on our
statistical sample of the 5,504 students enrolled at Job Corps centers
in March 2011, we estimated that 472 ineligible students enrolled in
the program during that month, and $13.9 million in DOL funds would be
spent to train them.
    In response to our recommendations, the Department made changes to
its student enrollment process--including an enhanced low-income
eligibility verification process, elimination of income self-
certification, and requiring outreach and admissions service provider
to obtain income documentation from all potential students.
   job corps needs to improve reliability of performance metrics and
     results--report no. 26-11-004-03-370 (september 30, 2011) \4\
---------------------------------------------------------------------------
    \4\ http://www.oig.dol.gov/public/reports/oa/2011/26-11-004-03-
370.pdf.
---------------------------------------------------------------------------
    Our audit objective was to determine the extent to which Job Corps
had metrics in place to assess the program's performance. Our scope
covered Job Corps' performance metrics and outcomes for program year
2009 and the month of October 2010. The audit found that while Job
Corps had 58 performance metrics in place, these metrics did not always
provide a clear and accurate assessment of the program's performance.
More than 15 years ago, GAO first expressed concerns about the
reliability of Job Corps' metric for job training match. While Job
Corps has made some improvements since that time, such as reducing the
number of allowable broad placement categories that were considered
matches for several vocations, we found that reliability continues to
be an issue. For example, problems with how Job Corps calculated its
job training matches led to an overstatement of 7,517 (42.3 percent) of
the 17,787 matches reported for the periods reviewed. Further, 3,226 of
these matches either did not relate or poorly related to the vocational
training received (e.g., students trained in office administration
placed in fast food restaurants).
    In response to our recommendations, the Department stated it would
launch a revised Job Training Match crosswalk and a new safeguard in
its student data base electronic system that will require career
transition service contractors to validate the relevance of a student's
placement to his or her training. The Department also launched an
online interactive map that shows the performance of every center, and
plans to publish additional performance metrics and an annual report on
the metrics required by the Workforce Investment Act.
job corps oversight of center performance needs improvement--report no.
               26-12-006-03-370 (september 28, 2012) \5\
---------------------------------------------------------------------------
    \5\ http://www.oig.dol.gov/public/reports/oa/2012/26-12-006-03-
370.pdf.
---------------------------------------------------------------------------
    We conducted a performance audit to determine the extent to which
Job Corps ensured that its centers managed their academic and career
technical training (CTT) programs in order to meet performance goals
and maximize student achievements. The scope of the audit included Job
Corps performance data for program year 2008 through 2010 (July 1,
2008-June 30, 2011). Our audit found that Job Corps initiated several
major programmatic shifts and policy changes that resulted in improved
performance across all three of its Government Performance and Results
Act performance indicators during program years 2008 through 2010.
However, we also found that individual centers did not consistently
meet established Career Technical Training program completion and High
School Diploma/General Educational Development Certificate (HSD/GED)
attainment goals. We also found that Job Corps did not provide
sufficient oversight at the center level to improve performance.
    In response to our recommendations, the Department revised its
Policy and Requirements Handbook in program year 2012 to clarify
processes and procedures for the issuance of Performance Improvement
Plans for underperforming CTT programs and stated that for centers with
Performance Improvement Plans, related oversight activities such as
Regional Office Center Assessments and monitoring visits will be more
tightly aligned, documented and coordinated. The Department also
redesigned its evaluation scale to reflect a more balance distribution
of overall trade performance, and is developing a report card format to
track the performance of center academic programs. Finally, the
Department stated it has made a concerted effort to conduct its
Regional Office Center Assessments on schedule and will be in full
compliance by fiscal year 2013.
    job corps needs to improve timeliness of and accountability for
    maintenance repairs at its centers--report no. 26-13-002-03-370
                         (december 7, 2012) \6\
---------------------------------------------------------------------------
    \6\ http://www.oig.dol.gov/public/reports/oa/2013/26-13-002-03-
370.pdf.

    During program years 2009-11, Job Corps received, on average,
$108.3 million per year in appropriations to pay for new center
construction, rehabilitation of existing centers, land acquisitions,
and necessary maintenance to keep its centers in acceptable condition.
Our audit found Job Corps did not always ensure center maintenance
deficiencies were repaired in a timely manner, exposing students,
staff, and visitors to potential safety and health hazards. We
identified 202 critical and funded maintenance deficiencies involving
life, safety, and health issues that remained unrepaired more than 1
year after they had been identified. We also identified 605 critical
maintenance deficiencies that had been repaired, but it took an average
of 2.4 years to complete those repairs. We also found Job Corps did not
effectively manage its maintenance funds and $32.9 million in unused
funds were expired or approaching expiration. The inability of Job
Corps to expend these funds represented a lost opportunity to fund
critical repairs and ensure safer Job Corps centers. These conditions
occurred because Job Corps did not have an effective process to ensure
maintenance deficiencies were addressed appropriately and timely, and
did not place sufficient emphasis on tracking and monitoring the status
of obligated funds.
    In response to our recommendations, the Department stated it had
begun Policy and Requirements Handbook changes to ensure deficiencies
are accurately identified and repaired in a timely manner. Final policy
changes are expected to be completed by June 30, 2013. Additionally,
the Department presented a series of webinars to all regional and
center staff responsible for recording accurate data in the Funded-Not-
Corrected data base, and stated that policy changes will include the
requirement that Funded-Not-Corrected projects should be completed
within 1 year unless reasonable circumstances delay the process. The
Department continues to disagree with our finding that $32.9 million in
unused maintenance funds were expired or approaching expiration,
maintaining that the cancellation of funds rate is not significant.
Nonetheless, the Department stated it will continue efforts to improve
and has realigned budget functions to provide increased oversight of
financial management processes in the new Job Corps Division of Budget.
                             senator murray
    Question 1. Can you assure me today that the causes for the
financial shortfall have been clearly identified, are being fixed, and
that there will not be another shortfall in upcoming years? And if not,
what has to happen to provide that assurance?
    Answer 1. The Job Corps program is administered by DOL's Employment
and Training Administration (ETA). The OIG's role is to review DOL
programs and operations such as those of Job Corps, and to make
recommendations to the Department on ways to improve program efficiency
and effectiveness.
    As we noted in our written testimony, our audit of the Job Corps
program is determining why the budget overruns happened, what control
issues allowed this to happen, what changes the Department has made,
and what additional changes are still needed to ensure this does not
happen again.
    However, while the OIG audit may identify Job Corps management
issues as well as reasons for the budget overruns over the past 2
years, it is the Department's responsibility to fix any issues
identified and to make sure that there are no overruns in upcoming
years.

    Question 2. What alternatives are there for the current use of
cost-reimbursable contracts, and what are the relative tradeoffs of
switching to a new model of contract? I understand there are
discussions about a hybrid-contract. What are the details of such a
contract model? When and how might it be introduced on a pilot basis?
    Answer 2. The Employment and Training Administration, as the
administrator of the Job Corps program, is best positioned to address
this question, given that the OIG's role is limited to audit and
investigative oversight of these programs.

    [Whereupon, at 3:55 p.m., the hearing was adjourned.]

                                   