Department of Labor: Senior Community Service Employment Program Delivery
Could Be Improved Through Legislative and Administrative Actions (Letter
Report, 11/01/95, GAO/HEHS-96-4).

GAO examined the Department of Labor's Senior Community Service
Employment Program (SCSEP), focusing on: (1) Labor's process for
awarding SCSEP grants; (2) the extent to which Labor equitably
distributes SCSEP funds; and (3) SCSEP administrative costs.

GAO found that: (1) in order to maintain 1978 activity levels, the Older
Americans Act requires Labor to award SCSEP grants to national sponsors
and those with proven track records; (2) of the $410 million in SCSEP
appropriations for program year 1994, $234.5 million was distributed
under the 1978 activity level provision; (3) Labor's use of the 1978
allocation pattern severely limited its ability to achieve equitable
distribution among states; (4) appropriations statutes have overriden
the title V funding provision to require that no more than 22 percent of
SCSEP appropriations be allocated to state governments; and (5) in
program year 1994, national sponsors' administrative costs exceeded the
15 percent limit due to administrative expenses being charged to another
cost category.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-96-4
     TITLE:  Department of Labor: Senior Community Service Employment 
             Program Delivery Could Be Improved Through
             Legislative and Administrative Actions
      DATE:  11/01/95
   SUBJECT:  Elderly persons
             Administrative costs
             Aid for training or employment
             Employment or training programs
             Non-profit organizations
             Grant administration
             State-administered programs
             State governments
             Grant award procedures
             Disadvantaged persons
IDENTIFIER:  ETA Senior Community Service Employment Program
             DOL Operation Mainstream
             
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Cover
================================================================ COVER


Report to the Ranking Minority Member, Subcommittee on Oversight of
Government Management and the District of Columbia, Committee on
Governmental Affairs, U.S.  Senate

November 1995

DEPARTMENT OF LABOR - SENIOR
COMMUNITY SERVICE EMPLOYMENT
PROGRAM DELIVERY COULD BE IMPROVED
THROUGH LEGISLATIVE AND
ADMINISTRATIVE ACTIONS

GAO/HEHS-96-4

Senior Community Service Employment

(205270)


Abbreviations
=============================================================== ABBREV

  AARP - American Association of Retired Persons
  ANPPM - Association Nacional Pro Personas Mayores
  ETA - Employment and Training Administration
  FICA - Federal Insurance Contributions Act
  NAPCA - National Asian Pacific Center on Aging
  NASUA - National Association of State Units on Aging
  NCCBA - National Caucus and Center on Black Aged
  NCOA - National Council on Aging
  NCSC - National Council of Senior Citizens
  NICOA - National Indian Council on Aging
  NUL - National Urban League
  OAA - Older Americans Act
  OIG - Office of the Inspector General
  OMB - Office of Management and Budget
  PRB - Procurement Review Board
  SCSEP - Senior Community Service Employment Program
  USFS - U.S.  Forest Service

Letter
=============================================================== LETTER


B-257708

November 2, 1995

The Honorable Carl Levin
Ranking Minority Member
Subcommittee on Oversight of
 Government Management and the
 District of Columbia
Committee on Governmental Affairs
United States Senate

Dear Mr.  Levin: 

Each year, the Department of Labor's Senior Community Service
Employment Program (SCSEP) provides grants to finance part-time,
minimum-wage community service jobs for about 100,000 economically
disadvantaged older Americans.  The program is authorized by title V
of the Older Americans Act (OAA), and it received an appropriation of
$396 million for fiscal year 1995.  Labor awards the bulk of the
SCSEP grant funds to 10 nonprofit national sponsors and the remainder
to the state governments that administer the program for the
Department. 

Earlier, you expressed concern to us about Labor's process for
awarding noncompetitive grants.  Our first report to you on the
subject covered Labor's 134 smaller grants,\1 and this, our final
planned report on the subject, covers the larger SCSEP program.  Our
objectives for this report were to examine

  Labor's process for making SCSEP grant awards;

  the extent to which Labor's allocation of SCSEP funds equitably
     distributes the subsidized job positions; and

  other administrative issues, including administrative expenses, for
     the program. 

To develop this information, we reviewed grant documents, the
relevant OAA provisions, Labor's regulations and procedures,\2
states' reports documenting the distribution of positions within
states, and Labor's internal documents reporting the distribution of
funds and positions to states\3 and national sponsors.  During our
review, we also interviewed officials of Labor, 28 state offices
responsible for SCSEP activities, and each of the 10 national
sponsors.  To examine the appropriateness of expenses allocated to
specific budget categories, we relied on budget data in the grant
applications.  We did so because Labor staff use these data in their
award and approval process and because actual cost data were not
available.  We did not independently verify the data reported to us. 
We conducted our review between April 1994 and April 1995 in
accordance with generally accepted government auditing standards. 
For further details on the scope and methodology of our work, see
appendix I. 

In an earlier report on training programs, we identified SCSEP as 1
of 163 federal programs and funding sources constituting the federal
effort to support employment training assistance.\4 The 104th
Congress is considering proposals to consolidate and transfer to
block grants many of these programs, including SCSEP.  Although this
report does not address such proposals, its information on SCSEP may
be useful to those considering them. 


--------------------
\1 Department of Labor:  Noncompetitive, Discretionary Grants
(GAO/HEHS-94-9, Feb.  22, 1994). 

\2 From 1980 to June 1995, Labor operated the SCSEP program under a
series of draft revisions to the 1976 regulations.  On May 17, 1995,
Labor published revised final regulations in the Federal Register,
which became effective on June 30, 1995. 

\3 In this report, we use the term "states" to refer also to the
governments of the District of Columbia, Puerto Rico, and the U.S. 
Territories.  These governments also participate in the SCSEP
program. 

\4 Multiple Employment Training Programs:  Major Overhaul Needed to
Reduce Costs, Streamline the Bureaucracy, and Improve Results
(GAO/T-HEHS-95-53, Jan.  19, 1995). 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

The OAA\5 requires Labor to award grants to national sponsors
sufficient to maintain their 1978 level of activities and in so doing
to give preference to organizations of proven ability.  This
requirement to maintain the 1978 level of activity is commonly known
as the "hold harmless" provision.\6 Of the $410.5 million
appropriation for program year 1994, $234.5 million was distributed
under this provision.  In applying this provision, Labor uses 1978
state-by-state position allocation patterns.  The remaining funds are
distributed in accordance with current age and per capita income data
to state governments and national sponsors. 

Labor's use of 1978 allocation patterns on a state-by-state rather
than nationwide basis greatly limits its ability to achieve equitable
distribution among the states on the basis of actual need.  This
results in overserved and underserved states.  Our analysis shows
that had the hold harmless funding for program year 1994 been
distributed on the basis of up-to-date age and income data, 25 states
would have gained or lost at least $500,000.  Further, within states,
Labor has permitted a continuing pattern of overserved and
underserved areas. 

Appropriations statutes also affect equitable distribution.  If title
V funding exceeds the 1978 funding level in subsequent years, another
provision of the OAA\7 requires that the excess be split--55 percent
for states and 45 percent for the national sponsors.  However, the
"55/45" provision has never been implemented.  Every year since 1978,
appropriations statutes have overridden the 55/45 provision.  These
statutes have required that no more than 22 percent of the SCSEP
appropriation be allocated to the state governments.\8 At least 78
percent must be allocated to the national sponsors. 

Under Labor's regulations, expenditures that we believe to be
administrative in nature may be charged to another cost
category--"other enrollee costs"--thereby allowing the statutory
15-percent limit on administrative expenses to be exceeded.\9 In
program year 1994, this resulted in national sponsors' budgeted
administrative costs exceeding the 15-percent limit by over $20
million.  As a result, grant funds that could have been spent to
finance additional program positions have therefore been improperly
allocated. 


--------------------
\5 42 U.S.C.  3056d(a). 

\6 The statute provides that the Secretary of Labor must first
reserve from annual appropriations "such sums as may be necessary"
for grants with public or nonprofit private organizations "to
maintain the level of activities carried on under such grants or
contracts at least at the level of such activities" in fiscal year
1978.  42 U.S.C.  3056d(a)(1)(A).  In 1978, the program had five
national sponsors.  Over the years, the number of national sponsors
has increased to 10. 

\7 42 U.S.C.  3056d(a)(1)(B). 

\8 For example, Public Law 103-333. 

\9 42 U.S.C.  3056(c)(3). 


   BACKGROUND
------------------------------------------------------------ Letter :2

SCSEP evolved from Operation Mainstream, which trained and employed
chronically unemployed adults under the Economic Opportunity Act of
1964.  In 1965, Operation Mainstream provided funding to the Green
Thumb organization, at the time a nonprofit affiliate of the National
Farmers Union, to conduct a pilot training and employment program for
economically disadvantaged older workers in several rural areas. 
Green Thumb was thus the first of the 10 nonprofit national sponsors
that today administer most of the SCSEP funds. 

During the next 13 years (1965-1978), legislative and administrative
actions instituted most of the basic aspects of today's SCSEP: 
responsibility for the program was moved to the Department of Labor;
the program was made part of the OAA and given the goal of providing
subsidized employment in community service organizations to
economically disadvantaged older Americans; all grantees were asked
to attempt to place at least 10 percent of their program enrollees in
unsubsidized jobs (the goal has been 20 percent since 1985); and 8 of
the eventual 10 national sponsors, as well as most state governments,
were made grantees for the program.\10

Of the current 10 national sponsors, 5 were added because of OAA
amendments and other congressional guidance to Labor, which directed
that Labor add sponsors oriented toward certain ethnic groups with
high concentrations of the elderly poor.  Such direction explains
Labor's funding, as national sponsors, two African American
organizations (1978) and three other organizations:  one representing
Hispanic Americans (1978); one, American Indians (1989); and one,
Asian Americans (1989).  The legislation, however, requires all
sponsors to provide all SCSEP applicants an equal opportunity to
participate in the program regardless of race or nationality. 


--------------------
\10 Labor offers all states the opportunity to administer SCSEP grant
funds.  In program year 1994, five states (Alabama, Arizona, Florida,
Montana, and South Dakota) declined, and their SCSEP funds were
administered by one or more of the national sponsors. 


      STATUTORY PROVISIONS ON
      ALLOCATING FUNDS
---------------------------------------------------------- Letter :2.1

The OAA contains several provisions for Labor's allocation of SCSEP
funds.  The hold harmless provision\11 requires the Secretary of
Labor to reserve for the national sponsors a funding amount
sufficient to maintain the 1978 activity level.  Any balance of the
appropriation over the hold harmless amount is to be distributed to
the sponsors and state governments mainly on an "equitable
distribution" basis--that is, in accordance with the state-by-state
distribution of persons 55 years old or older, adjusted for per
capita income.\12 A minor limitation on such a distribution is the
requirement for a minimum allocation for each state, a provision
designed to protect the smaller states.\13

Another provision requires that the portion of any appropriation that
exceeds the 1978 funding level in subsequent years will be split--55
percent for states and 45 percent for the national sponsors.\14
However, the "55/45" provision--designed to provide state governments
more parity with the national sponsors--has never been implemented. 
Every year since 1978, appropriations acts have overridden the 55/45
provision.  These statutes have required that no more than 22 percent
of the SCSEP appropriation be allocated to the state governments.\15
At least 78 percent must be allocated to the national sponsors. 

A third provision that also still applies is the requirement for an
equitable distribution of funds among areas within each state.\16


--------------------
\11 42 U.S.C.  3056d(a)(1)(A). 

\12 42 U.S.C.  3056d(a)(3). 

\13 42 U.S.C.  3056d(a)(3)-(4). 

\14 42 U.S.C.  3056d(a)(1)(B). 

\15 Public Law 103-333. 

\16 42 U.S.C.  3056d(c). 


      SCSEP IN PROGRAM YEAR 1994
---------------------------------------------------------- Letter :2.2

The SCSEP appropriation for the 1994 program year\17 ($410.5 million)
accounted for about 28 percent of all OAA funds.  All but two of the
OAA programs are administered by the Department of Health and Human
Services.\18 Labor administers SCSEP through its Employment and
Training Administration (ETA).  Like other OAA programs, SCSEP's
authorization expired at the end of fiscal year 1995.  The Congress
is reviewing proposals for reauthorization. 

To receive a SCSEP grant, a national sponsor or state government must
agree to provide a match, in cash or in kind, equal to at least 10
percent of the grant award.  Many state governments make their match
in the form of cash contributions.  The national sponsors, on the
other hand, normally provide in-kind matches in the form of donated
office space, staff time, equipment, and the like.  The in-kind
matches for most national sponsors come not from the sponsors' own
resources but from those of the community service host agencies,
where the SCSEP enrollees actually work.  These host agencies
typically are local libraries, nutrition centers, parks, and similar
public service entities. 

National sponsors and state governments use the SCSEP grants to
finance SCSEP part-time jobs in host agencies.  The cost of such a
job, or enrollee position--which generally must include at least 20
hours of work a week--is the amount determined sufficient to fund (1)
an enrollee's minimum wages, benefits, training, and incidental
expenses for up to 1,300 hours a year in the program and (2) the
associated administrative expenses.  This cost amount, termed the
"unit cost" by Labor, is adjusted periodically by Labor in
consultation with the Office of Management and Budget (OMB).  The
unit cost is currently $6,061.  Labor divides each year's SCSEP
appropriation by the unit cost amount to determine how many positions
are available. 

Program enrollees, who must be 55 or older and earn no more than 125
percent of the federal poverty level, are paid the federal or local
minimum wage--whichever is higher.  For the 1994 program year,
funding permitted the establishment of about 65,000 positions
nationwide.  An enrollee may leave a program position for such
reasons as illness or acceptance of an unsubsidized job.  Thus,
during the 1994 program year, about 100,000 enrollees occupied the
65,000 positions; about three-quarters of these enrollees were women. 

Often, in the administration of SCSEP grants, entities other than the
national sponsors and state governments participate as intermediaries
between the sponsors and the host agencies.  Some of these entities
are municipalities; many are Area Agencies on Aging, organizations
the state designates to plan and provide services to the elderly. 
These intermediaries sometimes enter into agreements with states and
national sponsors as subgrantees to find specific host agencies for
program enrollees. 


--------------------
\17 The SCSEP program year runs from July 1 to June 30.  For example,
the period from July 1994 through June 1995 was the 1994 program
year.  Funds for the 1994 program year came from the Department of
Labor Appropriations Act for fiscal year 1994.  Labor did not
obligate the SCSEP amounts in that appropriation until July 1994. 

\18 Under title IV of the OAA, the U.S.  Department of Agriculture
administers a program that provides surplus commodities for nutrition
services. 


      THE 10 NATIONAL SPONSORS
---------------------------------------------------------- Letter :2.3

Of the 1994 program year appropriation, Labor allocated the national
sponsors $320.2 million (78 percent) and the states and territories
$90.3 million (22 percent).  The 10 national sponsors that received
grant awards were, as in previous years, the following: 

  American Association of Retired Persons (AARP),

  Associacion Nacional Pro Personas Mayores (ANPPM),

  Green Thumb,

  National Asian Pacific Center on Aging (NAPCA),

  National Caucus and Center on Black Aged (NCCBA),

  National Council on Aging (NCOA),

  National Council of Senior Citizens (NCSC),

  National Indian Council on Aging (NICOA),

  National Urban League (NUL), and

  U.S.  Forest Service (USFS). 

National sponsors operate locally through (1) subgrant agreements
with local organizations, such as agencies on aging or community
groups, and (2) local affiliates.  Appendix II provides a short
profile of the SCSEP activities of each national sponsor. 

Whenever the SCSEP program has a new appropriation level, Labor
conducts with the national sponsors a meeting known as the "melon
cutting." At these meetings, Labor makes known its allocations to
each of the national sponsors and presides over discussions in which
national sponsors often trade enrollee positions in various areas. 
Sometimes, a representative from the National Association of State
Units on Aging (NASUA) is invited to express states' concerns, but
the states have no formal control over the distribution of positions. 

As seen in figure 1, program year 1994 grant amounts to the national
sponsors varied widely:  the $102.5 million Green Thumb grant was the
largest, and the $5.1 million grants each to the NICOA and NAPCA were
the smallest.  This variation partially reflects the differences in
time that these organizations have participated in the program. 

   Figure 1:  Program Year 1994
   SCSEP Grants to National
   Sponsors and States

   (See figure in printed
   edition.)

With the exception of Alaska, Delaware, and Hawaii--which operate
their own SCSEP programs and have no national sponsors--each state
has at least two national sponsors.  Fourteen states have six or more
national sponsors.  The District of Columbia and Puerto Rico also
have SCSEP programs and national sponsors, but none of the U.S. 
Territories has.  (See fig.  2.)

   Figure 2:  National Sponsors by
   State

   (See figure in printed
   edition.)

As seen in figure 3, four of the sponsors operate in over half of the
states; five of the sponsors operate in 16 or fewer states. 

   Figure 3:  Number of States in
   Which Each National Sponsor
   Operates

   (See figure in printed
   edition.)


   LABOR AWARDS GRANTS ONLY TO
   EXISTING GRANTEES
------------------------------------------------------------ Letter :3

Labor's regulations allow SCSEP funds to be provided to eligible
organizations through grants, contracts, or other agreements pursuant
to the purposes of title V of the OAA.  Department officials have
chosen to fund the program through noncompetitive grants.  The
regulations specify that grants are the "appropriate instrument when
the Department does not need to exercise considerable direction and
control over the project."\19

Labor provides annual grant applications only to national
organizations that currently sponsor SCSEP.  Labor's action is
consistent with the statute and with expressions of intent by the
Senate Appropriations Committee.  Labor officials rely on annual
Appropriations Committee report language such as the following from a
recent Senate Appropriations report that seems to indicate support
for the current sponsors:  "It is the intent of the Committee that
the current sponsors continue to build upon their past
accomplishments."\20 In addition, the OAA, although it permits awards
to other entities, creates a specific preference for awards to
"national organizations and agencies of proven ability in providing
employment services .  .  ."

Labor's procedures require that noncompetitive grants over $25,000 be
included in an annual procurement plan that is forwarded for approval
by the responsible Assistant Secretary to the Procurement Review
Board (PRB).  The PRB, whose members include designees of the Chief
Financial Officer and the Solicitor, as well as the Director of the
Division of Procurement and Grant Policy, is "to serve as a senior
level clearinghouse to review proposed noncompetitive and major
acquisitions." The PRB advises whether competition is appropriate for
each acquisition and whether long-term relationships with the same
organizations are consistent with Labor policies.  However, Labor
exempts title V awards and does not involve the PRB in reviewing the
program's annual grant renewal decisions.  Labor officials did not
adequately explain the reason for this exemption. 


--------------------
\19 29 C.F.R.  89.12. 

\20 Senate Report 103-143, p.  16 (1993). 


   INEQUITIES IN FUNDING PATTERNS
------------------------------------------------------------ Letter :4

The hold harmless provision of the OAA's title V, in effect, severely
limits Labor's ability to allocate funds among states in a way that
ensures equitable distribution, that is, in accordance with the
state-by-state distribution of persons 55 years old and older,
adjusted to give greater weight to economically disadvantaged areas
and persons.  The result is a pattern of too many SCSEP positions in
some states and too few in other states relative to their eligible
populations.  In addition, within states, Labor's administrative
inaction has permitted a continuing pattern of overserved and
underserved counties. 


      EQUITABLE DISTRIBUTION AMONG
      STATES NOT FULLY ACHIEVED
---------------------------------------------------------- Letter :4.1

In applying the OAA's hold harmless provision, Labor officials
establish a reserve amount from each year's SCSEP appropriation,
delineated by state subtotals, to finance the 1978 level of national
sponsor positions in each state.  So, if the national sponsors
together administered 100 positions in a certain state in 1978, they
would receive thereafter, from a Labor set-aside of appropriated
funds, enough funds to finance at least 100 positions in that state,
assuming that the appropriation level is high enough to finance the
1978 total number of positions. 

Because the 1978 distribution of SCSEP positions did not, and still
does not, correspond to the size of each state's economically
disadvantaged elderly population, the hold harmless provision in
effect prevents a fully equitable distribution.  For the 1994 program
year, for example, $234.5 million of the total appropriation of $410
million was subject to the hold harmless provision and distributed
accordingly.\21 Had the $234.5 million been distributed in accordance
with current age and per capita income data, every state would have
received a different allocation and, in many cases, the increase or
decrease would have been substantial.  A total of 25 states would
have gained or lost at least $500,000 each; in 13 of those states,
the amount would have been over $1 million.  Florida would have
gained the most, $4.2 million, and New York would have lost the most,
$3.9 million.\22 (See app.  III.)


--------------------
\21 This is the amount that Labor determined was needed from the
appropriation to fund 38,687 positions nationwide--the 1978 number of
positions.  Labor derived the $234.5 million by multiplying the
38,687 positions by the unit cost of each position for 1994--$6,061. 

\22 These results are based on our simulation using Labor's program
year 1994 data that also incorporated the OAA provision guaranteeing
a .5-percent SCSEP appropriation minimum to the states and a
.25-percent minimum to certain other areas, such as Guam and the
Virgin Islands. 


         OPTIONS FOR OVERCOMING
         THE PROBLEM
-------------------------------------------------------- Letter :4.1.1

The hold harmless provision could be modified in two ways.  The
relevant provision states that the Secretary of Labor will reserve
for the sponsors' grants or contracts sums necessary to maintain at
least their 1978 level of activities "under such grants or
contracts." Labor interprets this provision to require a
state-by-state distribution of positions based on the sponsors' 1978
activities.  One option is to amend the hold harmless provision to
specifically authorize Labor to base the distribution on the national
sponsors' 1978 total positions nationwide, rather than on the levels
in each state.  If the hold harmless provision were so amended, Labor
would still be required to provide sufficient grants to the national
sponsors to finance their 1978 number of total positions.  But it
would not necessarily be bound to the 1978 number of sponsor
positions in any state.  With the amendment, Labor could distribute
all of the SCSEP dollars in accordance with the pattern of need, as
measured by each state's 55 and older population size and per capita
income. 

Another approach would be to repeal the entire hold harmless
provision.  This would remove the authorizing legislation's
protection of the national sponsors' historic base of positions\23
and permit Labor officials to allocate funds according to need.  Such
a change could significantly shift funding from the national sponsors
to the states. 


--------------------
\23 Absent the hold harmless protection, the national sponsors would
still receive most of the grant monies as long as annual
appropriations acts continued to contain provisions stipulating that
78 percent of the funds shall go to the national sponsors.  See
footnote 8. 


         EQUITABLE DISTRIBUTION
         WITHIN STATES NOT FULLY
         ACHIEVED
-------------------------------------------------------- Letter :4.1.2

In some states, SCSEP positions may not be distributed among areas
according to the equitable distribution provision of the OAA's title
V.\24 Though the national sponsors administer about 80 percent of the
enrollee positions, both states and national sponsors are responsible
for equitably distributing enrollee positions.  Deficiencies in
equitable distribution, however, are evident in many cases when
comparing a county-by-county pattern of SCSEP positions in a state
with the county-by-county pattern of state residents who are eligible
for participation as SCSEP enrollees. 

For such a comparison, we reviewed the states' equitable distribution
reports for 1989 and 1994.  For example, in California, Illinois, and
New York, we found that most counties had either too many or too few
positions compared with the number that the distribution of eligible
people would indicate.  In California, for example, for program year
1994, 51 of the 59 counties had too many or too few positions.  In
some cases, the excess or shortfall was five positions or fewer, but,
in several cases, the amount was greater.  Fourteen of the counties
had excesses or shortfalls of at least 15 positions.  Orange County
had a shortfall of 70 positions.  Humboldt and San Francisco Counties
each had an excess of 32 positions. 

State government and national sponsor officials offer several
explanations for the sponsors' not always distributing their SCSEP
positions within a state strictly according to the equitable
distribution guidance.  First, the national sponsors are sometimes
restricted geographically.  In New York state, USFS, for example,
does not enter such underserved areas as Brooklyn and the Bronx
because they are urban communities and the Forest Service restricts
its activities to national forests.  Second, national sponsors with
an ethnic focus are reluctant to serve areas that do not have
significant numbers of their constituent ethnic group.  Third,
certain national sponsors, to save on administrative costs, may
prefer to concentrate SCSEP positions in fewer locations, increasing
the ratio of program enrollees to administrators.  Fourth, certain
national sponsors may be reluctant to shift positions from an
overserved area where they have had long working relationships with
subgrantees.  In the case of the states, some have distributed their
positions through existing administrative structures, without
sufficiently considering the distribution of eligible people.  Also,
some states may have tried to achieve an equitable distribution among
political jurisdictions rather than among eligible populations. 
Finally, some states have not adequately staffed their SCSEP program
efforts or were not sufficiently active in coordinating distribution
activities with national sponsors. 


--------------------
\24 42 U.S.C.  3056d(c). 


         DUPLICATION OF SERVICES
         IN OVERSERVED AREAS
-------------------------------------------------------- Letter :4.1.3

In most states, the state government as well as several national
sponsors operate SCSEP programs.  Thirty-six states have four or more
sponsors; while 14 states have six or more.  In our talks with
officials in 28 state governments, several expressed concern about
duplicative national sponsor programs in certain areas, some of which
also overlapped state government SCSEP programs. 

For example, in a northeastern state where eight national sponsors
had been operating, a ninth sponsor was allowed to begin a SCSEP
project in an area that, according to state officials, was already
overserved.  In addition, the state officials said, some national
sponsors in the area were already using television spots to attract
people to the program.  In a southern state, state officials could
not dissuade two national sponsors from operating in a city's
downtown area already served by the state's SCSEP office. 


         PROGRAM PARTICIPANTS MAY
         BE DENIED MOST
         APPROPRIATE TRAINING
-------------------------------------------------------- Letter :4.1.4

National--and some state--sponsors defend their remaining in
overserved locations, citing many reasons for being in the
communities where they are.  However, Labor officials acknowledge
that one consequence of several grantees operating in the same area
is that program enrollees in proximity may receive different wages
and benefits depending on the policies of the grantee organization. 

In a mid-Atlantic state, for example, the state unit on aging
administers its own SCSEP positions as well as those of a national
sponsor.  The program that the enrollee is placed in--whether state
or nationally sponsored and, consequently, the benefits package the
enrollee receives--can depend on the time of day the enrollee applied
for the program.  For example, a morning applicant might be placed in
the state program with a benefits package including federal holidays,
sick leave, and annual leave benefits; the afternoon applicant might
be placed in a national sponsor's program with a different benefits
package. 

Labor endorses an unwritten agreement among national sponsors that is
intended to prevent enrollees from different sponsors from working at
the same local host agency.  The agreement is to help avoid
situations in which host agencies or sponsors must explain why
enrollees performing the same job tasks are compensated with
different benefits and, perhaps, even wages.  The drawback of this
agreement, however, is that an applicant may be denied access to a
particular host agency that could provide the best job and training
experience for that person. 


         REALLOCATION OF NATIONAL
         SPONSOR POSITIONS NOT
         REQUIRED BY LABOR
-------------------------------------------------------- Letter :4.1.5

Labor requires states and the national sponsors to ensure efficient
and effective coordination of programs under this title.  One goal of
this coordination is to promote an equitable distribution of in-state
funds.  National sponsors are required to notify relevant state
government officials of their plans to establish projects; state
officials are to review and comment on such plans; and Labor is to
review proposed project relocations and the distribution of projects
within states.  As part of its overview authority, Labor also has
required states to compile annual distribution reports showing which
of their counties are overserved or underserved, according to the
size of their eligible populations.  Most importantly, Labor is to
make--limited by the OAA's hold harmless and minimum funding
provisions of title V--an equitable distribution of funds among and
within states.\25

It appears that Labor has taken few actions to more equitably
distribute national sponsor activities within the states.  The 1994
problems of underserved and overserved counties in California,
Illinois, and New York were essentially the same ones that those
states experienced 5 years earlier, in 1989.  Labor officials
acknowledge that they stop short of forcing the national sponsors to
reallocate their positions, preferring instead to encourage sponsors
to shift positions to underserved areas when enrollees vacate
positions in overserved areas.  State officials repeatedly pointed
out that they lack the authority, under law or Labor regulation, to
require the national sponsors to reallocate their positions to
underserved counties. 


--------------------
\25 42 U.S.C.  3056d(a)(3) and 3056d(c). 


         OPTIONS FOR OVERCOMING
         THE PROBLEM
-------------------------------------------------------- Letter :4.1.6

Labor could do more to encourage more equitably distributed national
sponsor activities within a state.  In extreme cases, Labor could
increase national sponsors' funding levels, rewarding sponsors
willing to establish positions in underserved areas.  Such
encouragement would not contradict the hold harmless provision, which
only applies among the states rather than within a state.  Indeed,
such encouragement could increase the effectiveness of the national
sponsor role in the program. 

Another option for more equitably distributing SCSEP positions within
the states is to increase the percentage of funds dedicated to state
governments from each year's appropriation from the current 22
percent to a higher percentage.  If the Congress were to stop
enacting the 22- percent limit on state funding, the OAA provision
requiring that state governments receive 55 percent of all funding
above the 1978 hold harmless amount would take effect.\26

At our request, Labor ran a simulated allocation of the program year
1994 funding formula without the "78/22" cap in place.  Under that
simulation, the funds available to the states for program year 1994
would have increased from $90 million to about $155 million. 
National sponsor funding would have decreased from $320 million to
$255 million (see app.  IV).  With their statewide administrative
structures and additional funds, state governments might have more
flexibility in serving their eligible populations or a greater
incentive than the national sponsors to administer positions in
underserved areas. 

In the three states where the state government administers 100
percent of the SCSEP grant money, comparatively few counties are
underserved or overserved.  For program year 1994, each of Delaware's
three counties had an equitable distribution of positions; each of
Hawaii's five counties had an equitable number of positions; and
Alaska's six geographic areas used for the program had close to
equitable numbers.  For example, one area of Alaska had 46 positions
instead of the equitable number of 43; another had 34 instead of 36. 
These three states, however, are not typical in their geographic and
population features. 

Increasing the states' share of the SCSEP funds would most likely not
result in a dramatically different profile of enrollees by ethnicity
or sex.  In the state programs, on average, the percentages of
enrollees by ethnicity and sex were about the same as those in the
national sponsor programs for the reporting period ending in June
1994.  For example, in the state programs, 22 percent of the
enrollees were black and 23 percent were male; the comparable
percentages in the national sponsor programs were 24 percent black
and 29 percent male. 


--------------------
\26 42 U.S.C.  3056d(a)(1)(B). 


   SPONSORS SHIFTED ADMINISTRATIVE
   EXPENSES
------------------------------------------------------------ Letter :5

Congressional hearings earlier in the program's history questioned
national sponsors' spending on their administration.\27 In our
review, we found that, in program year 1994, eight of the national
sponsors shifted some administrative costs to another cost category,
and therefore the true administrative costs exceeded the 15-percent
statutory limit.  This problem appears to be less widespread in the
state-administered SCSEP programs. 

Each of the national sponsors has its own approach to administration. 
Some of the sponsors perform all of the administrative functions of
the program directly.  Others subcontract or delegate aspects of
administration to other organizations or state agencies.  In
addition, all of the sponsors fund at least a portion of national
headquarters operations from SCSEP grant funds.  In 1994, to support
about 850 full-time administrative positions, national sponsors
budgeted about $6 million for travel and more than $9 million for
rental and other office expenses.\28

The 1976 SCSEP regulations permit sponsors to spend their SCSEP grant
funds in three categories:  administration, enrollee wages and
benefits, and other enrollee costs.  The OAA has established a
13.5-percent limit for administrative expenses.\29 This limit may
increase to 15 percent with a waiver from the Secretary of Labor.\30

These 1976 regulations, still in effect in program year 1994, note
that the first category, administration costs, includes, but is not
limited to,

     ".  .  .  salaries, wages and fringe benefits for project
     administrators; costs of consumable office supplies used by
     project staff; costs incurred in the development, preparation,
     presentation, management and evaluation of the project; the
     costs of establishing and maintaining accounting and management
     information systems; costs incurred in the establishment and
     maintenance of advisory councils; travel of project
     administrators; rent, utilities, custodial services and indirect
     costs allowable to the project; training of staff and technical
     assistance to subproject sponsor staff; costs of equipment and
     material for use by staff; and audit services."\31

The second category includes enrollee wages and benefits.  The third
category, other enrollee costs, under the 1976 regulations, includes
but is not limited to,

     "enrollee physical examinations; transportation; enrollee
     training; special job or personal counseling for enrollees; and
     incidental expenses necessary for enrollee participation, such
     as work shoes, safety eyeglasses, uniforms, tools, and similar
     items."\32


--------------------
\27 Hearings before the Special Committee on Aging, U.S.  Senate,
October 29, 1981. 

\28 This number does not include the approximately 300 USFS staff
used on a part-time basis in support of the SCSEP program. 

\29 42 U.S.C.  3056(c)(3). 

\30 In the 1994 program year, five national sponsors and six states
received such waivers. 

\31 29 C.F.R.  89.42. 

\32 29 C.F.R.  89.42. 


      SPONSORS' BUDGETS EXCEEDED
      THE ADMINISTRATIVE LIMIT BY
      OVER $20 MILLION
---------------------------------------------------------- Letter :5.1

Using application documents that grantees submitted for Labor's
approval--updated with some actual expense data not initially
available for the period under review--we examined national sponsors'
budget documents for program year 1994 to see (1) how costs were
apportioned among the categories and (2) whether administrative cost
limits were being adhered to.  We also discussed administrative cost
matters with Labor staff and national sponsor officials.  The results
showed that eight of the sponsors\33 had budgeted administrative
expenses in excess of the limit by over $20 million, by classifying
some administrative expenses as other enrollee costs and not
including them under administrative expenses. 

The following case illustrates this practice:  One national sponsor's
budget documents showed about $14 million for administrative
expenses, placing the organization under the 13.5-percent limit. 
However, our examination identified other amounts, classified in the
documents as other enrollee costs, that should have been treated as
administrative costs.  The sponsor classified as other enrollee
costs, rather than as administrative costs, all salaries and benefits
paid to its own field staff, including area supervisors, managers of
field operations, and program development specialists ($5.9 million),
and field staff's travel ($1.8 million).  If combined with the $14
million in acknowledged administrative costs, these expenses would
raise total administrative costs for this grantee to more than 20
percent of the grant amount. 

We similarly recomputed the administrative costs for the other
sponsors who understated these expenses (by classifying some as other
enrollee costs).  We found that the administrative percentages of the
eight national sponsors that exceeded the 15-percent administrative
expense limit ranged from 16.8 to 23 percent.  Appendix V details the
administrative expenses of each national sponsor for the 1994 program
year. 

We also reviewed the other enrollee costs average percentages for the
state governments in the SCSEP program and compared them with the
national sponsors.  For the state governments, the average, as a
percentage of total grant amount, was about 6 percent in the 1994
program year; for the national sponsors, the comparable figure was
about 8 percent.  However, 23 state governments recorded other
enrollee costs ranging from 7.0 to 13.2 percent. 

Labor's SCSEP officials could better identify such administrative
expense problems if Labor required that grantees provide better
documentation of their administrative expenses, particularly those in
the category of other enrollee costs.  Because of grantees' limited
or vague reporting, Labor officials cannot adequately explain the
other enrollee cost entries in the grantees' application materials. 

For example, one grantee provided grant documentation that included
an item shown as "other" in the category of other enrollee costs. 
This item, totaling $1,084,049, was delineated as $55,799 for the
sponsor and $1,028,250 for a subgrantee, with no further information
provided.  At our request, Labor asked the sponsor for further
documentation of this item.  This documentation indicated that the
sponsor and subgrantee expenses included costs that Labor could
question for not being classified as administration, including
$51,170 for postage, $132,874 for telephone service, and $522,494 for
rent. 


--------------------
\33 The two that stayed within the limit were USFS and NCSC. 


   USE OF DRAFT REGULATIONS
   PERMITTED EXPENSE SHIFTING
------------------------------------------------------------ Letter :6

From 1985 through the first half of 1995, the sponsors relied on
grant provisions that incorporated proposed regulations instead of
the 1976 regulations.  These proposed regulations, published in July
1985, and never finalized, expanded the definition of other enrollee
costs to permit several categories of costs that the 1976 regulations
did not permit.  These included expenses for orientation of host
agencies, development of appropriate community service employment
assignments, and "the costs associated with providing those
functions, services, and benefits not categorized as administration
or enrollee wages and fringe benefits."\34 Labor officials
acknowledge that Labor operated the SCSEP program without formally
amending the 1976 regulations. 

After the 1987 amendments to the OAA included the 1976 regulations'
15-percent administrative expense limit as part of the law, Labor's
decision--to use as criteria the 1985 draft regulations--permitted
sponsors to improperly characterize administrative expenses as other
enrollee costs. 


--------------------
\34 50 Fed.  Reg.  29615. 


   INDIRECT COSTS IN SCSEP GRANTS
------------------------------------------------------------ Letter :7

Labor's regulations permit sponsors to include in their
administrative costs ".  .  .  indirect costs allowable to the
project." A sponsor may use SCSEP grant money to pay for some of its
general operating expenses provided that the sponsor can demonstrate
that a part of those expenses indirectly supports SCSEP activities. 
Although our review concentrated on administrative issues other than
indirect costs, Labor's Office of Inspector General (OIG) has
identified a continuing problem of improper indirect cost charges in
the program. 


      LABOR NEGOTIATES INDIRECT
      COST RATES WITH SPONSORS
---------------------------------------------------------- Letter :7.1

Under the policy of OMB Circular A-122, Labor's Office of Cost
Determination periodically negotiates indirect cost rates with the
national sponsors.  Each sponsor's rate is the percentage of defined
general operating costs--termed the "base"--that may be charged
against its SCSEP grant as a SCSEP-related administrative expense. 
The categories of general operating expenses that may be included in
the base are defined in each sponsor's grant agreement with Labor. 
These categories vary somewhat among sponsors, but they typically
include such expenses as executive salaries, payroll, accounting,
personnel, depreciation, telephone, travel, and supply expenses. 

For example, one sponsor's grant agreement with Labor specified that
a rate of 35.21 percent may be applied against the sponsor's base,
defined as "Total direct costs excluding capital expenditures .  .  . 
membership fund costs, flow-through funds and program participant
costs." This means that 35.21 percent of the sponsor's base expenses
may be funded with SCSEP money, as long as that amount does not
exceed the overall limit on the use of SCSEP grant money for
administrative expenses. 

As shown in table 1, for the 1994 program year, the eight national
sponsors that charge indirect costs have approved rates that ranged
from 4.95 to 108.1 percent.\35 However, exact comparisons of the
rates may not be meaningful because these rates are applied to the
sponsors' different bases. 



                          Table 1
          
            National Sponsor Indirect Cost Rates

                                   Percent         Dollars
----------------------------  ------------  --------------
American Association of              15.80            $0\a
 Retired Persons
Associacion Nacional Pro             35.21         491,011
 Personal Mayores
Green Thumb                           4.95     4,772,285\b
National Asian Pacific               55.41         178,755
 Center on Aging
National Caucus and Center           48.80         427,652
 on Black Aged
National Council on Aging            57.00         727,328
National Council of Senior          108.00     2,570,481\c
 Citizens
National Urban League                66.40       147,097\d
----------------------------------------------------------
\a AARP states that it does not claim indirect costs unless its
actual administrative costs in support of the program are less than
the administrative cost limit. 

\b Green Thumb's rate is applied to the entire amount of the grant as
a base.  This includes all funds for enrollee wages and fringe
benefits that are normally not included in typical direct cost bases. 

\c Sponsor may claim a rate in excess of 100 percent.  No maximum
ceiling on reimbursements of indirect costs exists. 

\d NUL is allowed an indirect cost rate of 66.4 percent but charges
35 percent on the basis of its agreement with Labor. 


--------------------
\35 NICOA does not have an approved indirect cost rate.  USFS does
not charge indirect costs. 


      PROBLEMS WITH INDIRECT COSTS
---------------------------------------------------------- Letter :7.2

SCSEP grantees have sometimes used the grant funds to pay for
questionable indirect costs.  One national sponsor charged to the
grant more than $21,000 in indirect costs ".  .  .  to promote
employee morale and productivity including birthday, holiday and
other cards, flowers, and expenses related to the company picnic and
other employee morale events." This was in addition to approximately
$32,000 budgeted from direct costs for ".  .  .  the purchase of
refrigerators, microwaves, toaster ovens, and other appliances
reasonably necessary to promote a positive work environment, and the
purchase of bottled water for employees to promote health .  .  ."
OMB guidance allows reasonable expenditures for such items, and we
found no record of Labor's objection to these expenditures. 

Sometimes, the use of SCSEP dollars for indirect costs involves
considerably larger sums.  On more than one occasion, Labor's OIG
questioned the propriety of a national sponsor's use of SCSEP funds
to pay for some of its operating expenses.  One OIG report stated
that the sponsor ".  .  .  improperly charged to its indirect cost
pool salaries and fringe benefits of employees of those divisions and
offices responsible for [the national sponsor's] own activities, such
as fundraising and membership, and other non-Federal [sic]
projects."\36 The questioned costs for program years 1988 to 1990
totaled over $700,000. 

The OIG stated, and program officials acknowledged, that if the
amounts were upheld as improper, the national sponsor had no way of
paying the money back.  Yet for 3 years, while the dispute advanced
through an administrative appeals process, Labor continued to award
the sponsor SCSEP grants, with only a small modification to the
sponsor's indirect cost rate.  A Labor official explained that the
Department wanted to continue the funding while the matter was being
adjudicated. 

However, the national sponsor and Labor decided to settle the matter
before final adjudication:  they agreed, early in 1995, that the
sponsor would pay $400,000 (in full settlement of the $700,000 of
disallowed costs) to Labor, without interest, over a 4-year period. 
The $400,000 is to be repaid from the sponsor's nonfederal income in
fixed quarterly installments:  four payments of $12,500 in year 1,
$18,750 in year 2, $31,250 in year 3, and $37,500 in year 4.  At no
time during the dispute did Labor's program officials impose a
cutback in total administrative spending, even a small one.  Audits
for additional program years are in process. 


--------------------
\36 Audit Report No.  18-91-018-07-735, issued July 19, 1991. 


   LABOR'S MEASURE OF UNSUBSIDIZED
   PLACEMENTS
------------------------------------------------------------ Letter :8

Along with SCSEP's goals of providing training and subsidized jobs,
Labor has set for each sponsor a goal of placing at least 20 percent
of the enrollees in unsubsidized jobs each program year.  During our
review, we noted that Labor had not clearly stated in any of its
regulations the meaning of an unsubsidized placement.  This made it
virtually impossible for Labor to know how successful the sponsors
are in achieving that objective. 

Without such a definition, the sponsors may interpret unsubsidized
placement in many ways.  One sponsor has defined it as one in which a
program enrollee spends a specified minimum time and then moves into
a paying, non-SCSEP job and holds it for a specified minimum time. 
Other sponsors have had no time requirements for post-SCSEP job
retention or for program participation for claiming an unsubsidized
placement. 

Labor officials agreed that determining SCSEP job placement success
was a problem and initiated efforts to produce a useful definition. 
As we were concluding our review, Labor issued a directive defining
unsubsidized placement for SCSEP purposes. 


   CONCLUSIONS
------------------------------------------------------------ Letter :9

States' populations of those 55 years of age and older have changed
since 1978.  The statutory hold harmless provision locks in 1978
funding levels that do not correspond to each state's eligible 55 and
older population, adjusted by income; this limits Labor's ability to
equitably distribute SCSEP positions among the states.  Consequently,
some states in the SCSEP program are overserved and some are
underserved. 

Labor could more equitably distribute SCSEP funds among states if the
OAA's title V hold harmless provision were amended or eliminated. 
Amending it to permit Labor to hold harmless only the sponsors' 1978
nationwide total number of positions, rather than the 1978 funding
level in each state, would enable Labor to (1) depart from the 1978
state-by-state pattern and (2) allot the funds so as to correct the
problem of overserved and underserved states.  Repealing the hold
harmless provision, although an option, could significantly change
the program's character if it resulted in major shifts of funding
allocations from national sponsors to state governments. 

Similarly, within states, the distribution of SCSEP funds leaves some
counties overserved and some underserved.  National sponsors are
required by law to notify state governments and Labor of their plans
for SCSEP positions in each state, but only Labor has the authority
to effect a different pattern of positions among a state's counties. 
Labor could adjust national sponsors' funding levels to reward those
willing to establish positions in underserved counties. 

Another step that might improve the distribution of funds within
states would be legislative action to increase the percentage of
positions funded by grants to state governments from the current 22
percent imposed by appropriations restrictions.  The distribution
patterns in the three states solely responsible for SCSEP activities
were comparatively equitable.  If these appropriations limitations
did not exist, the share, over the hold harmless amount, going to the
state governments would increase to 55 percent under the 55/45
provision of the authorizing legislation. 

The SCSEP program also has administrative expense problems.  In the
1994 program year, we estimate that the national sponsors' budgeted
administrative expenses collectively exceeded by over $20 million the
limit set by the OAA.  This occurred because Labor's 1985 draft
regulations rather than the 1976 regulations guided the national
sponsors' cost allocations.  Under the 1985 draft regulations,
expenditures that we believe to be administrative expenses may be
charged to other enrollee costs.  Labor failed to require specific
and useful reporting by grantees of their other enrollee costs. 
Therefore, sometimes, Labor could not readily identify what kinds of
expenses were included in that category. 

The 1995 SCSEP regulations, which took effect in July 1995, allow a
broad interpretation of other enrollee costs.  Unless modified, these
new regulations will permit the continuing allocation of
administrative expenses.  These funds could otherwise be spent to
finance additional program positions. 

Labor's use of a modified noncompetitive process for making SCSEP
grants essentially results in continuing to offer grant applications
only to organizations already in the program.  However, in SCSEP's
case, Labor does not follow its normal procedure for noncompetitive
grants, in which the PRB reviews grant decisions.  If followed, PRB
reviews can advise whether competition is appropriate for each
acquisition and whether long-term relationships with the same
grantees are consistent with Labor's policies.  Labor officials did
not adequately explain the program's exemption from this review, and
we see no justification for it. 


   MATTERS FOR CONGRESSIONAL
   CONSIDERATION
----------------------------------------------------------- Letter :10

If the Congress wishes to ensure equitable distribution of SCSEP
funds among states, it should consider amending or eliminating the
title's hold harmless provision.  Such an amendment would authorize
Labor to hold harmless only the 1978 nationwide level of national
sponsor positions.  The Department would not be required to hold
harmless the 1978 state-by-state levels.  If the hold harmless
provision were eliminated, (1) the national sponsors could experience
reduced funding levels and (2) Labor could distribute the funds on
the basis of the most current demographic data available. 

If the Congress wishes to better meet the OAA's title V goal of
equitably distributing SCSEP funds within states, it should consider
increasing the portion of SCSEP grant funds allocated to state
governments from the current 22 percent.  One way to do that would be
to forgo appropriations act language limiting the state governments
to 22 percent of the annual appropriation. 


   RECOMMENDATIONS TO THE
   SECRETARY OF LABOR
----------------------------------------------------------- Letter :11

We recommend that the Secretary better meet the OAA's title V goal of
equitably distributing SCSEP funds within states.  To do this, the
Secretary should (1) require greater cooperation among national
sponsors and states in equitable distribution matters and (2) adjust,
as necessary, sponsors' funding levels to reward sponsors that are
willing to establish positions in underserved counties. 

In addition, we recommend that the Secretary revise the 1995
regulations to adopt the definition of administrative costs set out
in the 1976 regulations. 

We also recommend that the Secretary enforce the statutory limit on
administrative expenses and be prepared to reduce the funds available
for administration of any grantee exceeding the legal limit by
improperly categorizing costs or incurring improper indirect costs. 

Finally, we recommend that the Secretary no longer permit title V
grants to be exempt from Labor's normal review process and subject
these grants to the same review as other noncompetitive grants. 


   AGENCY COMMENTS AND OUR
   EVALUATION
----------------------------------------------------------- Letter :12

We provided copies of our draft report, for comment, to the
Department of Labor and, through Labor, to the national sponsors.  We
met with Labor officials several times to discuss their concerns as
well as those of the national sponsors.  Where appropriate, we
revised the report to include information provided by, and through,
Labor.  Labor's comments and our detailed responses appear in
appendix VI. 

Labor generally agreed with our recommendations that it (1) apply its
normal noncompetitive review process to SCSEP grants and (2) require
national sponsor grantees to cooperate more with states in the
equitable distribution process.  Specifically, Labor agreed to (1)
have PRB review of SCSEP grant awards and (2) prepare procedures to
enhance the role of states in the annual equitable distribution
meetings.  Labor also agreed to implement a process to ensure that it
is apprised of disagreements on equitable distribution. 

Although Labor officials agreed to examine the matter more closely,
they disagreed with our estimate that for the 1994 program year
budget funds of over $20 million in administrative expenses were
improperly allocated to the category of other enrollee costs.  Citing
recent audits of national sponsor organizations that did not disclose
noncompliance, Labor and several of the national sponsors questioned
our (1) use of budget data from grant applications and (2) criticism
of criteria used for determining what costs should be allowed in the
category of other enrollee costs. 

First, budget data submitted by the national sponsors were the only
data available for the period we examined.  More importantly,
however, decisions by Labor officials on the appropriateness of
expenses to be charged for the SCSEP program are made on budget data
rather than actual expenses.  Thus, our use of budget numbers that
Labor uses seems appropriate. 

Second, with regard to Labor's questioning of our criticism of the
cost criteria used, during the period covered by our review, only the
1976 regulations had been formally promulgated.  Because of Labor's
written comments about other enrollee costs, we discussed the issue
with officials of Labor's OIG and its contract auditors.  Labor's OIG
staff told us that they measure grantee performance against the grant
agreement.  Since ETA's program staff had incorporated the 1985 draft
regulations into the grant agreements, the OIG staff had reviewed the
grantees' performance against those criteria and had not focused on
this issue.  However, OIG contract auditor staff agreed that
administrative costs appear to have been shifted to the category of
other enrollee costs after the 1985 draft regulations became part of
the grant agreements.  Those discussions and Labor's position led us
to recommend that the Secretary of Labor review the SCSEP regulations
implemented in July 1995. 


--------------------------------------------------------- Letter :12.1

Copies of this report are being sent to the Secretary of Labor and
interested congressional committees.  We will make copies available
to others on request.  Please call me on (202) 512-7014 if you have
any questions concerning the report.  Other major contributors are
listed in appendix VII. 

Sincerely yours,

Linda G.  Morra
Director, Education
 and Employment Issues


SCOPE AND METHODOLOGY
=========================================================== Appendix I

To identify Senior Community Service Employment Program (SCSEP)
grants for program years 1993-94, we reviewed grant applications, the
Older Americans Act (OAA), and Labor's regulations that relate to
grant awards and to title V.  We also reviewed prior studies, audits,
and reports on SCSEP, including those by Labor's Office of Inspector
General (OIG).  We interviewed officials in the Employment and
Training Administration's (ETA) divisions of Older Workers Programs
and Acquisition and Assistance (the "Grant Office") and in Labor's
Office of Cost Determination and Office of Procurement.  We also
interviewed the OIG staff currently involved in program audits and
several contract auditors engaged in audits of the SCSEP national
sponsors. 

To learn about Labor's oversight, coordination among sponsors,
subsidized placements, and the effects of administrative practices on
program goals, we interviewed officials from

  the 10 national sponsor organizations;

  28 of the state units that administer or have the opportunity to
     administer SCSEP;

  other organizations with an interest in SCSEP, including, the
     National Association of State Units on Aging (NASUA), the
     National Association of Area Agencies on Aging, and the U.S. 
     Administration on Aging; and

  several organizations operating as subgrantees for national
     sponsors and state agencies. 

To learn about equitable distribution requirements and Labor's
implementation of the OAA's hold harmless provision, we interviewed
staff from ETA's Office of the Comptroller and reviewed the data used
in the funding allocation process.  We also reviewed states'
equitable distribution reports for 1989 and 1994 to check compliance
with and progress over time in meeting the OAA's equitable
distribution provision. 

To trace the evolution of SCSEP, we reviewed several legislative
histories, from the program's beginning as a pilot project to its
present status.  We also interviewed former congressional staff who
had interests in SCSEP authorization, appropriations, and oversight. 

To select states for review, we tried to obtain a balanced
perspective in geography, size, and degree of direct involvement with
SCSEP.  Our selection was not random. 

In discussing administrative and other enrollee costs for states or
the national sponsors, unless otherwise noted, we used amounts
budgeted in the grants rather than costs actually incurred.  Labor
acts on the budget information in the sponsors' grant application
packages during its approval process.  Although we reviewed audits by
Labor's OIG and others, we did not personally audit the grantees or
examine specific sponsor expenditures. 


   LIMITATIONS
--------------------------------------------------------- Appendix I:1

We did not try to assess (1) the outcomes of training offered by
national sponsors, states, or U.S.  Territories; (2) the 502 (e)(1)
section of the OAA allowing Labor to use small amounts of SCSEP funds
to conduct experimental projects that involve placing enrollees in
private business concerns; or (3) the relative performance in
administering SCSEP of individual states and territories or
individual national sponsors. 

We did not attempt to independently verify the accuracy of the data
provided to us.  We conducted our review between April 1994 and April
1995 in accordance with generally accepted government auditing
standards. 


NATIONAL SPONSOR PROFILES
========================================================== Appendix II

Senior Community Service Employment Program (SCSEP) national sponsor
projects operate locally under two general approaches:  (1) by
subgrant agreements with local organizations, such as agencies on
aging or community groups, and (2) through local affiliates of the
national sponsor.  National sponsor decisions on where they will
administer their enrollee positions--based on how they choose to
operate and the constraints that they operate under--alter the
distribution of program resources within states. 

A profile of each national sponsor along with grant information for
program year 1993 (the most recent complete year for which
performance data were available) follows.  (The number of staff shown
as funded by the grant is based on grant application materials.  The
number of staff funded through the indirect cost portion of the grant
may not be readily identifiable.)


   AMERICAN ASSOCIATION OF RETIRED
   PERSONS (AARP)
-------------------------------------------------------- Appendix II:1


      PROGRAM YEAR 1993 DATA
------------------------------------------------------ Appendix II:1.1

SCSEP federal grant for program year 1993:  $48,806,554

Enrollee slots administered:  8,131

Enrollees served:  13,923

End of program year profile:  male--29.6 percent, female--70.4
percent

Services to general community:  69.9 percent

Services to elderly community:  30.1 percent


      ORGANIZATIONAL
      CHARACTERISTICS
------------------------------------------------------ Appendix II:1.2

Year first provided funds:  1969

Administration:  10 area supervisors responsible for state projects
run by AARP staff and enrollees in administrative positions

Number of grant-funded employees:  144

Number of enrollees used in SCSEP administration:  502 (7 percent)

States operating in:  34 (33 and Puerto Rico)

State slots administered:  Florida (342), North Dakota (15)

Slots granted to states:  none

Benefits to enrollees:  Federal Insurance Contributions Act (FICA),
workers' compensation, sick leave

Definition of unsubsidized placement:  Placement of a person who
intends to stay for 30 days or more in an unsubsidized position


   ASSOCIACION NACIONAL PRO
   PERSONAS MAYORES (ANPPM)
-------------------------------------------------------- Appendix II:2


      PROGRAM YEAR 1993 DATA
------------------------------------------------------ Appendix II:2.1

SCSEP federal grant for program year 1993:  $11,403,935

Enrollee slots administered:  1,834

Enrollees served:  2,528

End of program year profile:  male--33.7 percent, female--66.3
percent

Services to general community:  76.9 percent

Services to elderly community:  23.1 percent


      ORGANIZATIONAL
      CHARACTERISTICS
------------------------------------------------------ Appendix II:2.2

Year first provided funds:  1978

Administration:  13 regional offices, one subgrantee operates SCSEP
as Project Ayuda

Number of grant-funded employees:  38 (estimate)

States operating in:  10 (9 states and District of Columbia) (Puerto
Rico added in program year 1994)

Number of enrollees used in SCSEP administration:  45 (2.6 percent)

State slots administered:  Florida (23)

Slots granted to states:  none

Benefits to enrollees:  FICA, workers' compensation, sick leave,
vacation, paid holidays, and Liberty Mutual Insurance

Definition of unsubsidized placement:  Placement must have occurred
in the same fiscal year that a person was a SCSEP enrollee.  Person
must stay on the job long enough to receive "a couple of paychecks."
Follow-up is at 60 days. 


   GREEN THUMB
-------------------------------------------------------- Appendix II:3


      PROGRAM YEAR 1993 DATA
------------------------------------------------------ Appendix II:3.1

SCSEP federal grant for program year 1993:  $102,163,953

Enrollee slots administered:  16,855

Enrollees served:  27,235

End of program year profile:  male--26.7 percent, female--73.3
percent

Services to general community:  78.4 percent

Services to elderly community:  21.6 percent


      ORGANIZATIONAL
      CHARACTERISTICS
------------------------------------------------------ Appendix II:3.2

Year first provided funds:  1965

Administration:  30 SCSEP state offices serving one or more states
coordinate Green Thumb employees and enrollees used in administration

Number of grant-funded employees:  417

States operating in:  45 (44 and Puerto Rico)

Number of enrollees in used in SCSEP administration:  439 (2.6
percent)

State slots administered:  Montana, South Dakota, Ohio, Florida

Slots granted to states:  none

Benefits to enrollees:  FICA, workers' compensation, personal leave
(up to 50 hours maximum), bereavement leave (up to 3 days), sick
leave, jury duty benefits, plus other fringe benefits in accordance
with Green Thumb policy

Definition of unsubsidized placement:  Enrollee must have received
job orientation, assessment, and counseling.  Placement must be
expected to last at least 90 days, must last at least 30 days.  Job
must have been procured within 90 days of leaving enrollee status and
pay a wage equal to or greater than what they received as an
enrollee. 


   NATIONAL PACIFIC ASIAN
   RESOURCES CENTER (NAPCA)
-------------------------------------------------------- Appendix II:4


      PROGRAM YEAR 1993 DATA
------------------------------------------------------ Appendix II:4.1

SCSEP federal grant for program year 1993:  $2,097,953

Enrollee slots administered:  346

Enrollees served:  463

End of program year profile:  male--62.1 percent, female--37.9
percent

Services to general community:  77.4 percent

Services to elderly community:  22.6 percent


      ORGANIZATIONAL
      CHARACTERISTICS
------------------------------------------------------ Appendix II:4.2

Year first provided funds:  1989

Administration:  Los Angeles and Seattle projects supervised by
headquarters staff, two subprojects

Number of grant-funded employees:  14

States operating in:  three (increases to eight in program year 1994)

Number of enrollees in SCSEP administration:  26 (7.6 percent)

State slots administered:  none

Slots granted to states:  none

Benefits to enrollees:  FICA, workers' compensation, up to 13
holidays, 4 hours per month sick leave, 1 personal day, 3 days
bereavement leave, 10 days jury duty

Definition of unsubsidized placement:  Must go directly to the job
from enrollee status.  No minimum time on the job is required. 


   NATIONAL COUNCIL AND CAUCUS ON
   BLACK AGED (NCCBA)
-------------------------------------------------------- Appendix II:5


      PROGRAM YEAR 1993 DATA
------------------------------------------------------ Appendix II:5.1

SCSEP federal grant for program year 1993:  $11,186,559

Enrollee slots administered:  1,923

Enrollees served:  2,805

End of program year profile:  male--24.8 percent, female--75.2
percent

Services to general community:  65.5 percent

Services to elderly community:  34.5 percent


      ORGANIZATIONAL
      CHARACTERISTICS
------------------------------------------------------ Appendix II:5.2

Year first provided funds:  1978

Administration:  NCCBA staff operate state projects--no subcontracts

Number of grant-funded employees:  43

States operating in:  11 (10 states and District of Columbia)

Number of enrollees used in SCSEP administration:  68 (3.7 percent)

State slots administered:  Florida

Slots granted to states:  none

Benefits to enrollees:  FICA, workers' compensation, sick leave,
annual leave, 11 paid holidays

Definition of unsubsidized placement:  Enrollee must have come from
program directly with jobs preferred to last at least 30 continuous
days.  Job must have minimum hourly rate at least equal to $4.25. 
Follow up at 30, 60, and 90 days.  No minimum time as an enrollee
required. 


   NATIONAL COUNCIL ON THE AGING
   (NCOA)
-------------------------------------------------------- Appendix II:6


      PROGRAM YEAR 1993 DATA
------------------------------------------------------ Appendix II:6.1

SCSEP federal grant for program year 1993:  $38,373,967

Enrollee slots administered:  6,425

Enrollees served:  10,298

End of program year profile:  male--23.7 percent, female--76.3
percent

Services to general community:  63.4 percent

Services to the elderly community:  36.6 percent


      ORGANIZATIONAL
      CHARACTERISTICS
------------------------------------------------------ Appendix II:6.2

Year first provided funds:  1968

Administration:  3 regional offices, 63 subsponsor agencies, direct
management of Los Angeles project

Number of grant-funded employees:  77

States operating in:  21

Number of enrollees used in SCSEP administration:  188 (2.9 percent)

State slots administered:  (Arizona, New Jersey, Florida)

Slots granted to states:  (Arizona, New Jersey, Virginia)

Benefits to enrollees:  FICA, workers' compensation, unemployment
insurance (where required), as well as benefits consistent with host
agency environment

Definition of unsubsidized placement:  Any job not federally funded
or volunteer.  No time limits in effect. 


   NATIONAL COUNCIL OF SENIOR
   CITIZENS (NCSC)
-------------------------------------------------------- Appendix II:7


      PROGRAM YEAR 1993 DATA
------------------------------------------------------ Appendix II:7.1

SCSEP federal grant for program year 1993:  $62,084,256

Enrollee slots administered:  10,245

Enrollees served:  15,276

End of program year profile:  male--24.0 percent, female--76.0
percent

Services to general community:  62.5 percent

Services to elderly community:  37.5 percent


      ORGANIZATIONAL
      CHARACTERISTICS
------------------------------------------------------ Appendix II:7.2

Year first provided funds:  1968

Administration:  All projects subcontracted to municipal, charitable,
local, or state organizations.  NCSC staff involved in training and
subproject supervision. 

Number of grant-funded employees:  65

States operating in:  28 (27 and the District of Columbia)

Number of enrollees used in SCSEP administration:  275 (2.7 percent)

State slots administered:  Alabama, Florida

Slots granted to states:  Maryland, District of Columbia

Benefits to enrollees:  FICA, workers' compensation, 8 paid holidays,
optional small hospital policy, 2 hours per pay period of leave

Definition of unsubsidized placement:  A job with pay equal to or
better than that of the enrollee position.  No time requirements
exist on how long the placement must last or on how long the enrollee
must have been out of the program. 


   NATIONAL INDIAN COUNCIL ON
   AGING (NICOA)
-------------------------------------------------------- Appendix II:8


      PROGRAM YEAR 1993 DATA
------------------------------------------------------ Appendix II:8.1

SCSEP federal grant for program year 1993:  $2,062,027

Enrollee slots administered:  340

Enrollees served:  512

End of program year profile:  male--30.9 percent, female--69.1
percent

Services to general community:  51.9 percent

Services to elderly community:  48.1 percent


      ORGANIZATIONAL
      CHARACTERISTICS
------------------------------------------------------ Appendix II:8.2

Year first provided funds:  1989

Administration:  State coordinators in three states, one subproject

Number of grant-funded employees:  10

States operating in:  six (increased to 16 in program year 1994)

Number of enrollees used in SCSEP administration:  one (0.3 percent)

State slots administered:  none

Slots granted to states:  none

Benefits to enrollees:  FICA, workers' compensation, paid holidays
consistent with worksite policy, sick and annual leave up to 20 hours
per grant year

Definition of unsubsidized placement:  No specific time criteria for
departure or duration


   NATIONAL URBAN LEAGUE (NUL)
-------------------------------------------------------- Appendix II:9


      PROGRAM YEAR 1993 DATA
------------------------------------------------------ Appendix II:9.1

SCSEP federal grant for program year 1993:  $13,689,730

Enrollee slots administered:  2,260

Enrollees served:  3,470

End of program year profile:  male--27.1 percent, female--72.9
percent

Services to general community:  68.7 percent

Services to elderly community:  31.3 percent


      ORGANIZATIONAL
      CHARACTERISTICS
------------------------------------------------------ Appendix II:9.2

Year first provided funds:  1978

Administration:  subcontracts with 23 NUL affiliates in urban areas

Number of grant-funded employees:  76

States operating in:  16

Number of enrollees used in SCSEP administration:  100 (4.5 percent)

State slots administered:  Florida

Slots granted to states:  none

Benefits to enrollees:  FICA, workers' compensation, and unemployment
compensation where applicable (New York and Michigan)

Definition of unsubsidized placement:  Placement in a position not
funded by another government grant found within 30 days after leaving
enrollee status; must have been an enrollee at least a week and must
remain on the job at least 30 days. 


   U.S.  FOREST SERVICE (USFS)
------------------------------------------------------- Appendix II:10


      PROGRAM YEAR 1993 DATA
----------------------------------------------------- Appendix II:10.1

SCSEP federal grant for program year 1993:  $25,736,918

Enrollee slots administered:  4,323

Enrollees served:  5,691

End of program year profile:  male--59.0 percent, female--41.0
percent

Services to general community:  99.9 percent

Services to elderly community:  0.1 percent


      ORGANIZATIONAL
      CHARACTERISTICS
----------------------------------------------------- Appendix II:10.2

Year first provided funds:  1972

Administration:  225 projects at various USFS locations within the
eight Forest Service regions, nine regional experimental stations,
and headquarters; two subcontracts

Number of grant-funded employees:  287 (4 full time, 283 part time)

States operating in:  40 (38 states, the District of Columbia, and
Puerto Rico)

Number of enrollees used in SCSEP administration:  1 (0 percent)

State slots administered:  Florida

Slots granted to states:  New Hampshire, Vermont

Benefits to enrollees:  FICA, workers' compensation, one hour of paid
leave for every 20 hours worked, up to $35 allowance for annual
physical exam

Definition of unsubsidized placement:  USFS has no required minimum
for placement duration or separation from the program. 


PROGRAM YEAR 1994 STATE
ALLOCATIONS COMPARED WITH
SIMULATED STATE ALLOCATIONS
WITHOUT HOLD HARMLESS PROVISION
========================================================= Appendix III

                  Program year     Simulated
                       1994 by       program
State                    state     year 1994    Difference
----------------  ------------  ------------  ------------
Alabama             $7,483,894    $7,841,642      $357,748
Alaska               1,782,400     2,050,682       268,282
Arizona              5,184,445     6,846,749     1,662,304
Arkansas             7,130,399     5,137,267    -1,993,132
California          34,116,026    36,635,152     2,519,126
Colorado             4,011,890     4,281,800       269,910
Connecticut          4,430,345     3,773,509      -656,836
Delaware             1,782,400     2,050,682       268,262
District of          2,291,524     2,050,682      -240,842
 Columbia
Florida             24,123,354    28,285,755     4,162,401
Georgia              8,895,159     9,464,973       569,814
Hawaii               1,782,400     2,050,682       268,282
Idaho                1,921,803     2,050,682       128,879
Illinois            15,892,863    15,805,235       -87,628
Indiana             10,542,397     9,518,356    -1,024,041
Iowa                 5,243,313     5,344,361       101,048
Kansas               4,173,410     4,192,029        18,619
Kentucky             7,516,140     6,842,574      -673,566
Louisiana            6,865,985     7,305,237       439,252
Maine                2,463,484     2,211,421      -252,063
Maryland             5,485,015     5,625,343       140,328
Massachusetts        8,965,346     7,663,875    -1,301,471
Michigan            13,571,672    14,321,447       749,775
Minnesota            9,344,688     6,470,690    -2,873,998
Mississippi          5,035,305     5,212,635       177,330
Missouri             9,912,701     9,081,677      -831,024
Montana              2,467,293     2,050,682      -416,611
Nebraska             3,089,931     2,781,873      -308,058
Nevada               1,921,803     2,050,682       128,879
New Hampshire        1,849,071     2,050,682       201,611
New Jersey          11,238,803     8,937,395    -2,301,408
New Mexico           2,222,551     2,695,530       472,979
New York            26,826,145    22,913,434    -3,912,711
North Carolina      10,546,849    11,677,280     1,130,431
North Dakota         2,382,439     2,050,682      -331,757
Ohio                18,063,819    18,790,357       726,538
Oklahoma             6,403,028     6,169,013      -234,015
Oregon               5,801,089     5,104,446      -696,643
Pennsylvania        22,048,545    21,397,401      -651,144
Puerto Rico          5,644,846     7,510,552     1,865,706
Rhode Island         2,133,938     2,050,682       -83,256
South Carolina       5,453,038     6,285,795       832,757
South Dakota         2,721,855     2,050,682      -671,173
Tennessee            8,284,106     8,916,286       632,180
Texas               22,215,326    24,570,981     2,355,655
Utah                 2,579,076     2,424,458      -154,618
Vermont              2,194,548     2,050,682      -143,866
Virginia             8,547,897     8,245,188      -302,709
Washington           5,945,604     6,756,045       810,441
West Virginia        4,498,913     4,088,906      -410,007
Wisconsin           10,180,156     8,249,502    -1,930,654
Wyoming              1,921,803     2,050,682       128,879
----------------------------------------------------------
Note:  Simulation based on demographic and income data available at
time of allocations.  Simulation does not show funding levels that
would be allocated for program activities in the U.S.  Territories. 


SIMULATION OF PROGRAM YEAR 1994
STATE ALLOCATIONS WITHOUT 78/22
LIMIT
========================================================== Appendix IV

The amounts of the SCSEP grants have been affected by appropriations
language that distributes the grant funds between the national
sponsors and states in a way that differs from the language in the
OAA.  For program year 1994, the national sponsors received about
$320 million (78 percent of the funds), and the states received about
$90 million (22 percent of the funds). 

At our request, Labor ran a simulated allocation of the program year
1994 funding formula without the 78/22 appropriations language limit
in place.  Under that simulation, the funds in excess of the 1978
appropriation would have been split 55 percent for the states and 45
percent for the national sponsors.  Of the $410.3 million
appropriated for program year 1994, funds for the state sponsors
would have increased by $65 million to about $155 million; national
sponsor funding would have decreased by that amount to $255 million. 

The first three columns of the simulation (see table IV.1) represent
simulated program year 1994 funding for the state sponsors.  Column 1
shows each state's 1978 funding level; column 2 shows the additional
funds, in excess of the 1978 level, that would have been distributed
to states on the basis of the "55-45" split; and column 3 is the sum
of these first two columns.  The national total for the state
sponsors, including territorial allocations, is more than $155
million. 

The next three columns represent simulated funding for the national
sponsors.  Column 4 shows the amount of national sponsor funding in
each state in 1978; column 5 shows the additional funds, in excess of
the 1978 level, that would have been distributed to the national
sponsors on the basis of the 55-45 split; and column 6 is the sum of
columns 4 and 5.  The national total for the national sponsors is
about $255 million. 

Columns 7 to 9 combine the state sponsor and national sponsor
funding.  Column 7 is the sum of columns 1 and 4.  Nationally, column
7 totals about $201 million, the amount of the 1978 allocation for
the program.  Column 8 is the sum of columns 2 and 5.  Nationally,
column 8 totals over $209 million and represents the funds for
program year 1994 that exceed of the 1978 appropriation.  Column 9 is
the total of columns 7 and 8; nationally, column 9 totals the $410.3
million appropriation for program year 1994. 



                                                                      Table IV.1
                                                       
                                                          Department of Labor Simulation of
                                                         Program Year 1994 State Allocations
                                                               Without 78/22 Provision

                                     55%/45%                                     55%/45%          Total
                    1978 state         state   Total state  1978 national       national       national
State                  sonsors      sponsors      sponsors       sponsors       sponsors       sponsors     1978 total  55%/45% total    Grand total
----------------  ------------  ------------  ------------  -------------  -------------  -------------  -------------  -------------  -------------
Alabama               $717,000    $2,145,756    $2,862,756     $2,872,000     $1,848,020     $4,720,020     $3,589,000     $3,993,776     $7,582,776
Alaska                 813,000     1,047,250     1,860,250              0              0              0        813,000      1,047,250      1,860,250
Arizona                395,000     1,873,517     2,268,517      1,568,000      1,613,556      3,181,556      1,963,000      3,487,073      5,450,073
Arkansas               491,000     1,405,743     1,896,743      3,458,000      1,210,688      4,668,688      3,949,000      2,616,431      6,565,431
California           2,930,000    10,024,701    12,954,701     12,841,000      8,633,712     21,474,712     15,771,000     18,658,413     34,429,413
Colorado               344,000     1,171,655     1,515,655      1,518,000      1,009,080      2,527,080      1,862,000      2,180,735      4,042,735
Connecticut            447,000     1,032,568     1,479,568      1,961,000        889,293      2,850,293      2,408,000      1,921,861      4,329,861
Delaware               813,000     1,047,250     1,860,250              0              0              0        813,000      1,047,250      1,860,250
District of            185,000       562,661       747,661        989,000        484,589      1,473,589      1,174,000      1,047,250      2,221,250
 Columbia
Florida              1,973,000     7,740,004     9,713,004      8,362,000      6,666,031     15,028,031     10,335,000     14,406,035     24,741,035
Georgia                797,000     2,589,958     3,386,958      3,374,000      2,230,586      5,604,586      4,171,000      4,820,544      8,991,544
Hawaii                 813,000     1,047,250     1,860,250              0              0              0        813,000      1,047,250      1,860,250
Idaho                  185,000       562,661       747,661        724,000        484,589      1,208,589        909,000      1,047,250      1,956,250
Illinois             1,541,000     4,324,883     5,865,883      6,354,000      3,724,780     10,078,780      7,895,000      8,049,663     15,944,663
Indiana                849,000     2,604,566     3,453,566      4,523,000      2,243,166      6,766,166      5,372,000      4,847,732     10,219,732
Iowa                   538,000     1,462,410     2,000,410      2,054,000      1,259,492      3,313,492      2,592,000      2,721,902      5,313,902
Kansas                 410,000     1,147,090     1,557,090      1,656,000        987,925      2,643,925      2,068,000      2,135,015      4,201,015
Kentucky               653,000     1,872,375     2,525,375      3,205,000      1,612,572      4,817,572      3,858,000      3,484,947      7,342,947
Louisiana              639,000     1,998,977     2,637,977      2,599,000      1,721,606      4,320,606      3,238,000      3,720,583      6,958,583
Maine                  220,000       605,124       825,124      1,058,000        521,160      1,579,160      1,278,000      1,126,284      2,404,284
Maryland               542,000     1,539,297     2,081,297      2,139,000      1,325,710      3,464,710      2,681,000      2,865,007      5,546,007
Massachusetts          995,000     2,097,113     3,092,113      3,953,000      1,806,126      5,759,126      4,948,000      3,903,239      8,851,239
Michigan             1,250,000     3,918,865     5,168,865      5,177,000      3,375,099      8,582,099      6,427,000      7,293,954     13,720,964
Minnesota              667,000     1,770,614     2,437,614      4,614,000      1,524,931      6,138,931      5,281,000      3,295,545      8,576,545
Mississippi            489,000     1,426,365     1,915,365      1,948,000      1,228,448      3,176,448      2,437,000      2,654,813      5,091,813
Missouri               925,000     2,485,075     3,410,075      4,202,000      2,140,256      6,342,256      5,127,000      4,625,331      9,752,331
Montana                185,000       562,661       747,661      1,114,000        484,589      1,598,589      1,299,000      1,047.250      2,346,250
Nebraska               289,000       761,221     1,050,221      1,324,000        655,597      1,979,597      1,613,000      1,416,818       3,029818
Nevada                 185,000       562,661       747,661        724,000        484,589      1,208,589        909,000      1,047,250      1,956,250
New Hampshire          185,000       562,661       747,661        672,000        484,589      1,156,589        857,000      1,047,250      1,904,250
New Jersey           1,062,000     2,445,594     3,507,594      5,178,000      2,106,253      7,284,253      6,240,000      4,551,847     10,791,847
New Mexico             185,000       737,594       922,594        741,000        635,248      1,376,248        926,000      1,372,842      2,298,842
New York             2,869,000     6,269,943     9,138,943     11,849,000      5,399,950     17,248,950     14,718,000     11,669,893     26,387,893
North Carolina         945,000     3,195,325     4,140,325      3,862,000      2,751,955      8,613,955      4,807,000      5,947,280     10,754,280
North Dakota           185,000       562,661       747,661      1,054,000        484,589      1,538,589      1,239,000      1,047,250      2,286,250
Ohio                 1,689,000     5,141,720     6,830,720      6,975,000      4,428,276     11,403,276      8,664,000      9,569,996     18,233,996
Oklahoma               548,000     1,688,065     2,236,065      2,625,000      1,453,835      4,078,835      3,173,000      3,141,900      6,314,900
Oregon                 415,000     1,396,761     1,811,761      2,534,000      1,202,952      3,736,952      2,949,000      2,599,713      5,548,713
Pennsylvania         2,192,000     5,855,101     8,047,101      8,970,000      5,042,671     14,012,671     11,162,000     10,897,772     22,059,772
Puerto Rico            449,000     2,055,158     2,504,158      1,688,000      1,769,992      3,457,992      2,137,000      3,825,150      5,962,150
Rhode Island           185,000       562,661       747,661        876,000        484,589      1,360,589      1,061,000      1,047,250      2,108,250
South Carolina         473,000     1,720,020     2,193,020      1,921,000      1,481,357      3,402,357      2,394,000      3,201,377      5,595,377
South Dakota           185,000       562,661       747,661      1,293,000        484,589      1,777,589      1,478,000      1,047,250      2,525,250
Tennessee              806,000     2,439,518     3,245,518      3,105,000      2,101,278      5,206,278      3,911,000      4,541,096      8,452,096
Texas                1,886,000     6,723,508     8,609,508      8,144,000      5,790,580     13,934,580     10,030,000     12,514,088     22,544,088
Utah                   185,000       663,419       848,419      1,080,000        571,366      1,651,366      1,265,000      1,234,785      2,499,785
Vermont                185,000       562,661       747,661        919,000        484,589      1,403,589      1,104,000      1,047,250      2,151,250
Virginia               731,000     2,256,181     2,987,181      3,502,000      1,943,122      5,445,122      4,233,000      4,199,303      8,432,303
Washington             534,000     1,848,698     2,382,698      2,122,000      1,592,180      3,714,180      2,658,000      3,440,878      6,096,878
West Virginia          383,000     1,118,872     1,501,872      1,921,000        963,622      2,884,622      2,304,000      2,082,494      4,386,494
Wisconsin              809,000     2,257,361     3,066,361      4,655,000      1,944,139      6,599,139      5,464,000      4,201,500      9,665,500
Wyoming                185,000       562,661       747,661        724,000        484,589      1,208,589        908,000      1,047,250      1,956,250
American Samoa         407,000       523,625       930,625              0              0              0        407,000        523,625        930,625
Guam                   407,000       523,625       930,625              0              0              0        407,000        523,625        930,625
Northern               203,500       523,625       727,125              0              0              0        203,500        523,625        727,125
 Marianas
Palau                  203,500       523,625       727,125              0              0              0        203,500        523,625        727,125
Virgin Islands         407,000       523,625       930,625              0              0              0        407,000        523,625        930,625
====================================================================================================================================================
U.S. Total         $40,179,000  $115,197,500  $155,376,500   $160,721,000    $94,252,500   $254,973,500   $200,900,000   $209,450,000   $410,350,000
----------------------------------------------------------------------------------------------------------------------------------------------------

NATIONAL SPONSORS' ADMINISTRATIVE
COSTS PLACED IN THE CATEGORY OF
OTHER ENROLLEE COSTS
=========================================================== Appendix V

For program year 1994, most of the national sponsors allocated
administrative costs to the category of other enrollee costs rather
than the administrative category, which has an Older Americans Act
(OAA) limit of 15 percent.  Officials at Labor and some of the
national sponsor organizations justified this practice because the
costs included support of enrollee training or assessment activities
or the costs of providing these services, expenditures allowed under
the 1985 proposed SCSEP regulations.  However, because the 1985
proposed regulations were never published in final form, they never
superseded the 1976 legally promulgated regulations. 

Labor, while defending the 1985 draft definition of other enrollee
costs, could not specifically explain how many of these allowed costs
for program year 1994 related directly to the enrollees--nor did most
of the documents provided by the national sponsors in response to
Labor's request to provide explanatory data.  Some grantees provided
the results of internal surveys of staff activity taken in 1985 or
earlier to support their budget allocations.  Others provided only
their stated reliance upon Labor's 1985 proposed regulation language
as the basis for their including such administrative costs as other
enrollee costs.  When actual costs for program year 1994 were
provided, we reviewed them and, where appropriate, included them in
the tables. 

Tables V.2 to V.11 delineate grant costs for administration and other
enrollee costs (1) from the individual national sponsor grant
agreements and (2) as we identified them.  Our delineation identifies
costs allocated to other enrollee costs that, in our judgment, were
administrative costs.  All costs that could be attributed directly to
enrollee training, special job-related or personal counseling,
incidentals, or other direct support were excluded from the following
tables. 

A combined total of (1) administrative costs from the grant agreement
and (2) additional administrative costs identified by GAO from the
other enrollee costs category is also shown for each grantee
organization.  A combined percentage for administration is computed
as well.  When actual cost data were provided by the grantees, those
costs are shown in an "actual costs" column.  In these instances,
actual costs were added to the acknowledged administrative costs from
the grant to derive totals and percentages.  In cases where no actual
cost data were provided, the actual cost column is blank. 

Using the budget data from the grant applications and, where
available, actual cost data provided by the grantees, we found that
administrative costs for most of the sponsors were higher than the
15-percent limit in the OAA.  For program year 1994, the
administrative costs labeled as other enrollee costs exceeded $18
million.  (Using budget data alone, the total exceeded $20 million.)
Table V.1 summarizes the additional administrative costs for all the
national sponsors. 



                         Table V.1
          
          Additional Administrative Costs in SCSEP
                           Grants

                                                Percent of
                                  Additional     grant for
                    Additional  administrati           all
                  administrati       ve cost  administrati
                       ve cost         (with      on (with
National sponsor      (budget)       actual)       actual)
----------------  ------------  ------------  ------------
American            $4,473,499    $4,097,080          23.2
 Association of
 Retired Persons
 (AARP)
Association            935,969       935,969          22.4
 Nacional Pro
 Personas
 Mayores (ANPPM)
Green Thumb          8,133,633     7,095,487          20.4
National Asian         343,903       343,903          16.8
 Pacific Center
 on Aging
 (NAPCA)
National Caucus        740,058       673,141          19.8
 and Center on
 Black Aged
 (NCCBA)
National Council     3,645,028     3,645,028          23.2
 on Aging (NCOA)
National Council       625,000       375,000          13.2
 of Senior
 Citizens (NCSC)
National Urban       1,275,685     1,263,685          22.4
 League (NUL)
National Indian        375,891       309,752          21.1
 Council on
 Aging (NICOA)
U.S. Forest                  0             0          10.0
 Service (USFS)
==========================================================
Total              $20,548,666   $18,739,045
----------------------------------------------------------


                               Table V.2
                
                 GAO Delineation of AARP Administrative
                Costs Included in the Category of Other
                             Enrollee Costs

                 (AARP: SCSEP federal grant for program
                        year 1994 ($49,894,391))

                                  Budgeted    Percent of
                                    amount         grant  Actual costs
----------------------------  ------------  ------------  ------------
Grant budget
----------------------------------------------------------------------
Administration                  $7,481,421         14.99
Other enrollee cost              4,686,249          9.39

GAO-identified administrative costs
----------------------------------------------------------------------
Personnel                        2,649,745                  $2,562,901
Fringe benefits                  1,091,790                     889,977
Travel                             140,000                     161,102
Rent                               406,250                     335,798
Telephone                          185,714                     147,302
Subtotal (A)                     4,473,499                   4,097,080
AARP-identified                  7,481,421
 administration (B)
GAO total of administration    $11,954,920          23.2   $11,578,501
 (A) + (B)
----------------------------------------------------------------------


                         Table V.3
          
          GAO Delineation of ANPPM Administrative
          Costs Included in the Category of Other
                       Enrollee Costs

          (ANPPM: SCSEP federal grant for program
                  year 1994 ($12,570,219))

                      Budgeted    Percent of
                        amount         grant  Actual costs
----------------  ------------  ------------  ------------
Grant budget
----------------------------------------------------------
Administration      $1,885,533      15 (with
                                     waiver)
Other enrollee       1,068,469           8.5
 cost

GAO-identified administrative costs
----------------------------------------------------------
Personnel              530,000
Fringe benefits        180,000
Travel                  50,000
Rent                   105,000
Telephone               42,969
Postage                 28,000
Subtotal (A)           935,969
ANPPM-               1,885,533
 identified
 administration
 (B)
GAO total of        $2,821,502          22.4
 administration
 (A) + (B)
----------------------------------------------------------


                         Table V.4
          
               GAO Delineation of Green Thumb
            Administrative Costs Included in the
              Category of Other Enrollee Costs

           (Green Thumb: SCSEP federal grant for
             program year 1994 ($102,509,745))

                      Budgeted    Percent of
                        amount         grant  Actual costs
----------------  ------------  ------------  ------------
Grant budget
----------------------------------------------------------
Administration     $13,838,815          13.5
Other enrollee       8,200,780           8.0
 cost

GAO-identified administrative costs
----------------------------------------------------------
Personnel            4,564,516                  $4,326,906
Fringe benefits      1,504,977                   1,548,085
Travel               1,700,086                   1,183,935
Insurance              364,054                      22,860
Miscellaneous                                       13,701
Subtotal (A)         8,133,633                   7,095,487
Green Thumb-        13,838,815
 identified
 administration
 (B)
GAO total of       $21,972,448          20.4   $20,934,302
 administration
 (A) + (B)
----------------------------------------------------------


                         Table V.5
          
          GAO Delineation of NAPCA Administrative
          Costs Included in the Category of Other
                       Enrollee Costs

          (NAPCA: SCSEP federal grant for program
                  year 1994 ($5,067,315))

                      Budgeted    Percent of
                        amount         grant  Actual costs
----------------  ------------  ------------  ------------
Grant budget
----------------------------------------------------------
Administration        $509,839         10.06
Other enrollee         423,825          8.36
 cost

GAO-identified administrative costs
----------------------------------------------------------
Personnel               49,655
Fringe benefits         14,967
Contractual            279,281
Subtotal (A)           343,903
NAPCA-                 509,839
 identified
 administration
 (B)
GAO total of          $853,742          16.8
 administration
 (A) + (B)
----------------------------------------------------------


                         Table V.6
          
          GAO Delineation of NCCBA Administrative
          Costs Included in the Category of Other
                       Enrollee Costs

          (NCCBA: SCSEP federal grant for program
                  year 1994 ($12,298,332))

                      Budgeted    Percent of
                        amount         grant  Actual costs
----------------  ------------  ------------  ------------
Grant budget
----------------------------------------------------------
Administration      $1,768,904         14.38
Other enrollee         867,785          7.06
 cost

GAO-identified administrative costs
----------------------------------------------------------
Personnel              444,320                    $396,152
Fringe benefits        172,892                     154,143
                                                    (est.)
Travel                  72,100                          \a
Equipment/              10,646                          \a
 supplies
Telephone               25,000                          \a
Contractual             15,100                          \a
Subtotal (A)           740,058                     673,141
NCCBA-               1,768,904
 identified
 administration
 (B)
GAO total of        $2,508,962          19.8    $2,442,045
 administration
 (A) + (B)
----------------------------------------------------------
\a No actual costs provided for these categories. 



                         Table V.7
          
           GAO Delineation of NCOA Administrative
          Costs Included in the Category of Other
                       Enrollee Costs

           (NCOA: SCSEP federal grant for program
                  year 1994 ($37,442,704))

                      Budgeted    Percent of
                        amount         grant  Actual costs
----------------  ------------  ------------  ------------
Grant budget
----------------------------------------------------------
Administration      $5,054,765          13.5
Other enrollee       3,931,484          10.5
 cost

GAO-identified administrative costs
----------------------------------------------------------
Personnel            1,992,691
Fringe benefits        494,793
Travel                 153,757
Equipment               47,200
Supplies               158,995
Miscellaneous           55,065
Postage                 51,170
Advertising             35,989
Rent                   522,494
Telephone              132,874
Subtotal (A)         3,645,028
NCOA-identified      5,054,765
 administration
 (B)
GAO total of        $8,699,793          23.2
 administration
 (A) + (B)
----------------------------------------------------------


                         Table V.8
          
           GAO Delineation of NCSC Administrative
          Costs Included in the Category of Other
                       Enrollee Costs

           (NCSC: SCSEP federal grant for program
                  year 1994 ($62,845,065))

                      Budgeted    Percent of
                        amount         grant  Actual costs
----------------  ------------  ------------  ------------
Grant budget
----------------------------------------------------------
Administration      $7,893,273          12.6
Other enrollee       1,432,000           2.3
 cost

GAO-identified administrative costs
----------------------------------------------------------
Annual                 235,000                    $235,000
 conference                                   reclassified
                                                        as
                                              administrati
                                                        on
Project training       140,000                     140,000
                                              reclassified
                                                        as
                                              administrati
                                                        on
Contingency for        250,000
 local project
 administration
Subtotal (A)           625,000                     375,000
NCSC-identified      7,893,273
 administration
 (B)
GAO total of        $8,518,273          13.2    $8,268,273
 administration
 (A) + (B)
----------------------------------------------------------


                         Table V.9
          
          GAO Delineation of NICOA Administrative
          Costs Included in the Category of Other
                       Enrollee Costs

          (NICOA: SCSEP federal grant for program
                  year 1994 ($5,066,911))

                      Budgeted    Percent of
                        amount         grant  Actual costs
----------------  ------------  ------------  ------------
Grant budget
----------------------------------------------------------
Administration        $760,036          15.0
Other enrollee         386,891           7.6
 cost

GAO-identified administrative costs
----------------------------------------------------------
Personnel              159,780                    $115,127
Fringe benefits         35,639                      22,960
Travel                  25,000                      17,125
Meeting expenses       144,291                     144,291
Other                   11,181                      10,249
Subtotal (A)           375,891                     309,762
NICOA-                 760,036
 identified
 administration
 (B)
GAO total of        $1,135,927          21.1    $1,069,788
 administration
 (A) + (B)
----------------------------------------------------------


                         Table V.10
          
           GAO Delineation of NUL Administrative
          Costs Included in the Category of Other
                       Enrollee Costs

           (NUL: SCSEP federal grant for program
                  year 1994 ($14,341,274))

                      Budgeted    Percent of
                        amount         grant  Actual costs
----------------  ------------  ------------  ------------
Grant budget
----------------------------------------------------------
Administration      $1,948,759         13.59
Other enrollee       1,316,535          9.18
 cost

GAO-identified administrative costs
----------------------------------------------------------
Personnel              831,864
Fringe benefits        205,914
Travel                   6,730
Equipment               52,000                     $40,000
Rent                   130,077
Telephone               35,100
Postage                 14,000
Subtotal (A)         1,275,685                   1,263,685
NUL-identified       1,948,765
 administration
 (B)
GAO total of        $3,224,450          22.4    $3,212,444
 administration
 (A) + (B)
----------------------------------------------------------


                         Table V.11
          
           GAO Delineation of USFS Administrative
          Costs Included in the Category of Other
                       Enrollee Costs

           (USFS: SCSEP federal grant for program
                  year 1994 ($26,844,903))

                      Budgeted    Percent of
                        amount         grant  Actual costs
----------------  ------------  ------------  ------------
Grant budget
----------------------------------------------------------
Administration      $2,684,418          10.0
Other enrollee       1,238,996           4.6
 cost

GAO-identified administrative costs
----------------------------------------------------------
None
Subtotal (A)                 0
USFS-identified      2,684,418
 administration
 (B)
GAO total of        $2,684,418          10.0
 administration
 (A) + (B)
----------------------------------------------------------



(See figure in printed edition.)Appendix VI
COMMENTS FROM THE DEPARTMENT OF
LABOR AND OUR EVALUATION
=========================================================== Appendix V



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)



(See figure in printed edition.)


The following are GAO's comments on the Department of Labor's letter
dated July 31, 1995. 


   GAO COMMENTS
--------------------------------------------------------- Appendix V:1

1.  Concerning the appropriateness of the draft report title, SCSEP: 
Significant Changes Needed, the purpose of our review was not to
question the need for the program or its results.  We were asked to
examine SCSEP's administration; therefore, we have changed the title
to Department of Labor:  Senior Community Service Employment Program
Delivery Could Be Improved Through Legislative and Administrative
Actions to reflect that focus.  More specifically, we found systemic
flaws that may deny eligible people an opportunity to participate in
the program and a cost allocation approach that allowed the improper
budgeting and expenditure of millions of dollars, permitting national
sponsors to exceed the statutory 15-percent limit on administrative
costs. 

2.  SCSEP is a grant program for which applicants apply annually. 
Labor has the authority to decrease or deny altogether the funding
amount sought if it has concerns about an applicant's future
performance.  Therefore, Labor had a choice in funding the national
sponsor in question.  For this national sponsor, Labor had sufficient
reason, on the basis of its Office of Inspector General (OIG)
reports, to (1) be concerned about future performance and (2)
consider a change to that grantee's funding. 

3.  The statement, which we have rewritten to avoid the inference
mentioned, seeks to explain program funding by identifying
contributors and the differences between cash and in-kind
contributions. 

4.  The report has been changed to include Labor's updated data that
reflect the proper proportion of women in the SCSEP program. 

5.  Although funding amounts are related to the time sponsors have
participated in SCSEP, the wide variation in sponsors' funding has
been cited as a problem by several national sponsors as well as
several states.  Some of the smaller, ethnically targeted national
sponsors have tried to serve targeted groups, these sponsors said,
but have been thwarted by a reluctance on the part of some large
national sponsors to leave areas they served.  According to some
state officials, the significant disparity between the funding they
received and that received by some national sponsors left the states
in a relatively powerless position in disputes over equitable
distribution. 

6.  Noncompetitive grant awards that total several hundred million
dollars a year are sufficiently sensitive to warrant the Procurement
Review Board's review.  Further, constraints on the Board members'
time is not justification for weakening internal control measures. 
An independent review of grant award decisions, although
administratively established and not explicitly required by law, is
an important internal control. 

7.  In objecting to our views on the inadequacy of attempts to
achieve equitable distribution of enrollee positions, Labor raised
several issues.  Concerning the issue of responsibility by states, we
have revised the report to ensure that it clearly points out the
responsibility that states, as well as national sponsors, have in
achieving equitable distribution of enrollee positions.  Concerning
the issue of administrative efficiency related to the goal of
equitable distribution, Labor cited our 1979 report, The Distribution
of Senior Community Service Employment Positions (GAO/HRD-80-13, Nov. 
8, 1979).  Labor quoted that report on the approach taken by
sponsors--and particularly national sponsors--to achieve equitable
distribution.  The report noted that, relative to the administrative
limits required of the program, the national sponsors' efforts to
become cost effective did have merit.  But the relationship between
national sponsors' and Labor's efforts to achieve equitable
distribution is more fully detailed in a later report, Information on
the Senior Community Service Employment Program and the Proposed
Transfer to the Department of Health and Human Services
(GAO/HRD-84-42, Mar.  12, 1984). 

This 1984 report (p.  22) noted the following:  "A Labor official
stated that the distribution of enrollee positions within the states
may not be equitable since some national sponsors established large
clusters of enrollee positions early in the development of SCSEP, and
these have been carried forward." According to the 1984 report,
Labor, in February 1979, asked for SCSEP sponsors in each state to
(1) discuss and agree upon a rationale for distributing SCSEP funds,
(2) identify areas that showed inequitable distribution, (3)
establish plans for eliminating inequities without displacing current
enrollees, and (4) send these plans to Labor.  Labor officials said
they did not receive many plans.  In 1981, following up on that
request, Labor asked national sponsors and state agencies, as a group
effort, to report on the progress made toward achieving equitable
distribution.  Labor said that it received reports from approximately
90 percent of the states. 

As also noted in our 1984 report, Labor officials established a panel
of representatives--from Labor, national sponsors, and state
agencies--to review the equitable distribution reports and determine
which states were making progress.  The panel examined the state
reports, but, according to our 1984 report, "The results were never
formalized by Labor, and no general feedback was provided to the
sponsors." Labor did suggest to the program sponsors that they use
the reports during their next planning sessions.  In January 1984,
Labor once again requested another equitable distribution report. 
According to our 1984 report, "while such cooperative efforts by
national and state sponsors are directed toward equitable
distribution, Labor does not know that such distribution has
occurred."

When we began the review leading to this latest report, we asked
Labor officials if they knew the status of equitable distribution in
the states compared with its status 5 years earlier.  Labor officials
did not know for certain which states had progressed in equitable
distribution. 

Concerning Labor's complaint about census data, any comparison of
distribution of positions between 1989 and 1994 is, necessarily,
skewed.  This is because the 1989 distribution of enrollee positions
was made on the basis of 1980 census data, and the 1994 distribution
was made on the basis of 1990 census data.  The introduction of 1990
census data in the 1994 equitable distribution reports may have
obscured progress made between 1989 and 1994 in some areas and
exaggerated progress in others. 

8.  The number of enrollee positions available depends on the level
of SCSEP funding, not on the hold harmless provision.  When funding
levels decline, past performance indicates that sponsors--state and
national--leave some positions unfilled to ensure that enrollees in
other positions may continue in the program.  In receiving enrollee
positions formerly available to a national sponsor under the hold
harmless provision, a state sponsor would have the option of (1)
administering these positions itself or (2) subcontracting the
administration to others, including the original national sponsor. 
In addition, the forward funding nature of the program (see footnote
7) would give all parties concerned ample time to adjust to a change
in sponsors.  Therefore, it is not likely that removing the hold
harmless provision would "place many enrollees `on-the-street' [sic]
without alternatives."

9.  Sponsors that emphasize different activities and target different
groups may, nevertheless, serve the same people.  All sponsors must
provide enrollees positions and training that corresponds to their
aptitudes and preferences--just as all sponsors, regardless of their
ethnic focus, must accept potential enrollees only on the basis of
age and income criteria, not on ethnicity or sex. 

10.  The unwritten agreement mentioned allows national sponsors to
avoid situations that might provoke dissension because of differences
in salaries or benefits of enrollees participating through different
sponsors.  This policy could possibly deny enrollees access to the
type of training best suited to their needs.  Whether such a denial
is permanent or not is irrelevant.  The policy serves the interests
of SCSEP's national sponsors rather than those of the elderly poor,
for whom the program exists. 

11.  Several national sponsors--the U.S.  Forest Service is an
example--have geographic constraints on their decisions on areas to
serve.  Other national sponsors have a preference for serving
specific ethnic or minority groups (whose languages and cultures may
require specialized knowledge), which guides some of their decisions
on areas to serve.  States are not likely to face such constraints or
preferences.  In addition, some states with small populations have
said (1) their level of effort in SCSEP has been curtailed by the
minimal funding they receive and (2) more funding would allow them to
increase their SCSEP efforts. 

12.  Labor raised two issues:  (1) our use of budgeted rather than
actual expense data in assessing administrative and other enrollee
costs and (2) our interpretation of acceptable administrative costs
in the SCSEP program.  Regarding the first issue, during our review,
we obtained from Labor's SCSEP staff the data relevant to SCSEP grant
awards.  When we discussed actual cost data, staff described the
separation of Labor's program and fiscal oversight activities and the
limited use of actual cost data in program planning and new grants
approval.  Actual cost data are not normally available until well
after the grant year is completed. 

When we received Labor's enclosure, indicating its revised view on
the use of actual cost data, we asked when these data would be
available.  Actual data would not be available for 3 months or
longer, Labor said.  By that time, program year 1995 allocations had
already been made. 

We also asked for any additional data the national sponsors had used
to justify their budgeted costs for the 1994-95 program year.  Labor
said it did not have these data but would request them from the
national sponsors.  Nine of the national sponsors provided data or
information intended to explain and support their allocation of costs
to the category of other enrollee costs.  In instances in which these
data indicated that the expenses had directly supported other
enrollee cost services, we have revised the totals we had originally
developed using budgeted amounts and noted the revisions in the
actual costs columns of tables V.2 through V.11.  However, little of
the cost data adequately distinguished other enrollee costs as being
in direct support of the enrollees rather than general administrative
operations. 

Ultimately, the relevance of the budgeted versus actual costs issue
is questionable because Labor's SCSEP program officials historically
have based their application approval and oversight decisions
primarily on budgeted costs, which should be supported by up-to-date
and accurate cost data.  Most of the data Labor received from the
national sponsors did not directly support the budgeted costs they
were asked to support. 

Regarding the second issue, Labor's other response to our findings of
misallocations questions our interpretation of acceptable
administrative costs.  Labor cites the authority of the 1985 SCSEP
draft regulations and their incorporation into the grant agreements. 
As noted earlier in this report, these draft regulations have no
legal authority.  In 1976, Labor published the only formal
regulations in effect for SCSEP before program year 1995.  Labor's
proposed amended SCSEP regulations, published in 1985, remained in
draft form.  Because these regulations never became final, they never
gained the force and effect of law.  Between 1976 and 1995, the only
regulations in effect that pertained to SCSEP were the 1976
regulations. 

Through its comments, Labor has (1) downplayed the existence of the
legally promulgated 1976 regulations and (2) interpreted the draft
1985 regulations as having the force and effect of law, when, in
fact, they do not.  Labor officials have not provided us with an
acceptable legal basis for using the 1985 draft regulations instead
of the legally promulgated regulations of 1976. 

Finally, these officials also suggested that other Labor programs
under other legislative authority may permit a different
interpretation of cost allocations.  This may be true, but with
respect to SCSEP, the regulations and related provisions of the Older
Americans Act (OAA) speak for themselves. 

A brief discussion of the context of the other enrollee costs issue
may help in understanding it.  The national sponsors have repeatedly
criticized Labor's refusal to recalculate the unit cost to administer
an enrollee position.  Labor officials have informally acknowledged
that the administrative costs associated with a placement have
increased significantly over time.  They also have acknowledged that
some expenses that have been allocated to the category of other
enrollee costs by national and state sponsors would have been more
appropriately included in the administrative cost category.  Through
the introduction of the 1985 SCSEP draft regulations, Labor, in
effect, used the category of other enrollee costs as a way to provide
sponsors, most national and some state, with additional funds to
cover administrative expenses. 

The purpose of our review was not to determine whether the present
level of funding for administrative expenses is adequate but to
identify whether administrative expenses have been properly allocated
under existing law and regulations.  We continue to conclude that in
many instances administrative expenses have not been properly
allocated. 

Finally, the July 1995 regulations, which became final as we
concluded our review, will allow many of the cost allocations of the
type that violated the 1976 regulations to continue.  We believe that
Labor's interpretation of these new regulations is inconsistent with
the OAA's 15-percent limit on administrative costs.  This belief has
prompted our recommendation that the Secretary of Labor clearly
delineate the expenses allowable as other enrollee costs and adopt
the definition of administrative costs set out in the 1976
regulations. 

13.  Labor's OIG officials and contract auditors have told us that
significant concern has existed about grantee indirect costs for
several years.  These costs have been the focus of most of Labor's
OIG audit activity for several of the grantee organizations. 

14.  While the Office of Management and Budget guidance allows
reasonable expenditures for "employee morale activities," we
questioned the use of scarce program funds for such activities.  In
the report example Labor cited, one of the grantee organizations
budgeted about $57,000 for items to promote staff morale and for
recognition of staff achievement.  We have changed the report to
reflect the fact that $25,000 of the budgeted amount was from
indirect costs and $31,944 was from direct costs.  The grantee
organization in question provided actual cost data showing that
program year 1994 expenditures from its employee morale account were
$21,347.27 rather than the budgeted amount of $21,821. 

15.  We have changed the report to reflect that reporting of only
legitimate unsubsidized placements is the responsibility of states as
well as national sponsors. 


GAO CONTACTS AND STAFF
ACKNOWLEDGMENTS
========================================================= Appendix VII

GAO CONTACTS

Larry Horinko, Assistant Director, (202) 512-7001
George A.  Erhart, Senior Economist, (202) 512-7026
Edward C.  Shepherd IV, Evaluator, (202) 512-7042

STAFF ACKNOWLEDGMENTS

Laurel H.  Rabin, Communications Analyst
Stefanie G.  Weldon, Senior Attorney


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