Practices sound, WIB says

The Tulare County Workforce Investment Board (WIB), sent reeling after a scathing report questioned the agency’s spending practices, is waiting for a directive from the state’s Employment Development Department (EDD) before changing any of its accounting practices.

On Wednesday, the WIB Board of Directors convened to discuss the report, issued by office of Inspector General Laura Chick, during its regularly scheduled midday meeting.

Chick, tasked with ensuring American Revitalization and Recovery Act (ARRA) funds are spent properly, called the board’s allocations of ARRA funds — specifically those used for indirect costs —“confusing and convoluted accounting” in a letter to Gov. Arnold Schwarzenegger preceding the report’s findings.

Adam Peck, executive director of the WIB, fielded questions from board members taken aback by the sudden allegations, and detailed the rationale behind the agency’s cost allocations.

“At the time we received Recovery Act funding, both the Federal Department of Labor and California Employment Development Department made it clear... that Recovery Act funds were supplemental to formula funds and must be accounted for using the same rules,” he said.

Peck said the allegation of improper accounting practices took him aback, considering they aligned with the practices in place for all other program allocations managed by the board.

“It would be simpler if they had said this money would have different rules” from other WIB grant programs, Peck said.

Though ARRA funds require additional levels of transparency, including additional reports pinpointing expenditures, Peck said the WIB received no alternative directives with regards to cost allocation.

The crux of the IG’s report rests on the claim that the board allocated approximately $1 million in Recovery Act funds to overhead, or indirect costs, instead of the $60,000 the IG said should have been allocated.

“This was done in spite of the fact that the WIB was basically a pass-through to the sub-contractors who were providing the actual services to the community,” the cover letter to the report states. “These precious dollars were intended to be spent providing training to at risk youth who need to improve their workforce readiness skills.”

Overhead costs, Peck said at the board meeting, must be distributed among all the WIB programs proportionately.

In the quarter ending in September 2009, the ARRA youth program — through which $2.29 million had been spent — took on 46 percent of WIB indirect costs.

The IG’s report suggested revising the allocation method for indirect costs to exclude subcontract costs, which would reduce the program’s direct cost total to approximately $74,000, leaving it paying only 11 percent in indirect expenses.

This revised plan, however, would put an undue burden on the other grant programs, Peck said.

For example, the Dislocated Worker program, which accounted for only $180,529 in expenditures in the same quarter, would shoulder 15, rather than four percent, of the indirect costs paid through WIB under the suggested reallocation plan.

Still, the IG report insists that expenditure of ARRA funds should be held to a higher standard than other WIB grants.

“Over and over again the transparency and accountability of the Recovery Act has been emphasized, as has the importance of keeping ARRA dollars sacredly separate and expenditures carefully tracked,” the report’s cover letter concludes.

Even so, until the board is directed to change their accounting practices by the EDD, Peck said they will maintain their stance that Recovery Act funds will be apportioned along the same rules as any other.

--Contact Sarah de Crescenzo at 784-5000, Ext. 1045, or sdecrescenzo@portervillerecorder.com.