Job Training Partnership Act (JTPA) Financial Closeout:
Technical Assistance Guide (TAG)

CONTENTS

March 17, 2000

PREFACE

The reader should focus on required actions described herein as well as suggested ones. Throughout this guide, ETA has attempted to provide States with suggestions for an orderly transition to the WIA.

This guide covers the expenditure of funds after June 30, 2000 for closeout of the JTPA program. Funds used for planning for transition to the WIA (up to 2 percent of the JTPA Program Year 1998 (PY 98) and PY 99 allotments, 20 CFR 667.900) must be reported and expenditures incurred no later than June 30, 2000, and are not to be included as closeout expenditures.

Included as Appendix A to this guide is a Grant Recipient Closeout Checklist. This checklist, while not all-inclusive, provides States with additional guidance on various areas of closeout that should be addressed. Appendix B to the TAG is the Department of Labor's official policy guidance on closeout, while Appendix C is a suggested closeout package for subrecipients. For reference purposes, Appendix D contains the JTPA expenditure reports, while Appendix E is the Department of Labor's Closeout package for JTPA grantees.

CHAPTER 1
CLOSEOUT PLANS

To assist their subrecipients and contractors to comply with the closeout instructions, States should establish policy and set timelines that will enable entities to submit the necessary closeout documents in a timely manner. States must comply with the timelines established by the Department of Labor/Employment and Training Administration (DOL/ETA).

At a minimum, each State should convey instructions to its subrecipients regarding the closeout of Job Training Partnership Act (JTPA) program activities. Notification should be provided as soon as possible, but no later than May 31, 2000. The notification should be sent "Return Receipt Requested" to the chief elected official and director of the service delivery area (SDA) administrative entity as well as to heads of other direct subrecipients with specific closeout instructions. The State's legal counsel should review the notice to ensure that it meets legal requirements, and the written instructions should include:

• Official notice that all program activities under JTPA are to end no later than June 30, 2000, or sooner for those States with early implementation plans;

• Copies of all closeout documents that subrecipients are required to submit to the State by an established date; and

• The State's policy on key closeout and transition issues.

The notification should be issued with sufficient lead time to organize and implement the instructions.

LOCAL PLANS

States are responsible for ensuring that all subrecipient awards are closed out. To accomplish this, each State should consider obtaining from its subrecipients a plan for the closeout of all JTPA activities that should be reviewed and approved by the State. Items to be considered in developing the plan should include:

• Review of closeout documents submitted by subrecipients;
• Date for completion and submission of closeout documents to the State;
• Staff issues;
• Participant issues;
• Procurement issues;
• Property issues;
• Legal and record retention issues;
• Audits;
• Resolution of complaints, grievances, audits, monitoring findings; and
• General fiscal and related issues.

At a minimum, the local plan(s) should include:

• Planned program closeout time schedule;

• Planned transfer of participants to new local workforce investment board-administered programs, where applicable, including how participant documentation (case management files, eligibility information, etc.) will be transferred to new deliverers of service;

• Estimated costs for closeout activities. These costs may include late claims, unfunded liabilities, termination costs associated with subrecipient agreements, penalties for breaking leases, uncharged accrued leave, possible severance pay and unemployment insurance (UI) payments, records retention and storage costs, audit costs and costs associated with audit resolution, appeal and debt collection activities, and other costs incurred during the closeout process. These costs should be itemized by category, i.e., accrued leave, severance pay, estimated UI payments, and estimated storage costs;

• Planned estimate(s) of the portion of unobligated Program Year 1998 (PY 98) and PY 99 allocations (obligational authority) that will be needed to pay for these costs. The local areas should retain this estimated amount on their books of account to pay for such costs during the 180-day closeout period following the full implementation of the Workforce Investment Act (WIA). Cash needed to support the closeout costs will be drawn down as needed for immediate disbursement needs; and

• Estimated preliminary transfer of PY 98 and PY 99 JTPA obligational authority to WIA.

Particular attention needs to be given to the transition from private industry councils to local workforce investment boards, especially where there are geographic changes involved.

Example: If the existing geographic area of the JTPA SDA is divided to form one or more new local workforce investment areas and their boards, the State should ensure that its closeout plan addresses an orderly separation of the entity and formation of new entities. Concerns would include the allocation of carryforward JTPA funds for the newly formed agency or agencies, continuation of services to existing participants, distribution of useable property, and decisions regarding the identification of responsible parties for the retention or transfer of records and the resolution of any outstanding issues.

It is especially important in the situation described above that the estimated amount of funds retained by the existing JTPA service delivery area is sufficient for closeout activities. Carryforward funds will be distributed to a new entity or entities, and it may not be possible to recoup the funds if closeout costs have been underestimated.

ESTIMATING CLOSEOUT COSTS

The estimate of closeout costs should include all potential expenditures involved in the process. No additional funds will be provided to conduct this activity, which will be in addition to the conduct of normal operations for which program performance is expected. Estimated costs should encompass all costs that are expected to accrue to the closeout activity. Accrued expenditures, as defined in the JTPA Regulations at 20 Code of Federal Regulations (CFR) 626.5, are "charges made to the JTPA program. Expenditures are the sum of actual cash disbursements, the amount of indirect expense incurred, and the net increase (or decrease) in the amounts owed by the recipient for the goods and other property received; for services performed by employees, contractors, subgrantees, subcontractors, and other payees; and other amounts becoming owed under programs for which no current services or performance are required, such as annuities, insurance claims, and other benefit payments."

Various factors should be considered in determining the amount of funds to be retained for closeout. Staff wages and fringe benefit costs involved in closeout activity will probably be the largest amount of funds to be set aside. Another significant amount of funds that should be included for closeout may be severance pay, which must be only for necessary and reasonable costs and must follow the local personnel policies of the organization in effect on August 7, 1998, the date of enactment of WIA.

In addition to necessary transition activities, other types of activities in which staff will be involved will be determined by whatever outstanding issues still remain at the time of closeout of the entity. These issues can include, but are not limited to, debt collection, incident report resolution, grievances, and audit appeals. As discussed further in Chapter 5 of this guide, States and subrecipients are required to maintain a JTPA grievance procedure system for one year from the last day of the JTPA program. Therefore, costs associated with resolution and settlement of complaints and grievances filed in accordance with Section 144 of the JTPA may be charged to JTPA closeout and then to WIA as a program cost until the end of this period. Costs associated with the complaints system incurred after this period may not be charged to WIA, and would have to be paid for with the organization's non-Federal funds. Assuming that the last date for filing a complaint is June 30, 2001, this will allow for charges to be made for these specific activities until August 31, 2001, since costs are allowable for the timely resolution of these complaints and grievances. Timely means that a hearing is held within 30 days of the filing of a complaint or grievance, and a decision is rendered within 60 days of filing, as required in Section 144(a) of the JTPA. Costs not included in this activity are complaint and grievance outcomes such as the payment of back wages and funds withheld in contract disputes. The entity should ensure that all allowable costs associated with these activities are identified and included as closeout costs.

CHAPTER 2
FORMULA GRANT CLOSEOUT

When JTPA is repealed on June 30, 2000, the fund availability period for all JTPA formula funds allotted through PY97 will have expired. Thus, all grants through PY 97 should be closed in accordance with the regular closeout procedures specified at 20 CFR 627.485. However, the JTPA funds from PY 98 and PY 99 will still be available for expenditure after June 30, 2000.

The closeout procedures included in this guide are intended to address the closeout of PY 98 and PY 99 expenditures for the JTPA program, and not those funds transferred into the WIA program which will be subject to closeout after the end of the funding period.

CLOSEOUT

Each recipient is responsible for developing and operating a system for closing agreements so it can comply with the closeout requirements contained in 20 CFR 627.485.

States and subrecipients should issue closeout instructions to lower-tiered entities with sufficient time to conduct an orderly closeout of JTPA operations. States should include instructions for the completion and submission with their closeout packages to subrecipients. These instructions should also include the name and phone number of awarding agency staff that the subrecipient can contact if questions arise.

Submission dates should be clearly established. Such dates should be based on required dates for the State's submission of closeout documents to the DOL. States should establish early dates to allow for staff time to review and correct, if needed, such documents.

SUBMISSION OF CLOSEOUT DOCUMENTS TO DOL

Under 20 CFR 627.455(d)(3), each State is required to submit a final financial report to the DOL within 90 days after the expiration of the funding period for each program year. To assist in the orderly transition to WIA, the period for submittal of the closeout package, including the final JTPA financial report for PY 98 and PY 99 funds is extended until December 31, 2000. Reports are to be marked "final" and signed by the state JTPA liaison. The closeout package will consist of the following final JTPA expenditure reports, copies of which are included as Appendix D to this Technical Assistance Guide (TAG):

• ETA 9040, JTPA Title II Quarterly Status Report; and
• ETA 9041, Worker Adjustment Formula Financial Report

TRANSFER OF FUNDS

Prior to closeout of the JTPA program, States will be requested to identify those JTPA funds by PY 98 and PY 99 fund streams that will not be utilized for closeout, two percent (2%) WIA transition planning, or PY 99 JTPA operations. Those funds will be transferred to WIA. If there is an over- or underestimation of the transferred funds necessary for remaining JTPA activities, a final adjustment will be made transferring funds back to JTPA or forward to WIA at time of final closeout by DOL. The adjustment will be based on the State's final expenditure reports.

Funds are to be transferred to the WIA funding streams in the following manner:

• Local Title II-A funds are to be transferred to the adult funding stream;

• Local Titles II-B and II-C funds are to be transferred to the youth stream;

• Local Title III funds are to be transferred to the dislocated worker funding stream;

• Rapid Response funds are to be carried forward as Rapid Response funds. Other Title III Governor's Reserve funds are to be carried forward to support Statewide Rapid Response activities [WIA Sec. 134(a)(2)], and Statewide employment and training activities [WIA Sec. 134(a)(2)(B) and (3)];

• The five percent (5%) set-aside for Statewide administration is to be carried forward as Statewide activity funds;

• The 5% set-aside for incentive grants, technical assistance and capacity building is carried forward as Statewide activity funds. Any of these funds that have already been awarded to SDAs but have not been spent continue to remain available for local level expenditure (Note: There is no administrative cost limitation on incentive grants under JTPA or WIA.);

• The 5% set-aside for services to older individuals under section 204(d) of JTPA is to be carried forward as local adult funds if the funds have already been distributed to the SDAs under JTPA. Where such funds were not distributed to the SDAs, funds not needed for completion of services to on-board participants should be carried forward as Statewide activity funds;

• Any remaining funds from the 20% of the eight percent (8%) set-aside for education coordination should be carried forward as Statewide activity funds; and

• The 80% of the 8% was for education and training services to participants. JTPA allowed these funds to be distributed to either SDAs or local education agencies. If the funds were distributed to local SDAs, they are to be carried forward as local youth and adult funds in the same proportion as the youth and adult contribution. When the funds were distributed to local education agencies, any remaining funds that are not needed for completion of already on-board participants are to be carried forward as Statewide activity funds.

For each program year of funds, each local area may take 10% of all of the funds carried forward for administrative costs. At the State level, one-third of the amount carried forward for Statewide activities may be used for administrative costs.

The JTPA obligational authority transferred to WIA in accordance with this paragraph is not subject to these closeout procedures.

STATE FINAL EXPENDITURE REPORTS

The final expenditure reports for each of the JTPA funding streams (Titles II-A, II-B, II-C, and III) and for both PY 98 and PY 99 must be submitted with the closeout package no later than 180 days following the full implementation of WIA, but no later than December 31, 2000, unless an extension has been granted. This final report will be in addition to the regularly required quarterly reports due 45 days after the end of the quarter. After the closeout process has been completed, no Federal funds will be available to pay for allowable JTPA claims. State and/or local funds will be necessary to pay for any such costs.

As a result of the mandatory requirement to operate a 1999 JTPA Title II-B program, for early implementing States, the earliest date on which the 180-day closeout period will have begun was on October 1, 1999. Due to the issuance date of this TAG, the closeout period for States that began implementation prior to January 1, 2000, will end on June 30, 2000.

While reported as administrative costs, the costs incurred during the closeout period for closing out the JTPA programs will not be subject to the administrative cost limitations. Also, States are not required to allocate these costs among funding streams. Closeout costs may be charged to a single fund stream, subject to the availability of funds in that funding stream.

Closeout costs will be reported separately in the remarks sections of the applicable JTPA expenditure report along with any funds used for 2% WIA transition planning costs. In addition, these costs are to be included in the total administrative costs on Line 6 or 23 of the ETA 9040 or Line 7, 16, or 21 of the ETA 9041. Closeout and transition costs may be charged to any or all of these line items subject to availability of funds in the grant. By identifying these costs in the remarks section of the expenditure reports, ETA will deduct these costs from the total reported expenditures prior to calculation of compliance with the cost limitations.

Administrative costs applicable to program year JTPA operations will continue to be reported on the appropriate expenditure report, and the State will calculate compliance by comparing actual administrative costs with the total local area allocation for each funding stream. Those funds carried forward to WIA will be treated as WIA funds, and WIA cost limitations will apply.

Example: A State has $2 million total in its Title II fund streams after a preliminary transfer of $500,000 to the WIA program on or before June 30, 2000. Shortly after June 30, 2000, the State calculates that total program expenditures including those of its subrecipients for PY 99 for Title II totaled $1.5 million, leaving a balance of $500,000. To this amount the State applied $80,000 in WIA transition costs accrued as of June 30, 2000, as there is no requirement that transition expenditures be allocated across fund streams. The amount of $80,000 represented 2% of its total JTPA Title II and III appropriations of $4 million. This left $420,000 that the State could use for closeout expenses. At the expiration of the grant, any unexpended funds remaining of the $420,000 would be transferred to the WIA program. In addition, all funds not expended on program operations in Title III were transferred to WIA.

If this State is subject to an administrative cost limitation for Title II, the cost limitation at the State level will be 20% of $2.5 million (the original allocation prior to the preliminary transfer of $500,000 to WIA). The State would use the same basis for calculating the administrative cost limitation of each of its subrecipients (administrative costs applicable to PY 99 program operations less WIA transition and closeout costs compared to the subrecipients' initial allocation for PY 99 before fund transfers).

DOL AUTHORITY

Closeout of a recipient's JTPA grant will not affect:

• The Grant Officer's right to disallow costs and recover funds on the basis of a later audit or other review;
• The recipient's obligation to return any funds due as a result of later refunds, corrections, subrecipient audit disallowances, or other transactions;
• Records retention requirements, requirements for records, and public access to records;
• Property management requirements; and
• JTPA audit and audit resolution requirements.

OBJECTIVES OF AN EFFECTIVE CLOSEOUT PROCESS

Whether pertaining to a recipient or subrecipient, the objectives of a successful closeout process should be:

• To ensure that States/recipients can meet the Federal closeout requirements by the required due date;

• To ensure that recipients and subrecipients reserve sufficient funds to pay all final JTPA obligations, including the costs of closeout;

• To ensure that organizations receiving funds are aware ahead of time of what actions are required for closeout and what conditions should exist at closeout;

• To ensure that each organization receiving JTPA funds can fulfill its closeout responsibilities to the awarding agency;

• To ensure that organizations receiving JTPA funds understand that certain rights of awarding agencies continue beyond closeout; and

• To identify problems/issues that frequently arise subsequent to closeout and to prescribe a way to handle them that minimizes the effort required to resolve them.

ELEMENTS TO BE ADDRESSED IN DESIGNING AN EFFECTIVE CLOSEOUT PROCESS

Closeout documentation requirements should be kept to the minimum necessary to achieve effective closeout and to prevent as many post closeout problems as possible. This may be accomplished by establishing and disseminating a well-designed policy that clearly defines what conditions should exist for closeout, what the rights and responsibilities of the various parties are after closeout, how to handle unresolved issues remaining at closeout deadlines, and how to address issues/problems arising after closeout.

The following are some of the issues that should be addressed in any closeout policies and procedures:

• Closing and settling by the recipient of its contracts/subgrants prior to closing the agreement with its funding agency;

• Use of a First-In, First-Out (FIFO) policy to promote expenditure of "oldest" funds first;

• Establishing a closeout due date that provides sufficient time for the funding organization to resolve issues in advance of its own closeout date;

• Identifying the financial reports required for closeout. At a minimum they should be a "final" report in the format that is routinely required of the organization closing the agreement. They should be no more complicated than is necessary to verify that all financial requirements have been met;

• How unclaimed/uncashed checks should be handled. State or local escheat legislation should be followed in addressing this issue;

• How pending claims and late arriving invoices will be handled after closeout;

• How any refunds, rebates, or credits received after closeout will be handled;

• How to reconcile grantor/grantee records to ensure that expenditures are equal to or less than budget, and that cash received, appropriately reconciled, equals expenditures;

• How JTPA funded property is to be treated at the end of the agreement;

• How the grievance system will continue to be maintained;

• How the recipient will determine compliance with the cost limitations;

• Closure of any special bank accounts required for the agreement;

• Cancellation of any fidelity bonds required only for the agreement; and

• Rights and responsibilities of the various parties after closeout has occurred; specifically those items addressed at 20 CFR 627.490 and any additional requirements established by the State, including:
  • The right to disallow costs and recover funds on the basis of a later audit or other review;
  • The funded organization's responsibility to return any funds due as a result of later refunds, corrections, subrecipient audit disallowances, or other transactions;
  • Record retention and requirements for public access to records;
  • Property management requirements;
  • Audit and audit resolution requirements; and
  • Notification of the subrecipient that closeout documentation is in order and that closeout has officially occurred.

APPLICABLE TERMS TO THE CLOSEOUT PROCESS

Accrued Expenditures Charges made to the JTPA program. Expenditures are the sum of actual cash disbursements, the amount of indirect expense incurred, and the net increase (or decrease) in the amounts owed by the recipient for the goods and other property received; for services performed by employees, contractors, subrecipients, subcontractors, and other payees; and other amounts becoming owed under programs for which no current services or performance are required, such as annuities, insurance claims, and other benefit payments.

Awardee The entity that receives a subgrant or contract award. For example, an SDA is an awardee for funds it receives from the State, and a service provider is an awardee for funds it receives from an SDA.

Awarding Agency With respect to a grant, the Department of Labor. With respect to a subgrant or contract, the party that awarded the subgrant or contract.

Cash Receipts All cash received, including program income.

Obligational Authority The total amount of the grant award.

Unpaid Accruals Allowable JTPA costs incurred during the agreement period that have not been paid.

SAMPLE JTPA CLOSEOUT PACKAGE

Appendix C to this guide provides a suggested format for a subrecipient closeout package. The forms presented are not Federally mandated and may be used or modified as necessary or desired.

The package consists of the following components, described below:

• Transmittal Sheet;
• Detailed Statement of Receipts;
• Detailed Statements of Expenditures;
• Financial Reconciliation Worksheet;
• Closeout Awardee's Release;
• Assignment of Refunds, Rebates, and Credits;
• Final Property Inventory Certification; and
• Tax certification.

Transmittal Sheet

Beyond its function as a transmittal document, this sheet may be used to fulfill the awarding agency's responsibility to notify the awardee that the agreement closeout package has been received, reviewed, and accepted, and that the agreement is administratively closed out. The document provides for signatures of individuals who have reviewed and approved the subrecipient's submission. When completed and appropriately signed, it can be returned to the subrecipient as evidence of final closeout.

Detailed Statement of Receipts and Detailed Statements of Expenditure

More detail may be warranted. The Detailed Receipts List and Detailed Expenditure Listings may make reconciliation easier. If awardee cash received does not match the awarding agency's tally, the discrepancy must be reconciled; the Detailed Receipts List will allow the reviewer to find the error immediately. There is an added burden to the awardee, especially if cash is drawn on a frequent basis. The Detailed Expenditure Listings might be useful to entities that negotiate line item budgets in their agreements and require their awardees to track costs by the line item budget. These forms can be substituted with computer facsimiles from the awardee's accounting system. While this can be burdensome for the awardee, it affords the awarding entity maximum administrative control.

Unclaimed or Outstanding Checks When a recipient or subrecipient has one or more unclaimed or outstanding checks, it should follow its local escheat law(s). Typically, escheat laws cover the reversion of funds to a local or State government when there are no legal claimants for the monies. In some instances, the funds are retained at the local level and then revert to the State government where they are deposited in the general fund, and there is no further obligation on the part of the subrecipient or recipient to track those funds for Federal reporting purposes. In cases where there are no local escheat provisions, the entity should then follow the State escheat law for disposition of the funds. States should ensure that subrecipients are aware of the process for handling unclaimed or outstanding checks. At a minimum, States should ensure that the following information is obtained for claim:

• Claimant's name, last known address, amount of money due, and social security number (where appropriate) for each individual to whom checks for wages (or other outstanding checks) were due;

• For employees (payroll checks), the pay period during which the money was earned, including the number of hours, hourly rate of pay, and dates worked;

• Check number, date of issuance, and amount of each uncashed check; and

• Name, address, and telephone number of any person who may be contacted in connection with any claim which may arise. Normally, this would be the individual who has control of the subrecipient's financial records.

Any unclaimed funds must be included in the total accrued expenditures reported in the closeout package.

Example: A subrecipient determines at time of closeout that it has unclaimed checks from two work experience participants in the amount of $820. Subrecipient staff have made every attempt to contact the participants involved, including sending certified letters to their last known addresses. When no claim is forthcoming, at closeout the subrecipient reports these costs on the appropriate final JTPA expenditure report, draws the funds to cover these costs, and deposits those funds in its bank account. Normally, the funds are retained at the local level for one year and then forwarded to a State government agency to be deposited in the general fund with separate accountability maintained. If not eventually claimed in accordance with State requirements and guidelines, the funds revert to the State and are no longer considered Federal funds.

Prepaid Expenses The prepayment of necessary, reasonable, and allocable costs is allowable. States and subrecipients are authorized to pay for the storage of records for a period of three years from the submittal of the final expenditure report to comply with JTPA regulatory requirements. They are also authorized to pay the allocable share of the single audit(s) that cover the program year(s) to be closed. Any prepaid expense is an actual expenditure that is to be included on the total expenditure line of the appropriate financial report and reported in the closeout package.

Program Income Income generated from program activities during PY 99 and prior years may be used to pay for closeout expenses or may be transferred to WIA. Program income must be liquidated within the three-year period of availability of the funds that generated the income.

Program income not used within the fund availability period must be returned to DOL. JTPA program income earned after the end of the program and received after the implementation of WIA may be retained by the entity with no further obligation to DOL and does not have to be carried forward to WIA.

Financial Reconciliation Worksheet

The objective of the financial reconciliation is to achieve the status where obligational authority, allowable reported costs, and payments (for most recipients, the amount of drawdowns) are equal or in balance. Adjustments will have to be made to reflect the portion of obligated funds and drawdowns that relate to the JTPA funds being transferred into the WIA program.

States should review cash advances made to subrecipients several months prior to June 2000 to ensure that, by the last month of program operation, subrecipient cash on hand is limited to immediate cash needs.

Excess cash from subrecipients must be returned to the State as appropriate. If the State is not able to recover excess cash from a subrecipient, it will be reflected in the total cash received by the State and place the State in an excess cash position. When obligations, costs, and drawdowns are not equal and the discrepancies cannot be reconciled, or where other violations are evident, the grant officer's initial and final determination process will be used to resolve the findings.

While cash will be available for JTPA purposes through the end of the closeout period, it is imperative that State JTPA administrative agencies ensure that State departments responsible for making cash requests submit their final request timely and as soon after the closeout period ends to ensure reconciliation can be achieved. The remaining unspent cash will continue to be available for WIA costs.

Closeout Awardee's Release

Listing of unpaid liabilities submitted to the State by subrecipients should include a worksheet indicating outstanding amounts as of the final closeout disbursement date. Sources and methods of determining the accrued unpaid liabilities should be documented. Supporting documents and methods should include:

• Total unpaid invoices from vendors and suppliers for shipments received and services provided;

• Computed amounts to be billed on receiving reports showing quantities requested for which invoices have not been received;

• Total vouchers for travel, payroll, etc., which have been prepared but not paid. Claims prepared and sent for payment, but not yet paid by the closeout date, must be included as an accrual;

• Estimated salaries and benefits based on the amount of the most recent completed payroll, for the days from the end of the last payroll period to the end of the closeout report period (only if still unpaid); and

• Amounts reported for subrecipient and subcontractor services for the period not yet received or paid.

Unpaid bills as defined in the JTPA Financial Management TAG are allowable JTPA costs that have resulted from program operation that have not been paid. States should establish a system for identifying those claims submitted after closeout reports have been filed by subrecipients to ensure payments are made only for authorized unpaid liabilities. States should ensure that these local late claims are paid prior to the submittal of the State's closeout package.

States will be authorized to draw funds from the U.S. Treasury for up to 30 days from the date of submittal of the final closeout package. This should provide adequate time to permit the liquidation of unpaid obligations, including payroll costs, incurred during the closeout of the program. The final actual cash drawdown for allowable costs incurred during closeout needs to occur as soon as possible after the date of closeout submittal. States are encouraged to make all payments for unpaid liabilities prior to December 31, 2000, as no funds may be requested for these liabilities under JTPA more than 30 days after the date of submittal of the final closeout package.

DOL will not be liable for any costs that States failed to ensure were paid before closeout. Furthermore, DOL will not be liable for any late claims received by the States. DOL will not have the funds available for such claims.

Obligational authority required to pay these bills should be included in the amount reserved for the completion of the closeout process. These liabilities are also to be included in the final expenditure report as an accrual by program year. Every effort should be made by subrecipients to pay allowable program expenditures before the end of their closeout process to minimize the tracking of unpaid liabilities by the State.

Assignment of Refunds, Rebates, and Credits

Refunds such as worker's compensation, sale of accountable property, and sale of real estate received up to the date of implementation of WIA are to be used to reimburse the JTPA program by reducing expenditures, thus freeing up obligational authority for transfer to WIA. Any refunds made after closeout of the JTPA program must be remitted to DOL and may not be applied to WIA expenditures.

Any funds remaining in the State's JTPA account after closeout that cannot be transferred to WIA because the fund availability period has lapsed, or any refunds received from disallowed costs associated with lapsed fund availability periods, plus any other refunds received after closeout, must be remitted to DOL. It is recommended that monies drawn down through the Health and Human Services (HHS) Payment Management System be returned through the same system during the closeout process. After closeout, refunds will need to be made by check to DOL.

Refunds to DOL should be made on a quarterly basis including the following information for each amount returned:

• Grant Number;

• Fund Stream or Title;
• Program Year; and
• Reason for return of funds.

Checks should be sent to:
U.S. Department of Labor
Employment and Training Administration
Division of Accounting
200 Constitution Avenue, NW Room N4702
Washington, DC 20210

Final Property Inventory Certification

As discussed in Chapter 4, all useable and accountable property will be transferred to WIA at the time of JTPA closeout. The State shall provide a listing of accountable JTPA-acquired property certifying to the condition codes described in Appendix C of this guide. This document will represent the beginning inventory of accountable equipment under the WIA program.

Tax Certification

The tax certification form is an attestation by the awardee to the awarding agency that all Federal, state, and local tax requirements have been met. If this form is not included as part of the closeout process, the awarding entity could face claims from the subrecipient after its ability to access JTPA funds is gone.

In addition to the suggested subrecipient closeout package, included as Appendix E is a copy of the DOL/ETA closeout package that will be issued to the State for closeout of the JTPA program.

CHAPTER 3
CONTINUED PROVISION OF SERVICES

It is ETA's policy that participants not be affected by the administrative transition to WIA. In this regard, SDAs and local workforce investment areas should ensure that there is a seamless transition in which participants continue to receive services that result in successful completion of training. The following guidance and suggestions are provided to achieve this goal.

PROVISION OF SERVICES

All service deliverers that are providing JTPA services, whether participant-related or for administrative functions related to the closeout of the program (e.g., accounting services), should be allowed to continue providing those services.

With respect to participant services, all JTPA participants being served under these contracts are to be provided all services called for under the terms of the contract. No additional services may be provided, and no additional participants may be added to the contract. All other contracts must be terminated no later than June 30, 2000.

Awarding agencies that have contracts that expire on June 30, 2000, may extend or replace these contracts with others that have expiration dates that coincide with the date of planned completion of services to participants. Under either scenario, local areas must provide for the continuation of services called for in participant plans of service.

PARTICIPANTS RECEIVING SERVICES

All JTPA participants who are enrolled and receiving services should be grandfathered into WIA. These participants are to be allowed to complete the JTPA services specified in their individual service strategy, even if that service strategy is not allowable under WIA, or if the participant is not eligible to receive these services under WIA.

PARTICIPANTS NOT RECEIVING SERVICES

Those participants who are enrolled, but have not yet received JTPA training services by June 30, 2000, except for initial assessment, must be enrolled into WIA. These participants should be assessed, if necessary, and provided services under a WIA service strategy.

PARTICIPANT RECORDS

Participant records, including case management files, may have to be duplicated and a complete set forwarded to a newly formed entity that will be providing services to participants who were originally enrolled and receiving training under JTPA. It is recommended that records be duplicated and a set retained with the original provider to ensure that information is available if issues arise at a later date.

SUBRECIPIENT AND VENDOR AGREEMENTS

Existing deliverers of services for existing JTPA participants should be allowed to continue to provide services under local agreements between the new local board and the appropriate chief elected official(s) in a local workforce investment area. All arrangements for continuation of current participants and associated service delivery programs should be worked out as far in advance as possible via local agreements and included in the local area plan to be approved by the Governor.

Example: If an SDA does not become a local area under WIA, it is possible that some of its participants may still be receiving training as of June 30, 2000. The SDA may have to negotiate with the newly formed local board for transfer of the participants and administration of the ongoing contract. Issues that would have to be resolved include how payments would be made after transfer of responsibilities. If there is an independent city or county treasurer or controller involved, there should be some modification to the contract to ensure that the local treasurer/controller will honor claims for payment.

TERMINATION VS. MODIFICATION

Local areas have the option of either terminating or modifying existing JTPA contracts, depending on how arrangements will be made for service providers to continue to deliver services to existing participants. No matter which option is chosen, the process should occur in a manner that ensures that the participants are unaware of the change in the contractual arrangement. Local areas that terminate existing JTPA contracts, while most likely incurring additional contract termination costs, will have to simultaneously award new WIA contracts to cover the same services for already enrolled JTPA participants. The procurement rules governing the local entity(ies) may have a bearing on which option is selected.

Alternatively, if the local areas modify existing contracts, one or more of the following should be changed:

• The contractual designation from JTPA to WIA;

• The number of participants to be served to reflect the actual number of JTPA participants;

• Where necessary, the level of funding to reflect the actual reduced amount required to serve the specified number of participants; and

• Where necessary, the designated awarding agency.

If agreement cannot be reached with a contractor for the continued provision of services, the local board should then award a contract to another deliverer to provide ongoing services to transitioned participants. In such cases, sole source contracting may be an appropriate means to ensure continuation and completion of services.

Where responsibility for subrecipient contracts is assumed by new or newly formed WIA program operators, it may be necessary to modify the contract to allow for payment to be made by these new entities.

If a subrecipient refuses to either terminate or modify its JTPA contracts, the awarding entity should terminate the contract effective the date on which WIA is fully implemented for its State or local area but not later than June 30, 2000. It would then either move the participants to another training provider or award a new contract to complete their training with a different training provider.

Example: If an existing provider refuses to allow its contract with the former SDA to be modified for continued services to participants still in training as of June 30, 2000, the contract should be terminated. A new contract should be procured on either a sole source or competitive basis, whichever is appropriate, to provide the continued training to the participants.

If, on the other hand, the contractor agreed to continue providing services until transitioned participants completed training, then the contract could be modified to cover the additional period of performance and payment would continue to be made for services performed.

Other bases for modification would be to authorize the prepayment of certain expenses such as records storage and audit costs as well as to extend the contract to cover the cost of closeout past the June 30, 2000, expiration date for programmatic services.

TUITION-BASED TRAINING

The payments made for tuition-based training costs for participants transitioned from JTPA to WIA should be charged to the grant (JTPA or WIA) at the time when the payment is made. It will not be necessary to prorate such charges between JTPA and WIA.

Example: Participants are enrolled in a tuition-based training class on June 1, 2000, for a ten-week course of study, and the institution requires payment at time of enrollment. The entity may charge all of the costs to JTPA even though a portion of the training will be received after the expiration of JTPA and the inception of WIA.

CHAPTER 4
PROPERTY

The provision at 20 CFR 627.465 of the JTPA regulations describes property management standards for the program incorporating the provisions of the DOL administrative requirements at 29 CFR Parts 95 and 97. It is recommended that States ensure that all useable equipment, regardless of value, is transferred to succeeding entities to reduce the cost of starting up new entities under the WIA.

For property not transferred to the WIA program, the property disposition rules at 29 CFR Parts 95.34(g) and 97.32(e)(2) require that the proceeds received when property is disposed of be returned to the awarding agency less any costs of disposition. To assist in the payment of JTPA closeout costs and to provide additional funds that can be carried forward into WIA, these procedures provide an exception to the uniform requirements. The equipment rule for JTPA closeout is as follows:

Funds received from the sale or disposition of equipment with a current fair market value (FMV) of $5000 or more prior to closeout of the JTPA program may be used to reduce JTPA expenditures. Funds received from the sale or disposition of this type of equipment after closeout of JTPA may not be retained for grant purposes and must be returned to ETA in accordance with 29 CFR Parts 95.34(g) and 97.32(e)(2) of the DOL administrative regulations. Therefore, it is important that States and subrecipients inventory equipment to ensure that all excess items that are not to be utilized in WIA or JTPA closeout are sold prior to the end of the closeout period.

Example: On July 27, 2000, the SDA sold a vehicle that it no longer needed and received $8,000 as the sale price. The funds were used to reduce closeout costs prior to submission of the final reports to the State. On January 24, 2001, after the State had completed its closeout and submitted its final reports to ETA, the same SDA sold another vehicle that it did not need for operation of the WIA program and received $6,000 as the sale price. This amount was remitted to the State, which forwarded the refund to DOL.

Items of equipment with a current fair market value of less than $5,000 and that are not needed for the WIA program may be retained, sold, or otherwise disposed of with no further obligation to the JTPA program. Such equipment may remain in place to be used for other Federally or non-Federally funded programs, or it may be disposed of in accordance with local procedures.

States should obtain accurate inventories containing the information required under 29 CFR Parts 95.34 and 97.32, as applicable, from their subrecipients holding equipment that meet these criteria. A determination should be made concerning which equipment will be transferred to the WIA program and which will be disposed of in accordance with the above instructions. Appropriate documentation should be maintained for equipment that is sold, scrapped, or disposed of in some other manner. An equipment inventory list using the condition codes described in Appendix C of this guide and certified by a designated official of the State must be submitted with the State's closeout documents.

If there is a residual inventory of useable supplies, such as paper, desktop supplies, computers, laptops, and calculators, with an aggregate total market value of $5,000 or more, these supplies must also be transferred into WIA. If the residual supplies are not needed for the WIA program, they should be retained, sold, or disposed of, and funds received from the sale used to reduce costs in the JTPA program prior to its closure, or returned to DOL subsequent to closure of JTPA. States should provide guidance to local areas concerning the transfer of equipment and supplies.

CURRENT FAIR MARKET VALUE

There are various ways that current fair market value (FMV) can be determined. The Internet provides access to various sites for market pricing of vehicles. Other mechanisms include appraisals, comparisons of prices in classified ads, or establishing a selling price where there was sufficient competition to obtain the highest possible return on the item. Whatever method is utilized, the local determination of current FMV must be reasonable.

REAL PROPERTY

If a State or local JTPA entity has purchased real property using JTPA funds, but failed to notify the Secretary (Grant Officer) in accordance with 20 CFR 627.465(d), it should do so at this time. For a subrecipient that will continue as a local area, real property must be transferred to the WIA program and listed on the Governor's inventory of accountable property. For a subrecipient or State that will not continue to use the property for WIA purposes, the property must be sold and the proceeds remitted to DOL, minus reasonable sales and handling costs, which may be retained by the entity in accordance with 29 CFR Parts 95 and 97.

States must submit with their closeout documents a status report on any property purchased with JTPA funds that has been offered for sale and has not been sold. The status report should include the following:

• Property address
• Percentage of JTPA equity
• Selling price
• Date placed on market
• Status:
  • No offers have been received
  • In escrow
  • Closing

COMBINED PROPERTY

Accountable property with a current FMV of $5,000 and real property that has been acquired through joint funding will be transferred in the same manner as other accountable JTPA property. If there is no use for the property under WIA, the JTPA grant, or DOL, as appropriate, must be compensated by applying the percentage of participation in the cost of the original purchase to the current FMV of the property.

Example: An SDA and the local education agency purchased a building in 1992 to provide client services. The cost of the building was $400,000. JTPA funds contributed to the sale were $100,000. With the inception of WIA, the building will no longer be needed for job training activities and is sold. The building was sold for $500,000.

The JTPA share of the proceeds is 25% or $125,000 of the proceeds of the sale.

$100,000 = 25% x $500,000 = $125,000
$400,000

CHAPTER 5
AUDITS, COMPLAINTS, AND GRIEVANCES

This chapter provides guidance and procedural suggestions for resolution of audits as well as non-criminal complaints and grievances at the expiration of the JTPA program. In addition, it provides updated information regarding the requirements of the amendments to the Single Audit Act and Office of Management and Budget (OMB) Circular A-133 issued pursuant to that Act which was issued after the publication of the JTPA Financial Management TAG.

AUDITS

States and subrecipients must complete normal annual audit cycles in accordance with OMB Circular A-133, codified at 29 CFR Part 99 and 20 CFR 627.480(a)(3) of the JTPA regulations. No additional funds will be provided by DOL to cover these audit costs. All JTPA recipient and subrecipient organizations that expend $300,000 or more in Federal financial assistance funds (from all Federal sources combined) and operate one or more programs must have a single audit.

If a recipient or subrecipient expends $300,000 in Federal financial assistance funds under only one Federal program, the auditee may elect to have a program-specific audit conducted in accordance with the guidance in OMB Circular A-133.

There are no Federal audit requirements for vendors.

It is particularly important with the expiration of JTPA that these audits are planned, conducted, and issued timely. States and other subrecipients required to conduct audits should determine the cost of performing the audit and include those costs as a prepaid expense to their program in their final costs at closeout. Only that portion allocable to the audit of JTPA funds is allowable. If the entity is multiple funded, the proportionate share of JTPA expenses can be determined by the percentage of JTPA funds to be audited of the total funds audited. If the costs are not included in the final expense reports, they will not be reimbursed to the entity at a later date and may not be charged to the WIA program.

OMB Circular A-133 and 29 CFR Part 99 now prohibit charging a Federal award for the conduct of any audit that does not meet the requirements of the OMB circular even if such audits are required by State or local government entities.

The completed audit must be submitted to the Federal Audit Clearinghouse, Bureau of the Census, 1201 E. 10^th St., Jeffersonville, IN 47132, within the earlier of 30 days after receipt of the report from the auditor or nine months after the end of the audit period unless a longer period is agreed to in advance by the cognizant or oversight agency for audit. Additional copies must be submitted for distribution to Federal departments or agencies that provided Federal financial assistance funds, as well as to the entity's cognizant Federal agency. At the same time, copies should be sent directly to non-Federal agencies that are pass-through entities.

COMMERCIAL (FOR PROFIT) ORGANIZATIONS

Commercial (for profit) organizations that meet the definition of subrecipient (see 29 CFR 99.210) and that receive more than $25,000 in JTPA funds in one year will continue to conduct audits in accordance with 20 CFR 627.480(a)(3) of the JTPA regulations. These entities may have either a program-specific annual independent audit conducted, prepared, and issued in accordance with generally accepted government auditing standards, or an organization-wide audit that covers the JTPA program within its scope.

AUDIT PROCUREMENT

Due to the termination of the JTPA program and the very limited time for conducting and resolving audits, recipients and subrecipients that have the ability to define the requirements of their audit service contract should consider including:

• A specific time by which all field work must completed;
• A specific deadline for issuance of the draft and final audit reports; and
• Payment conditions dependent on timely completion and issuance of draft and final audit reports.

NON-FEDERAL AUDIT RESOLUTION

Non-Federal audit resolution responsibility rests with each entity that directly awards JTPA funds to a subrecipient. 20 CFR 627.481(c) requires that States set standards for audit resolution to ensure both timely and appropriate resolution, and to ensure consistency within the State as well. SDAs must have included in their job training plan the audit resolution policies and procedures that are instituted in accordance with State standards.

The State must resolve all audits of SDAs, substate grantees (SSGs), and any other direct subrecipients. SDAs and SSGs are responsible for resolving audits of their service providers/direct subrecipients, and lower-tier service providers that award funds to subrecipients are responsible for resolving audits of those entities.

DOL encourages States to ensure that all audit resolution at all levels be completed within the closeout period. However, the closeout period will not be extended solely for the purpose of audit resolution. Audit reports are to be completed and submitted within nine months from the end of an entity or organization's fiscal year, and resolved within six months of submission. When successor WIA entities are required to resolve audit findings after JTPA closeout has been completed, the cost of these activities are to be treated as allowable WIA administrative costs if completed within this period.

Since no specific process is mandated, the audit resolution process used in individual States may vary. However, the process must accomplish the following:

• Determine the need for and ensure the implementation of corrective action for all findings that are apt to have an impact on the WIA program for all auditees that will continue to provide services under the new program;

• Allow or disallow all questioned costs and provide the basis for each such determination;

• Determine whether allowable "stand-in costs" were reported on the financial status report and included within the audit scope, meet the Title and three-year period of fund availability requirements, and are available to substitute for disallowed costs;

• Establish a debt (where appropriate) and indicate the method of repayment planned or required; and

• Notify the auditee of its appeal rights.

The suggested audit resolution system described in the following paragraphs is patterned after the Grant Officer's Initial and Final Determination process used at the Federal level (20 CFR 627.606). This process may be used at the State, SDA, SSG, and all other subrecipient levels within the State.

Pre-Resolution

Before starting resolution, the awarding agency (resolution agency) should verify the acceptability of the audit report. Although the auditee must ensure that the audit it obtains meets the standards required for the organization, the awarding agency may wish to do its own check.

Controls Related to Audit Resolution

OMB Circular A-133 requires recipients and subrecipients to ensure that appropriate corrective action, or audit resolution, occurs within six months after receipt of the audits of subrecipients.

20 CFR 627.480(d)(3) requires that an audit resolution file be maintained, documenting the disposition of reported questioned costs and corrective actions taken for all findings. Upon receipt of the final audit report, specific controls should be established to ensure that resolution takes place within required time frames. It is suggested that an audit control log be maintained to include the following:

• Date of audit;
• Period covered by audit;
• Date received;
• Auditor;
• Questioned costs;
• Administrative findings;
• Assigned audit number; and
• Date(s) Initial and Final Determination(s) scheduled, issued, and appealed.

SUGGESTED PROCEDURE FOR RESOLVING AUDIT REPORT FINDINGS

This three-part process includes the Initial Determination, an informal resolution period, and the Final Determination, and is based on the ETA Grant Officer resolution process. These must all be accomplished within six months of the receipt of the final audit report. It is recommended that the awarding agency give the auditee a copy of the audit report and allow a reasonable time for comment. Because the auditee is responsible for procuring the audit, it should already have a copy of the report. However, it may still be helpful to send a letter requesting comments on the audit findings before issuing an Initial Determination.

Part 1. Initial Determination

The Initial Determination is a preliminary decision on whether to allow or disallow questioned costs and resolve any non-monetary (administrative) findings. It offers the auditee/subrecipient an opportunity for informal resolution, not a formal hearing.

The Initial Determination, which addresses questioned costs and administrative findings, should be sent to the subrecipient within a reasonable time after the end of the subrecipient's comment period. The Initial Determination should be sent "Certified Mail-Return Receipt Requested."

The guidance below should be used for evaluating the allowability of questioned costs. The information can be used in the Initial and Final Determinations.

• In most instances, a cost will be disallowed if the basis is a clear and unequivocal violation of law and regulations. Costs can also be disallowed based on a violation of Federal grant terms and conditions.

• Costs incurred must be supported by required source documentation such as time and attendance records, bills and invoices, and canceled checks. The subrecipient's inability to produce such documentation is in itself supportable grounds for disallowing questioned costs.

• Some flexibility is available if the questioned cost is based on a violation of a subrecipient, subgrant, or contract requirement. Subgrants and contracts can be more restrictive in the range of activities and types of cost permitted under that subgrant or contract than Federal or, if applicable, State rules or regulations. Therefore, it is possible that a cost could be unallowable under the subgrant/contract provisions but allowable under State provisions and/or the JTPA Federal regulations. If the subrecipient subsequently allows and accepts such a cost, the State administration need not disallow the cost. However, an entity cannot require less than full compliance with the JTPA and its regulations.

Administrative (non-monetary) findings can be addressed in the same Initial Determination. While the JTPA program will no longer exist, there are some administrative findings that will continue to be applicable to recipients and subrecipients that will be transitioning into the WIA program. In those instances, administrative findings will need to be resolved with corrective actions that will remedy the deficiency or variance.

The proper resolution of an administrative finding is corrective action of the deficiency or variance. Although not required, entities may wish to prioritize administrative findings to focus immediate attention on those considered serious, especially if the finding could result in cost disallowances, such as an inadequate eligibility determination process.

Internal audit resolution controls should document the findings selected for urgent corrective action. In addition, it is strongly recommended that the resolution of administrative findings be coordinated with the agency monitoring the program to ensure that on-site follow-up verifies and documents corrective action. The guidance provided below can be used for both the Initial and Final Determinations. For each administrative finding, note:

• The deficiency and the corrective action required of the subrecipient. If the administrative finding was corrected during the comment period or as a result of informal resolution, indicate the manner in which the matter was resolved. If further corrective action is required, the specific action required should be specified in the Initial and Final Determinations, as appropriate;

• The dates for completion of the corrective action;

• The availability of technical assistance, if requested (Documentation in the subrecipient file should be maintained to indicate when technical assistance was requested and provided. Progress reports on the implementation of corrective action should be provided by the subrecipient and maintained in the file.); and

• Sanctions and remedial actions that may be taken against the subrecipient if the deficiency is not corrected. The completeness and specificity of this part of the Initial Determination is important in serious cases when it is likely that the awarding agency will take strong measures, including termination, reorganization, reallocation, or partial funding if the deficiency is not corrected.

Part 2. Informal Resolution Period

During this phase, the subrecipient has an opportunity to present new evidence, documentation, or explanation to change the decision by the awarding agency.

The subrecipient has an opportunity to agree to corrective action before the awarding agency initiates sanctions or remedial actions. Occasionally, the subrecipient will admit to the nonallowability of a questioned cost and make repayment. In such cases, the amount is disallowed but is not subject to debt collection in the final determination.

The terms of repayment may be negotiated; the terms for agreed upon repayment may also be included in the final determination.

Part 3. Final Determination

The Final Determination should be sent to the subrecipient within a reasonable time (not more than six months) after the awarding agency receives the final audit report. The Final Determination should be sent "Certified Mail-Return Receipt Requested."

The Final Determination should:

• Reference the Initial Determination;

• State the awarding agency's final decision to disallow the costs, listing each disallowed cost specifically and noting the reasons for each disallowance. It is suggested that the Final Determination include a discussion of the auditee's response to the Initial Determination. (Lengthy explanations can be incorporated by reference to item and page number of the audit report; however, a Final Determination that can stand on its own is preferable.);

• Identify the questioned costs in the audit report that have been allowed by the awarding agency and the basis for the allowance of the costs;

• Demand repayment of the disallowed costs;

• Describe debt collection actions and other sanctions that the awarding agency may impose if repayment is not made;

• Inform the subrecipient of its right to a hearing; and

• Restate the status of each Administrative finding.

When a cost is disallowed in the Final Determination, a debt is created. However, if the subrecipient requests a hearing, no further collection action can be taken pending the outcome of the hearing.

The agency responsible for resolution is required to maintain an audit resolution file documenting the points listed above as well as all formal correspondence relating to the resolution.

Note: The subrecipient should be told that the Final Determination letter is based on information that was currently available. If new information becomes available, the Final Determination letter may be reopened at the awarding agency's option. However, this is not intended to extend the negotiation process indefinitely. Ensuring due process without incurring needless delays is a concern every administrative complaint system must recognize and address.

Post Audit Resolution Follow-Up on Unresolved Findings In some cases, administrative findings may not be resolved within the six-month time frame allowed. If these findings are associated with an organization that will no longer be a subrecipient or provide WIA services, the resolution of the administrative findings is moot. If, on the other hand, the subrecipient will continue to administer programs for the local area and the administrative findings would affect WIA performance, the SDA and subsequently the local board must continue follow-up of corrective actions. To ensure that these findings are fully resolved, proper controls should be implemented that will track resolution during the post Final Determination period. Follow-up tracking systems are recommended that require auditees to report, at least quarterly, the status of unresolved audit and monitoring of findings.

The awarding agency's efforts to correct a deficiency should be monitored on a continuing basis by appropriate staff. Depending on the severity of the deficiency and the time of year, it may only be necessary to review the status of the corrective action during routine fiscal monitoring. However, per 29 CFR Part 96.54(c) in instances of non-compliance with Federal laws and regulations, the awarding agency must ensure that corrective action is taken within six months after receipt of the audit report.

If the subrecipient fails to correct the deficiency in the allotted time, the sanctions and remedies noted in the Final Determination may be exercised. This occurs only if the subrecipient has foregone its rights to a hearing or the hearing officer has upheld the awarding agency's Final Determination.

Note: If either party is dissatisfied with the decision of the hearing officer, there should be a process that provides for independent review of that decision, as described in 20 CFR 627.503.

Other Recommended Uses of the Initial and Final Determination Process All JTPA administrative entities are encouraged to develop a process or procedure similar to the Initial and Final Determination processes described above for resolving monetary and non-monetary findings resulting from monitoring, incident reports, compliance reviews, and investigations, in addition to audits.

STAND-IN COSTS

Stand-in costs may continue to be used as a resolution of audit and monitoring findings which are of a non-criminal nature as long as the documentation meets the criteria established in 20 CFR 627.480(f) of the JTPA regulations.

The application of stand-in costs occurs at the audit resolution stage. If an auditee agrees that an auditor's questioned cost is unallowable and wishes to propose the use of stand-in costs as substitutes for otherwise unallowable costs, the proposal must be included with the audit resolution report or other document by which the auditee provides its comments to the resolution agency. If the auditee is uncertain about the allowability of the auditor's questioned cost before receipt of the Initial Determination, the proposal to use stand-in costs may be presented during the informal resolution period.

Criteria

Stand-in costs are substitutes, disbursed or accounted for from non-Federal funds, for unallowable JTPA costs identified in an audit report. Stand-in costs must meet the following criteria:

• To be considered, proposed "stand-in" costs shall have been actually incurred allowable JTPA costs that were reported as uncharged JTPA program costs, included within the scope of the audit, and accounted for in the auditee's financial system as required by 20 CFR 627.425, Standards for financial management and participant data systems.

  Each of the separate criteria for consideration of proposed stand-in costs are discussed below.

  • Must be allowable JTPA costs that were actually incurred, but were paid by a non-JTPA source.

  • Must have been reported as uncharged JTPA program costs. The amount (value) of the service must be included in the appropriate section of the Federal reports. Additional guidance is provided in the JTPA reporting instructions.

  • Must have been included within the scope of the audit (not necessarily tested but potentially subject to testing). This means that the costs must be recorded and included in the financial statements presented by the agency to the auditor for audit. Failure to include unbilled costs disqualifies the costs for stand-in consideration.

  • Must have been accounted for in the auditee's financial system. This means that the unbilled expense must be recorded and documented in the administrative entity's chart of accounts. It cannot be presented as a separate consideration outside the entity's accounting system.

  • Must be adequately documented in the same manner as all other JTPA program costs. This means that the unbilled expense must be treated in a manner consistent with cost principles affecting other expenses, including but not limited to the cost allocation methodology, cost classification methodology, and supporting documentation requirements.

  • To be accepted, stand-in costs must come from the same Title and three-year period of fund availability as the costs that they are proposing to replace, and they must not cause a violation of the cost limitations.

Caution: Stand-in costs cannot be fabricated using circumstances or conditions that appear to be legitimate liabilities if no actual costs are incurred by any entity. For example, the local school department provides free space for the JTPA program in a building that has been fully depreciated. The only facility-related costs the school department actually pays are for general maintenance. A liability created by JTPA related to rental costs that were never paid is not a legitimate stand-in cost. The only legitimate stand-in cost available in this example, assuming that all recording and reporting requirements have been satisfied, is an allocable share of the general maintenance cost based on square footage occupied, or another allocation method that would be more equitable.

"In-kind" contributions are not considered unpaid JTPA program liabilities; therefore, they cannot be used as stand-in costs. "In-kind" contributions are not actual incurred costs. Examples of such items that are not stand-in costs include:

• Uncompensated overtime;
• Unbilled rental costs associated with fully depreciated publicly owned buildings;
• Allocated costs derived from an improper allocation methodology;
• Discounts; and
• Any State share of the cost of State or community college tuition

Two other caveats should be mentioned. First, as suggested above, allowable stand-in costs may be used to trade or substitute for disallowed costs under certain conditions. The source of stand-in, however, is intended to be limited to the same entity which incurred the disallowed costs. Thus, aggregation or pooling of stand-in within a state as a kind of insurance policy available to reduce or extinguish bad costs wherever they might be identified is not an arrangement that will be recognized by DOL. Second, if the cause of the disallowed costs was fraud or one of the other causes mentioned in Section 164(e)(1) of the JTPA, DOL will not consider proposals of stand-in to substitute for such costs.

COMPLAINTS

Recipients and subrecipients are encouraged to develop a process or procedure similar to the Initial and Final Determination processes described above for resolving monetary and non-monetary findings resulting from monitoring, incident reports, compliance reviews, and investigations. A tracking system similar to that used for audits should be established to ensure timely resolution in these matters also.

HEARINGS RELATED TO AUDITS, COMPLAINTS, AND GRIEVANCES

In accordance with Section 144 of the JTPA, States and subrecipients must continue to provide a system for receiving complaints for up to one year after the expiration of the program on June 30, 2000. Prior to closeout, the cost of operating the grievance/complaints systems should be charged to JTPA. After the closeout of JTPA, such costs may be charged to WIA until the end of the required one-year period. As previously stated in Chapter 1 of this TAG, only those costs associated with appeals that are resolved in a timely manner will be allowable costs to WIA. Costs associated with complaint system outcomes, such as back wages, contract disputes, etc., must be paid from a non-Federal source.

Example: Ninety days after the end of the JTPA program, a State receives an audit of one of its subrecipients that contains several findings involving questioned costs. The State begins the audit resolution process immediately and charges staff costs as part of its closeout expenditures. The State submits a final closeout expenditure report to DOL on December 31, 2000. If the audit is not completely resolved by that date, any staff costs associated with its resolution subsequent to the submission of the State's closeout report will be charged to the WIA program until the end of the six-month audit resolution period. Any staff costs associated with audit resolution after the six-month resolution period are to be charged to a non-Federal source.

Example: A final audit determination is issued in January 2001 with disallowed costs and the SDA appeals the determination. The costs associated with the conduct of the hearing as well as for its preparation are allowable if the hearing is held within 30 days from the date of the appeal and a decision is rendered within 60 days from the appeal date.

Example: An SDA staff member has filed a grievance alleging wrongful termination and is requesting back wages from the SDA. The grievance is filed on June 15, 2000, and is not completely resolved until January 16, 2001. The SDA lost the case and has been ordered to pay an amount of $8,000 in back wages. The legal and staff costs associated with the case were charged first to JTPA and, when the grant closed, to the WIA program. The amount owed the staff member for back wages must be paid from a non-Federal source. [20 CFR 627.435(e)(2)]

CHAPTER 6
RECORDS RETENTION

States are responsible for ensuring that all financial and participant records associated with the JTPA program are retained for two years after submission of the final expenditure report for each year of appropriation. [JTPA Sec. 165(e)] Records must be kept longer if any litigation or audit is begun, or if a claim is instituted involving the appropriated funds or agreement covered by the records. In these instances, records will be retained until the issue has been finally resolved. However, the only authorized closeout cost for record storage is the amount required to meet the record retention requirement. Because it would constitute an estimated contingency, costs for any longer retention period required must be paid with non-Federal funds. ETA will not pay for these costs.

States are responsible for ensuring the retention of records for subrecipients who are disbanding or otherwise unable to retain records. States must also ensure that this requirement is passed on to all subrecipients to ensure compliance.

States should ensure as part of the subrecipient closeout plan that records storage is included as an expense for a three-year period of time as well as the name, address, and telephone number of the individual who can be contacted if questions arise regarding information maintained in those records.

RETENTION REQUIREMENTS

The following retention rules apply to specific records:

Records for Nonexpendable Property

Records for nonexpendable property must be retained for three years after final disposition of the property. [JTPA Sec.165(e)] The definitions for nonexpendable property follow:

For governmental entities: Tangible, non-expendable personal property having a useful life of more than one year and an acquisition cost of $5,000 or more per unit. [29 CFR Part 97.3]

For nonprofit organizations: Tangible, nonexpendable personal property including exempt property charged directly to the award and having a useful life of more than one year and an acquisition cost of $5,000 or more per unit. [29 CFR Part 95.2(n)]

A recipient may use its own definition of equipment (nonexpendable personal property) provided that the definition at least includes all tangible personal property as defined above.

Real Estate Property Records

Real estate property records that clearly reflect the awarding agency's percentage of participation in the original purchase of the real property and capital expenditures that affect the awarding agency must be maintained for three years following final disposition of the real property and settlement of all issues. [29 CFR 95.53(b)(2) and 29 CFR 97.42(c)(2)]

Applicant/Nonselected Eligible Applicant Records

Applicant/nonselected eligible applicant records must be maintained by each recipient/subrecipient for not less than three years from the close of the applicable program year. [29 CFR 34.24(c)] This requirement starts on the date the recipient/subrecipient final expenditure report is submitted for the program year's allotment under which the applicants made application to the program. The records should be maintained as a whole group (applicants) separated as noted (applicant/nonselected eligible applicant).

Selected Eligible Applicant/Participant/Terminee Records

Selected eligible applicant/participant/terminee records must be maintained by each recipient/subrecipient for not less than three years from the close of the applicable program year. [29 CFR 34.24(c)] These records should be maintained as a whole group separated as noted. It is recommended that the record retention clock, particularly for participants whose participation covered more than one program year, start on the date the final financial report is submitted to DOL for the year the participant was terminated.

Applicant for Employment/Employee Records

Applicant for employment/employee records must be maintained by each recipient/subrecipient for not less than three years from the close of the applicable program year. [29 CFR.34.24(c)] This requirement starts on the date the final financial report is submitted for the program year's allotment under which the jobs were posted and filled. Personnel record requirements of the recipient/subrecipient organization must be maintained beyond the life of the grant.

Complaint Records

Complaint records and actions related to resolving complaints shall be maintained for not less than three years from the date of resolving the complaint. [29 CFR 34.24(c)] These records should be maintained as a whole record system.

Litigation/Audit Records

Litigation/audit records "... shall be retained beyond the prescribed period if any litigation or audit is begun, or if a claim is instituted involving the grant or agreement covered by the records. In these instances, such records shall be retained until the litigation audit or claim has been finally resolved" [20 CFR 627.460(b)], or until the end of the regular record retention period identified at 20 CFR 627.460(a), whichever is later. This may be either two years from the date on which the State submitted its annual expenditure report containing final expenditures charged to a program year allotment to DOL, or three years from the date on which the subrecipient submitted their final expenditure report to the State. Records must be retained beyond the prescribed period in the event of delays or failure to obtain or resolve a required and appropriate audit. Failure to obtain a required audit under the Single Audit Act extends the record retention requirement indefinitely. A delay in obtaining an audit or in resolving audit findings extends the record retention period until all audit requirements have been satisfied, and until all findings have been resolved to the satisfaction of the awarding agency.

SUBRECIPIENT LEVEL RECORDS RETENTION

In establishing the time period of record retention requirements for subrecipients, the State may either:

• Impose the time limitation requirements of Section 165(e) (two years after the date on which the State's expenditure report (containing the final expenditures charged to such program year's allotment) is submitted to the DOL); or

• Require that subrecipient records for each funding period be retained for three years after the subrecipient submits its final expenditure report for that funding period to the awarding agency.

In situations where subrecipients are dissolved, the State is responsible for the maintenance and retention of records if the subrecipient is unable to retain them.

CONSIDERATIONS FOR SELECTION OF OPTIONS

Because the Act does not specify exact record retention requirements for subrecipients, States have been given the option of using a Statewide or organization-specific clock for record retention. In selecting which option to use, States should consider the following options:

Option 1. State's Final Financial Report Submittal Date

• All subrecipients must be advised of when the clock starts; or

• Requires all subrecipients to retain records longer if one or more subrecipients are involved in a claim, audit, or litigation.

Option 2. Subrecipient's Final Financial Report Submittal Date

• Allows subrecipients to dispose of JTPA records in the same time frames that apply to other records covered by OMB circulars; or

• Subrecipients need not be advised when the Statewide clock starts.

CUSTODY OF RECORDS

To avoid duplicative recordkeeping, recipients and subrecipients may make special arrangements with lower-tier subrecipients, vendors, and others to retain records that are continuously needed for joint use. The awarding agency may request transfer of records to its custody when it determines that the records possess long-term value. When this has occurred, the retention requirements do not apply to the entity that relinquished the records.

APPENDIX A
GRANT RECIPIENT CLOSEOUT CHECKLIST

ETA 9040 JTPA TITLE II QUARTERLY STATUS REPORT
ETA 9041 WORKER ADJUSTMENT FORMULA FINANCIAL REPORT

Copies may be obtained from your Grant Officer.

APPENDIX E
DOL CLOSEOUT PACKAGE