At city expense, the San Bernardino City Council this week voted to extend for at least three more months funding for the operations of the San Bernardino Employment and Training Agency.
The San Bernardino Employment and Training Agency for 40 years has served as the city’s employment and training services provider for the purpose of implementing federally-funded workforce investment programs. The city previously received funding from the United States Department of Labor for the San Bernardino Employment and Training Agency’s operations. The funding is administered by the California Employment Development Department.
In October 2014, the California Employment Development Department placed the city on cash hold due to the city’s failure to submit a timely single audit of its federally-funded programs. A local entity that receives federal funding is required to submit a single audit annually, covering all its federal programs and showing how the funds were spent. Pass-through recipients of federal funds, such as the California Employment Development Department, are required to impose sanctions, which can include cash holds, on local entities that do not complete their single audits on time.
The city’s single audits for the years ended June 30, 2013 and 2014 are currently overdue. Hence, the cash hold has remained in place and the city has received no funds from the California Employment Development Department since October 2014. In the interim, the city has funded the San Bernardino Employment and Training Agency from other sources.
As a result of the delayed single year audits, the California State Board and the governor denied the San Bernardino Employment and Training Agency’s application for re-designation as a local workforce investment area.
The only basis stated by the California Employment Development Department for the cash hold when it was imposed in October 2014 was the delinquent 2013 single audit. More recently, however, when city officials asked the California Employment Development Department to confirm that the cash hold would be released upon the submission of the delinquent audits, the California Employment Development Department stated it might not release the cash hold if the audits had “systemic” adverse findings such as those contained in the 2012 single audit. An email from the California Employment Development Department staff attorney from August 2015 stated, “systemic material findings resulting from the single audits that are currently in process could result in the cash hold not being lifted.”
It is anticipated that the 2013 and 2014 audits will contain systemic adverse findings, but that the city will be able to demonstrate that action has been taken to redress the problems. In the interim, the Workforce Investment Act, through which previous funding for the agency was provided, was replaced by a new federal law, the Workforce Innovation and Opportunity Act of 2014, effective July 1, 2015.
The city applied to receive funding under the Workforce Innovation and Opportunity Act of 2014 but was initially rejected by the state due to the cash hold and overdue audits. The City of San Bernardino appealed the rejection and the hearing officer handling the appeal concluded in a decision and recommendation dated November 12, 2015 that the cash hold and audits were not a legal basis for rejecting the City’s the Workforce Innovation and Opportunity Act of 2014 application.
The San Bernardino Employment and Training Agency also obtained opinion letters, dated July 27 and September 17, 2015, from Rochelle Daniels, an attorney specializing in workforce matters, concerning the city’s likelihood of obtaining reimbursement of funds expended to fund the San Bernardino Employment and Training Agency pending the submission of the overdue audits. Daniels concluded that the City of San Bernardino should expect to be reimbursed for the money it spent to fund the San Bernardino Employment and Training Agency prior to the Workforce Innovation and Opportunity Act of 2014 taking effect, and might expect to be reimbursed for money spent after that time if it won its appeal, which, the city eventually did.
The most recent communication from the state concerning the cash hold is a November 17, 2015 letter from the state labor secretary directing that the city be conditionally designated to receive funding under Workforce Innovation and Opportunity Act of 2014, but threatening adverse action, including defunding, if the audit requirements and other fiscal requirements are not satisfied.
The city is sustaining costs of approximately $125,000 per month in keeping the San Bernardino Employment and Training Agency up and running.
After hearing a report on the matter and discussing what action to take, the council, on a motion by councilman Rikke Van Johnson, voted to continue the funding for three more months while seeking reimbursement from the state.