A state-funded program that incentivizes manufacturers and small businesses to train and hire new workers has not been adequately monitored and some of its funds may have been misused, state auditors said in a new report.
The Subsidized Training and Employment Program (Step Up), created in 2011 and administered by the Department of Labor (DOL) and five regional workforce development boards, pays employers up to $12,500 in wage and training subsidies per new hire over a six-month period.
Auditors said there was insufficient evidence that 71 workers, whose employers received a combined $982,000 in subsidies related to their wages and training, had actually worked at the companies. Overall, DOL reviewed for the audit 114 Step Up workers, whose employers received $1.3 million in subsidies.
Step Up has received $40 million in bond funding since its inception, and as of June 30, 2019, had provided subsidies to 856 employers for 5,405 hires and trainees, DOL said. The agency says the program has created 2,206 jobs.
Auditors said they conducted an extended review of Step Up after discovering several examples from fiscal years 2015 and 2016 of Step Up subsidies that were not later included in employers’ quarterly wage filing reports.
“Step Up is not properly designed with the necessary controls to operate the program effectively, or a mechanism to ensure that participants actually participated in the program during the period in which grants were paid,” auditors wrote.
The audit recommends that DOL work with the workforce boards to develop monitoring procedures to ensure the grants are “properly used and to avoid potential fraudulent activity.”
They also advised DOL to evaluate Step Up to ensure it has achieved its intended purpose.
In its response included in the audit, DOL said that it has enhanced its monitoring processes, which include unannounced on-site visits to employers and interviews with participants. The agency also wrote that quarterly wage filings may not reflect the subsidies right away, but may be more up-to-date in the future.
Auditors also faulted DOL for failing to set aside 1% of Step Up funds for program monitoring, which was mandated by a 2015 state law. DOL said it set aside the monitoring funds starting in fiscal year 2019.