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Enacted over 60 years ago as a Federal-state partnership primarily to provide a financial benefit to unemployed workers, the Unemployment Insurance (UI) program is the Department’s largest income-maintenance activity. While the framework of the program is determined by Federal law, the benefits for individuals are dependent on state law. The program is financed through a payroll tax on employers and is administered by the State Employment Security Agencies (SESAs).
During fiscal years 1998 and 1999, Congress appropriated funds to assist the SESAs in making their UI and Employment Service (ES) information technology (IT) systems Y2K compliant.
OIG Questions $914,221 of Y2K Grant Expenditures made by the New Mexico Department of Labor
ETA awarded the New Mexico Department of Labor (NMDOL) grants totaling $6.5 million to assist the agency in making its IT systems Y2K compliant. To determine whether grant funds were spent for intended purposes, and in compliance with the grant agreements and other applicable Federal requirements, the OIG audited $5.5 million of the grant expenditures made through June 30, 2000.
We found NMDOL did not always comply with requirements governing use of the funds and questioned grant expenditures of $914,221, and recommended ETA deobligate unspent grant funds that remained available to NMDOL. The predominance of the questioned costs resulted from staff salary and fringe benefit costs that did not satisfy criteria for reimbursement as Y2K expenditures, and overhead and other costs which were improperly allocated to the Y2K grants.
The NMDOL disagreed with most of the findings and questioned costs. It stated the grant requirements were unclear and contradictory and ETA was aware of its grant-related activities and practices. While the OIG recognizes the difficulty states encountered in preparing for Y2K, we believe the guidance provided to NMDOL was clear and that the principal cause of its difficulty was its failure to understand the grants’ spending restrictions.
Report No. 04-01-001-03-315 (Febuary 26, 2001)
