Sanctions for missing WIA performance levels

Official HTML letter (https://www.dol.gov/sites/dolgov/files/ETA/advisories/TEGL/2003/TEGL19-02.html):

Employment and Training Administration Advisory System
U.S. Department of Labor
Washington, D.C. 20210
CLASSIFICATION: WIA Performance
CORRESPONDENCE SYMBOL: PRO
DATE: February 10, 2003

TRAINING AND EMPLOYMENT GUIDANCE LETTER NO. 19-02

TO: ALL STATE WORKFORCE AGENCIES
ALL STATE WORKFORCE LIAISONS

/S/
FROM: EMILY STOVER DeROCCO, Assistant Secretary
SUBJECT: Sanctions Policy for Failure to Meet State Negotiated Performance Levels under Title I of the Workforce Investment Act (WIA)

1. Purpose. To provide states guidance on the Employment and Training Administration's (ETA) policy related to application of sanctions for failure to meet the state negotiated levels of performance under title I of the Workforce Investment Act (WIA).

2. References. The Workforce Investment Act of 1998, (P.L. 105-220), Section 136; 20 CFR Part 666, published at 65 Federal Register 49294,49417 (August 11, 2000) and Training and Employment Guidance Letter No. 8-99, "Negotiating Performance Goals; and Incentives and Sanctions Process under Title I of the Workforce Investment Act."

3. Background. The stated goal of the Workforce Investment Act is to increase employment, retention, and earnings of participants. A comprehensive performance accountability system has been created that includes core indicators of performance to measure employment, retention, and earnings, as well as attainment of credentials (or diplomas in the case of young people age 14-18), attainment of skills, and customer satisfaction. States have negotiated levels of performance for each of these indicators, and based on results reported in their Annual Reports that are submitted each December, states may qualify for incentives for performance that exceeds the negotiated performance levels or be subject to sanctions for performance that does not meet the negotiated performance levels.

RESCISSIONS: [none listed]
EXPIRATION DATE: Continuing
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If a state fails to meet the negotiated levels of performance for one year, the state may request technical assistance from ETA. If the state fails to achieve 80 percent of the negotiated levels of performance for two consecutive years, the state may be subject to financial sanctions in the form of a reduction in the annual allotment for the program area, up to 5 percent. Further, if a state fails to submit an accurate and complete annual report on its performance within 45 days of the due date, sanctions may be applied as if the state had failed to meet its negotiated performance levels.
The application of a financial sanction must be made to the allotment for the program year following the year of poor performance. Any funds recovered from the application of financial sanctions will be made available for performance incentive grants.
In addition to the statutory provisions in WIA section 136, guidance to the workforce system on the subject of sanctions has been provided in the regulations at 20 CFR 666.240 and in Training and Employment Guidance Letter No. 8-99, "Negotiating Performance Goals; and Incentives and Sanctions Process under Title I of the Workforce Investment Act." (See Attachment for relevant statutory, regulatory, and policy language.)
During the implementation of WIA and the first two years of full operation, Regional Administrators have worked with the states on planning and performance, conducted quarterly reviews of state performance, offered technical assistance and helped to develop alternative plans, as appropriate. ETA recognizes that although the credential and diploma measures may not have been traditional measures of performance under earlier programs, employment, earnings and retention goals have long been recognized as legitimate measures of performance for workforce programs.

4. Sanction Policy. The effective use of sanction authority related to performance will include a range of actions, with the ultimate goal of improving services to customers. Further, the use of sanctions will reinforce the management philosophy underlying WIA and the Administration--the importance of performance outcomes and results. Financial sanctions will be considered when it is clear that a state has not taken reasonable steps to address its poor performance, but levying a financial penalty will not be the sole purpose or result of a sanction.
   a.  Any state that has failed to perform at 80 percent of the negotiated level for a specific performance indicator or customer satisfaction indicator for a second consecutive year, or has failed to submit an accurate and complete annual report within 45 days of the due date, will be required to modify its Five-Year Strategic Plan to incorporate an agreed upon performance improvement plan.
At a minimum, if a state has failed to achieve the negotiated level of performance for two years in a row, the state will work with the Regional Office to develop a performance improvement plan. Such a plan will include: changes to program goals, as appropriate, as well as design, management or administration remedies that address any deficiencies in program design or service strategy that have inhibited performance, including reporting problems; appropriate technical assistance to improve program services; and continued monitoring by the Regional Office. The plan modification requirement is supported by 20 CFR 661.230(b)(3), which requires plan modifications in such circumstances.
   b.  The level of a financial sanction for poor performance for a specific performance indicator within a program area (other than for customer satisfaction) will be directly related to the number of negotiated performance indicators the state failed to meet within that program area for two consecutive years, but not more than 5 percent of the annual allotment for the program area.
In addition to the required performance improvement plan, financial sanctions will be applied to the program area in which the state failed to achieve the negotiated level of performance, i.e., Adults, Youth, and/or Dislocated Workers.
   c.   When determining the amount of a financial sanction, failure to meet negotiated levels for the customer satisfaction measures or failure to submit an accurate and timely annual report will increase the financial sanction by an additional 1 percent of the annual allotment in the program area that is being sanctioned.
If a state has failed only the customer satisfaction measure or failed to submit an accurate and timely annual report but has met all of the other negotiated levels of performance, then a financial sanction will not be imposed.
A financial sanction may be appropriate for any state that failed one or more measures of performance for workforce programs. This describes the maximum amount of a financial sanction, subject to adjustment upon further review. Since there are 4 measures for the adult and the dislocated worker programs, the amount of the financial sanction will be based on the number of measures failed in each program area:

    Adult/Dislocated Worker   Maximum
    No. of Measures Failed    Amount of Sanction
    1                         1%
    2                         2%
    3                         3%
    4                         4%
        *                         5%
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    * Failure to achieve one or both negotiated levels of customer satisfaction, or failure to submit an accurate and timely annual report will increase the level of financial sanction applied to a program by an additional 1 percent if it is otherwise subject to financial sanction.

For the youth program, since there are 7 indicators of performance, the amount of the financial sanction would be calculated as follows:

    Youth                    Maximum
    No. of Measures Failed   Amount of Sanction
    1-2                      1%
    3-4                      2%
    5-6                      3%
    7                        4%
        *                        5%
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    * Failure to achieve one or both negotiated levels of customer satisfaction, or failure to submit an accurate and timely annual report will increase the level of financial sanction applied to a program by an additional 1 percent if it is otherwise subject to financial sanction.

There are several general factors to consider in relation to sanctions for performance that will be taken into consideration in determining the actual amount of the sanction (up to the maximum percentage as discussed above), such as performance on other indicators, economic conditions, and the progress of performance on the failed measure between the two program years. Also, the Regional Offices will work with the state(s) to address the 7 mitigating factors articulated in the regulations at 20 CFR 666.240(c) (see Attachment).
Regional Offices will provide a final recommendation for a financial sanction based on their analysis of the information received from the state(s), including responses on the seven factors discussed above. The amount of the sanction for each missed indicator of performance could be reduced if the state provides relevant and sufficient information to explain the performance failure.

5. Exceptions for Program Years 2000 - 2001.The above policy provides effective guidelines for implementing the sanction provisions under WIA. There will, however, be two exceptions when applying these recommendations for performance in PY 2000-2001 (July 1, 2000, through June 30, 2002).
   a.   The amount of the financial sanction is based on how many of the "basic" measures per program the state failed. If a state has failed only the credential and/or diploma measure for PY 2000-2001, then a financial sanction will not be imposed on the state.
Several states have expressed concerns regarding the younger youth diploma measure, and the older youth, dislocated worker and adult credential measures, resulting from a perceived lack of baseline data when the goals were initially negotiated, and/or problems gathering and reporting the data on this new and unfamiliar measure. In acknowledgement of these concerns, it is ETA's policy that if these are the only measures where a state failed to achieve 80 percent of the negotiated level of performance, for PY 2000-2001, the credential and/or diploma measure will not, by itself, result in a financial sanction on the program area.
However, if the state also failed any other youth, dislocated worker or adult measure, the credential and diploma measures will be taken into account (i.e., added to the total number of performance failures) when determining the level of the financial sanction, since this combination of failures is indicative of a larger management and/or program design issue for the state.
   b.   For Program Years 2000-2001, the submission of an accurate and timely annual report, including compliance with reporting requirements such as the response rate for customer satisfaction surveys, will not be a factor in determining the level of a financial sanction to be applied to a state.
The annual report on performance is used to determine both incentives and sanctions, and an accurate report of valid information is critical. However, the development and implementation of the performance measurement system, including the record keeping and reporting guidelines, were not complete until well into the first year of program operation. We will delay any application of financial sanctions for failures to report for an additional year. A performance improvement plan will still be required from a state that did not have an adequate response rate for their customer satisfaction surveys, and states that fail to prepare and submit reports that are timely, accurate and reliable.

6. Appeals. States may request review of a decision to impose a sanction. In accordance with 20 CFR 667.800(a), such an appeal must be submitted in writing to the Department of Labor's Office of Administrative Law Judges within 21 days of receipt of the final determination imposing the sanction.

7. Action Required.State Workforce Agencies and WIA Liaisons are asked to distribute this guidance quickly to the appropriate officials at the state and local levels.

8. Inquiries. Direct questions to the appropriate ETA Regional Office.

9. Attachments.

- Workforce Investment Act Language Pertaining To Sanctions

Attachment: Workforce Investment Act language pertaining to sanctions (https://www.dol.gov/sites/dolgov/files/ETA/advisories/TEGL/2003/TEGL19-02_Attach.html):

ATTACHMENT

WORKFORCE INVESTMENT ACT
LANGUAGE PERTAINING TO SANCTIONS

TITLE I

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Section 136

- (g) Sanctions for State Failure To Meet State Performance Measures.
  (1) States.
    - (A) Technical assistance. If a State fails to meet State adjusted levels of performance relating to indicators described in subparagraph (A) or (B) of subsection (b)(2) for a program for any program year, the Secretary shall, upon request, provide technical assistance in accordance with section 170, including assistance in the development of a performance improvement plan. (B) Reduction in amount of grant.-- If such failure continues for a second consecutive year, or if a State fails to submit a report under subsection (d) for any program year, the Secretary may reduce by not more than 5 percent, the amount of the grant that would (in the absence of this paragraph) be payable to the State under such program for the immediately succeeding program year. Such penalty shall be based on the degree of failure to meet State adjusted levels of performance.
    (2) Funds resulting from reduced allotments. The Secretary shall use an amount retained, as a result of a reduction in an allotment to a State made under paragraph (1)(B), to provide incentive grants under section 503.

FINAL RULES

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Preamble (Part 666, Subpart B)

- 2. Sanctions: Section 666.240 explains that States failing to meet for any program adjusted levels of performance for core indicators and the customer satisfaction indicators for any program, in any year, will receive technical assistance, if requested. If a State fails to meet the required indicators for the same program for a second consecutive year, the State may receive a reduction of as much as five percent of the succeeding year's grant allocation.
  We received several comments suggesting that the limited experience in using wage records to measure performance, plus the energy and resources being focused on the creation of new partnerships and the establishment of new customer-focused, streamlined service designs, may have a negative impact on performance, possibly exposing States to sanctions. The comments proposed delaying the application of sanctions until baseline data could be developed, and States would be better prepared to negotiate realistic levels of performance against which they would be measured.
  Response: We recognize that the changes being undertaken with the implementation of WIA should ultimately lead to higher performance and a more sophisticated and accurate performance measurement system. Nonetheless, as a result of consultation with partners and stakeholders, we have clarified the process for determining acceptable and unacceptable performance by establishing a range so that a State's performance will be deemed to be acceptable if the actual performance falls within 20 percent of the negotiated level. Therefore, sanctions will not be considered unless actual performance is more than 20 percent below the negotiated level. This rule has been included as a new provision at Sec. 666.240(d).

Part 666, Subpart B, Sec. 666.240

- Under what circumstances may a sanction be applied to a State that fails to achieve negotiated levels of performance for title I?
  (a) If a State fails to meet the negotiated levels of performance agreed to under Sec. 666.120 for core indicators of performance or customer satisfaction indicators for the adult, dislocated worker or youth programs under title I of WIA, the Secretary must, upon request, provide technical assistance, as authorized under WIA sections 136(g) and 170.
  (b) If a State fails to meet the negotiated levels of performance for core indicators of performance or customer satisfaction indicators for the same program in two successive years, the amount of the succeeding year's allocation for the applicable program may be reduced by up to five percent.
  (c) The exact amount of any allocation reduction will be based upon the degree of failure to meet the negotiated levels of performance for core indicators. In making a determination of the amount, if any, of such a sanction, we may consider factors such as:
    1.  The State's performance relative to other States;
    2.  Improvement efforts underway;
    3.  Incremental improvement on the performance measures;
    4.  Technical assistance previously provided;
    5.  Changes in economic conditions and program design;
    6.  The characteristics of participants served compared to the participant characteristics described in the State Plan; and
    7.  Performance on other core indicators of performance and customer satisfaction indicators for that program. (WIA sec. 136(g).

  (d) Only performance that is less than 80 percent of the negotiated levels will be deemed to be a failure to achieve negotiated levels of performance.
  (e) In accordance with 20 CFR 667.300(e), a State grant may be reduced for failure to submit an annual performance progress report.
  (f) A State may request review of a sanction we impose in accordance with the provisions of 20 CFR 667.800.

Part 667, Subpart C, Sec. 667.300

- What are the reporting requirements for Workforce Investment Act programs?
  (e) Annual performance progress report. An annual performance progress report for each of the three programs under title I, subpart B is required by WIA section 136(d).
    1.  A State failing to submit any of these annual performance progress reports within 45 days of the due date may have its grant (for that program or all title I, subpart B programs) for the succeeding year reduced by as much as five percent, as provided by WIA section 136(g)(1)(B).
    2.  States submitting annual performance progress reports that cannot be validated or verified as accurately counting and reporting activities in accordance with the reporting instructions, may be treated as failing to submit annual reports, and be subject to sanction. Sanctions related to State performance or failure to submit these reports timely cannot result in a total grant reduction of more than five percent. Any sanction would be in addition to having to repay the amount of any incentive funds granted based on the invalid report.

Part 667, Subpart H, Sec. 667.800

- What actions of the Department may be appealed to the Office of Administrative Law Judges?
  (a) An applicant for financial assistance under title I of WIA which is dissatisfied because we have issued a determination not to award financial assistance, in whole or in part, to such applicant; or a recipient, subrecipient, or a vendor against which the Grant Officer has directly imposed a sanction or corrective action, including a sanction against a State under 20 CFR part 666, may appeal to the U.S. Department of Labor, Office of Administrative Law Judges (OALJ) within 21 days of receipt of the final determination.
  (b) Failure to request a hearing within 21 days of receipt of the final determination constitutes a waiver of the right to a hearing.
  (c) A request for a hearing under this subpart must state specifically those issues in the final determination upon which review is requested. Those provisions of the final determination not specified for review, or the entire final determination when no hearing has been requested within the 21 days, are considered resolved and not subject to further review. Only alleged violations of the Act, its regulations, grant or other agreement under the Act fairly raised in the determination, and the request for hearing are subject to review.
  (d) A request for a hearing must be transmitted by certified mail, return receipt requested, to the Chief Administrative Law Judge, U.S. Department of Labor, Suite 400, 800 K Street, NW., Washington, DC 20001, with one copy to the Departmental official who issued the determination.
  (e) The procedures in this subpart apply in the case of a complainant who has not had a dispute adjudicated under the alternative dispute resolution process set forth in Sec. 667.840 within the 60 days, except that the request for hearing before the OALJ must be filed within 15 days of the conclusion of the 60-day period provided in Sec. 667.840. In addition to including the final determination upon which review is requested, the complainant must include a copy of any Stipulation of Facts and a brief summary of proceedings.

TEGL NO. 8-99

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Section 5. Incentives and Sanctions Policies

- E.   Failing to Meet the Negotiated Levels Negotiated levels will be established for each of the 17 performance measures. The lowest acceptable level (lower limit) will be calculated as 80% of the established State negotiated level. States must attain 80% of the target performance level on each measure for performance to be determined acceptable. If a State falls below this threshold of 80% on any of the performance measures, the State may be subject to sanction. Although WIA and this guidance provide some specific requirements for sanctions, the Department will review possible sanctions on a case by case basis.
  G.    Unacceptable Performance in Two Consecutive Years If performance is unacceptable for two consecutive years on the same performance indicator, monetary sanctions may be imposed.
  H.   Amount of Monetary Sanctions Sanctions will be determined on a case by case basis, and may range from 1% up to a maximum 5% reduction.