Auditor's memo raises questions around job training program’s oversight

State Auditor Doug Hoffer. File photo by Morgan True/VTDigger

[S]tate Auditor Doug Hoffer is raising concerns about the oversight of a state job training and workforce development program, which provided $1.3 million in grants for companies to train 2,000 workers in 2014.

In a memo to state lawmakers that was also provided to the media, Hoffer says the Vermont Training Program has “no effective internal controls” to ensure that businesses meet eligibility requirements.

The Vermont Training Program gives companies grants to pay 50 percent of workers’ wages during on-the-job training or 50 percent of the trainer’s expense. It also provides money to classroom training programs such as Vermont HITEC, which offer training in high-demand industries.

The wage increases reported for workers who complete training through the program are also likely to be inaccurate because they reflect a worker's total earnings, not hourly wages, and therefore wage increases could reflect earnings from a second job -- not just the one they received training for through the program, according to Hoffer.

Lucy Leriche, Agency of Commerce and Community Development deputy commissioner, said Hoffer’s analysis dismisses the program’s self-certification process and the onsite follow-up visits that occur to ensure businesses are eligible. In 2014, the program engaged a review committee from across state government to further vet participating companies, she said.

Hoffer counters that there’s a lack of documentation for the onsite visits, and the companies’ self-reports are not subject to audits. The program has a statutory obligation to verify participants' eligibility, he added.

Leriche said if lawmakers want more stringent verification measures, that’s a conversation she’s willing to have. The training program has only one staff person, and any money directed toward auditing a company’s eligibility would come directly out of what’s available for workforce training grants, she said.

Sen. Kevin Mullin, R-Rutland, who chairs the Senate Economic Development, Housing and General Affairs Committee, said the concerns raised in Hoffer’s memo merit legislative review, and he’s not convinced that better oversight will come at the cost of grants for workforce development.

“I think there’s merit to what (Leriche) is saying, but I think there’s probably a way to do it without creating much of an expense,” Mullin said.

If a few companies were subject to a random audit every couple of years it would be enough to deter anyone from “thinking they could game the system,” Mullin said.

Hoffer is correct, Mullin said, in that state government is “playing with other people’s money,” and therefore has a greater obligation to verify that taxpayer funds are spent properly, he said.

The auditor's memo also questions whether it is appropriate that a “substantial portion” of the training grants go to a “a few large corporations year after year.” While 260 businesses have received training grants in the past 10 years, 10 of the largest firms operating in Vermont have received 22 percent of the $15.6 million distributed through the program.

Those businesses are Keurig Green Mountain, Dealer.com, IBM, Mylan, Plasan, Tivoly, Husky, Mack Molding, Dynapower and General Electric.

Leriche said it is by design that those firms continually receive grants, because that’s where opportunity lies.

“If you look at where the growth is in the state economy we have important businesses that are growing, and from our view that is a great place to invest in workforce development,” she said.

For Hoffer, the repeat business raises concerns that the program isn’t complying with its enabling statute. The law requires that businesses only receive grants for supplemental training, not workforce training that would occur in the normal course of business.

The frequency with which large firms receive training grants raises the question of whether those companies are using the subsidy to pay for training that would occur regularly. Again, Leriche said the program’s application review process and the onsite visits are designed to make sure that is not the case.

Those measures don’t go far enough to ensure the integrity of the Vermont Training Program, according to Hoffer.