References: The Wagner-Peyser Act, as amended (P.L. 97-300); 20 CFR 652; TEGL No. 4-94. Background: The Secretary of Labor is issuing final planning allotments for each State's share of PY 1995 funds for basic labor exchange activities. These allotments (Attachment I) are based on the FY 1995 appropriation of $845,912,000 and are distributed by the statutory formula described in Section 6 of the Act. The allotments are also being published in the Federal Register. The data used are Calendar Year 1994 averages of civilian labor force (CLF) and number of unemployed individuals. Section 6(b)(4) of the Act authorizes the Secretary of Labor to reserve up to 3 percent of the total fund availability to assure that each State will have sufficient resources to maintain statewide employment service (ES) activities. The set-aside for distribution through an administrative formula for PY 1995 is $24,791,040. The 3 percent distribution is included in the total final allotment. The set-aside was distributed in two steps to States whose relative share of resources declined from the previous year. In Step 1, those States with a CLF below one million and that are also below the median CLF density were held harmless at 100 percent of their prior year relative share of resources. The remainder was distributed in Step 2 in pro rata shares to all other States that lost in relative share from the prior year but did not meet the size and density criteria for Step 1. Differences between preliminary and final planning estimates are caused by the use of Calendar Year data as opposed to the earlier data used for preliminary planning estimates and postage savings related to U.S. Postal Service changes in methodology of calculating charges and improved mail management practices. Postage costs incurred by States during the conduct of ES activities are billed directly to the Department of Labor by the U.S. Postal Service. The States' final allotments do not include $19,544,000 of the total amount available, which is withheld for the payment of the States' ES penalty mail costs. Action: State planning activities are to be guided by the process described in the Wagner-Peyser Act, Federal Regulations at 20 CFR Part 652, and planning guidance provided by ETA Regional Offices.

Reference: Employment Security Manual (ESM), Part V, Section 3670-3693, Field Audit Function (ETA Audit Policy); Core Revenue Quality Control, Operations Handbook. Background: The role of the field auditor in administering a compliance program under State UC laws requires a high degree of technical knowledge covering State and Federal employment taxes and acquired investigative skill. Depending on individual State approaches to auditor training, acquired knowledge and skills are often reflected in varying degrees of auditor productivity and inconsistent audit quality. The need for a broader approach to field auditor development, beyond their own State UC law and rules, has frequently been expressed by State UC tax managers at National and multi-Regional Tax Conferences and has also been recommended by Federal and State auditors. The variables in payroll control, employer-employee relationships and remuneration for individual services cannot be monitored efficiently unless the auditors' education includes background familiarity with the larger arena of Federal employment tax laws and the inter-relationship of similar but unique State UC tax programs. State UC Tax Field Auditor Training Program: A field auditor training program which focuses on issues beyond a single State's UC law and rules, is nearing completion. The program, developed under a cooperative agreement with the Indiana Department of Employment and Training Services (IDETS), will provide States a special supplement of broad based instruction that will complement existing State UC tax compliance training for UC field tax personnel. The training program will: (A) Provide State UC compliance staff with a working knowledge of the Federal Unemployment Tax Act and other related Federal employment tax applications; (B) explain ETA audit policy provisions and the Federal interest in UC audit performance; (C) encourage interstate cooperation in compliance efforts; (D) improve professionalism in audit performance and report integrity, and discuss Generally Accepted Auditing Standards (GAAS) and their application in payroll and tax compliance audit applications; and (E) raise the level of auditor awareness of outside influences on employment tax administration, through tax avoidance, employment practices and legislation. Development: Many State UC tax experts have participated in the program design and development. All States were surveyed for input as to their existing policy on field audit operations, auditor training programs and desired subject matter for supplemental training. A workshop comprised of experienced UC tax compliance experts from twenty-five States representing each of the ten ETA regions, reviewed options resulting from the survey and provided guidance on desired or needed training and audit program development. Design: The training program under development is structured to be folded into existing State training with an introduction to Federal employment tax law, ETA policy on UC auditing, meeting State quality control requirements and the inter-dependence of the States' UC tax programs. Subject matter will be broad based and include, but not be limited to: (A) The Federal Unemployment Tax Act (FUTA) and related employment tax provisions of the Internal Revenue Code and Social Security Act referred to in FUTA; (B) the inter-relationship of Federal and State roles in unemployment tax programs and the value of inter-State cooperation; (C) an explanation of Generally Accepted Auditing Standards to the extent they apply to payroll and the limited financial auditing practiced in UC tax compliance audits; (D) all elements of current ETA audit policy (ESM, Part V, Sections 3670-3693 (as revised) and the proposed Revenue Quality Control audit quality requirements; (E) working relationships often designed to circumvent standard employment classification tests; (F) examples and explanations of special provisions in Federal and State laws that either extend or restrict worker coverage and employer tax liability; (G) trainee introduction to the central office processes for which he/she provides support, such as, status, cashiering, employer accounting, delinquency/collections, computer services available to the auditor; and (H) instructions for setting up and closing out of an audit assignment. This includes making the appointment, the entrance interview, closeout interview, auditor's report and the central office review. The training program for State UC tax auditors will be in stand- alone modules that may be used, in the whole as a phase of, or to complement training for State tax staff, or in parts to supplement existing State training formats. As a complement to State training programs, the modules will focus primarily on expanding the trainees' knowledge of outside factors and audit approaches that contribute to the overall effectiveness of their State tax compliance programs. Each stand alone training module will have a trainee and a corresponding trainer section. The training modules package will consist of: (A) A supervisory executive summary to provide SESA management with a training program overview; (B) an instructor's manual that follows each module and training unit, with desired results to exercises and options available to auditors in coverage issues; (C) a student manual with text and exercises designed to carry a trainee step-by-step through each module; (D) video instruction to enhance trainee understanding of the subject matter; and (E) all texts and printed material on floppy disks in a flat ASCII format. Trainer and student manuals for each unit will include test exercises to familiarize trainees with application of the procedures and principles covered in that unit. These test exercises will help instructors measure trainee comprehension of the training material. All modules will contain transparency and flip chart masters for use in group training sessions. The complete training program package will be made available to each State in reproducible units. Program Delivery: Three Train-the-Trainer sessions have been scheduled for State staff who are responsible for auditor training and/or performance in their respective States. Such individuals should attend one of the three sessions that have been scheduled as follows: May 18-21, Atlanta, Georgia June 15-18, Denver, Colorado June 22-25, Indianapolis, Indiana The Indiana Agency and its contractor, The White River Training Company, will provide you directly with specifics on the training sessions. Hotel accommodations will be provided by the contractor. Trainers will be responsible for transportation, meals and other travel expenses. Attending a Train-the-Trainers session is essential to the success of the program because it will provide State trainers with specific knowledge and skills to deliver the program and guidance to develop related State-specific material for their auditor training programs. The Train-the-Trainers sessions will also enhance State trainers' knowledge of Federal and multi-State employment tax interface that they may not have exposure to in their own programs. Action Required: State Agency Administrators are requested to: (A) Provide the information in this Directive to their UC Directors and/or appropriate tax managers and training officers; (B) select individuals to be responsible for implementation and integration of the program into their auditor training program; and (C) assure that individuals who will be conducting the training attend one of the three train-the-trainer sessions.

References: Training and Employment Information Notice (TEIN) No. 49-93, Capacity Building Strategy Paper; and TEIN No. 11-94, "Consultation with our Customers." Background: TEIN No. 11-94, dated November 4, 1994, discussed the Employment and Training Administration's (ETA) intention to conduct an extensive "consultation process" to strengthen our understanding of the technical assistance and training needs of the Nation's employment and training system. ETA is committed to the continuous improvement of employment and training staff capabilities as a key intervention in improving the quality of services provided to participant and employer customers. One activity of the consultation effort is the administration of a broad-based, system-wide survey to assess the capacity building and technical assistance needs of employment and training staff. The Department ofLabor systematically gathers information on the capacity building and technical assistance needs of its partners in order to achieve continuous improvement and provide high quality services to its primary customers -- the participant and the employer. To that end, this survey, along with other components of the capacity building effort, will obtain information needed to help design staff training programs which will help unify the current employment and training system; be flexible enough to meet local developmental needs; reach the hands- on service provider level; and ultimately improve the quality of services that our customers receive. Survey Instruments: Working with National and Regional Office staff, the Technical Assistance and Training Corporation (TATC), the contractor engaged to assist in this effort, developed the survey instruments for this project. Approved by the Office of Management and Budget, the surveys will be completed by State and local program directors and staff of the Job Training Partnership Act (JTPA), the U.S. Employment Service (ES/UI), the One-Stop Implementation States, the Job Opportunities and Basic Skills (JOBS) program, and other Federal, State and local employment and training initiatives. There are two different survey forms: Program Directors/Managers Form - These surveys will be completed by Program Directors or Managers, Assistant/Deputy Directors or Managers, Supervisors of Front-Line Staff, or Contract Manager/Monitors. Front-Line Staff Form - These surveys will be completed by Intake/Outreach workers, Case Managers, Counselors, Teachers, Instructors, or Trainers, Job Developers, Job Placement specialists and other staff who interact directly with participants and employers. TATC will mail survey packets directly to State and local Program Directors and will include a sampling plan for local distribution. All individual responses will be kept completely confidential; only summary results will be reported. Each packet will also contain "stamped" return envelopes for mailing the completed surveys back to TATC (each survey will have its own return envelope). Participation in this survey effort is voluntary, however, cooperation in completing the survey is greatly appreciated. The results of the survey will be used to establish priorities for the use of ETA resources and to create a capacity building system that addresses the long-range developmental needs of a customer- focused employment and training network. Survey results will be formatted by Regions, States and programs within States and will include information on common needs across programs, effectiveness of current training methods, and information on best practices and program models. The results will be widely distributed. Action: Recipients of this TEIN are requested to inform Directors and Program Administrators of Service Delivery Areas, Substate Areas, One-Stop Career Systems, and Employment Service/Unemployment Insurance programs of the upcoming survey and strongly encourage their participation in this system-wide effort. A copy of this TEIN will be sent by the Department of Health and Human Services to each State JOBS Director.

References: UIPL 44-90 (September 21, 1990); Core Revenue Quality Control Operations Handbook (July 31, 1992). Background: Revenue QC is being developed in four separate modules: (1) Core, which assesses the quality of State Employment Security Agencies' (SESAs') internal tax processing operations; (2) Benefit Charging, covering how accurately employer chargeability is determined and charges are allocated; (3) Employer Compliance, which is to measure the accuracy of employers' contributions reports and completeness of payment of contributions due; and (4) Data Validation, to assess the accuracy of data obtained through required UI reports. The first two modules have been tested and the voluntary stage of RQC reflects the Core RQC test findings. Core RQC assesses how timely, accurately, and completely UI tax operations internal to the SESA are conducted. However, it is not concerned with the accuracy of the information tax units receive or how completely employers pay taxes due. The Employer Compliance (EC) module is intended to fill this gap. EC is intended to assess the accuracy of the information reported on contributions reports and the information on which States have made status determinations. This pilot project will test the feasibility of doing this by taking randomly-selected samples of employer accounts and auditing them according to ES manual standards. This sample of firms can also be used to estimate how much of contributions due were paid timely during the audit year, so that the results can be compared with what is obtained from the new RQC computed measure "The percent of amounts due that were paid timely." Although all SESAs routinely conduct employer audits, the employers are rarely selected in a way that permits the audit findings to be used to generalize about the behavior of all the State's subject employers. Some SESAs select employers at random but do not take the next step of analyzing the random results to make inferences about compliance rates. Both steps--random selection, and analysis of findings--are part of the EC module, and are the subject of this pilot. The basic design for the pilot was developed by Abt Associates, Inc., the current RQC technical support contractor, with input from an expert panel of UI tax administrators. Abt estimated that each pilot State would need to complete 1,600 "random" audits (actually, chosen using an efficient sampling design) to provide a sufficiently precise estimate of compliance. For comparison, it would be desirable to have another 400 audits chosen either from previous blocked claims or IRS 1099 leads, or both. The 2,000 (or 2,400) audits are to be done in a 12-month period, and all will refer to the same base year. All audits will be expected to meet RQC/ESM standards for quality. It is expected that a certain number of out-of-State employers will be selected; the design calls for them to be audited as well as in-State employers. The pilot is scheduled to begin in October 1993 and run for 12 months. More details on the pilot are provided in the attached paper. Objectives: This pilot is intended to assess the feasibility of including an Employer Compliance module in RQC. It will attempt to do this by (a) measuring the extent of incomplete or inaccurate reporting in the pilot States; (b) estimating the costs of conducting large-scale random audits, including the foregone audit yield and possibly lower compliance because of reductions in audits selected using the SESA's usual targeting methods; (c) providing better estimates of sample sizes needed for EC purposes; (d) noting the operational realities of periodically conducting this kind of large-scale research effort as part of a continuing field audit program, particularly in States with differing ADP capabilities; (e) determining whether data can be effectively put to use for audit selection and employer education; and (f) determining whether EC is the most cost-effective way to estimate non-compliance. (g) The sample will also be used to estimate the percentage of contributions due accrued during the audit year that was paid timely and (h) will be used to gather information on employee leasing companies and/or their clients, for future research by SESAs or UIS. Structure and Timing: The Department is seeking five States to implement the basic design developed by Abt Associates, Inc. Staff from the pilot States will be expected to help refine the design. Technical assistance in fine-tuning the design, providing training, and managing the pilot will be provided by a contractor (yet to be selected), who will also evaluate the results. Based on the responses to this solicitation, the Department expects to select participants by approximately June 1. The State pilot coordinators will meet with Federal staff and the pilot support contractor to refine the design and set interim deadlines and tasks, including training plans, later in June. Shortly thereafter, State ADP staff will be asked to meet with Federal and contractor staff to refine specifications for the sampling frame, sample selection, and retrieving data relevant to the pilot. The pilot is scheduled to begin in October 1993 and run for 12 months. Eligibility and Selection Criteria: It is assumed that most States with an interest in the pilot will have audit or field staff programs large enough that it will be feasible to conduct 1,600 random audits. States must be able to conduct audits meeting the new standards for quality and documentation. To meet this criterion, a State must have completed the RQC Field Audit Program Review (preferably as part of having implemented RQC voluntarily) and initiated any program improvements needed. If such has not been done by time of responding to this solicitation, the State must agree to do so by August and complete any needed program improvement by October. Each eligible State must provide a pilot coordinator who is willing to assist in the refinement of the basic design. If the number of volunteers permits, selection will emphasize diversity of participants with regard to geographical location, size, industrial mix, and degree of tax (especially audit) automation. Resources Provided for the Pilot: a. ADP Support. The pilot has many aspects amenable to or requiring automation: selecting the "random" component of firms to be audited; extracting data elements from the mainframe for the audit record; storing the auditor's data; tracking the progress of audits; analyzing results. The Department will provide software and/or specifications for many of these functions. In addition, each State will receive resources to defray the costs of programming/installing project software. b. Auditor Support. The Department will provide every pilot State with the equivalent of nine staff years over a three-year period to defray most of the additional staffing costs of conducting the pilot. c. Travel Funds for Out-of-State Audits. The Department will provide funds to defray the estimated costs of conducting out-of- State audits as part of the project. d. Technical Support. The Department will secure the services of a technical support contractor to assist with managing and then evaluating the pilot. Action Required: Interested SESAs are asked to communicate their desire to participate to Regional Offices by 45 days from the date of release of this UIPL.

Reference: ET Handbook No. 395 and UIPL 41-92 (August 3, 1992). Background: Since the start of the Quality Control (QC) Program, the Office of Quality Control has envisioned a change in the methods used to collect and verify QC data. The primary reason for this change is cost savings, which will be reallocated to fund other QC activities. Additionally, SESAs have long requested relief from the rigors of in-person verifications which resulted in excessive travel times and produced results which could be obtained using other, more cost effective methods. To measure the effectiveness of these other verification methods, a Telephone Pilot was conducted in four SESAs. The pilot findings indicated that telephone verifications were in fact, a viable option to the present BQC in-person methodology. Individual components of the QC investigation which could be conducted using other than the in-person method were identified. The Pilot results demonstrated that these components could be investigated using the telephone/FAX, and or mail with little or no loss in data quality. There were six design considerations developed that were applied in conjunction with the data generated by the Telephone Pilot to produce the alternative methodologies. The following provides a brief description of the six design considerations: (1) Data Quality. The BQC's credibility is based on the quality of its data. Use of alternatives to the in-person method of investigation which lessen the accuracy of its findings must be justified by considerable gains in other areas. (2) Cost Savings. One of the major appeals of alternative methods is their ability to increase the efficiency of BQC verifications. Cost savings was important and was appraised in conjunction with its impact on data quality. These cost savings had to be developed to specifically show the impact of savings versus loss in data quality. (3) State Flexibility. SESAs have long requested more flexibility in how they can routinely conduct BQC investigations. The use of telephone or mail was always available to the SESAs, but only in extenuating circumstances, and it was necessary to provide adequate justification when using these "other" methods. These alternative methods will allow SESAs more flexibility when conducting investigations. (4) Administration. This was a consideration because the Department must be capable of administering these changes equitably among SESAs. This means that the budgetary and policy implications of these changes must be comparable and consistent among SESAS. (5) Monitoring. Monitoring by both Regional and National Office (RO) (NO) staff is an integral part of maintaining QC data integrity. Where variations in the methodology to be applied for a particular investigative component exists, the Federal Monitor will be required to determine if the proper application of the methodology was utilized. It is preferable to minimize monitoring subjectivity and increase monitoring consistency when implementing the alternative methodologies. (6) Consistency in Methodology. Maintaining a consistent methodology throughout BQC is a primary consideration. This is so that any differences in BQC findings reflect the true rate of mispayments in the universe of State UI payments, and not the differences in how thoroughly BQC verifications are done. The above design considerations played an integral part when addressing the feasibility of applying the pilot results to the five QC investigative components. These investigative components are: (1) Claimant Interview, (2) Benefit Year/Base Period Wages, (3) Separation Information, (4) Work Search Verifications, and (5) Third Party and Other Verifications. After presenting these findings in several meetings throughout the year, and receiving input from both Regional and SESA QC staff, the Department is now moving towards implementation of these alternative methods. For each individual investigative component, Handbook No. 395 will be revised to indicate the primary and secondary method(s) to be used in the collection and verification of QC information. The Handbook will provide detailed instructions for each component, and the method(s) to be applied. The Department had anticipated implementing these changes in May 1993. However, any change to the QC investigative methodology requires approval from the Office of Management and Budget, and due to unforeseen delays, it is necessary to move the implementation date. Policy: SESAS are scheduled to begin implementation of the new alternative methods on all BQC cases effective July 5, 1993, which is the sample pull date for Batch 9327. This may also be applied to incomplete cases from previously selected batches. However, SESAs may choose to complete these unfinished cases using the "old" in-person method, at their discretion. The investigative components that will be mostly impacted by the new methodology are: Work Search Contact Interviews, Employer Interviews, and Third Party Verifications. A draft copy of Chapter VI, which explains the methodology changes in detail, is provided as an attachment (See Attachment A). There were basically no changes to the in-person method used for the Claimant Interview. The Claimant Interview anchors the BQC investigation, and is the major detection point for a number of overpayments and underpayments of all types. Additionally, the Pilot indicated that there was a considerable loss in data quality when using other than the in-person method for conducting the Claimant Interview. There were major changes to the Work Search Verification methodology. Work Search verifications must continue to be conducted in-person, with a number of "sanctioned exceptions". The in-person method remains the "primary" method of verification for this investigative component. This was necessary for several reasons including a loss in data quality, difficulty in administering and monitoring, and the overall inconsistencies among SESAs that would be exhibited by permitting SESA flexibility for Work Search Verifications. For a detailed listing of the "sanctioned exceptions", see Attachment A, (Work Search Contact Interviews, item No. 7). A number of "exceptions" were also rejected, due primarily to their inability to satisfy certain design considerations. The primary method for conducting Employer Interviews is now the use of telephone/FAX. See Attachment A, (Employer Interviews, item No. 8).The primary method for conducting Third Party verifications is now by use of telephone/FAX. See Attachment A, (Third Party Verifications, item No. 9). Resource Allocations: Due to the launching of Revenue Quality Control, a number of BQC positions have been reallocated effective May 10, 1993. The reallocation of the BQC positions means that SESAs' weekly sample size will be adjusted beginning with Batch 9319 which has a sample pull date of May 10, 1993, and again beginning July 5, 1993, the sample pull date for Batch 9327 and the effective date of alternative methods. (See sample adjustment chart, Attachment B). Additionally, SESAs currently conducting Program Improvement (PI) studies are to make the sample adjustments and continue their PI studies, while ensuring that minimum sampling requirements are met. SESAs that may need an extension of their current PI study should follow the procedures in UIPL 37-91. Procedures: SESAs should begin preparation for implementing alternative methods on July 5, 1993. These preparations include, but are not limited to, revisions to the State QC Procedures Operations Handbook, staffing adjustments, forms development, etc. Action Required: SESA Administrators are requested to provide this information to appropriate staff.

References: JTPA Sections 161 and 162, as amended by the Job Training Reform Amendments Act of 1992; Department of Labor Appropriations Act, P.L. 103-333 (for PY 1995); Training and Employment Guidance Letter No. 4-94; Public Law 104-6 (Defense Department supplemental). Background: On April 10, 1995, President Clinton signed Public Law 104-6, a Defense Department supplemental appropriation, which also contained a $200 million rescission to the PY 1995 Title II-C Youth Training Program grants. This represents a 33.4 percent reduction from the previously appropriated level of $598,682,000. A second rescission package is currently pending in Congress. The House bill contains a $310 million reduction to the program, while the Senate rescission would be $272 million. The effect of the Public Law 104-6 $200 million rescission is not in the House bill, but is reflected in the Senate bill reduction; thus the possibility remains for a further reduction that could be in the range from $110 million to $272 million. The House/Senate conference to finalize the rescissions package is expected to occur during the week of May 8 and it is expected that the final bill will go to the President by May 29. Implementation: The attached table shows the $200 million reduction by State, and is being provided for planning purposes. The final revised Title II-C allocations will not be issued until final action is taken on the second bill. Notices of Obligation (NOOs) will be issued on or about July 1, 1995. One option for dealing with the Title II-C reductions is the flexibility provided by the Act to shift up to 10 percent of Title II-A funds, and/or 20 percent of Title II-B funds to Title II-C, provided such transfers are described in the Job Training Plan and approved by the Governor (20 CFR Part 628.550). Also, the Senate rescission bill includes language that would authorize transfers of up to 50 percent from II-B to II-C. Final Conference action will determine whether that provision stays. States and SDAs should ensure that all subgrants and subcontracts contain a clause which limits these agreements to the availability of Federal funds. Action: States are requested to begin adjusting their PY 1995 planning efforts in light of the information contained in this issuance and to advise their SDAs to do the same.

References: Title I of the Emergency Unemployment Compensation Act of 1991, P.L. 102-164, as amended by P.L.s 102-182, 102-244, 102-318, and the Emergency Unemployment Compensation Amendments of 1993, P.L. 103-6; the Federal-State Extended Unemployment Compensation Act of 1970 (FSEUCA) as amended; 20 CFR Part 615; GAL 12-92 and GAL 12-92, Changes 1 and 2; the Trade Act of 1974 (19 U.S.C. 2271 et seq.); 20 CFR Part 617. Background: GAL 4-92, dated November 27, 1991, and published on February 14, 1992 (57 FR 5472), transmitted the Department's operating instructions to the States for administration of the Emergency Unemployment Compensation (EUC) program. On June 4, 1992, the Department issued GAL 4-92, Change 3, which transmitted revised operating instructions for Section III.M., Fraud and Overpayment, in Attachment A, based on questions from States. This document was published on June 24, 1992 (57 FR 28188). After additional substantive changes to the operating instructions in GAL 4-92, based on amendments to the EUC Act of 1991 and other provisions of P.L. 102-318 (enacted July 3, 1992), the Department consolidated GAL 4-92 and the four changes into one document, GAL 12-92. This document, issued on September 11, 1992, became the official controlling guidance and was published on November 16, 1992 (52 FR 54106). Based on changes to the reporting requirements provided in Attachment C to GAL 12-92 and extension of the EUC program provided in P.L. 103-6, the Department issued Changes 1 and 2 to GAL 12-92 on February 16, 1993, and March 10, 1993, respectively. Now, additional questions have arisen from the States, as well as other interested parties, concerning the application of the offset of overpayment provisions in Section III.M.. After consideration of the comments and the provisions of the EUC Act of 1991 as a whole, the Department is revising Section III.M.2.b.(5) of Attachment A to GAL 12-92 for the reasons described below. Clarification and Revision--Explanation: Section 105(c)(1) of the EUC Act of 1991 (entitled Fraud and Overpayments) provides that in the event of an EUC overpayment, deductions from EUC and other unemployment compensation payable may be utilized to offset the overpayment; except that no single deduction may exceed 50 percent of the weekly benefit amount from which the deduction is made. Section 243(a)(2) of the Trade Act of 1974 contains nearly identical language and the Department's regulation at 20 CFR 617.55(a)(4)(C)(iii) was promulgated to implement the provision. Therefore, the Department did not vary from the provision in 20 CFR Part 617 when Section III.M.2.b.(5) was issued in GAL 4-92 and now GAL 12-92, since a precedent had been established in the Trade Act regulations. However, unlike the Trade Act of 1974, Section 101(d)(2) of the EUC Act of 1991 provides that the terms and conditions of State law that apply to claims for extended compensation and the payment thereof, shall apply to claims for EUC and the payment thereof, except where inconsistent with the provisions of the EUC Act or with regulations or operating instructions of the Secretary promulgated to carry out the EUC Act. Based on questions from the States and other interested parties, the Department has determined that part of the requirement provided in current Section III.M.2.b.(5), prescribing that any deduction must be 50 percent is too restrictive, since some States have a smaller deduction for regular compensation, which is applicable to EB, and, hence, is also applicable to EUC. Any State law requiring greater than a 50 percent reduction is inconsistent with Section 105(c)(1) and may not be applied to EUC overpayments under Section III.M.2.b.(5). Therefore, Section III.M.2.b.(5) is revised as described below. This interpretation is applicable to all outstanding EUC overpayments and to all offset determinations made after the date of this issuance. The revised operating instructions in this GAL 12-92, Change 3, are issued to the States and constitute the controlling guidance provided by the Department in its role as the principal in the EUC program. As agents of the United States, the States may not vary from the operating instructions in GAL 12-92, GAL 12-92, Change 1, GAL 12-92, Change 2, or this Change 3 (or any subsequent or supplemental operating instructions) without the prior approval of the Department of Labor. Amendment to Operating Instructions: Consistent with Section 105(c)(1) of the EUC Act of 1991, Section III.M.2.b.(5) of Attachment A of GAL 12-92 is changed to read as follows: "(5) No single deduction under this section III.M.2., shall exceed 50 percent of the amount otherwise payable to the individual." Action Required: SESA administrators should ensure that the above controlling guidance is issued to appropriate staff and, if State law so provides for a deduction of less than 50 percent, that such lesser reduction shall apply to all outstanding EUC overpayments and to all offset determinations made after the date of this issuance.

Information. As a part of DINAP's continuing effort to provide customer service, we are pleased to announce that all Section 401 grantee reports and plans are to be submitted to a new MIS Desk. This newly established MIS operation within DINAP will provide a central entry point for all reports and plans submitted by grantees to the Department. It will also provide DINAP immediate access to program data updated daily. Ms. Andrea T.B. Brown, DINAP Assistant Manpower Development Specialist has been assigned responsibility for all MIS desk duties: receiving, tracking and logging reports, as well as creating a database by individual program and on an aggregate basis. Ms. Brown is also responsible for contacting grantees regarding missing and incorrect reports. Action. All Section 401 grantees MUST submit all required reports and plans to the following address effective immediately: U.S. Department of Labor Employment and Training Administration Division of Indian and Native American Programs 200 Constitution Avenue, N.W. Room N-4641 Washington, D.C. 20210 ATTENTION: MIS Desk Inquiries. Questions should be addressed to Ms. Andrea T.B. Brown, Assistant Manpower Development Specialist.

Background: Section 106 of JTPA directs the Secretary to establish performance standards for adult, youth, and dislocated worker programs. These standards are normally updated every two years based on the most recent JTPA program experience and on program emphases and goals established by the Department. The Secretary also issues instructions for implementing standards and parameter criteria for States to follow in making adjustments to the Title II-A performance standards. Program policies and relevant standards have remained unchanged since Program Year 1990. The Department did not update its performance standards levels in Program Year 1992 in order to maintain program management continuity amidst uncertainty about the passage of the ma Amendments and economic conditions. Program Year 1991 data indicate that outcomes have continued to decline since 1988 -- the reference year for the current standards. In addition, the Department's adjustment model cannot adequately account for decreased opportunities caused by slow economic growth. JTPA Program Performance in 1991: A review of 1991 data shows a trend of declining SDA performance on the employment-related standards (i.e., the adult and welfare follow-up employment rates and the youth entered employment rate). Thus, despite the Department's intent in setting the standards at levels that 75% of SDAs can be expected to meet or exceed, only about 65% of SDAs met or exceeded their employment-related standards in 1991. There is little reason to believe that outcomes have declined because the quality of SDA services decreased. Rather, because of the program's sensitivity to the economic environment, the most likely explanation for the employment rates is the decline in job opportunities associated with slow economic growth. Although economic conditions are improving, they have not yet been accompanied by increased employment -- and continued slow employment growth is forecast for the near future. It is likely to be some time before job opportunities improve for JTPA participants, and lower program outcomes for the employment-related standards can therefore be expected to continue in Program Years 1992-1993. Effects of Current Standards on State Incentives and Sanction Determinations: Maintaining employment standards at current levels would unfairly penalize SDAs for the effects of economic conditions and discourage enrollment of more difficult-to-serve populations. This would be unproductive and contrary to DOL's intent in setting performance standards; that is, holding SDAs harmless for factors outside their control. Secretary's Revised National Numerical Standards for Program Years 1992-1993: To ease the implementation of the Amendments and to further the Department's goal of increased service to hard-to-serve populations, the Department has decided to update the national standards to levels that 75% of SDAs can be expected to exceed -- the Department's traditional benchmark. This will result in slightly lower employment-related standards and a slightly higher standard for the youth employability enhancement rate -- reflecting performance improvements that have come with an increased program focus on skill-enhancing efforts for youth. The Title II-A earnings measures will remain at current levels. The revised Title II-A standards are: -- Adult Follow-Up Employment Rate 60% -- Welfare Follow-Up Employment Rate 46% -- Youth Entered Employment Rate 41% -- Youth Employability Enhancement Rate 36% The following standards remain unchanged: Title II-A: -- Adult Weekly Earnings at Follow-Up $228 -- Welfare Weekly Earning at Follow-Up $207 Title III: -- Title III Entered Employments Rate 64% Implementing Provisions: Implementation provisions remain unchanged. Please refer to section 6, TEGL No. 9-89, dated June 29, 1990 for these provisions. Performance Standards Provisions for Title III: Provisions for Title III remain unchanged as no drop in program performance has been noted. Please refer to section 7, TEGL No. 9-89, dated June 29, 1990 for these provisions. State Action: States are to distribute this Guidance Letter to all relevant officials within the State responsible for implementing performance management policies and requirements for Program Years 1992-1993. A copy of this Guidance Letter is also being sent to State JTPA Liaisons, the State Wagner-Peyser Administering Agencies and the State Worker Adjustment Liaisons.

References: Section 223(f) of the Trade Act of l974 (l9 U.S.C. 2293(f)) and 20 CFR 617.15(d). Background: Under the TAA and NAFTA-TAA programs, weekly trade readjustment allowances (TRA) may be available to adversely affected workers while they are participating in an approved training program. Section 233(f) of the Trade Act of l974 specifies that, when a worker is participating in an approved training program before the break, the worker is treated as being in training during a regularly scheduled break in training that does not exceed l4 days. This provision is implemented by 20 CFR 617.15(d), which provides that a scheduled break in the training program of l4 days or less will not disqualify a trainee for TRA during the break. However, if the scheduled break exceeds l4 days, as calculated in accordance with 20 CFR 617.15(d)(4), the individual will not receive TRA during such break. Since semester breaks of more than l4 days are quite common, this l4-day limitation creates hardship for many TAA and NAFTA-TAA participants. While some States and training providers have attempted to accommodate this limitation by scheduling activities for affected workers that prevent a break in excess of 14 days, such efforts are not always feasible. Therefore, significant inequities result because the availability of income support may depend on the particular State and training institution where the individual participates. A Departmental review of the impact of Section 233(f) of the Trade Act, stimulated by complaints from TAA and NAFTA-TAA participants and their representatives, disclosed wide variations among the States in terms of the financial hardship imposed on dislocated workers as a result of the break in training provision. In some States, no TAA or NAFTA-TAA participants are affected while, in others, 80 percent or more of the trade- impacted dislocated workers are denied benefits during regularly scheduled semester breaks. Because of the financial hardship imposed by this provision and its inequitable impact among States, Senator Kerry (for himself and Senator Kennedy) and Congressman Olver have introduced bills (S. 556 and H. R. 1231, respectively) that would amend the Trade Act of 1974 to expand the allowable break from 14 days (as calculated under the interpretation set forth in 20 CFR 617.15(d)) to 45-calendar days. As an interim solution until such time as an amendment is enacted and the regulations are revised, the Department has developed new operating instructions to minimize both the number of individuals adversely affected and the degree of adverse impact on each of those individuals. Operating Instructions: These operating instructions are to be implemented pending enactment of an amendment to Section 233(f) of the Trade Act. It is the intent of the Department in issuing these revised operating instructions that States take active and aggressive steps to prevent TAA and NAFTA-TAA participants who are in training before the break and who continue training after the break from experiencing a semester break in training that exceeds 14 days (excluding Saturdays, Sundays, or official State or National holidays). This GAL is not intended to apply to summer breaks and other breaks between semesters that have normally been more than 45 days. Following are guidelines and suggested actions for ensuring that individuals are not disallowed benefits due to breaks of more than 14 days. (A) The State agencies should negotiate with training vendors that have regularly scheduled breaks of more than 14 days (as calculated under 20 CFR 617.15(d)) to resume classes earlier for TAA and NAFTA-TAA participants. If the training vendors are unable to comply, alternative vendors should be given preference in placing TAA and NAFTA-TAA participants. (B) If placement must be made at a vendor with a break longer than 14 days, the State agency is to encourage the vendor to arrange that special components of the training be developed and convened during the break. These special components must be integral to the attainment of the objectives of the overall training plan, and must be made part of that plan at the onset, and not simply to circumvent Section 233(f). Excluding summer breaks, in those instances when a break in training will exceed 14 days, the State agency must, prior to the break: (1) Advise the trainee in writing of the break in training provision and have the trainee sign an acknowledgement indicating an understanding and acceptance of the implications of the provision; and (2) Document its attempts to provide the participant with information and opportunities for acceptable training options that do not entail a break in training of more than 14 days. NOTE: Failure of the State agency to satisfy the above two conditions does not mean that the trainee is entitled to TRA during the break. There is no authority to waive the 14-day limitation of Section 233(f). Action Required: States are to implement the Operating Instructions of this GAL effective on the date of issuance. States are to inform all appropriate staff of the contents of this document.