TRAINING AND EMPLOYMENT GUIDANCE LETTER NO. 19-02

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	EXPIRATION DATE
	Continuing

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%

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%

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



TO:	ALL STATE WORKFORCE AGENCIES ALL STATE WORKFORCE LIAISONS