Report 2016-110 All Recommendation Responses

Report 2016-110: Trade Apprenticeship Programs: The State Needs to Better Oversee Apprenticeship Programs, Such as the Air Conditioning Trade Association's Sheet Metal Program (Release Date: November 2016)

Recommendation #1 To: Industrial Relations, Department of

To better oversee state apprenticeship programs, the apprenticeship division should resume conducting program audits by December 2016. As part of such audits, the apprenticeship division should ensure that apprenticeship programs receiving grants are appropriately spending the money to train apprentices.

6-Month Agency Response

In 2017, the Division has thus far started 19 audits of programs. An additional 11 are scheduled to take place in May through the end of July. Audits for the remaining half of 2017 will be scheduled beginning in July.

The Division has inserted language in its operations manual to make apprenticeship consultants aware they are required to request information during audits to ensure apprenticeship programs spend grant funds appropriately. The language makes clear that the requirement to ask for copies of invoices, receipts, cancelled checks and other documentation to substantiate appropriate use of the Apprenticeship Training Contribution Fund grants applies to building and construction trades programs and that legal advice should be sought if the program refuses to provide the requested documentation. All of the Division's apprenticeship consultants are attending a statewide training May 30- June 1 in Redondo Beach, where a significant portion of the time will be dedicated to audit training and the new procedures as recommended by the State Auditor.

The Division is also aware that the Legislature has taken the State Auditor's recommendation and introduced Assembly Bill 581 to grant the Division authority to verify that grant funds be used solely for training purposes and to deregister a program that spends grant funds inappropriately.

  • Completion Date: February 2017
  • Response Date: May 2017

California State Auditor's Assessment of 6-Month Status: Fully Implemented


60-Day Agency Response

As a part of the audit unit's restructuring, the Division created new audit forms and checklists. The Operations Manual has been revised to reflect current audit procedures, complete with a flowchart describing the process. Senior Consultants now directly assign audits to all consultants, who must report regularly on the status of those audits. This will ensure that audits are closely tracked until the new case management software is deployed.

An audit of ACTA's program began on November 16, 2016. The Division has also commenced 14 other audits and scheduled at least another 24 between now and July 2017, which covers all scheduled audits required by law.

As the State Auditor notes, under current law, the Division can only request information such as invoices, receipts, or cancelled checks within the context of an audit. Yet, compelling a program that refuses to comply with the request is a different issue. Indeed, the State Auditor, armed with broad investigative authority, was unable to compel ACTA to turn over certain records and ultimately opted not to press the issue.

The State Auditor suggests that the Division "could initiate the process of deregistering the apprenticeship program in accordance with state regulations" if a program refuses to turn over records. While true, deregistration is generally only appropriate "if the program is not conducted, operated and administered in accordance with applicable federal and state law and regulations." Citing ERISA preemption, a program could argue that refusing to turn over records is in accordance with federal law. What action the Division takes in response must be evaluated on a case-by-case basis.

With that said, the Division reiterates that it will request invoices, receipts, and other records, where appropriate, when conducting audits. The Division, however, must take into consideration many factors, as the State Auditor did, in deciding how to proceed if the audited program refuses to comply.

  • Completion Date: January 2017
  • Response Date: January 2017

California State Auditor's Assessment of 60-Day Status: Partially Implemented

We agree that as a best business practice, Industrial Relations would need to weigh the costs and benefits of following-up with apprenticeship programs that refuse to turn over records. However, the issue, which we point out on page 12 of our report, is that although the apprenticeship division has the authority to request an apprenticeship program provide information—such as invoices, receipts, or cancelled checks—to demonstrate that it appropriately spent grant funds, it had not considered including that confirmation as part of its audit process. Therefore, we stand by our recommendation that Industrial Relations begin requesting this information while conducting its audits of apprenticeship programs.

Furthermore, in order for this recommendation to be fully implemented, Industrial Relations needs to include language in its operations manual for requesting information to ensure apprenticeship programs spend grant funds appropriately.

Finally, we stand by our legal conclusion that Industrial Relations could deregister apprenticeship programs if they do not provide documentation to demonstrate how grant funds were spent. As we mention on page 47 of our report, Industrial Relations' legal counsel also agreed with this conclusion.

  • Auditee did not address all aspects of the recommendation

Recommendation for Legislative Action

The Legislature should amend state law to provide the apprenticeship division with explicit authority to verify that as a condition of receiving future grant funds, apprenticeship programs are using state funds solely for training apprentices. In addition, if an apprenticeship program is unable to demonstrate how state funds are used or if it is found to be using funds for inappropriate purposes, the apprenticeship division should have the authority to deregister that particular program.

Description of Legislative Action

Assembly Bill 581 (McCarty, Chapter 553, Statutes of 2017) requires an apprenticeship program, to be eligible to receive grant funds from the California Apprenticeship Council (council), to agree to keep adequate records that document the expenditure of those grant funds and make all records available to Industrial Relations so that Industrial Relations is able to verify that grant funds were used solely for training apprentices. This statute prohibits an apprenticeship program that is unable to demonstrate how grant funds are expended or an apprenticeship program that is found to be using grant funds for purposes other than training apprentices from being eligible to receive any future grant from the council under these provisions and would authorize Industrial Relations to initiate the process to rescind the registration of the apprenticeship program.

  • Legislative Action Current As-of: October 2017

California State Auditor's Assessment of 1-Year Status: Legislation Enacted


Recommendation #3 To: Industrial Relations, Department of

Until it implements new case management software in April 2017, the apprenticeship division should ensure that consultants perform and track their oversight activities. Furthermore, once the software is implemented, the apprenticeship division should ensure that consultants consistently use the software to document their oversight activities. Finally, the apprenticeship division should improve the usefulness of the site visit reports to provide the findings and an evaluation of each apprenticeship program, and it should periodically verify that consultants are performing their required oversight activities, including attending apprenticeship committee meetings and performing site visits.

Annual Follow-Up Agency Response From October 2018

The Division has completely revamped its case management system with the new web-based California Apprenticeship System (CAS). Nearly all the Division's business is conducted through CAS. The Division has also continued to update its Operations Manual to set management expectations for the duties and responsibilities of staff. The Manual details the many new features in CAS and incorporates those features into the Division's oversight activities. CAS allows staff to upload documents, enter notes to describe their activities, record important dates, generate meaningful statistical reports, and issue notifications that serve as reminders to staff for tasks that must be completed. Division management can quickly review, through CAS, whether required oversight activities have been completed.

The Manual now specifies how often consultants must attend committee meetings and perform site visits, and what type of reporting consultants must engage in afterwards. The Division recognizes that it is important for consultants to attend every committee meeting, if possible, to ensure that programs are following rules and regulations and to provide advice for program improvement. All these Division policies are enshrined in the updated Manual.

Reports of meetings and site visits are entered into CAS, which ensures that records are kept in a safe, centralized location. Among other things, consultants can flag issues that need to be addressed by checking a box next to any of 14 program-related categories. The flagged items are placed in a tasks list with dates to remind consultants that the task is pending. Division management can also place tasks on a consultant's list for issues that must be addressed. Management discusses visits and reports with consultants on a monthly basis. Consultants must enter all appointments into CAS so management can track oversight activities. A completed report ensures consultants conduct meaningful site visits and committee meetings.

  • Completion Date: September 2018

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented


1-Year Agency Response

The Department of Industrial Relations received approval from the State's Department of Technology (CDT) to proceed with the project. Phase 1 which covered apprenticeship program development and monitoring, apprentice monitoring, program and apprentice outreach, apprenticeship committee meetings and site visits, and activities calendaring was completed at the end of September 2017. Phase 2 which will address complaints management, program audits and training fund management is scheduled to be completed at the end of January 2018.

  • Completion Date: September 2017
  • Response Date: November 2017

California State Auditor's Assessment of 1-Year Status: Partially Implemented

The department's response does not address how it is ensuring that consultants are performing their required oversight responsibilities.

  • Auditee did not address all aspects of the recommendation

6-Month Agency Response

The Department of Industrial Relations (DIR) is still in the process of seeking approval from the State's Department of Technology (CDT) to start the project. The CDT's approval process has four stages, each of which require CDT approval. DIR has CDT approval for Stage 1. DIR is required to submit to CDT a Reporting Exemption Request (RER) which, if approved, would delegate the project approval to DIR. Anticipating approval of the RER, DIR estimates a project start date of June 1, 2017. The project will be in two phases.

Phase 1 will cover apprenticeship program development and monitoring, apprentice monitoring, program and apprentice outreach, apprenticeship committee meetings and site visits, and activities calendaring. The expected completion date of this phase is the end of August 2017. Phase 2 will address complaints management, program audits and training fund management. The planned completion of this phase is the end of December 2017.

This integrated system provides for an improved monitoring of apprenticeship programs as well as provide a tool in measuring the effectiveness of the Division's consultants in performing their oversight activities. DIR will train the Division's personnel and provide desk procedures in the use of the case management system.

  • Estimated Completion Date: 8/1/2017
  • Response Date: May 2017

California State Auditor's Assessment of 6-Month Status: Partially Implemented


60-Day Agency Response

The Division is currently on schedule to implement its new case management software in April 2017. In the meantime, effective November 2016, the Division reinstituted the use of the "Monthly Time Report" that is widely used throughout the Department to report on how time was spent under specific categories of activities. Management at the Division and Department levels have communicated to consultants that their attendance at regular apprenticeship committee meetings is a priority and they must report on the substance of the meetings to their Senior Consultants.

  • Estimated Completion Date: 4/30/2017
  • Response Date: January 2017

California State Auditor's Assessment of 60-Day Status: Partially Implemented


Recommendation #4 To: Central Unified School District

To ensure that ACTA was reimbursed only for allowable costs from fiscal years 2010-11 through 2014-15, Central Unified should determine how much it reimbursed ACTA for unallowable activities and work with the Chancellor's Office to determine how to recover those funds from ACTA.

1-Year Agency Response

ACTA and Central Unified executed the agreed upon dates for reimbursement. Hours were submitted and and reviewed by both ACTA and CUSD. Central Unified's business office then reimbursed accordingly.

  • Completion Date: June 2017
  • Response Date: November 2017

California State Auditor's Assessment of 1-Year Status: Partially Implemented

Central Unified determined that ACTA had overcharged $39,513 for unallowable activities related to fiscal years 2012-13 through 2014-15. Central Unified billed ACTA for that amount on November 14, 2017, and it is waiting for ACTA's payment. However, our audit covered a five fiscal year period (2010-11 through 2014-15) and we found that ACTA was overcharging Central Unified in all five fiscal years. Central Unified received direction from the Chancellor's Office to bill ACTA for three fiscal years.

  • Auditee did not substantiate its claim of full implementation

6-Month Agency Response

CAS will work with district and site personnel in order plan and determine the amount of hours that were allowable. Depending on the findings, additional support may be needed from ACTA and the Chancellor's office to complete the task.

  • Estimated Completion Date: 6/20/17
  • Response Date: May 2017

California State Auditor's Assessment of 6-Month Status: Pending


60-Day Agency Response

CLASS LEA will communicate with the state chancellor's office to determine next steps in retrieving funds.

  • Estimated Completion Date: 7/1/17
  • Response Date: January 2017

California State Auditor's Assessment of 60-Day Status: No Action Taken

Central Unified has not yet begun the process to determine how much it reimbursed ACTA for unallowable activities.


Recommendation #5 To: Central Unified School District

To ensure that Central Unified correctly reimburses state funds to ACTA, Central Unified should develop a process—like the one it currently has for its other two apprenticeship programs—to verify that ACTA's apprentices have attended the online training courses for the corresponding hours ACTA reports. Further, Central
Unified should ensure that it reimburses apprenticeship programs only for allowable activities.

1-Year Agency Response

Previous discussions and face to face meeting with ACTA ensures proper attendance procedures. As a back-up and for file sharing, a google drive account for attendance is shared. This folder contains student student attendance for the 16-17 SY thus far.

  • Completion Date: August 2017
  • Response Date: November 2017

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Central Unified provided evidence that it now verifies online attendance of training courses through log in and log off times of apprentices.


6-Month Agency Response

A meeting date has been set with ACTA to meet and discuss future allowable hours submission and what is allowable. This outcome will be reflected in a new MOU and Agreement.

  • Estimated Completion Date: 6/20/17
  • Response Date: May 2017

California State Auditor's Assessment of 6-Month Status: Pending


60-Day Agency Response

CLASS has met with ACTA to determine next steps with future agreements and MOU's. Both parties realize and accept that even though CLASS acts as a pass through, tighter measures can be taken to verify and validate attendance. CLASS is in the process of developing a visitation schedule with ACTA and verification process. When implemented, all program attendance verification will be aligned.

  • Estimated Completion Date: 7/1/17
  • Response Date: January 2017

California State Auditor's Assessment of 60-Day Status: Partially Implemented


Recommendation #6 To: Central Unified School District

To limit its risk and to clarify its roles and responsibilities as they relate to ACTA, Central Unified should update its agreement with ACTA to reflect each party's current roles and responsibilities. Further, Central Unified should periodically update this agreement to ensure that the agreement continues to reflect current roles and responsibilities.

1-Year Agency Response

An boilerplate agreement from the Chancellor's office was requested and received. This document was used to update the 2003-04 standing agreement with CUSD and ACTA. Final reviews of the agreement has been taking place and a newly updated and signed agreement is scheduled for late November 2017.

  • Estimated Completion Date: 11/25/17
  • Response Date: November 2017

California State Auditor's Assessment of 1-Year Status: Pending


6-Month Agency Response

A new MOU /Agreement will be generated when CAS and ACTA meet and come to and understanding for future collaboration. Defining the amount of hours needed, what is and is not allowable are to be provided prior to generating a new MOU /Agreement.

  • Estimated Completion Date: 6/20/17
  • Response Date: May 2017

California State Auditor's Assessment of 6-Month Status: Pending


60-Day Agency Response

To date, the current MOU and Agreement reflects 2003. It was the recommendation from the state to hold off until all preceding were complete. As the process continues we will be in communication with ACTA to develop a new Agreement and MOU.

  • Estimated Completion Date: 7/1/17
  • Response Date: January 2017

California State Auditor's Assessment of 60-Day Status: No Action Taken

Based on our discussion with Central Unified, it has not begun the process for updating its agreement with ACTA.


Recommendation #7 To: Community Colleges Chancellor's Office

To ensure that LEAs develop sound contract agreements with apprenticeship programs, the Chancellor's Office and the apprenticeship division should develop a model agreement to outline the types of information, roles, and responsibilities for both parties as the Education Code requires and make this model agreement available to K-12 LEAs by April 2017. In addition, this model agreement should specify that K-12 LEAs will verify that the apprentices have attended the instructional courses by collecting supporting documentation such as sign-in sheets or rosters.

6-Month Agency Response

The Chancellor's Office and the Department of Industrial Relations' Legal Team worked collaboratively to develop a model contract agreement. The model contract agreement included all the elements suggested in the recommendation, including guidance that apprentices who attend instructional courses are supported with appropriate documentation, such as sign-in sheets.

The model contract agreement was made available to K-12 LEAs and community college districts participating in the apprenticeship program. The The email sent is submitted separately to the State Auditor.

  • Completion Date: May 2017
  • Response Date: May 2017

California State Auditor's Assessment of 6-Month Status: Fully Implemented


60-Day Agency Response

On January 26, 2017 the California Apprenticeship Council approved the Common Administrative Procedures and Treatment of Costs and Practices Related to RSI, which was developed by the Chancellor's Office's Workforce and Economic Development Division with input from the Division of Apprenticeship Standards, Apprenticeship Program Sponsors, LEAs and Commissioners of the California Apprenticeship Council. This document outlines the types of information, roles, and responsibilities for LEAs, College Districts, program sponsors, the Chancellor's Office, and the Division of Apprenticeship Standards. This document will be provided to all colleges and LEAs that receive RSI by February 2017. In addition, this document will inform monitoring done by RSI funding recipients and the Chancellor's Office.

  • Completion Date: February 2017
  • Response Date: January 2017

California State Auditor's Assessment of 60-Day Status: No Action Taken

The common administrative practices document that the Chancellor's Office refers to in its response actually addresses a different recommendation. Furthermore, when we followed up with the Chancellor's Office to obtain evidence that a model agreement had been drafted, it was unable to provide anything. Therefore, the status of this recommendation is no action taken.

  • Auditee did not substantiate its claim of full implementation

Recommendation #8 To: Industrial Relations, Department of

To ensure that LEAs develop sound contract agreements with apprenticeship programs, the Chancellor's Office and the apprenticeship division should develop a model agreement to outline the types of information, roles, and responsibilities for both parties as the Education Code requires and make this model agreement available to K-12 LEAs by April 2017. In addition, this model agreement should specify that K-12 LEAs will verify that the apprentices have attended the instructional courses by collecting supporting documentation such as sign-in sheets or rosters.

6-Month Agency Response

The Division worked in conjunction with the Chancellor's Office to develop a model agreement consistent with this recommendation. The model agreement has already been distributed to K-12 LEAs and the broader apprenticeship community.

  • Completion Date: May 2017
  • Response Date: May 2017

California State Auditor's Assessment of 6-Month Status: Fully Implemented


60-Day Agency Response

Negotiations to develop a model agreement consistent with this recommendation are ongoing with the Chancellor's Office. The Division expects that a model agreement will be developed in conjunction with the Chancellor's Office by April 2017.

  • Estimated Completion Date: 4/30/2017
  • Response Date: January 2017

California State Auditor's Assessment of 60-Day Status: No Action Taken

Based on our discussions with Industrial Relations, a model agreement has yet to be drafted, which was the same status that we found during the audit.


Recommendation #9 To: Industrial Relations, Department of

To ensure the proper oversight of funding for related and supplemental instruction and to clarify the roles of the entities involved in the State's apprenticeship system, the apprenticeship division should work with the Apprenticeship Council to formally approve the common administrative practices document by April 2017 and distribute it to all relevant parties within that system. In addition, to ensure the proper reimbursement of apprenticeship programs, the common administrative practices document should specify that K-12 LEAs take steps to verify that the apprentices actually attended the courses and that the apprenticeship attendance hours reported are for allowable activities only.

60-Day Agency Response

The draft common administrative practices document has been placed on the agenda for discussion at the January 26 quarterly California Apprenticeship Council ("CAC") meeting. The CAC may take action to adopt the document as early as the April CAC or subsequent quarterly meeting.

  • Completion Date: January 2017
  • Response Date: January 2017

California State Auditor's Assessment of 60-Day Status: Fully Implemented

The Apprenticeship Council provided a letter showing that it approved the common administrative practices document on January 26, 2017.


Recommendation for Legislative Action

To ensure accountability, the Legislature should amend state law to clarify that the Chancellor's Office has the authority to provide accounting guidance to and conduct audits of the K-12 LEAs' oversight of apprenticeship training funds.

Description of Legislative Action

Assembly Bill 1731 (McCarty, Chapter 94, Statutes of 2017) requires the Chancellor's Office to provide guidance to LEAs on the allocation and oversight of apprenticeship training funds, consistent with the rules set by the council.

  • Legislative Action Current As-of: October 2017

California State Auditor's Assessment of 1-Year Status: Legislation Enacted


Recommendation #11 To: Industrial Relations, Department of

To ensure that the apprenticeship division is overseeing apprenticeship programs adequately, it should consider periodically checking with U.S. Labor to determine what investigations it has recently conducted on apprenticeship programs. The apprenticeship division could use this information as a basis for conducting its own audit to ensure apprenticeship programs are using state funds appropriately.

1-Year Agency Response

The Division has continued in its effort to enter into an information sharing agreement with the U.S. Department of Labor's (DOL) Employee Benefits Security Administration (EBSA). Unfortunately, this effort has been unsuccessful. Even if it were successful, an information sharing agreement could be unilaterally terminated by EBSA, a result completely outside the Division's control. Thus, an information sharing agreement would not fully and permanently implement this recommendation.

Because there is no information sharing agreement, the Division has instead inserted language in its operations manual making apprenticeship consultants aware that they must ask apprenticeship programs whether they have been, or is currently being, audited by EBSA. The Division's Self-Assessment Review form, which apprenticeship programs must submit to the Division on an annual basis, has also been updated. In the updated Self-Assessment Review form, programs are also asked whether they have been subject to an EBSA audit. Once the Division is made aware that a program has been subject to an EBSA audit, the Division will, if appropriate, make Freedom of Information Act requests to obtain EBSA audit reports. Furthermore, the Department's Legal Unit will separately inquire with DOL and EBSA on an annual basis regarding EBSA's investigations of state-approved apprenticeship programs.

  • Completion Date: November 2017
  • Response Date: November 2017

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Although the department was unsuccessful in its efforts to enter into an information sharing agreement with U.S. Labor, the actions it has taken will substantially achieve the same outcome.


6-Month Agency Response

The Division has continued to engage the U.S. Department of Labor (DOL) in clarifying the bases for an information sharing agreement with DOL's Employee Benefits Security Administration (EBSA) and defining the agreement's scope. The Division envisioned that the agreement would bolster audit capabilities by affording the Division full access to non-confidential records and information relating to EBSA's oversight of California apprenticeship programs. Unfortunately, the discussions have stalled, and it does not seem likely that an agreement will be entered into in the immediate future.

In the meantime, the Division has inserted language in its operations manual making apprenticeship consultants aware that they must ask apprenticeship programs whether they have been, or is currently being, audited by EBSA. The Division will then use that information, as appropriate, to make Freedom of Information Act requests to obtain EBSA audit reports.

  • Completion Date: February 2017
  • Response Date: May 2017

California State Auditor's Assessment of 6-Month Status: Partially Implemented

The apprenticeship division should continue it efforts to enter into an information sharing agreement with the U.S. Labor. However, if this effort is unsuccessful, the apprenticeship division should implement a process to periodically check with U.S. Labor to inquire about its investigations of apprenticeship programs.

  • Auditee did not substantiate its claim of full implementation

60-Day Agency Response

As stated in the previous response, shortly after learning that the Department of Labor's Employee Benefits Security Administration (EBSA) audited ACTA, the Division made a Freedom of Information Act (FOIA) request for a copy of the audit report, which the Division received on November 18, 2016. At that time, the Division also began the process of establishing an information sharing agreement with EBSA. That agreement is intended to afford the Division full access to non-confidential records and information relating to EBSA's oversight of California apprenticeship programs. It is anticipated that these records and information will bolster the Division's audit capabilities. The Division and EBSA are currently engaged in clarifying the bases for the agreement and defining its scope.

In the meantime, the Division will begin asking apprenticeship programs whether they have been audited by EBSA. The Division will then use that information, as appropriate, to make FOIA requests to obtain EBSA audit reports.

  • Completion Date: January 2017
  • Response Date: January 2017

California State Auditor's Assessment of 60-Day Status: Partially Implemented

We would expect Industrial Relations to memorialize this new process in its policies to ensure that going forward staff will be aware of how and when to follow-up with U.S. Labor. Furthermore, we would not consider this recommendation fully implemented until the agreement between Industrial Relations and U.S. Labor is finalized.

  • Auditee did not substantiate its claim of full implementation

All Recommendations in 2016-110

Agency responses received are posted verbatim.