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Congress Has Bipartisan ‘Concerns’ Over DOL Misuse of Funds (1)

Nov. 20, 2019, 7:06 PMUpdated: Nov. 20, 2019, 9:28 PM

The Republican and Democratic leaders of the appropriations panels that fund the Labor Department warned Labor Secretary Eugene Scalia Nov. 20 about his department’s recent admission that it misused congressionally appropriated apprenticeship funding—and House Democrats later cranked up the heat.

The bipartisan group of four House and Senate appropriators wrote to Scalia to express “serious concerns regarding the Department’s internal financial controls and accountability on the use of appropriated funds.” The letter was sent just before the Labor Department’s top job-training official faced tough questions on the financial misstep from members of the House Labor Committee.

In both instances, the lawmakers cited a Nov. 6 Bloomberg Law report that department officials recently acknowledged misspending more than $1 million on the White House-directed Industry-Recognized Apprenticeship Program, which has yet to receive any funding from Congress. The money came from finances Congress earmarked for the department’s long-standing registered apprenticeship programs.

Documents obtained by Bloomberg Law raised questions about whether the actual amount of work that went to support IRAP as part of three outside contracts for the registered apprenticeship program could be much higher than $1 million. The total amount allotted for those contracts is $32 million.

“We are troubled to learn that the press was able to obtain such documentation before any information was provided to the Committees on Appropriations of the House of Representatives and the Senate,” the bipartisan letter said.

The letter was signed by Reps. Rosa DeLauro (D-Conn.) and Tom Cole (R-Okla.), who head the House panel responsible for funding the DOL, and Sens. Patty Murray (D-Wash.) and Roy Blunt (R-Mo.), who hold leadership roles in the Senate labor appropriations subcommittee.

Pallasch Under Scrutiny

The IRAP system, a White House labor priority, is meant to encourage greater business participation by giving companies more say in training workers in skills needed in their respective industries. President Donald Trump outlined the initiative in an executive order, and the administration said in the fall 2019 regulatory agenda it released Nov. 20 that it intends to release a final regulation in April 2020 to create the program.

Critics contend that by replacing government oversight with industry-run accreditation groups the untested program will lack the wage, safety, and civil rights protections of the registered apprenticeship system, which has been in place for more than 80 years.

John Pallasch, head of the DOL’s Employment and Training Administration, told the House Labor Committee’s panel on Higher Education and Workforce Investment that he became aware of the funding issue shortly after joining the department in July. Pallasch said he immediately “directed ETA to ascertain the facts and take appropriate corrective action.”

“We ensured that expenditures to this work were obligated against the proper appropriation accounts,” Pallasch said. “We believe the issue has now been corrected.”

But his words didn’t appease a group of Democrats on the subcommittee, who seized on the funding issue throughout the hearing. They grilled Pallasch on his agency’s integrity due to the fact that former Labor Secretary Alexander Acosta had previously testified before the committee that registered apprenticeship funds wouldn’t be spent on IRAP. Democrats on the panel questioned Pallasch about how much of the agency’s budget overall has supported the IRAP system.

“I am extremely concerned about this department creating a new program for which we explicitly told you we’re not appropriating funds,” said Rep. Andy Levin (D-Mich.).

Pallasch emphasized on several occasions that he was not employed at the department at the time the funds were misdirected.

Democratic members also pressed Pallasch for more information on the work performed on three apprenticeship contracts, awarded to Maher & Maher, Booz Allen Hamilton, and Edelman. Rep. Mark Takano (D-Calif.) cited presentation slides mentioned in the Bloomberg Law article that showed Maher & Maher stating that one of its objectives was expanding the IRAP model.

Pallasch replied that he was not at the agency at the time the work was conducted.

The House Labor Committee’s Democratic leadership continues to make oversight demands that the department prove its financial analysis was correct in determining that $1 million was the full extent of the misspent funding. The DOL’s inspector general is also probing the matter.

The department previously said it addressed the misuse of funding by drawing money from the Office of Apprenticeship’s program administration account. Pallasch defended the financial support of IRAPs by pointing out that the department has broad discretion to spend those program administration funds, including on IRAPs.

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editor responsible for this story: John Lauinger at jlauinger@bloomberglaw.com