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Trump Apprenticeship Plan Under Fire for Alleged Misuse of Funds

Nov. 6, 2019, 11:11 AM

The Labor Department misused more than $1 million to finance a White House-directed apprenticeship program after repeatedly telling Congress that existing funding would not be spent on the initiative, the DOL has confirmed.

The Trump administration intended for the Industry-Recognized Apprenticeship Program to be the centerpiece of President Donald Trump‘s labor policy, but the Labor Department has yet to finalize a rulemaking that would establish the new apprenticeship system—and Congress hasn’t provided any funding for it.

DOL officials have acknowledged, however, that their review of three outside contracts totaling $32 million found that $1.1 million in contracted work was drawn from funding Congress had allocated for a different job-training program and used to advance Trump’s proposal, which would give private sector companies greater freedom to set apprenticeship standards.

Officials made that admission during an Oct. 21 call to brief House and Senate labor committee staffers after House Democratic aides flagged the misspent money earlier this year. House Democratic staffers and a DOL spokesman confirmed the record of the conversation, which Bloomberg Law also verified by reviewing an internal agency discussion document detailing results of the financial review.

“During the call, the Department stated that earlier this year, it became aware of the potential misapplication of Training and Employment Services funds for the industry-recognized apprenticeship program (IRAP),” the DOL spokesman said in a statement. Multiple offices “conducted a review of the work performed under three contracts to date” and found that $1.1 million in contracted work had in fact supported IRAP, the spokesman said in a followup statement.

The funding misstep violated former Labor Secretary Alexander Acosta’s pledge, made during multiple congressional hearings, that DOL wouldn’t spend federal funds on IRAP. The Labor Department inspector general launched an investigation last month. The probe concerns whether the department violated the Antideficiency Act, which prohibits federal agencies from spending in excess of what Congress has appropriated.

DOL said in its statement that the agency found a new source of funding for the $1.1 million. The new source was identified after the Democrat-controlled House labor committee raised questions, but the panel’s chairman, Rep. Bobby Scott (D-Va.), said he suspects the department is undervaluing its error.

Scott wants to learn more about the $32 million the department awarded to three firms to handle apprenticeship-related contracts. Contractor materials obtained by Bloomberg Law show that, contrary to a congressional mandate that the funding support DOL’s longstanding registered apprenticeship programs, at least one of those companies was keenly focused on IRAP.

The funding questions could jeopardize the already-stalled IRAP initiative, which the administration created in response to business complaints that the registered apprenticeship program is hampered by red tape and lackluster participation in booming sectors such as IT and health care.

The IRAP system is meant to encourage greater business participation by giving companies more say in training workers in skills needed in their respective industries. But 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.

Acosta testified during three congressional hearings that the department wouldn’t use federal dollars reserved for existing apprenticeship programs to advance IRAP.

“Federal dollars are not used to support IRAP programs,” Acosta said in response to a question Scott asked at a House Education and Labor Committee hearing on May 1.

Scott now believes Congress was misled.

“There is clear evidence that the Department made several false statements to Congress and diverted millions of taxpayer dollars away from the popular and successful Registered Apprenticeship program, which has overwhelming bipartisan support,” Scott said in a statement to Bloomberg Law. “The Department’s most recent claim that it only misspent roughly one million dollars on IRAPs is difficult to square with the substantial amount of work assigned to multiple contractors to advance this initiative, in contradiction to Congress’ directive.”

The DOL spokesman later declined to specifically address Scott’s accusation that the department misled Congress during Acosta’s tenure.

“At this time, the Department does not have any comment on prior actions of former DOL employees,” the spokesman said.

When asked for comment on Scott’s accusation that the funding error may have been undervalued, the DOL spokesman said the department could not comment because it was “in the process of answering specific questions from the relevant congressional committees.”

Acosta, who resigned in July, “was at all times clear during his tenure that the Department must comply with appropriation directives and is unaware of any appropriation violation,” according to a statement provided to Bloomberg Law by an Acosta spokesman.

“To the extent that $1.1 million may have been drawn from an incorrect fund, or other violations of policy may have occurred, he supports whatever investigative or corrective action the Department may deem appropriate,” the statement added.

Scott’s committee has scheduled a hearing for later this month to examine the misused funds as part of a broader focus on apprenticeship programs.

A spokesman for labor committee Republicans, led by ranking member Virginia Foxx (R-N.C.), said in a statement to Bloomberg Law that “DOL has taken action to ensure this error doesn’t happen again” and that GOP lawmakers “look forward to hearing from DOL later this month when they testify about the steps they have taken.”

The Other $31 Million

The department awarded apprenticeship contracts last year to Maher & Maher ($8 million), to conduct industry research; to Edelman ($7 million), for marketing; and to Booz Allen Hamilton ($17 million), for information technology and other support. The contracts were funded with money from a March 2018 government spending law that Congress designated be used “to expand opportunities” under the registered apprenticeship program.

The inspector general’s investigation is examining the trio of contracts as part of its review of whether an appropriations law violation occurred, according to an internal draft discussion document obtained by Bloomberg Law.

Department leaders told congressional aides that the $32 million in combined contracts involved work to develop and expand traditional registered apprenticeships, including referring potential applicants. But the contractors also performed at least some work that boosted the IRAP model, according to current and former DOL officials and a review of contractor documents.

Copies of Maher & Maher’s presentation materials suggest the consulting firm was primarily looking to bolster the IRAP system. The company focused mostly on promoting IRAP, rather than registered apprenticeships, during a presentation to a health-care working group in February, according to a presentation outlining the partnership with DOL.

The presentation listed three project objectives: to “support the establishment of the IRAP model"; to “accelerate apprenticeship growth” through both IRAP efforts and registered apprenticeships; and to “gain a better understanding of the prevalence of unregistered apprenticeships.”

The Booz Allen Hamilton work involved substantial enhancements to the apprenticeship.gov portal. The site’s homepage in August led with information about the IRAP accreditation process.

Laurie Rowe, a former DOL senior policy adviser, was among the officials who oversaw the contracts, current and former officials with direct knowledge told Bloomberg Law. The contractors, particularly Maher & Maher, made significant efforts, in coordination with department officials, to lay groundwork for the IRAP system, and acted largely on orders from Rowe, the officials said.

Daniel Villao was deputy administrator at DOL’s Office of Apprenticeship throughout solicitation of the contracts and early stages of performance. Villao, who resigned in May, said he and other career officials in the office flagged concerns to Rowe, arguing the contracts violated the budgetary mandate to support the registered apprenticeship system, and offered alternative approaches. Villao said he and other officials were no longer invited to related meetings shortly after voicing their criticism.

Rowe, who left DOL in August, declined to comment, citing the ongoing inspector general probe. Maher & Maher also declined comment; a representative for Edelman didn’t reply to a request for comment; and a Booz Allen Hamilton spokeswoman said “questions are best answered by DOL.”

Scrutiny Continues

The department began telling congressional staffers in August that it was taking steps to clean up the matter, in response to questions from Scott’s office. DOL’s review looked at contracts that used funding from a total of $145 million Congress appropriated for registered apprenticeships in the March 2018 spending bill.

Department officials told congressional staff during the October call that they fixed the spending mistake by drawing money from the Office of Apprenticeship’s program administration account. That pool of cash is typically reserved for staff employees in Washington and state offices that provide assistance to private and public sector registered apprenticeship programs. Six state apprenticeship office director positions are currently vacant—openings that could be filled with the same funding stream that was used to cover contractors’ IRAP work.

The DOL spokesman told Bloomberg Law the department also took a number of corrective actions after the contract review was conducted. Those included “modifying the contracts with the three vendors to ensure that any future IRAP deliverables are charged against the correct appropriation, and issuing renewed guidance to the Office of Apprenticeship on appropriate contractor communications.”

But the funding questions have given ammunition to Democratic lawmakers who previously questioned why the Trump administration would want to duplicate a registered apprenticeship system that they say is working well.

John Pallasch, DOL’s assistant secretary for employment and training, is scheduled to testify at the House labor committee’s Nov. 20 hearing on apprenticeship programs. Pallasch took part in the October call.

The department is now reviewing some 300,000 public comments on the proposed regulation to establish the IRAP system. Democrats could use the funding questions to slow the rule’s finalization, but they are not alone in their criticism: at least one Republican on the Hill also wants answers.

“Obviously, if money was spent in contradiction to what Congress directed, then that’s a very, very serious thing,” Rep. Tom Cole (R-Okla.), ranking member of the Appropriations Subcommittee on Labor and a supporter of Trump’s apprenticeship push, said in an interview. “We ought to be spending money on the programs we said we would be spending money on and not trying to get around it, by and large, unless there’s an emergency situation.”

— Jaclyn Diaz contributed to this report.

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

To contact the editors responsible for this story: Chris Opfer at copfer@bloomberglaw.com; John Lauinger at jlauinger@bloomberglaw.com