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California State Auditor Report Number : 2016-110

Trade Apprenticeship Programs
The State Needs to Better Oversee Apprenticeship Programs, Such as the Air Conditioning Trade Association’s
Sheet Metal Program





Summary

The Air Conditioning Trade Association (ACTA) is a nonprofit organization that provides apprenticeship training and education in the use of sheet metal for heating, ventilation, and air conditioning (HVAC) systems. The Division of Apprenticeship Standards (apprenticeship division) of the Department of Industrial Relations (Industrial Relations) has primary responsibility for overseeing apprenticeship programs, and it also provides grants to State‑approved apprenticeship programs. The California Community Colleges Chancellor’s Office (Chancellor’s Office) and local educational agencies (LEAs), such as the Central Unified School District (Central Unified), also provide funding to apprenticeship programs. The Chancellor’s Office allocates apprenticeship instruction funding to specific LEAs, which act as fiscal agents for distributing the apprenticeship training funds to the apprenticeship programs.

For this audit, we reviewed and assessed how well the apprenticeship division and the Chancellor’s Office oversee ACTA, and to the extent possible, how well they oversee other apprenticeship programs throughout the State. This report draws the following conclusions:


The apprenticeship division is not overseeing apprenticeship programs adequately

The apprenticeship division does not conduct audits consistently, and it is not using its audit authority to ensure that apprenticeship programs are spending state funds appropriately.


Insufficient oversight resulted in ACTA receiving unallowable reimbursements

Because of inadequate oversight from the Chancellor’s Office and Central Unified, which is the K–12 LEA that has the fiscal contract with ACTA, we estimate that nearly $51,000 of the $142,000 Central Unified provided to ACTA from fiscal years 2010–11 through 2014–15 was for unallowable activities. Specifically, Central Unified does not verify whether the instructional hours that ACTA claims for reimbursement are for activities that state law allows. Furthermore, the Chancellor’s Office does not issue guidance to K–12 LEAs on how they should verify attendance records for apprenticeship programs.


It is unclear whether transfers among ACTA’s funds were allowable, but a recent federal investigation found that ACTA improperly spent apprenticeship training funds

ACTA is a nonprofit organization and therefore our access to its funds was limited to verifying its use of state funds. As a result, we were unable to determine if the transfers ACTA made among its funds were allowable. However, the U.S. Department of Labor (U.S. Labor) completed a civil investigation of ACTA in December 2014 and determined that between 2005 and 2012, ACTA misused $800,000 in apprenticeship training funds for activities that included legal fees and vacations for apprentices and instructors.



Summary of Recommendations

To better oversee state apprenticeship programs and to ensure that they spend funds appropriately, the apprenticeship division should resume conducting program audits by December 2016.

To ensure that ACTA was reimbursed only for allowable costs between 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 best to recover those funds.

To ensure that Central Unified correctly reimburses state funds to ACTA, Central Unified should develop a process to verify that ACTA’s apprentices attended the online training courses for the corresponding hours ACTA reports and that it reimburses only apprenticeship programs for allowable activities.


Agency Comments

The Chancellor’s Office and Central Unified agreed with our conclusions and recommendations. Industrial Relations generally agreed with our conclusions and recommendations but had concerns about its authority to implement some of our recommendations.




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