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HomeMy WebLinkAbout05.D- City Manager 5.D DOC ID: 4449 A CITY OF SAN BERNARDINO — REQUEST FOR COUNCIL ACTION In Support/Opposition From: Mark Scott M/CC Meeting Date: 05/16/2016 Prepared by: Jolena E. Grider, (909) 384- 5355 Dept: City Manager Ward(s): All Subject: Authorize Mayor to Sign and Send Letter to State of California Regarding Funding of San Bernardino Employment and Training Agency and Continued Provision of Workforce Development Services in the City of San Bernardino (#4449) Current Business Registration Certificate: Not Applicable Financial Impact: No direct impact; City will indirectly benefit from the continuation of local workforce development services if the State makes provision for these services as requested in the proposed letter. Motion: Authorize Mayor to sign and send letter. Synopsis of Previous Council Action September 14, 1983 -- Mayor and Common Council adopted Resolution No. 83-306, accepting a subgrant from the State of California Employment Development Department (EDD) for the operation of job training programs under the federal Job Training Partnership Act (now repealed), and authorizing the Executive Director of the San Bernardino Employment and Training Agency (SBETA) to conduct negotiations and sign all necessary documents. July 10, 2006 - Mayor and Common Council adopted Resolution No. 2006-246, authorizing the Executive Director of SBETA to execute a new subgrant agreement between the City and EDD for the administration of job training programs under the federal Workforce Investment Act (WIA; now repealed), and rescinding Resolution No. 83-306. July 6, 2015 - Mayor and Common Council voted to authorize and direct the City Attorney to pursue administrative appeals of the anticipated decision of the Governor not to designate the City as a workforce development area under the Workforce Innovation and Opportunity Act of 2014 (WIOA). July 20, 2015 -- Mayor and Common Council voted to authorize a budget amendment equal to 1/12th of SBETA's annual budget to keep the agency open until July 31, 2015, and to discuss the matter further at a meeting on July 29, 2015. IJuly 29, 2015 -- Mayor and Common Council voted to allocate up to $250,000 to continue SBETA in operation until September 21, 2015. Updated: 5/9/2016 by Linda Sutherland A Packet Pg. 141 5.D 4449 September 21, 2015 -- Mayor and Common Council voted to allocate $375,000 to continue SBETA in operation through the end of December 2015. December 21, 2015 -- Mayor and Common Council voted to continue funding for SBETA for three months, through the end of March 2016. March 21, 2016 -- Council voted 4 to 2 to continue to fund SBETA for three months from City funds; the measure was vetoed by the Mayor and therefore failed. Background As the preceding chronology shows, the City has provided employment and training services through SBETA for several decades using federal funds provided under a succession of federal laws. The current applicable law is WIOA, which went into effect in July 2015. Under WIOA, the United States Department of Labor provides workforce development funds to the states for disbursement to local workforce areas. The state agency responsible for administering federal workforce funds in California is EDD. EDD does this through subgrant agreements with local jurisdictions. As indicated above, the City has been a party to such agreements over the years. Council approval for the execution of subgrant agreements was obtained in 1983 and 2006. More recently, SBETA entered into several WIA and WIOA subgrant agreements on behalf of the City covering 2012 through 2017. (See, e.g., Attachment 2 to this report.) Staff has not been able to find any documentation (e.g., resolutions, agenda items) indicating these agreements were considered by the Council. Pursuant to the subgrant agreements, the City received federal workforce funding under WIA until October 2014. At that time, however, EDD imposed a cash hold due to the City's failure to submit timely single audits of its federally-funded programs. A local jurisdiction that receives federal funding is required to submit a single audit annually, covering all of its federal programs and showing how the funds were spent. Pass- through recipients of federal funds, such as EDD, are required to impose sanctions, which can include cash holds, on local jurisdictions that do not complete their single audits on time. I Shortly before WIOA went into effect in July 2015, the City applied for designation as a WIOA local workforce development area, which if granted would entitle the City to receive federal workforce funds under WIOA. Although the October 2014 cash hold had not been released, the City believed it would be able to submit the delinquent audits relatively soon and that funding would be restored at that time. The City, by vote of the Council at a succession of regular meetings, therefore continued to fund SBETA on a short-term basis using its own funds, with the expectation that it would be reimbursed once the cash hold was released. The State initially denied the City's WIOA application, but after an appeal the City received a two-year conditional designation as a WIOA workforce area in November 2015. However, EDD declined to release the cash hold until the City had submitted the Updated: 5/9/2016 by Linda Sutherland A I Packet Pg. 142 4449 delinquent audits and addressed accounting issues identified therein. The single audits for fiscal years ending June 30, 2013 and 2014 were submitted in December 2015 and January 2016, respectively. However, due to turnover and staffing limitations in the City's Finance Department, the accounting issues have not been completely addressed. In addition, the City's FY 2015 single audit became delinquent on March 31, 2016 and is not expected to be submitted until at least the end of June 2016. Therefore, the cash hold has remained in effect. The Council most recently considered the funding issue at its March 21, 2016 regular meeting. The City had been advised by that time that it could not continue funding SBETA with its own resources without jeopardizing its bankruptcy exit plan, because the financial model on which the plan is based does not allow for continued expenditures to operate SBETA. Funding for SBETA is not included in the City's current budget either. Notwithstanding these concerns, the Council voted to fund SBETA for another three months; however, the Mayor vetoed the measure and no additional City funding has been allocated to fund SBETA. SBETA has used its limited remaining funds to wind down its operations, but may require some additional funding to complete that process. Discussion The City's top priority is that its residents continue to receive employment and training services pursuant to WIOA. As this cannot be accomplished through the City due to the cash hold, services need to be provided through an alternative provider. Following the March 21, 2016 Council action, the City advised the State that it could no longer fund SBETA and that an alternative provider would need to be designated. The State advised that for this to occur, the Mayor needed to submit a letter voluntarily relinquishing the City's conditional designation under WIOA and recommending designation of the County of San Bernardino as the local workforce development area for the City. The City declined to submit a letter in the form requested. The City does not consider the termination of its WIOA designation to be voluntary, as it is necessitated by the cash hold imposed by EDD. Further, the City believes the designation of an alternative workforce area is a matter for the State rather than the City. The parties were able to agree on the form of a letter that is acceptable to both, which is attached to this report as Attachment 1. The letter requests that the City be relieved of its obligations under the subgrant agreement. This is necessary because the agreement, which remains in effect until formally terminated, obligates the City to operate a program in accordance with the provisions of the subgrant. See cover page of subgrant agreement attached as Attachment 2. The letter also requests that responsibility for providing workforce development services for the City be reassigned to an appropriate alternative entity. This is necessary in order to ensure that City residents will continue to receive services when the funding currently allocated to SBETA has been expended. Updated: 5/9/2016 by Linda Sutherland A Packet Pg. 143 5.D 4449 ,T Staff recommends that the Council authorize the Mayor to sign and send a final form of the letter to the State. (The State will designate the State officer to whom the letter should be addressed at a later time.) Supportinq Documents: SBETA Draft Letter (PDF) WIOA Subgrant Agreement (PDF) Updated: 5/9/2016 by Linda Sutherland A Packet Pg.144 DRAFT [Governor Jerry Brown] [Secretary David Lanier, Labor and Workforce Development Agency] Sacramento, CA Dear [Governor Brown] [Secretary Lanier]: The City of San Bernardino (City) was granted conditional initial designation as a local workforce development area under the Workforce Innovation and Opportunity Act (WIOA) in November 2015. One of the conditions was that designation was subject to revocation following submission and review of the City's single audits for fiscal years ending June 30, 2013 and 2014, which had been overdue since March 31, 2014 and 2015, respectively. 0) At the time of the designation, the City had been on cash hold with respect to its federal workforce funding since October 2014. The Employment Development Department (EDD), the agency responsible for disbursing federal workforce funds, had placed the City on cash hold at that time due to the overdue 2013 audit. In the interim, the City had used its own funds to operate the San Bernardino Employment and Training Agency (SBETA), the City's federally- o funded employment and training agency. The City believed it could promptly submit the single audits and that the cash hold would be released and the City m would be reimbursed at that time. w a� The 2013 and 2014 single audits were submitted in December 2015 and January s 2016, respectively. However, EDD has declined to release the cash hold until adverse findings in the audits are adequately addressed and the City's audited a financial reports for fiscal year 2014 are completed and submitted. In addition, the City's single audit for fiscal year 2015 became overdue on March 31, 2016. Accordingly, the cash hold remains in effect at this time. The City has provided well over$2 million of its own funds to operate SBETA since the cash hold was imposed. The City has been a chapter 9 bankruptcy debtor since August 2012 and is in the process of preparing for bankruptcy court confirmation a plan for the adjustment of its debts and the restoration of fiscal stability. The plan does not provide for continued funding of SBETA with City funds, and in fact it assumes the City will be reimbursed the funds it has provided to date. Given these circumstances, the City determined in March 2016 that effective March 31, 2016, it could not continue funding of SBETA. SBETA is currently in the process of winding down its operations while the City continues its efforts to obtain a release of the cash hold. ATTACHMENT 1 Packet Pg.145 SBETA operates pursuant to a subgrant agreement between the City and EDD. The agreement obligates the City to operate a workforce development program in accordance with its provisions. For the reasons stated, the City cannot continue to fund SBETA while the audit issues are being resolved. The City therefore requests that it be relieved of its obligations under the subgrant agreement and that responsibility for providing workforce development services for the City be reassigned to an appropriate alternative entity. The City understands that this process will entail the termination of the City's conditional WIOA designation and funding. The City consents to this outcome, with the proviso that this consent shall not constitute an admission of any liability or a waiver of any right the City may have to reimbursement of the amounts it has expended to operate SBETA due to the cash hold. The City understands that disallowed expenditures under the subgrant agreement, i.e., expenditures that are found not to be in accordance with federal law, shall remain the responsibility of the City and not the State of California. The City reserves all rights it may have to seek judicial or other review of a determination that particular expenditures are disallowed. The City will cooperate fully in the transitioning of workforce services to an alternative entity. Sincerely, w R. Carey Davis Mayor of San Bernardino CU L 0 Q MW W Cn E U Rf Q ATTACHMENT 1 Packet Pg. 146 WIOA SUBGRANT AGREEMENT SUBGRANT MODIFICATION NO: K696386 ggI_022829084 MODIFICATION N0: New SAN BERNARDINO CITY SUBGRANTEE CODE: SBI SUBGPANTOR: SUBG3P-ITEE: V 3E'Md DiNO ._Ti State of California 600 NGRTH ARROWHEAD VENSE Employment De,,elcpment Dept. SAN 3ERNARDINO, CA 32401-11:8 Workforce Services Division P.O.Box 826890, MIC 69 GOVERVh1ENTAL ENTITY: Yes Sacramento, CA 94280-0001 This Subgrant Agreement is entered into by and between the State of California, Employment Development Department, hereinafter the Subgrantor, and the SAN BERNARDINO CITY, hereinafter the Subgrantee. The Subgrantee agrees to operate a program in accordance with the provisions of this Subgrant and to have an approved WIOA Local Plan for the above name Subgrantor filed with the Subgrantor pursuant to the Workforce Innovation and Opportunity Act (WIOA). This modification consists of this sheet and those of the following exhibits, which are attached hereto and by this reference made a part hereof: Funding Detail Chart General Provisions Youth Formula Rd 1 Rf r+ d ALLOCATION(s) PRIOR AMOUNT: $0.00 N The Subgrantor agrees to reimburse the Subgrantee INCREASE/DECREASE: $990,612.00; not to exceed the amount listed hereinafter 'TOTAL' TOTAL: $990,612.001 t TERM OF AGREEMENT Terms of Exhibits are as .� From 4/1/2015 To: 6/30/2017 designated on each exhibit C PUR SE* To initiate Program Year (PY) 2015-16 WIOA Subgrant and incorporate WIOA Youth formula funding unde grant code 301. Term of these funds is from 04/01/2015 - 06/30/2017 41 - APPRO D FOR SUBGRANTOR(EDD) ( Signature) APPROVED FOR SUBGRANTEE (By Signature) d to Nam i e Nam,and Title JOSE IS MARQUEZ r'�� Er'nest B. Dowdy Q WORKFORCE SERVICES DIVISION Ixecutive Director 0 I hereby certify that to my knowledge, the budgeted This agreement does not fall within the meaning of funds are available for the period and purpose of Section 10295 of Chapter 2 of Part 2 of Division 2 of ; C expenditures as stated herein the Public Contract Code of the State of California d and pursuant to 58 OPS Cal. Atty. Gen 586, is exempt E from review or approval of the Dept. of General Services and the Dept. of Finance � Q 1 Signature of EDD Accounting Officer Sig a ure of EDDo tract Officer Budget item:7100 Fund:0869 Budgetary Attachment:No Chapter.025 Statute:2014 FY:14/15 Page 1 of 13 Packet Pg. 147