Atlanta could lose $11.3 million in jobs funding

Atlanta might have to forfeit $11.3 million for allegedly mishandling federal grant money intended to help people find jobs, even as the city grapples with a budget crisis in the midst of a crippling recession.

The Atlanta Workforce Development Agency spent that amount issuing contracts without competitive bids, making questionable expenditures and supplying services to ineligible recipients, according to an audit by the U.S. Department of Labor’s Office of the Inspector General.

The audit recommends that the Labor Department seek to recover $11.3 million in federal Welfare-to-Work and Workforce Investment Act funds that were supposed to pay for job training and placement services. Douglas F. Small, a deputy assistant secretary for the Labor Department, said his department will make a decision about that recommendation by March 15.

Deborah Lum, the Atlanta agency’s executive director, said in a written response to the auditors that she strongly disagrees with their findings.

She issued a statement by e-mail in response to requests for an interview by The Atlanta Journal-Constitution.

“The city is confident that we provided sufficient financial controls and systems to plan, measure, implement and evaluate federal grant-funded programs,” Lum said in her statement. “There is no final decision from the Department of Labor yet, and we will continue to work with them until a final decision is made.”

Small said the city could submit documents before March 15 to dispute the findings in the audit, which might allow the city to forfeit less than or none of the $11.3 million.

The city will be given a second opportunity to submit records before June 15, Small said.

Lum’s agency serves under the office of Mayor Shirley Franklin, according to its Web site. And it operates out of an office building near Turner Field on Pollard Boulevard, where it offers job training and help finding work, including help writing résumés and access to a telephone, fax machine and e-mail.

The jobs agency’s largest source of funding is federal grant money.

Its budget balance as of Dec. 31 was $5.1 million, according to city records.

A spokeswoman for Franklin said the mayor was not available for comment.

While struggling with repeated multimillion-dollar budget shortfalls, Atlanta has laid off more than 680 employees, eliminated more than 1,100 positions, announced furloughs for about 4,600 city workers and instituted a hiring freeze.

City Councilman Howard Shook, chairman of the city’s Finance Committee, said he had not heard of the federal audit until contacted by the AJC.

“Obviously, that would be another unwelcome blow” to the city’s budget, Shook said of the possible forfeiture of $11.3 million. “The last thing the general fund needs is another huge, unexpected demand on it. Obviously, this will prompt a lot of questions.”

This is not the first time the city agency has come under the microscope. In 1998, state and federal labor officials investigated allegations about the agency — then known as the Private Industry Council — ranging from instances of waste and mismanagement to charges of cronyism and political favoritism in the awarding of job-training contracts.

Also that year, the state Labor Department suspended funding for the city agency and asked Atlanta to return $364,000 in unjustified expenses. And in 2000, a federal jury awarded three fired employees $473,721 in damages after determining the city dismissed them from the agency for speaking out against improper and possibly illegal activities by other workers. Franklin was elected mayor in 2001.

Federal auditors said they started looking into the city’s spending practices after an outside auditing firm reported “material weaknesses in Atlanta’s cash management and financial reporting” in 2002.

The federal audit covered the city agency’s spending from 1998 to 2004.

Lum said all the federal grant funds at issue had been spent by the time Franklin appointed her to become executive director of the city agency in March 2003.

Also among the audit’s findings:

• Auditors questioned $5.9 million for contracts awarded without evidence of full and open competitive bidding processes.

• The city could not provide contracts or invoices to support $2.5 million in expenditures.

• City contractors were paid $657,465 for “unallowable or unsupported costs,” including payments without invoices, invoices with duplicated payments and invoices without any evidence of payment approval.

• Atlanta’s records show $300,000 in unsupported costs posted to a “Board of Directors” account that was charged to a Workforce Investment Act program.

• The city mingled federal grant money with non-Labor Department funds.

• The city could not demonstrate that it always complied with eligibility requirements when enrolling people in Welfare-to-Work and Workforce Investment Act youth programs.