When it was enacted in 1998, WIA created a new, comprehensive workforce investment system designed to change the way employment and training services are delivered. Under WIA, each state designates local workforce investment areas across the state. Each local area is governed by local workforce investment boards that make decisions about the number and location of one-stop career centers, where partner programs make their services and activities available. Local boards are required to promote employers’ participation in the workforce investment system and assist them in meeting hiring needs. Training services provided must be directly linked to occupations in demand in the local area. WIA requires states and localities to track the performance of WIA-funded activities and Labor to hold states accountable for their performance in the areas of job placement, employment retention, and earnings change. The Employment and Training Administration (ETA) oversees the High Growth, Community Based, and WIRED grant initiatives. The vast majority of these grants are awarded under a provision of WIA, which provides authority for demonstration, pilot, multiservice, research, and multistate projects, and a provision of the American Competitiveness and Workforce Improvement Act (ACWIA), which provides authority for job training grants funded by the H-1B visa program. Labor is required to conduct impact evaluations of its programs and activities carried out under WIA, including pilot and demonstration projects. While impact evaluations make it possible to isolate a program’s effect on participants’ outcomes, there are several ways to conduct them, including experimental and quasi-experimental methods. In 2004 and 2007, GAO recommended that Labor comply with WIA requirements to conduct an impact evaluation of WIA services to determine what services are most effective for improving employment-related outcomes. Labor agreed with our recommendation. In December 2007, the agency announced it had begun a quasi-experimental evaluation⎯an impact evaluation that does not use a control group—of the WIA Adult and Dislocated Worker programs, with a final report expected in November 2008. Federal law recommends, but does not require, that all grants be awarded through competition. The Federal Grant and Cooperative Agreement Act encourages competition in grant programs, where appropriate, to ensure that the best possible projects are funded. In addition, Labor’s own guidance governing procurement and grant operations—the Department of Labor Manual Series—states that competition is recommended, unless one or more of eight exceptions apply. Further, a guide on improving grant accountability developed by the Domestic Working Group Grant Accountability Project recommends grants be awarded competitively because competition facilitates accountability, promotes fairness and openness, and increases assurance that grantees have the systems in place to efficiently and effectively use funds to meet grant goals. Effective monitoring is also a critical component of grant management. The Domestic Working Group’s suggested grant practices state that financial and performance monitoring is important to ensure accountability and the attainment of performance goals. Labor monitors most grants through a risk-based strategy based on its Core Monitoring Guide. A key goal is to determine compliance with specific program requirements. In addition, entities receiving Labor grants are subject to the provisions of the Single Audit Act if certain conditions are met. A single audit is an organization-wide audit that covers, among other things, the recipient’s internal controls and its compliance with applicable provisions of laws, regulations, contracts, and grants. According to Labor officials, the grant initiatives are designed to change the focus of the public workforce system to emphasize the employment and training needs of high-growth, high-demand industries, but Labor will be challenged in assessing their impact. For the three grant initiatives, Labor awarded 349 grants totaling almost $900 million that were intended to bring about this change by identifying the workforce and training needs of growing, high-demand industries; engaging workforce, industry, and educational partners to develop innovative solutions to workforce challenges, such as worker shortages; leveraging a wide array of resources to fund the solutions; and integrating workforce and economic development to transform regional economies by creating good jobs. However, 7 years after awarding the first grant, Labor will be challenged to evaluate the effect of the grants. We recommended that Labor take steps to ensure that it could, but its response to our recommendation suggests that conditions remain much as they were when we did our audit work. According to Labor officials, the High Growth, Community Based, and WIRED initiatives are designed to collectively change the focus of the workforce investment system by giving greater emphasis to the employment and training needs of high-growth, high-demand industries. They characterized High Growth as a systematic change initiative designed to make the system more demand-driven (i.e., focused on the needs of growing and high-demand industries) and to make the system’s approach to workforce development more strategic by engaging business, industry, and education partners to identify workforce challenges and solutions. As a related effort, the Community Based grants were designed to build the training capacity of community colleges for high-growth, high-demand occupations. The goal of third grant initiative, WIRED, was to “catalyze” the creation of high-skill and high-wage opportunities for workers within the context of regional economies, to test models for integrating workforce and economic development, and to demonstrate that workforce development is a key driver in transforming regional economies. From 2001 through 2007, Labor awarded 349 grants totaling almost $900 million for these initiatives (see table 1). Labor officials said a number of indicators show that the initiatives are changing the system. According to Labor, they have seen a “system-shift” in the approach to implementing workforce solutions through an increase in demand-driven topics at conferences since the roll out of the initiatives. Labor said this shift has been driven by partnerships between the workforce investment system, business, industry, and educators using the High Growth framework. Labor also said it is seeing demand-driven strategies in state and local strategic plans and in states using their own money to fund High Growth-like projects. Labor pointed out that the system has evolved to the point where high performing local workforce boards with demand-driven practices are mentoring lesser performers. Lastly, Labor said the content on its Web site, Workforce3 One, was also evidence of change. For example, Labor held an interactive seminar broadcast on this site to train participants to use an online tool to share curricula developed through the initiatives. However, experts identified a number of challenges states face in pursuing demand-driven practices. These included insufficient funding, limited flexibility in how funds can be used, statutory requirements to target services to certain groups of workers, and the need to respond to local economic conditions. Commenting on workforce boards’ ability to form strategic partnerships, one expert noted that there are no funds to support such endeavors and no performance standards to measure them. With regard to regional economic development, experts said boards are structured around local areas, not regions, regional economies are highly variable, regional governance structures can make achieving buy-in difficult and that rural areas can be particularly challenged in pursuing regional approaches. Despite the money invested and emphasis placed on these initiatives, Labor did not fully integrate them into its strategic plan or ETA’s research plan from the start. The Government Performance and Results Act states that strategic plans shall contain strategic goals and objectives, including outcome-related, or performance goals, and objectives for an agency’s major functions and operations. However, the strategic plan includes performance goals only for the Community Based initiative. High Growth and WIRED—the two initiatives where Labor spent the most money⎯are mentioned in the strategic plan, but not specifically linked to a performance goal; therefore, it is unclear what criteria Labor will use to evaluate their effectiveness. Moreover, the data needed to assess the performance of these initiatives are not specified. Labor officials said the strategic plan did not address the initiatives because it focuses on budget issues. Just as the initiatives are not fully integrated into the strategic plan, neither are they fully integrated into ETA’s research plan, which cites plans for future evaluations, but it does not specify an assessment of their impact. In responding to recommendations made in our May 2008 report, Labor said only that it would consider inclusion of the initiatives in its next 5 year research agenda due for revision in 2009. Not fully incorporating the initiatives into its strategic or research plans may have limited Labor’s ability to collect consistent outcome data. Labor said that, prior to 2005, it consistently collected data from grantees on the number of participants enrolled in and completing training funded under High Growth—the only one of the three grant initiatives operating at that time. However, it did not collect performance outcomes similar to those being collected for its other training and employment services. Labor will face challenges in obtaining the data necessary to make meaningful comparisons. In 2005, Labor instituted what were called common measures to assess the effectiveness of one-stop programs and services. The common measures include participant employment outcomes, earnings, and job retention after receiving services. At the time, Labor could not require High Growth and Community Based grantees to provide data on the common measures because it did not have Office of Management and Budget (OMB) approval. In anticipation of OMB approval, starting in 2006, Labor included information on the common measures in all new solicitations for High Growth and Community Based grants, notified grantees of its goal for standardizing performance reporting, and provided technical assistance to help grantees prepare for it. Labor also encouraged grantees to work with local workforce system partners to leverage their experience in tracking and reporting performance outcomes. According to Labor, it has an OMB approved reporting format in place and expects data collection to begin in early program year 2008. However, because some of the first grantees have already completed their projects, obtaining information about workers that have left the program may prove difficult and costly. According to Labor, it can collect common measures for WIRED grantees, but it has not yet done so. As a result, Labor may not have consistent data for individuals participating in the programs funded under the grant initiatives.