RESPONSE BY SUBCOMMITTEE STAFF TO LETTER FROM NAB The subcommittee staff, which prepared the study of the JOBS program, is extremely gratified that the National Alliance of Businessmen has failed to cite a single specific inaccuracy in the staff report. During the May 5 subcommittee hearings, Mr. Robert J. Wilson, testifying for NAB, strongly criticized the staff study of the JOBS program. The subcommittee chairman, Senator Nelson, responded by saying: "I would be interested in knowing specifically what is wrong with the staff report... I will be glad to have the specific criticisms of the report so that the record will be balanced." Now, after one month of effort, Mr. Wilson has filed his report for the NAB. Once again, he alleges that there are "numerous inaccuracies" in the staff study, but he is unable to cite a single one. It is, of course, quite remarkable for a 177 page study of a complex, nation-wide program such as JOBS to undergo three days of public hearings, nation-wide discussion, and a month of scrutiny by critics without having a single inaccuracy cited. Having failed to find any inaccuracies in the staff study, Mr. Wilson has returned to generalities, a word which the chairman used to characterize his testimony at the hearing. Every one of these generalized complaints is answered simply by reading the staff report. The staff knows of no other available document which provides in one place such a complete compilation of the program's record to date. Most of Mr. Wilson's letter is an attack on newspaper stories relating to the JOBS program. In this area of newspaper coverage, there does appear to be a fundamental difference of opinion between Mr. Wilson and the subcommittee staff. NAB received $5,499,148 in public funds during fiscal 1970. An unspecified portion of this money was used by NAB to prepare newspaper stories and editorials, praising the JOBS program as an unqualified success. These stories and editorials were sent to newspapers all over the nation. When it success fully places a story or a favorable editorial, NAB reprints the story in a monthly magazine of clippings, which also is distributed nation-wide. NAB is highly pleased with these stories. In recent months, however, some sharply different newspaper stories have appeared. The Dallas Morning News exposed a scandal in a JOBS contract there which was so serious that the Labor Department cancelled the contract. The New York Daily News, after interviewing an executive of Merit Enterprises in Brooklyn, N.Y. revealed that the firm had hired more than 400 JOBS trainees for low wage, largely unskilled jobs and laid off all or most of them. The Milwaukee Journal, basing its story on a letter from the General Accounting Office which was released at a hearing in the House of Representatives prior to the Senate hearing May 5, told of a New York subcontractor ing more than $6 million. The Los Angeles Times reported that the Labor which was apparently failing to deliver services under a JOBS contract involv. Department was cutting back on the funds for the JOBS program, partly because of difficulties such as were cited in the staff study. So far as the staff knows, all these stories were factual, documented reports by reputable newsmen and were published in newspapers with long traditions did contact the subcommittee staff in the course of developing their stories. of covering government affairs in the public interest. Some of these reporters Some of them were supplied with factual material which is a matter of public record. But in every case, the reporters wrote their own stories. The stories releases or prewritten editorials such as the NAB mails to newspapers regufailures in the JOBS program were not prepared press If, as Mr. Wilson alleges, the publication of stories involving fraud or other of the subcommittee staff nor of the press. Neither a conscientious subcommitfailures in JOBS contracts hurts the overall program, that is neither the fault tee staff nor a respected newspaper can accept the argument that governmen exposing certain larly. Perhaps that is why they displeased the NAB. 40-963 0-70-pt. 4 tal frauds or failures should be covered up to avoid giving a government program a bad name.-William R. Bechtel, Subcommittee Staff Director. Senator NELSON. Our next witness is Mr. Henry Eschwege, General Accounting Office, Washington, D.C. STATEMENT OF HENRY ESCHWEGE, GENERAL ACCOUNTING OFFICE, WASHINGTON, D.C., ACCOMPANIED BY MR. SANGER AND MR. WOODS Senator NELSON. Mr. Eschwege, it is a pleasure to have you here this morning. The committee is very pleased to have you here this morning, and I see you are accompanied by Mr. Sanger and Mr. Woods. I think that is a very valuable contribution you have made, bringing along nameplates, so that the reporter and everybody can keep track of who the witnesses are. Your statement will be printed in full in the record. The staff tells me you would just as soon summarize it. Is that correct? Mr. ESCHWEGE. I can do that if you wish. Senator NELSON. I regret that we have been so late in getting to you. I think we are going to have to do summarizing of these in order to get through six more witnesses after you. Mr. ESCHWEGE. Very well, I will try to do my best on this. I have also, after this, some questions which the staff has submitted to us beforehand, and we have answers to them which I can read into the record if that is your wish. Senator NELSON. Fine. Mr. ESCHWEGE. Thank you, Mr. Chairman. We are pleased to be here today to present our preliminary findings and observations on the review of the JOBS program. (The prepared statement of Mr. Eschwege follows): PREPARED STATEMENT OF HENRY ESCHWEGE, ASSOCIATE DIRECTOR, CIVIL Mr. Chairman and Members of the Subcommittee: We are pleased to appear before this Subcommittee today, as you have requested, to present our preliminary findings and observations on the JOBS program. With your permission, Mr. Chairman, I would first like to present some background on our more recent review efforts in the area of manpower training. Title II, section 201 of the Economic Opportunity Amendments of 1967 directed the General Accounting Office to determine (1) the efficiency of administration of programs and activities conducted by the Office of Economic Opportunity and delegate agencies, and by local public and private agencies carrying out such programs and activities; and (2) the extent to which such programs and activities were achieving the objectives set forth in the relevant part or title of the Economic Opportunity Act of 1964 authorizing such programs or activities. The results of this review are contained in a summary report issued by the Comptroller General to the Congress on March 18, 1969, and in 59 supporting reports to the Congress on the results of our reviews of individual programs at various locations. Our review involved evaluations of the major programs authorized by the Economic Opportunity Act, including various manpower programs such as the Neighborhood Youth Corps, the Job Corps, Work Experience and Training programs, and the Concentrated Employment Program. The Concentrated Employment Program, or CEP, was a relatively new program at the time of our review. As we completed the foregoing work we intensified our efforts on other manpower programs and activities, such as the JOBS program and on-the-job and institutional training programs authorized under the Manpower Development and Training Act of 1962, as amended. In scheduling this work we were mindful that the Senate Committee on Labor and Public Welfare, in its report on the 1968 amendments to the Manpower Development and Training Act of 1962, expressed the view that the General Accounting Office should broaden its activities in the area of program evaluation in order to give the Congress independent reviews of the performance of the executive agencies. We are currently reviewing the JOBS program in San Francisco and Oakland, California; Portland, Oregon; Seattle, Washington; and Detroit, Michigan. Although our review is not completed, we would like to present here today a number of our preliminary observations on the results achieved by the program at these locations, administrative problems encountered, and aspects of the program which we believe require particular attention at this time. We have not yet given the Department of Labor or the National Allianc of Businessmen, or participating contractors an opportunity to formally comment on our observations, although we have had discussions with representatives of the Department and NAB, throughout our review. The JOBS program was announced by President Johnson in his Manpower Message to the Congress on January 23, 1968. The President called on American business to assist in solving the Nation's manpower problems and announced the formation of NAB. The initial goal of the JOBS program was to place 100,000 hard-core unemployed in jobs by June 30, 1969, and 500,000 The JOBS proin jobs by June 30, 1971, in the Nation's 50 largest cities. gram has since been expanded to nationwide coverage and the 1971 target was increased to provide for placing 614,000 hard-core unemployed in jobs. From inception through fiscal year 1970, a total of $624,128,000 has been made available for the JOBS program. As of February 28, 1970, $348.3 million had been obligated and $96.9 million had been paid to contractors. We believe it is important to note at the outset that the JOBS program the contract component and in reality consists of two distinct components the non-contract component. Under the contract component businessmen enter into an agreement with the Federal Government to hire and train disadvantaged persons. The basic format of this component provides that the extraordinary costs borne by the employer in hiring, training and retaining a disadvantaged person will be reimbursed by the Government. JOBS contractors receive a negotiated fixed-price contract and are paid for the actual number of days worked by trainees at a unit cost based on the contract price divided by the number of days of training to be provided. About 75 Under the non-contract component, businessmen volur.eer to effect the same result without claiming reimbursement from the Government. percent of the reported hires in the JOBS program fall under the non-contract component of the JOBS program. Several reasons have been advanced to us as to why businessmen choose to hire and train disadvantaged persons without obtaining reimbursement from the Government. Some employers told us that the disadvantaged are frequently being hired in entry level jobs which do not require any training beyond that which had always been given and that therefore, it would not be fair to bill the Government for the cost of training disadvantaged persons. Other reasons |