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DENVER – The Office of Economic Development didn’t do a thorough analysis before deciding to privatize the workforce development programs and services and wasn’t doing enough to ensure diligent oversight of the taxpayer-funded ResCare services to ensure quality, according to a recent audit from Denver Auditor Timothy M. O’Brien, CPA.

The Office of Economic Development did not fully determine the costs and benefits of privatization. Since the operations change, the agency has not continued to methodically monitor the costs of the contract with ResCare and the quality of the services provided. As a result, it is difficult to determine whether privatizing workforce development services was appropriate. Our findings address concerns with oversight and analysis and the Office of Economic Development agreed to all seven recommendations.

“We are already seeing changes from The Office of Economic Development to ensure better contract monitoring and quality assurance,” Auditor O’Brien said. “I think this audit will be a good tool for the department to use as they do some restructuring.”

The Workforce Development Services Division is responsible for coordinating and supporting local activities, such as managing approximately $10.6 million in federal grants. The Office of Economic Development transitioned from a direct service provider role to a contract-based model working with ResCare Workforce Services and other providers in 2016 after changes to the federal Workforce Innovation and Opportunity Act. The Office of Economic Development estimated the change would displace more than 100 city employees. Ultimately the department laid off more than 30 people, and other staff members transitioned to different positions or found other work.

The audit looked at the decision to make the privatization move and the monitoring of the new ResCare contract after the change happened. Although the Office of Economic Development did consider some qualitative factors and estimate the average administrative costs, the process was not thorough enough to understand the full cost of the transition and services. The audit revealed that established strategies for monitoring ResCare’s contract performance are not sufficient to ensure ResCare is delivering quality control planning, policies and procedures used to guide monitoring strategies and staff training, as required by contract.

The Office of Economic Development did not have a systematic approach for evaluating the cost and quality of services and programs to use in future decision making. As a result, the Office of Economic Development might not be able to accurately assess ResCare’s services and might not be able to make informed decisions regarding future contracts with ResCare or the competitive proposal process.

By following a more comprehensive approach to privatization, the Office of Economic Development would be better informed about the true cost of the programs and services and would be better able to do the due diligence required.

“As good stewards of taxpayer dollars, it’s important to follow and document processes for decision-making,” Auditor O’Brien said. “Transparency is the best protection against accusations that a decision was made without proper research and thought or without a lack of bias.”

The Office of Economic Development could also be relying on faulty data to make workforce development management decisions. On three separate occasions, the Office of Economic Development provided the audit team with incomplete data. Office of Economic Development officials points to the state’s archiving of the Connecting Colorado information system. The amount of missing information in the state’s system was unknown to them before this audit.

Denver’s local workforce development plan also does not reflect some of the key elements required by the federal workforce law. Denver’s local plan does not include statewide rapid response coordination strategies. In the case of workforce development, rapid response activities refer to helping workers and businesses deal with the effects of layoffs and plant closures, including those stemming from changing marketplace conditions and natural disasters.

The workforce development local plan performance measures are also outdated. The performance measures are negotiated with the governor; however, Denver’s local plan was still using goals from past years. The Economic Development points to the Colorado Department of Labor and Employment for not having the goals done in time. The state says the U.S. Department of Labor did not send out up-to-date goals in time for Denver to update its local plan.

“Once the Office of Economic Development implements our recommendations, it will be able to confidently reaffirm ResCare and the city’s dedication to providing quality, cost-effective services to the people of Denver who are looking for work,” Auditor O’Brien said.

Read the Audit