Appendix d

New Job Counting Method

Why change?
There were three main reasons that prompted the Department to begin looking at ways to improve upon the process by which contract job obligations were counted and tracked: comments from businesses, observations in the State Auditor’s January 26, 2007 Special Review of the Grow Iowa Values Fund Report, and the limited number of staff available to perform the contract oversight functions compared to the large number of contracts.

Feedback from businesses
The compliance team responsible for all post-award contract, monitoring, reporting and closeout activities was established on July 1, 2005. Since that time the Legal and Compliance staff heard concerns from businesses about IDED’s reporting requirements in their contracts. During contract negotiations the businesses repeatedly said that they were willing to provide the required reports, but the method required in the contract did not reflect the way employment data was maintained in their payroll systems. The paperwork was described as cumbersome and time-consuming.

Input from others
Beginning in March, 2007 the Legal and Compliance managers consulted with several award recipients, their tax, human resource and legal advisors, the Association of Business and Industry, and the State Auditor’s Office about ways to improve the job tracking and reporting process. Comments from these groups help shape the form of the new method that is now in use.

Project volume increases, staffing level remains static
There was a need to find a better method to count and track jobs using the resources available at the Department. Previously, project status reports were prepared semi-annually even though there was no statutory requirement for twice yearly reporting. Since the creation of the first Grow Iowa Values Fund in 2003 the Department’s volume of applications and increased dramatically. Those applications resulted in more contracts.
     
 The number of contracts and jobs to be tracked is increasing faster than contracts are closing.
By way of illustration the facts below describe the numbers associated with the last released project status report:

  1. In the 6/30/06 Mid Year Project Status Report, the Legal and Compliance (formerly known as the Business Services Team) staff reviewed 224 active project reports to verify over 11,000 jobs and identify over $2,321,401,251 spent on projects in performance.
  2. As of January 2007, the Department had made 405 awards to projects proposing to create or retain 31,650 jobs.
  3. There were 5 project managers in Legal and Compliance at that time with each manager overseeing approximately 80 projects.
  4. Status Reports from businesses were requested and reviewed every 6 months.
  5. Project numbers continued and will continue to increase at the pace of approximately 10-15 new projects per month.
  6. Projects do not close out as quickly as they are added.
  7. Contract lengths range from 5 years to 13 years.

The numbers related to this 2007 Annual Project Status Report further illustrate the increasing volume of awards:
As of June 30, 2007, the Department had made 441 awards to projects proposing to create or retain 23,381 jobs. Because each project typically has more than one program providing assistance to the Project, these 441 projects represent 687 contracts.

 

Why is the new method an improvement over the former system?
It is:

  1. A simplified, systematic approach.
  2. Produces consistent, verifiable results.
  3. A business friendly process that reduces paperwork.

Accountable, verifiable and business friendly
The new system is more accountable because businesses must show growth above their base employment levels and they are held to a fixed number of jobs, each paying at or above the Qualifying Wage Threshold (QWT).

The new system is more verifiable because base employment numbers, and the wage characteristics of that base, are established through a more detailed analysis of payroll records at multiple points during the length of the contract, not IWD documents.

The new system is more business friendly because it is more compatible with how businesses maintain employment records, eliminates the tracking of individuals within a business for 5-17 years, and reduced the paperwork required to comply with contract requirements.

Counting Created and Retained Jobs

  • At the time of application the total number of jobs at the project location is established.
  • By comparing the differences between total employment at the beginning of the project and total numbers at annual reporting, project completion, and end of maintenance and closeout, we can determine if there has been a decrease or increase in totals.
  • If job numbers increase, an assumption could be made that the retained jobs remained in place and the growth was the result of new jobs.

 

What were the issues with the former method?
The former method sounded simple enough. It required:

  1. Certifying the base employment number at the location being funded.
  2. Certifying the statewide employment base of the company.
  3. Having the company report the created and retained jobs from the award date forward.
  4. Having the company identify by individual name and job title the created and retained positions.
  5. Having the company provide a payroll to document the created and retained positions and highlight the.

These issues that were encountered with this method:

  • What do we do when people retire?
  • What do we do when people quit?
  • Can retained employees be promoted to a created position?
  • Do we check job titles?  What if they are different?
  • What if a company has a layoff in year 3, but over creates by year 5?
  • How do we accurately track all of this movement?
  • How much checking and against which documents must we perform to “verify” our numbers?

 

What is the new way of counting and tracking jobs?
     
      Rather than try to track thousands of jobs by individual employee and job title over a 5-17 year contract period, the improved tracking process looks at the characteristics of the business’s workforce at the time of the award and compares it to annually reported numbers. This new method collects data about the total number of full time employees and the average wage of that base, the number of full time employees that meet or exceed the Qualifying Wage Thresholds (QWTs) for IDED programs and the average wage of that group.
  
Base employment analysis & verification
Base employment analysis is now performed at the following stages of an award:

  1.   At the time of application, before the award is made.
  2.   Annually during the reporting cycle.
  3.   At the Project Completion Date.
  4.   At the End of the Maintenance Period.

Payroll documents are used to calculate and verify base employment numbers at each of these stages. 

Base employment analysis at time of application
The Department’s Business Finance team analyzes a businesses application and, using payroll records, establishes the base employment level at the Project location. The same base employment characteristics that are used later in the contract and for annual reporting are collected now at the beginning of the application phase before an award is made.

Contractual Job and Wage Obligations – Exhibit D
After an award is made, the job and wage obligations are outlined in a Master Contract between the Department and the Business. Exhibit D, Job Obligations, to the Master Contract:

    1. Indicates the programs providing direct financial and tax credit assistance for the Project.
    2. Includes the certified base employment numbers at the time of application.
    3. Establishes the Project Completion Date for each funding source.
    4. Establishes the End of Maintenance Period Date for each funding source.
    5. Identifies the total employment numbers that much be attained by the Project Completion Date and through the End of Maintenance Period.
    6. Describes the Qualifying Wage requirements that must be met.
    7. Indicates if the Benefits Value can be added to reach the Qualifying Wage (for IVF(2005) and HQJC the Benefits Value can be added to an employee’s pay to meet the Qualifying Wage Threshold requirements for a program).

 

Throughout the life of a Project, IDED now tracks:
Employment Totals

  1. The increase/decrease in the Company’s overall employment base.
  2. The increase/decrease in the average wage of the overall employment base.

Qualifying Wages

    • The increase/decrease in the number of Company jobs that meet or exceed the Qualifying Wage (with and without the Benefit Value added).
    • The increase/decrease in the average wage of the Company jobs that meet or exceed the Qualifying Wage (with and without the Benefit Value added)

    IDED procedures that stayed the same under this new method.

      • Applications are still used to identify qualifying jobs based on wages & benefits.
      •  Base Employment is still established at the time of award, but now with greater detail.
      •  It is still possible to identify created, retained and other jobs in Board and press materials.
      • Contracts continue to be written based on the information verified at time of application.
      • Project Status Reports are still collected, analyzed and verified annually by the Legal and Compliance Team.

       

      IDED procedures that changed under this new method.

      • Contracts hold businesses to Qualifying Wage Thresholds instead of Average Wages.
      • Exhibit D (Job Obligations) no longer list jobs individually or contain job titles.
      • Exhibit D no longer refers to created, retained or other jobs.
      • Exhibit D lists total employment and singles out the jobs within the total employment listing that meet or exceed Qualifying Wage Thresholds.
      • Exhibit D establishes base numbers, sets job requirements, identifies program Qualifying Wage Thresholds, and establishes Qualifying Wage Thresholds that must be paid to all qualified jobs.
      • Businesses no longer are required to submit the job creation/retention worksheet.
      • Businesses are asked to upload an electronic version of their payroll and report total full-time employment.

       

      When was this new method implemented?
      The Department adopted administrative rules in June, 2007 to implement the new job counting and tracking method. The rules became effective on June 15, 2007

      Excerpt from IDED’s Administrative Rules
      261—188.5(15)  Job counting using base employment analysis.  The department will count jobs to be created or retained as part of a funded project using a base employment analysis.  At the time of application, a baseline employment number will be established using payroll records.  The baseline data will include details about how many jobs at the project location already meet the qualifying wage thresholds (with and without the value of benefits added to the hourly wage).  Changes in these baseline employment numbers will be collected and analyzed by the department as part of the annual reporting process.
      188.5(1) A base employment analysis will be performed at the following stages of an award:
      a.   At the time of application, before the award is made.
      b.   Annually during the reporting cycle.
      c.   At the project completion date.
      d.   At the end of the maintenance date.
      188.5(2) Payroll documents or lists run from payroll systems will be used to calculate and verify the base employment analysis.  If a list run from a payroll system is used, the person who submits the documents must, under penalty of perjury, sign the list to verify that it is true and correct.  The following items will be calculated and verified as part of the annual status report:
      a.   The total number of FTEs at the funded facility as of the date of the report.
      b.   The average wage of all FTEs.
      c.   The qualifying wage used in the award.
      d.   The benefit value used in the award.
      e.   The total number of FTEs at the funded facility that are currently at or above the qualifying wage.
      f.    The average wage of the FTEs identified in paragraph “e.”
      g.   The total number of FTEs at the funded facility that are currently at or above the qualifying wage after the benefit value has been added.
      h.   The average wage of the FTEs identified in paragraph “g.”
      188.5(3) For projects involving more than two physical locations or involving more than 500 employees, an independent auditing service will be used to set the business’s employment base and provide payroll analysis.
      a.   The following data points will be verified by the independent auditor regarding jobs:
      (1)  The total number of FTEs at the funded facility (the business’s employment base).
      (2)  The average wage of all FTEs.
      (3)  If applicable, the total number of FTEs working at other company facilities within the state of Iowa (statewide base).
      (4)  The qualifying wage used in the award (provided by IDED).
      (5)  The benefit value used in the award (provided by IDED).
      (6)  The total number of FTEs at the funded facility that are currently at or above the qualifying wage.
      (7)  The average wage of the FTEs identified in subparagraph (6).
      (8)  The total number of FTEs at the funded facility that are currently at or above the qualifying wage after the benefit value has been added.
      (9)  The average wage of the FTEs identified in subparagraph (8).
      b.   All businesses are required to submit annual reports to the department.  However, if an independent auditing agreement is in place, the business will be required to report only on the following data points concerning jobs:
      (1)  The total number of FTEs at the funded facility as of the date of the report.
      (2)  The average wage of all FTEs.
      c.   The business will not be required to verify this information as submitted for the annual reports and will not be required to submit annual payroll information.
      d.   Information submitted concerning the expenditures for the annual report will not change, but verification documents used at project closeout and at the end of project maintenance will be generated by the independent auditor.
      188.5(4) Following is an example of the format that the department will use for job counting and tracking using the base employment method.

       

      [program] JOB OBLIGATIONS

      Project Completion Date:

      Project Maintenance Date:

      Employment
      Base

      Jobs
      to Be Created

      Total
      Job
      Obligations

      Total employment at project location

      1

      9

      12

      Average wage of total employment at project location

      2

       

       

       

       

       

       

      Qualifying wage (per hr)

      3

       

       

      Benefit value (per hr)

      4

       

       

       

       

       

       

      Number of jobs at or above qualifying wage

      5

      10

      13

      Average wage of jobs at or above qualifying wage

      6

       

       

       

       

       

       

      Number of jobs at or above qualifying wage w/benefits

      7

      11

      14

      Average wage of jobs at or above qualifying wage w/benefits

      8

       

       
      1. The number entered in this cell is the total number of FTEs working at the project location at the time of application.  This number must be verified with payroll documents.
      2. The number entered into this cell is the average wage of all the FTEs identified in cell #1.  This number must be verified with payroll documents.
      3. The number entered in this cell is the 90%, 100%, 130%, etc., qualifying wage threshold used in the award.  This data point must include the wage/hr and the percentage in parentheses.  [ex:  $15.34/hr (130%)]
      4. The number entered in this cell is the benefit value used in the award.  N/A (not applicable) should be used for all projects that are not funded with IVF (2005) or HQJC.  All supporting documentation must be included in the file.
      5. The number entered in this cell is the number of jobs identified in cell #1 that meet or exceed the wage reflected in cell #3.  This number is calculated using the payroll documents.  If this project is not funded with IVF (2005) or HQJC, the number of “retained” jobs and retained “other” jobs must be included in this entry.  Please note that the number of retained jobs and the number entered here may not match as all jobs existing at the project site may not be considered retained.
      6. The number entered in this cell is the average wage of all FTEs identified in cell #5.  This number is calculated using the payroll documents.
      7. The number entered in this cell is the number of jobs identified in cell #1 that meet or exceed the wage reflected in cell #3, after the value identified in cell #4 has been added to all base hourly wages reflected in the payroll documents.  If this project is an IVF (2005) or HQJC, the number of “retained” and retained “other” jobs must be included in this entry.  Please note that the number of retained jobs and the number entered here may not match as all jobs existing at the project site may not be considered retained.
      8. The number entered in this cell is the average wage of all FTEs identified in cell #7.
      9. The number entered in this cell number includes the number of “created” jobs, as well as the number of created “other” jobs.
      10. The number entered in this cell is the number of “created” jobs in the project.  This entry is used only for projects that are not IVF (2005) or HQJC.
      11. The number entered in this cell is the number of “created” jobs in the project.  This entry is used only for projects that are IVF (2005) or HQJC.
      12. The number entered in this cell is the sum of cell #1 and cell #9.
      13. The number entered in this cell is the sum of cell #5 and cell #10.
      14. The number entered in this cell is the sum of cell #7 and cell #11.