Purpose

To determine if the Department of Labor (Labor) is ensuring that employers meet New York Youth Jobs Program (Program) eligibility requirements and are certified, and that the youth they hire are eligible for the Program. This audit also determined if the Department of Taxation and Finance (Tax and Finance) is ensuring that tax credits are appropriately granted under the Program. Our audit covers the period January 1, 2014 through July 2, 2018 for Labor and January 1, 2014 through July 3, 2018 for Tax and Finance.

Background

The Program, which was established in 2011 under section 25-a of the New York State Labor Law (Law) and known formerly as both the New York Youth Works Program and the Urban Youth Jobs Program, is intended to create jobs and spur economic growth in the State by establishing incentives for employers to hire new employees and retain existing ones. Under the Program, eligible employers may receive tax credits when they hire unemployed, disadvantaged youth aged 16 to 24 who live in New York State, with a focus on 13 cities and towns. Labor certifies both employer and youth eligibility, while Tax and Finance establishes procedural requirements for claiming Program tax credits and determines whether credits that are claimed are allowable.

The Program began with an allocation of $25 million for the combined 2012 and 2013 calendar years and was expanded in 2016 with additional allocations to include non-target areas. It has since been reauthorized through 2022. During the audit period, employers were entitled to claim credits equal to $500 per month, for up to six months, for each full-time employee or equal to $250 per month, for up to six months, for each part-time employee who worked at least 20 hours per week (or 10 hours per week for employees enrolled full time in high school). Retaining employees beyond the initial six months results in an additional credit to employers.

Although as much as $50 million per year has been allocated to the Program in certain years, the amount of credits claimed and allowed has been relatively low. For the three calendar years 2014 through 2016, $80 million was allocated to the Program, while the tax credits allowed totaled $17.6 million, 22 percent of the amount available.

Key Findings

• Labor could improve its methods for verifying youth eligibility, and Tax and Finance could do better to ensure that the tax credits granted are accurate and only for Program-eligible youth.
• We found that 209 of 359 individuals in our sample who were certified by Labor were either not Program-eligible or potentially not eligible, or their employer records did not support the claimed full-time high school status. Employers claimed and received $191,336 in tax credits for the 209 individuals that they may not have been entitled to.
• Program tax credits were granted by Tax and Finance for 145 employees whose eligibility was in question or inadequately supported or who were inaccurately claimed, including tax credits allowed for 29 employees who were not certified by Labor as Program-eligible.

Key Recommendations

To Labor:

• Develop risk-based procedures to ensure that only eligible youth are certified for the Program.

To Tax and Finance:

• Improve procedures to help ensure Program tax credits are appropriately claimed and allowed, such as providing clarified tax credit instructions to employers.
• Take appropriate action to investigate and recover – where applicable – the $191,336 in excess tax credits allowed.

Other Related Audit/Report of Interest

Empire State Development: Performance of the Excelsior Jobs Program (2015-S-15)