The U.S. Congress asked the Government Accounting Office (GAO) to determine the following: (1) to what extent states were spending their Workforce Investment Act (WIA) funds and whether the Department of Labor's (Labor's) data accurately reflected available funds; (2) what Labor did to assess how states were managing their WIA spending; and (3) what affected states' WIA expenditure rates. Nationwide spending data from 2002 was compared with financial reports collected from selected states. These were among the findings: (1) states spent WIA funds faster than required by law; (2) Labor's estimate of expenditure rates suggested a slower pace for spending; (3) states did not have a clear definition of obligations and what to report to Labor; and (4) without consistent information from states on funds that were committed, Labor relied on expenditures and overestimated the funds states had available to spend. To enhance Labor's ability to manage its WIA grants and to improve the accuracy and consistency of financial reporting, several recommendations were made, including clarification to states of the definition of unliquidated obligations, requiring states to collect and report on obligations at the point of service delivery, and enhanced communication of spending benchmarks. (Thirteen tables/figures are included. Appended are a sample financial status report form, state expenditure rates, and comments from the Department of Labor). (AJ)