Directed to Service Delivery Area (SDA) administrators but also useful to local elected officials and Private Industry Council members in determining key areas for their review, this document provides suggestions to SDAs on preventive activities that can assist in reducing disallowed costs resulting from the improper operation of JTPA programs. An executive summary lists all the activities suggested and explained in the remainder of the document. Section 1 lists the key areas discussed in the paper, including: precontract award and contract provisions; recapture of advance payments; reasonableness of fixed unit price contracts; verification of placements; monitoring systems; preparing for audits; conduct of the audit and audit resolution; and systems for obtaining timely information for management decision making. Each of the next eight chapters addresses one of those topics and contains specific activities recommended to protect the SDA from liability as a result of future audits. Chapter 10 tells how the SDA can make preventive measures part of its daily routine. Among the recommendations are to maintain up-to-date records on performance data, monitoring, and audit activities for the SDA and for individual contractors; and develop clear, specific guidelines governing all systems from proposal review to program evaluation. The appendix contains references to audits and liabilities in the Job Training Partnership Act and regulations. (CML)