Office of the Legislative Auditor - Financial Audit Division

Report Summary

Department of Trade and Economic Development

July 1, 1998, through June 30, 2001

Key Findings and Recommendations

The department's internal controls provided reasonable assurance that it properly awarded and monitored grants, accurately recorded grant financial activities in accounting systems, and complied with applicable finance-related legal provisions and management's authorization. Department accounts were effectively structured to handle diverse appropriation conditions for numerous special and ongoing grants. The account structure ensured that grants cancelled at the end of the fiscal year or biennium, or carried forward when legal authority existed. For the items tested, the department complied with finance-related legal provisions. However, we noted the following internal control weaknesses and instances of noncompliance during our audit.

• The department disbursed some grants several years after the period they were originally appropriated for. The slow disbursement stream, while for legitimate reasons, created questions regarding the period of availability for these grants and uncertainty when the moneys should cancel and revert back to the General Fund. We recommended they work with the Department of Finance to clarify the period of availability for its grants and cancel any unneeded encumbrances.
• The Business and Community Development Division managed $11 million of Minnesota Investment Fund loans receivable that were not recorded in the state's accounting system nor included in the state's year-end financial statements.
• The Office of Tourism did not prepare written agreements for certain Component Organizational Partnership grants; instead, purchase orders were used. We recommended the office formalize these grant agreements in writing.

Department Background

The Department of Trade and Economic Development's (DTED) mission is to facilitate an economic environment that produces new jobs and increases tourism revenues. A large part of the department's financial activities involve awarding and managing loans and grants provided to private and public sector organizations and administering pass-through funding as directed by state Legislature. The department employed approximately 250 staff under the direction of Ms. Rebecca Yanisch.

Financial-Related Audit Reports address internal control weaknesses and noncompliance issues noted during our audits of state departments and agencies. The scope of our work at the Department of Trade and Economic Development included ongoing program and one-time special appropriation grants managed by each of its divisions and overall grant financial management for the period from July 1, 1998, through June 30, 2001.