Office of the Legislative Auditor - Financial Audit Division

Report Summary

Department of Employment and Economic Development

Fiscal Year Ended June 30, 2003

Key Findings and Recommendations

• The Department of Employment and Economic Development incorrectly reported federal expenditures on the annual Single Audit schedules provided to the Department of Finance and made minor errors on quarterly financial status reports submitted to the federal government. We recommend the department accurately measure federal program spending and provide supervisory review of expenditure schedules to eliminate financial reporting errors.
• The department’s unemployment insurance financial statements required large adjustments to conform with generally accepted accounting principles. Adjustments were necessary to correct the reporting of a negative cash balance, intrafund transfers, and noncapital financing activities on the statement of cash flows. Additional adjustments were also necessary to correctly reflect the proper governmental fund that the Unemployment Insurance Fund operating transfers were made into. Recommendations include accurate preparation of the unemployment insurance financial statements and improved coordination of the Unemployment Insurance Fund’s operating transfers with the Department of Finance.
• The department did not enforce a retainage clause in Social Security Disability Income (CFDA #96.001) program contracts for consultant fees paid to medical doctors. We recommend the department enforce the retainage, or if deemed unnecessary, seek approval from the commissioner of Administration to remove the clause from the contracts.

Management letters address internal control weaknesses and noncompliance issues found during our annual audit of the state’s financial statements and federally funded programs. The scope of work in individual agencies is limited. During the fiscal year 2003 audit, our work at the Department of Employment and Economic Development focused on financial activities of the Unemployment Insurance Fund and several federal programs administered by the department.