Office of the Legislative Auditor - Financial Audit Division

Report Summary
Department of Labor and Industry
Internal Control and Compliance Audit

 

Financial Audit Division Report 08-20

Released August 28, 2008

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Conclusions

The department’s internal controls over workers’ compensation assessments and claims, payroll, and administrative expenditures were not adequate. As a result, the department was not able to ensure it safeguarded assets, accurately paid employees and vendors in accordance with management’s authorization, produced reliable financial information, and complied with finance-related legal requirements. For the items we tested, the department did not consistently comply with finance-related legal requirements for workers’ compensation claims, payroll, and administrative expenditures. The department did resolve a prior finding related to workers’ compensation assessments, pending actions and penalty reductions; however, it failed to adequately address a prior finding regarding employee security access to the state’s accounting system.

Key Findings

• The department did not fulfill its management responsibility to control financial activities. The audit detected overpayments to employees and a claimant, unclear justification and undocumented management authorization for certain high-risk transactions, missing records, and noncompliance with state requirements and department policies. (Finding 1)
• Poor department controls over employee travel allowed one employee to inappropriately claim over $10,000 of mileage and meal reimbursements. (Finding 2)
• The department did not effectively restrict employee access to the state’s accounting and payroll systems. (Finding 3)
• The department did not have a documented basis for an accounting adjustment that shifted $45 million of workers’ compensation revenue between fiscal years and did not have controls to detect a $55,572 workers’ compensation settlement paid to the wrong party. (Findings 4 and 5)
• Department staff did not document justification and obtain management authorization for some unique personnel and payroll transactions. (Findings 7 thru 10)
• The department could not locate records to substantiate proper use of purchasing cards for a nine-month period. (Finding 14)

Audit Objectives and Scope

Objectives	Period Audited
Internal Controls Compliance	Fiscal Years 2005, 2006, and 2007 (July 1, 2004, through June 30, 2007)
Programs Audited
Special Compensation Fund Assessments and Claims	Payroll Expenditures Administrative Expenditures

Background

The Department of Labor and Industry’s mission is to ensure that Minnesota's work and living environments are equitable, healthy, and safe by inspecting and regulating workplaces through education and enforcement. It annually assessed and expended workers’ compensation funds totaling approximately $100 million for each of the past three years. In May 2005, the Governor transferred functions for safety codes and services into the department.