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3 golden objects Minnesota Legislature

Office of the Legislative Auditor - Financial Audit Division

Report Summary
Department of Labor and Industry

Financial Audit For the
Fiscal Year Ended June 30, 1996


Public Release Date: March 14, 1997 No. 97-13


The Department of Labor and Industry is responsible for processing and paying over $100 million of workers' compensation claims each year. The department's liability for these claims results from supplemental benefits, second injury responsibilities, and uninsured employers. The claims are paid from the Special Compensation Fund that is financed by assessments made on employers. The department also collected receipts for various purposes and activities, such as issuing licenses. Mr. Gary Bastian has served as Commissioner of Labor and Industry since April 12, 1995.

Selected Audit Areas and Conclusions

Our initial audit scope focused on workers' compensation claims paid and assessments collected by the Special Compensation Fund for fiscal year 1996. Both financial activities were material to the state's financial statements and examined as part of our annual Statewide Audit. We also expanded our work to examine internal controls over other departmental receipts during fiscal year 1996.

We concluded that Special Compensation Fund assessments and claims were fairly presented on the state's fiscal year 1996 financial statements in compliance with generally accepted accounting principles. However, we found that the department needs to maintain consistency in preparing the reserve for general long-term obligation. For fiscal year 1996, we made a $2.2 million adjustment in the reserve calculation.

We also found that the department needs to adequately safeguard receipts, verify completeness of deposits, and separate duties in the receipt cycle.

Our review of access controls for the department's computer system and the Minnesota Accounting Procurement System (MAPS) revealed that ineffective computer access controls are compounding the separation of duties weaknesses. In addition, people were given access to perform processes not necessary to the employee's regular job responsibilities. Collectively, these control weaknesses are exposing the department's assets to an unnecessary risk of loss or misuse.


Office of the Legislative Auditor, Room 140, 658 Cedar St., St. Paul, MN 55155 : or 651‑296‑4708