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3 golden objects Minnesota Legislature

Office of the Legislative Auditor - Financial Audit Division

Report Summary

Financial-Related Audit

Department of Economic Security - State Dislocated Worker Program

Four Fiscal Years Ended June 30, 2000

Overall Conclusions

The Department of Economic Security (DES) properly recorded detailed financial activity for the State Dislocated Worker Program in its cost allocation system and properly recorded summary financial information in the state's accounting system. The department appropriately transferred the June 30, 2000, account balance of $25 million to the Department of Trade and Economic Development (DTED).

The department allocated a share of unemployment insurance collection costs to the State Dislocated Worker Program based on a statutory authorization and an agreement with the United States Department of Labor. Administrative costs and subgrant expenditures complied with statutory limitations and other program guidelines.

Administrative costs charged to the program were lower during fiscal year 2001, when the program was managed by DTED. DTED's costs were lower than DES's because DTED had fewer employees working on the program than DES did, and DTED did not charge statewide or agency indirect costs to the program, while DES did. Also, during the last two years that DES managed the program, it added certain new functions or activities to the cost pool that previously had not been charged to the program. These new costs were allowable under program guidelines. DES continues to perform many of these functions, which can benefit various programs, including Dislocated Worker.

Program Background

The State Dislocated Worker Program provides employment and training programs to individuals dislocated from long-held jobs due to factors such as plant closings or mass layoffs, as well as job reductions from technological changes and changes in consumption and competition. The Department of Economic Security administered the State Dislocated Worker Program from 1991 until 2000. The Legislature transferred the program to the Job Skills Partnership Board, administered through the Department of Trade and Economic Development, effective July 1, 2000.

The complex nature of the Department of Economic Security's cost allocation system (referred to as the State Employment and Security Agency System or SESA) made it difficult for unfamiliar users to understand or assemble meaningful financial information. Several legislators and state agency officials expressed concerns about how DES managed the state program. These questions prompted us to examine the program's financial activities during the final four years the program was managed by DES. Questions also were raised about the level of administrative costs DES charged to the program in prior years as compared to the amounts currently charged by DTED.

Financial-Related Audit Reports address internal control weaknesses and noncompliance issues found during our audits of state departments and agencies. The scope of this audit included the State Dislocated Worker Program, administered by the Department of Economic Security, for fiscal years 1997 through 2000.

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