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Nebraska labor department audit alleges employees faked trips

By   /   January 10, 2014  /   No Comments

By Deena Winter | Nebraska Watchdog

LINCOLN, Neb. — An audit of the Nebraska Department of Labor found some employees got reimbursed for making field trips to Nebraska businesses that auditors were unable to substantiate ever happened. One man accused of taking the most trips retired during the investigation.

The audit also dinged the department for being slow to respond to its requests for information, which delayed the audit for five months. State Auditor Mike Foley said the Labor Department was not exactly cooperative and just doesn’t “appreciate the audit process.”

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Labor Commissioner Catherine Lang

“We had a lot of problems,” he said. “It was a very, very difficult audit. Probably one of the most difficult in recent years.”

Foley said the audit had an unusually high number of findings.

“There’s a lot of financial weaknesses in that agency,” he said. “Quite a few are repeat issues.”

State Labor Commissioner Catherine Lang said she appreciates the auditor’s efforts to help correct and adjust her department’s practices to eliminate the perception of impropriety.

“There are certainly findings that we agree with and will be taking action on,” she said. “But there are findings where we do disagree.”

Auditors uncovered about $9,000 in questionable mileage reimbursements in one month, as well as possible payroll overpayment of $1,800 since the field reps didn’t appear to have been working.

The problems were found in the unemployment insurance tax division, which collects employer tax and wage reports and pursues delinquent payments of employer taxes. The 18 field representatives often travel to employers statewide to do audits and collect delinquent taxes.

State auditors checked with 14 employers that a field rep said he visited in November 2012, and 12 said they never received a visit. The remaining two couldn’t recall a visit. In one case, the employee said he’d met with an employer’s CPA in his home, but the employer said they didn’t have a CPA by that name on staff. Auditors assumed the employee wasn’t working at all on those days, since he was not in the office.

Due to the inconsistencies found, auditors checked April 2013 mileage reimbursements for seven field reps, calling 90 employers. They found discrepancies for three field reps, with 26 employers saying the field reps had not met with them.

In its written response to the audit findings, the Labor Department disagreed with the allegation, saying collection of past-due taxes from the businesses indicate the employers were in fact contacted even if the employers didn’t recall the visits. The department said the fact that employers were contacted by auditors months later is “primarily responsible for the alleged discrepancy rather than any misconduct.”

Nebraska Watchdog

State Auditor Mike Foley

However, the department said it would review its procedures and documentation requirements and enhance monitoring of daily field activities. The auditor’s office responded by saying it never suggested the employers weren’t contacted, it questioned whether field reps actually visited the employers as claimed.

“That the department appears willing to dismiss those results in such a cavalier fashion is indicative of serious, systemic problems with its employee oversight and accountability,” the audit said.

Lang said the mileage records are reviewed for accuracy, but she acknowledged the department hadn’t done a good job of documenting contacts made or attempted and said changes are being made to ensure field reps’ time is being spent on state business.

State auditors were planning to interview the field rep with numerous travel log discrepancies when he retired in July 2013, soon after they’d expanded their testing.

“Even though both the department and field rep were well aware of the APA’s ongoing examination of questionable travel reimbursements, neither informed us of the retirement,” the audit said.

Foley said the field rep in question “took an early retirement in the middle of the audit.”

“He was aware that we were looking at him,” Foley said.

The employee’s bosses “tried to back him up,” Foley said, claiming employers probably just forgot about the visits due to the passage of time between the visits and audit.

“I don’t know if I buy that,” Foley said. “I think if a state (labor department employee) showed up at a business and wanted to look at the books, I’d remember it.”

Lang said the man had worked for the department for nearly 40 years and had been talking about retiring for a couple of years.

The audit was turned over to the attorney general and Nebraska Accountability & Disclosure Commission for further review, since it documents possible theft by deception and misuse of public office for personal financial gain.

Lang said she’d welcome an investigation.

“As we have gone back to review the data, we do not believe there was any misuse of public office for personal gain,” she said. “We do not believe that is an accurate representation of this employee’s effort with the department for almost 40 years.”

The audit also dinged the Labor Department for delayed preparation of financial data for the Unemployment Compensation Fund, saying it took the department more than five months to provide the information, which was incomplete and inaccurate.

Lang said the Labor Department has completely rebuilt its financial structure since she arrived five years ago in the wake of a scathing 2008 federal audit that “brought the agency to its knees.” The department has seen a dramatic increase in its workload while restructuring the financial services division, she said.

“So it has been very difficult,” Lang said. “Along the way things have not always gone well, but it’s not because we’re not trying.”

Contact Deena Winter at deena@nebraskawatchdog.org.

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Deena Winter is a reporter for NebraskaWatchdog.org. Contact her at deena@nebraskawatchdog.org and follow her on Twitter @DeenaNEWatchdog.

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