Kentucky Auditor Mike Harmon announced Tuesday afternoon his office completed its annual audit of the state’s Comprehensive Annual Financial Report and issued a qualified opinion.
A qualified opinion is an auditor’s opinion that the financials are fairly presented, except for a specified area. In the report, Harmon said the Unemployment Insurance Fund had poor internal controls over benefit payments, which increased the risk of fraud and undetected material misstatements.
He added during the fourth quarter of fiscal year 2020, the Office of Unemployment Insurance, to expedite unemployment benefit payments, eliminated key internal controls that were put in place to reduce the risk of improper payments. As a result, ineligible claimants received payments.
Harmon said a significant backlog of unprocessed claims existed at the end of the year and the date of their audit report. Management was unable to provide a reasonable or reliable estimate of the financial impact of backlogged claims.
Because of that, Harmon said they were unable to obtain sufficient appropriate audit evidence to conclude that the accounts payable balance in the unemployment compensation fund was free of material misstatement.
The inability to provide reliable data on the number of claims still owed adds to the challenge that faces the General Assembly as legislators return in January to craft a new budget, according to his statement. He added that UI officials must address the problems that led to this issue to provide reliable data for the current fiscal year and the future.
During his Tuesday afternoon COVID update, Governor Andy Beshear said they are continuing to work on the system.
Beshear blamed an outdated system for the issues.
Beshear added federal and state law caused other issues for the system.
Harmon will release more details on the specific issues auditors found within the UI system when they issue the first volume of the Statewide Single Audit of Kentucky in the coming months.
