Minnesota study finds fault with state agencies over pay adjustments

Yet another shortcoming of financial control has been found in Minnesota’s state government.

In a report released this week, the Office of the Legislative Auditor found that three state departments and Minnesota Management and Budget made mistakes in payments they made to employees to compensate them retroactively for raises they were due under a new labor contract.

As a result, many of the employees received inadequate compensation that took more than six months to recover, according to the OLA. In 30% of the cases that were found to be in error, the mistakes were not corrected. The OLA also found some employees were overpaid.

The report, now the third one within the past month uncovering financial management inadequacies in the state government, highlights limitations in the state’s payroll system, poor communication among state agencies, and an inability of those agencies to make payments to employees accurately and in a timely fashion.

The departments that were audited include the state Departments of Corrections, Commerce, Natural Resources and Public Safety, and the audit focused on payments made between July 1, 2021, and June 7, 2022, following a labor agreement between those agencies and the Minnesota Law Enforcement Association.

According to the report, the overall conclusions of the audit were:

• Minnesota Management and Budget did not have adequate internal controls over the parameters it established for the payroll system’s retroactive pay adjustment calculations.
• The Department of Commerce complied with the legal requirements related to the retroactive pay adjustments that the OLA tested and had adequate internal controls to ensure compliance with those legal requirements.
• The Departments of Corrections, Natural Resources, and Public Safety did not comply with the legal requirements related to the retroactive pay adjustments the OLA tested. Those departments also did not have adequate internal controls to ensure compliance with the legal requirements.

The OLA audit found those agencies either miscalculated or failed to resolve incorrect payments for 983 Minnesota Law Enforcement Association members of those agencies. This includes approving retroactive payments that the Department of Public Safety and the Department of Natural Resources knew were inaccurate for 234 employees.

The inaccurate payment totals for each agency range from $258 at the Department of Corrections to $28,911 at the Department of Public Safety.

While the payment totals are minuscule compared to payroll totals at each agency, the report comes on the heels of two OLA audits released earlier this year detailing mismanaged state agencies, including $250 million in fraud due to a lack of oversight by the Minnesota Department of Education regarding a food program and $205 million in unverified payments to people through a Frontline Worker Pay bonuses program in 2023.

When performing its audits, the OLA usually finds that an agency can improve a process, according to Deputy Legislative Auditor Lori Leysen. She said she could not think of a report her office released in the past few years that didn’t have at least one issue, though the severity levels have differed.

“Our job is to really show where there are areas for improvement and to try to help the government find ways to make those improvements,” Leysen said.

In its report, the OLA recommended agencies adhere to legal requirements, fix inaccurate payments when known and strengthen internal controls.

Also included in the report are responses from four of the five audited agencies that agreed with the OLA’s report and said they would follow the recommendations.

A response from the Department of Commerce, which was found in compliance, was not included in the report.

The report will also be presented to the Legislative Audit Commission on Thursday, July 25, at 10 a.m. and livestreamed on YouTube.

OLA Retroactive Payments Report by Mark Wasson on Scribd