Unemployment Insurance Financial Audit _part3 pdf

Page 19 This is trial version www.adultpdf.com Page 20 The Alaska Department of Labor and Workforce Development Employment Security Division (ESD) administers the Unemployment Insurance (UI) program. Benefits payments, Tax collections, and the Trust Fund are the three major components of the UI program. Annually, the UI Benefit program issues client payments in excess of $100 million. The UI Tax Unit is responsible for processing approximately 72,000 employer contribution reports and payments annually for UI taxes which are deposited into the federally managed Alaska UI Trust Fund. The Tax system allows ESD to establish, adjust, and monitor the employer accounts of those entities operating within the State of Alaska who are obligated to report employment totals and/or taxable wages. These taxes provide the monies that supply the Federal Trust Fund known as the Unemployment Compensation Fund (UCF), which is the fiscal source for paying Alaska Unemployment Insurance claimant’s benefits. DLWD was using a Tax system installed in 1982. It reached its useful lifecycle in the early 1990’s. The system was not able to keep up with the department’s changing needs and was replaced in 2006 with a new Tax system called ESTeR (Employment Security Tax Redesign). The replacement included the accounting system. For the past several years, accounting issues in the Unemployment Compensation Fund (UCF) have been identified during the audit process. Some of the issues may have been created when DLWD replaced its subsidiary unemployment compensation accounting system. None of the problems are material to the fund as a whole. However, when considered together, they raise concerns on the adequacy of internal controls over the valuation and presentation of the UCF financial activity and may lead to material misstatement in the future years. Although improvements have been made, a comprehensive analysis of the UCF computer system’s output is necessary to ensure transactions processed in the Alaska Statewide Accounting System (AKSAS) are in accordance with generally accepted accounting principles. The conversion of the of the UCF computer system from that used historically to the robust system now known as ESTER has contributed significantly to the change in processes and procedures required for accurate accounting transactions to occur in AKSAS. Documentation on the system’s output would aid with transparency of information, provide assurance that accounting processes are necessary and accurate, and facilitate staff training. This is trial version www.adultpdf.com Page 21 The State of Alaska Department of Labor and Workforce Development, Employment Security Division (ESD) is seeking the professional services of a Certified Public Accountant to audit the Unemployment Insurance Benefit System and Tax System financial activities and financial postings into the State of Alaska Accounting System (AKSAS). The work will involve auditing and documenting the analysis of the UI Benefit System Trust Fund Accounting output and auditing and documenting the analysis of the Tax System Trust Fund Accounting output. A comprehensive analysis will be necessary to gain an understanding of the system’s functions and to identify redundant transactions. Upon completion, hard copy and electronic detailed financial documentation will be required for both systems. System 1 – UI Benefit System (DB2) Scope of Work Comprehensive analysis of the Unemployment Insurance Trust Fund accounting operations to examine and document its functions, making recommendations for improving internal controls where appropriate. Analyzing procedures for adequacy to ensure the financial accounting records are accurately reflected in AKSAS in accordance with Generally Accepted Accounting Principles (GAAP) and guidance in the Government Accounting, Auditing, and Financial Reporting (GAAFR) ―blue book‖. Outcome Hard copy and Microsoft Office compatible electronic formats documenting monthly, quarterly, and year end closing financial activities and financial postings. Timeline and Schedule - proposed 1. Observe daily operations, review desk manual and prior month’s journal entries. (1-2 days) 2. Observe month end processing; reconciliations, trial balance postings, journal entries, and federal reports. (5-7 days) 3. Prepare and submit system’s operational trust fund financial accounting analysis documentation within 10 business days of month end processing. System 2 – UI Tax System (ESTER) Scope of Work Comprehensive analysis of the Unemployment Insurance Trust Fund accounting operations to This is trial version www.adultpdf.com Page 22 examine and document its functions, making recommendations for improving internal controls where appropriate. Analyzing procedures for adequacy to ensure the financial accounting records are accurately reflected in AKSAS in accordance with Generally Accepted Accounting Principles (GAAP) and guidance in the Government Accounting, Auditing, and Financial Reporting (GAAFR) ―blue book‖. Outcome Hard copy and Microsoft Office compatible electronic formats documenting monthly, quarterly, and year end closing financial activities and financial postings. Timeline and Schedule - proposed 1. Observe daily operations, review desk manual and prior month’s journal entries. (1-2 days) 2. Observe month end processing; reconciliations, trial balance postings, journal entries, and federal reports (5-7 days) 3. Prepare and submit system’s operational trust fund financial accounting analysis documentation within 10 business days of month end processing. OUTCOME FOR BOTH SYSTEMS Comprehensive analysis of the Unemployment Insurance Trust Fund accounting operations to investigate and document its functions, making recommendations for improving internal controls where appropriate. Analyzing procedures for adequacy to ensure the financial accounting records are accurately reflected in AKSAS in accordance with Generally Accepted Accounting Principles (GAAP) and guidance in the Government Accounting, Auditing, and Financial Reporting (GAAFR) ―blue book‖. The following additional information is available upon approved request. Flow of UI Funds Chart of Accounts Monthly systems reports Tax – Summary Transactions Activity Postings Benefit – Distribution of Charges Desk Manual – Table of Contents This is trial version www.adultpdf.com Page 23 This is trial version www.adultpdf.com Page 24 This is trial version www.adultpdf.com Page 25 This is trial version www.adultpdf.com Page 26 This is trial version www.adultpdf.com Page 27 This is trial version www.adultpdf.com . Accountant to audit the Unemployment Insurance Benefit System and Tax System financial activities and financial postings into the State of Alaska Accounting System (AKSAS). The work will involve auditing. that supply the Federal Trust Fund known as the Unemployment Compensation Fund (UCF), which is the fiscal source for paying Alaska Unemployment Insurance claimant’s benefits. DLWD was using. accounting issues in the Unemployment Compensation Fund (UCF) have been identified during the audit process. Some of the issues may have been created when DLWD replaced its subsidiary unemployment compensation