Senate Republicans are calling for an inquiry into Delaware’s Unemployment Trust Fund after a reported $180,000 went missing in 2023.

The caucus says it wants answers to how an employee was able to embezzle the money from the Department of Labor fund.

“Our caucus recently met with DOL’s and Division of Unemployment Insurance’s administrative team to discuss what happened. Outside consultants have been brought in to analyze the deficiencies in the agency’s systems that led to this happening. While we appreciate the department’s openness and willingness to meet, we believe, as elected leaders, that we must perform a separate inquiry to both rectify the issue and reestablish trust between the department and the public we serve,” the caucus wrote in a statement.

The Delaware Coalition for Open Government alerted all members of the General Assembly May 30 about an embezzlement problem at the Department of Labor’s Division of Unemployment Insurance, and requested an investigation into the Office of the Auditor of Accounts and the Department of Finance’s Division of Accounting for failing to disclose the embezzlement problem.

John Flaherty of DelCOG said so far only Republicans have reached out to his group expressing interest in finding out how $180,000 went missing and why it was never reported.

“The General Assembly has an obligation when there’s been such a huge breach of public trust to hold hearings and to provide some assurance from agencies that have been wayward. Both the auditor and Division of Accounting are legally required to report these to the governor and the General Assembly,” he said.

However, Flaherty said, neither the auditor’s office nor the finance department mentioned anything about embezzling in their state-required reports.

In June 2023, the auditor’s office released a Uniform Guidance Single Audit Report conducted by independent auditing firm CliftonLarsonAllen, and later released its own special report on the Delaware Unemployment Compensation Fund based on the independent auditor’s investigation.

In the special report, State Auditor Lydia York said the independent auditor had determined that the Delaware Unemployment Compensation Fund was not auditable for fiscal year 2023 because of poor accounting – a situation that has never before happened.

“Simply put, [the Department of Labor’s Division of Unemployment Insurance] was unable to provide detailed accounting records of any kind to allow CliftonLarsonAllen to reach an opinion,” she wrote.

York continues to say the Division of Unemployment Insurance failed to complete timely accounting, and the Division of Accounting was slow to respond when the scope of the problems with DOLUI became clear, yet her report never details what the problems were.

Likewise, the state auditor’s Annual Comprehensive Financial Report mentioned the inability of CliftonLarson Allen to audit DUCF without providing any particulars on missing money.

Details of the missing $180,000 are not included in the 2023 Uniform Guidance Single Audit Report, which used the independent auditor’s findings. 

In it, the independent auditor notes “material weakness in internal control over financial reporting” that includes no monthly reconciliation of cash, accounts receivable or accounts payable.

“The results of our audit procedures identified several material misstatements to various accounts and balances that are indicative of systemic accounting and financial reporting deficiencies in internal control, which ultimately led to a disclaimer of opinion over the Unemployment Insurance Trust Fund and business-type activities,” the report states.

According to the report, a high employee turnover rate, loss of institutional knowledge, lack of adequate staffing and an antiquated accounting system are all contributing factors to the problem.

Delaware Department of Finance’s 2023 Annual Comprehensive Financial Report also refers to internal control issues with the unemployment fund, but provides no further details on missing money or embezzlement.

It does, however, highlight how the fund benefitted from multimillion-dollar cash infusions from the federal Coronavirus Relief Fund.

“Delaware’s UI Trust Fund balances currently stand at 140% of recommended reserve ratios. By way of comparison, from 2014 through 2019, Delaware’s UI Trust Fund balances averaged just 43% of recommended reserve ratios,” the report states.

The finance department report states millions of dollars in American Rescue Plan Act funds went to modernize financial systems for the Division of Unemployment Insurance, and it claims “precise financial reporting and accuracy in the years ahead” will be assured.

CliftonLarsonAllen also raised issues in the 82-page report over Medicaid costs. The independent accountant said in its review, Medicaid costs were undetermined.

“Based on lack of information, we were unable to determine if unallowed costs were incurred,” the report states.

It continued to state that a lack of documentation could allow ineligible providers to perform services under the Medicaid program.

Flaherty said the General Assembly needs to hold oversight hearings to determine how much money has gone missing.

“When you have such a huge amount of money being stolen, it’s probably not an isolated instance, but we don’t know. That’s why it’s important that we have public hearings so we can get to the bottom of this and any other issues that come up,” Flaherty said.

Flaherty and his group are supporters of a Senate bill introduced in March to create an Office of Inspector General along with the position of inspector general to investigate and prevent fraud, waste, mismanagement, corruption and other abuse of governmental resources. The bill awaits action in the Senate Finance Committee.

Signed into law

HB 336 was signed into law May 30 by Gov. John Carney to amend the Delaware Limited Liability Company Act. The bill passed the Senate May 16 with 19 votes and two absent and passed the House with 38 votes and three absent April 23. 

HB 337 was signed into law May 30 by Gov. John Carney  to amend the Delaware Revised Uniform Limited Partnership Act. The bill passed the Senate May 16 with 20 votes and one absent and passed the House with 38 votes and three absent April 23.

HB 338 was signed into law May 30 by Gov. John Carney to amend the Delaware Statutory Trust Act. The bill passed the Senate May 16 with 20 votes and one absent and passed the House with 38 votes and three absent April 23 

HB 339 was signed into law May 30 by Gov. John Carney to amend the Delaware Revised Uniform Partnership Act. The bill passed the Senate May 16 with 20 votes and one absent and passed the House with 38 votes and three absent April 23. 

HB 271 with HA 1 was signed into law May 30 by Gov. John Carney to eliminate the prohibition against hunting game birds on Sundays, and is now law. The bill unanimously passed the Senate March 19, and passed the House with 37 votes and four absent on Jan. 25.