Audit finds flaws in way state agency handles money

By Cy Ryan

Wednesday, April 13, 2011 | 2:05 a.m.

CARSON CITY — The office of the state labor commissioner has failed to adequately safeguard the nearly $2 million a year it receives to pay claims of workers who have been underpaid, a legislative audit says.

“Although we did not encounter instances of fraud in the transactions we tested, inadequate cash controls increase the risk that fraud could occur and go undetected,” the audit released Tuesday concluded.

The labor commissioner’s office is responsible for investigating complaints from workers who claim they have been shortchanged by employers in their pay.

Legislative Auditor Paul Townsend said state Labor Commissioner Michael Tanchek accepted all 12 of the recommendations to tighten the handling of money and to improve efficiency.

A major finding was that it takes two to three weeks to send a check to a worker once the employer has honored a claim. The agency puts the check from the employer in the bank, waits to determine if the business is solvent and then mails the check to the worker.

Townsend said the process could be streamlined by sending the check from the employer directly to the worker without depositing it in the bank. The audit said it takes an employee of the labor commissioner an average seven minutes to process the information for each check.

The audit also found that money was not always deposited in the bank in a timely manner. In a sampling of the Carson City office, ten of 25 checks were not deposited timely. The checks, worth about $3,000, were placed in a safe and forgotten. They were held for more than three months before they were sent to the bank, the audit found.

The office resolves most claims from workers in timely fashion. But some remained open for months or years without documentation that the office took any action, according to the audit.

Failure to settle these claims “can cause financial hardship to workers and their families,” Townsend said.

Tanchek, in his reply to the audit, said it will take time to determine if eliminating the bank deposits is practical.

Tanchek said direct mailing would complicate the process. If the office held the checks instead of placing them in the bank, “we would end up holding unendorsed, undeposited checks,” he said.

Tanchek said the Las Vegas office has been restructured to speed up the resolution of workers’ claims.