Audit Shows Continuing Issues with State’s Unemployment Insurance Trust Fund

An annual audit continues to report problems with the management and accountability of the state’s Unemployment Insurance Trust Fund.

Thousands of Delaware employers contribute to this fund, which pays out unemployment benefits to Delawareans every week. While the fund’s assets vary, it typically has a balance of several hundred million dollars. The Delaware Department of Labor manages the fund, with federal funds contributing to its administration.

Red flags about the fund have been flying for several years.

Three years ago, a staffer was found to have embezzled over $180,000. (The Delaware Coalition for Open Government has published a complete timeline of the crime and its fallout.)

Two years ago, an independent auditor, CliftonLarsonAllen LLP (CLA), determined the fund was “not auditable” for Fiscal Year 2023, a situation that has persisted since then.

A March 2024 report by the Delaware State Auditor revealed multiple weaknesses and procedural issues with the fund dating back to 2021, with the wheels coming off in 2023. Among the issues leading to the decline were antiquated, siloed systems, a unique fiscal structure that prevented oversight, and a failure to commit to corrective actions.

Under federal law, the State of Delaware is required to have an independent audit conducted of its administration of federal assistance programs. The latest audit was released earlier this week. In Fiscal Year 2025, the state administered over $4.1 billion in federal funding across 18 major programs.

The report continued to find problems with the Department of Labor and the Unemployment Insurance Trust Fund. While the independent auditor recognized that the department has made progress, it noted that it still could not confirm that the fund’s account balances “are fairly stated…due to a pervasive lack of internal controls over the accounting and financial reporting process.”

The auditor says “enhanced controls” have been implemented and are in operation, but provided no timeline for when those fixes would yield results in the form of verifiable accounting.