An Audit Report on Unemployment Insurance Tax at the Texas Workforce Commission
July 2011
Report Number 11-042
Overall Conclusion
The Texas Workforce Commission (Commission) has effective processes and controls in place to verify that employers that are subject to unemployment insurance tax make proper tax payments to the State of Texas. The Commission collected $2.1 billion in unemployment taxes from 450,966 employers in fiscal year 2010. However, the Commission should strengthen its collection process by:
- Retaining support for payments that service agents make.
- Consistently following its internal policies and procedures related to delinquent employers.
The Commission has multiple tools in place to monitor employers for unemployment insurance tax liability. These tools include tax audits, receiving and processing complaint referrals, and generating and reviewing reports that can identify unregistered employers and wage-reporting errors. The Commission should improve its tax audit process by incorporating a supervisory review of the tax audit data entered into its unemployment tax system and consistently adhering to its policies and procedures.
In addition, the Commission should review its tax audit rejection procedures. The Commission's account examiners rejected 5,791 tax audit assignments in calendar year 2010. Of the 30 tax audit rejections tested, 18 (60 percent) did not have adequate documentation entered in the Commission's tax system. As a result, state auditors could not determine whether the reasons provided for the rejections were appropriate.
The Commission has effective controls over its tax system, and these controls were operating as intended. An external review of the tax system did not identify any significant weaknesses in information system controls. However, auditors determined that data in the Commission's complaint referral database was not sufficiently reliable for the purposes of this report. Auditors identified several weaknesses within the database, including a lack of supervisory review of complaint referral data and incomplete investigation results.