Audit finds billions in Colorado unemployment insurance accounting errors
State auditors found that the Colorado Department of Labor and Employment severely miscalculated how much funding it expected to receive and spend on unemployment insurance last year.
Auditors found several “material weaknesses,” the most serious type of audit finding, most notably within the department’s estimates of its payables and receivables for its unemployment insurance during the 2025 fiscal year. The total amount of accounting adjustments made to unemployment insurance estimates based on audit findings totaled $10.6 billion.
The Department of Labor and Employment administers the state’s labor programs, the largest being unemployment insurance.
No money from the department was improperly spent. If the state auditor’s office had not identified the accounting errors before Colorado’s financial statements were finalized, they would have been inaccurate. That would mean “the public cannot rely on them to understand how government is operating, and legislators cannot rely on them to make decisions,” according to Jenny Page, a spokesperson for the auditor’s office.
The findings were part of the statewide single audit for the 2025 fiscal year. Staff with the Office of the State Auditor presented their findings to the Colorado Legislature’s Legislative Audit Committee Wednesday.
Balances for unemployment insurance accounts receivable and revenue balances were both overstated by $1.4 billion at the end of the year. The department reported it owed to claimants an estimated $1.5 billion for unemployment benefits, while the correct amount was $103 million. It also reported that its estimated revenue as $1.5 billion, while the correct amount was $86 million.
State auditors recommended the department strengthen its internal controls over its estimates, ensure recorded estimates are accurate by following current policies and procedures, and by adequately reviewing the financial calculations.
The department changed its calculation methods, but those policies were not put into writing. Staff also did not adequately review the estimates or transactions prior to submitting them to the state’s accounting system.
The ‘billion’ word
Colorado state Senator Mike Weissman, an Aurora Democrat who is vice chair of the Legislative Audit Committee, said that while he expects the auditor’s office to find some mistakes in the course of its work, he was surprised by the magnitude of the miscalculations.
“We don’t hear the ‘billion’ word around here very much,” Weissman said.
State Senator Barb Kirkmeyer, a Weld County Republican who sits on the powerful Joint Budget Committee and is running for governor, said in a social media post about the audit findings, “This is why we have a budget crisis.”
Alex Fink, deputy controller for the department, said the unemployment insurance program works with large amounts of incoming money dating back to the surges in claims during the COVID-19 pandemic. He said the department used to base its estimates on its payables, but it now focuses on receivables for those calculations while attempting to ensure its estimates are accurately calculated.
The department’s accounting team also did not fully implement previous audit recommendations related to accuracy and completeness of its financial reporting. Auditors found issues with the department’s exhibits, capital asset balances, and an accounts receivable balance.
