Evaluating the Adequacy of the Department of Commerce’s Pre-Employment Screening (Limited-Scope)

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Print Report

Audit Team

Supervisor

Samuel Dadds

Manager

Matt Etzel

Published December, 2024

Introduction

Senator Mike Thompson, Senator Caryn Tyson, Representative Shannon Francis, Representative Jason Probst, Representative Sean Tarwater, and Representative Kristey Williams requested this limited-scope audit, which was authorized by the Legislative Post Audit Committee at its September 10, 2024 meeting.

Objectives, Scope, & Methodology

Our audit objective was to answer the following question:

Did the Department of Commerce use an adequate pre-employment screening process for select staff who oversee financial matters?

The scope of our work included Commerce’s hiring policies and procedures and personnel records for select staff who oversee financial matters hired over the past 4 years.

Our method included reviewing national-level best practices related to criminal history screening during the hiring process. We also examined Kansas law and reviewed Commerce’s hiring policies and procedures, as well as personnel records for recently hired staff overseeing financial matters at Commerce. We did this to determine if Commerce followed their hiring policies and procedures and to determine if those policies and procedures were adequate for jobs overseeing financial matters.

More specific details about the scope of our work and the methods we used are included throughout the report as appropriate.

Important Disclosures

We conducted this performance audit in accordance with generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives. Overall, we believe the evidence obtained provides a reasonable basis for our findings and conclusions based on those audit objectives.

Audit standards require us to report our work on internal controls relevant to our audit objectives. They also require us to report deficiencies we identified through this work. In this audit, we reviewed Commerce’s hiring policies, procedures, and personnel records. Commerce does not have a criminal history check policy for their jobs overseeing financial matters. Some of the personnel records were also missing hiring documentation such as notes from reference checks. This means Commerce’s hiring policies and procedures for jobs overseeing financial matters that we reviewed are not adequate to mitigate the risks associated with hiring applicants with a criminal history.

Commerce’s hiring policies and procedures were not adequate to mitigate the risks associated with hiring applicants with a criminal history.

Background

Commerce’s hiring practices came into question after they unknowingly hired a felon who then oversaw the state’s economic recovery from COVID.

In 2020, the Department of Commerce hired Jonathan Clayton as a regional program manager. Commerce then promoted Mr. Clayton to be the director of economic recovery for Kansas. This meant Mr. Clayton oversaw more than $100 million in recovery funds through the American Rescue Plan Act. That $100 million was intended to address infrastructure and economic development needs that were delayed or slowed due to COVID-19.

The American Rescue Plan Act provided funding to states and individuals to address the continued impact of COVID-19 on the economy, public health, state and local governments, individuals, and businesses.

However, before being hired by Commerce, Mr. Clayton had previously pleaded guilty to felonies in Pennsylvania after being accused of stealing more than $200,000 from a Pennsylvania business. Mr. Clayton was on probation in Pennsylvania when he was hired by Commerce. Commerce officials told us they were unaware of Mr. Clayton’s criminal history at the time he was hired and subsequently promoted at Commerce.

In August 2024, Mr. Clayton’s work at Commerce and for local associations came under scrutiny following media reporting on his past misconduct. Concerns arose around why Commerce didn’t know about Mr. Clayton’s previous conviction.

Best practices recommend criminal history checks for certain high-risk jobs.

Criminal history checks are a tool used by private and public employers to evaluate the criminal history of job applicants. Criminal history checks can include reviewing court records, local and national law enforcement records, or registries and watchlists. Law enforcement agencies, such as the Kansas Bureau of Investigation (KBI), or Consumer Reporting Agencies can compile these records for employers using an applicant’s name or fingerprints. The KBI also has a publicly available web tool where anyone can search for public criminal history records for Kansas for a small fee.

Criminal history checks are usually performed when jobs grant access to vulnerable populations (e.g., children, the elderly), sensitive information (e.g., financial, personal), or public trust (e.g. government, law enforcement).

However, criminal history checks should be targeted and tailored to jobs.
- Generally, the Equal Employment Opportunity Commission (EEOC) recommends that employers eliminate policies and practices that exclude people from employment based on any criminal history. This means having a criminal history shouldn’t automatically disqualify an applicant from a job. This is because using any criminal history as an automatic disqualification could violate Title VII of the Civil Rights Act (42 U.S.C. 2000 et. seq.) by creating a disparate impact on one or more protected classes.
- Instead, the EEOC recommends employers’ policies regarding an applicant’s disqualification because of a criminal history should be clearly defined and narrowly tailored to the job. This means including things like which convictions should disqualify an applicant from a job and the time frame for exclusion. They also recommend giving any disqualified applicant an opportunity to demonstrate they are fit for the job. For example, the applicant or employee could show they were previously employed in a similar job post-conviction with no known criminal conduct.

In Kansas, state law identifies certain jobs that need a national criminal history check, but it appears agencies may have discretion for all other unclassified jobs.

State law identifies specific jobs that enable agencies to request a national criminal history check through the Kansas Bureau of Investigation (KBI). Agencies use the KBI to perform a national criminal history check for these jobs using the repository maintained by the Federal Bureau of Investigation. Depending on the job, these national criminal history checks are fingerprint-based or name-based. There are over 50 jobs identified in state statutes. They are listed in Appendix B.

Agencies can’t use the KBI to perform a national criminal history check unless enabled by statute. However, state law (K.S.A 22-4710(c)) appears to generally allow employers to conduct criminal history checks with the written consent of the applicant. Department of Administration officials told us unless required by statute, state employers set their own hiring policies and procedures for their unclassified jobs. But they also said it’s their interpretation that there isn’t a general authority for agencies to conduct any type of criminal history check because it’s not explicitly in statute.

Implemented in 2018, Executive Order 18-12 sought to limit the impact of criminal history on the application process for executive branch agencies in Kanas. The executive order prohibited staff from asking about an applicant’s criminal history during the application process. It also prohibited any criminal records from disqualifying an applicant from an interview. But this executive order didn’t prohibit executive agencies from conducting a criminal history check as a condition of employment.

For Commerce, state law identifies only one job that requires a national criminal history check. State law (K.S.A 74-50,184) requires Commerce to request a fingerprint-based criminal history check through the KBI before the athletic commission can appoint a boxing commissioner. This is the only job that state law requires Commerce to conduct a national criminal history check for.

Commerce’s Screening Process

We interviewed Commerce officials and reviewed hiring documents in personnel files for staff overseeing financial matters.

We interviewed Commerce officials about their hiring policies and procedures and asked about their opinions regarding different ways they could check job applicants for relevant criminal histories. We also reviewed Department of Administration resources about the state’s hiring requirements.

We reviewed personnel records for Commerce’s 5 most recent hires, including Mr. Clayton, for jobs that oversee financial matters. The selected records were for 3 program managers and 2 accountants. Their hire dates range from 2020 to 2024.This selection isn’t projectable to all Commerce hires.

We checked hiring documentation in their personnel records to ensure it was consistent among the personnel records we reviewed. We did this to verify that Commerce was following the policies and procedures they described to us. The documentation included things such as interview notes, reference check notes, and their new social media check template. We didn’t evaluate whether Commerce made the appropriate hiring decision in each case.

Commerce’s hiring policies and procedures do not include any type of criminal history check for any jobs other than the 1 in statute.

Commerce officials explained they use the same hiring process for all their unclassified jobs. They said that during the interview process, there are job-specific questions and standardized questions asked to the applicant, but these questions don’t include asking about criminal history. Their process does not include any type of criminal history check for any job other than the boxing commissioner.

Commerce officials said that once they’ve decided to hire an applicant, they perform a reference check and a social media check on the applicant that includes searching their name in a search engine. Officials said they rely on references, social media checks, search engine results, and applicants being forthcoming and honest about their work history and their criminal history to reveal potential problems.

As part of their on-boarding process, we saw that new hires affirm they’ve read and understood Commerce’s conflict of interest policy that expects employees to avoid unethical behavior such as using their job at Commerce to personally benefit themselves or another organization they’re associated with.

Commerce hired Mr. Clayton in 2020 without knowing about his previous criminal conviction in Pennsylvania and then subsequently promoted him to Director of Economic Recovery. Commerce officials told us they were not aware of Mr. Clayton’s criminal conviction until after his promotion.

Commerce officials told us they were unaware of the criminal history check options they could use.

Commerce officials told us they don’t perform state-level criminal history checks on applicants because they don’t think they have the authority to perform them through the KBI. Further, they said the process is more time-consuming without the KBI. State law (K.S.A 22-4710(c)) appears to allow employers to conduct criminal history checks with the written consent of the applicant. However, agencies can’t use the KBI to perform a national criminal history check unless enabled by statute.

Commerce officials told us they were in favor of criminal history checks for some of their jobs if it helped avoid potential problems in the future. Officials said a criminal history check through the KBI would be the most efficient and useful option, if available. State-level, name-based criminal history checks using the KBI’s website are useful for checking offenses in Kansas, and they don’t require an enabling statute. Commerce is not allowed to do national criminal history checks based on current statutes except for the one job.

Another option would be to use aConsumer Reporting Agency (CRA) to perform criminal history checks. These companies may provide employment screening services that include credit checks, license verification, and criminal history information from state and federal databases.

Commerce officials said they’d need more information about CRAs and the type of information they could reveal before they could determine if they would be useful in their hiring procedures.

Commerce didn’t adequately document their hiring procedures for 3 of the 5 staff we reviewed.

Commerce has templates available for documenting interviews and reference checks. Commerce officials told us they’ve also added a template for documenting social media and search engine check as of September 2024. These tools are useful because they ensure hiring managers follow a standardized process for each applicant and have evidence to support hiring decisions.

Reference check summaries weren’t available for 3 of the 5 employees we reviewed, and interview notes were missing for 1 of the 5 employees we reviewed. This means we couldn’t determine if Commerce is following these processes consistently.

Further, state retention policies require agencies to retain hiring documentation in the full personnel file for the length of their employees’ tenure plus 3 years. As such, we expect Commerce to use their hiring templates during the hiring process and retain that documentation in the full personnel file with other hiring documentation for the length of their employees’ tenures plus 3 years based on state regulation (K.A.R. 53-2-209). However, Commerce officials told us that they don’t retain some hiring records past 3 years from the date of hire.

Recommendations

The legislature should consider clarifying when and how executive agencies can obtain and consider criminal history information on prospective job applicants from the Kansas Bureau of Investigation or other sources such as Consumer Reporting Agencies.
Commerce should strengthen their process for checking the backgrounds of applicants applying for jobs that oversee financial matters in accordance with EEOC best practices.
- Agency Response: Commerce agrees jobs overseeing financial matters are important and the hiring process should reflect that importance. We will be pursuing legislation to address the background check issue and give Commerce the authority to utilize criminal background checks in the hiring process. We support a hiring process that both appropriately screens job applicants and is within its authority.
Commerce should use their available templates to create interview notes, reference check summaries, and internet search summaries and retain those documents in accordance with the state’s retention policy for personnel files to ensure Commerce can justify hiring decisions if they’re questioned in the future.
- Agency Response: Commerce uses best efforts to utilize templates and follow policies to properly document its hiring processes. Our existing processes are constantly evolving and improving, and we will continue to modify processes consistent with best practices and guidance.

Agency Response

On December 11, 2024 we provided the draft audit report to the Department of Commerce. We reviewed the information agency officials provided during technical feedback and made some minor changes to 1 finding and 1 recommendation. Commerce’s formal response is below. Agency officials didn’t agree with our findings and conclusions in the 2 areas described below. We carefully reviewed the information agency officials provided but did not change our remaining findings, conclusions, or recommendations for the following reasons:

Commerce contends they cannot do any criminal background checks on applicants. Executive agencies require authorization to perform a specific type of criminal history check through the KBI and to receive confidential, non-public criminal history information such as juvenile records. However, the public records accessible through the KBI’s public records portal or any other government site where public records are available would be pertinent to a criminal history check for the jobs we reviewed. We didn’t find any statute that prevents Commerce from implementing criminal history background checks as part of their hiring process using public records during this audit. Commerce also didn’t identify any statute that prevents them from implementing criminal history checks using public records as part of their hiring process.

Commerce said they are restricted under Executive Order 18-12 from requiring criminal background checks as part of their hiring process. We disagree. We reviewed Executive Order 18-12 as part of our audit work. There are 2 parts of that order that stand out as relevant to the audit.
- The order states that during the initial stage of a state employment application, job applicants shall not be asked if they have a criminal record. It also states that a criminal record shall not automatically disqualify an applicant from receiving an interview.
- The order states that it doesn’t prevent agencies from conducting a criminal background check as a condition of employment.

What this means is that, once the applicant has passed the initial application stage of the hiring process, agencies may include a criminal background check as a conditional of employment. In other words, Executive Order 18-12 prohibits agencies from using criminal history as an initial screen during the application process. This aligns with EEOC recommendations. The order also leaves room for agencies to clearly define and narrowly tailor their criminal background check process to the job by moving the criminal background check to the end of the hiring process as a condition of employment. This also aligns with EEOC recommendations.

Commerce contends we misstated record retention regulations. We also don’t believe we’ve misstated the record retention schedule for these records. There are 3 specific retention schedules applicable.
- Commerce cites K.A.R. 53-2-107, series ID 0096-000. This retention schedule is for 3 calendar years. It covers recruitment files described as job announcements, postings, advertisements, outreach plans, and other records related to an agency’s efforts to fill a vacant position. In other words, marketing materials.
- We cite K.A.R. 53-2-209, series ID 0036-000. This retention schedule is tiered. The specific portion we reference requires the retention of an employee’s full personnel file for the length of the employee’s tenure plus 3 calendar years. It covers records associated with the employment of specific personnel such as employee evaluation forms, applications of employment, background checks, and other personnel materials. In other words, hiring, evaluation, and employment materials.
- Finally, we reviewed K.A.R. 53-2-158, series ID 0043-000. This retention schedule is for 3 calendar years. It covers employment applications for non-hired applicants which includes applications, resumes, and supplementary materials such as background checks. In other words, the records that would be retained in the personnel file if the applicant were hired.

We believe the distinction between recruitment files and personnel files is clear. Recruitment files are marketing materials which should be retained for 3 calendar years. Personnel files are hiring, evaluation, and employment materials that should be retained for the length of the employee’s tenure plus 3 calendar years if the applicant is hired or for 3 calendar years if the applicant is not hired.

Further, Commerce is correct in that there is no law regarding interview notes. In this area, we held Commerce to its own policies and practices. Commerce has templates hiring managers use as part of Commerce’s hiring process. We’ve also seen they’ve created a new template for social media and search engine checks as of September 2024. Commerce officials told us that, during the applicant’s interview, there is a set of standardized questions interviewees are asked as part of Commerce’s hiring policy. Thus, we expected the hiring procedures and documentation for each hire to be consistent across Commerce’s personnel records

Department of Commerce Response

December 12, 2024

Legislative Post Auditor

Ms. Chris Clarke

800 SW Jackson, Suite 1200

Topeka, KS 66612

Dear Ms. Clarke:

The Department of Commerce (Commerce) has reviewed the Performance Audit Report titled, “Evaluating the Adequacy of the Department of Commerce’s Pre-Employment Screening”. More specifically, LPA considered whether Commerce used adequate pre-employment screening for select staff who oversee financial matters.

While we appreciate the time and effort that went into the review, Commerce has significant concern over LPA’s determination that the hiring process for Executive Branch agencies includes the discretion to utilize criminal background checks as a condition of employment. Contrary to this finding, Executive Branch agencies lack the authority for this type of background check. Commerce also disagrees with the finding regarding record retention and the alleged lack of documentation in its recruitment processes.

Criminal Background Checks-

Executive Branch agencies are not authorized to provide criminal background checks as a condition of employment without specific statutory or regulatory authorization. While LPA discusses the advantages of such background checks and recommends criminal history checks for certain types of positions, it fails to acknowledge that Executive Branch agencies lack authority to obtain these criminal history checks. Commerce operates in a legal and regulatory environment established by the constitution and legislature. Notwithstanding that criminal background checks may be a good practice, Commerce lacks the authority to use these checks as part of the hiring process. Commerce is restricted under Executive Order 18-12 from requiring criminal background checks as part of the hiring process. Further, the Kansas Department of Administration, Division of Personnel Services has provided guidance that “Department of Administration (DoA) doesn’t believe there is clear, existing legal authority that allows Executive Branch agencies to conduct a criminal background check as a condition of employment unless it is authorized by statute.” DoA is the agency with authority over Executive Branch agency hiring practices.

The Criminal Justice Information System statutes cited by LPA are more pertinent to how criminal justice agencies transfer criminal history data but is not authority for the notion Commerce can avoid compliance with the EO or the guidance from DoA. Absent express authority, Commerce cannot conduct these background checks. The legislature has given Commerce that express authority with respect to only one position in the agency, the Boxing Commissioner. Commerce simply does not have the discretion to proceed as outlined by LPA.

Record Retention-

LPA also found alleged inadequacies in how Commerce documents interviews and reference checks in the hiring practice. To be clear, LPA isn’t contending Commerce didn’t perform reference checks or interviews, only that some of the documentation of those actions were missing from the sample of files it reviewed. LPA references no legal or regulatory requirement that either reference checks or interview notes be made. LPA also appears to mis-state the record retention schedule applicable to such records. Commerce considers these types of records to be part of the “Recruitment File” and subject to a 3-year retention schedule. LPA apparently considers these records “personnel files” and subject to a different retention schedule. Again, Commerce receives and follows guidance from DoA on these matters and that specific guidance is attached.

Commerce appreciates this opportunity to review its hiring practices and always strives to improve practices and procedures.

Sincerely,

Robert E. North

Chief Counsel

Appendix A – Cited References

This appendix lists the major publications we relied on for this report.

Enforcement Guidance on the Consideration of Arrest and Conviction Records in Employment Decisions under Title VII of the Civil Rights Act (April, 2012). U.S. Equal Employment Opportunity Commission.
Best Practice Standards: The Proper Use of Criminal Records in Hiring (2013). Lawyers’ Committee for Civil Rights Under Law, The Legal Action Center, and National Workrights Institute.

Appendix B – Enabling Statutes

This appendix is an excerpt of KBI’s testimony to the Senate Judiciary Committee Regarding SB 491 on February 19, 2024. It summarizes state enabling statutes that authorize national criminal history checks through the KBI. At the time, there were 55 state statutes that authorized fingerprint-based criminal history checks for non-criminal justice agencies and 4 state statutes that authorized fingerprint-based criminal history checks for criminal justice agencies. There were 18 state statutes that authorized name-based criminal history checks for non-criminal justice agencies.

Criminal Justice Agency as defined in K.S.A. 22-4701

Receives fingerprint-based results: Adult convictions, adult non convictions, adult diversions, adult expunged records, juvenile adjudications, juvenile non-adjudications and juvenile diversions.

City clerk for position of Chief of Police as described in K.S.A. 12-1,120.
County election officer for a candidate for sheriff as described in K.S.A. 19-826.
Governor for an appointment to the position of Kansas highway patrol superintendent as described in K.S.A. 74-2113.
State, county, city, university, railroad, tribal, horsethief reservoir benefit district or school law enforcement agency for the purpose of admitting applicants as defined in K.S.A. 74-5602 in connection with K.S.A. 74-5605.