My best guess is that you have one or more linked accounts setup to use the department you are inactivating.

Go through the following areas of the program

1. Inventory Linked Accounts - can be put on the Inventory List report but the departments don't show so you have to go through each ledger on the Linked Accounts tab
2. Vendor default expense accounts - Options tab on vendor ledger
3. Customer default expense accounts - Options tab on customer ledger
4. Employee default department - Personal tab of each employee ledger
5. Setup, Settings and review all the linked accounts in each module including those for Sales tax and Credit cards

You were correct .... it was still listed in the employee ledger - thank you so much!!