District E

Audit Finding Resolution Summary
Mid-America Regional Council Solid Waste Management District - Region E
Date of Final Audit Report: Oct. 1996
For The Fiscal Years: 1992, 1993, 1994, 1995
Date of Final Resolution: March 13, 1997

Note.gif (986 bytes) This document is a summary of the actual findings and resolutions determined by this audit. The document is posted here for informational purposes only and not all data from the audit is included here. A complete copy of the audit material may be requested under Section 610, Revised Statutes of Missouri and can be obtained by contacting the Solid Waste Management Program at 573-751-5401.

1.  Audit Finding and Recommendation:
Accounting System Discrepancies. The District’s accounting of grant expenditures did not match those records maintained by Mid-America Regional Council (MARC) program staff. The accounting records tracked expenditures by cost category (i.e., salaries, rent, contractual services) while program records tracked expenditures by project or grant. No reconciliations of these two systems were apparent.

The District could not specifically identify the remaining unspent district grant funds from fiscal years 1993 and 1994.

The auditor recommends that reconciliations of program and accounting records be performed on a regular basis. Additionally, MARC program staff should monitor the accounting records to ensure the consistency and propriety of data.

District Response:
The district has developed a procedural checklist to ensure that the reconciliation of program and accounting records occurs on a regular basis. Monthly reports received from the accounting department will be compared to program records in order to ensure consistency and propriety of data pursuant to the requirements of 10 CSR 80-9.050 and 10 CSR 8-9.010.

Final Resolution:
The Missouri Department of Natural Resources (DNR) considers this matter resolved. The DNR Internal Audit Program acknowledged that the above procedure was acceptable.

2.  Audit Finding and Recommendation:
Grant Evaluation Form. The District used a standardized evaluation form to score each district grant proposal submitted. However, the form did not contain all of the eighteen evaluation criteria required by statute. The two missing elements were the subgrantee’s ability to implement timely and selected financial ratios.

The auditor recommends the District’s evaluation form be revised to include all criteria required by statute.

District Response:
The district revised its grant evaluation criteria to ensure that applicable criterion from each of the 18 criteria required in the District Grant Rule are used to evaluate grant applications for Solid Waste Management funding.

Final Resolution:
DNR considers this matter resolved.

3. Audit Finding and Recommendation:
Grant Evaluation Process. The evaluation form for district grants was prepared for each proposal in each fiscal year by a staff member of the MARC. The score and ranking of the proposals were compiled and presented to the District board. Fiscal year 1993 subgrant awards were made based on the proposals’ evaluation scores. However, in fiscal years 1994 and 1995 subgrant awards were not based on the evaluation scores. According to MARC staff, a grant evaluation subcommittee was appointed by the Executive Board. This subcommittee made recommendations for the award of District grants in fiscal years 1994 and 1995. Fiscal year 1994 awards were made subjectively after discussion among subcommittee members. There was no evidence available to document criteria used to make the awards. In fiscal year 1995 the evaluation rankings by MARC staff were evidenced. However, the subcommittee again made subjective award decisions based on additional criteria, whose effects on the initial proposal scores were not documented.

The auditor recommends that the award of district grants be made solely upon objective criteria. Furthermore, we recommend that all criteria used by the Board be incorporated into the grant evaluation form which is completed for all District grant proposals.

District Response:
The district provided a copy of the district evaluation criteria and FY97 District Grant Application packet. Written procedures for evaluating, ranking and making funding decisions on grant applications were described in detail in the application packet.

Final Resolution:
DNR considers this matter resolved.

4.  Audit Finding and Recommendation:
Conflict of Interest. The auditor noted that one of the members of the grant evaluation subcommittee appointed by the Board was the director of an agency who received district grants for Project Numbers 95070 and 94001, 95069, and DW01, in both fiscal years 1994. and 1995. Another subcommittee member was a project officer on a district grant, Project number 95066, awarded in fiscal year 1995. Appointments to the grant evaluation subcommittee were made without regard to potential conflicts of interest which may have existed.

The auditor recommends that the grant evaluation subcommittee consist of individuals who have not submitted district grant proposals. Should any potential conflict arise, the evaluation records should evidence that the affected member abstained from participating in any decision regarding that proposal.

District Response:
To avoid conflicts of interest in the district grant evaluation process, any parties in the grant review committee who have a conflict of interest regarding a specific proposal will be asked to leave the meeting room when the relevant proposal is discussed. When committee recommendations are presented to the Executive Board, individuals with a conflict of interest will be asked to abstain from the discussion. Furthermore, all discussions pertaining to grant evaluation and awards will be thoroughly documented by district staff.

Final Resolution:
DNR considers this matter resolved.

5.  Audit Finding Recommendation:
Reports Not Timely Filed. The auditor noted that quarterly status reports and final reports to DNR on the progress of district grants were not submitted on a timely basis. Additionally, in a sample of twelve subgrant files we noted two instances where final reports were not timely submitted by subgrantees to the District and one case where we were unable to determine the date of submission of the subgrantee’s final report. In one other case, some of the quarterly reports did not contain all of the required elements.

The auditor recommends that MARC submit its reports to DNR within the time limits allowed by law. The reports should note any subgrantee that has not complied with the reporting requirements.

District Response:
The district developed a general reporting procedure and time line for each fiscal year to ensure that quarterly status reports (QSR) are provided to DNR on a timely basis.

Final Resolution:
DNR considers this matter resolved with the understanding that the district will provide additional procedural steps that describe actions it will take to assure that subgrantees provide the district with timely and accurate QSRs, including a description of penalties for non-compliance. The district provided this documentation to the SWMP May 9, 1997.

6.  Audit Finding and Recommendation:
Interest Income Not Reported. District grant funding received from DNR was placed in a pooled interest-bearing account. MARC did not track the cash balances, nor the interest earned on SWMD funds. According to MARC staff the interest income was used for general operating expenses of the agency.

DNR General Terms and Conditions II.C. states, "Program income shall be deducted from outlays that may be both federal and nonfederal, unless DNR, as negotiated with the recipient, or federal awarding agency specifies an alternative method in the agreement." Furthermore, in accordance with sound accounting practices, all program income must be tracked with proper accountability.

The auditor recommends the program reduce future payments to the District for the interest earned in FY92, FY93, FY94, and FY95 or that the District obtain permission from the program to use this interest income for administration of the program. Should the District receive permission from DNR to retain interest income, then they are required to implement a system of tracking and accounting for all funds that is accurately maintained and ensures interest is treated as project money.

District Response:
The district developed a system for tracking and accounting interest income for proper allocation to respective funding sources. Since receipt of the first grant for solid waste planning in 1992, MARC staff estimates that interest income would have been approximately $37,362.

The executive board approved the matching funds provided by MARC during this time period to be used to offset the interest income earned during the same period. Interest income and MARC's match were included in the audit reports submitted to the SWMP each year. As well, the district submitted an interest income chart along with its audit response.

Final Resolution:
DNR considers this matter resolved.

7.  Audit Funding and Recommendation:
Equipment Purchases. The subgrant agreements were silent as to the title of equipment purchased with subgrant funds. MARC staff assumed that equipment belonged to the subgrantees. Equipment is not currently tracked on MARC’s inventory management system.

DNR’s General Terms and Conditions, as amended by DNR’s Special Terms and Conditions, states, "Title to equipment acquired under this agreement will vest with the district." Also these standards require property records to be maintained, physical inventories to be performed, and controls for the safeguarding of assets to be implemented.

The auditor recommends that MARC add all equipment purchased with district grant funds to its inventory tracking system. Also, we recommend that the general terms and conditions for subgrants’ be amended to recognize the District’s title in all equipment purchases.

District Response:
The district has developed procedures to properly manage equipment purchased with district grant funds. The district has developed an equipment inventory to track all equipment purchased with district grant funds; this was provided to the SWMP. This inventory will be maintained on an on-going basis as equipment is acquired using district grant funds. Equipment will be noted on a worksheet developed for each district grant.

The district completed a physical inspection of district-funded equipment in January, 1997. A physical inspection of all equipment acquired by district subgrantees will be performed once every two years.

All subgrantees will be required to file a yearly status report on equipment acquired with district grant funds and will inform the district of safeguards to prevent loss, damage, or theft of property. If loss, damage or theft of equipment occurs, the subgrantee shall inform the district within seven working days.

Procedures for management and disposition of equipment to subgrantees will be in accordance with DNR General Terms and Conditions. The district's amended terms and conditions for subgrantees will clearly depict the district's right to hold title to or a security interest in equipment acquired with district funds. The district's policy on equipment disposition will be on a case by case basis.

Final Resolution:
DNR considers this matter resolved.

8.  Audit Finding and Recommendation:
Grant Application Deficiencies. Projects awarded district grants had proposals which did not fully meet the State guidelines. As part of the audit twelve district grants were sampled. In one case, the auditor noted that the date of the proposal was after the required due date. It was impossible to determine the date the proposal was received by the District in the other cases.

The auditor also noted one instance where the application did not contain verification of necessary permits, one instance where the proposal did not include documentation showing the commitment for matching funds, and three instances where three prior years’ financial statements and credit histories had not been provided.

The auditor recommends that the District ensure that all district grant applications under consideration contain all of the information required by 10 CSR 80-9.050.

District Response:
The district has adopted a procedure which will provide an irrefutable method of identifying the date on which each application was received by the district. Specifically, each application is stamped with the date of arrival and initialed by district staff. On the final day on which applications are received, the time of submission will also be noted and initialed by staff.

Final Resolution:
DNR considers this matter resolved.

9.  Audit Finding and Recommendation:
Payments to Subgrantees. Of the twelve project files sampled we noted two instances where subgrantees did not provide adequate supporting documentation of expenses incurred. In addition, we noted one instance where a subgrantee was paid for costs incurred prior to the contract date. In two other cases the financial assistance agreements were not dated, which precluded our ability to verify that no costs were incurred prior to the contract date.

DNR Regulations and General Terms and Conditions each state, "Accounting records must be supported by such source documentation as cancelled checks, paid bills, payrolls, time and attendance records, contract, and agreement award documents."

Additionally, 10 CSR 80.9.050(1) (E) (2) states, "The following costs are considered ineligible for district grant funding: . . . B. Costs incurred before the project start date."

The auditor recommends that subgrant disbursements be made only upon receipt of proper source documentation as required by DNR. We also recommend that MARC establish procedures to ensure that costs incurred prior to the project start date are not paid to subgrantees. For the exceptions, noted, the auditor recommended specific remedies.

District Response:
The district developed and submitted a worksheet for each subgrant in order to comply with the supporting documentation requirements of DNR Regulations and General Terms and Conditions. The district submitted additional documentation from the subgrantees noted in the findings in order to document eligible expenses.

Final Resolution:
DNR considers this matter resolved.

10.  Audit Finding and Recommendation:
Of the twelve project files sampled we noted cases where the 15 percent retainage was not held by the District prior to approval of the final report. In two other cases we were unable to determine from the project file documents whether proper funds were retained as required by DNR Regulation. However, final reports on the projects were later approved.

The auditor recommends that MARC implement procedures to ensure that the proper retainage is held from subgrantees as required by regulation.

District Response:
The district developed and submitted a checklist for each subgrant which outlines the amount of retainage withheld until the final report is approved by the district in accordance with DNR Regulations. The amount equal to 15 percent retainage shall be noted in the terms and conditions between the district and the subgrantee which specifies district approval of the subgrantee's final report.

Final Resolution:
DNR considers this matter resolved.