District G

Audit Finding Resolution Summary
Mark Twain Solid Waste Management District - Region G
Date of Final Audit Report: Jan. 17, 1996
For The Fiscal Years: 1993, 1994, 1995
Date of Final Resolution:  June 28, 1996

Special Note 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 (SWMP) at 573-751-5401.

Review Of Accounting And Internal Control

1.  Audit Finding and Recommendation: Banking System Weaknesses.
All the district mail is opened by the executive director of the Regional Planning Commission. When checks arrive for the solid waste district, the executive director hands the checks over to the fiscal manager. The fact that two separate employees see the incoming checks is a good separation of duties. This separation would be more effective if the executive director maintained a log of the checks which come for the district. This log should be reconciled by the executive director to the bank statements to ensure that all checks received by the district have been properly deposited.

The checks are given to the fiscal manager, who prepares the deposit slip and takes the deposit to the bank. The process would be more effective if these two duties where not performed by the same person. Each month the fiscal manager reconciles the bank statements for the district. A bank reconciliation should not be completed by the same person who handles the checking account. Because of limited staff, the district board should review the bank reconciliation to create another check in the system.

The auditor recommended the executive director maintain a log of incoming receipts to reconcile to deposit records, the district segregate the duties of preparing the deposit slip and taking the deposit to the bank, and the district board complete a review of bank reconciliations as part of their regular agenda at each board meeting.

District Response:
The district provided the following procedures it has implemented to segregate accounting duties:
a. The executive director opens the checks.
b. The clerical person logs checks in.
c. The clerical person gives the checks to the fiscal manager.
d. Fiscal manager prepares the bank deposit slip, then gives the checks and deposit slip to the clerical person.
e. The clerical person transports the deposit to the bank. (All incoming checks are deposited on the day received).
f. The executive board reviews the district bank statement and a list of deposits along with checks (both received and written).

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

Audit Finding and Recommendation:
District Assets Not Properly Safeguarded.

The district checkbook is currently kept on a shelf on the fiscal manager’s desk. This does not provide proper safeguarding of the checkbook. The auditor recommended the district store the district checkbook and incoming checks in a locked drawer to provide greater protection of district funds.

District Response:
The district stated that all incoming checks are deposited on a daily basis. The district further stated that when not in use, the district checkbook is locked in a fire proof file cabinet.

Final Resolution:
The DNR considers this matter resolved.

District Grants

Audit Finding and Recommendation:
No Formal Evaluations Completed.

The district board does not currently complete a formal evaluation of all district grant proposals. The current evaluation consists of the entire board discussing each proposal to determine if it should be funded by the district. 10 CSR 80-9.50(2)(C) lists the criteria which must be used to evaluate district grant proposals. The district should create a formal evaluation sheet which includes all the required evaluation criteria, and complete one for each grant proposal in order to determine that projects are being properly evaluated.

The auditor recommended the district create an evaluation sheet including the proper evaluation criteria to be completed by board members when evaluating district grant proposals.

District Response:
The district stated that beginning with the fiscal year 1996 grant requests the executive board now uses criteria for evaluating and ranking applications as required by the District Grant Rule. This practice was implemented at the Jan. 25, 1996, executive board meeting. The district provided evaluation criteria and a copy of rankings for the fiscal year 1996 district grant cycle. The district also stated that this will be an on-going practice.

Final Resolution:
The DNR considers this matter resolved and accepts the evaluation criteria used by the executive board as evidence of its intent to complete evaluations and ranking for all future district grant applications.

Audit Finding and Recommendation:
Inadequate Documentation Required from Subgrantee.

When reviewing subgrant documentation, the auditor did not locate sufficient documentation to fully support subgrant expenditures in the district files. Canceled checks were requested and were readily produced by the subgrantee. These canceled checks should be part of the required documentation to be submitted to the district by subgrantees. By requiring this information, the district can ensure that expenditures have actually been made prior to grant reimbursement payments.

The auditor recommended the district require canceled checks from all subgrantees as part of the necessary documentation prior to grant reimbursements.

District Response:
The district stated that for future grant cycles, canceled checks will be required for reimbursement to grantees. The district also submitted copies of canceled checks that were initially absent from district files. The district also indicated that each subgrantee now receives an invoice with instructions for reimbursement, including notice that copies of canceled checks must be submitted.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district provides to the SWMP, a copy of the invoice provided to subgrantees to ensure that subgrantees provide documentation that adequately supports application of district grant funds. This documentation was received on June 3, 1996.

Audit Finding and Recommendation:
Retainage not Held.

Project number 94135 was a subgrant for $21,400, and 15 percent of this amount should be retained until approval of the final report. 10 CSR 80-9050(4)(C) states that "The executive board shall retain 15 percent of the funds from the recipient until the board gives approval to the recipients final report and the final accounting of project expenditures." $20,845.15 has already been released to the subgrantee even though no final report has been submitted. The district has released $2,655.35 ($3,210 proper retainage less $554.65 actual retainage), part of the retainage without receiving a final report. If the remaining $554.65 is not spent on this project, it should be returned to the SWMP or deducted from future Mark Twain Solid Waste Management District grant amounts.

Project 94133 was a grant of $16,000, and project 95012 was a grant of $17,600, both for chippers. In both projects, 15 percent retainage disbursement was made before approval of the final reports.

The auditor recommended the district immediately obtain a final report and final accounting from projects 94135, 94133, and 95012 to properly complete the project documentation. It was recommended the district retain 15 percent of subgrant funds until approval of the final report and accounting. It was also recommended that the remaining $554.65 from project 94135 be returned to the program or deducted from future district grant allocations.

District Response:
The district stated that the three subgrant projects, number 94135, 94133 and 95012 have either submitted a final report or are in the process of compiling one. The district stated that the remaining $554.65 from subgrant number 94135 had been paid to the subgrantee. The district also stated that the new invoice provided to subgrantees has language pertaining to retainage of funds.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district provides a copy of the invoice provided to subgrantees to ensure that 15 percent is held until a final report is submitted and approved by the district. The district also needs to provide documentation to show appropriate expenditure of $554.65 for subgrant number 94135 and copies of final reports for subgrants number 94135, 94133 and 95012. The district submitted this information to SWMP on July 12, 1996.

Audit Finding and Recommendation:
Subgrant not on Reimbursement Basis.

Project 94133 was not implemented on a reimbursement basis. Grant funds were paid to the grantee prior to the city paying for the chipper. The canceled check from the Mark Twain Solid Waste District to the city of Perry is dated March 17, 1995. The canceled check from the grantee to the vendor is dated March 20, 1995. The DNR General Terms and Conditions II.A. states "The recipient will be reimbursed for all allowable expenses incurred in performing the scope of services. The recipient shall report project expenses and submit standard invoices, attached to the Agreement, for payment." The auditor recommended the district implement all district grants on a reimbursement basis.

District Response:
The district stated that it will provide funding to subgrantees on a reimbursement basis and will consider advance payments on a case by case basis and only rarely, using procedures established in the departments General Terms and Conditions.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district provides a copy of its invoice and any other appropriate documentation instructing subgrantees that funding is provided on a reimbursement basis only. The district provided this documentation to the SWMP on June 3, 1996.

Audit Finding and Recommendation:
Interest Income not Reported.

(a) Interest income was earned by the district in their checking accounts and from certificate of deposit. The DNR’s General Terms and Conditions II.C. states, "Program income shall be deducted from outlays which may be both federal and nonfederal, unless the DNR, as negotiated with the recipient, or federal awarding agency specifies an alternative method in the agreement…" The district did not report their interest income and the program did not deduct the interest income from outlays. The amount of interest income earned totaled $5,486.93.

The auditor recommended the program reduce fiscal year 1996 payments to the district by $5,486.93 for interest earned in fiscal year 1993, fiscal year 1994, fiscal year 1995 or the district obtain permission from the program to use this interest income. It was also recommended the district obtain permission from the program to use future interest income earned by the district.

District Response:
The district stated that it will annually inform the DNR of its intended use of interest income from district grant funds.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district spends the unreported $5,486.93 interest income on activities that directly benefit or are specifically identifiable to the district grant program or applies the funds toward future district grant awards. The district must also retain all documentation to show how these funds are spent.

In the 1993 district grant cycle, the district awarded a grant to the Mark Twain Regional Council of Governments (MTRCG) for a revolving loan fund (RLF). This loan fund account has not been used since its inception. The grant proposal states that the fund will be in an ‘interest bearing account with the "interest accumulation being returned to the RLF." To date there has been no documentation of the interest being added to the fund balance.

The auditor recommended the district document to the program the interest income which has been added to the value of the revolving loan fund. It was also recommended the loan fund be reevaluated for its effectiveness, particularly since no loan has ever been made.

District Response:
The district stated that it will discontinue the RLF and will disperse the funds in the RLF including the interest, for fiscal year 1997 district grants.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district will close out the RLF account and apply this funding toward the fiscal year 1997 district grant cycle. The district will submit to the SWMP the total amount of funding, including interest, in the RLF. This documentation was submitted on July 12, 1996.

Administrative Grant

Audit Finding and Recommendation:
Copier Charges not Allocated Appropriately.

The MTRCG rents a copier and allocates $36.00 or 36 percent of the total basic rental charge and $.34 per copy to the Solid Waste Management District. The means of arriving at the $36.00 is unknown, but has been used since fiscal year 1993 when the district board voted to pay it. The other programs administered by the MTRCG, including the MTRCG, are allocated the remaining charges after Solid Waste’s charges are deducted based on payroll percentages. The price breaks given for additional copies are realized by these other programs. Authorizing an unequitable portion of an expense to one program prior to the allocation to other participating programs is an unacceptable allocation method. Based on the Solid Waste’s percentage of the budget for fiscal years 1993, 1994, 1995, 1996 through Nov. of 1995; MTRCG’s Solid Waste Management District is due a credit of $752.38.

The auditor recommended the MTRCG credit the Solid Waste District account and establish a consistent method of allocation to all programs. The auditor also recommended that the contract between the district and MTRCG should be renegotiated.

District Response:
The district stated that copier rental was no longer contracted with the MTRCG on a predetermined percentage basis. The copier has been upgraded to a Canon Control Card III system. Now each program has its own card, which is inserted into the copier for accurate tracking of all copies. The district will now pay a percentage of the monthly rent according to the copies generated. The district further stated that the $752.38 overpaid by the district to MTRCG will be reimbursed by the MTRCG.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district provides the SWMP a receipt showing reimbursement of $752.38 to the district from MTRCG. The district provided this documentation to the SWMP on July 12, 1996.