District L

Audit Finding Resolution Summary
Region L, St. Louis-Jefferson Solid Waste Management District
Date of Final Audit Report: Jan. 16, 1996
For The Fiscal Years: 1993, 1994, 1995
Date of Final Resolution: June 26, 1996

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 (SWMP) at 573-751-5401.

Review Of Accounting And Internal Control

Audit Finding and Recommendation:
No Financial Audit.The district has not had a financial audit since its inception; however, the county auditor for the county of St. Louis did complete a performance audit. The district is currently in the process of reviewing bids for a financial audit submitted by Certified Public Accounting firms. The General Terms and Conditions (GTC), Section II.O., pursuant to the 8/94 revision, states, in part: "Audit Requirements. Solid waste districts receiving $200,000 or more of financial assistance from the department in any fiscal year must provide the department with a copy of an independent auditor’s report on the fair presentation of the districts financial statements in conformity with generally accepted accounting principles; the internal control structure, and compliance with applicable laws and regulations. Financial assistance shall include Operations Grants, District Project Grants, or State Project Grants." The district received over $200,000 in fiscal years 1993, 1994, and 1995. The auditor recommended the district proceed with the bid evaluation and complete arrangements for a financial audit of the district in order to comply with the GTC.

District Response:
The district stated that it currently is having a financial audit conducted by the firm of Aselage, Kiefer and Company. The district further stated that the audit should be completed within the next 60 days. A copy of the audit will be provided to the SWMP.

Final Resolution:
The Department of Natural Resources (DNR) considers this matter resolved with the understanding that the district agrees to submit to the SWMP a copy of the financial audit currently being conducted by Aselage, Kiefer and Company. A copy of the financial audit was received on Sept. 16, 1996.

Audit Finding and Recommendation:
Petty Cash Not Secured.The petty cash fund for the district is kept in an unlocked drawer. Petty cash is a highly liquid asset and, as such, should be safeguarded. Petty cash should be kept in a locked area and should require regular reconciliations, receipts, and approval signatures on the petty cash replenishment requests. The auditor recommended the district implement and maintain a secure system of safeguarding the petty cash fund.

District Response:
The district stated that it has ceased to maintain a petty cash fund.

Final Resolution:
The DNR considers this matter resolved with the understanding that if the district decides to again maintain a petty cash fund, the district will follow the auditor’s recommendation of implementing and maintaining a secure system for it.

Audit Finding and Recommendation:
Equipment Management. The district has no formal policy regarding equipment control. An inventory of equipment purchased with grant funds has never been performed. The executive director of the district could not furnish a list of equipment that had been purchased with grant funds.

For 1993 and 1994, the district was not in compliance with the GTC nor with the Special Terms and Conditions (STC) pertaining to equipment. For these two years, title vested the subgrant recipient.

There has never been a physical inventory taken of the equipment purchased with grant funds. There is no assurance that the property purchased with the Solid Waste Management Funds was being used to support program activity.

There is no control system in existence, such as regular physical inventories and a list of serial numbers, and no way to ensure that the property is safeguarded against loss, damage, or theft such as insurance requirements.

The district was not aware of the requirements pertaining to disposal of equipment purchased with grant funds. The DNR’s GTC, II.J.E.a. and b., and the STC both require that items with a per unit value of greater than $1,000 be sold to the subgrantee for an amount equal to the percentage of fair market value that equals the percentage of DNR funds used for the purchase. Equipment with a fair market value of less than $1,000 can be transferred to the subgrantee for no consideration. Therefore, the district is not properly disposing of assets as required by the GTC, Section II.J.

The auditor recommended the district review the title to all assets purchased with grant funds to determine the appropriate vesture and change those that vest incorrectly. The auditor also recommended the district perform a physical inventory and create records which detail all of the required information, that the district create and implement an equipment management procedure, and that the district create and implement a control system to safeguard assets purchased with grant funds. The auditor also recommended that the district familiarize itself with the proper disposition regulations and procedures to ensure compliance with them.

District Response:
For Fiscal Year 1993 (FY93) the district stated that title to equipment purchased with 1993 District Grant funds should not be an issue since DNR provided no provisions in the 1993 District Grant Agreement concerning title to equipment purchased with grant funds.

For Fiscal Year 1994 (FY94) and Fiscal Year 1995 (FY95) the district requested that the FY94 and FY95 District Grant Agreements be amended to allow the title to equipment to be vested with the subgrantees as it believes that it would be more productive to focus on establishing compliance procedures for 1996 and beyond.

In regard to future grants, the district stated that it does not wish to hold title to equipment. However, they recognize that it is essential to assure that the equipment purchased with district funds is used for its intended purpose. The district would like the SWMP to modify the STC to allow districts to use a security interest to protect the grant funds and ensure that the equipment continues to be used for the intended purpose. There may be some instances where the district would want title to a piece of equipment, but allowing flexibility to use a security interest is more appropriate for most subgrants, particularly when only partial funding is being provided.

The district stated that beginning with the 1996 grants, it will maintain a master list of equipment purchased with District Grant funds, conduct an annual inspection and inventory of subgrants that include equipment, and perform equipment confirmations as part of the annual audit process. The master equipment list will be compiled and maintained on an ongoing basis. The district stated that it will develop a site visit and inspection form. The form will also include additional information pertinent to site visits. 1996 subgrantees with equipment will have site visits conducted periodically, and site visit forms will be maintained by the district and included in district quarterly reports. The district also stated that it has gone back and developed an inventory list of all equipment purchased with FY94 and FY95 funds.

Final Resolution:
The DNR will consider the matter of the district’s equipment management and inventory procedures resolved with the understanding that the district will provide a copy of its physical inventory of all equipment purchased for the FY94 and FY95 funding cycle and a description of the inventory management procedures. The district provided this documentation to the SWMP on September 16, 1996.

The DNR will consider the matter of the district acquiring title for equipment purchased during the FY94 and FY95 funding periods resolved by noting that there is no feasible way of acquiring title to equipment after a project is complete. The DNR will also consider the use of a security interest for equipment purchased with future district grant funds. The DNR will allow the district to proceed with either holding title or a security interest with subgrantees for equipment acquired with FY96 district grant funds.

Audit Finding and Recommendation.
Anti-Lobbying Certification. Neither the DNR’s SWMP or the district require grant recipients to file an Anti-Lobbying Certification form. The Anti-Lobbying Certification form is required by the GTC, Section II.T.1. which states, "Recipient agrees to comply with the Anti-Lobbying Act, Section 319 of Public Law 101-121, effective Dec. 23, 1989. Recipient further acknowledges that failure to file or amend the disclosure form, if required, shall be subject to a civil penalty of not less than $10,000 and not more than $100,000 for each such failure." Additionally, subrecipients are required to submit an Anti-Lobbying Certification form or the Disclosure of Lobbying Activities form if the subgrant exceeds $100,000, as required by the GTC, Section II.T.2.

Without these certification forms, the district is not in compliance with the GTC and the district has no way of knowing if the subgrantees are aware of the prohibition of lobbying and propaganda. The auditor recommended the DNR’s SWMP require recipients to submit Anti-Lobbying Certifications at the beginning of each grant cycle. The auditor also recommended the district require subrecipients submit Ani-Lobbying Certification for any subgrant of which exceeds $100,000.

District Response:
The attorney for the district does not believe that an anti-lobbying certification is applicable.

Final Resolution:
The DNR considers this matter resolved based on its initial recommendation that this decision needed to be made at the district level.

Audit Finding and Recommendation:
Non-Compliance with Purchasing Requirements. The district did not require competitive bids for the production of a waste disposal manual funded through the project grant 94094. There was no formal bidding process, nor were the bids requested in writing. The district is not in compliance with the purchasing and procurement requirements as required in the GTC. By not requiring bids for the project, the district cannot be certain of purchasing the best product for the least price, and the objectivity of vendor selection is compromised. The auditor recommended the district require bids for all major projects.

District Response:
The district stated that it does require bidding for contractual services and has followed

St. Louis County purchasing guidelines. According to those guidelines, the services questioned by the auditors involved "professional services" which are unique in nature and therefore not subject to usual bid procedures. The district maintains that it has been in compliance and will continue to maintain compliance by following the St. Louis County purchasing guidelines as St. Louis County has many state and federal grants programs, including the DNR. The county guidelines have been accepted with all of these programs. The district enclosed a copy of the St. Louis County Purchasing Ordinance and requested that it be accepted as the official district purchasing guidelines.

Final Resolution:
The DNR will consider this matter resolved upon receipt of certification that the St. Louis County purchasing guidelines are consistent with state purchasing guidelines. The certification should be prepared by the district’s auditor or by the district’s attorney. The certification should have executive board approval and submitted to the SWMP. This certification was received on Sept. 16, 1996.

Audit Finding and Recommendation:
General Terms and Conditions. The district had two sets of their own GTC, the latest of which was written in 1995. A comparison of the two sets of General Terms and Conditions revealed several major differences. 10 CSR 80-9.050(4)(E) states, in part, "All general terms and conditions of the department applicable to either the activity, recipients of financial aid, or the project, respectively, will be applicable to recipients of awards…"

The auditor recommended the district use DNR’s GTC and the program’s STC to ensure compliance with the 10 CSR 80-9. The auditor also recommended the district stop using GTCs that do not conform to the program’s GTC.

District Response:
The district stated that it proposes to provide all 1996 subgrantees with terms and conditions that are consistent with DNR’s GTC and STC. The attorney representing the district has been revising the district subgrant GTC to include all applicable components of the DNR’s GTC, and STC. A preliminary draft has been prepared, and will be finalized for use with the 1996 district subgrants.

Final Resolution:
The DNR considers this issue resolved with the understanding that the district will provide a copy of its revised GTC to the SWMP. This information was received on Sept. 16, 1996.

District Grants

Audit Finding and Recommendation:
Match Documentation. During the review of district grants, instances were noticed where proper match documentation was not obtained. The department’s GTC II.D.1. states, "Recipient must invoice the DNR (district), as required by the particular agreement, and provide financial records for total expenditure of state and match or cost share funding." Project 93078 used match certifications to document time spent on the grant, but not all of these were signed by a supervisor. Project 94044 did not contain match certification for time spent on the grant. The auditor recommended the district require complete documentation and certification for all match committed.

District Response:
The district stated that it is currently requiring complete documentation of match for all FY95 grants, and will continue to do so to the extent that match is included in future district subgrant agreements.

Final Resolution:
The DNR considers this issue resolved with the understanding that the district will provide a copy of the procedures for ensuring that only eligible matching funds are considered in grant proposals. The district will also provide additional documentation, for project 93078 and project 94044, to support match documentation or a signed and notarized affidavit certifying that adequate match was provided. The procedures and additional documentation must be submitted to the SWMP. This information was received on Sept. 16, 1996.

Audit Finding and Recommendation:
Final Reports not Properly Submitted and Quarterly Reports not Properly Submitted. 10 CSR 80-9.050(3)(C) states that final reports are to be submitted to the district by each subgrantee within 30 days of the project completion date listed in the grant assistance agreement between the district and the subgrantee. A representative sample of 11 included two final reports for FY93 projects, 93062 and 93078 which were not submitted in the proper time period.

10 CSR 80-9.050(3)(B)1 states, "the district shall submit to the department, at the end of each fiscal year quarter, a report which contains the following for each project in progress…." There were instances when the quarterly status reports were submitted late. Also 10 CSR 80-9.0.(3)(B)1 requires quarterly reports to contain "details of progress, including the volume of waste disposal abatement for each type of recovered material utilized in the project, if appropriate..." Some of the reports were not timely submitted and the quarterly reports for project 94050 did not contain sufficient information to evaluate the project. None of the quarterly reports stated whether proper safety training was given to employees who operate equipment purchased with grant fund. Proper safety training, which may not be a grant requirement, can reduce the district’s, and by extension the program’s liability in case of accident.

The auditor recommended the district and the DNR’s SWMP require complete final reports be submitted within 30 days of the project completion date stated on the grant assistance agreement or within a reasonable period after the actual completion date, whichever is earliest, and the district submit complete and timely quarterly reports for each district grant project. The auditor also recommended the district encourage the subgrantees to include in their quarterly reports a statement attesting that employees operating grant funded equipment have received proper safety training.

District Response:
The district stated that it has been continually upgrading the reporting process to facilitate the submission of timely reports. Improvements have included report meetings, developing and later improving reporting forms, sending report due reminders and individual counseling. This has helped to significantly improve the ability of grantees to submit reports in a timely and accurate manner. The district will continue to work closely with recipients to further upgrade and improve the reporting process.

Final Resolution:
The DNR considers this matter resolved and will revise the district grant rule to allow for flexibility in submission of quarterly and final reports.

Audit Finding and Recommendation:
District Grants not Administered on Reimbursement Basis. According to the DNR’s GTC II.A. "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 district has been trying to move toward a strictly reimbursement basis for the past two fiscal years, but almost all of the subrecipients have received advanced payments throughout the audit period. The auditor recommended the district only disbursed funds in accordance with the GTCs in order to provide control over expenditure approval and for proper use of grant funds.

District Response:
The district stated that it had begun to administer subgrants on a reimbursement basis prior to the audit. The district pointed out that the GTC allow advance payments for up to 30 days, as long as specific steps are taken prior to payments being made. Also, the district stated that it has become extremely careful about providing funds in advance, and it will only be considered when absolutely necessary.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district submits to the SWMP a copy of its subgrant agreement language which documents the district’s intent to administer grant funds on a reimbursement basis. This documentation was submitted on Sept. 16, 1996.

Audit Finding and Recommendation:
Costs Incurred Prior to Project Start Date. 10 CSR 80-9.050(1)(E)2. states, "The following costs are considered ineligible for district grant funding:.. Costs incurred before the project start date:..." The auditor found two projects, 95044 and 95051, for which disbursements were made for costs incurred prior to the project start date.

The Grant Agreement for project 95044 was signed on June 22, 1995. An invoice dated May 15, 1995 for $18,560, for which $15,130 was reimbursed, was allowed as an expenditure for the grant. The Grant Agreement for project 95051 was signed April 28, 1995. An invoice of $11,962.66 paid on April 17, 1995 was reimbursed to the grantee. The payments incurred before the start date on the Grant Agreement are ineligible expenses and should be repaid to DNR. The auditor recommended the district remit $27,092.66 ($15,130.00 plus 11,962.66) to DNR for ineligible District Grant expenditures.

District Response:
The district stated that it amended the agreement for subgrant 95044 with the subgrantee. The DNR amended the agreement for subgrant 95051 with the district. Both the DNR amendment and the subgrant amendment have been signed. The DNR amendment has been returned to the SWMP. The district stated that the subgrant amendment will be included in the next quarterly report.

Final Resolution:
The DNR considers the matter involving $11,962.66 in questioned costs resolved based on the amended agreement to include prior costs for project #95051 between the DNR and the

St. Louis SWMD. The DNR considers the matter involving $15,130 in questioned costs resolved with the understanding that the district provides a copy of the amended subgrant agreement between the district and its subgrantee for project 95044 to the SWMP. This information was received on September 16, 1996.

Audit Finding and Recommendation:
Evaluation Process Not Complete. After a review of the evaluation procedures followed by the board, and according to 10 CSR 80-9.050(2)(C)1 and 10 CSR 80-9.050 (2)(C)3, the auditor determined that the board’s evaluation procedures were inadequate for FY93, FY94, and FY95. In order to ensure that all the projects are given fair consideration and to ensure that grant funds are spent appropriately, the board needs to follow the policies and regulations set forth for them. The auditor recommended the district follow the policies and regulations that govern evaluating projects and proposals.

District Response:
The district stated that it is extremely conscientious in the review of proposals, and has added additional review criteria to ensure even more complete review of proposals. As a result, the district views its evaluation process as comprehensive, complete, and fair. The district further stated that the board utilizes all criteria in the rule along with other criteria such as project impact and plan priority measures.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district will provide a copy of its revised evaluation program and criteria to the SWMP. This information was received on Sept. 16, 1996.

Audit Finding and Recommendation:
Decals not Displayed on Equipment. Seven project sites, one of which received two grants, were visited to discuss the status of the projects and to view the equipment purchased with grant funds received from the district. In the Grant Assistance Agreement drafted by the district, the district requires the subgrantees to place decals that give credit to the St. Louis-Jefferson County SWMD on the equipment funded by grants. Two of the seven sites visited did not have the decals giving credit to the district properly displayed. As mentioned in a previous finding, the district should complete a physical inventory of the equipment purchased with district funds. If the physical inventory had been performed, the district could have previously remedied this situation. The auditor recommended the district check for and enforce compliance with the requirements it sets for its subgrantees.

District Response:
The district stated that it will be more diligent in enforcing other requirements set for grantees in the 1996 grants. The district will not include any requirements that will not be enforced. Additional requirements will be included in site visit forms, and subgrantees will be checked for compliance.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district will provide a copy of the site visit forms to the SWMP. The information was received on Sept. 16, 1996