District M Audit

MoDNR Topics

District M

Audit Finding Resolution Summary
Region M Solid Waste Management District
Date of Final Audit Report: Oct. 30, 1996
For The Fiscal Years: 1992, 1993, 1994, 1995
Date of Final Resolution: March 18, 1997

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:
Failure to Provide Surety Bonding. During the four year audit period ending June 30, 1995, the district did not provide surety bonding for the Executive Director and Recycling Coordinator. The individuals have cash receipting responsibilities and prepare and deliver bank deposits as the Department of Natural Resources (DNR) General Terms and Conditions II.E.(3) require. In case of loss or theft, inadequate insurance coverage is present.

The auditor recommends that surety bonding should be purchased for all employees, which are entrusted with funds and property.

District Response:
The district stated that the Contract for 1997 with Harry S. Truman Coordinating Council (HSTCC) provided a clause requiring proof that HSTCC does indeed have a surety bond for all employees that would have any contact with assets or bank deposits and receipts.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district provide a copy of the documentation that all employees as well as executive board members having contact with assets or bank deposits or receipts have surety bonding coverage. The district provided this documentation to the Solid Waste Management Program (SWMP) on June 17, 1997.

2. Audit Finding and Recommendation:
Inadequate Match Documentation. During the fiscal years 1994 and 1995 the district could not support the one-third match for the district’s $20,000 administrative grant each year as required by the DNR General Terms and Conditions II.D.

The auditor recommended the district obtain the supporting documentation to authenticate the in-kind match for the administrative grant. If the proper supporting documentation is not provided, then the district may be ineligible to receive funding for five years.

District Response:
Region M submitted evidence of meetings attended by the Board of Directors and members of the Management Council, along with hourly wage rates as presented by the individual members. Minutes of the meetings attended and mileage were also calculated. These activities were the in-kind contribution intended to be used to match the Administrative Funds.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district will provide documentation supporting in-kind match. The district provided this documentation to the SWMP on June 25, 1997.

3. Audit Finding and Recommendation:
Reports Not Timely Filed – District Grants. Quarterly status reports to DNR on the progress of district grants were not submitted on a timely basis. Additionally, final reports as required by 10 CSR 80-9.050(3) (C) were not located on any district grants.

The auditor recommended that the district complete all final reports for all district grants that are due and submit future reports to DNR within the time limits allowed by law. The reports should note any subgrantee, which has not complied with the reporting requirements.

District Response:
The district stated that all district grants, which are currently open, will be reported to DNR on a quarterly basis, as established by DNR. The district did not provide written procedures as recommended by the SWMP.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district provide written procedures for ensuring compliance with reporting requirements by both the district and its subgrantees. The district provided this documentation to the SWMP on July 8, 1997.

4. Audit Finding and Recommendation:
Interest Income Not Reported. Interest income was earned by the district in their checking account. Although the district did not report the interest income, on occasion, they did deduct the interest income from outlays.

The auditor did not quantify unspent interest income for the following primary reasons:

1. The district maintains their records on a calendar year basis whereas DNR grant funding is on a fiscal year basis.

2. The Regional Planning Commission in fiscal year 1994 and fiscal year 1995 would credit interest income against monthly expenditures on vouchers to the district without tabulating the accumulated value of credited interest.

The auditor did determine that interest was earned on a calendar year basis in the following amounts:

Calendar Year	Amount
1992	$1,135
1993	$1,782
1994	$1,581
1995	$3,210

Interest income was not properly accounted or reported to the DNR. The auditor recommended DNR reduce future payments to the district for the interest earned in fiscal year 1992, fiscal year 1993, fiscal year 1994, and fiscal year1995 or that the district obtain permission from the DNR to use this interest income for administration of the district.

District Response:
None required.

Final Resolution:
The district was not required to take any actions because SWMP has made changes to the Special Terms and Conditions to allow districts to utilize income generated from interest earned on district grant agreement funds. The expenditure of income earned from such interest must comply with 10 CSR 80-9.050 Solid Waste Management Fund (SWMF) - District Grants. Interest earned from grant monies may be used to fund costs as long as they are reimbursable under the provisions established in the SWMF - District Grants rule and directly benefit the district grant program.

5. Audit Finding and Recommendation:
Property Inventory – Restricted to Subgrantees Only. The district does not maintain an inventory of property purchased by subgrantees as required by the DNR General Terms and Conditions II.J.2.a. Property purchased under the program has not been inventoried in violation of contract provisions.

The auditor recommended that an inventory be established, maintained, and taken every two years.

District Response:
The district stated that it created an inventory of all equipment purchased by the subgrantees and currently has detailed records of all such equipment. The district did not submit this information or documentation of the inventory control procedures at the final resolution meeting.

Final Resolution:
The DNR considers this matter resolved since the district provided the written procedures it will use to perform physical inventories, managing equipment and comply with proper equipment disposition and provided a complete inventory of all equipment purchased with SWMF following criteria as described in the DNR General Terms and Conditions II.J.2.a on July 8, 1997.

6. Audit Finding and Recommendation:
Lack of Source Documentation – Administrative Grants. Administrative Grants of $45,000 were awarded to the district for fiscal years 1992 and 1993. The district had one employee, which operated the SWMD and wrote the solid waste management plan. The solid waste management plan was written over a two year period. The auditor could not locate any invoices, which would support the expenditures associated with the administrative grants. The auditor did find a general ledger, cancelled checks, bank statements, and the solid waste management plan. However, this limited documentation failed to support the expenditure of DNR funding in the amount of $45,000 or more for each calendar year in 1992 and 1993.

This results in questioned costs of $2,898 for 1992 and $4,339 for 1993. Without source documentation the district is unable to support the cost as being administrative costs. Furthermore, this deficiency likely contributes to the computation that not all grant funds were expended.

The auditor recommended the district be required to find support for misplaced records and resolve any resultant deficiency of grant fund expenditures. If the proper supporting documentation is not provided, then the costs may be disallowed by the DNR.

District Response:
The district stated that documentation is readily available for review and was reviewed by the auditor during the audit. The district stated that at the exit interview there was no mention of any deficiency. The departmental staff representing the Internal Audit Program (IAP) reviewed the audit finding and concluded that undocumented costs still existed. To resolve this finding, documentation must be provided for the remainder of the costs. The IAP has determined that the district still needed to provide additional documentation to support expenditures in the amounts of $1,763 for fiscal year 1992 and $2,557 for fiscal year 1993.

Final Resolution:
The DNR considers this matter resolved since the district provided additional documentation to support expenditures of at least $1,763 for fiscal year 1992 and $2,557 for fiscal year 1993. The district provided this documentation to the SWMP on July 8, 1997.

7. Audit Finding and Recommendation:
Lack of Source Documentation – Project Grant. The Project Teach Trash Grant of $15,335 was awarded to the district for the fiscal year 1993. The auditor could not locate any invoices, quarterly reports, payroll records, matching funds, matching in-kind, grant agreement, timesheets, and final report, or documentation of procurement and contracts. The general ledger did record income and expenditures of the project grant, but without source documentation the district is unable to support the costs as being administrative costs.

Final Resolution:
The SWMP provided the district with the missing documentation from their files and now considers this matter resolved.

8. Audit Finding and Recommendation:
Accounting System Deficiencies. The district’s present accounting system commingles all grant funding, grant expenditures and grant related program income into one account. Primarily, this account presents the "inflow" and "outflow" of all transactions associated with MDNR programs.

The program staff (the Recycling Coordinator) maintains accounting records for all district and project grants, segregated by grant and grant recipient. These records are maintained by the Harry S. Truman Coordinating Council, or the Regional Planning Commission, which handles the administration of the Region M Solid Waste Management District. Neither the district nor the Regional Planning Commission retain reconciling worksheets between their independent accounting systems. The reconciliations are critical since the Regional Planning Commission is the only system, which segregates costs by project and year. The district cannot specifically identify the remaining unspent DNR grant funds either by type or year.

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

District Response:
The district stated that detailed accounting procedures to ensure consistency and propriety of source documentation along with other grant related information were being developed.

Final Resolution:
The DNR considers this matter resolved since the district submitted a written description of the district’s accounting and bookkeeping system which described procedures by which program and accounting records are reconciled and segregated by grant type, funding amount, and fiscal year. The district also submitted an example spreadsheet representative of the accounting and bookkeeping system. Also, the district submitted written procedures for monitoring the accounting records to ensure consistency and propriety of source documentation along with other grant related information. The district provided this documentation to the SWMP on July 8, 1997.