District Q

Audit Finding Resolution Summary
Region Q
Ozark Foothills Regional Solid Waste Management District
Date of Final Audit Report:  July 16, 1998
For The Fiscal Years: 1992-1997
Date of Final Resolution:  April 26, 1999

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.

Audit Finding and Recommendation:
Inappropriate Composition and Operation of the District Council. No evidence exists in the records of the district of the appointment of the members of the District Council. The council has not met on a regular basis and has not had a statutory majority at a meeting since Aug. 26, 1991. No records have been kept of the terms of the council members. The Executive Board has met only once with a quorum on Oct. 14, 1991 and did not meet subsequently. RSMo. 260.315 designates the composition, terms, and duties of the council. The term of council members is set at two years and reappointment is allowed. The council is required to meet "at least twice annually." RSMo. 260.320 requires that the Executive Board be appointed by a valid meeting of the District Council. The executive board is to consist of "seven persons." Because the council has not maintained records of the appointment of members and has not legally met for a period exceeding the statutory terms of its members, it appears that any action taken by the council, including the appointment of the executive board, would not be valid.

The auditor recommended that the district review RSMo. 260.315 and obtain the required appointments to reconstitute the council. It was also recommended that when that is completed the council meet, based on the statutory quorum requirement of a majority of the council, and reappoint the executive board. Once the executive board is established they should review actions taken over the past seven years to ensure that they are valid.

District Response:
The district formed as an alternative management structure with resolutions signed by all counties involved. The district has met to review all previous actions (1990-1997) to ensure the actions were valid as required in 260.315. The secretary of the Executive Board recorded minutes for the meeting. The minutes are complete and contain text of all matters discussed or referred to during the December 14, 1998, meeting and was submitted to the SWMP on Jan. 26, 1999. The alternative management structure resolutions were signed on Oct. 23, 1998, Oct. 26, 1998, Oct. 27, 1998, Oct. 28, 1998, and Oct. 30, 1998, and submitted to the SWMP on Nov. 2, 1998. All documentation is a part of the district’s permanent file.

Final Resolution:
The Department of Natural Resources (DNR) considers Finding 1 resolved.

Audit Finding and Recommendation:
Incomplete Minutes for Both Council and Executive Board Meetings. Board and council minutes were not signed and did not include copies of resolutions or other matters discussed. They did not include evidence of the appointment of the members of the council and the board. Meetings were held and actions taken without the presence of a quorum. RSMo. 610.020.6 requires that governmental units retain complete and accurate records of their proceedings. The minutes should be signed by both the chairman and the secretary. All matters discussed at the meeting should be clearly stated and any documents or resolutions acted on by the government should be retained as part of the record of the government. RSMo. 260.315 and 260.320 establish the quorum requirements for both the Executive Board and the council, as well as the powers and duties of the council.

The auditor recommended the district record minutes for all meetings and have them signed by the chairman and secretary; ensure that all minutes are complete and contain copies of all matters discussed or referred to; record motions, seconds, and votes by name and ensure that all participants are validly appointed and listed as present or absent for each meeting; ensure that a quorum is present prior to starting any meeting; provide for adequate and orderly minute retention allowing public access.

District Response:
The district agreed to ensure all minutes are complete and contain copies of all matters discussed or referred to during the meetings. All motions, seconds, and votes by name will be recorded and all participants are validly appointed and listed as present or absent for each meeting. The district agreed to ensure a quorum is present prior to starting a meeting. Adequate and orderly minute retention will be maintained for public access to comply with RSMo. 610.020.6. These items were approved during a Dec. 14, 1998, meeting and the minutes were submitted to the SWMP on Jan. 26, 1999. All documentation is a part of the district’s permanent file.

Final Resolution:
The DNR considers Finding 2 resolved.

Audit Finding and Recommendation:
By-Laws in Violation of Statutes.  Article V – Membership Eligibility of the by-laws adopted by the district is in violation of statutes. The by-laws attempt to modify the statutory powers of the council and this article, as adopted, attempts to give the council the power to deny membership in the Region Q Solid Waste Management District to political subdivisions, not part of the original agreement, which might vote to join the district. RSMo. 260.305.4 gives each county the explicit authority to join any district it chooses by adoption of an appropriate order or ordinance and notifying, in writing, the governing board of each county in the existing district and the DNR. The auditor recommended the district review and amend the by-laws as necessary to ensure compliance with Missouri statutes.

District Response:
The district has amended the by-laws as necessary to comply with RSMo. 260.305.4. which gives each county the explicit authority to join any district it chooses by adoption of an appropriate order or ordinance and notifying, in writing, the governing board of each county in the existing district and the SWMP. A draft by-law revision was submitted to SWMP on Dec. 2, 1998. It was approved during the April 12, 1999, district executive board meeting. All documentation is a part of the district’s permanent file.

Final Resolution:
The DNR considers Finding 3 resolved.

Audit Finding and Recommendation:
Failure to Contract for Management Services. The district adopted a by-law which indicated that the Ozark Foothills Regional Planning Commission (OFRPC) would be its management agent. No agreement with the OFRPC was reached and a contract was not signed. The by-law does not mention reimbursing the OFRPC for expenses incurred in performing services for the district. Yet the district did disburse funds to the OFRPC as reimbursement for expenses. The General Terms and Conditions (GTC), II.P. requires the district to determine allowability of costs in accordance with the principles of OMB Circular A-87. Circular A-87 states that "A contract is a mutually binding legal relationship obligating the seller to furnish supplies or services and the buyer to pay for them. A contract includes all types of commitments that obligate the government to an expenditure of appropriated funds and that are in writing."

The auditor recommended the district should obtain documentation from the OFRPC to substantiate the administrative expenses that were paid by the district to the OFRPC for fiscal years 1992-1997. The district should recover payments improperly made or not substantiated. The district should negotiate a written contract for future management services.

District Response:
The OFRPC provided copies of contract documentation for years 1992 through 1997 between the district and the OFRPC to SWMP on April 7, 1999. All documentation is a part of the district’s permanent file.

Final Resolution:
The DNR considers Finding 4 resolved.

Audit Finding and Resolution:
Purchase of Land with State Grant Funds. Project Grant 94003 was a Materials Recovery Facility (MRF) building purchase. The facility, which was valued at $100,000, was purchased from Ozark Foothills Economic Development Association (OFEDA) in April of 1995, $80,000 with Project Grant funds and $20,000 was donated by OFEDA. The $20,000 was listed on the grant proposal as matching funds. OFEDA had purchased the building and land for $85,000 in Nov. 1993. The deed, recorded in Nov. 1995, which transferred the property to the district includes both the land and the buildings on it. An appraisal of the property prior to the transfer to the district valued the property, including the land, at $120,300. It appears that the appraiser valued the land at approximately $50,000. 10 CSR 80-9.040(1)D.3F states that land is not an allowable use for project grant funds. The auditor recommended the district reimburse the state grant fund $50,000 for the amount of funds improperly expended for land acquisition.

District Response:
Neither party (the DNR nor the district) agreed with the auditor’s recommended reimbursement of $50,000. Based on calculations taken from project information and the 1994 appraisal, it was agreed upon by both parties and Internal Audit during the Feb. 3, 1999, audit resolution meeting that a $14,800.00 cash reimbursement or documentation of $20,000 in appropriate match during the grant period must be submitted to DNR from the district. All documentation is a part of the district’s permanent file.

Final Resolution:
The DNR will consider Finding 5 resolved upon receipt of the proper reimbursement and/or documentation of appropriate match to DNR by the district. The district provided partial match documentation on Feb. 16, 1999. The remaining amount was reimbursed to the program on Oct. 7, 1999.

Audit Finding and Recommendation:
Failure to Adopt Required Policies.  The district has not adopted certain required policies nor any procedures to implement the required policies. The district has not adopted a Non-discrimination policy, an Environmental Standards policy, and a Procurement policy, all required respectively by GTC, I(A), I(B), and II(N). The district has not adopted a policy to ensure compliance, or ensure that subrecipients comply, with the GTC for state grant funds, required by 10 CSR 80-9.050 and GTC, I. The district has not adopted a policy prohibiting the signing of checks in advance or drawing checks to cash required by 10 CSR 80-9.050 and the GTC, II.E. The district has not adopted a policy on Conflicts of Interest in the council, board, or subrecipients as required by RSMo. 260.320.5 and GTC, II.Q.

The auditor recommended the district adopt and implement policies and procedures to ensure compliance with all applicable governing statutes, regulations, and contract provisions.

District Response:
The district provided draft copies to the SWMP on Nov. 30, 1998, and implemented policies and procedures to ensure compliance with all applicable governing statutes, regulations, and contract provisions. These policies were approved during the district’s April 26, 1999 executive board meeting. All documentation is a part of the district’s permanent file.

Final Resolution:
The DNR considers Finding 6 resolved.

Audit Finding and Recommendation:
Inadequate Bonding Insurance. The district has not provided bonding insurance for one of the two check signers or for any of the personnel who have access to the district equipment. The GTC, II.E.3 requires effective control and accountability for all recipient cash, real, and personal property. The auditor recommended that the district obtain sufficient bonding insurance to cover the check signers and the personnel who handle district equipment.

District Response:
The district has obtained the bonding insurance and it is in effect. This was submitted to SWMP on Dec. 2, 1998. During the audit resolution meeting of Feb. 3, 1999, it was discussed whether this bond amount was adequate coverage. The district provided additional justification to the SWMP on Feb. 17, 1999. All documentation is a part of the district’s permanent file.

Final Resolution:
The DNR considers Finding 7 resolved as the district submitted meeting minutes from an April 26, 1999 executive board meeting that approved a resolution to provide the bonding insurance and to provide the deductible required by the insurance policy. The DNR’s Internal Audit approved the policy on April 30, 1999.

Audit Finding and Recommendation:
Inappropriate Handling of State Funded Equipment. Title to grant funded equipment has been vested in the OFRPC. It is not clear from the district’s records which equipment is owned by the district and which equipment, if any, is owned by the OFRPC. Inventory records maintained by the district show the equipment as owned by the district but the inventory records are incomplete, in that no costs, dates of acquisition, location, or condition were noted for most of the assets listed. GTC for district grants as modified by the Special Terms and Conditions, GTC II.J, requires that equipment title be vested in the district. Inventory records of grant funded equipment are required to be maintained showing cost, date of acquisition, location, and condition among other information. The auditor recommended the district retain ownership of all state grant funded equipment during the time the grant is in effect. Maintain records of the equipment including location, use, serial number, date of purchase, cost, etc.

District Response:
The district disagreed with the contracted auditor’s finding. However, the district provided copies of an asset list from the district’s general inventory which reflects all DNR funded equipment including the required information (quantity, description, source, ID number, owner, purchase date, cost per unit, SWMP project number, location, use, condition and life estimate). This information was provided to the SWMP on Dec. 2, 1998. All documentation is a part of the district’s permanent file.

Final Resolution:
The DNR considers Finding 8 resolved.

Audit Finding and Recommendation:
Failure to Comply with Procedures for Receipts.

The district, through the OFRPC, adopted procedures to handle funds received from the sale of recyclable materials. These procedures include issuing Bills of Lading for materials leaving the facility. This procedure was not followed on all sales. In addition, the procedures adopted are not sufficient to fully control sales revenues.

The Bills of Lading are not consistent and are not prenumbered. In some cases, no Bill of Lading is prepared. There is no accounts receivable system, and no record of how many Bills of Lading are issued or whether they are all accounted for. There is no reconciliation of the monthly receivable total to new sales and deposits. The GTC, II.E, require the district to provide adequate financial systems to safeguard assets. The auditor recommended the district should comply with its own adopted policies and review the adopted policies to ensure that their design is sufficient to ensure that they capture sales revenues and safeguard the district’s assets. They should especially consider the use of numbered sales invoices, an accounts receivable system, securing the sales documents, and reconciling sales, collections and deposits at least monthly.

District Response:
The district did not feel this finding was completely correct in its descriptions and implications concerning district sales revenues, however, the district felt the finding did raise points of sufficient merit. The district is using numbered invoices in all future sales and an accounts receivable system was instituted on Jan. 1, 1999. Sales documents (Bills of Lading) are kept in secure files in two separate locations, and sales, collections and deposits are reconciled on a monthly basis. Drafts were provided to SWMP on Dec. 2, 1998, and will be approved during the district’s April 26, 1999, executive board meeting. All documentation was received on April 30, 1999, and is a part of the district’s permanent file.

Final Resolution:
The DNR considers Finding 9 resolved.

Audit Finding and Recommendation:
Failure to Maintain Accounting Records on the Basis of Generally Accepted Accounting Principles. The district’s accounting records are maintained on the cash basis. The district has made no efforts to determine the method of accounting for subrecipients. 10 CSR 80-9.050 requires that the records of grant recipients and subrecipients be maintained on the basis of generally accepted accounting principles. The auditor recommended the district provide a full GAAP accounting system for the district and ensure that subrecipients are on that basis of accounting as well.

District Response:
The district has procured services from a CPA to review the district’s current accounting structure and provide assistance to the district regarding any changes necessary to comply with 10 CSR 80-9.050. A copy of a request for services to an independent accounting firm was submitted to SWMP on Dec. 2, 1998. This review has been initiated and the district will provide all documentation of the CPA’s findings, recommendations, and implementation plan to the District Grants Manager when it has been submitted to the district by the auditing firm.

Final Resolution:
The DNR considers Finding 10 resolved as it received the CPA’s recommendations on May 10, 1999.

Audit Finding and Recommendation:
Failure to Adopt and Implement Adequate Accounting Control Systems. The district accounting and internal control systems are not sufficient to meet the objectives of safeguarding assets. The district has not maintained grant ledgers, does not issue receipts, uses unnumbered checks for disbursements, and deposited sales revenues directly into the account of the OFRPC. The GTC, II.E, requires the district to maintain accounting systems adequate to safeguard assets. The auditor recommended the district maintain grant ledgers for each grant and establish an adequate system of controls for financial transactions.

District Response:
The district has created and will maintain grant ledgers for each grant. It has established an adequate system of controls for financial transactions to comply with GTC, II.E which was submitted to SWMP on Dec. 2, 1998. All documentation is a part of the district’s permanent file.

Final Resolution:
The DNR considers Finding 11 resolved.

Audit Finding and Recommendation:
Failure to Print Recycled Symbol on Printed Materials. Printed materials prepared by the district were not printed on recycled paper and did not display the recycled paper symbol on at least one page. The GTC, II.V, require the use of recycled paper and the printing of the recycled symbol on at least one page of printed material. The auditor recommended that the district ensure that recycled paper is used for all documents and the recycle symbol is printed on at least one page of all materials.

District Response:
The district agreed to place the recycled symbol on at least one page of all publications and correspondence created and distributed by the district to comply with GTC, II.V. Copies of existing publications were submitted to SWMP on Dec. 2, 1998. The district has procured recycled content paper that is usable in their equipment. A label copy of the paper was submitted to SWMP on Feb. 17, 1999. All documentation is a part of the district’s permanent file.

Final Resolution:
The DNR considers Finding 12 resolved.

Audit Finding and Recommendation:
Failure to Provide Funding Notice of Public Documents. Press releases and other public notifications prepared by the district did not show the DNR as a funding source and did not display the department’s logo. The GTC, as modified by the STC, GTC II.M and II.U, require that all press releases, etc, identify the DNR as a funding source and display the department’s logo in the materials with the full department name. The auditor recommended including the appropriate wording and the department’s logo on all public documents.

District Response:
The district disagreed with this finding and indicated that they have been in compliance with this requirement. Documentation supporting the use of the DNR logo and name was submitted to SWMP on Dec. 2, 1998, and deemed adequate during the Feb. 3, 1999, audit resolution meeting. All documentation is a part of the district’s permanent file.

Final Resolution:
The DNR considers Finding 13 resolved.

Audit Finding and Recommendation:
Failure to Provide Financial Information in Proposals. Proposals received by the district did not disclose the required financial information for subrecipients. 10 CSR 80-9.050 requires disclosure of three years financial history for applicants for District Grants, and 10 CSR 80-9.040 requires disclosure of three years financial history for applicants for Project Grants. The auditor recommended the district adopt and implement policies to ensure that applications are completed and reviewed adequately.

District Response:
The district disagreed with this audit finding. The district indicates that each year, all applications forwarded by the district on behalf of subrecipients are reviewed by the staff of the SWMP. Additional information regarding this issue has never been requested by the SWMP. The district has had only one subrecipient since first applying for grant funding, which has been the OFRPC. An annual audit is provided to SWMP, which has contained the fair presentation letters from the past three years audits done by contracted, independent CPAs. Each subrecipient application is accompanied by the following statement: The Ozark Foothills Regional Planning Commission is audited each year by an independent certified public accountant. Copies of past audits are retained in previous district grant cycle permanent files. The Fiscal Year 1999 application packet contained the required financial information and was submitted to SWMP on Jan. 7, 1999. All documentation is a part of the district’s permanent file.

Final Resolution:
The DNR considers Finding 14 resolved.

Audit Finding and Recommendation:
Failure to Publish Required Notices Requesting Proposals. Notices requesting proposals for grant applications were published in only one newspaper. The district was not aware if the newspaper chosen was the newspaper designated for legal notice in the other four counties or in the cities participating in the district. 10 CSR 80-9.050(2)(A)2 requires "district executive boards to request project proposals by giving written notification to the governing officials of each county and cities over 500 in population and by publishing a notice in a newspaper officially designated by the presiding commissioner of each county for public notices for every county and for each city with a population over 500 within the district. The auditor recommended the district publish required notices in all counties and cities participating in the district.

District Response:
The district agreed to add additional newspaper advertisement during the Fiscal Year 2000 cycle to comply with 10 CSR 80-9.050(2)A.2.

Final Resolution:
The DNR considers Finding 15 resolved.

Audit Finding and Recommendations:
Failure to Comply with Disadvantaged Business Enterprise Requirements. The district did not prepare and submit Form 334, MBE/WBE Utilization Report. The auditor found no evidence that the district had made any positive effort to make contract opportunities available to Disadvantaged Business Enterprises or to Women Owned Business Enterprises. The GTC, II.W, requires the district to file Form 334 quarterly and to make positive efforts to make contract opportunities available to Disadvantaged Business Enterprises or to Women Owned Businesses Enterprises. The auditor recommended the district adopt and implement appropriate policies and file Form 334 quarterly as required.

District Response:
The district adopted policies in the following area and developed an implementation plan, GTC, I.A-Nondiscrimination (A,J). Draft copies were submitted to SWMP on Dec. 2, 1998. This policy will be approved during the district’s April 26, 1999, executive board meeting. Minutes from this meeting were provided to the DNR on April 30, 1999. A form 334 will be filed quarterly as required to comply with GTC, II.W and will be provided along with quarterly status reports. This documentation was provided to SWMP on Dec. 2, 1998. All documentation is a part of the district’s permanent file.

Final Resolution:
The DNR considers Finding 16 resolved.

Audit Finding and Recommendation:
Failure to Obtain Flood Insurance.  The building purchased with Project Grant 94003 – MRF Building Purchase is situated in a flood plain according to the certified appraisal. The district did not obtain flood insurance on this property. The GTC, I.G. requires participation in a Flood Disaster program if the total cost of construction or acquisition is $10,000 or more. The auditor recommended the district obtain adequate flood insurance as required by the grant agreement.

District Response:
The district obtained adequate flood insurance as required by GTC, I.G and a copy was submitted to SWMP on Dec. 2, 1998. The $2,000 deductible was discussed during the Feb. 3, 1999, audit resolution meeting and the district has pledged to cover the deductible annually through program income. All documentation is a part of the district’s permanent file.

Final Resolution:
The DNR considers Finding 17 resolved as the executive board has approved the pledge and the SWMP received the minutes from the April 26, 1999, meeting.