District S

Audit Finding Resolution Summary
Bootheel Solid Waste Management District – Region S
Date of Final Audit Report: March 18, 1997
For The Fiscal Years: 1993, 1994, 1995, 1996
Date of Final Resolution: Oct. 29, 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.

ACCOUNTING AND INTERNAL CONTROLS

1. Audit Finding and Recommendation:
Funds in Excess of Collateral Pledging.  On July 3, 1993, the district’s bank balance reached $130,831.62 and continued above the $100,000.00 Federal Depositors Insurance Corporation (FDIC) coverage for several months. State Statutes require that depositories of public funds shall provide collateral security pledging on any funds in excess of FDIC insurance.

The auditor recommends that the district maintain agreements with the financial institutions that they deal with to provide collateral pledging when required and to notify the district when funds exceed the FDIC coverage. Also, the district should monitor the accounts to ensure the condition does not reoccur.

District Response:
The district has adopted procedures to assure that all funds are covered by FDIC insurance. Specifically, whenever the cash balance nears $100,000.00, excess funds are transferred to a short-term certificate of deposit at a different financial institution, which is also covered by FDIC insurance. Thus, all of the district's funds would be covered by FDIC insurance. These procedures will be incorporated into a job description or will be discussed and detailed through a board resolution.

Final Resolution:
The Department of Natural Resources (DNR) considers this matter resolved since the detailed procedures describing the method for tracking and transferring funds were submitted to the Solid Waste Management Program (SWMP) on Oct. 20, 1997.

2.  Audit Finding and Recommendation:
Budget.  The district has failed to adopt an annual budget as required by State Statutes and by it’s own bylaws.

The auditor recommends that the district adopt an annual budget for the current year as soon as possible. Also, previous years should be reviewed to determine possible effects on the district.

District Response:
The district stated that the Bootheel Regional Planning Commission (BRPC) submitted a budget for the administrative contract for prior fiscal years through fiscal year 1997. While the district had a plan on how to spend available funds, it never formally adopted the plan in a budget document. The district is currently preparing a budget for the fiscal year ending June 30, 1998, which will be submitted to the District Board at the Aug.14, 1997, meeting for adoption. The district planner provided the department with a copy of the board adopted budget at the Aug.19, 1997 meeting.

Final Resolution:
The DNR considers this matter resolved.

Audit Finding and Recommendation:
Treasurer’s Bond.  The district’s treasurer is not properly bonded and the district is at a risk of loss of public funds. The auditor recommended that reasonable coverage should be acquired as soon as possible.

District Response:
Currently, funds are administered by the BRPC, which has commercial crime insurance on employees of BRPC. The checkbook is maintained by BRPC employees, but requires two signatures from the approved Solid Waste Board Members. Checks are only written after approval by the Solid Waste Board. All of the district board members are county commissioners and are already bonded by their representative counties. If bonding authority transfers for district activities, such authority should suffice to resolve this issue. However, if bonding authority does not transfer, surety bonding will be secured for any board members having check signature authority.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district provide documentation supporting the transfer of county bonding authority to commissioners conducting solid waste management district business. If such transfer authority cannot be supported, the district will submit documentation that assures that district board members having check signature authority are covered by surety bonding. The district submitted this documentation to the SWMP on Oct. 20, 1997.

4. Audit Finding and Recommendation:
Banking System Weaknesses and Interest.  On Aug.19, 1994, the district opened a new checking account for the District Grant Fund which was non-interest bearing for approximately 2 ½ months. Also, written permission was not obtained to use interest income earned by grant monies and the interest was not deducted from outlays. The amount of interest earned totaled $6,070.33.

The auditor recommended that the district should deposit grant funds in interest bearing accounts and permission should be obtained by the district to use the interest income. Also, the program should reduce payments to the district by $6,070.33 for interest earned or the district obtain written permission from the program to use this interest income and any future interest income earned.

District Response:
The district feels that they were not made aware of all requirements of the grants and that the DNR has been informed of the district’s activities. Also, the district will try to fully comply with requirements in the future.

Final Resolution:
The district was not required to take any actions. The SWMP made changes to the Special Terms and Conditions to allow districts to utilize income generated from interest earned on district grant agreement funds. The SWMP allows Region S to have spent this income, as long as documentation shows that expenditures directly benefited and are specifically identifiable to the district grant program or to the implementation and related administration of the district's plan and resource recovery efforts.

5. Audit Finding and Recommendation:
Bank Reconciliation. Bank reconciliations were not available for all periods in question. The district is required to design and implement an internal control structure to achieve the control objective of the program. It seems that preparing and maintaining monthly bank reconciliations should be a part of the system.

The auditor recommended that bank reconciliations be prepared on a monthly basis and that a copy of the reconciliation be kept for the required record retention period.

District Response:
The district submitted a detailed description of accounting procedures including monthly reconciliation of bank accounts that assures assets are adequately safeguarded and ensures the accuracy and consistency of its financial information.

Final Resolution:
The DNR considers this matter resolved.

DISTRICT GRANTS

1.  Audit Finding and Recommendation:
Cash Forecasting Inadequate. The district maintained excessive cash on hand and its requests for funds were incorrect. The auditor recommended the district receive permission from the DNR to use the prior excess funds for future projects or return the funds. In the future, the district should deduct excess funds from their next request and inform the department when budget deviations occur.

The district was not required to take any actions. The district was required to spend or encumber all funds from previous fiscal years before additional funds would be disbursed by the SWMP. The SWMP required that SWMD identify all funds on hand for new district grant applications prior to forwarding to the department director for approval.

Final Resolution:
The DNR considers this matter resolved.

2. Audit Finding and Recommendation:
Quarterly Reports. Quarterly reports for district subgrants were not filed on a consistent basis or in a timely manner. They also did not include all required information to keep the program informed.

The auditor recommended that quarterly reports be filed on a timely basis and all required information should be detailed in those reports.

District Response:
The district stated that all quarterly status reports (QSR) were filed with DNR, however, at the time of the audit copies were not in the project files. The QSRs were later found in a separate file and have been filed in the appropriate project file.

Final Resolution:
The DNR considers this matter resolved.

3. Audit Finding and Recommendation:
District Checks. The district maintains a separate checking account for its district subgrants program. The checks used for that account were blank counter checks that were not prenumbered. The district is required to maintain adequate internal controls. Using prenumbered documents should be a part of that system.

The auditor recommended the district order prenumbered checks as soon as possible. The small expense would be worth the added control.

District Response:
The district stated that when the bank accounts were opened, an initial supply of counter checks was provided to last until the printed checks could be received. The district submitted a copy of check registers and a sample copy of checks showing that pre-numbered checks are currently being used.

Final Resolution:
The DNR considers this matter resolved.

Audit Finding and Recommendation:
Equipment Management. The district does not maintain a property ledger and a physical inventory was not taken. Also, compliance with the flood insurance purchase requirements are not documented. The auditor recommended the district design and implement a control system to ensure adequate safeguards of district assets and should also conduct a physical inventory of property at least once every two years and reconcile the results with the property records.

District Response:
The district submitted their General Terms and Conditions that depict the district's right to a security interest for equipment. Also, the district submitted a current inventory of equipment for which it holds a security interest and written equipment management procedures.

Final Resolution:
The DNR considers this matter resolved.

5. Audit Finding and Recommendation:
Inadequate Documentation For Projects.  The district failed to sufficiently document subgrants. For two 1993 projects, the district did not complete formal evaluations, final reports were not found, documentation of bidding incomplete, 15 percent retainage was not held until final board approval, and expenditures were not documented properly. The 1994 project was improved but still had problem areas. The 1995 project was incomplete at the end of field work but documentation seemed reasonable.

The auditor recommended the district prepare a written documentation plan for the district subgrant programs that included all checklist and criteria used for documentation and submitted to the DNR for their approval. The district should obtain the required documentation to support the subgrant expenditures for the fiscal years 1993 and 1994 projects. If proper documentation is not provided, the cost may be disallowed.

District Response:
At the audit resolution meeting the district indicated that it would develop a checklist to follow for its district grant application and administration process. Also, the district indicated that the scope of work document referenced in finding number 2, under district grants, documented the districts compliance with 10 CSR 80-9.050(4)(B). After the audit resolution meeting, the district provided a significant amount of supporting documentation for the three subgrants noted in the finding.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district submits to the SWMP some additional documentation and will submit a checklist that it will follow for its district grant application and administration process. The district provided documentation and sample checklist to the SWMP on Oct. 20, 1997.

Audit Finding and Recommendation:
Possible Related Party Transaction-Conflict of Interest. A fiscal year 93 project did not adequately document subgrantee expenses with copies of original vendor’s invoices and canceled checks. The only supporting documentation in the file was statements from a related party that indicated the vendor’s name and a brief description of items or services purchased. Since the payments were to a related party and the required documentation was not maintained, the district had a possible conflict of interest problem. Also, the original project budget should have been amended as considerable expenditures for the project were unbudgeted.

The auditor recommended the district should try to gather as much additional information as possible from the subgrantee. District personnel should visit the subgrantee and examine the completed project and try to determine if it is operating according to plan. If the proper documentation is not provided, the cost may be disallowed.

District Response:
In its response to the SWMP recommended actions the district stated that it currently managed the district grant program as required by 10 CSR 80-9.050(4)(B). Also, the district provided discussion regarding the subgrant in question. Discussion included the relationship and ownership of the entities involved in expenditure of solid waste management funds and an explanation of unbudgeted expenditures made without a budget amendment.

Discussions at the audit resolution meeting concluded that the scope of work document provided by the district, referenced in finding number 2 under district grants, documented the districts compliance with 10 CSR 80-9.050(4)(B). As well, it was determined that there was not a conflict of interest based on documentation provided by the district. In a follow up discussion with DNR, Internal Audit Program director, concluded that an amendment would not be necessary to resolve the unbudgeted expenditures issue. Instead, it was suggested that the board be presented with the facts regarding this issue. After presentation of such facts, the board should determine whether the expenditures were appropriate. The board meeting minutes should then be submitted to the SWMP to resolve this audit finding.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district submits to the SWMP board minutes discussing unbudgeted expenditures associated with the fiscal year 93 project. The district provided this document to the SWMP on Oct. 20, 1997.