District T

Audit Finding Resolution Summary
Lake of the Ozarks Solid Waste Management District
Region T
Date of Final Audit Report: Nov. 6, 1996
For the Fiscal Years: 1993, 1994, 1995
Date of Final Resolution: April 30, 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 (SWMP) at 573-751-5401.

1. Audit Finding and Resolution:
No Separate Bank Account for Solid Waste Management District Funds. The district does not maintain a bank account for Solid Waste Management Funds (SWMF) separate from the Council of Local Governments bank account. District grant funds were commingled with other program’s funds causing misidentification of grant receipts related to Solid Waste Management District (SWMD).

The auditor recommended the district be treated as a separate entity from the Lake of the Ozarks Council of Local Governments including proper segregation of funding source bank accounts.

District Response:
The district has opened a bank account separate from the Lake of the Ozarks Council of Local Governments. A copy of a bank statement was submitted to verify the existence of the account.

Final Resolution:
The Department of Natural Resources (DNR) considers this matter resolved.

2.  Audit Finding and Resolution:
District Does Not Maintain Monthly Bank Reconciliations. The district performs a reconciliation from the bank statement to the general ledger balance using a computer software package, but no evidence of the reconciliation is maintained by the district. Reporting of cash account does not have adequate control.

The auditor recommended that bank accounts should be reconciled monthly and reviewed by a member of the district’s board. The auditor also recommends the district maintain a record of the bank reconciliations or write out the outstanding items on the back of the monthly bank statement.

District Response:
The district stated that reconciliations have always been done by computer for all accounts. In the interest of solid waste reduction, paper copies were not printed. The district further stated that paper copies will be printed in the future and retained on file on a monthly basis.

Final Resolution:
DNR considers this matter resolved with the understanding that the district submits to the SWMP a copy of its reconciliation documentation. Further, this documentation should identify all individuals involved in the reconciliation process. Also, reconciliation documentation should be signed or initialed by all those involved. The district provided this documentation to the SWMP on July 23, 1997.

3. Audit Finding and Recommendation:
Improper Allocation of District Funds. Neither the district nor the council maintains separate accounts for the SWMD revenues and expenses. Proper allocation of district revenues and expenses is impossible due to the limitations of the current system.

The auditor recommended that the district segregate revenues and expenses once a separate account is created for Finding Number 1. Revenues and expenditures should be allocated on an equitable basis and charged to the appropriate account for each grant program.

District Response:
The district submitted a written description of the district's accounting and bookkeeping system by which program and accounting records are reconciled and segregated by grant type, funding amount and fiscal year.

Final Resolution:
DNR considers this matter resolved upon approval by the Division of Administrative Support's Internal Audit Program. Internal Audit has reviewed the plan and considers the proposed action adequate to resolve this finding.

4. Audit Finding and Recommendation:
Failure to Provide Surety Bonds. None of the district employees who are involved with the receipt or disbursement of funds are covered by a surety bond. In case of loss or theft, inadequate insurance coverage is present.

The auditor recommended that the district cover all employees which handle district funds and property with surety bond coverage.

District Response:
The district purchased a surety bonding for all employees (as well as the district director) entrusted with SWMF and/or property purchased with SWMF. A receipt for purchase of the surety bond as well as a copy of the bond document was submitted to the SWMP.

Final Resolution:
DNR considers this matter resolved with the understanding that the district will provide a copy of the schedule that identifies employees or employee titles. The district provided this documentation to the SWMP on or in June 24, 1997.

5. Audit Finding and Resolution:
Improper Support for Cash Disbursements-Administrative Grants. Five of the disbursements reviewed by the auditor had no supporting documentation present nor could the district locate invoices for these items. The auditor noted during the course of testwork that one invoice was not properly cancelled in adherence to district prescribed internal control procedures.

The auditor recommended that the district establish procedures to ensure adequate control over cash disbursements so that supporting documents are in proper order and maintained in district files. The auditor recommended that the district provide the required documentation to support the expenditures for the costs identified above. If proper documentation is not provided, then the cost may be disallowed.

District Response:
The district indicated that it would provide written documentation.

Final Resolution:
DNR considers this matter resolved with the understanding that the district will submit to SWMP written procedures for maintaining 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 June 24, 1997.

6. Audit Finding and Resolution:
Disbursement Checks Did Not Have Dual Signatures. The auditor noted one instance where a check was disbursed without dual signatures of the District Director and Board President. Control over disbursement was weakened, as a second signature on a check was not present.

The auditor recommended the District improve procedures that require dual signatures in order to maintain adequate review and control of disbursements.

District Response:
The district stated that a renewed effort has been made to ensure two signatures on all checks. It further indicated that no checks ever cleared without at least verbal approval from two signers. The district stated that the bank it does business with has been instructed not to clear checks without two signatures. The district submitted written procedures describing the actions it will take to ensure that dual signatures are obtained on all district checks.

Final Resolution:
DNR considers this matter resolved.

7. Audit Finding and Recommendation:
No Support for the In-Kind Match. District accounting records are not in sufficient detail to determine the amount and extent of in-kind match attributable to the SWMD.

The auditor recommended the district develop a system that allows for the tracking of the in-kind match amount. The auditor also recommended that the district fully implement Findings Number 1 and 3 to facilitate the system of segregating transactions related to the SWMD. The auditor further recommended that the district be required to obtain the supporting documentation to authenticate the district’s match contribution.

District Response:
The district responded that in-kind matches were not used regarding district administrative expenditures. Further, the district indicated that all recorded expenditures were matched with local cash. The district stated that beginning December 1996 volunteer time sheets were started, in the event in-kind becomes the method of match for the district. A cash disbursement sheet was submitted for July and August 1993 the first and second months of FY94. The sheet showed local cash match for those months.

Final Resolution:
DNR considers this matter resolved with the understanding that to ensure that a match of either in-kind or cash is supported through actual documentation, the district will submit to the SWMP documentation that supports the district's match obligation for the FY94 and FY95 district administrative grants. The district provided this documentation to the SWMP on July 8, 1997.

8. Audit Finding and Recommendation:
Lack of Segregation of Duties. The district accounts payable procedures call for the Director to open the mail, approve transactions, sign disbursement checks, and maintain custody of the checks until they are taken to the other authorized signer. Checks received via mail pass through the Director, secretary, and fiscal officer, then back to the secretary who takes the deposit to the bank. Assets could be misappropriated without management’s knowledge.

The auditor recommended the district secretary open the mail and the Director be removed from check signing so he can concentrate on approving disbursements. The auditor also recommended that the secretary restrictively endorse receipts received by mail.

District Response:
The district provided a written description of the procedures and actions it will take to implement a system to segregate accounting duties.

Final Resolution:
DNR considers this matter resolved upon review and approval by the Internal Audit Program. Internal Audit has reviewed the procedures/actions and considers them adequate to resolve this finding.

9. Audit Finding and Recommendation:
Interest Income Not Reported. Interest income was earned by the district in their checking account. The district did not report their interest income and did not deduct the interest income from outlays. Due to Findings Number 1, 2 and 3, interest income applicable to DNR funding is not identifiable.

The auditor recommended DNR reduce future payments to the district for the interest earned in FY93, FY94, and FY95 or that the district obtain permission from the DNR to use this interest income for administration of the district. The auditor also recommended the district fully implement Finding Number 1 so interest pertaining to the SWMD is identifiable.

District Response:
The district stated that documentation will be kept when interest monies are spent. The district has implemented procedures to address Finding Number 1 and agreed to submit an accounting of interest earnings from the SWMF.

Final Resolution:
DNR considers this matter resolved with the understanding that the district will submit to the SWMP a ledger sheet that identifies the amount of interest earned on all SWMF monies granted to the district since 1993. The district provided this documentation to the SWMP on June 24, 1997.

10. Audit Finding and Recommendation:
Employment Status of District Director. The Director is contracted by the council to be the Director of the council and all agency programs. This contract pertains to the council’s programs and not to the SWMD which is considered a separate entity. Since the Director is not entitled to the benefits that other employees receive, he is considered a consultant. As a consultant, the Director should provide surety bond coverage for himself as he is an authorized signer for district funds, but none is provided. Since the Director has provided over 12 years of service to the council, it appears highly irregular that he be considered a consultant who is not entitled to the regular benefits of the other employees. Allocation of grant receipts may have been improper since no allowance for payroll taxes was made by the district for the Director’s salary.

The auditor recommended that the Director be classified as an employee of the Council of Local Governments and be eligible for the same benefits as other employees. The auditor also recommended that the Director, as an employee be covered under the Surety Bond discussed in Finding Number 4. The auditor also suggested that the Director be removed as an authorized signer on all district funds as he is a vital part of the payroll, disbursement, and receipt function as described in Finding Number 8. For further guidance, the district should consult their outside accountants and legal counsel.

District Response:
As previously noted, the district submitted written procedures to implement Findings 4 and 8. The district stated that it has consulted legal counsel and outside accountants regarding this finding and neither legal counsel nor the outside accountant found a problem. However, at the April 30, 1997, meeting it was indicated that the district director would become an employee of the district.

Final Resolution:
DNR considers this matter resolved with the understanding that the district will submit in writing the intent of the district to hire the Director as an employee of the district rather than a subcontractor. The district provided this documentation to the SWMP on June 24, 1997.