District B Audit

MoDNR Topics

District B

Audit Finding Resolution Summary
North Missouri Solid Waste Management District - District B
Date of Final Audit Report: June 21, 1996
For The Fiscal Years: 1992, 1993, 1994, 1995
Date of Final Resolution: March 20, 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.

Audit Finding and Recommendation:
Incompatible Duties. The District’s cash reconciliation procedures call for the bank reconciliation’s to be done by the same person who maintains the general ledger and prepares disbursement checks for signing, and who mails checks to vendors. Also, the validated deposit slip from the bank is returned to the person who prepares and mails in the deposit. It was recommended that the district segregate duties to the extent possible based on the staff size and that the District Board review monthly bank reconciliation’s.

District Response:
The district developed and adopted a written fiscal operations manual. The manual outlines procedures for segregation of duties, posting and collecting receipts, and other internal control procedures.

Final Resolution:
The Department of Natural Resources (DNR) considers this matter resolved. The department's Internal Audit Program acknowledged that the above operations manual was acceptable.

Audit Finding and Recommendation:
Management Contract Terms Violated. The auditor noted that the District entered into a management contract with Green Hills Regional Planning Commission for a fixed price each year. The District then wrote checks to the Commission. However, no invoices were prepared to identify the periods to which these drawdowns exceeded the contracted amounts. In fairness to the Regional Planning Commission, it was also noted that the Commission incurred costs on behalf of the District in excess of these drawdowns. Therefore the Commission has not realized any windfall; however, the fact remains that a technical violation exists, and the District has overpaid the Commission for program administration.

The source of funding which has paid for this circumstance cannot be determined since the District commingles DNR grant funding and program income. The auditor recommends that the district document all payments to the commission, and that such payments conform to the terms of the agreement.

District Response:
The district submitted billing statements with invoices that identified the periods for which draw downs occurred. The district also identified funding sources for each of the transactions submitted.

Billing statements submitted by the district for the years 1991-92 and 1992-93 verify payment amounts made to the Green Hills Regional Planning Commission (GHRPC) as being the same as the contracted amounts.

The contract amount with GHRPC for year 1993-94 equaled $25,000. Billing statements from the district totaled $25,000. The billing statements showed DNR funds totaled $16,500 of the $25,000. The remainder of the billings, $8,500, were paid by Per Capita Local Support (PCLS). An additional $8,500 identified in the audit findings as having been paid to GHRPC is unaccounted for.

The contract amount with GHRPC for year 1994-95 equaled $25,000. Billing statements from the district totaled $25,000. The billing statements showed DNR funds totaled $17,500 of the $25,000. The remainder of the billings, $7,500, were paid by PCLS. An additional $7,500 identified in the audit findings as having been paid to GHRPC is unaccounted for.

The district indicated that it would provide the unaccounted for information.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district will provide documentation in the form of billing statements and invoices for payments by the district to GHRPC in the amounts of $8,500 for year 1993-94 and $7,500 for year 1994-95. The documentation was submitted to the Solid Waste Management Program (SWMP) in May 1997.

Audit Finding and Recommendation:
Inadequate Documentation Required From Subgrantees. The auditor noted that the District does not require that subgrantees submit paid invoices and cancelled checks to support subgrant expenditures. These documents should be part of the required documentation to be submitted to the District by subgrantees. By requiring this information, the District can ensure that expenditures have actually been made prior to grant reimbursement payments. In addition, subgrant requests do not contain the required certification of correctness signed by the subgrantee. The auditor recommends that the district require paid invoices, copies of cancelled checks and required certifications from all subgrantees as part of the necessary documentation prior to grant reimbursements.

District Response:
District concurs and will take appropriate action.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district will require the documentation specified above.

Audit Finding and Recommendation:
Retainage. The auditor noted that the grantee was not applying the restrictions in the state regulations and the General Terms and Conditions to disbursements to subgrantees. Payments were made in some cases to subgrantees prior to disbursement of funds to vendors, and the required 15% retention was not withheld from grant payments prior to receipt of the subgrantees final report. No final reports were approved for projects in which the 15% retainage was not withheld.

The District is required to retain 15% of subgrant funds until approval of the final report and accounting of project expenditures. The district should discontinue the practice of making payments to subgrantees in advance of disbursement of funds to subgrantee vendors.

District Response:
The district stated that in the future it will require all subgrantees to be subject to the 15% retainage requirement. The district further stated that all payments to subgrantees shall be on a reimbursable basis. Also, each invoice, as a matter of policy, shall have 15% withheld.

The district did not submit written procedures describing the manner in which it intends to comply with 10 CSR 80-90.050(4)(C) as recommended by the SWMP.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district will provide written procedures describing the manner in which the district intends to comply with 10 CSR 80-9.050(4)(C). The written procedures were submitted to the SWMP in May 1997.

Audit Finding and Recommendation:
Subgrants Not On Reimbursement Basis. The District’s policy is to pay subgrantees upon their submitting an invoice (prepared by the subgrantee) to the District, and the District’s receiving funds from the DNR. No policy is in place to assure that the funds are paid on a reimbursement basis. The auditor recommends that the district implement the practice that all District grants be on a reimbursement basis in the future.

District Response:
The district stated that in the future it would strictly adhere to a policy of distributing funds to subgrantees only when presented with a paid invoice or other suitable evidence of payment is submitted.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district will provide written procedures describing the manner in which the district intends to administer grant funds on a reimbursement basis. The written procedures were submitted to the SWMP in May 1997.

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 the program did not deduct the interest income from outlays. Due to the accounting system deficiencies noted in Finding 2, it is not possible to quantify interest earnings on DNR funding. Interest income was not accounted for according to the DNR General Terms and Conditions of the contract. The auditor recommends the program reduce future payments to the District for the interest earned or that the district obtain permission from the program to use the interest income for administration of the district.

District Response:
The district requested and was granted permission from DNR to use interest earned in FY 92, 93, 94, 95, and 96 for administration of the programs.

Final Resolution:
The DNR considers this matter resolved.

Audit Finding and Recommendation:
Procurement Procedures. The auditor noted that the District does not require documentation of subgrantee procurements as required in DNR’s General Terms and Conditions II N. It was noted that one subgrantee, a city, purchased a wood chipper from a sole source even though the City’s own procurement procedures call for obtaining at least two bids. In this particular case, the bidder submitted two bids for two different models. It is recommended that the district require documentation of procurement polices of their subgrantees and that subgrantees be required to adhere to these policies.

District Response:
The district stated that it would closely monitor subgrantees to ensure that purchases paid for with district grant funds would follow state purchasing guidelines. The district did not provide written procedures describing the mechanism it will implement to ensure that subgrantees adhere to state procurement standards or local procurement standards that conform to state standards.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district will provide written procedures describing the mechanism the district will implement to ensure that subgrantees adhere to state procurement standards, or a local procurement standard provided it conforms to state procurement standards. The written procedures were submitted to the SWMP in May 1997.

Audit Finding and Recommendation:
Property Inventory – Restricted to Subgrantees Only. The auditor noted that the District does not maintain an inventory of property purchased by subgrantees as required by DNR General Terms and Conditions II.J.2.a. It is recommended that an inventory be established, maintained and taken at least once every two years.

District Response:
The district stated that a property inventory has been prepared. The district did not submit the property inventory. The district also did not submit written procedures describing the method for performing physical inventories, creating an equipment management procedure, creating and implementing a control system and complying with proper disposition procedures as recommended by the SWMP.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district will provide written procedures describing the method for performing physical inventories, creating an equipment management procedure, creating and implementing a control system, and complying with proper disposition procedures. Also, the district will provide a complete inventory of all equipment purchased with Solid Waste Management Fund following criteria as described in the DNR General Terms and Conditions II.J.2.a. The written procedures and equipment inventory were submitted to the SWMP in May 1997.

Audit Finding and Recommendation:
Recycled Paper. The District is not using recycled paper as required DNR General Terms and Conditions II.V. The auditor recommends they use recycled paper in compliance with the contract terms.

District Response:
The district stated that it had tried to use recycled content paper, but the recycled paper did not work well in the district photocopy machine. The recycled paper the district has used in the past was more expensive than paper made from virgin fibers. The district stated that it will evaluate switching to recycled paper to see whether paper quality has improved. The district stated that it does purchase envelopes made from recycled fibers. The district did not provide written procedures describing its mechanism for assuring that recycled paper is used in the future as recommended by the SWMP.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district will provide written procedures describing the District’s mechanism for assuring that recycled paper is used in the future. The written procedures were submitted to the SWMP in May 1997.

Audit Finding and Recommendation:
Inadequate Evaluation Completed for District Grant Proposals. The criteria used by the District to evaluate District grant proposals did not include all the 18 criteria set forth at 10 CSR 80-9.50 (2) (c) (3). Instead, only 8 criteria were used for 1994 grants, and 9 for 1995 grants. The auditor recommends that the District’s evaluation criteria be changed to conform with state regulations.
District Response:
The district stated that is has changed its criteria to conform with state regulation. The district submitted a document with a list of the criteria along with value points assigned to each criterion. The district did not provide written procedures that describe the district’s mechanism for ensuring complete evaluations of all grant applications as recommended by the SWMP.

Final Resolution:
The DNR considers this matter resolved with the understanding that the district will provide the district’s written procedures that describe the mechanism to ensure complete evaluations of all grant applications. The written procedures were submitted to the SWMP in May 1997.