District F

Final Audit Resolution Summary
Region F, West Central Missouri Solid Waste Management District
Date of Final Audit Report: Jan. 26, 1999
For the Fiscal Years: 1992, 1993, 1994, 1995, 1996, 1997
Date of Final Resolution: March 2001

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.

1.  Audit Finding and Recommendation: Inadequate Match Documentation. 
For fiscal years 1994-1997, the district could not support the one-third match for the district’s $20,000 annual administrative grants. The district was using time and mileage of board members’ attendance at board meetings as match contribution. Although board members were required to sign in, no documentation of mileage or time spent was maintained. The department’s General Terms and Conditions (GTC) II.D. states, "In kind (noncash) contributions are allowable project costs when they directly benefit and are specifically identifiable to the project or program." Also, II.D.(1) states, "Recipient must invoice the department, as required by the particular agreement, and provide financial records for total expenditures of state and match or cost share funding." The auditor recommended that the district obtain the supporting documentation to authenticate the in-kind match for the administrative grants. If the proper supporting documentation is not provided, then the district may be ineligible to receive funding for five years.

District Response:
Region F reviewed the records for fiscal years 1994-1997 and documented the match for district administrative grants for this time period. A review of the meeting minutes and other records from fiscal years 1994-1997 showed that Region F’s district board members donated 33,896 miles (@ $.26/mile) and 2511 hours (@ $8.00/hour). Any miscellaneous in-kind donations, such as phone calls, etc. were also included. A spreadsheet with all donated hours and miles by fiscal year was provided. In addition, the proposal to administer from the Prairie Rose Resource Conservation and Development (RCD), Inc. to the Region F Solid Waste Management District detailing in-kind match from the RCD was provided. The yearly match was $12,438/year, figured at 1995 rates even though those costs were actually higher each succeeding year. Each year the match was figured as part of the administrative match. Since the required match is $6,800, the district felt that the requirement had been met.

Final Resolution:
The department considers Finding 1 resolved. The district provided to the department’s Solid Waste Management Program (SWMP) on October 5, 1999, copies of executive board member in-kind tracking forms, a spread sheet for fiscal years 1994-1997 executive board in-kind donations and a proposal to administer Region F district to comply with GTC, II.D.1 and II.D. All documentation will be retained in the district’s permanent file.

2.  Audit Finding and Recommendation: Reports Lack Information for Evaluation – District Grant. 
It was noted that quarterly and final project reports for the district grants did not contain any information on the volume of waste disposal abatement as stated in 10 CSR 80-9.050(3)(B)(1)(A), "The district shall submit to the department at the end of each fiscal year quarter, a report which contains the following for each project in progress. The details of progress, including the volume of waste disposal abatement for each type of recovered material utilized in the project." and (C) states, "The district shall submit to the department a final report for each project…that shall contain the same information as described for quarterly reports…" The auditor recommended that the district be required to submit future reports to the department which contain evaluation information. The reports should note any subgrantee which has not complied with the reporting requirements.

District Response:
The information supplied to Region F for the time period of fiscal years 1994-1997 did not include the volumes of materials recycled for those projects that this requirement applied to, and therefore, couldn’t be supplied at that time. However, all projects from the time of the audit and in the future would contain those amounts on the report. The information would be supplied to the district grant manager with the quarterly reports.

Final Resolution:
The department considers Finding 2 resolved. The department’s SWMP does not elect to take further action for non-compliance on this finding as the district indicated this situation would no longer occur and SWMP believes the district understands and intends to comply with this requirement. To date, quarterly status reports submitted to the department’s SWMP have provided complete information as required by 10 CSR 80-9.050(3)(B)(1)(A). All documentation will be retained in the district’s permanent file.

3.  Audit Finding and Recommendation: Composition of the Executive Board. 
Section I of the audit report states that the executive board is comprised of 11 members. RSMo, Section 260.315.4.(2) states that the council shall select seven persons to serve on the executive board. The district believes that the regulations at RSMo, Section 260.315(1) provide for the districts to formulate an alternative management structure pursuant to section 260.300. Region F further states that the by-laws of the district were intended to demonstrate that an alternative management structure had been formulated and compliance to state regulations achieved. They cite the department’s Model Plan Guidelines for Comprehensive Solid Waste Management, Chapter 3, under the heading Alternative Management Structure, "The district can determine the number of members to serve on the executive board, as well as their terms of office and the manner of selection and replacement for the members." However, Region F does acknowledge that they have not obtained from each local political subdivision member a letter approving the Alternative Management Structure. The auditor recommended that the by-laws, Alternative Management Structure, and approval letter from each participating local political subdivision member be submitted to the department to demonstrate compliance with RSMo, Section 260.315.

District Response:
Region F complied with the requirements of establishing the district when they were formed. A copy of the letter, dated August 30, 1991, from G. Tracy Mehan, III, Director of the department at the time was included with the district’s response. In the letter, Mr. Mehan officially notified the Region F of their formation and congratulated them on this fact. Copies of the resolutions from the County Commissions and Cities involved with the formation of the district were also included with the attachment. In addition, a copy of the by-laws of Region F was included which states the make-up of the executive board as well as the district board. The district reviewed Section 260.300(3) RSMo, and felt it had met all the requirements of the law. Therefore, the district felt that there was no need to reformulate the executive or district board and that to do so would be a waste of time for Region F, the department, County Commissioners, and everyone else involved. The district instituted a tracking system to ensure that all voting members were seated. This was done at the time of the audit and the auditor was made aware of this fact.

Final Resolution:
The department considers Finding 3 resolved. The district provided to the department’s SWMP on October 5, 1999, a copy of an August 30, 1991, letter signed by the department director identifying the district as officially formed as required by Section 260.300(3) RSMo. Also, the district submitted resolutions indicating the district was administering the district as an alternative management structure and provided copies of the resolutions to the department’s SWMP on February 9, 2001. All documentation will be retained in the district’s permanent file.

4.  Audit Finding and Recommendation: MBE/WBE Utilization.
The district’s current practices do not include a formal policy to encourage utilization of minority, women, and small disadvantaged businesses when procuring goods and services. Additionally, the department has no record of the district submitting Form 334, "MBE/WBE Utilization Report." The department’s GTC, II.W. and RSMo, Section 260.320.4 requires the district to establish policies which encourage the utilization of such disadvantaged enterprises. The auditor recommended the district’s procurement policies be amended to include the GTC provisions relating to the encouragement of utilizing disadvantaged enterprises. Appropriate documentation should be maintained in the file supporting submission of Form 334 "MBE/WBE Utilization Report" to the department.

District Response:
Region F regarded the utilization of minority, women and small, disadvantaged businesses when procuring goods and services as very important. However, the district never used the Standard form 334 for two reasons: 1) the district didn’t know that it existed and was never given guidance from the department as to its use and, 2) the form was fully titled "MBE/WBE Utilization under Federal Grants, Cooperative Agreements and other Federal Financial Assistance."  Therefore, it was not valid for use when reporting on district grants, which were funded with tipping fees, collected at landfills.

A look at the form gave a vivid eye opener to anyone interested in districts submitting this report to the district grant manager as required under Audit Finding Resolution Summary, Item 4. For example, box 2 asked for the Federal Financial Assistance Agency. For any district projects this would be "NOT APPLICABLE". Line 4a asked for the (Federal) Financial Assistance Agreement ID Number. This was "NOT APPLICABLE." Line 4b asked for the Federal Financial Assistance Program. This was "NOT APPLICABLE." Line 4c asks for the Type of Federal Assistance Agreement. This was "NOT APPLICABLE."

In addition, the instructions for Form 334 stated that "MBE/WBE utilization is based on Executive Orders 11625, 12138, 12432 and OMB Circular a-102. Standard Form 334 must be completed by recipients of Federal grants, cooperative agreements, or other Federal financial assistance valued at $500,000 or more and which involved procurement of supplies, equipment, construction, or services to accomplish Federal assistance programs." This requirement may apply to the department since it received Federal funds, but did not apply to solid waste districts which received district grant dollars from the State of Missouri, generated from fees collected at landfills.

If the department’s SWMP insisted that Region F submit this meaningless report which would be a waste of resources, time and effort, it would do so. However, it must be pointed out that this goes against what the solid waste districts are trying to accomplish for reducing waste and preserving our natural resources.

Final Resolution:
The department considers Finding 4 resolved. The district provided to the department’s SWMP on April 27, 2000, a copy of a district policy complying with GTC, II. W. which included an executive board approval statement. All documentation will be retained in the district’s permanent file.

5.  Audit Finding and Recommendation: Conflict of Interest.
The district has an informal policy regarding conflict of interest. During our review of areas where the potential for conflict of interest could surface, we determined that the informal procedures as described to us were in place. However, due to the sensitivity of this area, a formal policy should be developed to ensure compliance with department GTC II.Q. GTC, II.Q. does not allow performance or participation in any decision which would affect their personal or pecuniary interest, directly or indirectly. The auditor recommended that the district develop a formal conflict of interest policy setting out guidelines to council and executive board members and grant evaluators.

District Response:
Region F felt that the recommendation to adopt a policy on conflict of interest was an important issue to be addressed and thanked the department’s SWMP for making such recommendation. There wasn’t a quorum at the last meeting of the district and such policy wasn’t adopted at that time but would be at the next scheduled meeting of the district which was October 21, 1999. The policy would be presented to the board at that meeting for their consideration. As soon as the policy was adopted by the district, a copy of the policy as well as minutes of the meeting would be given to the district grant manager.

Final Resolution:
The department considers Finding 5 resolved. The district provided to the department’s SWMP on April 5, 2000, a copy of a district policy complying with GTC, II. Q. which included an executive board approval statement. All documentation will be retained in the district’s permanent file.

6.  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. Total interest earnings for fiscal years 1992 –1997 amounted to $10,478. The department’s GTC II.C. states, "Program income shall be deducted from outlays which may be both federal and nonfederal, unless the department, as negotiated with the recipient, or federal awarding agency specifies an alternative method in the agreement." The auditor recommended the program reduce future payments to the district for the interest earned for fiscal years 1992-1997 ($10,478) or that the district obtain permission from the program to use this interest income for administration of the program.

District Response:
Region F sent a letter to Mr. Jim Hull requesting permission from the department’s SWMP to use the interest income for administration of the district’s operation in order to comply with GTC, II.C. The district purchased an accounting system that would track all funds and account for all monies in each fund, including any interest income. A copy of the permission request letter and evidence of the implemented tracking system would be provided to the district grant manager as requested.

Final Resolution:
The department considers Finding 6 resolved. The district provided to the department’s SWMP on April 5, 2000, a copy of a December 13, 1999, letter from SWMP to all 20 districts giving permission to use and instructions as to how to use accrued interest income to comply with GTC, II.C. All documentation will be retained in the district’s permanent file.

7.  Audit Finding and Recommendation: Unprotected Cash Balance
Cash balances averaged over $100,000 for the period under audit. The FDIC only insures funds up to $100,000 leaving the remaining balance as a potential loss to the district. The department’s GTC II.E.3. states, "Effective control and accountability must be maintained for all grant and subgrant cash, real and personal property, and other assets. Grantees and subgrantees must adequately safeguard all such property and must assure that it is used solely for authorized purposes." The auditor recommended that the district request that the bank pledge collateral on its collective cash balance in excess of $100,000.

District Response:
When this item was brought up during the audit, the district contacted the bank and obtained the pledged collateral to comply with GTC, II.E.3. This item was completed before the auditor left the office. A copy of the pledged collateral was provided to the district grant manager.

Final Resolution:
The department considers Finding 7 resolved. The district provided to the department’s SWMP on April 5, 2000, documentation of pledged collateral from the State Bank of Missouri to comply with GTC, II.E.3. All documentation will be retained in the district’s permanent file.

8.  Audit Finding and Recommendation: Comingling of Funds.
The district deposits all funds into one interest bearing account and pays all district and project grant costs out of this account. However, reimbursement of administrative costs are transferred to a non-interest bearing account on an as-needed basis. All interest is placed with administrative funds. Because of these procedures, it is not possible to determine the amount of interest earned on district grant funds or the administrative grant funds. The department’s GTC II.C. states, "When anticipated and authorized, program income is added to the funds committed to the agreement it must be credited back to the original fund or project from which it was earned." The auditor recommended that the district adopt a fund accounting system to track the separate funds, or open a separate interest bearing account for administrative grants.

District Response:
The district adopted a fund accounting system to track the separate funds and felt that this would serve to adequately address this item in the audit findings report. However, if the department’s SWMP felt that the district should open a separate interest bearing account for administrative funds, it would be done. Copies of any documentation would be given to the district grant manager as requested.

Final Resolution:
The department considers Finding 8 resolved. The district provided to the department’s SWMP on April 5, 2000, a copy of December 16, 1999, executive board meeting minutes in which the board discussed and approved separate accounts to comply with GTC, II, C. All documentation will be retained in the district’s permanent file.

9.  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 department. However, this procedure is not in place for district projects 94131 ($10,400), 94132 ($7,000), and 96122 ($5,400) which were awarded to the Prairie Rose Resource Conservation and Development to support administrative costs for present and future district grant cycles. Due to the comingling of administrative costs, it is not possible to determine whether unexpected project costs exist, if at all, at June 30, 1997, for any one of the district projects 94131, 94132 and 96122. In total, the reported administrative costs exceeded the three district project grant administrative budgets. The department’s GTC II.A. states, "The recipient will be reimbursed for all allowable expenses incurred in performing the scope of services. The recipient shall report project expenses and submit standard invoices, attached to the agreement, for payment." The auditor recommended that the district should be required to implement the practice that all district grants be on a reimbursement basis for all costs in the future. Additionally, subsidiary records should be prepared that detail unexpended cash balances for all projects.

District Response:
The only projects that this item applied to were the district grants that were awarded to the Region F Solid Waste Management District for administering the district grants in fiscal years 1994, 1996 and 1997. As suggested to the district, it provided invoices to itself in order to "pay" itself and satisfy the requirements of the audit findings. Copies of these invoices will be provided to the district grant manager in this report.

Final Resolution:
The department considers Finding 9 resolved. The district provided to the department’s SWMP on October 5, 1999, copies of invoices covering district reimbursement to itself to comply with GTC, II.A. All documentation will be retained in the district’s permanent file.