District J Audit

MoDNR Topics

District J

Audit Finding Resolution Summary
Region J, Quad-Lakes Solid Waste Management District
Date of Final Audit Report: May 20, 1998
for the fiscal years: 1991 through 1997
Date of Final Resolution: Jan. 2000

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 district's records of the appointment of the district council members. The council has not met on a regular basis and has not had a statutory majority at a meeting for approximately four years. By-Laws adopted by the executive board changed the quorum requirement to one-third of the council. No records have been kept of the terms of the council members.

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. Copies of resolutions should be present in the minutes of the council to verify the legal appointment of each member. The council is required to meet "at least twice annually." A quorum of the council is defined as "a majority of the council."

The auditor recommended that the district review RSMo, 260.315 and obtain the required appointments to reconstitute the council. The auditor 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.

District Response:
The Quad-Lakes Solid Waste Management District (SWMD) considers this finding resolved. A letter dated Aug. 27, 1998, with resolutions and copy of Aug. 27, 1998, meeting minutes is provided.

Final Resolution:
The Department of Natural Resources (DNR) considers Finding 1 resolved. The district has complied with RSMo, 260.315 as recommended by the contracted auditor by reelecting the district council on Aug. 27, 1998 and meeting as required. All documentation will be retained in the district’s permanent file.

Audit Finding and Recommendation:
Inappropriate Composition and Operation of the Executive Board. As noted the executive board does not appear to be appropriately appointed. No records were found regarding the terms or appointments of the executive board. The By-Laws adopted by the executive board increase the size of the board to twelve members and reduce the quorum requirement to one-third of the board. RSMo, 260.320 designates the terms, composition, and duties of the executive board. The statute requires that the executive board be appointed by a valid meeting of the district council. The executive board is to consist of "seven persons." RSMo, 260.315(4)(2) states that a quorum consists of "a majority of the members of the board."

The auditor recommended after the executive board has been appointed by the council, it should meet with a statutory majority and review any actions taken over the past several years to determine which, if any, need to be reaffirmed or modified. At a minimum, the By-Laws adopted by the district need to be changed to conform to statutory requirements.

District Response:
The Quad-Lakes SWMD considers this finding resolved. A copy of the Aug. 27, 1998, meeting minutes is provided.

Final Resolution:
The DNR considers Finding 2 resolved. The district complied with RSMo, 260.320 as recommended by the contracted auditor by reelecting the district executive board on Aug. 27, 1998. All documentation will be retained as a part of the district’s permanent file.

Audit Finding and Recommendation:
Incomplete Minutes for Both Council and Executive Board Meetings. Board minutes were not available for all meetings of the council or the executive board. The minutes that were present were not signed, did not include copies of resolutions or other matters discussed. They did not include evidence of the appointment of the members of the council or the board. The minutes were not organized for retention in that they were kept in a manila folder, were not attached in any way and were not maintained in any order. 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.

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 Quad-Lakes SWMD has implemented all recommended measures as recommended by the contracted auditor as provided in documentation of the Aug. 27, 1998, meeting minutes.

Final Resolution:
The DNR considers Finding 3 resolved. The district complied with RSMo, 610.020.6 as recommended by the contracted auditor by providing copies of the most recent executive board meetings on Aug. 27, 1988. All documentation will be retained in the district’s permanent file.

Audit Finding and Recommendation:
Inappropriate Closed Meetings. On two occasions the executive board held closed sessions. The matters discussed at those meetings were not suitable for closed session under the Missouri Sunshine Act. These closed sessions could risk a legal challenge under the Sunshine Act and could render any matters voted on in these sessions invalid. RSMo, 610.010, commonly referred to as the Missouri Sunshine Act, requires that all meetings of governmental agencies be open to the public unless the subject matter of the meeting complies with one of the designated exceptions. The auditor recommended the district go into closed session only after a careful review of the Sunshine Act to ensure that matters to be discussed are allowed for closed session. Cite the section of the Sunshine Act relied on in the motion to go into closed session. Keep minutes in closed session and make them public as required by the Sunshine Act.

District Response:
The Quad-Lakes SWMD has implemented all recommended measures. A copy of the Aug. 27, 1998, executive board meeting minutes reflecting the discussion was provided to the SWMP on Aug. 9, 1999.

Final Resolution:
The DNR considers Finding 4 resolved. The district complied with RSMo, 610.010 and ff. as recommended by the contracted auditor by providing to the SWMP on Aug. 9, 1999, executive board meeting minutes in which the correct procedures for closed meetings were discussed. All documentation will be retained in the district’s permanent file.

Audit Finding and Recommendation:
Lack of Separation of Duties for Financial Activities. The district has designated the Treasurer to write checks, make deposits, and receive bank deposit slips. No bank reconciliations are prepared by the district. The district does require two signatures on checks. Cash is held up to two months before deposit. No policy has been adopted regarding signing checks in advance or drawing checks to cash. The GTC for grant funds, II(E)2 and 3, requires that effective control and accountability be maintained for all assets.

The auditor recommended the district have monthly bank reconciliations prepared by someone who does not have access to receipts and disbursements. Have the bank deposit slips and bank statements returned directly to the person who prepares the bank reconciliation. Incorporate formal financial reports into the meeting records including the bank reconciliation. Deposit cash as quickly as possible. Adopt policies forbidding signing checks in advance or making checks to cash.

District Response:
The Quad-Lakes SWMD has a proposed policy on financial tracking and outlay (A,B). The district proposes adoption of the policy into the district By-Laws upon acceptance by SWMP. An approved policy was provided to the SWMP on Aug. 9, 1999.

Final Resolution:
The DNR considers Finding 5 resolved. The district complied with GTC, II(E) 2 and 3 by providing a copy of the district By-Laws which include financial tracking policies to the SWMP on Aug. 9, 1999, as recommended by the contracted auditor. All documentation will be retained in the district’s permanent file.

Audit Finding and Recommendation:
Inadequate Bonding Insurance. The district maintains a bonding insurance policy with a limit of $40,000. Cash balances have ranged from $50,000 to $90,000 over the period reviewed. The GTC, II.E.3 requires effective control and accountability for all recipient cash, real and personal property. The auditor recommended the district obtain sufficient bonding insurance to cover the maximum expected cash balance.

District Response:
The Quad-Lakes SWMD has implemented the recommended measures (A,C and Finding #2, Dec. 7, 1998, meeting minutes, 5.b.) regarding bonding insurance. The executive board voted to cover the $2,500 deductible during a July 22, 1999, meeting. The district provided a copy of the meeting minutes to the SWMP on Dec. 23, 1999.

Final Resolution:
The DNR considers Finding 6 resolved. The district complied with GTC, II.E.3 as recommended by the contracted auditor by providing a copy of an insurance policy and executive board meeting minutes discussing the bonding insurance and agreeing to cover the deductible to the SWMP on Dec. 7, 1998, July 22, 1999, and Dec. 23, 1999. All documentation will be retained in the district’s permanent file.

Audit Finding and Recommendation:
Inappropriate Handling of State Funded Equipment. Title to grant funded equipment has been vested in the subgrantee with a lien registered in the district’s name in some cases. The district has not maintained records of any equipment funded with state grant funds. The district has used an arbitrary method of determining the value of grant funded equipment. The GTCs 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. When equipment is no longer to be used for the grant purpose, the fair market value of the equipment is to be used in determining the disposition of the equipment. 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 the purchase, cost, etc. Account for the fair market value at the time of the grant or program conclusion.

District Response:
The Quad-Lakes SWMD does retain ownership of all state grant funded equipment during the time frame the grant is in effect through the Financial Assistance Agreement, and has developed a property inventory form which fulfills all requirements. A completed copy was provided at the March 3, 1999, audit resolution meeting. They agreed to comply to all SWMD recommendations for equipment tracking and control.

Final Resolution:
The DNR considers Finding 7 resolved. The district complied with GTC, II.J as recommended by the contracted auditor by providing equipment tracking and control forms to the SWMP on Dec. 20, 1999. All required documentation will be retained in the district’s permanent file.

Audit Finding and Recommendation:
Failure to Adopt and Implement Required Policies. No policies were adopted in the following areas: Procurement, Non-discrimination, Environmental Standards, Debarment/Suspension, Disadvantaged Business Enterprises, or Compliance with GTCs of grants. The district has not prepared or filed Form 334 relating to Disadvantaged Business Enterprises. The GTCs for state grant funding require the district to adopt and implement these policies: Procurement, GTC, II.N, Non-discrimination, GTC, I.A, Environmental Standards, GTC, I.B, Debarment, GTC, II.S. and Disadvantaged Business Enterprises and Form 334, GTC, II.W.

The auditor recommended the district should adopt policies in these areas and develop implementation plans. File form 334 quarterly as required.

District Response:
The Quad-Lakes SWMD was, and still is, under the impression that it has bound itself to all of these policies, and additional policies, through annual signature of Financial Assistance Agreements containing the GTC and through its own By-Laws.

Final Resolution:
The DNR considers Finding 8 resolved. The district complied with GTC, I.A, B, II.N, and S as recommended by the contracted auditor by providing copies of the recommended policies and executive board meeting minutes approving the policies to the SWMP on Aug. 9, 1999. The district agreed to provide Form 334 with future quarterly status reports. All documentation will be retained in the district’s permanent file.

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 effort 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 Generally Accepted Accounting Principles (GAAP) system for the district and ensure that subrecipients are on that basis of accounting as well.

District Response:
The Quad-Lakes SWMD is now using Generally Accepted Accounting Principles. The district brought evidence of this fact to the resolution meeting. If this accounting structure is not deemed suitable by the SWMP the Quad-Lakes SWMD will hire the services of a CPA.

Final Resolution:
The DNR considers Finding 9 resolved. The district complied with 10 CSR 80-9.050 as recommended by the contracted auditor by providing a letter to the SWMP on Dec. 20, 1999, from a CPA indicating it had reviewed the district’s procedures and recommended actions. The district provided documentation to the SWMP on Jan. 21, 2000, indicating it will follow the recommendations of the CPA. All documentation will be retained in the district’s permanent file.

Audit Finding and Recommendation:
Failure to Adopt and Implement Conflict of Interest Policies. The district has made no positive efforts to adopt a conflict of interest policy or to request information regarding conflict of interest from the council or board members. RSMo, 260.3320.5 and the GTC, II.Q, refer to these conflicts and requires the district to ensure that there are no conflicts on the board or in the process of awarding grants. The auditor recommended the district develop and implement a policy to ensure that all board members are aware of the conflict of interest problem and have their understanding and positive assurance that they have no conflicts recorded in the minutes.

Final Resolution:
The DNR considers Finding 10 resolved. The district complied with 260.320.5 and GTC, II.Q as recommended by the contracted auditor by providing a copy of the district’s By-Laws addressing conflict of interest on Dec. 24, 1998. All documentation will be retained in the district’s permanent file.

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

District Response:
The Quad-Lakes SWMD considers this finding resolved (A,G).

Final Resolution:
The DNR considers Finding 11 resolved. The district complied with GTC, II.V as recommended by the contracted auditor by providing a copy of district letterhead displaying the recycled symbol to the SWMP on Dec. 24, 1998. All documentation will be retained in the district’s permanent file.

Audit Finding and Recommendation:
Failure to Provide Funding Notice of Public Documents. Press releases and other public notifications prepared by the district did not identify the DNR as a funding source. The GTCs, as modified by the Special Terms and Conditions, 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 the district include the appropriate wording on all public documents.

District Response:
The Quad-Lakes SWMD has implemented this policy.

Final Resolution:
The DNR considers Finding 12 resolved. The district provided correspondence dated Aug. 5, 1999, with DNR name and logo to the SWMP on Aug. 9, 1999. All documentation will be retained in the district’s permanent file.

Audit Finding and Recommendation:
Failure to Perform Primary Duties of the Executive Board. The district has made no positive effort to locate and identify illegal dump sites, has not actively pursued an education program, has made no effort to minimize the introduction of small amounts of hazardous waste into the solid waste system, nor made efforts to assure adequate capacity to manage waste not otherwise removed from the solid waste system. No policies or implementation regarding these matters has been adopted. RSMo, 260.320 list these activities as the primary duties of the executive board. The auditor recommended the district develop and implement policies in each of these areas.

District Response:
The Quad-Lakes SWMD has clearly defined the executive board’s duties in the district By-Laws (A,F, Article III, A.) which was provided to the SWMP on Dec. 24, 1998. The district indicated during the March 3, 1999, Audit Resolution meeting that the district implemented a Household Hazardous Waste (HHW) project in the FY98 grant cycle.

Final Resolution:
The DNR considers Finding 13 resolved. The district provided a copy of its By-Laws to the SWMP on March 3, 1999, which addresses the executive board duties as recommended by the auditor in compliance with RSMo, 260.320. A HHW project was funded in Fiscal Year 1998 directly complying with RSMo, 260.320. All documentation will be retained in the district’s permanent file.

Audit Finding and Recommendation:
Proposal Evaluation Criteria not Used. The auditor found no evidence that the district used evaluation criteria in the rating of proposed grant projects. 10 CSR 80-9.050 requires the use of criteria in evaluating proposals. The auditor recommended the district develop and use evaluation criteria in the ranking of each proposal considered by the board for grant funding.

District Response:
The Quad-Lakes SWMD has implemented this measure in the 1998 grant cycle and provided documentation to the SWMP on Dec. 24, 1998.

Final Resolution:
The DNR considers Finding 14 resolved. The district complied with the recommended resolution by providing evaluation criteria to the SWMP on Dec. 24, 1998. All documentation will be retained in the district’s permanent file.

Audit Finding and Recommendation:
Grant Funded Equipment Not Used for the Grant Purpose. Equipment from two grants was no longer used for the purposes of the grant. Equipment purchased through grant funds for maintenance of a composting project appears to be used for general city maintenance operation and it did not appear as if a compost pile was being actively maintained. The equipment consisted of a tree chipper, a Bobcat loader, and a chain saw. Equipment purchased through one grant (grant # 93001) was not available for review. It had been leased by the subrecipient to another company outside the district. The equipment consisted of a truck to be used for recycle pickup.

The GTC, II.J, require the district to monitor the progress of the grants. The subrecipient is required to return the equipment to the district if the program is not to be completed. If the fair market value of the equipment exceeds $1,000 the subrecipient is required to repay the grant funds to retain the equipment. The auditor recommended the district develop and implement a policy to ensure the appropriate use of the property funded with state grant funds. Recover any equipment not currently being used for the appropriate purposes and recover any lease payments received by the grant recipient.

District Response:
The Quad-Lakes SWMD has implemented a measure of equipment control through Financial Assistance Agreements with subgrantees. In addition, the district will hold a security interest on all future equipment and will perform annual site visits.

The district is unaware of equipment not currently being used for the purpose of the approved grant. The circumstances with project 93001, were learned of only after the district planner talked with the project coordinator in May 1998. While the Quad-Lakes SWMD is in agreement with the SWMP in that the leasing of equipment purchased through DNR is wrong in essence, the district can not determine that the leasing of equipment is an unacceptable or inappropriate release of ownership under GTC, II.J. The district seeks a written legal opinion from DNR staff before the district moves ahead with seeking the recovery of lease payments, which may eventually cost the district more in legal fees than the value of the lease payments.

Final Resolution:
The DNR considers Finding 15 resolved. A copy of a lease agreement between the recipient and its lease dated Oct. 25, 1995, was provided to the SWMP on July 26, 1999. According to the lease, no monies exchanged hands. A quarterly report dated Dec. 6, 1995, indicated the district held the title for the vehicle at the time of the lease. The truck was wrecked and declared totaled and is no longer in use. The leasee purchased another truck to continue collecting cardboard. Due to these circumstances, the SWMP chooses not to take any further action on this aspect of the finding and considers it resolved. All documentation will be retained in the district’s permanent file.

Audit Finding and Recommendation:
Incomplete Documentation for Grants. The auditor reviewed the documentation for District Grant # 93001 was unable to locate any of the documents and paperwork for this project. No grant ledgers were maintained. The content of the quarterly reports was not sufficient to adequately determine progress in the implementation of the grant. No proposal evaluations or accounting records were found. District Grant # 94114 had no documentation of the districts review of the recipient’s eligibility. Quarterly reports did not disclose problems that were encountered in the implementation of the grant by the subgrantee The district did not document and report on these problems on the required quarterly basis. No verification of the recipient’s compliance with the grant agreement was required by the district and no grant ledgers were maintained.

10 CSR 80-9.050 requires retention of all documents related to state grants for a period of at least three years from the submission of the final status report. The GTC, 11.J, require the district to monitor the use of the equipment and retain ownership to it. The auditor recommended the district adopt and implement policies to track grant progress and to establish a system of filing and records retention which will ensure that all required documents are adequately filed and preserved.

District Response:
Grant progress will be tracked through quarterly reports. Copies of quarterly reports will be forwarded to the SWMP’s District Grants Manager.

Final Resolution:
The DNR considers Finding 16 resolved. The district is current on submissions of quarterly status reports. All documentation will be retained in the district’s permanent file.