District L
Audit Finding Resolution Summary
Region L, St. Louis-Jefferson Solid Waste Management District
Date of Final Audit Report: Jan. 16, 1996
For The Fiscal Years: 1993, 1994, 1995
Date of Final Resolution: June 26, 1996
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.
Review Of Accounting And Internal Control
Audit Finding and Recommendation:
No Financial Audit.The district has not had a financial audit since
its inception; however, the county auditor for the county of St.
Louis did complete a performance audit. The district is currently
in the process of reviewing bids for a financial audit submitted
by Certified Public Accounting firms. The General Terms and Conditions
(GTC), Section II.O., pursuant to the 8/94 revision, states, in
part: "Audit Requirements. Solid waste districts receiving
$200,000 or more of financial assistance from the department in
any fiscal year must provide the department with a copy of an independent
auditors report on the fair presentation of the districts
financial statements in conformity with generally accepted accounting
principles; the internal control structure, and compliance with
applicable laws and regulations. Financial assistance shall include
Operations Grants, District Project Grants, or State Project Grants."
The district received over $200,000 in fiscal years 1993, 1994,
and 1995. The auditor recommended the district proceed with the
bid evaluation and complete arrangements for a financial audit of
the district in order to comply with the GTC.
District Response:
The district stated that it currently is having a financial audit
conducted by the firm of Aselage, Kiefer and Company. The district
further stated that the audit should be completed within the next
60 days. A copy of the audit will be provided to the SWMP.
Final Resolution:
The Department of Natural Resources (DNR) considers this matter
resolved with the understanding that the district agrees to submit
to the SWMP a copy of the financial audit currently being conducted
by Aselage, Kiefer and Company. A copy of the financial audit was
received on Sept. 16, 1996.
Audit Finding and Recommendation:
Petty Cash Not Secured.The petty cash fund for the district is kept
in an unlocked drawer. Petty cash is a highly liquid asset and,
as such, should be safeguarded. Petty cash should be kept in a locked
area and should require regular reconciliations, receipts, and approval
signatures on the petty cash replenishment requests. The auditor
recommended the district implement and maintain a secure system
of safeguarding the petty cash fund.
District Response:
The district stated that it has ceased to maintain a petty cash
fund.
Final Resolution:
The DNR considers this matter resolved with the understanding
that if the district decides to again maintain a petty cash fund,
the district will follow the auditors recommendation of implementing
and maintaining a secure system for it.
Audit Finding and Recommendation:
Equipment Management. The district has no formal policy regarding
equipment control. An inventory of equipment purchased with grant
funds has never been performed. The executive director of the district
could not furnish a list of equipment that had been purchased with
grant funds.
For 1993 and 1994, the district was not in compliance with the GTC nor with the Special Terms and Conditions (STC) pertaining to equipment. For these two years, title vested the subgrant recipient.
There has never been a physical inventory taken of the equipment purchased with grant funds. There is no assurance that the property purchased with the Solid Waste Management Funds was being used to support program activity.
There is no control system in existence, such as regular physical inventories and a list of serial numbers, and no way to ensure that the property is safeguarded against loss, damage, or theft such as insurance requirements.
The district was not aware of the requirements pertaining to disposal of equipment purchased with grant funds. The DNRs GTC, II.J.E.a. and b., and the STC both require that items with a per unit value of greater than $1,000 be sold to the subgrantee for an amount equal to the percentage of fair market value that equals the percentage of DNR funds used for the purchase. Equipment with a fair market value of less than $1,000 can be transferred to the subgrantee for no consideration. Therefore, the district is not properly disposing of assets as required by the GTC, Section II.J.
The auditor recommended the district review the title to all assets purchased with grant funds to determine the appropriate vesture and change those that vest incorrectly. The auditor also recommended the district perform a physical inventory and create records which detail all of the required information, that the district create and implement an equipment management procedure, and that the district create and implement a control system to safeguard assets purchased with grant funds. The auditor also recommended that the district familiarize itself with the proper disposition regulations and procedures to ensure compliance with them.
District Response:
For Fiscal Year 1993 (FY93) the district stated that title to equipment
purchased with 1993 District Grant funds should not be an issue
since DNR provided no provisions in the 1993 District Grant Agreement
concerning title to equipment purchased with grant funds.
For Fiscal Year 1994 (FY94) and Fiscal Year 1995 (FY95) the district requested that the FY94 and FY95 District Grant Agreements be amended to allow the title to equipment to be vested with the subgrantees as it believes that it would be more productive to focus on establishing compliance procedures for 1996 and beyond.
In regard to future grants, the district stated that it does not wish to hold title to equipment. However, they recognize that it is essential to assure that the equipment purchased with district funds is used for its intended purpose. The district would like the SWMP to modify the STC to allow districts to use a security interest to protect the grant funds and ensure that the equipment continues to be used for the intended purpose. There may be some instances where the district would want title to a piece of equipment, but allowing flexibility to use a security interest is more appropriate for most subgrants, particularly when only partial funding is being provided.
The district stated that beginning with the 1996 grants, it will maintain a master list of equipment purchased with District Grant funds, conduct an annual inspection and inventory of subgrants that include equipment, and perform equipment confirmations as part of the annual audit process. The master equipment list will be compiled and maintained on an ongoing basis. The district stated that it will develop a site visit and inspection form. The form will also include additional information pertinent to site visits. 1996 subgrantees with equipment will have site visits conducted periodically, and site visit forms will be maintained by the district and included in district quarterly reports. The district also stated that it has gone back and developed an inventory list of all equipment purchased with FY94 and FY95 funds.
Final Resolution:
The DNR will consider the matter of the districts equipment
management and inventory procedures resolved with the understanding
that the district will provide a copy of its physical inventory
of all equipment purchased for the FY94 and FY95 funding cycle and
a description of the inventory management procedures. The district
provided this documentation to the SWMP on September 16, 1996.
The DNR will consider the matter of the district acquiring title for equipment purchased during the FY94 and FY95 funding periods resolved by noting that there is no feasible way of acquiring title to equipment after a project is complete. The DNR will also consider the use of a security interest for equipment purchased with future district grant funds. The DNR will allow the district to proceed with either holding title or a security interest with subgrantees for equipment acquired with FY96 district grant funds.
Audit Finding and Recommendation.
Anti-Lobbying Certification. Neither the DNRs SWMP or the
district require grant recipients to file an Anti-Lobbying Certification
form. The Anti-Lobbying Certification form is required by the GTC,
Section II.T.1. which states, "Recipient agrees to comply with
the Anti-Lobbying Act, Section 319 of Public Law 101-121, effective
Dec. 23, 1989. Recipient further acknowledges that failure to file
or amend the disclosure form, if required, shall be subject to a
civil penalty of not less than $10,000 and not more than $100,000
for each such failure." Additionally, subrecipients are required
to submit an Anti-Lobbying Certification form or the Disclosure
of Lobbying Activities form if the subgrant exceeds $100,000, as
required by the GTC, Section II.T.2.
Without these certification forms, the district is not in compliance with the GTC and the district has no way of knowing if the subgrantees are aware of the prohibition of lobbying and propaganda. The auditor recommended the DNRs SWMP require recipients to submit Anti-Lobbying Certifications at the beginning of each grant cycle. The auditor also recommended the district require subrecipients submit Ani-Lobbying Certification for any subgrant of which exceeds $100,000.
District Response:
The attorney for the district does not believe that an anti-lobbying
certification is applicable.
Final Resolution:
The DNR considers this matter resolved based on its initial recommendation
that this decision needed to be made at the district level.
Audit Finding and Recommendation:
Non-Compliance with Purchasing Requirements. The district did not
require competitive bids for the production of a waste disposal
manual funded through the project grant 94094. There was no formal
bidding process, nor were the bids requested in writing. The district
is not in compliance with the purchasing and procurement requirements
as required in the GTC. By not requiring bids for the project, the
district cannot be certain of purchasing the best product for the
least price, and the objectivity of vendor selection is compromised.
The auditor recommended the district require bids for all major
projects.
District Response:
The district stated that it does require bidding for contractual
services and has followed
St. Louis County purchasing guidelines. According to those guidelines, the services questioned by the auditors involved "professional services" which are unique in nature and therefore not subject to usual bid procedures. The district maintains that it has been in compliance and will continue to maintain compliance by following the St. Louis County purchasing guidelines as St. Louis County has many state and federal grants programs, including the DNR. The county guidelines have been accepted with all of these programs. The district enclosed a copy of the St. Louis County Purchasing Ordinance and requested that it be accepted as the official district purchasing guidelines.
Final Resolution:
The DNR will consider this matter resolved upon receipt of certification
that the St. Louis County purchasing guidelines are consistent with
state purchasing guidelines. The certification should be prepared
by the districts auditor or by the districts attorney.
The certification should have executive board approval and submitted
to the SWMP. This certification was received on Sept. 16, 1996.
Audit Finding and Recommendation:
General Terms and Conditions. The district had two sets of their
own GTC, the latest of which was written in 1995. A comparison of
the two sets of General Terms and Conditions revealed several major
differences. 10 CSR 80-9.050(4)(E) states, in part, "All general
terms and conditions of the department applicable to either the
activity, recipients of financial aid, or the project, respectively,
will be applicable to recipients of awards
"
The auditor recommended the district use DNRs GTC and the programs STC to ensure compliance with the 10 CSR 80-9. The auditor also recommended the district stop using GTCs that do not conform to the programs GTC.
District Response:
The district stated that it proposes to provide all 1996 subgrantees
with terms and conditions that are consistent with DNRs GTC
and STC. The attorney representing the district has been revising
the district subgrant GTC to include all applicable components of
the DNRs GTC, and STC. A preliminary draft has been prepared,
and will be finalized for use with the 1996 district subgrants.
Final Resolution:
The DNR considers this issue resolved with the understanding that
the district will provide a copy of its revised GTC to the SWMP.
This information was received on Sept. 16, 1996.
District Grants
Audit Finding and Recommendation:
Match Documentation. During the review of district grants, instances
were noticed where proper match documentation was not obtained.
The departments GTC II.D.1. states, "Recipient must invoice
the DNR (district), as required by the particular agreement, and
provide financial records for total expenditure of state and match
or cost share funding." Project 93078 used match certifications
to document time spent on the grant, but not all of these were signed
by a supervisor. Project 94044 did not contain match certification
for time spent on the grant. The auditor recommended the district
require complete documentation and certification for all match committed.
District Response:
The district stated that it is currently requiring complete documentation
of match for all FY95 grants, and will continue to do so to the
extent that match is included in future district subgrant agreements.
Final Resolution:
The DNR considers this issue resolved with the understanding that
the district will provide a copy of the procedures for ensuring
that only eligible matching funds are considered in grant proposals.
The district will also provide additional documentation, for project
93078 and project 94044, to support match documentation or a signed
and notarized affidavit certifying that adequate match was provided.
The procedures and additional documentation must be submitted to
the SWMP. This information was received on Sept. 16, 1996.
Audit Finding and Recommendation:
Final Reports not Properly Submitted and Quarterly Reports not Properly
Submitted. 10 CSR 80-9.050(3)(C) states that final reports are to
be submitted to the district by each subgrantee within 30 days of
the project completion date listed in the grant assistance agreement
between the district and the subgrantee. A representative sample
of 11 included two final reports for FY93 projects, 93062 and 93078
which were not submitted in the proper time period.
10 CSR 80-9.050(3)(B)1 states, "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 ." There were instances when the quarterly status reports were submitted late. Also 10 CSR 80-9.0.(3)(B)1 requires quarterly reports to contain "details of progress, including the volume of waste disposal abatement for each type of recovered material utilized in the project, if appropriate..." Some of the reports were not timely submitted and the quarterly reports for project 94050 did not contain sufficient information to evaluate the project. None of the quarterly reports stated whether proper safety training was given to employees who operate equipment purchased with grant fund. Proper safety training, which may not be a grant requirement, can reduce the districts, and by extension the programs liability in case of accident.
The auditor recommended the district and the DNRs SWMP require complete final reports be submitted within 30 days of the project completion date stated on the grant assistance agreement or within a reasonable period after the actual completion date, whichever is earliest, and the district submit complete and timely quarterly reports for each district grant project. The auditor also recommended the district encourage the subgrantees to include in their quarterly reports a statement attesting that employees operating grant funded equipment have received proper safety training.
District Response:
The district stated that it has been continually upgrading the reporting
process to facilitate the submission of timely reports. Improvements
have included report meetings, developing and later improving reporting
forms, sending report due reminders and individual counseling. This
has helped to significantly improve the ability of grantees to submit
reports in a timely and accurate manner. The district will continue
to work closely with recipients to further upgrade and improve the
reporting process.
Final Resolution:
The DNR considers this matter resolved and will revise the district
grant rule to allow for flexibility in submission of quarterly and
final reports.
Audit Finding and Recommendation:
District Grants not Administered on Reimbursement Basis. According
to the DNRs GTC II.A. "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 district
has been trying to move toward a strictly reimbursement basis for
the past two fiscal years, but almost all of the subrecipients have
received advanced payments throughout the audit period. The auditor
recommended the district only disbursed funds in accordance with
the GTCs in order to provide control over expenditure approval and
for proper use of grant funds.
District Response:
The district stated that it had begun to administer subgrants on
a reimbursement basis prior to the audit. The district pointed out
that the GTC allow advance payments for up to 30 days, as long as
specific steps are taken prior to payments being made. Also, the
district stated that it has become extremely careful about providing
funds in advance, and it will only be considered when absolutely
necessary.
Final Resolution:
The DNR considers this matter resolved with the understanding that
the district submits to the SWMP a copy of its subgrant agreement
language which documents the districts intent to administer
grant funds on a reimbursement basis. This documentation was submitted
on Sept. 16, 1996.
Audit Finding and Recommendation:
Costs Incurred Prior to Project Start Date. 10 CSR 80-9.050(1)(E)2.
states, "The following costs are considered ineligible for
district grant funding:.. Costs incurred before the project start
date:..." The auditor found two projects, 95044 and 95051,
for which disbursements were made for costs incurred prior to the
project start date.
The Grant Agreement for project 95044 was signed on June 22, 1995. An invoice dated May 15, 1995 for $18,560, for which $15,130 was reimbursed, was allowed as an expenditure for the grant. The Grant Agreement for project 95051 was signed April 28, 1995. An invoice of $11,962.66 paid on April 17, 1995 was reimbursed to the grantee. The payments incurred before the start date on the Grant Agreement are ineligible expenses and should be repaid to DNR. The auditor recommended the district remit $27,092.66 ($15,130.00 plus 11,962.66) to DNR for ineligible District Grant expenditures.
District Response:
The district stated that it amended the agreement for subgrant 95044
with the subgrantee. The DNR amended the agreement for subgrant
95051 with the district. Both the DNR amendment and the subgrant
amendment have been signed. The DNR amendment has been returned
to the SWMP. The district stated that the subgrant amendment will
be included in the next quarterly report.
Final Resolution:
The DNR considers the matter involving $11,962.66 in questioned
costs resolved based on the amended agreement to include prior costs
for project #95051 between the DNR and the
St. Louis SWMD. The DNR considers the matter involving $15,130 in questioned costs resolved with the understanding that the district provides a copy of the amended subgrant agreement between the district and its subgrantee for project 95044 to the SWMP. This information was received on September 16, 1996.
Audit Finding and Recommendation:
Evaluation Process Not Complete. After a review of the evaluation
procedures followed by the board, and according to 10 CSR 80-9.050(2)(C)1
and 10 CSR 80-9.050 (2)(C)3, the auditor determined that the boards
evaluation procedures were inadequate for FY93, FY94, and FY95.
In order to ensure that all the projects are given fair consideration
and to ensure that grant funds are spent appropriately, the board
needs to follow the policies and regulations set forth for them.
The auditor recommended the district follow the policies and regulations
that govern evaluating projects and proposals.
District Response:
The district stated that it is extremely conscientious in the review
of proposals, and has added additional review criteria to ensure
even more complete review of proposals. As a result, the district
views its evaluation process as comprehensive, complete, and fair.
The district further stated that the board utilizes all criteria
in the rule along with other criteria such as project impact and
plan priority measures.
Final Resolution:
The DNR considers this matter resolved with the understanding that
the district will provide a copy of its revised evaluation program
and criteria to the SWMP. This information was received on Sept.
16, 1996.
Audit Finding and Recommendation:
Decals not Displayed on Equipment. Seven project sites, one of which
received two grants, were visited to discuss the status of the projects
and to view the equipment purchased with grant funds received from
the district. In the Grant Assistance Agreement drafted by the district,
the district requires the subgrantees to place decals that give
credit to the St. Louis-Jefferson County SWMD on the equipment funded
by grants. Two of the seven sites visited did not have the decals
giving credit to the district properly displayed. As mentioned in
a previous finding, the district should complete a physical inventory
of the equipment purchased with district funds. If the physical
inventory had been performed, the district could have previously
remedied this situation. The auditor recommended the district check
for and enforce compliance with the requirements it sets for its
subgrantees.
District Response:
The district stated that it will be more diligent in enforcing other
requirements set for grantees in the 1996 grants. The district will
not include any requirements that will not be enforced. Additional
requirements will be included in site visit forms, and subgrantees
will be checked for compliance.
Final Resolution:
The DNR considers this matter resolved with the understanding that
the district will provide a copy of the site visit forms to the
SWMP. The information was received on Sept. 16, 1996
