District P

Audit Finding Resolution Summary
South Central Solid Waste Management District – Region P
Date of Final Audit Report: Nov. 1995
for the fiscal years: 1993, 1994 and 1995
Date of Final Resolution: Oct. 4, 1996
July 12, 1999

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.

Review of Accounting and Internal Control

1.  Audit Finding and Recommendation: Inadequate Accounting Systems and Procedures

(a) Inadequate System of Internal Controls.
The district does not have an effective system of internal controls over accounting functions. The executive board treasurer is responsible for every aspect of district finances. No other person took an active role in the administration or review of the district’s financial matters.

Without adequate oversight, and checks built into the district’s system, there is an increased risk for irregularities or misappropriation of funds. By separating accounting duties within the system, the district can provide greater security over district assets.

The auditor recommended the district establish a system of internal controls including an adequate segregation of accounting duties.

District Response:
The district stated that it now has a system in place that adequately segregates accounting duties and safeguards the district's assets. The district now conducts accounting duties such as check signing, bank statement reconciliation and budget reporting at district board meetings. These actions are documented in the meeting minutes.

Final Resolution:
The Missouri Department of Natural Resources (DNR) considers this matter resolved with the understanding that the district agrees to submit written procedures describing the district's day-to-day accounting and bookkeeping procedures. The purpose of these written procedures is to provide a manual to district staff that anyone could follow and adhere to in carrying out daily accounting functions. The procedure was submitted to the Solid Waste Management Program (SWMP) on May 16, 1996.

(b) Inadequate Accounting/Bookkeeping System. 
The district does not have an accounting system that conforms with generally accepted accounting principles (GAAP), which accurately reflects all fiscal transactions, incorporates appropriate controls and safeguards and provides clear references to the projects.

The auditor recommended that the district implement and maintain an accounting system in compliance with GAAP.

District Response:
The district now uses a computerized accounting system using the software program MSMoney. All of the data from previous fiscal years has been entered into this system.

Final Resolution:
DNR considers this matter resolved with the understanding that the written procedures requested in finding 1(a) describes how and what data is entered in to the computerized accounting system. The procedure submitted in finding 1(a) contained this information.

2.  Audit Finding and Recommendation: Inadequate Payroll Records

(a) Inadequate Maintenance and Monitoring of Payroll Records. Payroll records for the District Coordinator, the district’s only employee, were not maintained. There were no records prepared to support the payroll payments nor earnings records to support tax documents. Therefore, all salary paid to the District Coordinator is unsupported.

The auditor recommended the district maintain employee payroll and earnings records, and that earnings records be maintained for monthly payroll as well as other forms of compensation.

District Response:
The district indicated that payroll records are now kept on the district computer and includes: dates, check numbers, gross salary, deductions, net pay, tax payments and monthly expenses incurred by the District Coordinator. The district indicated at the meeting that these payroll records are signed, after discussion, at monthly board meetings.

Final Resolution:
DNR considers this matter resolved with the understanding that the district will provide a representative printout of the payroll account record approved by the executive board. This printout was received on May 16, 1996.

(b) Overpayment of Salary. The district’s agreement with the District Coordinator provided for an annual salary of $15,000 a year, or $1,250 a month. Beginning in July 1994, the District Coordinator’s paycheck was inadvertently increased by $3.63 a month. The monthly overpayments through April of 1995 totaled $39.93. The likelihood of such errors increases when no earnings or other payroll records are maintained. The auditor recommended the district recover $39.93 from the District Coordinator.

District Response:
The District Coordinator indicated that the district had been reimbursed the amount of $39.93.

Final Resolution:
DNR considers this matter resolved. The district submitted copies of the canceled check and deposit slip. This information was received by the SWMP on June 5, 1996.

Administrative Grants

1. Audit Finding and Recommendation:

Inadequate Documentation of Expenditures.
The district did not maintain records to support payroll and other expenditures as required by the General Terms and Conditions, which govern the administration of funds dispersed under the program. The district did not maintain adequate ledgers and did not retain complete supporting documentation. Additionally, the district’s records did not include the required documentation, which adequately identified application of funds. Payments were made for which invoices or other documentation was not acquired or retained. Payments totaling $16,407.12 are considered questioned costs. The auditor recommended the district resolve the questioned costs with the SWMP or remit $16,407.12 to SWMP. The auditor also recommended the district ensure future payments are documented and supported as required in the General Terms and Conditions.

Districts Response:
The district brought additional records to the final resolution meeting. It was determined that the questioned costs involved lack of supporting documentation associated with payment of District Administrative Grant funding to South Central Ozarks Council of Governments (SCOCOG). DNR’s Division of Administrative Support, agreed to review this documentation and request additional information, if needed, from the District Coordinator.

Final Resolution:
DNR considers the finding of $16,407.12 in questioned costs resolved. DNR’s Division of Administration Support’s auditor indicated that the supporting documentation provided was satisfactory.

2.  Audit Finding and Recommendation:

(a) Inadequate Supporting Documentation for Reimbursement.
The District Coordinator submits a list of expenses, which is reimbursed at each board meeting. Listed are the places traveled and the number of miles. However, the purpose of the trip is not included. The District Coordinator also submits a monthly amount for phone and itemized postage expenses. Occasionally, there were phone bills and receipts for postage submitted for payment that included indications that the calls were made on behalf of the district. However, there were other payments made to the District Coordinator for these same type of expenses for which no documentation was provided. By requiring support for all payments, the district will have more assurance that the expenditures are reasonable and appropriate. Questioned costs due to inadequate supporting documentation of payments to the District Coordinator are $1,902.83. The auditor recommended the district resolve the questioned costs with SWMP or refund $1,902.83
to SWMP.

District Response:
The auditor provided district representatives a list of deficiencies concerning this finding. The finding involved inadequate documentation of billings to the district by the District Coordinator for phone calls. The board approves the expenses and pays the District Coordinator by check. The reasoning for the questioned cost was the lack of a canceled check that would identify that the phone bill had been paid by the District Coordinator.

Final Resolution:
DNR considers this matter resolved because the District Coordinator submitted copies of the paid phone bills and a complete explanation of the reimbursement process. The copies and explanation were received by SWMP on July 8, 1996.

(b) Altered Receipt Submitted for Reimbursement. An altered receipt for postage was submitted for reimbursement by the District Coordinator. Accordingly, $29.20 is in question. The auditor recommended the district resolve the questioned costs with the SWMP or remit back to the program $29.20 for unsupported expenditures and that the district review all supporting documentation for expenditures, and approve only payments for which adequate support is submitted.

District Response:
The recommended action requested by SWMP was for the District Coordinator to repay $29.20 in questioned costs to SWMP. SWMP indicated at the meeting that the District Coordinator should repay the district instead of SWMP.

Final Resolution:
DNR considers this matter resolved. The district submitted copies of the canceled check and deposit slip. This documentation was received by SWMP on June 5, 1996.

3.  Audit Finding and Recommendation:
No Documentation to Support Match for Administrative Grants.
 The district is required to provide a one-third match on the Administrative Grant. For the fiscal year 1994 grant, the district used time spent by its treasurer on district related activities prior to application for grant as match for the 1994 grant. For the fiscal year 1995 grant, time spent by board members for meetings was used as match. However, no time sheets to document this time were kept. The auditor recommended the district resolve the issue of match documentation with  SWMP. If not, the district must refund $40,000 to the program for the 1994 and 1995 Administrative Grants and that the district maintain documentation for any match required on future grants.

District Response:
The district now maintains a log of time and sign-in sheets for district meetings.

Final Resolution:
DNR considers this matter resolved. The district provided documentation for all hours designated as match. Attached to the documentation were the names of individuals donating their time, along with actual hours donated and the rate of hourly pay. The documentation was signed by all affected board members and was received by SWMP on June 5, 1996.

District Grants

1.  Audit Finding and Recommendation: Conflict of Interest

(a) District Grant Evaluations Performed by Potential Recipients.
Of the 25 projects awarded during the audit period, six were grants wherein a board member was listed as the contact person for the project. The board members also participated in the district’s evaluation and ranking of the projects. As the district did not follow the regulations governing the evaluation and award of these funds, the entire amount is disallowed. There is therefore, $37,297 in questioned costs.

The auditor recommended the district resolve the questioned costs with SWMP or remit $37,297 back to the program and that the district refrain from allowing anyone directly involved with a project to evaluate and rank the proposals.

District Response:
All of the grants in question have project managers who are on the executive board. This issue has the appearance of conflict of interest mainly due to lack of complete documentation. Six subgrants spanning three fiscal years for an actual total of $36,434.41 are involved in this finding.

The district proposed resolutions as follows:

For FY93 the individuals who were grant managers and also participated proposed on the evaluation panel submit notarized affidavits explaining the part that they played in the evaluation process. It was also noted that a Notary Public, not affiliated with the district, would notarize the affidavits.

For FY 94 the district indicated that the executive board member and project manager, remained silent when grant proposal 94097 was discussed. The suggested resolution was to have the district provide a signed and notarized affidavit from the project manager stating that he abstained from voting on this proposal.

For FY 95 the district indicated that a decision was made to fund all grant proposals, prior to evaluation and ranking because there was adequate funding available for all of the grant proposals submitted. The district indicated that it would submit the evaluations and rankings for the FY95 grants, as well as signed and notarized affidavits from the individuals who were grant managers or participated on the evaluation panel explaining their role in the evaluation process.

To avoid this type of problem in the future, the district initiated a process for evaluation and ranking proposals during FY96 district grant cycle. This new procedure should eliminate conflict of interest or the appearance of conflict of interest.

Final Resolution:
DNR considers this matter resolved since the district provided signed and notarized affidavits from all affected board members on June 5, 1996. However, the affidavits were not notarized by a Notary Public unaffiliated with the district in order to be acceptable to the department. This was completed on June 5, 1996.

The district also agreed to submit copies of evaluations and ranking for the FY95 district grant cycle. This documentation was received by SWMP on June 5, 1996.

The district also submitted a written description of the new process that was initiated for FY96 to avoid any appearance of conflict of interest in the future on June 5, 1996.

(b) District Grant Evaluations Performed by District Coordinator as Recipient. 
The District Coordinator receives the subgrant proposals and performs a preliminary evaluation. The District Coordinator then makes recommendations regarding the ranking of each proposal to the board of directors. Some of the subgrant projects are projects for which the District Coordinator may receive compensation. While the District Coordinator is not officially involved in the rating process, it appears the board of directors relies heavily on the District Coordinator’s recommendations. This finding results in a questioned costs of $22,755.

The auditor recommended the district resolve the questioned costs with the SWMP or remit $22,755 back to the program, and that the district ensure the coordinator is not involved in evaluating any project proposal in which the District Coordinator may participate.

District Response:
The district indicated that the District Coordinator does not participate in any evaluation or ranking of proposed projects, other than to conduct a preliminary completeness review of submitted applications. The District Coordinator indicated that she would fully describe her duties as they relate to the district grant review process. The District Coordinator also agreed to submit a signed and notarized affidavit indicating that she does not take any part in the evaluation and ranking process for any district grant applications.

Final Resolution:
DNR considers this matter resolved since the district provided a signed and notarized affidavit from the District Coordinator on May 23, 1996, indicating that she did not and does not take part in the evaluation and ranking process for any district grant application. However, it was not notarized by a Notary Public unaffiliated with the district. This was completed and submitted to SWMP on June 5, 1996.

The District Coordinator also submitted a written description of her duties as they relate to the completeness review of district grant applications on June 5, 1996.

2. Audit Finding and Recommendation:

Inappropriate Match Considered During Evaluation of District Grants.
Project grants are not required to provide any match. However, grant sponsored financial participation is preferred and additional evaluation points are given if a proposal indicates a matching contribution. In 1995, Project 95027 listed match. The matching contribution was the cost of the truck, which was purchased in the previous fiscal year. This was not considered to be an eligible match because the purchase did not occur during the project period. The match was considered eligible by the district and the proposal received 10 points in the Applicant Contribution section. If there had been more projects than funding, the 10 evaluation points could have made the difference between this project getting funding or not.

The auditor recommended the district consider only eligible contributions for matching district funds.

District Response:
The match in question is a vehicle already on hand. Discussion revealed that the match was not considered by the district in ranking or evaluating the project.

Final Resolution:
DNR considers this matter resolved due to the receipt of a subgrant agreement and a budget for this project indicating that no match was required for funding. Also, the district developed a procedure for ensuring that only eligible matching funds are considered in future grant proposals. The procedure was submitted in writing to SWMP on June 5, 1996.

3.  Audit Finding and Recommendation:

District Proposal Evaluation Forms do not Include all Required Criteria.  
The board’s list of criteria used to evaluate project proposals for 1993 or 1994 and 1995 grants are not complete. 10 CSR 80-9.050 (2)(C)3 lists 17 criteria, which are to be used to evaluate district grant proposals. The district is not in compliance with the applicable CSR, which requires an objective rating method for the projects. Additionally, without compliance with the pertinent section of the CSR, the district runs the risk of being denied funding in the future. The auditor recommended the district ensure evaluations are completed as required.

District Response:
The district suggested that a criteria evaluation form be provided by SWMP to the districts in a training session.

Final Resolution:
DNR considers this issue resolved and provided evaluation forms at training in the fall of 1996.

4.  Audit Findings and Recommendation:

Proposed Projects Approved Without Containing all Required Information.  
Proposals submitted to the district for district grants are required to contain eight elements which include an executive summary, documentation of costs, location of property, work plan, timetable, verification of permits, match documentation, and evaluation description. In 1993, two proposed projects (93104 and 93105) were funded without all of the required elements. There were also proposals funded in 1994 without the required elements. The auditor recommended the district require all proposals contain all required information before they are evaluated and funded.

Districts Response:
The district suggested that a form listing the required information that must be included with all proposals be provided by SWMP to the districts in a training session.

Final Resolution:
DNR considers this issue resolved and provided forms identifying the eight required elements for proposals at training in the fall of 1996.

5.  Audit Finding and Recommendation:

Project Funded Without Formal Evaluation Process Completed.
The ranking of the 1994 district grant projects was submitted to the district on June 1, 1994, on the 1994 District Grant Review form. Nine projects were chosen for funding at the April 28, 1994, board meeting. In the May 26, 1994, board meeting minutes, the board decided to use any left over funding to complete a waste analysis project (94105) for the district. A second 1994 District Grant Review submitted to the program showed funding for 10 grants, including project 94105, however, there is no evidence that this project went through the required evaluation process resulting in a questioned cost of $1,886. The auditor recommended the district resolve the questions costs with SWMP or remit $1,886 back to the program for project 94105 and that the district refrain from funding projects which have not been through the required evaluation process.

District Response:
No formal evaluation form was submitted for the questioned subgrant. The questioned amount totaled $1,886. The District Coordinator indicated that an evaluation had been completed.

Final Resolution:
DNR considers this matter resolved. DNR requested a copy of the evaluation for the proposal in question. This documentation was received by SWMP on June 5, 1996.

6.  Audit Finding and Recommendation:

District Grant Documentation Submitted Contained No Proof of Payment.  
For 1993 district subgrants, funds were requested from the district by four of the subgrantees for a total of $22,127. These requests for funds were inadequately supported as valid and paid and are considered questioned costs. For 1994 project grants, the district used an internal document, a Request for Funds, for the expenditures made on the projects. Based on the Requests for Funds, the treasurer issued checks to the subgrantees. Out of 38 Requests for Funds from the district, 20 did not provide supporting documentation with the reimbursement claim. The unsupported payments for these projects totaled $5,059 in questioned costs. The auditor recommended the district resolve the questioned costs with SWMP or remit back to the program a total of $27,186 ($22,127 + $5,059) and that the district require invoices for reimbursement on district grants and ensure they are adequately supported.

District Response:
The questioned costs are due to lack of complete documentation. Eleven subgrants spanning two fiscal years for a total of $27,186 are involved in this finding. For FY93, the district provided copies of invoices that were submitted by the subgrantees. The invoices were not marked paid. The district also had copies of the front of checks paying the invoices, but not the cancelled back. The auditor reviewed the documentation and accepted it as adequate to resolve the issue. DNR requested that the district’s documentation process be improved. The district acknowledged the need to improve this process. For FY94, the district submitted documentation to resolve $5,059 in questioned costs to SWMP on June 5, 1996. The auditor reviewed the documentation and notified SWMP that the information received was adequate to support payment for the questioned costs.

Final Resolution:
DNR considers this matter resolved for FY93 and FY94 projects totaling $27,186 since the district provided a list of documents that will be required before any district grant reimbursement on June 5, 1996.

7.  Audit Finding and Recommendation:

Unallowable Costs Reimbursed by the District.
A 1994 cycle District Grant subgrant was compensated for costs incurred before the allowable start date of the grant. The reimbursed expenses totaling $991 were incurred in September 1994. No start date was found on the proposal, but the agreement between SWMP and the district did not begin until October 1994. Therefore, $991 are questioned costs. The auditor recommended the district resolve the questioned costs with SWMP or remit $991 to the program.

District Response:
The district indicated they acted on information from the department in reimbursing costs incurred prior to the signing of a Financial Assistance Agreement (FAA) between DNR and the district.

Final Resolution:
DNR considers this matter resolved since the district explained in writing the reason for the reimbursement of prior costs, substantiated that the costs were legitimate, formally requested approval of the prior costs from the department, and received a grant amendment signed by the department director authorizing the prior costs. The district provided the documentation and approval request on June 5, 1996. The department then processed a amended grant agreement signed on
September 16, 1996.

8.  Audit Finding and Recommendation:

No Written Notification Sent to Governing Officials to Request Proposals.
The district is required to send written notification of request for proposals to the governing officials of each county and each city over 500 in population in the district. No notification letters were found in the district records for the 1994 grant cycle. The auditor recommended the district send written notification to all appropriate officials each grant cycle.

District Response:
The district indicated that it had used regular mail to notify the cities and counties. The district also indicated that it has adopted a procedure for documenting future notification mailings.

Final Resolution:
DNR considers this matter resolved since the district provided a copy of the letter announcing the availability of district grant funds, along with the names of cities and counties to which it was sent on June 5, 1996. The district also provided a written description of the new procedure for documenting mail outs on June 5, 1996.

9. Audit Finding and Recommendation:

(a) Final Reports not Submitted in a Timely Manner.
Regulations require that final reports are to be submitted by the district within 30 days of the project completion date. For 1994 project grants, four instances were noted of final reports not submitted within 30 days of project completion. The auditor recommended the district submit final reports within 30 days of project completion to comply with regulations.

District Response: None Required

Final Resolution:
In an effort to provide flexibility to the districts, SWMP allows districts to submit subgrant final reports with the districts subsequent quarterly reports.

(b) Quarterly Reports not Submitted.
For the 1993 grant cycle, first quarter reports were submitted on October 24, 1994, for three of the five projects. These three were also final reports. One quarterly report was submitted on Feb. 6, 1995. No quarterly reports were found for the remaining projects. Of the 10 projects approved by the board for the 1994 cycle of District Grants, first quarter reports were not submitted for seven of them. Reports for the second quarter were not submitted for three of the projects. The auditor recommended the district submit quarterly reports at the end of each fiscal year quarter for each project in progress to comply with regulations.

District Response:  None Required.

Final Resolution:
In an effort to provide flexibility to the districts, SWMP allows districts to submit quarterly status reports on a timetable established by the date of the DNR Director’s signature on the grant agreement. These dates do not coincide with the state fiscal year.

General Grant Management

1. Audit Finding and Recommendation:

Program Income Used Without Written Approval.
A district is not permitted to use district income without the express permission of SWMP. According to the district’s bank statements, interest of $3,905.57 was earned on grant funds. According to program records, the district neither requested nor received authorization to use the program income. Pursuant to the General Terms and Conditions, the district should seek written authorization to use the program income, or return the program income to SWMP. The auditor recommended the district obtain written authorization to retain program income or credit SWMP $3,905.57 for program income earned.

District Response: None Required.

Final Resolution:
Changes to the Special Terms and Conditions allow districts to use income generated from interest earned on grant agreement funds as long as they are reimbursable under the provisions in regulation and they directly benefit the district grant program. SWMP allowed the district to have spent this income, as long as it can be documented that the above conditions exist.

2. Audit Finding and Recommendation:

No Time Records Kept by the District Coordinator.
The District Coordinator has an agreement with the district to work 24-hours per week. For this, the District Coordinator is paid a salary from the district’s administrative grant. Any time spent on other district grants over the 24-hour base is charged to the specific grant. The District Coordinator also works on subgrants the district awards to other organizations. For that work the District Coordinator is paid by the subgrantee from the subgrants.

Without time records, there is nothing to show that her time is being compensated accurately or that it is being paid from the correct funding sources. Since there was not compliance with the General Terms and Conditions pertaining to payroll documentation, the following amount is a questioned cost: $25,921.54. The auditor recommends the district resolve the questioned costs with SWMP or remit $25,921.54 (25,000.00 + $921.54) to the program for all salary paid on district grants and subgrants without supporting documentation and that the district document payroll expenses with proper time sheets.

District Response:
The district included a reference to 24-hours in the agreement with the District Coordinator in order to arrive at a yearly salary of $15,000 based on a reasonable hourly wage. The district raised serious objections to the department's suggestion that the District Coordinator maintain time accounting records to verify the number of hours worked. The basis for the district's concern was related to compliance with the federal Fair Labor Act. The auditor suggested that the issue could be resolved by removing the references to 24-hours from the agreement, thus eliminating the department's concern over time accounting.

Final Resolution:
DNR considers this matter of $25,921.54 in questioned costs resolved since the district provided a signed and notarized affidavit stating that the District Coordinator worked at least 24-hours per week for the time period in question. On June 5, 1996, SWMP received a signed affidavit from the District Coordinator for the time period October 1993 to May 1995. However, the affidavit needed to be notarized and include the month of May 1995. This information was submitted to SWMP on June 5, 1996.

The district prepared and entered into a contract with the District Coordinator that makes no reference to hours worked, only the annual/monthly salary rate. A signed copy of this contract was received by SWMP on June 5, 1996.

3.  Audit Finding and Recommendation:

Prior Approval for Publication.
The district and its subgrantees have published brochures and other material, with no documentation that any of the material had ever been submitted to SWMP for approval prior to printing. DNR approval of printed materials prior to publication is required by the General Terms and Conditions and ensures the consistency of messages between DNR and all Solid Waste Management Districts throughout the state. Prior approval also ensures that proper credit is given to the program for its support of the district. The auditor recommended the district submit all printed material to SWMP and publish only after written approval has been received.

District Response: None Required.

Final Resolution:
Due to the quantity of publications funded, the length of time required to obtain DNR pre-approval and the local focus of many of these publications, SWMP believes the districts are better suited to perform these reviews. Consequently, DNR’s Division Information Office has agreed to allow the districts to review their own publications. SWMP made changes to the District Grant Special Terms and Conditions to formalize this arrangement and set criteria for district approval.