YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

Report No. 2006-47

August 2006

The following findings were included in our audit report on the Lincoln County Public Water Supply District #2.

The Lincoln County Public Water Supply District #2 (district) does not have a current contract with the City of Troy regarding the district's arrangements to purchase water from the city and provide water hookups to district residents.  A contract was established in 1980 for a period of 20 years with a renewal option for an additional 5 years, but there is no documentation that the contract was renewed after the original 20 years and no current contract has been negotiated.  In addition, the district's water rules and regulations appear to be outdated because the district is not following several of the provisions outlined in the rules and regulations, including billing and collection cycles and delinquent service charges.

The district does not reconcile the total gallons of water billed to customers to the gallons of water purchased from the City of Troy.  Our review noted water losses and while the city provided possible explanations, they had not identified water losses or formally documented the reasons for such losses.  The district does not have procedures to reconcile total billings, payments received, and amounts remaining unpaid, and has not maintained a complete, accurate, and up-to-date listing of refundable meter deposits.  Late fees assessed on some utility payments were abated without documented reasons or board approval.  In addition, adequate documentation is not maintained to support partial payment agreements.  Also, the district has not established formal procedures for making adjustments to individual water bills, and there is no independent review or approval of the adjustments recorded.

A district board member and an office employee are the grandson and daughter, respectively, of the board president.  There was no documentation in the board minutes as to whether the board president abstained from voting on the appointment of his grandson, or the hiring of his daughter. 

The district does not have a formal bidding policy.  The decision of whether to solicit bids/proposals for a particular purchase is made on an item-by-item basis.  During 2005,

bids were not solicited for water meter installation and reading, plumbing services and plumbing inventory.  Additionally, a request for proposal was not distributed by the district to use in selecting their legal and accounting services.   There was inadequate documentation to support certain expenditures, including meter reading and grass mowing.  For two loads of dirt, a district check was made payable to cash, then cashed by the district with the cash used to pay the vendor.

The board president receives a $150 monthly travel allowance, and during 2005, the district reimbursed him $854 for cell phone costs and $143 for gasoline expenses.  The district does not require documentation of any expenses he incurs on behalf of the district, including the amount of his cell phone usage that is for district business nor the destination and reason for his trips.

The district does not prepare budgets, submit annual financial reports, and obtain annual audits as required by state law.  Also, in connection with $83,700 in water system revenue bonds issued in 1974, the district has not established separate accounts to fund the costs of operation and maintenance, depreciation, and extensions as required by state law.  Furthermore, the sewerage system revenue bonds issued in September 2005 will require similar accounts.

Also included in the report are recommendations related to minutes, agendas and bylaws, internal controls over receipts, personnel procedures, and capital asset records.

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