YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

Report No. 2006-87

December 2006

The following findings were included in our audit report on the Birmingham Drainage District.

The Birmingham Drainage District's board needs to increase its oversight and management of district operations. It appears that many duties/functions performed by the District Attorney are outside the scope of services as provided by state law.  The board only holds two meetings a year, and relies upon the District Attorney to perform most of the day-to-day responsibilities for the operation of the district.   During 2005, the district paid the District Attorney's firm over $45,000 for legal services.

State law provides for the appointment of a District Secretary/Treasurer, District Overseer, District Engineer, and District Attorney.  The district did not report wages, withhold payroll taxes, or pay the employer's share of social security on compensation paid to these officials. Rather, it appears the district considers the officials independent contractors; however, they do not have written agreements with the officials regarding their duties, responsibilities, and compensation. 

In March 2004, the district hired a former supervisor as its District Engineer and paid $200 per month during the year ended December 31, 2005 for his services.  The District Engineer, who lives in Utah, has not attended a board meeting since July 2004, and did not attend the May 2006 U.S. Army Corps of Engineers inspection of district improvements.  Also, he does not prepare annual reports required by state law.  The district could provide no documentation of the work done by the District Engineer.

For the year ended December 31, 2005, the District Overseer was paid $650 per month  for his duties as Overseer.  In addition, the district paid him almost $23,000 for various maintenance services, such as mowing, chemical application, tractor work, and other general labor.  This situation may be a conflict of interest in violation of state law.

There was no documentation that the board approved all significant district business.  In addition, the board does not report to the landowners at the annual landowner's meeting the work which was done within the district.

There is little independent oversight or adequate segregation of duties regarding the district's accounting functions.  At December 31, 2005, the district had several accounts which totaled approximately $1.3 million, and were held at 6 banks and an investment firm.  The district needs to better manage these accounts. 

The district does not review or verify the accuracy of its maintenance tax book.  In the 2005 tax book and tax calculations, we found that the maintenance tax for 6 of 10 properties reviewed was not correctly calculated.  Errors in the tax book were not detected and corrected, nor were the assessed benefits always calculated in accordance with the court order.  As a result, the district had little assurance that taxes assessed are proper and accurate.

There were numerous weaknesses with the district's procedures for conducting and documenting board meetings and elections.  The meetings were infrequent and were not always at a location and time that were conducive for the public to attend, the minutes did not always contain sufficient detail of business conducted and actions taken, and some meetings did not comply with the open meetings law.  Also, the district did not have written policies and procedures for public access to records, absenteeism by supervisors, and election of supervisors. 

The district does not have a formal bidding policy.  As a result, the decision of whether to solicit bids for a particular purchase is made on an item-by-item basis.  During the year ended December 31, 2005, bids were either not solicited or bid documentation was not retained for certain goods and services totaling over $200,000.

In March 2004, the district completed a construction project to repair a section of the levee.  The district did not document the basis or justification for awarding the bid to a contractor other than the low bidder for the project.  Board minutes did not indicate that construction change orders totaling approximately $28,000 relating to the project were approved by the board, nor could the district provide copies of these change orders.  In November 2003, the district requested the contractor to purchase extra steel, costing $209,170, for Phase II of the project; however three years later, the steel has not been used.  In addition, no documentation was available to support that the district procured the engineering services for the project, as provided by state law.

The board as a whole does not approve expenditures or review invoices before payment of the district's expenses.  There was no evidence that the board requested or reviewed invoices and/or other supporting documentation for expenditures.  Additionally, the board is not provided with a listing of payments made until after the fiscal year has ended.

The district did not prepare and adopt annual budgets in accordance with state law, nor obtain annual audits as required by state law.  Actual expenditures exceeded budgeted amounts by over $69,000 for the year ended December 31, 2005.

The district's responses did not address many of our recommendations.  The lack of board oversight and various weaknesses need to be addressed.

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