Report No. 2009-71
July 2009
Complete Audit Report

The following findings were included in our audit report on the Three Rivers Community College.

Various concerns were noted involving expenditures. The college's current bidding policy requires competitive bidding procedures based on the cost of individual items rather than the total amount of the purchase, resulting in some significant purchases not being bid and/or advertised. In addition, the college did not always obtain bids or document efforts to obtain bids for the purchase of goods and services as required by the college's purchasing policy. Examples of expenditures which were not properly bid or where bidding documentation was not properly retained, included: satellite campus construction costs ($261,528), laboratory renovations ($191,468), bleachers renovation ($99,100), and laboratory equipment ($73,202). Also, the college did not document its evaluation and selection of engineering services costing $20,661.

During fiscal year 2006, the college made regular purchases of gas and other items (such as oil and tires) from a local gas station owned by a member of the Board of Trustees, with the related payments totaling over $13,000. Because competitive bids were not obtained for these purchases, this situation appears to represent a conflict of interest and may violate state law. Some expenditures were noted which may not be necessary or prudent uses of college funds. In addition, the college did not enter into, or could not locate written contracts with various entities with which it does business. Also, improvements are needed related to controls over credit cards.

The college has not bid banking services and does not have a written agreement with any of the banks holding college funds. In addition, it appears the college has an excessive number of checking accounts. Bank accounts have not been reconciled on a timely basis. As of May 2008, the college's primary checking account and payroll account had not been reconciled since September 2007 and June 2007, respectively. Receipts collected and recorded by the cashiers in the business office are not always deposited intact because the college allows students and employees to cash personal checks from daily cash receipts. Cashing personal checks from daily cash receipts is a poor practice and reduces the accountability of monies received.

The on-campus housing operation has incurred substantial losses each year since it began housing students in 2002. As a result of this situation, the college's Current Fund absorbed over $370,000 in housing operation losses during the 3 years ended June 30, 2008. The college's child care operation has also incurred substantial operating losses (over $200,000 during the 3 years ended June 30, 2008) and is subsidized by other college funds. In addition, as of August 2008, the college had not received any state payments since at least January 2005 for child care services provided for children eligible for state subsidies. This may have been due to the child care operation not billing the state until late 2008. The college's contracted cafeteria vendor has not paid commissions owed since March 2006. Prior to March 2006, the college received commissions of approximately $200 per month from this vendor.

The college does not have a formal capital assets policy and has not established adequate records and procedures to account for, track, and control capital assets. Prior to fiscal year 2008, the college did not maintain any type of internal listing or record of most of its capital assets. Beginning in fiscal year 2008, using the capital asset information maintained and provided by its independent auditors, the college assumed control and maintenance of the capital asset records. However, those records do not provide sufficient detail and other information to adequately account for and control the capital assets of the college. In addition, the college has not established adequate records and procedures to account for the disposition of capital asset items or to ensure such dispositions have been properly authorized.

Due to inadequate controls and little oversight of the campus bookstore by the business office, a former bookstore manager misappropriated a substantial amount of monies through fraudulent textbook buyback and refund transactions for several years prior to June 2007. According to a forensic investigation conducted by the college's independent auditors in 2007, approximately $130,000 was misappropriated. The college was subsequently able to recover most of the amount lost through a fraud insurance policy. After the discovery of the fraud and the forensic investigation, the bookstore and the business office made changes to improve the controls and procedures related to textbook buybacks and refunds.

In 2005 and subsequent years, the college spent at least $807,000 on start-up costs of new centers and legal fees related to a dispute with Southeast Missouri State University (SEMO) that could not be resolved through negotiation or other means. The audit recommended the college make a concerted effort to resolve any future differences it might have with another public institution of higher education. If the differences cannot be resolved, the matter should be submitted to the state Department of Higher Education for binding dispute resolution in accordance with a 2007 provision added to state law.

The college has not adequately documented how the rates in its current 5-year tuition rate plan were determined, nor does it review the 5-year plan periodically to ensure the rates remain appropriate in light of changing financial conditions.

The college's budget documents did not include some operating funds, did not include some information required by state law, and were not adopted timely. In addition, the college did not adequately review or monitor actual expenditures compared to budgeted expenditures by department.

Other findings in the audit report relate to booster club activities and expenditures, closed meeting minutes and public access to records, vehicle usage, and computer security issues.

Complete Audit Report
Missouri State Auditor's Office
moaudit@auditor.mo.gov