YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

Report No. 2000-08
February 21, 2000

The following problems were discovered during an audit of the Land Trust of Jackson County, Missouri conducted jointly by this office and the Kansas City, Missouri, City Auditor's Office.

Although state law requires Land Trust to turn over the net sale proceeds from land sales to the taxing authorities, no such distributions have been made since 1994. Since that time, Land Trust has retained the proceeds from all property sales and used those monies to pay all operating expenses and accumulate a surplus in excess of $500,000.

Several questionable sales transactions were noted which may warrant further review. These include two property sales made to the spouse of a Land Trust employee. One of these involved the May 1998 sale of an improved property (a property which includes a house or commercial building) for $6,200. No documentation could be located to indicate that any monies were ever received or deposited related to this sale. In addition, it does not appear this sale went through Land Trust's review and approval process.

The other property was sold in July 1997 to the Land Trust employee's spouse for $2,000; however, it appears only $1,300 was received and deposited, with $700 unaccounted for or outstanding. This property was subsequently condemned by the City of Kansas City for public use and the applicable Land Trust employee and spouse were awarded an $11,000 settlement for this property.

Various other problems were noted regarding Land Trust's management and sale of property.

Appraisals were not made when properties were added to inventory as required by state law.

Letters of consent were not obtained from at least two of the three appointing authorities (City of Kansas City, Jackson County, and Kansas City School District) when an offer was accepted for less than two-thirds of a property's value.

Many of the property sales files did not contain adequate documentation to support property valuations and offers. One of these files included the 1996 sale of the Vista Del Rio building for $400,000. There was no documentation supporting the valuation of that property. Also, there was no documentation available concerning the sale of the Uptown Theater to a former trustee in 1993.

The highest offer was not always accepted.

Improved properties were not advertised in 1997. In addition, Land Trust does not advertise in a newspaper with a wide circulation.

Land Trust does not have written policies or procedures regarding properties sold on an installment basis or properties held off the available sales list at the request of the City of Kansas City.

Various concerns were noted regarding expenditures incurred by Land Trust.

In 1998, extra salary payments totaling $10,025 were made to three Land Trust employees. There was no documentation supporting the reasons for the extra payments or indicating that they had been approved by the board. In addition, annual bonuses totaling $32,000 were paid to employees between January 1997 and December 1998. Neither the extra salary payments nor the bonuses were reported on the employees' W-2 forms.

From 1995 through August 1999, Land Trust expended over $650,000 for contracted mowing services. Land Trust has not formally solicited bids or other proposals for these services. It was noted that the highest paid mowing contractor was the spouse of a Land Trust employee, receiving approximately $50,000 in 1998 and $42,400 during the first eight months of 1999.

Competitive bids were not solicited for any other items and services purchased by Land Trust, including various pieces of office furniture and equipment.

Land Trust has not solicited proposals for its banking services as required by law. In 1997, Land Trust moved its accounts to a bank where a trustee serves on the board of directors. At a minimum, this situation gives the appearance of a conflict of interest.

The Land Commissioner is paid a $500 monthly auto allowance without being required to provide any documentation to support these payments.

Actual expenditures exceeded the budgets by significant amounts during the past several years.

A review of Land Trust accounting controls and procedures disclosed various record keeping and procedural weaknesses including a lack of segregation of duties, untimely deposits, inadequate records of monies collected, and checks being signed in advance of preparation, among others.

Other findings included:

The lack of any written policies and procedures.

Concerns regarding the bonding of the trustees and the Land Commissioner.

Lack of proper documentation and disclosure regarding offers considered and approved, and not being fully compliant with the Open Meetings Law.

Complete Audit Report