YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

Report No. 2000-53
June 28, 2000

The following findings were noted as a result of an audit conducted by our office of the Office of the Attorney General.

Formal written contracts are rarely prepared to document agreements for outside legal and other professional services, but instead the Attorney General's office generally uses an engagement letter to document such arrangements. However, twenty-two payments were noted totaling over $199,000 for such services, which the Attorney General's office was unable to produce an engagement letter.

Eleven payments were noted which included charges which were either not addressed in the engagement letters or were not in accordance with the letters. In all of these instances, the rates billed for associates and paralegals were not included in the engagement letters, and in four instances, the rates billed for partners were higher than the rates quoted in the letters. While the Attorney General's Office has established billing policies and procedures for outside counsel in a billing policies and procedures manual, we noted many instances where supporting documentation was not in accordance with this manual.

Without written agreements, it is difficult to determine whether all charges billed are proper. In addition, written agreements are necessary to ensure all parties are aware of their duties and to clarify all compensation allowed.

According to staff of the Attorney General's office, outside legal counsel is hired when there is a conflict of interest for the office or when the case is very complex and requires specialized services. The Attorney General's office could not provide us with documentation regarding the reasons for hiring outside legal counsel for particular cases or the method of selecting these attorneys, including the case involving the tobacco litigation. There was no documentation to support how the lead attorney was selected to represent Missouri in this case.

Considering the extent of services obtained from outside legal counsel, it appears this information should be documented to support the propriety of the decision-making process.

Other items noted in the report included:

The duties surrounding the establishment and handling of restitution amounts due are not adequately segregated and procedures for monitoring the collection of these receivables are not adequate.

The Attorney General's Office does not require some employees to prepare monthly time sheets, and the timekeeping system is cumbersome and does not provide useful information. A written personnel policy has not been established and written job descriptions have not been created.

The Attorney General's Office does not ensure the costs of commercial flights are compared to the costs of using state planes for out-of-state air travel.

It was noted that some computer equipment purchased with federal funds for the Medicaid Fraud Control Unit was being used by employees in other sections. According to the federal program regulations, equipment purchased with funds pursuant to this program should not be used for any purpose other than investigating and prosecuting Medicaid fraud.

The Attorney General's office has established several bank accounts outside the state treasury. It appears the monies deposited in some of these accounts are state funds and should be maintained by the State Treasurer's office. In addition, a formal written depositary contract has not been entered into with the bank where the accounts are maintained.

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