YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

March 08, 2004

Report No. 2004-17

Missouri wastewater treatment needs should be addressed in a more efficient manner

The Department of Natural Resources (DNR) implemented the state’s Clean Water State Revolving Fund (SRF) in 1992.  It is a federally subsidized, low-interest, leveraged-loan program, which assists Missouri communities desiring to build, expand or improve their wastewater treatment facility.  The SRF balance has grown to $260 million in fiscal year 2003.  This excessive balance is a result of inadequate outreach to communities, an untimely application process and an overly complicated financing process.

State’s wastewater treatment needs not completely assessed or quantified

DNR did not maintain a comprehensive inventory of communities with inadequate wastewater treatment systems, or have sufficient outreach efforts to identify communities’ wastewater needs.  As a result, DNR's ability to determine wastewater treatment needs in the state and then target those communities needing assistance is limited.  (See page 4)

Untimely application process contributed to the excessive cash balance

DNR did not require a facility plan to be submitted with a project application, which extended the average application processing time to 3 years.  Delays in the application process causes disbursements to communities to lag.  Subsequently, fund receipts have outpaced disbursements resulting in the growth of the fund's cash balance during each of the three fiscal years ended June 30, 2003.  In addition, inaccurate financial projections have hindered DNR’s ability to manage some financial aspects of the program.  (See page 5)

DNR could more proactively serve communities with increased outreach

DNR should enhance outreach to communities determined to have wastewater treatment needs by offering information and assistance prior to the submission of the application and facility plan.  This information would inform communities of the financing options, give community leaders the information they need to move forward with the application while potentially reducing the excessive application processing time.  (See page 6)

Use of SRF interest earnings should be re-evaluated

The benefits of issuing short-term bonds instead of long-term debt for the match portion of the Clean Water SRF Capitalization Grant should be evaluated.  Short-term bonds would allow the state to utilize more of the fund’s interest earnings for matching purposes.  This method could reduce additional long-term debt issuances by up to $10 million annually.  (See page 9)

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