YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

Report No. 2005-74

October 2005

The following problems were discovered as a result of an audit conducted by our office of the Department of Conservation.

The Missouri Department of Conservation (MDC) did not assess achievement of the fiscal year 2004 strategic plan goals or update the strategic plan, coordinate the strategic plan process with long-term funding projections and the budget process, or develop specific data to allow measurement of progress toward the strategic plan's goals.

During the two fiscal years ended June 30, 2004, the MDC distributed over $9.2 million through grants, cooperative agreements, and cost share programs.  These agreements between the MDC and entities or individuals provide funding for private and public land activities related to MDC's mission.  We reviewed some of the contracts discussed in our previous audit (Report No. 2002-108) and determined that MDC is more closely monitoring these projects.  In addition, the MDC implemented a revised policy for grants and cooperative agreements in January 2003, which included significant new requirements for application procedures, project approval, project monitoring, and administration of the grant and cooperative agreement contracts.  However, some improvement is still needed in ensuring employees are assigned responsibility for monitoring these contracts, and in requiring contract payments to be made on a reimbursement basis.

All MDC full-time employees and certain designated hourly employees and volunteers are provided a clothing allowance.  During the two fiscal years ended June 30, 2004, the MDC expended over $980,000 on clothing reimbursements for department employees and volunteers.  While a significant portion of these expenditures were for employees with specific clothing requirements, some employees with infrequent public contact are allowed up to $100 per year for the purchase of signature clothing that identifies them as department employees.  We have questioned the need for clothing allowances in these instances.

During the two fiscal years ended June 30, 2004, the MDC expended approximately $63,000 on gifts and awards for employees; however, the department does not have a policy to control these expenditures and allows purchases of gifts and awards which are excessive in amount.

The MDC's outside employment policy requires employees to complete an annual outside employment authorization and related business disclosure form if the employee has outside employment or has a personal or family interest in a business.  However, the form does not provide a reporting mechanism for other types of conflicts of interest that could

arise from other circumstances, such as involvement in not-for-profit organizations which have conservation related objectives or friendships and relationships which the employee feels could compromise their ability to properly perform supervisory or oversight duties. 

During our review, we noted indications that compliance with the MDC policy is not being adequately implemented and monitored.

We noted that the department director and a commission member were ex-officio non-voting members of the board of directors for a not-for-profit organization with a business relationship to the department.  However, neither person had reported the entity on their financial disclosure forms filed with the State Ethics Commission for the affected time period.

The MDC maintains approximately 1,300 passenger vehicles.  The department's accounting system does not separately identify between 60 and 80 vehicles available to employees for temporary or daily use as pool vehicles.  As a result, the vehicles were not analyzed for appropriate usage levels or compliance with state policy for pool vehicles.  As reported in the prior audit, the MDC does not maintain vehicle usage logs.  In addition, adequate records are not maintained relating to employees allowed to use department vehicles for commuting.

As of June 30, 2004, MDC employees occupied twenty-seven MDC-owned residential structures.  Sixteen of these homes are occupied by employees that are not required to live in the home as a condition of their employment.  These employees are charged rental rates from $75 to $125 per month based on the home's assigned classification. The MDC has not performed adequate market analysis to determine the actual rental values of the homes.  If the homes are rented to department employees at less than the market rate, the difference is a taxable benefit to the employee and should be reported on the employees' W-2 form.

The MDC maintains an inventory of publications and gift items, with a value of approximately $800,000 at June 30, 2004, which are sold through the MDC's central distribution warehouse, nature centers, and regional offices.  Although the MDC periodically reviews the profitability of for-sale inventory activities, only the cost of the merchandise is included in the calculation and other costs such as personnel, fringe benefits, storage, and administrative costs are not included in the analysis.  Additionally, the Forestry Division maintains a nursery that produces tree and shrubbery seedlings, utilized in various MDC programs, sold or provided to external entities for planting pursuant to co-operative agreements with the MDC, and offered for sale to the public.  Sales revenues exceeded $1.2 million during the fiscal year ended June 30, 2004.  The MDC does not document an adequate analysis of the nursery production and sales activities to determine if nursery sales revenues are recovering the cost of producing the stock in accordance with management's objectives.

The MDC did not document how some items discussed in closed session complied with state law. Certain information in the minutes for closed sessions was intentionally withheld from our review based on the department's interpretation of state law.

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