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YELLOW SHEET Office of the State Auditor of Missouri |
Report No. 2006-16
March 2006
The following findings were included in our audit report on the Tobacco Settlement Funds.
The state has not adequately accounted for the use of tobacco settlement funds. Through June 30, 2005, the state received tobacco settlement payments totaling over $965 million. These tobacco payments represent discrete funding streams which will continue in perpetuity. For the first 25 years, Missouri's share of base payments (prior to adjustments, most reductions, or offsets) is almost $4.6 billion.
Instead of funding a comprehensive tobacco prevention program, approximately 69 percent of Missouri's tobacco payments received were transferred to the state's General Fund and used to cover state budget shortfalls. The remaining funds were spent on various state programs, with a majority of these monies used to replace funds cut from the state's Medicaid Program. Only a small portion of Missouri's tobacco payments were used to enhance other state programs, and most of these programs were later discontinued due to budget constraints. During the five years ended June 30, 2005, only about $1.8 million of the tobacco payments were spent on tobacco-related programs.
All tobacco funds transferred to the state's General Fund were ultimately spent without being designated for a specific purpose or without any other method of tracking how the funds were spent. In addition, a formal report regarding the use of tobacco monies is not prepared for public review.
During the five years ended June 30, 2005, tobacco payments were distributed to nine different funds and often redistributed again, with some monies held in three different funds before ultimately being spent. This practice of making numerous transfers of the tobacco monies to various funds has made it difficult to determine the ultimate disposition of the funds and has resulted in multiple, and some excessive, cost allocation charges totaling over $13 million.
Furthermore, the state has not passed additional legislation that would amend the model statute as recommended by the National Association of Attorneys General and pursued by the Missouri Attorney General. This legislation is needed to make state enforcement of the model statute more effective and to safeguard the current annual tobacco payments to the state.
