YELLOW SHEET Office of the State Auditor of Missouri Claire McCaskill

June 5, 2000

Delays in construction, cost overruns, and the failure to open the Jackson County Jail Annex in a timely manner prompted the Jackson County Legislature to request an audit of the jail construction and renovation project.

At the request of the Jackson County Legislature, the Missouri State Auditor's Office provided assistance in regard to the financial review of the jail annex project. The following summarizes some problems discovered during the audit.

* NOTE: Since completing the Jackson County Jail Annex construction audit, additional expenses have been incurred by Jackson County relating to change orders and project cost overruns. These additional expenses include a $1.5 million settlement with Walton Construction, plus $450,000 for litigation and arbitration costs, for a current project total of $24.2 million.

* The County did not prepare an adequate budget of total project costs during the planning stage of the project and did not adequately track total costs in comparison to the budget. Furthermore, financial statements detailing total project costs were either not presented to the Legislature for their review in a timely fashion or not presented at all.

* The Schedule of Obligations for the Criminal Justice Improvement fund was not presented to the Legislature until December 1997, approximately 18 months after the project was initiated. This schedule was not detailed and included estimates for some costs that had already been incurred. Furthermore, this schedule was never incorporated as a part of the County's adopted budget. Consequently, there was never a formal budget for the expenses associated with equipping and furnishing the Jail Annex. The adopted budgets from 1997 through 1999 indicate that specific amounts were budgeted under the construction program for architect and engineering, other professional services and relocation costs. However, a majority of the expenditures were appropriated to the building and improvements account category of the construction program. These amounts were expended without any budgetary constraint.

* Several payments made to contractors for the project were not recorded in the County's accounting system as payments.

The Finance Department issues manual payments when there is a need to expedite payment to a contractor. The purchase order or invoice is handled similar to a regular payment except that manual payments are issued the same day approval for the expenditure is received. Regular payments are issued on a weekly basis. The Finance Department is responsible for ensuring manual payments are properly entered into the County's accounting system. It was noted at least four payments made to contractors by manual check, totaling $510,000, which were not recorded in the accounting system as of August 31, 1999.

* A disbursement of $62,336 for expenses associated with the Electronic Home Detention Program was improperly made from the construction budget when it should have been paid out of the Federal Court Mandated Programs budget.

As of August 1999, approximately $22.3 million has been spent for the jail annex construction and renovation project. Additional costs have been incurred and have not yet been paid. We also identified additional funds that have been allocated to pay for work that has not yet been performed. The report recommends the County Executive should work with the Legislature to identify all costs remaining to complete the project. In addition, the County Executive should issue a written report to the Legislature on a regular basis documenting the status of the pending project amounts. Once the project is completed and all related funds are closed, a final report of total project costs should be prepared by the County Executive and presented to the Legislature.

* No estimate was done to determine the additional operating costs of the jail annex facility.

As a part of the audit, an inquiry was made regarding estimates of additional operating costs associated with the jail annex facility. It was determined that no estimates had been prepared. The County Executive believes that the additional costs will be between zero and $1,000,000 annually. However, the County Executive has no support for this conclusion, either in the form of an estimate or a report. The only indications of future operating costs that are available are contained in the jail's proposed year 2000 budget.

The report also recommends in the future when undertaking large projects that have significant budgetary impact, concrete data on the potential impact the project will have on the County's budget should be developed. This can be accomplished through the preparation of operating estimates.