Auditor Logo Susan Montee

Report No. 2010-148
November 2010

Complete Audit Report

Findings in the audit of the Missouri Technology Corporation

Conflicts of Interest
The Missouri Technology Corporation (MTC) did not have a conflict of interest policy requiring full public disclosure of actual and potential conflicts of interest until June 2009. Some MTC board members also served simultaneously on the boards of other non-profit entities receiving funding from the MTC. In addition, a board member submitted a report to the Executive Committee voicing concerns relating to conflicts of interest in the Missouri Venture Partners (MVP) program. The report included various instances of alleged conflicts of interest for the former Executive Director, former General Counsel, and a former Department of Economic Development (DED) official who frequently served as the DED representative on the MTC Board. The conflict of interest policy and related procedures adopted by the MTC in June 2009 (about 2 months after the board member's report) does not explicitly require interested parties with potential conflicts of interest to recuse themselves from participating in related board actions or decisions.

DED Agreements
The MTC and the DED did not enter into cooperative agreements related to support provided to the MTC for fiscal years 2009 and 2008. In addition, the cooperative agreement for fiscal year 2010 was not signed until February 2010, nearly 8 months after the start of the fiscal year and after we requested a copy of the agreement. In total, the DED cost for the support provided to the MTC was $434,312 during the 3 fiscal years ended June 30, 2009. The DED continued to pay the salary and fringe benefit costs of the MTC executive director in fiscal years 2010 and 2009 after the appropriation authorizing the payments was eliminated in April 2009. The DED provides a part-time administrative employee to the MTC, but does not require the employee to track the actual time spent working on MTC business. As a result, the amounts billed by the DED and reimbursed by the MTC are based upon estimates made by the employee.

Missouri Venture Partners Program
The MTC issued payments for consulting services and reimbursed travel expenses without ensuring required progress reports had been submitted. Neither the Request for Proposal (RFP) nor the contract with the consulting firm required potential investments to be utilized within the state. In addition, the MTC did not ensure the consulting firm was registered to conduct business in the state. Also, MTC reimbursements for travel related expenses of the MVP consulting firm appeared excessive and exceeded those allowed by the contract terms, and extravagant group meals were claimed and reimbursed without itemized receipts. In addition, the primary goal of the program, to secure $15 million in investments for the seed and early stage venture capital fund, was not accomplished.

Selection of General Counsel
The selection of the former general counsel firm in October 2007 was not conducted in accordance with the criteria stated in the RFP. The MTC paid over $960,000 for legal services billed by the former general counsel firm from October 2007 through December 2009.

Administrative Costs and Fees
Report No. 2010-87, Lewis and Clark Discovery Initiative (LCDI), issued in July 2010, noted the MTC imposed a 7 percent administrative fee on LCDI monies received from the state without sufficiently documenting how the fee was determined or whether the amount of the fee was reasonable and necessary. In addition to the administrative fee, the MTC collected over $250,000 in interest from the LCDI funds as of June 30, 2009, and the DED also provided administrative support to the MTC. In addition, our current audit of the MTC identified additional administrative funding received from other state funded programs.

The MTC has achieved only limited success regarding the LCDI program to date. The purpose of the LCDI funding as stated in the appropriation bill was to attract and retain high technology companies and commercialize existing research conducted in Missouri. The MTC has been unable to make significant progress in funding the legislatively mandated LCDI programs, and as a result, the primary goal of the LCDI program, the attraction and retention of high technology companies and commercialization of existing research being conducted in Missouri, has not yet been met. The audit recommends the legislature closely evaluate program results before appropriating significant funding to the MTC in the future.

Other Issues
The report also addressed concerns regarding MTC's closed session minutes, investment policy, and accounting controls and procedures.

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Missouri State Auditor's Office