JEFFERSON CITY (Dec. 30, 2011) – State Auditor Tom Schweich today released the Missouri State Auditor's 2011 Annual Report. In addition, Auditor Schweich provided the following abridged year end summary.

State Auditor Tom Schweich took office in January 2011. He quickly recognized the value of the experienced and dedicated audit staff and retained every accountant and auditor in the office. Auditor Schweich eliminated some non-auditor positions and filled several vacancies. He hired Harry Otto, the former President of the Missouri Society of CPAs, as Deputy State Auditor, and Darrel Moore, the former Greene County Prosecuting Attorney, as Chief Litigation Counsel, among others. The office budget for this year was lower than it was in 2010 and was, in fact, the lowest it has been since 2004.

The State Auditor's office audits state agencies and institutions, including Missouri's statewide elected officials, various offices, commissions, departments, divisions, and universities; the General Assembly; the 89 Class 3 counties; numerous funds; the 644 municipal courts and 3 courts of appeal; the 522 school districts; the 166 transportation development districts; the 183 contract license offices; and any other political subdivision, including cities, fire protection districts, and Class 1 and Class 2 counties, pursuant to the Governor's request or a duly-executed petition. Audits are conducted in a nonpartisan manner, in accordance with the auditing standards issued by the United States Government Accountability Office, and are intended to determine whether auditees comply with applicable laws, regulations, and policies and employ sound accounting practices and principles.

In addition to conducting audits, the State Auditor's office reviews and registers general obligation bonds issued by political subdivisions in Missouri to ensure those bonds comply with both state law and the conditions of the contracts under which the bonds were issued. The State Auditor's office also prepares fiscal notes and fiscal note summaries assessing the fiscal impact to state and local government of initiative petitions proposing constitutional or statutory changes and certifies whether the overall property tax rate set by each taxing jurisdiction in the state is within the limits approved by voters and allowed by Missouri law.

Year End Summary

• The 2010 Statewide Single Audit was the largest audit ever performed by the State Auditor's office. It required over 27,000 hours to audit the $13.46 billion in federal awards spent on major programs by the state. One of the most significant findings in this year's audit was that agencies did not adequately monitor how over $700 million in federal awards, including American Recovery and Reinvestment Act of 2009 (ARRA) funds, were spent.
• Since taking office in January, Auditor Schweich has released 123 audit reports; more than any other first-year Missouri state auditor. In addition, the State Auditor's office received 117 initiative petitions for fiscal impact analysis and registered over 160 bonds totaling nearly $800 million dollars.
• In 2011, audits identified and helped quantify over a dozen instances of embezzlement totaling more than $700,000 and identified numerous instances of waste and inadequate internal control. These audit findings led to criminal charges, prosecutions and guilty pleas on the part of corrupt public officials
• In order to facilitate transparency and increase accountability, Auditor Schweich instituted the Citizens Summary and a rating scale. The Citizens Summary provides readers with a short, plain language summary of each audit, and the rating scale rates the audited entity as Excellent, Good, Fair or Poor, so readers can tell at a glance how the entity is performing overall in the audited areas. Missourians have reacted favorably to the Citizens Summary and rating scale, and Auditor Schweich believes subjects of audits are more accountable now that they know they are subject to a grading scale.
• In February, Auditor Schweich formally announced the first-ever rapid response program in the State Auditor's office. This unit, led by former Greene County Prosecuting Attorney Darrell Moore and dubbed ASAP for the Auditor's Swift Assessment Program, responds to credible allegations of fraud, violations of state or federal law, mismanagement or misuse of public resources, or significant risk of a loss of confidence in government when there is a need for immediate action to preserve relevant evidence and/or prevent continued harm.
• Auditor Schweich activated ASAP this year to investigate allegations of enrollment and attendance report tampering at Patrick Henry Downtown Academy in the St. Louis Public School District. The audit (Report No. 2011-066) found substantial, credible evidence that a school official inflated attendance data.
• Auditor Schweich also formed the Auditor's Follow-up Team to Effect Recommendations (AFTER). The follow-up team ensures government entities with serious shortcomings implement corrective action plans. The State Auditor's office released five follow-up reports in 2011, including reports for the Department of Mental Health, Office of Director; the City of University City; the Village of Indian Point; the City of Pine Lawn, and the City of Neosho. All five entities demonstrated progress.
• The State Auditor's office determined that Governor Nixon's Office of Administration lacked any accounting support for its announced withholds of over $170 million of non-vetoed appropriations for fiscal year 2012. Moreover, the Governor announced these withholds before the start of the fiscal year, which appeared to exceed the Governor's constitutional and statutory authority. Auditor Schweich issued a letter report recommending that the Governor work with the General Assembly to clarify and/or address the issues. The Governor declined to take such action, and the matter is currently in litigation.
• An audit of the Department of Public Safety, Missouri State Water Patrol uncovered over $3,000 in missing boater education fees and led to the arrest of a former clerk. In addition, the audit discovered $250,000 in unused assets and found that the merger of the Missouri State Water Patrol into the Missouri Highway Patrol would not provide the promised $3 million in savings, but, in reality, can be expected to cost the taxpayers of Missouri an extra $900,000 per year.
• The State Auditor's office found the Kansas City 33 School District (KCSD) did not always competitively bid or effectively monitor contracts, lacked adequate documentation to support nearly $4 million in expenditures for student incentives and food and meals, and could not account for $2.6 million in inventory. The audit also identified weaknesses in the KCSD's accounting controls which enabled the former principal of Lincoln College Preparatory Academy to make $58,000 in unauthorized disbursements and withdrawals, for which she is currently awaiting trial.
• This year, the State Auditor's office released the first ever audits of Missouri's Department of Revenue contract license offices. Ten offices were audited, and the audits found several of the offices need to improve their accounting controls and procedures and their handling of prepayment void transactions.
• An audit of the Missouri Department of Conservation (MDC) found the MDC spent over $1.23 million to reintroduce thirty-nine elk into Missouri and discussed the elk restoration project in closed sessions, which was not allowed by the Sunshine Law. The audit also questioned the MDC's sole source procurement whereby a retired former employee will receive at least $155,000 to write a book about Missouri rivers and streams.
• An audit of the Department of Insurance, Financial Institutions and Professional Registrations, Division of Finance (DOF) revealed it was often late performing association examinations and lacked documentation that examinations had been completed and reviewed properly. The audit also found the DOF overcharged banks by more than $1.5 million for the cost of conducting examinations, which it partially corrected after we questioned this practice.
• While conducting a regularly-scheduled audit of Schuyler County, the State Auditor's office discovered more than $560,000 in missing property tax receipts in the County Collector's office. Weak internal controls and procedures allowed the theft to continue undetected over several years. The former County Collector resigned and pled guilty to a federal charge of felony mail fraud.
• The State Auditor's office discovered Northwest Missouri State University (NWMSU) had not solicited competitive bids or proposals for auxiliary services for years and had extended and amended its existing contracts in exchange for approximately $1.5 million in donations or other payments to fund a stadium renovation. In addition, it appears NWMSU violated the Missouri Constitution by making substantial payments to its former president and subsidizing more than $3.3 million of the not-for-profit Northwest Foundation's operating costs.
• In an audit of the Board of Election Commissioners, City of St. Louis, the State Auditor's office found more than 2,400 voters registered both in the city and elsewhere in the state.
• As noted in the compilation of 2010 Criminal Activity Forfeiture Act (CAFA) seizures, the State Auditor's office did not receive a single report from any applicable law enforcement agencies and did not receive the required reports from nine prosecuting attorneys. Based upon the information provided, less than $26,000 in seizure proceeds went to Missouri public schools.
• The State Auditor's office identified at least $15,000 in missing funds during a petition audit of the City of Lanagan and concluded that the city owes the state at least $36,000 in excess ticket revenues.
• In keeping with his commitment to offer preventative advice, Auditor Schweich traveled to Joplin after the tornado this year to advise local officials on best accounting practices in light of the large amount of disaster relief funds the city will receive. In addition, he developed a "Ten Steps to Excellence" presentation in which he provides guidance on good fiscal practices, which can be found on our website, http://auditor.mo.gov.

Looking ahead to 2012

• The State Auditor's office is already diligently working on the 2011 Statewide Single Audit and will release this report early in 2012.
• Also in 2012, the State Auditor's office will release audits of:
  • The Office of Administration's procurement process for contract license offices and the Department of Revenue's oversight and monitoring practices of these offices;
  • The Springfield Public School District;
  • The Office of the Treasurer;
  • Southeast Missouri State University;
  • Monarch Fire Protection District;
  • Missouri Employers Mutual;
  • Fiscal year end spending practices compared across several of the largest state agencies;
  • The Office of the Governor;
  • The City of Peculiar and its municipal division;
  • The Public Defenders Commission; and
  • The Office of the Attorney General.

As my first year in office concludes, I want to thank the professional and dedicated employees of the State Auditor's office who continue to serve the citizens of Missouri by improving government efficiency and accountability. I look forward to another productive year.

To view the complete annual report, visit http://www.auditor.mo.gov/annualreport/2011annualreport.pdf..

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