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YELLOW SHEET Office of the State Auditor of Missouri |
March 27, 2001
Report No. 2001-26
Some
problems were discovered as a result of an audit conducted by our office in
response to the request of petitioners from the Public Water Supply District
Number 16, Jackson County, Missouri.
The
Public Water Supply District #16 has a significant amount of debt and has not
adequately funded the reserve accounts associated with a United States
Department of Agriculture (USDA) loan.�
In 1996, the district formed the Jackson County Water Company, a
not-for-profit organization, to obtain a $5,000,000 loan from Rural Development,
USDA.� The proceeds of the loan and
$480,000 in lease participation certificates were used by the Jackson County
Water Company to retire the district�s outstanding Series 1991 and 1992
bonds.� The district leases all of its
assets to the Jackson County Water Company which leases them back to the
district for an amount equal to the loan payments, required reserve account
payments and other required payments.�
Apparently due to financial difficulties, the district has failed to
make all the required payments.
The
district owes approximately $85,000 to two vendors for past billings and
$130,500 to the Jackson County Water Company to fully fund reserve accounts
associated with a USDA loan.� The
district has not developed a plan to repay these debts and only had a cash
balance at December 31, 2000, of approximately $5,100.
The
Board of Directors was not adequately monitoring the financial condition and
expenditures of the district.� District
revenues received during 1999 and 2000 were not sufficient to cover current
operating expenditures (including loan payments) of the district.� Although the board took steps to reduce
expenditures, including eliminating the manager position, the district remains
in poor financial condition.
Since
1994 the district has contracted with a company owned by the spouse of current
board member Robert K. Clifton to read meters.�
During 1999, the company was paid $8,261.� On occasions when the contract with the company was discussed, the
board minutes indicate that Robert K. Clifton was either not present or did not
vote.� However, the service was not
competitively bid.� At the January 2000
board meeting, the board rejected a lower unsolicited bid from another party to
read meters.
Also,
payments were made to three children of current board member Geral Rinacke during
1994 and 1995, while he served as board president.� A daughter was employed by the district as a clerk and two sons
were contracted to read meters and pressure test water lines.� No documentation was available to determine
whether Geral Rinacke voted to hire his relatives.� The Missouri Constitution prohibits the appointment or hiring of
relatives.
In addition, the district purchased a truck in 1994, from
current board member Geral Rinacke, while he served as board president, for
$3,500, without seeking bids.
These
payments represent potential violations of state law.� Prior to 1998, state law prohibited financial transactions
between a political subdivision and an officer or employee of that political
subdivision that involved more than $500 per year unless there had been public
notice to solicit proposals and competitive bidding, provided that the bid or
offer was the lowest received.� In 1998,
this threshold was changed to $500 per transaction or $1,500 per year.� In addition, the appointment or hiring of a
relative by a public official is prohibited by the Missouri Constitution.� Because the serious consequence of
forfeiture of elected office or position can result by hiring a relative, the
circumstances surrounding the hiring of a district official�s relative should
be fully documented.
During
1999, the district�s former manager was paid $1,854 for unused 1998 vacation
leave and $1,910 for unused 1999 vacation leave.� According to the former manager, any leave days he had taken
during 1998 and 1999 were compensatory time for overtime earned, so no vacation
leave had been used and he was entitled to full compensation of his vacation
leave.� Because the former manager did
not prepare time sheets, there is no record to document� that he worked any overtime, earned
compensatory time, or did not take any vacation leave.
The
district does not have a formal bidding policy.� Supporting documentation was not maintained or did not include
sufficient detail for some expenditures.�
Some expenditures did not appear to be necessary costs of operating the
district.� Checks were being issued
prior to expenditures being incurred.
The
board minutes and meeting agendas normally did not document the specific reason
to go into a closed session.�
In
addition, formal written minutes are not maintained for closed meetings.� Although minutes for closed meetings are not
specifically required by law, minutes constitute a record of proceedings of the
Board of Directors.� Formal written
minutes for closed meetings result in a better record of district transactions,
proceedings, and decisions.
Board
minutes of the open meetings do not always include sufficient detail of matters
discussed and actions taken. For example, the district received an unsolicited
bid for reading water meters, but the minutes did not include any discussion of
the bid or the reason for rejecting it.
The
district does not prepare annual budgets in accordance with state law and the
Board did not approve them.� Annual
financial reports were not submitted to the State Auditor�s office as required
by state law.
