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YELLOW SHEET Office of the State Auditor of Missouri |
Report No. 2006-37
June 2006
The following findings were included in our audit report on the Department of Revenue, Branch Office Conversion
The Department of Revenue (DOR) incurred unnecessary closing costs that could have been avoided. In April 2002, DOR officials signed a 15 year lease agreement with the Office of Administration (OA) for office space in the Deer Creek Office Building, a privately owned building in the St. Louis area. Since the DOR was closing the office in 2005, it was liable for the lease expenditures until the office was subleased. According to accounting records, the state's General Revenue Fund paid approximately $39,000 in lease expenditures for vacant office space during the period of May 15, 2005 through October 31, 2005.
The Kansas City branch office closed on June 30, 2005, and was reopened by the contract agent on August 29, 2005, although the contract agent did not sign the OA lease agreement until September 6, 2005. Additionally, the lease agreement prepared by the OA allowed the Kansas City contract agent to make staggered lease payments during the first 12 months of the lease. By allowing the contract agent to stagger lease payments and giving the contract agent a 30-day termination clause, the contract agent could potentially vacate the premises prior to the end of the first year of the lease leaving the state to pursue recovery of lease amounts due.
Four contract agents were allowed to operate without a fully executed contract. Had these agents failed to perform the necessary duties during this time period, the DOR may not have been able to enforce the requirements of the contract agents' agreement. Also, one contract agent did not comply with the contract agreement requirements to register and remain in good standing with the Secretary of State, a misdemeanor. After we informed DOR personnel of the situation, department personnel contacted the agent who then filed his fictitious name registration with the Secretary of State approximately 143 days after the agent's office opened. Additionally, the Kansas City office's contract agent did not submit a business plan until 51 days after the office opened.
The DOR was granted local disposal authority by the Missouri State Agency for Surplus Property (MOSASP) to auction the equipment at the 11 former branch offices. Bids accepted for the equipment ranged from $151 to $3,100 for a total of $16,477 for all 11 offices. Notification of the sealed bid auction was sent to all 182 contract agents operating at that time, as DOR officials determined that other individuals would not be interested in this "worthless equipment". The DOR did not allow an equal opportunity
for everyone to inspect the equipment prior to making a bid; however, the 11 contract agents were allowed to inspect the equipment and, in most cases, use the equipment for several months. This does not appear to provide a fair, open, and competitive environment for all potential bidders. Furthermore, the auction of state-owned branch office assets included computer equipment and software, printers, televisions, and fax machines which did not appear to meet the MOSASP criteria for condemned property. Based on our review, it appears that the items sold through local disposal should have been transferred to the MOSASP for auction.
The DOR could not account for the disposition of approximately 250 state-owned assets. These 250 items included a laser printer, a fax machine, computers, software, and other miscellaneous items.
The former branch offices are higher volume offices. According to DOR records, during fiscal year 2004, these former branch offices remitted transaction processing fees to the state in excess of $6.2 million. It appears appointed agents should possess qualities such as experience, knowledge, and business skills that will allow them to successfully achieve their assigned duties in an efficient and effective manner and ensure that Missouri taxpayers receive the level of service they demand. In addition, the DOR should also consider soliciting proposals prior to appointing fee agents. It should be noted that the method used by the current administration to appoint or select contract agents has been a long-standing practice within state government.
The division's goal is to visit each contract agent's office once each month; however, without additional staff, the DOR may not be able to reach this goal. The DOR has only approximately 10 staff positions allocated to monitor the state's 183 contract offices. As of October 25, 2005, the DOR had only performed two monitoring visits of the 11 converted offices.
