Report No. 2010-87
July 2010
Complete Audit Report

The following findings were included in our audit report on the Lewis and Clark Discovery Initiative.

The Lewis and Clark Discovery Initiative (LCDI) was a program to fund capital improvement projects at various state higher education institutions with funds from the Missouri Higher Education Loan Authority (MOHELA). Senate Bill 389, passed during the 2007 legislative session, provided for the MOHELA to transfer a total of $350 million to the Lewis and Clark Discovery (LCD) Fund over a 6-year period. Subsequent appropriation bills totaling $350 million allocated $335 million between various projects and initiatives related to higher education institutions, and $15 million for the Missouri Technology Corporation (MTC).

The Missouri Department of Higher Education (MDHE) was established to carry out the goals and administrative responsibilities for the state system of higher education, but it had little input into the selection of projects for the LCDI. As a result, some projects were selected for LCDI funding by the General Assembly that were not considered priorities by the MDHE or the individual higher education institutions, and some projects that were considered priorities were not included in the initiative. While 3 MDHE recommended projects were not included, 19 other projects that had not been recommended by the MDHE were included in the initiative. In addition, when projects were prioritized in February 2009 due to funding shortages, the MDHE was asked to recommend critical factors to consider, but was not directly involved in the funding decisions.

The Office of Administration (OA) did not prioritize the projects selected for the LCDI or ensure adequate funding was available to complete projects that were started. As a result, as of April 2010, $2.3 million has been expended on 10 projects that were started but then suspended before completion. The Missouri Higher Education Loan Authority missed or reduced its quarterly payments beginning in March 2008. However, the OA did not initially communicate a possible funding shortage to the higher education institutions and continued to make reimbursements to those institutions with the limited funds remaining in the LCD Fund. In addition, the River Campus project at Southeast Missouri State University (SEMO) was completed using university bond proceeds prior to the LCDI appropriation from the General Assembly. Since the project was already completed, SEMO was reimbursed its entire $17.2 million LCDI allocation for this project during fiscal years 2008 and 2009, while other institutions were forced to halt projects due to the funding shortage.

In January 2008, the MTC imposed a 7 percent administrative fee (totaling $1.05 million) without adequately documenting its rationale for how the 7 percent fee was determined, or preparing a budget detailing anticipated administrative costs. In addition to the fee, the MTC received over $250,000 in interest earnings on LCDI funds as of June 30, 2009. The Department of Economic Development also paid administrative expenses totaling approximately $363,000 for the 2 years ended June 30, 2009, to further subsidize the MTC.

As of December 31, 2009, the MTC paid $42,348 for outside audit-related legal advice, including reviewing documents prior to releasing those documents to our office to conduct our audit. The majority of the documents requested by our office were open public records pursuant to state law, and legal expenses for reviewing these documents do not appear to be necessary expenses charged to the LCDI funds.

As of June 30, 2009, the MTC had spent approximately $3.2 million of the $15 million it received in LCDI funding. If the OA had funded the MTC on an as-needed basis, additional interest would have been earned and available in the state's LCD Fund for other LCDI projects. In addition, the OA and General Assembly could have considered reallocating unused MTC funds as LCDI funding shortfalls continued and MDHE projects were prioritized in February 2009.

Complete Audit Report
Missouri State Auditor's Office
moaudit@auditor.mo.gov