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YELLOW SHEET Office of the State Auditor of Missouri |
Report No. 2005-29
April 2005
The following problems were discovered as a result of an audit conducted by our office of the State Fair Community College.
In October 2003, the Board of Trustees of State Fair Community College (SFCC) approved an agreement to hire a consulting firm to manage its information technology (IT) department for the next five years at a cost not to exceed $3,327,200. Our audit noted the college did not solicit proposals from other potential service providers and did not adequately document any efforts to determine if other qualified service providers existed. The president of the college had recommended the bid process be waived on the basis that the consultant was the sole source from which the needed services could be obtained.
The college is not required by state law to solicit bids or competitive proposals for goods or services, but it is generally accepted that competitive procurements are appropriate and necessary in the public sector. This concept is also recognized by the college's own purchasing policies. The State Auditor had communicated concerns to the college regarding the procurement of these services in January 2004, after our office learned about this contract and performed an initial inquiry.
We determined the total payments the SFCC will make to the consultant will substantially exceed the amount initially approved by the Board of Trustees. The agreement provided the contract costs over the five-year period would total $4,913,200; however, the contract estimated the total payments due from the college would be reduced by a $1,586,000 personnel cost credit, representing the salary and benefit costs of the IT department employees who would remain employed by the college. During the first year of the contract all but one IT department employee transitioned to employment with the consultant. As a result, as of October 2004, the estimated amount of the college's personnel credit had been reduced to about $211,000, and the total estimated amount the college will be required to pay the consultant will increase to over $4.7 million.
The college's budget documents for the three years ended June 30, 2004, did not include all budgetary information required by law and did not reflect all planned activities of the college. In addition, the college did not adequately monitor the budget amounts to ensure expenditures were kept within budgetary limits. Because of incomplete budget data and inadequate budgetary procedures, the college's expenditures exceeded the budget by substantial amounts during fiscal years 2004 and 2003. It was noted the college made an effort to address some of these problems during the preparation of the fiscal year 2005 budget.
During the audit period, the SFCC lost over $106,000 in federal and state grant revenues due to the college's failure to submit required paperwork timely and due to errors or omissions made in preparing the paperwork. Most of this lost revenue related to federal Pell Grants.
For a number of years the college has offered retirement-related incentive programs to its employees, the costs of which have been paid from SFCC operating funds. Between fiscal years 1988 and 2004, the college paid over $1.4 million in SFCC operating funds to former faculty and staff employees under two retirement-related incentive programs. The college has projected that from fiscal years 2005 to 2009, it could pay up to $660,000 in additional retirement incentive payments to eligible employees. Considering the current program is not designed to result in a cost savings, it should be reevaluated in light of the college and state's current financial situation.
In recent years, the SFCC was involved with several construction projects that required the services of a construction manager. The same construction manager was used for all of these projects. The college failed to adequately document the evaluation and selection process related to the construction management proposals it received. The total construction management fees for three projects totaled $365,000. Additionally, all bid documentation related to the construction projects reviewed was retained by the construction manager and not turned over to the college upon project completion.
The audit also noted the college did not always obtain competitive bids/proposals or document efforts to obtain such for the purchase of goods and services, as required by the college's purchasing policy. For example, the college did not solicit bids for various insurance plans, including $2,173,000 spent for employee health insurance. The college's portion of these health insurance costs totaled $1,479,000. We determined this insurance had not been bid since prior to 2000. Other procurements not properly documented included architectural services and computer equipment and software costing $128,670 and $41,057, respectively.
The SFCC has increased tuition rates each of the last four years. For example, tuition rates for students from within the district increased from $42 to $60 per credit hour during this period. Tuition for Missouri residents from outside the district increased from $65 to $87 per credit hour during the same period. The college does not adequately document the annual reviews of its tuition rates or the various factors considered when calculating and determining tuition rate increases. The college should maintain such documentation to provide assurance to its students and other constituents that any tuition rate increases are justified.
The audit also includes recommendations related to expenditures, food purchases, controls over receipts, a day care operation, cellular phone usage, subsidies to the college's foundation, promotional monies provided to the college president, and capital asset records and procedures.
