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YELLOW SHEET Office of the State Auditor of Missouri |
May 12, 1999
Report No. 99-33
The following findings are some of the problems discovered after our office conducted an audit of Harris-Stowe College in St. Louis.
Harris-Stowe has hired consultants to perform various professional services for the institution. Our review of these consulting expenditures disclosed various concerns regarding the procurement and documentation of these services.
For example, for several years Harris-Stowe has contracted with three former employees to provide consulting services. The related expenditures totaled $101,500 during fiscal year 1997 and the first half of fiscal year 1998. Two of these consultants write grant proposals and advise on various programs. The other individual serves as the College's Executive Institutional Consultant. For 1997 and prior, the College contracted with these three people without soliciting bids for the services as required. When the College realized these services should be bid, a Request for Proposals (RFP) for each of these services was prepared in fiscal year 1998.
The RFPs included restrictive qualifications and it appears they were written to mirror the three consultant's qualifications. One such restrictive qualification was that the person had to have "six years of successful administration of Harris-Stowe's Title III-B program". The manner in which these professional services were procured had the effect of compromising the intent of the bidding process and may have unfairly prevented other possible consultants from being considered.
The State Auditor recommended Harris-Stowe ensure consulting services are competitively bid in accordance with state purchasing guidelines, and that the procurement process is handled in a manner consistent with the intent of the law.
For a number of years, the College President's compensation package has included specified amounts for a tax sheltered annuity and a housing allowance. The College did not adequately oversee, properly account for and correctly report these fringe benefits for tax purposes for the tax years 1992 though 1995. It was Harris-Stowe's Board of Regents' intent that these benefits be tax free to the President, in 1996 the College paid the President additional "grossed-up" compensation totaling $192,839 to cover the related income tax liability. This amount included $21,088 in interest charges. As a result, the College incurred additional expenditures of at least $21,088.
The President is now responsible for paying the applicable taxes on his benefits. Despite the tax reporting problems discovered and corrected for 1995 and prior, we also noted additional problems in accounting for and reporting fringe benefits of the President in 1996 and 1997. Also in fiscal year 1997, the College provided $100,000 more in life insurance coverage for the President than the amount authorized by the Board of Regents. The State Auditor has recommended specific improvements in the administration of compensation issues.
The College has established a five year master plan for campus expansion, which includes the design and construction of six new buildings on campus. Concerns were noted regarding the manner in which the College procured the design and construction management services related to the first of these new buildings, a new library/technology center building.
The College needs to improve documentation regarding the architectural firms considered for design services, and ensure a written description of the scope of the services is prepared as required by state law. The cost of the design services was approximately $175,000. In addition, the College did not advertise for proposals regarding construction management services (costing approximately $83,500) as required by state law, instead these services were negotiated with the firm which designed the building.
The College provides various insurance benefits for its employees. Our review of the College's handling of these benefits disclosed various problems. For example, the College did not reconcile billing statements and eligibility lists from its medical insurance carriers to appropriate personnel and payroll records on a periodic basis. This resulted in the College paying premiums for employees who no longer worked for Harris-Stowe.
Insurance premiums are not always paid on a timely basis. As of April 1998, some premiums had not been paid since December 1997. Furthermore, in early 1997, the College quoted the wrong premium rate to employees and the College paid an additional $16,700 from College funds making up for the mistake. Harris-Stowe needs to improve its control over its employee insurance programs.
Other findings included:
Harris-Stowe's competitive bid requirements for purchases over $3,000 were not always followed.
Harris Stowe has not solicited bids for its checking and depository services, nor have policies and procedures been established for the type of investments and bank accounts used by the College.
The controls over the bank accounts, insufficient funds checks, and electronic transfers between bank accounts need to be improved.
Harris-Stowe agrees with the majority of the State Auditor's findings and is implementing the Auditor's recommendations.
