|The Birmingham Drainage District's board needs to increase its oversight and management of
district operations. It appears that many duties/functions performed by the District Attorney are
outside the scope of services as provided by state law. The board only holds two meetings a
year, and relies upon the District Attorney to perform most of the day-to-day responsibilities for
the operation of the district. During 2005, the district paid the District Attorney's firm over
$45,000 for legal services.
State law provides for the appointment of a District Secretary/Treasurer, District Overseer,
District Engineer, and District Attorney. The district did not report wages, withhold payroll
taxes, or pay the employer's share of social security on compensation paid to these officials.
Rather, it appears the district considers the officials independent contractors; however, they
do not have written agreements with the officials regarding their duties, responsibilities, and
In March 2004, the district hired a former supervisor as its District Engineer and paid $200 per
month during the year ended December 31, 2005 for his services. The District Engineer, who
lives in Utah, has not attended a board meeting since July 2004, and did not attend the May
2006 U.S. Army Corps of Engineers inspection of district improvements. Also, he does not
prepare annual reports required by state law. The district could provide no documentation of
the work done by the District Engineer.
For the year ended December 31, 2005, the District Overseer was paid $650 per month for his
duties as Overseer. In addition, the district paid him almost $23,000 for various maintenance
services, such as mowing, chemical application, tractor work, and other general labor. This
situation may be a conflict of interest in violation of state law.
There was no documentation that the board approved all significant district business. In
addition, the board does not report to the landowners at the annual landowner's meeting the
work which was done within the district.
There is little independent oversight or adequate segregation of duties regarding the district's
accounting functions. At December 31, 2005, the district had several accounts which totaled
approximately $ 1.3 million, and were held at 6 banks and an investment firm. The district
needs to better manage these accounts
The district does not review or verify the accuracy of its maintenance tax book. In the 2005 tax
book and tax calculations, we found that the maintenance tax for 6 of 10 properties reviewed
was not correctly calculated. Errors in the tax book were not detected and corrected, nor were
the assessed benefits always calculated in accordance with the court order. As a result, the
district had little assurance that taxes assessed are proper and accurate.
There were numerous weaknesses with the district's procedures for conducting and
documenting board meetings and elections. The meetings were infrequent and were not
always at a location and time that were conducive for the public to attend, the minutes did not
always contain sufficient detail of business conducted and actions taken, and some meetings
did not comply with the open meetings law. Also, the district did not have written policies and
procedures for public access to records, absenteeism by supervisors, and election of
The district does not have a formal bidding policy. As a result, the decision of whether to solicit
bids for a particular purchase is made on an item-by-item basis. During the year ended
December 31, 2005, bids were either not solicited or bid documentation was not retained for
certain goods and services totaling over $200,000.
In March 2004, the district completed a construction project to repair a section of the levee.
The district did not document the basis or justification for awarding the bid to a contractor
other than the low bidder for the project. Board minutes did not indicate that construction
change orders totaling approximately $28,000 relating to the project were approved by the
board, nor could the district provide copies of these change orders. In November 2003, the
district requested the contractor to purchase extra steel, costing $209,170, for Phase II of the
proj ect; however three years later, the steel has not been used. In addition, no documentation
was available to support that the district procured the engineering services for the project, as
provided by state law.
The board as a whole does not approve expenditures or review invoices before payment of the
district's expenses. There was no evidence that the board requested or reviewed invoices
and/or other supporting documentation for expenditures. Additionally, the board is not
provided with a listing of payments made until after the fiscal year has ended.
The district did not prepare and adopt annual budgets in accordance with state law, nor obtain
annual audits as required by state law. Actual expenditures exceeded budgeted amounts by
over $69,000 for the year ended December 31, 2005.
The district's responses did not address many of our recommendations. The lack of board
oversight and various weaknesses need to be addressed.
All reports are available on our website: www.auditor.mo.gov
|District's Attorney's name, Robert McKinley, name only appear in 3 financial
statements, 1989 ($1,500.00 for legal work on Sissom's Island property), 1993
($55.90), and 1995 ($134.38) ($32.45). The records do not indicate any payment as a
member of the board of supervisors even though McKinley claimed to be president
for over 10 years, acting for his clients LDS companies Northland Part, Inc., Property
Reserve, Inc., and Zion Inc.
|Since McKinley's clients, Property Reserve, Inc., Northland Park, Inc, and Zion
Securities,. appoint these officials as well as the supervisors (as the majority
landowner) and have not been able to legally act as a public or private corporation,
then these officials could not be elected employees by state rules.
|But he was paid for nonservice. Kansas City actually sponsored the levee with the
Corps of Engineers.
As V.P. of the LDS company Property Reserve, Inc, which controlled the district,
Norb Kemp came to town in 1994 to negotiate a lease with Station Casino for using
district property. It appears that Station Casino paid $200,000.00 in rent for its water
pipes to cross the levee. Ameristar now pays $140.000.00 rent for the same
privledge. Kemp has been listed as a supervisor and now District Engineer.
|District Overseer, Dan Sissom, a local farmer, (Mormon Church property Farm
Manager) whose family sold its farm's public assess rights was listed as a
supervisor in 2000. He has been paid as the Overseer of the drainage district and
maintenance supervisor. He was paid: 1) $33,369.38 in 2001; 2) $34,460.00 in 2002; 3)
$34,467.14 in 2003; and 4) $31,685.00 in 2004, for his part time BDD work, for a total of
|The only significant district business approved by the board was in 1995, when the
board, "Resolved that the supervisors obtain and pay the insurance premiums for a
policy insuring the officers and directors (?) from liability and to pay all legal costs,
judgments and out-of-pocket expenses of the supervisors who are sued or threaten
to be sued because of their acts as supervisors."
|With no provisions for oversight from county or state agencies and not having to
answer to the small property owners in the communities of Birmingham and Vrooman
Acres, representatives of the LDS companies can do what they want too.
|As the majority land owner, who controls the district (and the maintenance tax
book), the court gave the LDS companies what they wanted in 1995 -- get rid of the
per acre tax rate which fell mostly on the LDS company and replace it with an
Ad-valorem tax which could be placed on the value of real estate. And LDS
companies get to set the value of its own real estate.
|When the majority land owner has 4/5th of the votes, he is the big monkey on the
block and gets to do what he wants too. Interestinly, after Mckinley picked up the
records for the Birmingham Drainage District in 1993-- they were in storage for a
while. From 1994 through 1997, McKinley's firm, Swanson & Midgley, charged
$300.00 a year to store the records. Yet, in a 1998 court action, McKinley claimed he
had no BDD records, which appears to be true since he has not been able to
produce a 1970 certified copy (within 60 days) of the court decree purporting to
reorganize the BDD. Nor was there any storage charges for the records after 1997.
|If there is no statute providing for district oversight, and since the court and state
agencies who are suppose to have oversight, are operating in a legal quadmire
created by the 1970 court there appears to be good reason this audit was released
without a press conference.
|There is some concern on the part of district taxpayers that this construction
project, while apparently suggested by the Corps of Engineers, actually pertained to
the districts function had it been a legal corporation.
|As appointees of the LDS companies, the board rubber stamps the need and wants
of the companies and its directors to protect the interest of the Church of Jesus
Christ of Latter-Day Saints -- at the expense of the local taxpayers.
|The district, operating as an arm of the LDS companies, is beholden to the laws of
the Church, not the laws of man -- it appears the companies (generally operated by
priests) just use the legal system when it is to their benefit.
|The last is a very interesting comment by a state official (now United States
Senator). McCaskill states in a number of place that this district is not operating in
accordance with state laws, is not operating as required by state laws and these
weakness need to be addressed. Apparently, McCaskill just didn't want to give the
audit petitioners and tax payers any help or guidence in addressing these
weaknesses or the conflict of interest that appeared to violate state laws.