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By Allison Colburn April 21, 2017

U. of Missouri System bonuses might not be an outlier for state agencies

Two days after the Missouri State Auditor’s office released a report showing the University of Missouri System paid top executives and administrators roughly $2.3 million in inappropriate bonuses, state Sen. Dan Hegeman, R-Cosby, criticized the university system during a meeting with three Board of Curators nominees.
"We don’t give bonuses in the state of Missouri on any level of government, so this is very troubling for me what we’re seeing, and I’m glad you’re taking it to heart," Hegeman said to one nominee, according to the Columbia Daily Tribune. "Even if it’s legal, it may not be the right thing to do."
Amid public and legislative scrutiny, newly appointed UM System President Mun Choi ended the executive compensation program on March 10.
But we were interested in looking into Hegeman’s claim that public money is not used for employee bonuses in other areas of the state.
When asked to elaborate on the claim, Drew Dampf, a spokesman for Hegeman, said the state senator was speaking from his experience working in government at both the county and state levels, where giving out bonus pay is not standard practice.
In fact, Article III, Section 39 of the Missouri Constitution states that any unearned, extra compensation given after a service has already been rendered is unlawful. The UM System audit found that the executive compensation program appeared to violate that section along with the Attorney General’s Opinion No. 72-1955, which extends the law on bonus pay to all government agencies within the state.
But the audit also noted a distinct difference between bonus pay and incentive pay.
"While the use of an incentive program may be allowable if implemented and executed appropriately, the absence of consistent documentation about performance goals to be met and the lack of defined objective criteria to determine the achievement of incentives gives the appearance the payments represent additional compensation for past performance," the audit read.
In other words, incentives are predetermined in an employment contract and have specific requirements to be met in order to receive payments, State Auditor Nicole Galloway said. Bonuses reward extra compensation for work the employee was already expected to perform.
Whether a violation has occurred at the state or the local level, it is up to law enforcement agencies to decide if any legal actions should be taken.
"Sometimes we find things that are clear violations, but we don’t have power to seek any legal enforcement," Galloway told PolitiFact Missouri. "It can be very frustrating sometimes."
Bonus pay is not something a government body would broadcast to the public, so it’s tough to tell whether the same thing is happening anywhere else in the state.
Gena Terlizzi, a spokeswoman for the auditor’s office, said the office had not identified other concerns with bonus or incentive pay at the state level since Galloway assumed the office in April 2015. However, Terlizzi provided examples of several recent local audits that included findings that appeared to violate Article III, Section 39.
Problems at the local level
There are dozens of local government audits over the past decade showing various bonuses paid to employees and contractors. Terlizzi pointed out the five most recent examples:
1. In December 2014 and 2015, the Huntsville City Council approved year-end bonuses for all city employees. Full-time employees with more than a year of service received $100, while half-time employees and those with under a year of service received $50. In total, $2,000 in bonus pay was handed out each year.
2. A 2016 audit of Buck Prairie Road District in Lawrence County gave a poor rating to the district’s budgetary system. A myriad of problems were identified, including $207,000 paid to three district employees over two years when the total should have been about $156,000, according to the district's payroll system. In violation of Article III, Section 39, the road district’s three employees were paid bonuses of more than $2,000 per person in November 2014. These bonuses were given the label "special" payments in the district’s accounting system.
3. Marion County Services for the Developmentally Disabled received a slap on the wrist in April 2016 for its financial documentation procedures. In addition, the services department spent $1,420 on 46 gift cards in 2014-2015 and $420 for small gifts and cash payments to reward employees for their work. The department had already been called out in a prior audit for similar misuse of funding.
4. Henry County was also unfazed by previous audits when State Auditor Nicole Galloway released a statement in December 2015 saying the office found the county failed to implement the office’s recommendations in two prior audits. The county received a rating of "poor" that year. Along with many other reporting and documentation issues, the county paid $1,000 in bonuses to seven employees.
5. In November 2015, the Village of Leasburg, in Crawford County, also received a "poor" rating. Nearly $10,000 was missing from the village’s budget from 2011-2013, and the auditor’s office was unable to figure out exactly who was responsible due to outdated record and documentation management. In addition, several employees were given bonuses or were paid for hours they had not worked, including $350 Christmas bonuses paid to village employees and reserve police officers in December 2013. No documentation or reasoning was given for $3,505 paid to the Board of Trustees chairperson’s son in 2013.
Past issues at the state level
The former state auditor, John Watson, found an instance in 2012 when a Missouri Department of Transportation employee received a $30,000 reimbursement from the department for a loss on a sale of the employee's property. The audit defined such a reimbursement as an impermissible extra compensation.
In 2009, the St. Louis Post-Dispatch reported that the state’s retirement fund doled out $300,000 in bonuses to its 14-member investment team and $160,000 in "one-time incentive payments" to 58 operations staffers despite the fact that the pension system had lost $1.8 billion in investments in 2008. State workers hired before 2011 do not pay a portion of their salary to the pension program. Other funding comes from taxpayers and investment earnings.
Then-Gov. Jay Nixon described the bonuses as "unconscionable" and criticized the department for establishing a bonus program that avoided transparency requirements.
In 2011, the Missouri State Employees Retirement System discontinued the operations staff incentive program and modified the investment staff incentive program.
Our ruling
Sen. Hegeman called out the UM System for its inappropriate use of public and tuition funding by contrasting it with the rest of the state.
"We don’t give bonuses in the state of Missouri on any level of government," he said in a Senate Gubernatorial Appointments Committee meeting.
While it is true that state law forbids bonuses, several government agencies have given them and legal retribution is inconsistent.
Hegeman’s claim is accurate but needs clarification. We rate this claim Half True.
CLARIFICATION, April 22, 2017: This article has been updated to clarify which state workers didn't pay a portion of their salary to the pension program. This change did not affect the ruling.

Our Sources

Columbia Missourian State retirement system pays performance bonuses despite losses June 18, 2009

Columbia Missourian UM System ends executive incentive program, will not seek repayment March 10, 2017

Columbia Missourian UPDATED: State auditor says UM System paid out $2 million in ‘inappropriate’ bonuses

St. Louis Post-Dispatch Bonuses for all at state agency, Nixon calls for oversight as extent of ‘incentive payments’ is revealed, April 10, 2009

Columbia Daily Tribune Senators focus on critical states audit while questioning nominees for University of Missouri curators March 8, 2017

Missouri State Auditor’s Office, audit of Missouri State Employees’ Retirement System, December 2010

Missouri State Auditor’s Office, audit of University of Missouri System Administration, March 2017

Missouri State Auditor’s Office, audit of the City of Huntsville, October 2016

Missouri State Auditor’s Office, "audit of Buck Prairie Special Road District," August 2016

Missouri State Auditor’s Office, "audit of Marion County," April 2016

Missouri State Auditor’s Office, "audit of Henry County," December 2015

Missouri State Auditor’s Office, "audit of Village of Leasburg," November 2015

Missouri State Auditor’s Office, "audit of the Missouri Department of Transportation," November 2015

Missouri State Auditor’s Office press release, " Auditor Galloway releases Henry County audit, notes previous findings have not been addressed," December 23, 2015

Phone interview with Nicole Galloway, April 11, 2017

Phone interview with Gena Terlizzi, March 20, 2017

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U. of Missouri System bonuses might not be an outlier for state agencies

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