JEFFERSON CITY, Mo. (AP) — A state audit released Wednesday criticizes the Agriculture Department for trying to use an improper fund for a sexual harassment settlement and for lax administration of several programs.

State Auditor Susan Montee said during a news conference that it's fair to characterize many of the problems as simple sloppiness, and that many of the troubles have since been corrected. The audit generally focused on 2006-2007.

For example, auditors found that the Agriculture Department had not been reviewing whether applicants for state incentives for ethanol and biodiesel plants produced what they claimed. Last fall, the department hired an auditor to review applications for biofuels grants.

The audit also referenced controversy about the Agriculture Department's attempted settlement of a former employee's sexual harassment complaint. The audit did not identify any of the participants by name.

Last fall, the state paid former department employee Heather Elder $82,500 to settle claims raised in her lawsuit accusing then-Agriculture Director Fred Ferrell of sexual harassment and discrimination. Shortly after Elder sued, Gov. Matt Blunt asked Ferrell to resign.

Among her accusations, Elder claimed that during a staff discussion of whether to create "jeans days," Ferrell told her that there should be a "tight jeans day" and a wet T-shirt contest. She said the director then pointed at her and said she needed to be the first in line for the contest. He brought up the contest again later that day.

Elder's claims became public after the Agriculture Department asked a court to enforce a proposed settlement agreement to be paid out of the department's Agriculture-Federal and Other Fund account.

The audit released Wednesday criticized the department for trying to use that account, noting that state law requires legal settlements be paid for out of a fund over which the attorney general's office has supervision.

"If you're not paying these moneys out of the proper fund, then you don't have the proper oversight," Montee said.

The Agriculture Department, responding to the audit's findings, repeated its assertion that the department fund had to be used for an attempted November settlement because the attorney general's office stalled in agreeing to defend against the sexual harassment allegations.

The attorney general's office has said its policy is to wait until litigation has started, which didn't happen until the Missouri Commission on Human Rights on Nov. 27, 2006, gave Elder approval to sue. A spokesman for the attorney general's office said that the department was then told it had access to a proper legal defense fund but chose not use it.

"This is the administration's effort to cover up their attempted secret settlement of this matter," said Nixon spokesman John Fougere.

Elder filed her lawsuit after the department sued her to try to enforce the proposed settlement agreement. The Agriculture Department eventually settled Elder's lawsuit using funds from the state Legal Expense Fund, which Montee said was appropriate.

Another component of Wednesday's audit found that many animal care facilities and rescue shelters had not been inspected. Of the 2,769 licensed care facilities, 40 percent were not inspected in 2006. Also, 38 percent of licensed rescue facilities were not inspected.

The state inspection program has determined that rescue facilities pose a lower risk for problems, but Missouri has no formal guidelines for determining whether a facility will fail to meet minimum standards for care, health and safety. Auditors recommended evaluating whether a facility will have problems to ensure those more likely to have violations are inspected annually.

Responding to the findings, the Agriculture Department said not every facility is inspected because the number of new facilities is growing far quicker than new inspectors are hired. But the department plans to research a formal risk assessment system.

Auditors also identified examples where the department did not follow requirements for distributing grant money, could not justify costs billed to a federal grant and could improve tracking and follow-up after inspections of commercial feed, gas stations, airports, marinas and petroleum bulk storage facilities.