HomeMy WebLinkAboutMINUTES - 12171996 - C117 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
TO: BOARD OF COMMISSIONERS
FROM: Richard J. Martinez,Executive Director
DATE: December 17, 1996
SUBJECT: ACCEPTANCE OF AUDIT REPORT FOR FISCAL YEAR ENDING MARCH 31, 1996
SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION
I. RECOMMENDED ACTION:
ACCEPT financial audit report for the period April 1, 1995 through March 31, 1996,performed by Ham and Rowe,
Pleasant Hill,California,as recommended by the Advisory Housing Commission.
II. FINANCIAL IMPACT:
Funding has been provided in the Housing Authority's Fiscal Year 1996/97 Consolidated Operating Budget for the
$14,000 due the certified public accountancy firm of Ham and Rowe for performing this financial audit.
III. REASONS FOR RECOMMENDATION/BACKGROUND
Ham and Rowe has completed their audit of the financial records of the Housing Authority of the County of Contra
Costa and all financial records of the Housing Authority are in order. Two findings were made pertaining to tenant files and
unexpended federal funds. The auditor's recommendations and Housing Authority responses are contained on pages 31 and 32
of the audit report. Additionally,a separate management letter contains three items to strengthen the internal controls and
operating efficiency of the Housing Authority.
The Housing Authority agrees with both the audit findings and the recommendations stated in the management letter.
Full implementation of the audit recommendations has been made and the Housing Authority has implemented changes to
further strengthen its internal controls. These changes will be reviewed by the auditors during their next engagement.
IV. CONSEQUENCES OF NEGATIVE ACTION:
Should the Board of Commissioners elect not to accept the financial audit report as performed by the certified public
accountancy firm of Ham and Rowe, it would become necessary to expend additional funds to either redo the financial audit
report or contract with another certified public accountancy firm.
CONTINUED ON ATTACHMENT: YES SIGNATURE
RECOMMENDATION OF EXECUTIVE DIRECTOR RECOMMENDATION OF BOARD COMMITTEE
APPROVE OTHER
SIGNATURE(S):
ACTION OF BOARD ON December 17, 1996 APPROVED AS RECOMMENDED X OTHER
VOTE OF COMMISSIONERS
I HEREBY CERTIFY THAT THIS IS A
X UNANIMOUS (ABSENT ) TRUE AND CORRECT COPY OF AN
AYES: NOES: ACTION TAKEN AND ENTERED ON THE
ABSENT: ABSTAIN: MINUTES OF THE BOARD OF
COMMISSIONERS ON THE DATE SHOWN.
ATTESTED December 17, 1996
PHIL BATCHELOR,CLERK OF
THE BOARD OF COMMISSIONERS
AND COUNTY ADMINISTRATOR
B 1.<DEPUTY
bo-audit
C .0
HARN & ROWE
Certified Public Accountants
2255 Morello Avenue
Suite 209
Pleasant Hill, CA 94523
(510) 686-5550 • Fax (510) 686-5814
October 18, 1996
To the Board of Commissioners
and Management
The Housing Authority of the
County of Contra Costa
In planning and performing our audit of the financial statements of the Housing Authority of the County
of Contra Costa for the year ended March 31, 1996, we considered the Authority's internal control
structure to determine our auditing procedures for the purpose of expressing our opinion on the financial
statements and not to provide assurance on the internal control structure.
However during our audit we became aware of several matters that are opportunities for strengthening
internal controls and operating efficiency. The items that accompany this letter summarize our comments
and suggestions regarding those matters. We have issued a separate report on the Authority's internal
control structure which is included in our financial report dated October 18, 1996. This letter does not
effect our report dated October 18, 1996 on the financial statements of the Housing Authority of the
County of Contra Costa.
We will review the status of these comments during our next engagement. We have already discussed
these comments and suggestions with various Authority personnel, and we will be pleased to discuss
them in further detail at your convenience, to perform any additional study of these matters, or to assist
you in implementing the recommendations.
Sincerely,
Housing Authority of the County of Contra Costa
October 18, 1996
Page 2
1. During our review of the internal controls over land, structures, and equipment, we noted that the
writing-off of missing or obsolete equipment during the fiscal year was not always properly
authorized. The Authority's system requires that each item written off the books of accounts
must be agreed upon by several of the Authority's personnel and ultimately approved by the
Director of Housing Operations. Several items of equipment were written off the Authority's
books of accounts during the fiscal year ended March 31, 1996 without signatures from several
personnel, including the final approval signature by the Director of Housing Operations.
We recommend that equipment not be written off the books of accounts without proper
authorization.
2. Indirect costs were not allocated to all of the Authority's programs. During the fiscal year ended
March 31, 1996, the Authority began the administration of a new program (Shelter Plus Care).
The Authority's indirect cost allocation plan was not altered to account for the administration of
this new program. Therefore, no indirect costs were allocated to the Shelter Plus Care program
(CFDA#14.238).
We recommend that indirect costs be allocated equitably to all of the programs administered by
the Authority.
3. During our review of the Authority's internal controls over the application procedures, we noted
the following:
a) One application reviewed was not date stamped to document the date and time that it was
received.
b) The applications are stored in unlocked cabinets in an unsecured area.
c) Information updating applications is unfiled and left in boxes in an unsecured area. There
were several of these boxes.
d) For two of the five applications reviewed the applicant had been given housing. The
applications for these housed tenants remained in the application file cabinets. Applications
should be removed from the application file cabinets and placed in the tenant files once the
applicant is housed.
We recommend that the Authority date and time stamp all application materials received, file all
application information updates on a timely basis, maintain the application information in a
secure location, and file all application information in the tenant's file once an applicant is
housed.
C. 0
HOUSING AUTHORITY
OF THE COUNTY OF CONTRA COSTA
GENERAL PURPOSE FINANCIAL STATEMENTS
YEAR ENDED MARCH 31, 1996
(Including Auditors' Report Thereon)
HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
GENERAL PURPOSE FINANCIAL STATEMENTS
MARCH 31, 1996
TABLE OF CONTENTS
Page
Independent Auditors' Report 1
Financial Statements:
Combined Balance Sheet - All Fund Types and Account Groups 2
Combined Statement of Revenues, Expenditures, and Changes in
Fund Balances - All Governmental Fund Types 4
Combined Statement of Revenues, Expenditures, and Changes in
Fund Balances - Budget and Actual - Special Revenue Fund 5
Notes to the General Purpose Financial Statements 6
Independent Auditors' Report on Schedule of Federal Financial Assistance 16
Schedule of Federal Financial Assistance 17
Independent Auditors' Report on Supplemental Information 18
Analysis of Changes in Surplus - HUD Basis 19
Statement of Completed CIAP Project 20
Independent Auditors' Report on Compliance Based on an Audit
of General Purpose Financial Statements Performed in
Accordance with Government Auditing Standards 21
Independent Auditors' Report on Compliance with General Requirements
Applicable to Federal Financial Assistance Programs 22
Independent Auditors' Report on Compliance with Specific Requirements
Applicable to Major Federal Financial Assistance Programs 23
Independent Auditors' Report on the Internal Control Structure
Based On An Audit of General Purpose Financial Statements
Performed in Accordance with Government Auditing Standards 25
Independent Auditors' Report on the Internal Control Structure
Used in Administering Federal Financial Assistance Programs 27
Status of Prior Audit Findings 30
Findings and Recommendations 31
HARN & ROWE
Certified Public Accountants
2255 Morello Avenue
Suite 209
Pleasant Hill, CA 94523
(510) 686-5550 • Fax (510) 686-5814
INDEPENDENT AUDITORS' REPORT
To the Board of Commissioners
Housing Authority of the
County of Contra Costa
Martinez, California
We have audited the accompanying general purpose financial statements of the Housing
Authority of the County of Contra Costa, California, as of and for the year ended March 31,
1996. These general purpose financial statements are the responsibility of the Housing Authority
of the.County of Contra Costa, California, management. Our responsibility is to express an
opinion on these general purpose financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards; Government
Auditing Standards, issued by the Comptroller General of the United States; and the provisions
of Office of Management and Budget Circular A-128,Audits of State and Local Governments.
Those standards require that we plan and perform the audit to obtain reasonable assurance about
whether the general purpose financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the
general purpose financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall general
purpose financial statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the general purpose financial statements referred to above present fairly, in all
material respects, the financial position of the Housing Authority of the County of Contra Costa,
California, as of March 31, 1996, and the results of its operations for the year then ended in
conformity with generally accepted accounting principles.
In accordance with Government Auditing Standards, we have also issued a report dated October
18, 1996 on our consideration of the Housing Authority of the County of Contra Costa's internal
control structure and a report dated October 18, 1996 on its compliance with laws and
regulations.
October 18, 1996 -
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HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES - ALL GOVERNMENTAL FUND TYPES
FOR THE YEAR ENDED MARCH 31, 1996
Governmental Fund Types Total
Special Debt (Memorandum
Revenues Revenue Service Only)
Grants $ 45,342,919 $ 409,210 $ 45,752,129
Rents 2,363,481 - 2,363,481
Interest 195,088 433 195,521
Loan proceeds 173,487 - 173,487
Other 376,368 - 376,368
Total revenues 48,451,343 409,643 48,860,986
Expenditures
Current:
Administration 3,427,303 - 3,427,303
Tenant services 94,003 - 94,003
Utilities 867,071 - 867,071
Maintenance 2,250,456 - 2,250,456
Protective services 182,135 - 182,135
General 2,421,733 - 2,421,733
Rehabilitation loans 307,056 - 307,056
Housing assistance payments 35,710,954 - 35,710,954
Grants 70,128 - 70,128
Shelter costs 39,049 - 39,049
Debt service:
Principal - 299,670 299,670
Interest - 107,290 107,290
Capital additions 2,732,955 - 2,732,955
Total expenditures 48,102,843 406,960 48,509,803
Excess of revenues over (under) expenditures 348,500 2,683 3511183
Other financing sources (uses)
Proceeds from the sale of real property 72,600 - 72,600
Excess of revenues and other sources
over (under) expenditures and other uses 421,100 2,683 423,783
Fund balances, beginning of year 3,737,721 307,256 4,044,977
Fund balances, end of year $ 4,158,821 $ 309,939 $ 4,468,760
The accompanying notes are an Integral part of this statement.
4
HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
COMBINED STATEMENT OF REVENUES, EXPENDITURES, AND
CHANGES IN FUND BALANCES - BUDGET AND ACTUAL - SPECIAL REVENUE FUND
FOR THE YEAR ENDED MARCH 31, 1996
Variance
Favorable
Revenues
Budget Actual (Unfavorable)
Grants $ 48,152,036 $ 45,342,919 $ (2,809,117)
Rents 2,512,450 2,363,481 (148,969)
Interest 144,903 195,088 50,185
Loan proceeds - 173,487 173,487
Other 609,362 376,368 (232,994)
Total revenues 51,418,751 48,451,343 (2,967,408)
Expenditures
Current:
Administration 3,683,449 3,427,303 256,146
Tenant services 165,266 94,003 71,263
Utilities 789,490 867,071 (77,581)
Maintenance 2,051,939 2,250,456 (198,517)
Protective services 440,370 182,135 258,235
General 2,137,336 2,421,733 (284,397)
Rehabilitation loans 220,000 307,056 (87,056)
Housing assistance payments 38,576,322 35,710,954 2;865,368
Grants - 70,128 (70,128)
Shelter casts - 39,049 (39,049)
Capital additions 2,441,057 2,732,955 (291,898)
Total expenditures 50,505,229 48,102,843 2,402,386
Excess of revenues over (under) expenditures , 913,522 348,500 (565,022)
Other financing sources (uses)
Proceeds from the sale of real property - 72,600 72,600
Excess of revenues and other sources
over (under) expenditures 913,522 421,100 (492,422)
Fund balances, beginning of year 3,330,174 3,737,721 407,547
Fund balances, end of year $ 41243,696 $ 42158,821 $ (84,875)
The accompanying notes are an integral part of this statement.
5
HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
MARCH 31, 1996
Note 1 - DEFINITION OF REPORTING ENTITY
The Housing Authority of the County of Contra Costa (the Authority) was established pursuant
to the laws of the State of California in 1941. The Authority's Board of Commissioners are
appointed by the County of Contra Costa Board of Supervisors.
The Authority has implemented the provisions of the Governmental Accounting Standards Board,
codified in GASB section 2100, "Defining the Government Reporting". For financial reporting
purposes the Authority's financial statements include all funds, account groups, and other
organizations over which Authority officials exercise oversight responsibility. Oversight
responsibility .includes such duties as appointment of governing body members, budget review,
approval of tax levies, responsibility for outstanding debt secured by the Authority's full faith
and credit, or revenues; and the responsibility for funding deficits.
During the year ended March 31, 1996, the Authority did not exercise oversight responsibility
over any other organizations.
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial reporting policies of the Authority conform to general accepted accounting
principles as applicable to governmental entities. The following is a summary of the more
significant policies:
(A). Basis of Presentation - Fund Accounting
The accounts of the Authority are organized on the basis of funds and account groups, each
of which is considered a separate accounting entity. The operations of each fund are
accounted for within a separate set of self-balancing accounts that comprise its assets,
liabilities, fund equity, revenues, and expenditures as appropriate. Government resources
are allocated to and accounted for in individual funds based upon the purposes for which
they are to be spent and the means by which spending activities are controlled. The various
funds are grouped by fund type in the combined general purpose financial statements as
follows:
GOVERNMENTAL FUND TYPES
Special Revenue Funds - Special Revenue Funds are used to account for the proceeds of
specific revenue sources (other than debt service funds) that are legally restricted to
expenditures for specified purposes.
Debt Service Funds = Debt Service Funds account for the accumulation of resources for,
and the payment of, general.long-term debt obligation principal, interest and related costs.
6
HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
MARCH 31, 1996
(Continued)
Note 2 (continued)
FIDUCIARY FUND TYPES
Trust and Agency Funds - Trust and Agency Funds are used to account for assets held by
the Authority in a trustee capacity or as an agent for individuals, private organizations, other
governments, and/or other funds. Those include Expendable Trust and Agency Funds.
Expendable Trust Funds are accounted for in essentially the same manner as governmental
funds. Agency Funds are custodial in nature (assets equal liabilities) and do not involve
measurement of results of operations. The Authority accounts for deferred compensation
funds in a trust fund.
ACCOUNT GROUPS
General Fixed Assets Account Group_ - This group of accounts is established to account
for recorded fixed assets of the Authority.
General Long-Term Debt Account Group - This group of accounts is established to
account for all general long-term obligations of the Authority.
(B) Basis of Accounting
Governmental fund types are accounted for using the modified accrual basis of accounting.
Revenues are recognized in the accounting period in which they become available and
measurable; expenditures are recognized in the accounting period in which the liability is
incurred, if measurable, except for unmatured interest in general long-term debt which is
recognized when due. Significant revenue sources that have been treated as susceptible to
accrual under the modified accrual basis include interest on investments and grants. The
revenues from grants which are received as reimbursement for specific expenditures are
recognized based upon the expenditures recorded.
(C) Total Columns on Combined Statements
Total columns on the combined statements are captioned "Memorandum Only" to indicate
that they are presented only to facilitate financial analysis. Data in these columns does not
present financial position or results of operations in conformity with generally accepted
accounting principles nor is such data comparable to a consolidation. Interfund eliminations
have not been made in the aggregate of this data.
7
HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
MARCH 31, 1996
(Continued)
Note 2 (continued)
(D) Fixed Assets
General fixed assets are valued at historical cost. Contributed general fixed assets are
recorded at fair market value at the time received. Interest expense incurred during the
development period is capitalized. The Authority records capital outlays in its respective
funds as expenditures during the year and annually records the total capital outlay in the
General Fixed Assets Account Group. No depreciation has been provided on the general
fixed assets.
(E) Collection Losses
The direct write-off method has been adopted for providing for uncollectible accounts.
(F) Encumbrances
Encumbrance accounting is not employed by the Authority.
(G) Differing Year Ends
The Authority's Homeless Programs operate on a fiscal year from July 1 through June 30.
This differs from the Authority's other programs which have a fiscal year ending March.31.
Our operating period for these programs was July 1, 1995 through June 30, 1996. The
effect on the financial statements of these differing year ends is not material. Due, however,
to these programs having differing fiscal year ends the due to/from other funds is not in
exact agreement as reflected on the accompanying balance sheet.
(.n Grant Restrictions
The Authority has received loans and grants from the U.S. Department of Housing and
Urban Development to build and improve housing projects. The grants require that only
individuals and families that meet various income, age and employment standards be housed
or aided.
Note 3 - CASH AND INVESTMENTS
All cash and investments held by the Authority are maintained in checking or savings accounts
and certificates of deposits. The California Government Code requires California banks and
savings and loan associations to secure the Authority's deposits not covered by federal deposit
insurance by pledging mortgages or government securities as collateral. The market value of
mortgages must equal at least 150% of the face value of deposits. The market value of
government securities must equal at least 110% of the face value of deposits. Such collateral
must be held in the pledging bank's trust department in a separate depository in an account for
the Authority.
8
HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
MARCH 31, 1996
(Continued)
Note 4 - CASH WITH TRUSTEE
Funds totalling $310,330 are maintained in the Authority's name by the Bank of America,which
acts as the fiscal agent for previous bond issuances of the Authority. These funds are required
to be invested in insured or registered U.S. Government securities and commercial paper. Funds
totalling $952,008 represent assets of the deferred compensation plan and are recorded as cash
with trustee. See Note 9 for further discussion of the deferred compensation plan.
Note 5 NOTES RECEIVABLE AND DEFERRED REVENUE
At March 31, 1996 there were $1,329,390 of Community Development Block Grant, $868,768
of Rental Rehabilitation Grant, and $286,871 of other Ioans outstanding. The Community
Development Block Grant and Rental Rehabilitation Grant Loans were issued to homeowners
or owners of rental property to aide in unit rehabilitation and are secured by recorded deeds of
trust. The other loans were loaned to the owners of two apartment complexes and are secured
by recorded deeds of trust. There are various types of these loans. Some loans require monthly
principal reductions, others are deferred over several years. Interest rates on the loans range
from zero to 7% per annum. Many of these loans will be forgiven at some specific future date.
- The agency elects to record the loan and interest receivable on these notes as deferred revenue.
Revenue is recognized as these loans are collected.
Note 6 - FIXED ASSETS
The following is a summary of the Authority's changes in fixed assets for the fiscal year ended
March 31, 1996.
Balance Balance
4/1/95 Additions Deletions 3/31/96
Conventional $ 62,886,796 $ 2,623,214 $ 109,305 $ 65,400,705
Section 8 1,379,956 109,741 6,134 1,483,563
Other 142,982 - - 142,982
$ 64,409,734 $ 2,732,955 $ 1151439 $ 67,027,250
9
HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
MARCH 31, 1996
(Continued)
Note 7 - LONG-TERM DEBT
Following is a summary of changes in long-term debt for the year ended March 31, 1996:
Balance Less Balance
4/1/95 Adiustments Deletions 3/31/96
Federal Financing
Bank Notes $ 159,039 $ - $ 49,670 $ 109,369
Bonds 2,780,000 - 250,000 2,530,000
Compensated Absences
(Note 8) 236,592 20,646 - 257,238
$ 3,175,631 $ 201646 $ 299,670 $ 2,896,607
Following is a schedule of debt payment requirements to maturity for long-term obligations other
than compensated absences:
Year Ending March 31,
1997 $ 408,110
1998 409,248
1999 349,794
2000 345,131
2001 350,356
Thereafter 1,329,062
Less amount 3,191,701
representing interest 552,332
$ 2,639,369
The Federal Financing Bank Notes accrue interest at 6.6% per annum and require annual
payments of $60,166. The Bonds accrue interest at 3-1/8% to 5% per annum.
The Consolidated Omnibus Budget Act of 1986 (COBRA) authorized the Secretary of the
Department of Housing and Urban Development to forgive all permanent notes held by the U.S.
Treasury. In the event that the notes are not forgiven by HUD, the Conventional Program's
Annual Contributions Contract (ACC) states that all debt service requitements related to notes
will be HUD's responsibility. It is management's opinion, that the Authority is not liable for
these notes unless the federal government fails to honor the ACC, therefore, they should not be
included on the Authority's financial statements. The Authority has no permanent notes, and
interest on those notes, recorded on its books of accounts as of March 31, 1996. Per the
financial reports received from HUD, there is actually $28,579,983 of permanent notes payable,
and interest on these notes, that have not been forgiven as of March 31, 1996. The difference
between the amount of notes recorded on the Authority's books of accounts and the amounts
recorded on the HUD reports are the amount of notes reflected on part III of the HUD report
which the Authority believes has been forgiven prior to March 31, 1996.
10
HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
MARCH 31, 1996
(Continued)
Note 8 - COMPENSATED ABSENCES
It is the Authority's policy to permit employees to accumulate earned but unused vacation leave
up to a maximum of 240 to 560 hours depending on the employee's length of service. This
leave will be used in future periods or paid to employees upon separation from the Authority.
Accrued vacation leave has been valued by the Authority and has been recorded in the General
Long-Term Debt Account Group at $257,238 as of March 31, 1996.
It is the Authority's policy to permit employees to accumulate earned but unused sick leave;
however, the value of unused sick leave is not payable to employees upon separation from the
Authority. The cost of vacation and sick leave is recognized when payments are made to
employees, in the special revenue.fund
Note 9 - DEFERRED COMPENSATION
The Authority offers its employees a deferred compensation plan created in accordance with
Internal Revenue Code 457. The plan, available to all Authority employees, permits them to
defer a portion of their current salary until future years. The deferred compensation is not
available to employees until termination, retirement, death or unforeseeable emergency.
All amounts of compensation deferred under the plan, all property and rights purchased with
those amounts, and all income attributable to those amounts, property, or rights are, until paid
or made available to the employee or the beneficiary, solely the property and rights of the
Authority, without being restricted to the provisions of benefits under the plan, subject only to
the claims of the Authority's general creditors. Participants' rights under the plan are equal to
those of general creditors of the Authority in an amount equal to the fair market value of the
deferred account for each participant.
It is the Authority's position that they have a fiduciary obligation for the due care required of
a prudent investor in the management of the plan's resources but is not responsible for any loss
due to the investment or failure of investment funds and assets of the plan nor shall the
Authority be required to replace any loss which may result from such investments. In the past,
plan assets have been used for no purpose other than to pay plan benefits. The Authority
believes it is unlikely that it will use the assets to satisfy the claims of general creditors in the
future.
As of March 31, 1996, the assets of the plan, recorded at their fair market value, amounted to
$952,008. This amount is held under the Authority's name for the named employees. This
amount is reported as "Cash with trustee" on the Combined Balance Sheet.
11 '
HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
MARCH 31, 1996
(Continued)
Note 10 - EMPLOYER RETIREMENT PLAN
The Authority participates in a defined benefit retirement plan that is administered by the Contra
Costa County Employees' Retirement Association. All full-time employees of the Authority
participate in this plan. The plan provides death, disability and service retirement benefits.
Benefits are based on the employee's highest level of annual salary, years of service and age at
the time of retirement. The Authority's retirement plan had 81 participants at March 31, 1996.
The Authority contributes 19.25175 of eligible employees' annual compensation. In addition, the
Authority also paid approximately 50% of the employees' basic annual contributions pursuant
to agreements during salary negotiations. Employer contributions are vested (1) after 10 years
of service and employee attain age 50 or (2) 30 years of service regardless of age or (3) at
mandatory age regardless of the amount of service.
Employees contribute to the retirement system through biweekly payroll deductions. The rate
of contribution for employees is determined by age at the time of entrance into the system.
Employee contributions and interest thereon may be withdrawn only at termination of
employment or at retirement. Total payroll subject to contributions was $3,269,004 for the year
ended March 31, 1996. Employer contributions were$652,523 and employee contributions were
$180,754, representing 19.9617o and 5.53% of payroll subject to contribution, respectively, for
the fiscal year ended March 31, 1996.
The ten year trend analysis and other disclosures required by generally accepted accounting
principles are described in the general purpose financial statements of the County of Contra
Costa, California as of June 30, 1996.
Note 11 - HEALTH INSURANCE
Health care benefits for active and retired employees are financed by the beneficiaries and by
the Authority. The Authority's contribution during the fiscal year ending March 31, 1996 for
active employees was $399,596 and for retired employees $142,323. The Authority's liability
for health care benefits is limited to its annual contribution. As of March 31, 1996, there were
101 active and 58 retired employees being covered by the Authority's health insurance.
12
HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
MARCH 31, 1996
(Continued)
Note 12 - LEASE OBLIGATIONS
The Authority is obligated under certain leases accounted for as operating leases. Operating
leases do not give rise to property rights, therefore the results of the lease agreements are not
reflected in the Authority's account groups. Total rental expense for the year ended March 31,
1996 for all operating leases amounted to $180,665. The following is a schedule of future
minimum rental payments required under the Authority's noncancelable operating leases as of
March 31, 1996:
Year Ended
March 31-
1997 $ 156,036
1998 76,279
$ 232,315
Note 13 - MANAGEMENT AGREEMENTS
Under an agreement with the CDR Senior Housing Associates(a California limited partnership),
�. the Authority manages the Casa Del Rio Apartments. Under this agreement, for the fiscal year
ended March 31, 1996, the Authority received $28,250 in compensation for its management
services. As of March 31, 1996, the CDR Senior Housing Associates owes the Authority $6,808
which is included on the balance sheet as Other Accounts Receivable and $146,176 which is
included on the balance sheet as Notes Receivable. The result of operations and financial
position of the CDR Senior Housing Associates are not presented or included in these
statements.
Note 14 - JOINT POWERS AGREEMENT- PROPERTY AND LIABILITY INSURANCE
The Authority participates in a joint venture under a joint powers agreement (JPA) with the
California Housing Authority's Risk Management Agency (CHARMA). CHARMA was formed
to provide general liability, property, and errors and omissions risk financing. In addition to the
Authority there are five other members. The Authority's property insurance has a $10,000
deductible per occurrence. The Authority's liability insurance has a $250,000 deductible per
occurrence. The relationship between the Authority and CHARMA is such that CHARMA is
not a component unit of the Authority for financial reporting purposes. CHARMA's governing
board controls the operations of the JPA, including selection of management and approval of
operating budgets independent of any influence by member authorities beyond their
representation on the board. Each member pays a premium commensurate with the level of
coverage requested and shares surpluses and deficits proportionately to their participation in
CHARMA.
13
HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
MARCH 31, 1996
(Continued)
Note 14 (continued)
Condensed audited financial information for the year ended May 31, 1995, is as follows:
Total assets $ 3,589,953
Total liabilities (496,276)
Total retained earnings $ 3,093,677
Total revenues $ 1,611,937
Total expenses (990,789)
Net increase in retained earnings $ 621,148
CHARMA had no long-term debt outstanding at May 31, 1995. The Authority's share of year
end assets, liabilities, or retained earnings has not been calculated.
Note 15 - JOINT POWERS AGREEMENT - WORKERS'.COMPENSATION INSURANCE
The Authority participates in a joint venture under a joint powers agreement (JPA) with the
California Housing Workers' Compensation_ Authority (CHWCA). CHWCA was formed to
provide workers' compensation insurance coverage for member housing authorities. At
December 31, 1995, there were thirty-two members. The relationship between the Authority and
LHWCA is such that CHWCA is not a component unit of the Authority for financial reporting
purposes.
Condensed audited financial information for the year ended December 31, 1995, is as follows:
Total assets $ 7,700,041
Total liabilities (5,030,595)
Total retained earnings $ 2,669,446
Total revenues $ 4,213,265
Total expenses (3,177,996)
Net increase in retained earnings $ 1,035,269
CHWCA had no long-term debt outstanding at December 31, 1995. The Authority's share of
year end assets, liabilities, or retained earnings has not been calculated.
14
HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
NOTES TO THE GENERAL PURPOSE FINANCIAL STATEMENTS
MARCH 31, 1996
(Continued)
Note 16 - CONTINGENT LIABILITIES
A. Grants
The Authority has received funds from various federal, state, and local grant programs. It
is possible that at some future date it may be determined that the Authority was not in
compliance with applicable grant requirements. The amount, if any, of expenditures which
may be disallowed by the granting agencies cannot be determined at this time although the
Authority does not expect such disallowed amounts, if any, to materially affect the financial
statements.
15
HARN & ROWE
Certified Public Accountants
2255 Morello Avenue
Suite 209
Pleasant Hill, CA 94523
(510) 686-5550 • Fax (510) 686-5814
INDEPENDENT AUDITORS' REPORT ON
SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE
To the Board of Commissioners
Housing Authority of the
County of Contra Costa
Martinez, California
We have audited the general purpose financial statements of the Housing Authority of the County of Contra
Costa, California, as of and for the year ended March 31, 1996, and have issued our report thereon dated
October 18, 1996. These general purpose financial statements are the responsibility of the Housing
Authority of the County of Contra Costa, California's management. Our responsibility is to express an
opinion on these general purpose financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and Government Auditing
Standards issued by the Comptroller General of the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the general purpose financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the general purpose financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our opinion.
Our audit was made for the purpose of forming an opinion on the general purpose financial statements of
the Housing Authority of the County of Contra Costa, California, taken as a whole. The accompanying
Schedule of Federal Financial Assistance is presented for purposes of additional analysis and is not a
required part of the general purpose financial statements. The information in that schedule has been
subjected to the auditing procedures applied in the audit of the general purpose financial statements and, in
our opinion, is fairly presented in all material respects in relation to the general purpose financial statements
taken as a whole.
October 18, 1996
16
HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE
FOR THE YEAR ENDED MARCH 31, 1996
Federal Grantor CFDA Number Expenditures
Department of Housing and Urban Development (HUD)
Direct Programs:
Public and Indian Housing 14.850 $ 4,523,440*
Public Housing - Comprehensive
Improvement Assistance Program 14.852 308,862
Public Housing - Comprehensive Grant Program 14.852 2,222,226*
Public Housing - Drug Elimination Program 14.854 272,026
Section 8 Housing Voucher Program 14.177 6,187,047*
Lower Income Housing Assistance Program 14.156 33,872,329*
Shelter Plus Care 14.238 101,973
Passed through the City of Antioch, CA:
Community Development Block Grant 14.218 50,441
Passed through the County of Contra Costa:
Community Development Block Grant 14.218 252,764
Total CDBG 14.218 303,205
Rental Housing Rehabilitation 14.230 109,609
Total HUD 47,900,717
Department of Health and Human.Services (HH&S)
Passed Through the County of Contra Costa:
Health Care for the Homeless Program 93.151 101,612
Total HH&S 101,612
Total federal expenditures $ 48,002,329
* Major federal financial assistance program.
The accompanying notes are an integral part of this statement.
17
HARN & ROWE
Certified Public Accountants
2255 Morello Avenue
Suite 209
Pleasant Hill, CA 94523
(510) 686-5550 • Fax (510) 686-5814
INDEPENDENT AUDITORS' REPORT ON
SUPPLEMENTAL INFORMATION
To the Board of Commissioners
Housing Authority of the
County of Contra Costa
Martinez, California
We have audited the general purpose financial statements of the Housing Authority of the County of Contra
Costa, California as of and for the year ended March 31, 1996, and have issued our report thereon dated
October 18, 1996.These general purpose financial statements are the responsibility of the Housing Authority
of the County of Contra Costa, California's management. Our responsibility is to express an opinion on these
general purpose financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards and Government Auditing
Standards issued by the Comptroller General of the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the general purpose financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the general purpose financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis for our opinion.
Our audit was made for the purpose of forming an opinion on the general purpose financial statements of
the Housing Authority of the County of Contra Costa, California, taken as a whole. The accompanying
Analysis of Changes in Surplus - HUD Basis and Statement of Completed CIAP Project are presented for
purposes of additional analysis and the requirements of the U.S. Department of Housing and Urban
Development. These supplemental statements are not presented in accordance with generally accepted
accounting principles and are not a required part of the general purpose financial statements. The
information in these schedules have been subjected to the auditing procedures applied in the audit of the
general purpose financial statements and, in our opinion, are fairly presented in all material respects in
relation to the general purpose financial statements taken as a whole.
October 18, 1996
18
HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
ANALYSIS OF CHANGES IN SURPLUS - HUD BASIS
FOR THE YEAR ENDED MARCH 31, 1996
Surplus .- April 1, 1995 $ 56,263,916
Excess of revenues over (under)
expenses - HUD basis:
Conventional Program (2,135,308)
Section 8 Existing Program (31,817,304)
Section 8 Moderate Rehabilitation (1,635,337)
Section 8 Voucher Program (6,086,092)
HUD Annual Contributions:
Conventional Program 404,277
Section 8 Existing Program 31,909,886
Section 8 Moderate Rehabilitation 1,676,723
Section 8 Voucher Program 6,147,082
HUD Operating Subsidy - Conventional Program 2,236;024
Modernization Grants 2,540,670
Debt Forgiveness 8,074,301
Surplus - March 31, 1996 $ 67,578,838
The accompanying Independent Auditors'.Report on Supplemental Information
-_and notes are an fntegral part of_this statement.
_ 19
HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
STATEMENT OF COMPLETED CLAP PROJECT
ANNUAL CONTRIBUTIONS CONTRACT SF-182
MARCH 31, 1996
CA39P011912
Funds approved $ 4;450,607
Funds expended 4,450,607
Excess of funds approved $ -
Funds advanced $ 4,450,607
Funds expended 4,450,607
Excess of funds expended $ -
CA39P011913
Funds approved $ 4,153,000
Funds expended 4,153,000
Excess of funds approved $ -
Funds advanced $ 4,153,000
Funds expended 4,153,000
Excess of funds expended $ -
CA39PO11914
Funds approved $ 32,175
Funds expended 32,175
Excess of funds approved $ -
Funds advanced $ 32,175
Funds expended 32,175
Excess of funds expended $ -
The accompanying Independent Auditors' Report on Supplemental Information
and:notes_are an integral part_of this statement.
20
HARN & ROWE
Certified Public Accountants
2255 Morello Avenue
Suite 209
Pleasant Hill, CA 94523
(510) 686-5550 • Fax (510) 686-5814
INDEPENDENT AUDITORS' REPORT ON
COMPLIANCE BASED ON AN AUDIT OF GENERAL
PURPOSE FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Board of Commissioners
Housing Authority of the
County of Contra Costa
Martinez, California
We have audited the general purpose financial statements of the Housing Authority of the County of Contra
Costa, California, as of and for the year ended March 31, 1996, and have issued our report thereon dated
October 18, 1996.
We conducted our audit in accordance with generally accepted auditing standards and Government Auditing
Standards, issued by the Comptroller General of the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the general purpose financial statements
are free of material misstatement.
Compliance with laws, regulations, contracts, and grants applicable to the Housing Authority of the County
of Contra Costa, California, is the responsibility of the Housing Authority of the County of Contra Costa,
California's management. As part of obtaining reasonable assurance about whether the general purpose
financial statements are free of material misstatement,we performed tests of the Authority's compliance with
certain provisions of laws, regulations, contracts, and grants. However, the objective of our audit of the
general purpose financial statements was not to provide an opinion on overall compliance with such
provisions. Accordingly, we do not express such an opinion.
The results of our tests disclosed no instances of noncompliance that are required to be reported herein under
Government Auditing Standards. We noted certain immaterial instances of noncompliance which are
described in the accompanying schedule of findings and recommendations.
This report is intended for the information of the Board of Commissioners, management, and the U.S.
Department of Housing and Urban Development. However, this report is a matter of public record and its
distribution is not limited.
October 18, 1996
21
HARN & ROWE
Certified Public Accountants
2255 Morello Avenue
Suite 209
Pleasant Hill, CA 94523
(510) 686-5550 • Fax (510) 686-5814
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH
GENERAL REQUIREMENTS APPLICABLE TO
FEDERAL FINANCIAL ASSISTANCE PROGRAMS
To the Board of Commissioners
Housing Authority of the
County of Contra Costa
Martinez, California
We have audited the general purpose financial statements of the Housing Authority of the County of Contra
Costa, California, as of and for the year ended March 31, 1996, and have issued our report thereon dated
October 18, 1996.
We have applied procedures to test the Housing Authority of the County of Contra Costa, California,
compliance with the following requirements applicable to its federal financial assistance programs, which
are identified in the Schedule of Federal Financial Assistance, for the year ended March 31, 1996.
Political Activity
Davis - Bacon Act
Civil Rights
Cash Management
Federal Financial Reports
Relocation Assistance and Real Property Acquisition
Allowable Costs/Cost Principles
Drug-Free Workplace
Administrative Requirements
Our procedures were limited to the applicable procedures described in the Office of Management and
Budget's Compliance Supplement for Single Audits of State and Local Governments. Our procedures were
substantially less in scope than an audit, the objective of which is the expression of an opinion on Housing
Authority of the County of Contra Costa, California compliance with the requirements listed in the preceding
paragraph. Accordingly, we do not express such an opinion.
With respect to the items tested, the results of those procedures disclosed no material instances of
noncompliance with the requirements listed in the second paragraph of this report. With respect to items
not tested, nothing came to our attention that caused us to believe that the Housing Authority of the County
of Contra Costa, California, had not complied, in all material respects, with those requirements. However,
the results of our procedures disclosed immaterial instances of noncompliance with those requirements,
which are described in the accompanying schedule of findings and recommendations.
This report is intended for the information of the Board of Commissioners, management, and the U.S.
Department of Housing and Urban Development. However, this report is a matter of public record and its
distribution is not limited.
October 18, 1996
22
HARN & ROWE
Certified Public Accountants
2255 Morello Avenue
Suite 209
Pleasant Hill, CA 94523
(510) 686-5550 - Fax (510) 686-5814
INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH
SPECIFIC REQUIREMENTS APPLICABLE TO MAJOR
FEDERAL FINANCIAL ASSISTANCE PROGRAMS
To the Board of Commissioners
Housing Authority of the
County of Contra Costa
Martinez, California
We have audited the general purpose financial statements of the Housing Authority of the County of Contra
Costa, California, as of and for the year ended March 31, 1996, and have issued our report thereon dated
October 18, 1996.
We have also audited the Housing Authority of the County of Contra Costa, California's compliance with
the requirements governing types of services allowed or unallowed; eligibility; reporting; special tests and
provisions for 14.156 - Lower Income Housing Assistance Program, 14.177 - Section 8 Housing Voucher
Program and 14.852 - Public Housing-Comprehensive Grant Program; and claims for advances and
reimbursements that are applicable to each of its major federal financial assistance programs, which are
identified in the accompanying schedule of federal financial assistance, for the year ended March 31, 1996.
The management of the Housing Authority of the County of Contra Costa, California, is responsible for the
Housing Authority of the County of Contra Costa, California's compliance with those requirements. Our
responsibility is to express and opinion on compliance with those requirements based on our audit.
We conducted our audit of compliance with those requirements in accordance with generally accepted
auditing standards; Government Auditing Standards, issued by the Comptroller General of the United States;
and Office of Management and Budget (OMB) Circular A-128, Audits of State and Local Governments.
Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable
assurance about whether material noncompliance with the requirements referred to above occurred. An audit
includes examining, on a test basis, evidence about the Housing Authority of the County of Contra Costa,
California's compliance with those requirements. We believe that our audit provides a reasonable basis for
our opinion.
The results of our audit procedures disclosed immaterial instances of noncompliance with the requirements
referred to above, which are described in the accompanying schedule of findings and recommendations. We
considered these instances of noncompliance in forming our opinion on compliance, which is expressed in
the following paragraph.
23
In our opinion, the Housing Authority of the County of Contra Costa, California, complied, in all material
respects, with the requirements governing types of services allowed or unallowed; eligibility; reporting;
special tests and provisions for 14.156 - Lower Income Housing Assistance Program, 14.177 - Section 8
Housing Voucher Program and 14.852 - Public Housing-Comprehensive Grant Program; and claims for
advances and reimbursements that are applicable to each of its major federal financial assistance programs
for the year ended March 31, 1996.
This report is intended for the information of the Board of Commissioners, management and the U.S.
Department of Housing and Urban Development. However, this report is a matter of public record and its
distribution is not limited.
October 18, 1996
24
HARN & ROWE
Certified Public Accountants
2255 Morello Avenue
Suite 209
Pleasant Hill; CA 94523
(510) 686-5550 • Fax (510) 686-5814
INDEPENDENT AUDITORS' REPORT ON THE INTERNAL CONTROL
STRUCTURE BASED ON AN AUDIT OF GENERAL
PURPOSE FINANCIAL STATEMENTS PERFORMED
IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
To the Board of Commissioners
Housing Authority of the
County of Contra Costa
Martinez, California
We have audited the general purpose financial statements of the Housing Authority of the County of Contra
Costa, California, as of and for the year ended March 31, 1996, and have issued our report thereon dated
October 18, 1996.
We conducted our audit in accordance with generally accepted auditing standards and Government Auditing
Standards, issued by the Comptroller General of the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the general purpose financial statements
are free of material misstatement.
The management of the Housing Authority of the County of Contra Costa, California, is responsible for
establishing and maintaining an internal control.structure. In fulfilling this responsibility, estimates and
judgements by management are required to assess the expected benefits and related costs of internal control
structure policies and procedures. The objectives of an internal control structure are to provide management
with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use
or disposition, that transactions are executed in accordance with management's authorization and recorded
properly to permit the preparation of general purpose financial statements in accordance with generally
accepted accounting principles. Because of inherent limitations in any internal control structure, errors or
irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the structure
to future periods is subject to the risk that procedures may become inadequate because of changes in
conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate.
In planning and performing our audit of the general purpose financial statements of the Housing Authority
of the County of Contra Costa, California, for the year ended March 31, 1996, we obtained an understanding
of the internal control structure. With respect to the internal control structure, we obtained an understanding
of the design of relevant policies and procedures and whether they have been placed in operation, and we
assessed control risk in order to determine our auditing procedures for the purpose of expressing our opinion
on the general purpose financial statements and not to provide an opinion on the internal control structure.
Accordingly, we do not express such an opinion.
25
Our consideration of the internal control structure would not necessarily disclose all matters in the internal
control structure that might be material weaknesses under standards established by the American Institute
of Certified Public Accountants. A material weakness is a reportable condition in which the design or
operation of one or more of the internal control structure elements does not reduce to a relatively low level
the risk that errors and irregularities in amounts that would be material in relation to the general purpose
financial statements being audited may occur and not be detected within a timely period by employees in
the normal course of performing their assigned functions. We noted no matters involving the internal control
structure and its operations that we consider to be material weaknesses as defined above.
However,we noted matters involving the internal control structure and its operations that we have reported
to the management of the Housing Authority of the County of Contra Costa, California, in a separate letter
dated October 18, 1996.
Ibis report is intended for the information of the Board of Commissioners, management, and the U.S.
Department of Housing and Urban Development. However, this report is a matter of public record and its
distribution is not limited.
October 18, 1996
26
HARN & ROWE
Certified Public Accountants
2255 Morello Avenue
Suite 209
Pleasant Hill, CA 94523
(510) 686-5550 • Fax (510) 686-5814
INDEPENDENT AUDITORS' REPORT ON THE
INTERNAL CONTROL STRUCTURE USED IN ADMINISTERING
FEDERAL FINANCIAL ASSISTANCE PROGRAMS
To the Board of Commissioners
Housing Authority of the
County of Contra Costa
Martinez, California
We have audited the general purpose financial statements of the Housing Authority of the County of Contra
Costa, California, as of and for the year ended March 31, 1996, and have issued our report thereon dated
October 18, 1996. We have also audited the compliance of the Housing Authority of the County of Contra
Costa, California, with requirements applicable to major federal financial assistance programs and have
issued our report thereon dated October 18, 1996.
We conducted our audits in accordance with generally accepted auditing standards; Government Auditing
Standards, issued by the Comptroller General of the United States; and Office of Management and Budget
(OMB) Circular A-128,Audits of State and Local Governments. Those standards and OMB Circular A-128
require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose
financial statements are free of material misstatement and about whether the Housing Authority of the
County of Contra Costa, California, complied with laws and regulations, noncompliance with which would
be material to a major federal financial assistance program.
In planning and performing our audits for the year ended March 31, 1996, we considered the internal control
structure of the Housing Authority of the County of Contra Costa, California, in order to determine our
auditing procedures for the purpose of expressing our opinions on the general purpose financial statements
of the Housing Authority of the County of Contra Costa, California, and on the compliance of the Housing
Authority of the County of Contra Costa, California, with requirements applicable to major programs, and
to report on the internal control structure in accordance with OMB Circular A-128. This report addresses
our consideration of internal control structure policies and procedures relevant to compliance with
requirements applicable to federal financial assistance programs. We have addressed internal control
structure policies and procedures relevant to our audit of the general purpose financial statements in a
separate report dated October 18, 1996.
The management of the Housing Authority of the County of Contra Costa, California, is responsible for
establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and
judgements by management are required to assess the expected benefits and related costs of internal control
structure policies and procedures. The objectives of an internal control structure are to provide management
with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use
or disposition, that transactions are executed in accordance with management's authorization and recorded
properly to permit. the preparation of general purpose financial statements in accordance with generally
27
accepted accounting principles, and that federal financial assistance programs are managed in compliance
with applicable laws and regulations. Because of inherent limitations in any internal control structure, errors,
irregularities, or instances of noncompliance may nevertheless occur and not be detected. Also, projection
of any evaluation of the structure to future periods is subject to the risk that procedures may become
inadequate because of changes in conditions or that the effectiveness of the design and operation of policies
and procedures may deteriorate.
For the purpose of this report, we have classified the significant internal control structure policies and
procedures used in administering federal financial assistance programs in the following categories:
Cycles of the Entity's Activity
Revenue/Receipts
Purchases/Disbursements
Payroll
General Requirements
Political Activity
Davis - Bacon Act
Civil Rights
Cash Management
Federal Financial Reports
Relocation Assistance and Real Property Acquisition
Allowable Costs/Cost Principles
Drug-Free Workplace
Administrative Requirements
Claims for Advances and Reimbursements
Specific Requirements
Types of Services Allowed or Unallowed
Eligibility
Reporting
Special Tests and Provisions
For all of the internal control structure categories listed above, we obtained an understanding of the design
of relevant policies and procedures and determined whether. they have been placed in operation, and we
assessed control risk.
During the year ended March 31, 1996, the Housing Authority of the County of Contra Costa, California,
expended 98% of its total federal financial assistance under major federal financial assistance programs.
We performed tests of controls, as required by OMB Circular A-128, to evaluate the effectiveness of the
design and operation of internal control structure policies and procedures that we considered relevant to
preventing or detecting material noncompliance with specific requirements, general requirements, and
requirements governing claims for advances and reimbursements that are applicable to each of the Housing
Authority of the County of Contra Costa, California's major federal financial assistance programs, which
are identified in the accompanying schedule of Federal Financial Assistance. Our procedures were less in
28
scope than would be necessary to render an opinion on these internal control structure policies and
procedures. Accordingly, we do not express such an opinion.
Our consideration of the internal control structure policies and procedures used in administering federal
financial assistance would not necessarily disclose all matters in the internal control structure that might
constitute material weaknesses under standards established by the American Institute of Certified Public
Accountants. A material weakness is a condition in which the design or operation of one or more of the
internal control structure elements does not reduce to a relatively low level the risk that noncompliance with
laws and regulations that would be material to a federal financial assistance program may occur and not be
detected within a timely period by employees in the normal course of performing their assigned functions.
We noted no matters involving the internal control structure and its operations that we considered to be
material weaknesses as defined above.
However, we noted a matter involving the internal control structure and its operations that we have reported
to the management of the Housing Authority of the County of Contra Costa, California, in a separate letter
dated October 18, 1996.
This report is intended for the information of the Board of Commissioners, management, and the U.S.
Department of Housing and Urban Development. However, this report is a matter of public record and its
distribution is not limited.
October 18, 1996
29
HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
STATUS OF PRIOR AUDIT FINDINGS
MARCH 31, 1996
The previous audit report for the year ended March 31, 1995 contained the following audit
findings:
1. Tenant Files (CFDA #14.156, #14.177 and #14.850)
During our prior audit we noted errors in various tenant files. During our current audit we
again noted errors in tenant files. See current finding #1.
2. Drug Free Workplace Policy (All Programs)
During our prior audit we were unable to locate documentation verifying that employees
hired after March 31, 1989 had been made aware of the Authority's drug-free workplace
policy. During the current fiscal year, the Authority prepared a "Drug Free Workplace Act"
memorandum and incorporated it into the packets of information given to all new hires.
This memorandum is signed by each employee and placed in their personnel file.
30
HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
FINDINGS AND RECOMMENDATIONS
MARCH 31, 1996
1. Tenant Files - Lower Income Housing Assistance and Section 8 Housing Voucher
Programs (CFDA #14.156 & #14.177) And Public Housing Program (CFDA #14.850)
We reviewed the files of thirteen Lower Income Housing Assistance Program, three Section
8 Housing Voucher Program, and five Public Housing Program tenants. We also reviewed
the leases of an additional seventeen Public Housing Program tenants. We noted the
following exceptions:
CFDA #14.850
1. For one file examined a reexam had not been performed since 1993. HUD
regulations require annual reexams of all tenant files.
2. For one file examined the unit had not been inspected on an annual basis.
3. For one file examined an incorrect utility allowance was used in the calculation of
the tenant's rent.
4. For one file examined the income used in the calculation of the tenant's rent did not
appear to be adequately verified.
CFDA #14.156 and #14.177
5. For one file examined the utility allowance used in the rental calculation did not
agree to the utility allowance amount per the tenant's lease.
6. For one file examined the utility allowance was calculated incorrectly.
7. For one file examined the lease was incorrect. It referred to the unit as having two
bedrooms when it actually had three.
8. For one file examined the lease was not signed by either party.
9. For one file examined no unit inspections could be located.
10. For two files examined the income used to calculate tenant rent was not adequately
verified.
11. For one file tested the HUD form 50058 was incorrect. Contract rent and gross rent
did not appear to be accurately reported on the HUD form 50058.
We recommend that the Authority review its tenant files to ensure all of the required
documentation is present, accurate and prepared in a timely manner.
Authority's Response - The Housing Authority concurs with this recommendation and
corrective action has been taken.
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HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA
FINDING AND RECOMMENDATIONS
MARCH 31, 1996
(Continued)
2. Unexpended Federal Funds (CFDA #14.156 and #14.177)
At March 31, 1996, the Authority retained $2,251,024 and $776,945 of unexpended federal
funds of the Lower Income Housing Assistance and Section 8 Housing Voucher Programs,
respectively. These figures represent 6.69o' and 12.6% of the federal financial assistance for
these programs. The error occurred due to a change in the requisitioning procedures set
forth by HUD. The Authority prepared the annual requisitions prior to the beginning of the
fiscal year as required by HUD but did not revise the requisitions during the fiscal year to
adjust the annual estimates and bring them into alignment with actual amounts of HUD
annual contributions earned.
The Authority is aware of the requisitioning requirements set forth by HUD. The Authority
notified HUD of the amount owed to them by the Authority. HUD has informed the
Authority that they will adjust future annual contribution payments until the total amount
owed to HUD is recaptured. No further recommendation is necessary at this time.
Authority's Response - The Housing Authority concurs with this recommendation and
corrective action has been taken to prevent future excess overpayments of annual
contributions.
32