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HomeMy WebLinkAboutMINUTES - 12192000 - HA1 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA TO: BOARD OF COMMISSIONERS FROM: Robert McEwan, Executive Director DATE: December 19, ZOOM SUBJECT: ACCEPTANCE OF AUDIT REPORT FOR FISCAL YEAR ENDING MARCH 31, 2000 SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION 1. RECOMMENDED ACTION: ACCEPT financial audit report for the period April 1, 1999 through March 31, 2000, performed by Wallace Rowe and Associates, Pleasant Hill, California, as recommended by the Advisory Housing Commission. 11. FINANCIAL IMPACT: Funding has been provided in the Housing Authority's Fiscal Year 2000/2001 Consolidated Operating Budget for the audit contract due the certified public accountancy firm of Wallace Rowe and Associates for performing this financial audit. Ill. REASONS FOR RECOMMENDATION/BACKGROUND Wallace Rowe and Associates 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. Four findings were made. The auditor's recommendations and Housing Authority responses are contained on pages 23 through 29 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 the audit findings and the recommendation stated in the management letter. Full implementation of the audit recommendations has been made and the Housing Authority has implemented the management letter recommendation to further strengthen its internal controls. The auditors during their next engagement will review these changes. 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 Wallace Rowe and Associates, 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 APPROVED AS RECOMMENDED� . OTHER VOTE OF COMMISSIONERS I HEREBY CERTIFY THAT THIS IS A UNANIMOUS (ABSENT } TRUE AND CORRECT COPY OF AN AYES: NOES: ACTION TAKEN AND ENTERED ON THE ABSENT: ABSTAIN: MINUTES OF THE BOARD OF CO)4MISSIONERS ON THE DATE SHOWN. ATTESTED�'—D PHIL BATCHELOR,CERK OF THE BOARD OF COMMISSIONERS AND COUNTY ADMINIS`T'RATOR bo-audit BY DEPUTY E CV Oo r'• CT r- In tP5 M ; W) C IPS \i 0 0 VS it 1 ;0 C.7 � `� OraV� M —+W •-+ C>W vt C S W) Cti IPS V) d d od ONrr N icy o IT C>[V I/Z v CV CS r- CV M .—+ oo CT 6+9 r I I t I t I/Y r t t 1 ! M M M 00 00 00 Cii iLl C14 C`i CC14 cl `y w o 00 1 001 V . Vll* uw 04 04 U � 64 c% ro N 00 r- (7� rr v) A oo en oo CSO .•r C:1 W v1 C t+l t+1 rT t+h IGy C4 oo CSE ti ,Vl 0 G `J't di ' �e rh '00 Cd jay ars 0 C) 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 31,2000 Governmental Fund Types Total Special Debt (Memorandum Revenues Revenue Service Only) Grants $ 49,563,872 $ - $ 49,563,872 Rents 3,188,374 - 3,188,374 Interest 268,377 - 268,377 Loan proceeds 440,423 - 444,423 Other 230.232 - 230.232 Total revenues 53.691.278 53.691.278 Expenditures Current: Administration 4,010,294 - 4,010,290 Utilities 997,839 - 997,839 Maintenance 2,819,642 2,819,642 General 2,276,355 - 2,276,355 Rehabilitation leans 111,138 - 111,138 Housing assistance payments 38,703,632 - 38,703,632 Grants and shelter costs 358,285 - 358,285 Capital additions _ 9.115379 9.115,379 Total expenditures 58.402,560 58.401560 Excess of revenues over (under) expenditures (4,711,282) - (4,711,282) Other financing sources uses): Transfer of San Pabl© Housing Authority 7.548.177 7.548.177 Excess of revenues and ether sources over(under)expenditures and other uses 2.835.895 - 2.836,895 Fund balances,beginning of year- as previously stated 5,567,532 328,298 5,895,830 Prior period adjustment(Note 7) (1.501.372) (328,298) (1.829.670) Fund balances, beginning of year- as restated 4.066.160 4.066.150 Fund balances, end of year $ 6,903.055 $ $ 6,903,055 The accompanying notes are an integral part of this statement. 5 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA COMBINED STATEMENT OF REVENUES,EXPENDITURES,AND CHANGES IN FEND BALANCES-BUDGET AND ACTUAL- SPECIAL REVENUE FUND FOR THE YEAR ENDED MARCH 31, 2000 Variance Favorable Revenues Budget Actual { nfavarable Grants $ 53,018,879 $ 49,563,872 $ (3,455,007) Rents 2,592,740 3,188,374 595,634 Interest 408,256 268,377 (139,879) Loan proceeds - 440,423 440,423 Other 329.914 230.232 (99.682) Total revenues 56.349.789 53.691.278 (2,658.511) Expenditures Current Administration 4,213,127 4,014,290 202,837 Utilities 857,500 997,839 (140,339) Maintenance 3,511,773 2,819,642 692,131 General 2,401,813 2,276,355 125,458 Rehabilitation loans - 111,138 (111,138) Housing assistance payments 40,838,332 38,703,632 2,134,700 Grants and shelter costs - 368,285 (3618,285) Capital additions 4.456.632 9.115.379 1'4.658.747} Total expenditures 56.279.177 58.402.560 _�2,123s, 3) Excess of revenues over(under) expenditures 70,612 (4,711,282) (4,781,894) Cather financing sources(usp Transfer of San Pablo Housing Authority - 7,548.177 7.548.177 Excess of revenues and other sources over(under) expenditures $ 70 612 2,836,895 $ (2.766.283) Fund balances, beginning of year- as restated 4.066.160 Fund balances, end of year $ 6,903.055 The accompanying nates are an integral part of this statement. 6 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TOT GENERAL-PURPOSE FINANCIAL STATEMENTS MARCH 31,2000 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 2140, "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, 2400, 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 financialstatements 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. 7 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS MARCH 31, 2004 (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 went 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 +an 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. 8 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS MARCH 31,2000 (Continued) Nate 2(continued) (D) Fixed Assets General fixed assets are valued at historical cost. Contributed general faced 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 fined assets. (E) Collection Losses The direct write-off method has been adopted for providing for uncollectible accounts. (F) Encumbranc s 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. The reporting period for these programs was July 1, 1999 through June 30, 2000. 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. (J) Grant Restricts 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°/0 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. 9 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS MARCH 31,2000 (Continued) Nate 4 - NOTES RECEIVABLE AND DEFERRED REVENUE At March 31, 2000 there were$949,273 of Community Development Block.Grant, $992,826 of Rental Rehabilitation Grant,and$356,566 of other loans 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 leaned 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. Nate 5 - FIXED ASSETS The following is a summary of the Authority's changes in fixed assets for the fiscal year ended March 31, 2000. Balance Balance 4!115+9 t idi#inns Dele#inns 3!31!1)0 Conventional 74,052,913 $ 9,075,348 193,651 $ 82,934,610 Section 8 1,446,637 40,031 153,518 1,333,150 Other 93.503 - 612 92.890 75593.053 9.115,379 $_- -- tea � _P 4 36t�.650 Note 6 - LONG-"TERM DEIST Following is a summary of changes in long-term debt for the year ended March 31, 2000: Balance Balance 41-/99 Additions Dgletions 3 11315 Bonds Note 7) $ 1,735,000 $ - $ 1,735,000 $ - Compensated Absences (Note 8) 244,247 41.108 - 28, 355 12,243,206 41,109 1,735 285�3�,55 10 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS MARCH 31,2000 (Continued) Nate 7 - PRIOR PERIOD ADJUSTMENT During the fiscal year ended June 30, 2000 the Authority elected to remove$1,829,670 of account balances associated with bonds payable from its books of accounts. These bonds were issued in the name of the Authority, however, all debt service amounts required for these bonds is the responsibility of the U.S. Department of Housing and Urban Development(HUD). All amounts paid for retirement of these bonds are paid directly by HUD. Note 8 - COMPENSATED ABSENCES It is the Authority's policy to permit employees to accumulate earned but unused vacation leave up to a ma)dmurn 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$285,355 as of March 31, 2000. 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 cast of vacation and sick leave is recognized when payments are made to employees, in the special revenue fund. Note 9 - 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, 2000. The Authority contributes 19.25%of eligible employees'annual compensation. In addition, the Authority also paid approximately 50°lo 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$3,786,276 for the year ended March 31, 2000. Employer contributions were$693,368 and employee contributions 11 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS MARCH 31, 2000 (Continued) Note 9 (Continued) were$125,793, representing 18.31% and 3.32% of payroll subject to contribution, respectively, for the fiscal year ended March 31, 2000. The ten year trend analysis and other disclosures required by generally accepted accounting principles are described in the general purpose financial statementsof the County of Contra Costa, California as of June 30, 1999. Note 10 - 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, 2000 for active employees was $442,557 and for retired employees $176,162. The Authority's liability for health care benefits is limited to its annual contribution. As of March 31,',2000, there were 98 active and 64 retired employees being covered by the Authority's health insurance. Note 11 - MANAGEMENT AGREEMENTS Under an agreement with CDR Senior Housing Associates(a California limited partnership), the Authority manages rental units. Under this agreement, for the fiscal year ended March 31, 2000, the Authority received $28,250 in compensation for its management services. The result of operations and financial position of COR Senior Housing Associates are not presented or included in these statements. Note 12 - JOINT POWERS AGREEMENT-PROPERTY AND LIABII.MY 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. CHAEtMA'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.. 12 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS MARCH 31, 2000 (Continued) Note 12 (Continued) Condensed audited financial information for the year ended May 31, 1999, is as follows: Total assets $ 3,201,435 Total liabilities (95.300) Total retained earnings $ 106,13fi Total revenues $ 1,195,014 Total expenses x'588,205) Net increase in retained earnings $ 507809 CHARMA had no long-term debt outstanding at May 31, 1999. The Authority's share of year end assets, liabilities, or retained earnings has not been calculated. Note 13 - JOINT PONVER.S AGREEMENT,.WORKERS' COMPENSATION INSURANCE The Authority participates in a joint venture under a joint powers agreement QPA)with the California Housing Workers' Compensation Authority(LHWCA). LHWCA was formed to provide workers' compensation insurance coverage for member housing authorities. At December 31, 1999, there were thirty-two members. The relationship between the Authority and LHWCA is such that LHWCA is not a component unit of the Authority for financial reporting purposes. Condensed audited financial information for the year ended December 31, 1998,is as follows: Total assets $ 9,757,890 Total liabilities (4,709,393) Total retained earnings $ 5,p058,497 ffiffdY` __ BB Total revenues $ 3,229,295 Total expenses 2ti707.250) Net increase in retained earnings $ 522 035 CHWCA had no longterm debt outstanding at December 31, 1999. The Authority's share of year end assets, liabilities, or retained earnings has not been calculated. 13 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO THE GENERAL-PURPOSE FINANCIAL STATEMENTS MARCH 31,2000 (Continued) Nate 14 - CONTINGENT LIABILITIES The Authority has received funds from various federal, state, and local grant programs. It is possible that at some fixture 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. Note 15 o SUBSEQUENT EVENT During September 2000 the Housing Authority of the County of Contra Costa was named as a defendant in a case of litigation. The claimant has filed for$10,000,000 in damages for a claim involving personal injuries. The Authority's management is unable to predict at this time the final outcome of this litigation, or whether the resolution of this matter could materially affect the Authority's financial position. It is however, managements' belief that any potential losses would be covered by the Authority's insurance carrier. 14 SUPPLEMENTARY DATA 15 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED MARCH 31, 2000 Federal Granter CFDA Number Expenditures Denarnnent of Housing and Urban Development a=) Direct Programs: Shelter Plus Care 14.238 1.299.944 Public and Indian Housing 14.850 5.899.433* Public Housing-Comprehensive Grant Program 14.852 721.591 Public Housing-Drug Elimination Program 14.854 275.979 Section 8 Rental Voucher Program 14.855 101988.407* Lower Income Housing Assistance Program- Section 8 Moderate Rehabilitation 14.856 1.020.520* Section 8 Rental Certificate Program 14.857 _ 29,926,479* Passed through the City of Antioch, CA: Community Development Block Grant 14.218 9,619 Passed through the County of Contra Costa: Community Development Block Grant 14.218 _ _ 50.019 Total CDBG 14.218 59.638 Rental Housing Rehabilitation 14.230 117.977 Total HUD 50.309.968 DDgpartment of Health and Human Services (HH&S) Passed Through the County of Contra Costa: Health Care for the Homeless Program 93.151 42.431 Total HH&S 42.431 Total federal expenditures 50,352.399 * Major federal financial assistance program. The accompanying notes are an integral part of this statement. 16 WALLACE ROWE & ASSOCIATES Accounting Firm 2255 Morello Avenue, Suite 209 (925)686-5550 Pleasant Hill, CA 94523 Fax (925) 686-5814 E-mail wroweassocCaol.com REPORT ON COMPLIANCE AND INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF GENERAL-PURPOSE FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITI3 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, 2000, and have issued our report thereon dated November 22, 2000. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Compliancy As part of obtaining reasonable assurance about whether the general-purpose financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants, noncompliance which could have a direct and materialeffect on the determination of financial statement amounts. However, providing an opinion on compliancewith those provisions was not an objective of our audit and,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. Internal control {aver Financial R=rting In planning and performing our audit, we considered the Housing Authority of the County of Contra Costa's internal control over financial reporting in order 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 over financial reporting.However,we noted certain matters involving the internal control over financial reporting and its operation that we consider to be reportable conditions.Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control over financial reporting and its operation that in our judgement,could adversely affect the Housing Authority of the County of Contra Costa,California's ability to record,process, summarize,and report financial data consistent with the assertions of management in the general purpose financial statements. Reportable conditions are described as findings one, two, and three in the accompanying schedule of findings and recommendations. 17 A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that misstatements in amounts that would be material in relation to the general purpose financial statements being auditedmay occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control that might be reportable conditions and,accordingly,would not necessarily disclose all reportable conditions that are also considered to be material weaknesses. However,we believe that none of the reportable conditions described above is a material weakness. This report is intended for the information of the Board of Commissioners, management and federal awarding agencies. However, this report is a matter of public record and its distribution is not limited. November 22, 2000 18 WALLACE ROWE & ASSOCIATES Accounting Firm 2255 Morello Avenue, Suite 209 (925) 686-5550 Pleasant Dill, CA 94523 Fax (925) 686-5814 E-mail wroweassoc C aol.com REPORT ON COMPLIANCE WITH.REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM A"INTERNAL CONTROL OVER CONIPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 To the Board of Commissioners Housing Authority of the County of Contra Costa Martinez, California Compliance We have audited the compliance of the Housing Authority of the County of Contra Costa, California with the types of compliance requirements described in the H.S. Office of Management and Budget(OMB)Circular A- 133 Compliance supplement that are applicable to each of its major federal programs for the year ended March 31,2000. Compliance with the requirements of laws,regulations, contracts and grants applicable to each of its major federal programs is the responsibility of the Housing Authority of the County of Contra Costa's management. Our responsibility is to express an opinion on the Housing Authority of the County of Contra Costa, California's compliance based on our audit. We conducted our audit of compliance with those requirements in accordance with generally accepted auditing standards;the standards applicable to financial audits contained in Government Auditing Sia izrds, issued by the Comptroller General ofthe United States;and(OMB)Circular A-133,Audits of States,Local Governments andNon-Profit fxt Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program 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 and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the Housing Authority of the County of Contra Costa, California's compliance with those requirements. In our opinion, the Housing Authority of the County of Contra Costa, California complied, in all material respects,with the requirements referred to above that are applicable to each of its major federal programs for the year ended March 31, 2000. However, the results of our auditing procedures disclosed instances of noncompliance with those requirements that are required to be reported in accordance with OMB Circular A-13 3 and which are described as finding number four in the accompanying schedule of findings and recommendations. 19 Internal Con rol Over Cpm 2Y„ ia�nce The management of the Housing Authority of the County of Contra Costa, California is responsible for establishing and maintaining effective internal control over compliance with requirements of laws, regulations, contracts and grants applicable to federal programs. In planning and performing our audit, we considered the Housing Authority of the County of Contra Costa, California's internal control over compliance with requirements that could have a direct and material effect on a major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on internal control over compliance in accordance with OMB Circular A-133. Our consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be a material weaknesses. A material weakness is a condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that noncompliance with applicable requirements oflaws,regulations,contracts and grants that would be material in relation to a major federal program 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 over compliance and its operation that we consider a material weakness. We did however note other matters involving the internal controls over compliance that we have reported to management of the Housing Authority of the County of Contra Costa, California in a separate letter dated November 22, 2000. This report is intended for the information of the Board of Commissioners, management, and federal awarding agencies. However,this report is a matter of public record and its distribution is not limited. 6U a November 22, 2000 20 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA STATUS OF PRIOR AUDIT FINDINGS MARCH 31,2000 The previous audit report for the year ended March 31, 1999 contained no audit findings. 21 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA SCHEDULE OF FINDINGS AND RECOMMENDATIONS MARCH 31,20€30 Section I- Summary of Auditors' Results Financial Statements Type of auditors'report issued: unqualified Internal control over financial reporting: '.Material weaknesses identified? no Reportable conditions identified not considered material weaknesses? yes Noncompliance material to financial statements? no Federal_AWards Internal control over major programs: Material weaknesses identified? no Reportable conditions identified not considered material weaknesses? no Type of auditors'report issued on compliance for major programs: qualified Any audit findings disclosed that are required to be reported in accordance with A-133, Section .510(a)? yes Identification of major programs: Public and Indian Housing 14.850 Section 8 cluster: Rental Certificate Program 14.857 Moderate Rehabilitation 14.856 Rental Voucher Program 14.855 Dollar threshold to distinguish between Type A and Type$programs $ 1,510,5"72 Auditee qualified as low risk auditee? no Section II-Financial Statement Findings none Section III-Federal Award Findings none 22 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA FINDINGS AND RECOMMENDATIONS MARCH 31, 2000 Finding 1 - AgMating Records nd Real Estpte Assessment n r(REAQ Electronic Submission(At! Programs At the commencement ofour audit fieldwork we discovered that the accounting records contained numerous errors. We also noted that the accounting records for some of the Authority's programs were not being maintained in a current and up to date manner. Numerous adjustments were required to correct the account balances for several ofthe Authority's programs. As of July 2000, the programs which are accounted for on a fiscal year ending June 30 basis had not been closed for the fiscal year ended June 30, 1999. Several of the accounts for these programs also required adjustments to correctly state the account balances. Due to the accounting records not being maintained in an accurate and timely manner, the required unaudited electronic submission was not prepared and submitted to REAC as required. This submission had not been prepared as of the November 22,2000,audit report date. Recommendation- We recommend that the Authority's books ofaccounts be.nnaintained on a current basis. The individual account balances should be reviewed monthly to ensure that the account balances are correct. We also recommend that the required electronic submissions be prepared and submitted in a timely manner. Authority's Response- We concur with this finding. Due to the untimely resignation of the agency's Finance Director,the Authority was without personnel able to complete and ensure all year-end closing entries were correct. This situation also resulted in not being able to submit the final corrected financial data in time to perform REAL electronic submission by stipulated deadlines. We had communication with REAC to keep them informed of our situation.We are now fairly certain that our finial year-end data for the required audited submission will be performed and completed. 23 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA FINDINGS AND RECOMMENDATIONS MARCH 31, 2000 Finding 1 (Continued) Since then a neve Finance Director has been hired and the maintenance of the financial records is beim restored.It is our expectation that we will be able to meet future REAL submittal deadlines. 24 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA FINDINGS AND RECOMMENDATIONS MARCH 31,2000 (Continued) Finding 2- The Ifly_tntoa gf Fixed s NPA Completed, A# r The results of the annual physical inventory of the Authority's fixed assets was not reconciled to either the general ledger or to the results of the previous year's physical inventory. Recommendation- We recommend that the results of each year's physical inventory of fixed assets be reconciled to the boobs of accounts and the previous year's inventory results. Authority's Response- We concur with the finding and confirm that the results of the,physical inventory count has been reconciled to the fixed assets inventory listing for the year ended March 21, 2000.However,the fixed assets inventory listing had not been reconciled to the General Ledger. The management of the agency has made this a priority to ensure that this reconciliation is completed by 12131/00, and in the fixture these reconciliation are completed within reasonable period after year-end. 25 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA FINDINGS AND RECOMMENDATIONS MARCH 31,2000 (Continued) Finding 3- Circumvention of Internal Controls 1A11 Programs) During our examination of the Authority's internal controls we noted numerous instances where established internal control procedures were not followed. Several travel reports were paid without being properly approved. It appears that hundreds of unauthorized phone calls were made and charged to the Authority.The billings for these calls were paid without being questioned for allow ability. Recommendation- We recommend that the Authority comply with its established internal control procedures regarding approval and payment of its expenditures. Authority's Response- L, The Executive Director recently issued an Administrative Bulletin regarding phone usage malting it clear that phone usage for personal calls shall be made only during non-working time and at no expense to the Authority. Further, it has been made clear that managers are responsible for monitoring phone usage and are required to report irregularities to the Executive Director. 2. :Finance staff has been directed not to process travel expense vouchers without the signature of the Executive Director. 3. Accounts payable has been directed to review phone bills more vigilantly. 26 HOUSING AUTHORITY OF THE COUNTY OF CONTRACOSTA FINDINGS ANIS RECOMMENDATIONS MARCH 31,2000 (Continued) Finding 4- Numerous Errors were Noted In the Files of Participants in AbeFamily Self Sufficiency Progr�am (CFDA #!1-14.855,& 14,857) During our examination of the internal controls and tenant files for the Family Self Sufficiency(FSS)Program we noted the following: 1. There was no documentation available to indicate that the FSS programs' tenants were being monitored to ensure their program goals were being met. 2. We examined nine files for tenants participating in the FSS Program. The result of our review of these tenants' files is as follows: a. The FSS contract in four of the tenant files was incomplete or contained incorrect information. b. For five of the tenants an incorrect escrow mount was paid to the tenant. These incorrect amounts were paid due to errors in the escrow calculations. c. The results of two tenants' annual rexam nations were not calculated for the FSS Program. This resulted in the tenant making incorrect escrow contributions. d. For one tenant the original FSS calculation was performed incorrectly which resulted in the tenant making an incorrect escrow contribution. e. The required annual escrow statement sent to one of the FSS Program's tenants was not correct. The statement reflected a zero balance in the tenant's account, when the tenant actually had a balance of$2,324 plus any accrued interest. Recommendation- We recommend the Authority review its procedures for managing the FSS Program. These procedures should be revised if necessary to ensure that the program is being properly managed.Ifchanges are needed,the procedures should be revised. If the established procedures are adequate to properly administer the program they should be followed. 27 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA FINDINGS AND RECOMMENDATIONS MARCH 31,2000 (Continued) Finding 4 (Continued) Authority's Response- 1. Tenant monitoring was deficient in past years but records have been updated for the past six months.Each FSS participant was contacted by phone or letter.During the coming year,measures are in place to revisit all active cases at least once a year.To insure case management was being documented,in September 2000,FileMaker Pro was installed with a case management tracking system. 2. a. The complete or incorrect contract information contained in the four tenant files occurred several years ago but has only recently been corrected. b. Several files contained escrow errors due to incorrect information carried forward from previous and due to incomplete communication between Housing Assistants and financial staff.In the past,several staffmembers from the various field offices handled cases along with normal.duties.This created inconsistencies and training difficulties resulting in erroneous or missing information. In order to improve lines of communication between FSSCoordinator, fiscal and housing assistants, two field staff has been designated to handle all coordination of participant status to rectify this problem. As of July 1, 2000 new procedures were implemented for this specialized program. In June and July FSS training sessions were heft for Housing Assistant Managers and staff.Training and further procedure clarification will occur over the next 90 days.Future escrow information will be correct and any past escrow will be rectified to the best of our ability by the end of the next fiscal year. c. See b. above. d. The mistake mane on the referenced case file calculations,which occurred over five years ago, could no longer be corrected due to logistics and to the scale of the mistake. however, Housing Assistants, fiscal department and FSS Coordinator are carefully monitoring all new case calculations. e. Internal accounting procedures have been modified to ensure year to year balances do not get dropped due to the fiscal year nature of other accounting. 28 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA FINI)INGS AND RECOMMENDATIONS MARCH 31, 2040 (Continued) Finding 4 (Continued) Conclusion: Many errors occurred during the management ofthis small but important program since its inception 6 years ago. Steady improvement in program management has been completed and it is anticipated that all new cases from 5/1/00 on will be fully and accurately managed. 100%of past cases will be internally audited and if necessary will be rectified as allowable by 3131/02. We concur with the auditor's recommendations and they are fully underway. 29 'dNALLACE ROWE & ASSOCIATES Accounting Firm 2255 Morello Avenue, Suite 209 (925) 686-5550 Pleasant Hill, CA 94523 Fax (925) 686-5814 E-mail wroweassocCaol.com November 22, 2000 To the Board of Commissioners and Executive Director Housing Authority of the County of Contra Costa Martinez, California In planning and performing our audit of the financial statements of the dousing Authority of the County of Contra Costa for the year ended March 31, 2000, we considered the Authority's internal control structure to determine our auditing procedures for the purpose of expressing an 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 November 22,2000. This letter does not affect our report dated November 22,2000 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 audit engagement. We have already discussed many of 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 Management Letter Page 2 1. Luring our review of the controls over cash and the cash receipt procedures at the various project offices we again noted that tenants were allowed to pay their rents with cash.We have previously brought this to the attention of the Board and the Authority's management. However, it has been four years since we last discussed this issue. We Feel the possibility of theft or robbery would be significantly reduced if tenants were required to pay their rents with a check or money order. We recommend that the Authority revise its policies to require all payments by tenants be made by check or money orders. 2 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA GENERAL-PURPOSE FINANCIAL STATEMENTS YEAR ENDED MARCH 31,2000 (Including Auditors' Report Thereon) HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA GENERAL-PURPOSE FINANCIAL STATEMENTS MARCH 31, 2000 TABLE OF CONTENTS Paye Independent Auditors'Report 1 Financial Statements: Combined Balance Sheet-All Fund Types and Account Groups 3 Combined Statements of Revenues, Expenditures, and Changes in Fund Balances - All Governmental Fund Types 5 Combined Statement of Revenues, Expenditures, and Changes in Fund Balances, Budget and Actual - Special Revenue Fund 6 Notes to the General-Purpose Financial Statements 7 Supplementary Data: Schedule of Expenditures of Federal Awards 16 Report on Compliance and on Internal Control Over Financial Reporting.Based on an Audit of General-Purpose Financial Statements Performed in Accordance with Government Auditing Standards 17 Report on Compliance with Requirements Applicable to Each Major Program and Internal Control Over Compliance in Accordance with OMB Circular A-133 19 Status of Prior Audit Findings 21 Findings and Recommendations 22 WALLACE ROWE & ASSOCIATES Accounting Firm 2255 Morello Avenue, Suite 209 (925) 686-5550 Pleasant Hill,CA 94523 Fax(925) 686-5814 Email wroweassocCaol.com 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, 2000. 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. 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, 2000, and the results of its operations for the year then ended in conformity with generally accepted accounting principles. In accordance with Gover mnent Auditing Standards,we have also issued our report dated November 22, 2000 on our consideration of the Housing Authority of the County of Contra Costa`s internal control over financial reporting and our tests of its compliance with certain provisions of taws, regulations, contracts and grants. Our audit was performed 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 supplementary schedules are presented for purposes of additional analysis as required by the U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and lion-Profit Organizations, and the U.S. Department of Housing and Urban Development, and is not a required part of the general-purpose financial statements. Such information has been subjected to the auditing procedures applied in the audit of the general- purpose financial statements and, in our opinion, is fairly stated in all material respects, in relation to the general-purpose financial statements taken as a whole. November 22, 2000 2 tt3 et CT et' P d" �Ci is"1 v`r �' t PS aN '-+C3i 0 0 V7 h7 � +-* C,4 en N t't G7 •--� N "I C7 .-- 00 C? 6q kn 1 i s i r i I 9 N til wl W N ted 64G u y M c+z � Cep Z � � 'S4 kn Ctli �" G ��Gti +�nc�ws � I t u�i CA 614 65 cn CV 0Z ca 'O -g — +"mfg ttl� > -9 0 — > *6 C: 0dpi •G8.iC�1 4-0 44 r > ,