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HomeMy WebLinkAboutMINUTES - 01152002 - HA.1 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA TO: BOARD OF COMMISSIONERS • 1 FROM: Robert McEwan, Executive Director DATE: January 15, 2002 SUBJECT: ACCEPTANCE OF AUDITED FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS REPORT FOR FISCAL YEAR ENDING MARCH 31, 2001 SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION I. RECOMMENDED ACTION: ACCEPT audited financial statements and independent auditors report for the period April 1, 2000 through March 31, 2001, performed by Patel and Associates, Certified Public Accountants, Oakland, California, as recommended by the Advisory Housing Commission. Il. FINANCIAL IMPACT: Funding has been provided in the Housing Authority's Fiscal Year 200112002 Consolidated Operating Budget for the audit contract with Patel and Associates. lll. REASONS FOR RECOMMENDATION/BACKGROUND Patel and Associates has completed their audit of the financial records of the Housing Authority of the County of Contra Costa. Patel and Associates reports that the general purpose financial statements present fairly, in all material respects, the financial position of the Housing Authority of the County of Contra Costa as of March 31, 2001. There were no findings. Additionally, a separate management letter was issued that contains two recommendations to strengthen the internal controls and operating efficiency of the Housing Authority. The Housing Authority agrees with the recommendations stated in the management letter. 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 Patel 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 January 15, 2002 APPROVED AS RECOMMENDED XX OTHER VOTE OF COMMISSIONERS I HEREBY CERTIFY THAT THIS IS A X UNANIMOUS (ABSENT Nonp ) 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 January 15, 2002 JOHN SWEETEN,CLERK OF THE BOARD OF COMMISSIONERS AND COUNTY ADMINISTRATOR P ` �ff i a BY` �'r i , Y � PUTY \\housauth_I\user\bobmcmtz\msoffice\winword\board orders\bo-audit fye 3-3I-00-rjm.doe , Patel Associates Telephone: (510)452-5051 21011,Webster Street, Suite.1650 Facsimile: (510)452-3432 Certifteci Public Accountant oakland,California 9461.2 E-Mail: Pate1cpa@a0l.com The]Board of Commissioners Housing Authority of the County of Contra.Costa Martinez,California In planning and performing our audit of the financialstatements of the Housing Authority of the County of Contra Crista (the "Authority") for the year ended lwi:lrch 31., 2001, we considered the Authority's internal control in order 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. However, during our audit, we became aware of matters that are opportunities for strengthening internal controls and operating efficiency.The memorandum that accompanies this letter summarizes our'comments and suggestions regarding those matters: This letter does not affect our report: dated. November 26, 2001,on the financial statements of the Authority. We will review the status of these comments during our next audit engagement. We have already discussed many of these comments and suggestions with the Authority's management, 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. Our comments are summarized as follows- 1. Payroll Dishurselments During our review of the controls over payroll disbursements,we noted the following: - One incidence of vacation hours deducted per an employee pay record that did not agree to the employee's time carol. We recommend that management monitor payroll transactions and personnel files to enure the recorded transactions are accurate and employees are aware of personnel policies. 2. Project Expenses Project expenses per the accounting records are not reconciled in a t-Imely manner to ilhe Development Department's records. We mc€mmend that management establish a formal written policy that requires the month-1, reconciliation of project expenses per the Fiscal Department to the Development Department's records. r ' ov 26 ,2001 Oakland,California HOUSING AUTHORITY OF THE COUP OF CONTRA COSTA AUDITED FINANCIAL STATEMENTS FOTO THE YEAR ENDED MARCH 31, 2001 Patel & Associates Certified Public Accountant HOUSING AUTHORITY OF THE COUNTY OF CON'T'RA COSTA MARCH 31,2001 TABLE OF CONTENTS INDEPENDENT AUDITOR'S REPORT 1 FINANCIAL STATEMENTS Combined Balance Sheet 3 Combined Statement of Revenues,Expenses and Changes in Fund Equity 4 Combined Statement of Cash.Flows Notes to Financial Statements 6-114 SUPPLEMENTARY INFORMATION. Combining Balance Sheet .Federal Programs Combining Statement of Revenues,Expenses and Changes in Fund Equity- Federal Programs 16 Combining Balance Sheet-Local Programs 17 Combining Statement of Revenues,Expenses and Changes in Fund Equity Local Programs .18 Schedule of Expenditures of Federal Awards 119 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMEN'T'S PERFORMED IN ACCORDANCE WITH GOVERVWNT A UDrRNG STANDARDS 20-21 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 22-23 SCHEDULE OF FINDINGS AND QUEST10NED COSTS 24-25 STATUS OF PRIOR YEAR:FINDINGS AND RECOMMENDATIONS 26-27 Patel & Associates Telephone: (5 0)452-5051 2101 Webster Street,suite 1650 t'acsimfle; ;510)4.523432 Certified Public Accountant Oakland,California 94612 i,-tnsil: 1'etelepaC2xol.com INDEPENDENT AUDITOR'S REPORT 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 (the Authority) as of and for the year ended March 31, 2001, as listed in the table of contents. These general-purpose financial statements are the responsibility of the Authority'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 U.S. generally accepted auditing standards and the standards applicable to financial audits contained in 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 financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the 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. 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 as of March 31, 2001, and the results of its operations and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. In accordance with Government Auditing Standards, we have also issued our report dated. November 26, 2001 on our consideration of the Housing Authority of the County of Contra Costa's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grants. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be read in conjunction with this report in considering the results of our audit. {Jur 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 taken as a. whole, `The accompanying financial information listed as supplementary information in the table of contents is presented for purposes of additional analysis. Also, the accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, 1 and Nonprofit Organizations. These are 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 generalepurpose financial statements taken as a whole_ Oakland,California November 26,2001 2 s HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA COMBINED BALANCE SHEET MARCH 31,2001 TOTAL FEDERAL LOCAL (Memorandum PROGRAMS PROGRAMS (?nlyl ASSM Cash and Cash Equivalents(Nate 3) $ 3,058,764 $ 223,097 $ 3,281,861 Accounts Receivable a HL`D 890,137 890,137 Accounts Receivable-Other 418,981 179,377 598,358 Accounts Receivable-Tenants 72,917 72,917 Investments(Note 13) 4,059,350 768,436 4,827,78, Note Receivable 1,823,998 1,825,998 Prepaid Expenses and Other Assets 183,340 183,340 Interest:Receivable 34,135 34,135 Interfund Receivable(Note 4) 1,726,998 218 1,727,216 Land,Structures and Equipment(Note 14) 19,170,742 5,057 �19 175,799N Total Assets $ 31,441,362 $ 1,176,185 $ 32,£17,547 1JADELInES AND FUND t1 JT'I Y LIABILITIES Accounts payable $ 303,420 $ $ 303,420 Accounts Payable- HUD 1,294,462 1;294,462 Tenants SecurityDeposits 273,499 275,499 Accrued Liabilities(Note 5) 434;457 434,45 7 Other:Liabilities 436,792 436,792 Unearned Revenue 1,601,406 179,378 1,780,78 Interfused Payable(Note 4) 1,716,562 1.0,654 1,727,216 Total Liabilities 6,062,598 190,032 6,252,630 Fluid Equity Unreserved/Undesignated 25,378,764 986,153 25,364,417 Total Fund Equity 25,378,764 986,153 26,364,917 Total Liabilities and Fund Equity $ 31,441,362 $ 1,176,185 $ 32,617,547 The accompanying notes are an integral part of these financial statements 3 9 ROUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA COMBINED;STATE aNTOF REVENUES,EXPENSES ANIS CHANGES IN FUND EQUITY FOR I=3MAR EMM MACH 31,2091 TOTAL FEDERAL LOCAL (:Vlemoranducn GUAM PROGRAM WY) ' RAT NG ��I'F NI Rental Revenue-Tenant $ 3,432,328 $ $ 3,432,328 HLJD PHA Grants 50,182,613 50,182,613 Other Revenue 2,078,674 203,083 2,281,757 Total Operating Revenues 55,693,615 203,083 55,896,698 O=A IY jETP .S Administration 5,488,738 79,251 5.557,999 Tenant Service 130,14I 130„141 Utilities 1,122,003 1,122,003 Ordinary Maintenance and Operations 4,216,220 4,216,220 General Expenses 501,406 501,406 Depreciation Expense 2,751,836 2,751,836 Housing Assistance Payments 41,206,170 41,246,170 Total Operating Expenses 55,416,514 79,261 55,495,775 Operating Income 277,101 123,822 4110,923 NONwO RAIM REYEWIES ZENRES) Investment Income 223,750 27,850 251,600 Net Non-Operating Revenues(Expenses) 223,750 27,850 251,600 Net Income 500,851 151,672 652,523 Beginning Equity as of April 1,2000(As RestaW,Note 12) 90,350,398 913,3+07 91;263,705 Lose Due to Change its Accounting Policy(Note 11) (2,549,944) (4,411) (2,554,355) Prior Period Adjustments(Moto 10) (62,922,541) (74,415) (62,995,956) Ending Equity as of March 31,:2001 $ 25,378,764 $ 986,153 5 26,364,917 The accompanying notes are an integral part of these financial statements. 4 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA COMBINED STATEMENT OF CASH FLOWS FOIL Tom:::YttAtt El�$Tt:TV�,tuc>�'fit.2Q�i Cash flows from operating activities: Cash collected from: HUD $ 48,850 549 Dwelling Rental 3,492,625 Repayments 469,795 Cather Miscellaneous 411,334 Cash used for: Housing Assistance Payments 41,206,174 Employee Expenses 5,162,(;39 Administrative Expenses 6,791,758 Net cash collected from operating activities 73,833 Cash flows from investing activities: Cash collected from: Interest 251,600 Net cash collected from investment activities 25;,600 Cash flaws from capital and related financing activities: Cash used for, Construction of capital assets Net cash used for capital and related financing activities 2,7� 88 8671 Cash flows from noncapital financing activities: Cash used for: Notes payable 4 285,355) Net cash used for non capital financing activities '285,355} Net decrease in cash (2,741+,784) Cash and cash equivalents at beginning>ofyear 5,030,650 Cash and crash equivalents at of year $ 3,281,861 Reconciliation of operating income to net cash flows from operating activities: Cash flows from operating activities: Operating Income $ 400,923 Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities: Prior year adjustments (339,012) Depredation expense 2,751,836 Bad debt expense 29,583 Decrease in accounts receivable-HUD 629,705 Increase in accounts receivable-other (577,7811 Increase in accounts receivable-Tenants (2,977) Increase in accrued interest receivable (34,135) Decrease in prepaid expenses and other assets 40,357 Increase in Interfirnd Receivable (685,824; Increase in Other Assets (1011,357; Decrease in notes receivable 472,667 Decrease in accounts payable (104.532) Decrease in accounts payable-HUD (2,856,736) Decrease in deferred revenue {528,871} Decrease in accrued liabilities (11 0,450; Increase in Interfund Payable 686,559 Increase in tetrant security deposits 16,630 Increase in other liabilities 43(,792 Net cash provided by operating activities g 73,833 The accompanying notes ars an integral part of this financial statement. 5 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31,2401 DOTE 1: ORGANIZATION AND CONTRACTS A. Or ization The Housing Authority of the County of Contra Costa (the Authority) was established pursuant to the State Health and Safety Code in 1941 to provide affordable housing options to low and moderate income families. The Authority's Board of Commissioners are appointed by the County of Contra, Costa Board of Supervisors. The members of the County's Board of Supervisors and the Authorities Board of Commissioners are the same. The Authority is a legally separate Agency maintaining separate accounting records front those of the County and with its own employees. For purposes of these financial statements the Authority is not considered to be a component unit of the County. However, these financial statements are included in those of the County as a non-discrete component unit. The Authority's .financial statements include all fiends, and organizations over which Authority officials exercise oversight responsibility. The accompanying financial statements are those of the Loin Dent Housing Program (Contract SF-477) and the Section. 8 Housing Progra.tn (Contract SF- 473), which includes Existing Certificate, Moderate rehabilitation and Voucher programs and the Local Programs. A summary, of the programs administered by the Authority is provided below to assist the reader in interpreting such financial statements. Following is a summary of the major programs operated by the Authorit-,r: B. Conventional The Authority has contracted with the HUD(Contract No. SF-477)to provide housing for families of low-income in public housing facilities o-wned and maintained, pursuant to the United States Housing Act of 1931 and the Department of Housing and Urban Development Act. Under this program, the public housing agency develops and owns properties which are rented to qualified lave income families. The Authority has financed these housing developments through the issuance of nates; under which HUD has guaranteed the debts and made specific annual debt and service contributions to the Authority. C. Section 8 The Authority has contracted with the HUD (Contract No. SF-473) to provide rent subsidy payments to love and moderate income families pursuant to the United States Housing Act of 1937 and the Department Of Housing and Urban Development Act. 6 HUD makes annual contributions to the program for housing assistance payments on behalf of the families. Included in this annual contribution is an allowance for administrative costs. Under this program, tenants lease directly with private owners after being certified as eligible under program guidelines. Tenants make payments directly to owners and the Authority makes ontbly subsidy payments to the owners. Programs included it this annual contribution are the Section 8 Existing Certificate, 'Voucher and Moderate Rehabilitation. Also included are the Drug.Elimination/Weed Seed and Shelter Plus Care Programs. The Authority monitors program compliance annually and makes monthly Housing Assistance Payments to owners. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Accountirta Basis of accounting refers to when revenue and expenditures or expenses are recognized in the accounts and reported in the financial statements. The Authority uses the accrual basis of accounting. Revenue is recognized in the accounting period in which it becomes both earned and measurable. Expenses are recognized in the accounting period in wbich the liability is incurred (when goods are received or services rendered). Funds received in advance for which services have not been performed are treated as unearned revenue. In such instances, revenue is recognized as the earning process is completed. In fiscal year 1999/2000, the Authority converted the preparation of financial statements from HUD's basis of accounting, which is an accounting practice prescribed or permitted by the Department of Housing and Urban Development, which varies in some respects from U.S. generally accepted accounting principles (GAAP) to GAAP using the Governmental Model for reporting purposes. However, the Authority has converted to the Enterprise Model for the 2000/2001 fiscal year. The Authority applies all applicable FASB pronouncements issued subsequent to November 30, 1989, except for those that conflict with or contradict GASB pronouncements. The more significant of these changes are: 1. Provision for depreciation of assets has been recorded and only hard modernization costs are capitalized. 2. HUD's annual contributions, operating subsidy, and grants for other programs are recorded as program income. 3. Statement of cash flows has been presented. B. Land;Structures and Equipment Under HUD basis accounting, Land, structures and equipment were stated at original cost without distinguishing between soft modernization costs and hard modernization costs and were presented in the funds to which they relate. Soft modernization costs are used in connection with HUD capital projects but do 7 not extend the useful life of the assets. (lard modernization costs are incurred for projects associated with the purchase of capital assets and major constructions and improvements. No provision was made for the possible decrease in values because of wear and tear or obsolescence and income were not charged for the depreciation of such assets. After the conversion from HUD basis accounting to GAAP basis accounting, the Authority established a new capitalization policy, which requires all acquisitions of property and equipment in excess of $5,000 and all expenditures for repairs, maintenance, renewals, and betterments that materially prolong the useful lives of assets be capitalized. Property arjd equipment are carried at cost or, if donated,at the approximate fair value at the date of donation. Depreciation is computed on a straight-line basis over the useful lives of the assets generally as follows: Fears Computer Hardware and Software 3 Furniture and Equipment 5 Vehicles 5 Building Improvements ;0 Buildings As a result, the Housing Authority wrote off all soft modernization costs and all the property and equipment,which cost less than$5,000. C. Accounts.Recetvsble Receivables are principally amounts due from HUD and tenants. Allowance for doubtful accounts has not been provided due to immateriality. D. Estimates Management uses estimates and assumptions in preparing financial statements, Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. E. Fund Equity Fund equity consists of unreserved/undesignated fund balance. F. Total Columns on Combined Financial Statements Total columns on the accompanying general-purpose financial statements are captioned "Memorandum Only" to indicate that they are presented only to facilitate financial analysis. Such data is not comparable to a consolidation. G. Taxes The Authority is exempt from federal and state income taxes. The AuthoritTd is also exempt from property taxes but makes payments in lieu of taxes on owned housing. 8 H. Budaeb and Budgetaxy Accountfn The Board of Commissioners adopts an operating budget no later than April 1, This budget is revised by the Beard of Commissioners during the year to give consideration to unanticipated revenue and expenditures primarily resulting from events unknown at the time of budget adoption. The Authority employs budget control by minor object and by individual appropriation accounts. Expenditures cannot legally exceed appropriations by major abject account, NOTE 3: CASH AND CASH EQI ALEINT All cash 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. Cash equivalents are short term, highly liquid investments that are both readily convertible to known amounts of cash and so near their maturity that they present significant risk of changes in value due to changes in interest rates, NOTE 4 PMR-FUND RECEIVABLES f PAYABLES Receivables Payables Federal Programs: Aided-Low lent 1.,691,061 Certificate Program 31,828 42,293 Moderate Rehabilitation 7,840 Shelter Plus Care 15,971 Voucher 603,431 CIA:PiCGP 514,890 Drug Elimination 61,266 Weed Seed 42,565 EDSS 65,395 CDBG 4,109 11,043 Rental Rehabilitation 4,109 County Homeless Program - 347,759 TOTAL FEDERAL PROGRAMS 1,726,998 1;716,562 Local Programs: Management Fund 218 . 10,654 TOTALLOCALPROGRAMS 218 10.654 TOTAL FEDERAL AND LOCAL PROGRAMS $ 1,727,216 1,7.21,216 9 NOTE5: PA.YIMNT IN LIEU OF TAXES In connection with the Conventional Housing Program, the Authority is obligated to make annual payments in lieu of property taxes based on the lesser of assessable value of owned housing times the current tax rate or 10% of the dwelling rents net of utilities expense. At March 31, 2001, accrued liabilities include $65,594 for payment in lieu of taxes. NOTE 6: RETIREMENT PLAN The Authority participates in a defined benefit retirement plan that is administered by the Contra Costa County Employees' Retirement Association. All ffill-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 89 participants at March 31, 2001. "Flee Authority contributes 15% 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 -nay be withdrawn only at termination of employment or at retirement. Total payroll subject to contributions was $3,877,139 for the year ended March 31, 2001., Employer contributions were $709,584 and employee contributions were $132,593, representing 18.30% and 3.42% of payroll subject to contribution, respectively, for the fiscal year ended March 31,2001. The ten-year trend analysis and other disclosures required by U.S, generally accepted accounting principles are described in the general-purpose Financial statements of the County of Contra Costa, California as of June 30,2001. NOTE 7: 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 err}ployees upon separation from the Authority. Accrued vacation leave has been valued by the Authority and has been recorded at$284,253 as of March 31, 2001. 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. 10 NOTE g: IES The Authority has received funds from various Federal, 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 amounts, 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. During September 2000 the HousingAuthority of Centra Costa County was named as a defendant in a case of litigation. The claimant has filed for S10,000,000 in damages for a claim involving personal injuries. The Authority's legal counsel believes that the probability of liability exposure is high. However, he is unable to say with any certainty as to what the possible exposure to the Housing Authority will be, since there are two other large corporate defendants who could potentially be held liable for the injuries. NOTE 9 RISK MAINAGEMENT The Authority is exposed to all common perils associated with the ownership and rental of real estate properties. A risk management program has been established to minimize loss occurrence and to transfer risk through various levels of insurance, Property, casualty, employee dishonesty and public official's liability forms are used to cover the respective perils. Insurance for these perils is carried by C=alifornia Housing Authority Risk Management Agency (CHARMA), a Joint powers Agreement(JPA). Excess insurance from. $250,000 to $5,000,000 is carried through, the Housing Authorities Risk Retention Group(HARRG), a Housing Authority Insurance Poo! NOTE 10: PRIOR PERIOD AWTUSTMENTS In fiscal year 200012001, the Authority converted the presentation of financial statements from the Governmental Model to the Enterprise Model. Accordingly,prior period adjustments to fund balances were made as follows: Write-off fixed soft assts $ (9,065,437) Accumulated depreciation as of March 31, 2000 (52,863,237) Accrued compensated absences as of March 31,2:000 (285,272) Total of adjustments related to change in reporting model (62,213,946) HUD adjustments (87,349) Miscellaneous Corrections (5,061) CTAP as of April 1, 2000 (690,600) Total of ether adjustments and corrections (783,010) Total Prior Period Adjustments $ (62,996,956) 11 NOTE 11: LOSS DUE TO CHANGE IN ACCOUNTING POLICY The Authority changed its capitalization policy for fixed assets during the fiscal year ending March 31, 2001. The policy prior to this change was to capitalize all fixed assets acquired with a value of$300 or greater. Under the new policy the Authority will only capitalize fixed assets with a value equal to or greater than $5,000. As a result of this change in accounting policy the Authority has written off all fixed assets acquired prior to the policy change with a value less than the new threshold amount of$5,000. NOTE 12. RESTATEMENT OF BEGINNING EQUITY As part of the conversion of the Authority's financial statement presentation from the Governmental Model to the Enterprise Model the beginning equity was restated for each fund to reflect the investment in fixed assets previously presented in the General Fixed Asset Account Group. 12 z a 4001 +- ON oo 00 c Eft rw u�s iv v r- a fA ct vt It Qq €4 00 00 CA 00 V) p en v� uti ,•-: en m M to c-• •-, O en td e+, oo oo 00 C Cs O vii C O Q3 i� 00 00 SUPPLEMENTARY INFORMATION � RR g � H H H H w rq A H w rYi r7i �i � S iR H H w vi , #6 uv H H' an w H w H H H H w V! w H (A H H H �F a �� M i ev Wv Y' �i i t S M " p a HOUSING AUTHORITY OF THE COUNTY OF CONTRA COST COMBEqNG BALANCE SHEET-LOCAL PROGRAMS FGA THE YEAR=ED MARCH 3 . M Management F _. ASSEI Cash $ 223,497 Investments 768,436 Interfund Receivable 218 Land, Structures and Equipment 5,057 Accounts Receivable-Other 179,377 Total Assets $ 1,176,185 11ARMITIES AND EIM EW 3 V LIABILITIES Unearned Revenue $ 179,378 Interfimd Payable 10,654 Total Liabilities $ 190,432 FUND EQUITY Fund Equity Unreserved/Undesipated 986,153 Total Fund Equity 986,153 Total Liability and Fund Equity $ 1,176,185 17 HtiUNNG AUTHORITY OF THE COUNTY OF CONTRA COSTA COM23TNTNG STATEMENT OF REVDWES,EXPENSES AND CHANGES IN FUND EQUITY LOCAL PROGRAM MR THE U"ENM MARCH 31,2001 Management Diad OPER MNQ U IFS Other Revenue $ 203,083 Total Opetuting Revenues203,003 Administration 79._261 Ordinary Maintenance and Operations General Expenses Depreciation Expense Total Operating Expenses 79,,261 Operating Income(Loss) 123,822 Investment Income 27,850 Net Non-Operating Revenues(Expenses) 27,850 Net Income(boss) 151,672 Beginning Equity as of April 1,2000(As Restated,Note 12) 913,307 Loss Due to Change in accounting Policy (4,+11) Prior Period Adjustments (74,415) Ending Equity as of March 31,2001 986,153 is HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Pass-Through Federal Entity Federal Grantor/Pus-Through CFDA Identifying Federal C rt►ntt z1 Prearam at Cluster 11t1p N untie ersclut=r c II S_ftatm.fm of Housing and IJrhan 1hyriMucat� Shelter Plus Care 14.238 1,325,195 Aided Low hent Housing 14.850 2,401,156 Public Housing-Comprehensive Grant Program 14.859 1,907,926 Public Housing-Drug Elimination Program 14.854 236,005 Section 8 Rental Voucher Program 14.855 40,760,055 Section 8 Moderate Rehabilitation 14.856 424,114 Section 8 Rental certificate Program 14.857 3,1-M,742 Rental Housing Rehabilitation 14.230 17,045 Passed through the City of Antioch, CA: Community Development Block Grant(CD13G) 14.218 N/A 23,978 Passed through the County of Contra Costa. Community Development Block Grant(CDBG) 14.218 N/A 135,030 Total HUD 50,337,458 D=Artmot of ZWtb and Hmnarn Sonim Passed through the County of Contra Costa Health Care for the Homeless Program(Homeless) 93.151 NIA 32,700 Total Federal Expenditures 50,370,158 Neste: Basis of Presentation The accompanying schedule of expenditures of federal awards includes the federal grant activity of the Autl crit v and is presented on the accrual basis of'accounting. The information in this schedule is presented it_accordance with the requirements of()MB Circular A-133,Audits of States,Local Governments,and Non-Profit Organizations. Therefore,some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of,the basic financial statements. NIA: Not Available 19 This report is intended for the information of management, federal awarding agencies and pass- through-entities and is not intended to be and should not be used by anyone other than these specified parties. Y A ..4> Oakland, California November 26,2001 21 Patel Associates Telephon,-: (51(1)452-5051 2101 Webster Street, Suite 1650 facsimile: (510)452-3432 Certified Public Accountant Oakland, California 94612 E-mail: Patelcpa@8eLcom INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH REQUMEEMENI'S APPLICABLE TO EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 Hoard 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 (the Authority) with the types of compliance requirements described in the U.S, QTwe 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, 2001, The Authority's major federal programs are identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs. Compliance with the requirements of laws, regulations, contracts, and grants applicable to each of its major federal programs, is the responsibility of the Authority's management. Our responsibility is to express an opinion on the Authority's compliance based on our audit. We conducted our audit of compliance in accordance with U.S. generally accepted auditing standards; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular AAI-33, Audits of States, Local Governments, and Non-Profits Organizations and the previsions of the Public and Indian Housing Compliance Supplement HUD Notices 96-32 and 97--30. 'Those (standards and OMB A-133 require that we plan and perform the audit to obtain reasonable assurance about whether-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 Authority'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 of the Authority's compliance with those requirements.. In our opinion, the Authority 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, 2001. Internal Control Over Compliance The management of the Authority is responsible for establishing and maintaining effective internal control over compliance with the requirements of laws,regulations, contracts, and grants applicable to federal programs. In planning and performing our audit, we considered the 22 Authority's internal control over compliance with requirements that could lave 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 the internal control over compliance in accordance with OMB Circular A-133. Our consideration of the internal control over compliance would not necessarily disclose all matters in the internal control that might be 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 of laws, 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 to be material weaknesses, This report is intended for the information of management, federal awarding agencies and pass- through entities and is not intended to be and should not be used by anyone other than these specified parties. ' v ° Oakland,California November 26,2001 23 HOUSING AU'T'HORITY OF THE COUNTY of CONTRA COSTA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED MARCH 31.2001 SECTION I-SUNT`WARY OF AUDITOR'S RESULTS Financial Statements Type of auditor's report issued: Unqualified Internal control over financial reporting: * Material weaknesses identified? No • Reportable conditions identified that are not considered to be material weaknesses? Mone reported Noncompliance material to financial statements noted? No Federal Awards Internal control over major programs: • Material weaknesses identified.? No • Reportable conditions identified that are not considered to be material weaknesses? ' No Type of auditor's report issued on compliance for major programs: Unqualified Any audit findings disclosed that are required to be reported in accordance with section 510(a)of Circular A-133? No Identification of major programs: CFDA Number Kure oLFederal Prggram 14.855 section 8-Voucher Program 14.859 Comprehensive Grant Program Dollar threshold used to distinguish between type A and type B programs: $1,511,105 A.uditee qualified as low-tisk auditee? No 24 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR TSE YEAR ENDED MARCH 31,2001 SECTION II-FINANCIAL STATEMENT FINDINGS No matters were reported. SECTION III-FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No matters were reparted. 25 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA STA'T'US OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS MARCH 31,2001 Current Status 1, Accounting Records and Real Estate Assessment Center(REAL) Implemented Electronic Submission(All ProMMs) At the commencement of our audit field work 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 forseveralof the 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.lune 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 R.EAC as required. This submission had not been prepared as of the November 22, 2000,audit report date. 2. The hpTntog of Fixed Assets was not CoMpleted(All Implemented Programs) 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 years physical inventory. 3. Circumvention of internal Controls(All Programs) Implemented 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 'tieing properly approved. It appears that hundreds of unauthorized phone calls were made and charged to the Authority. The billings for there calls were paid without being questioned for allowability. 26 HOUSING AUTHORITY 4F THE COUNTY OF CONTRA COSTA STATUS''OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS MARCH 31,2001 FInLins Current Status 4. Numerous Errors were noted in the files of narticants in the Family Self Sufficiency(CFDA#s 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 Implemented 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 Implemented Program. The result of our review of these tenants' files is as fellows: a. The FSS contract in four of the tenant files was Implemented incomplete or contained incorrect information. b. For five of the tenants an incorrect escrow amount was Implemented paid to the tenant. These incorrect amounts were paid due to errmrs in the escrow calculations. C. The results of two tenants' annual reexaminations were Implemented not calculated for the FSS Program. This resulted in the tenant making incorrect escrow contributions. d. For one tenant the original FSS calculation was Implemented performed incorrectly which resulted in the tenant making an escrow contribution. e. The required annual escrow statement sent to one of the Implemented FSS Program'stenants 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. 27