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MINUTES - 12022003 - HA4
+ .t HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA TO: BOARD OF COMMISSIONERS FROM: Robert McEwen, Executive Director DATE: November 4, 2003 SUBJECT: ACCEPTANCE OF AUDIT REPORT FOR FISCAL YEAR ENDED MARCH 31, 2003 11 I SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION 1. RECOMMENDED ACTION: ACCEPT financial audit report for the period April 1, 2002 through March 31, 2003, performed by Patel and Associates, Oakland, California, as recommended by the Advisory Housing Commission. 11. FINANCIAL IMPACT: Funding has been provided in the Housing Authority's Fiscal Year 2002/2003 Consolidated Operating Budget for the audit contract due the certified public accountancy firm of Patel and Associates for performing this financial audit. Ill. 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 and all financial records of the Housing Authority are in order. There were no material weaknesses or reportable findings or management concerns. 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 SIGNATUREX10;—Q RECOMMENDATION OF EXECUTIVE DIRECTOR RECOMMENDATION OF BOARD COMMITTEE APPROVE OTHER SIGNATURE(S): ACTION OF BOARD ON December 2, 2003 APPROVED AS RECOMMENDED X OTHER VOTE OF COMMISSIONERS I HEREBY CERTIFY THAT THIS IS A x UNANIMOUS (ABSENT_]mp } 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 2 2003 JOHN SWEETEN,CLERK OF THE BOARD OF COMMISSIONERS AND COUNTY ADMINISTRATOR f -b_ ,DEPUTY H:UudyHayes\MSOFFICEIWNWORD\BOARD\BO-AUDIT FYE 3-31-03.doe HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31,2003 Patel & Associates Certified Public Accountant HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA MARCH 31, 2003 TABLE OF CONTENTS MANAGEMENT DISCUSSION AND ANALYSIS 1-10 E'4DDEPENDENT AUDITOR'S REPORT U-12 FINANCIAL STATEMENTS Statement of Net Assets 13 Statement of Activities 14 Statement of Cash Flows 15 Statement of Net Assets-Proprietary Funds 16 Statement of Revenues,Expenses and Changes in Fund Net Assets- Proprietary Funds 17 Notes to Financial Statements 18-28 SUPPLEMENTARY INFORMATION; Combining Statement of Net Assets-Other Enterprise Funds 29 Combining Statement of Revenues,Expenses and Changes in Net Assets- Other Enterprise Funds 30 Schedule of Expenditures of Federal Awards 31 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AVDITIWG STANDARDS 32-33 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 34-35 SCHEDULE OF FINDINGS AND QUESTIONED COSTS 36-37 STATUS OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS 38 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA MANAGEMENT DISCUSSION AND ANALYSIS MARCH 31,2403 The Housing Authority of the County of Contra Costa (the Authority) management discussion and analysis is designed to (a) assist the reader in focusing on significant financial issues, (b) provide an overview of the Authority's financial activity, (c)identify changes in the Authority's financial position(its ability to address the next and subsequent year challenges),and(d)identify individual fund issues or concerns. The Management Discussion and Analysis (MD&A) is designed to focus on the current year's activities, resulting changes and currently known facts. Please read MD&A' n conjunction with the Authority's financial statements(beginning on page 13). FINANCIAL HIGHLIGHTS • The Authority's net assets decreased by $1.04 million (or 4.35%) during 2003. The Authority engages only in business-type activities, therefore the decrease is attributable to the Authority's business-type net assets. Net Assets were $23.91 million and $22.87 million for 2002 and 2003 respectively. • The business-type activities revenue increased by $17.33 million (or 26.99%) during 2003. They were$64.21 million for 2002 and$81.54 million for 2003. • The total expenses of all Authority programs increased by $17.55 million (or 26.98%) during 2003. Total expenses were $65.04 million and$82.59 million for 2002 and 2003 respectively. 1 USING THIS ANNUAL REPORT mD&A Management Discussion and Analysis Basic Financial Statements Authority-wide Financial Statements(new)--pgs 13-15 Fund Financial Statement(refocused.)—pgs 16-17-., Notes to Financial Statements (expanded/restructured)—pgs 18-28 --- Authority-Wide Financial Statements The Authority-wide financial statements are designed to be corporate-like in that all business type activities are consolidated,into,columns that add to a total for the entire Authority. These Statements Fcld . `e nt of Net Assets, which is similar to a Balance Sheet. The Statement of Nit 11 financial and capital resources for the Authority. The statement is presented in the format where assets,minus liabilities,equals"Net Assets", formerly known as equity. Assets and liabilities are presented in order of liquidity. The focus of the Statement of Net Assets(the"Unrestricted Net Assets")is designed to represent the net available liquid(non-capital)assets,net of liabilities, for the entire Authority. Net Assets (formerly equity)are reported in three broad categories: Net Assets, Invested in Capital Assets, Net of Related Debt: This component of Net Assets consists of all Capital Assets, reduced by the outstanding balanus of any bonds, mortgages, ' notes or other borrowings that are attributable to the acquisition, construction, or improvement of those assets. Restricted Net Assets: This component of Net Assets consists of restricted assets, when constraints are placed on the asset by creditors (such as debt covenants), grantors, contributors, laws,regulations, etc. Unrestricted Net Assets: Consists of Net Assets that do not meet the definition of"Net Assets Invested in Capital Assets,Net of Related Debt", or"Restricted Net Assets". 2 The Authority-wide financial statements also include a Statement of Revenues Expenses and Changes in Fund Net Assets (similar to an Income Statement). This Statement includes: Operating Revenues, such as rental income, grant revenue, fees and miscellaneous income. Operating Expenses, such as administrative, utilities, and maintenance, and depreciation; and, Non-Operating Revenue and Expenses,such as investment income and interest;expense. The focus of the Statement of Revenues, Expenses and. Changes in Fund Net Assets is the "Change in Net Assets",which is similar to Net Income or Loss. Finally, Statement of Cash Flows is included, which discloses net cash provided by, or used for operating activities, non.-capital financing activities, and from capital and related financing activities. Fund Financial Statements The Fund Financial Statements presentation is similar to the traditional government financial statements. The focus is now on Major Funds, rather than fund types. The Authority's major funds consist exclusively of Enterprise Funds. Enterprise funds utilize the full accrual basis of accounting. The Enterprise method of accounting is similar to accounting utilized by the private sector accounting. Many of the funds administered by the Authority are provided by the Department of Housing and Urban Development. Others are segregated to enhance accountability and control. The Authority's Funds Business Tuve Funds Conventional Public Housing—Under the Conventional Public Housing Program, (also titled as `Low Rent-Aided Housing') the Authority rents units that it owns to very low & low-income households. The Conventional Public Housing Program is operated under an Annual Contributions Contract (ACC) with HUD. The ACC provides Operating Subsidy and Capital improvement Grant funding to enable the PHA to provide the housing at a rent that is based upon 30%of household income or at a flat rate below market rate. Housing Choice Voucher Pro ran -- Under the Housing Choice Voucher Program, (hereunder titled as 'Voucher' Program) the Authority administers the program under an Annual Contributions Contract(ACC)with HUD.The ACC provides funding to the Authority to provide tenant based rental assistance to program participants. The rental assistance payment is structured so as the rental payment that the participant is obligated to pay is 30% to 40% of household income. CDBG Rental Rehabilitation ProgramSRRP'} Linder the RRP, the Authority executes annual funding contracts with Contra Costa County and the Cities of Antioch and Walnut Creek to fund operation of a program that assists rental property owners with rehabilitation of housing units to help assure a supply of affordable rental apartments and homes for its Section 8/Voucher users and other low-income households. Technical assistance in determining repairs is provided by Authority staff and below-market-rate loans are made to cover part of rehabilitation costs. Program administrative costs are shared by the funding providers and the Authority. 3 Other lion-Major Funds—In addition to the major funds above,the Authority also maintains the following non-major funds. Non-major funds are defined as funds that have assets, liabilities, revenues, or expenses of less than 10% of the Authority's total assets, liabilities, revenues or expenses: Shelter Plus Care program — is designed to provide rental assistance and supportive services to homeless and disabled individuals and their families. It is cooperatively administered by the County Health Services Department and the Housing Authority of Contra Costa County, and has capacity to serve 200 households. Participants receive rental assistance through the Section 8 Rousing Choice Voucher program funded by U.S Department of Housing and Urban Development, Economic Development and Supportive Services Program--- a grant-program funded by the Department of Housing and Urban Development that encourages economic self- sufficiency among the Authority's public housing resident population, ROSS—The Resident Opportunities and Self Sufficiency Program isa grant program for the benefit of public housing residents. It is designed to provide residents empowerment activities and assistance in becoming economically self sufficient; provide resource to enhance independent living for the elderly and persons with disabilities, and improve overall quality of life. Funding for the program primarily comes from.the Department of Housing and Urban Development Section 8, Pension—The Coggins Square family Apartments (150 Units) in the City of Pleasant Hill, California, was developed under Section 8 Community Investment Demonstration (Pension Fund) Program of the U.S. Department of Housing and Urban Development. HUD is responsible for the contract administration; however, HUD has contracted with the Housing Authority to carry out the contract administrative functions for five of the units under this program. The administrative functions relate to the five project based Section 8 certificates at Coggins Square. Drug,Elimination Program-a grant program funded by the Department of Housing and Urban Development that is intended to reduce the use of illegal drugs within the Authority's properties Moderate Rehabilitation -- is a Department of Rousing and Urban Development funded rehabilitation program that provides project based rental assistance based on the Housing Choice Voucher methodology in determining subsidized rent and program compliance. Management Fund&County Programs—represents non-HUD resources developed from a variety of activities,including County cost reimbursement projects. 4 AUTHORITY"-WEDE STATZIL NT Statement of Net Assets The following table reflects the condensed Statement of Net Assets compared to prior year. The Authority is engaged only in Business-Type Activities. TABLE 1 STATEMENT OF NET ASSETS 2003 2002 (in millions (in millions of dollars) of dollars Current and Other Assets $ 11.18 $ 16.66 Capital Assets 16.15 17.58 Total Assets 27.33! 34.24 Other Liabilities 4.46 10.33 Long-Term Liabilities 0 0 Total Liabilities 4.46 10.33 Net Assets: Invested in Capital Assets, Net of Related Debt 16.15 17.58 Restricted Unrestricted 6.72 6.33 Total Net Assets $ 22.87 $ 23.91 For more detailed information see page 13 for the Statement of Net Assets. Maior Factors Affecting the Statement of Net Assets Current assets & Other Assets decreased by $5.48 million, while other liabilities decreased by $5.87 million. The decrease in other liabilities and current and other assets is primarily due to an increase in unearned portion of the Housing Choice Voucher Program and CD13G & Rental Rehabilitation program revenues. Capital assets also changed significantly, decreasing from $17.58 million to $16.15 million. Of which, $2.49 million decrease was attributed primarily to writing off of construction soft costs, that are not considered as part of the capital costs, and current year depreciation & amortization of$3.14 million. Additional purchases of capital assets, including construction costs,in the year amounted to $4.2 million, net, after deletion. For more detail see "Capital Assets and Debt Administration"below. S Table 2 presents details on the change in Unrestricted Net Assets TABLE 2 CE[ANGE OF UNRESTRICTED NET ASSETS Millions of Dollars Unrestricted Net Assets 04101/02 $ 6.33 Results of Operations (1.05) Adjustments: Depreciation(1) 3.14 Adjusted Results from Operations 8.42 Capital Expenditures: (1.70) Unrestricted Net Assets 03/31/03 6.72 (1) Depreciation is treated as an expense and reduces the results of operations but does not have an impact on Unrestricted Net Assets While the result of operations is a significant measure of the Authority's activities, the analysis of the changes in Unrestricted Net Assets provides a clearer change in financial well-being. 6 ................:........................... TABLE 3 STATEMENT OF REVENUES,EXPENSES AND CHANGES IN NET ASSETS The following schedule compares the revenues and expenses for the current and previous fiscal year. The Authority is engaged only in Business-Type Activities. 2003 2002 (Millions of (Millions dollars) of dollars) Revenues Tenant Revenue—Rents and Other $ 3.46 $ 3.54 Operating Subsidies and Grants 73.42 57.36 Capital Grants 3.90 2.09 Investment Income •38 .27 Other Revenues •38 .95 Total Revenue 81.54 64.21 Expenses Administrative 9.30 6.50 Tenant Services .46 .30 Utilities 1.21 1.22 Maintenance 3.79 3.64 General .6 . .66 Housing Assistance Payments64.07 49.77 Depreciation;{ 3.14 2.95 Total Expenses 82.59 65.04 Net Increase $ (1.05) $ (.83) MAJOR FACTORS AFFECTING THE STATEMENT OF REVENUE,EXPENSES AND CHANGES IN NET ASSETS Tenant revenue has slightly decreased due to decrease in the tenant portion of the rent generated mainly due to decrease in average household income during the year. Operating Subsidies, Grants and Capital Grants increased substantially. This increase was primarily clue to: A higher level of activity in the areas of capital grants. The Authority is under- taking an aggressive modernization program. • Increased HUD reimbursements for the increased HAP payments mainly due to hard rental market in the local Bay-Area and more vouchers were placed in service and hence, increased the HAP expenditure for the year. 7 Other revenues have decreased mainly due to substantially fewer activities during the year compared to prior year. Most expenses are in line with those incurred in the previous year, however, administrative expenses have increased due to increased workers compensation and; health benefits contributions and a substantial increase in contributions for retirement benefits plan. Also, Housing assistance payments have increased significantly due to increase in rental costs and an increase in the number of voucher holders during the year. CAPITAL ASSETS AND DEBT ADMIMSTRATION Capital Assets As of year-end, the Authority had $16.15 million invested in a variety of capital assets as reflected in the following schedule, which represents a net decrease (addition, deductions and depreciation)of$1.43 million or 8.1%from the end of last year. TABLE 4 CAPITAL ASSETS AT YEAR-END (NET OF DEPRECIATION) Business-type Activities 2003 2002 Land and land rights $ 1,031,462 $ 1,034,720 Buildings 74,155,314 70,513,646 Equipment 1,295,306 885,030 Accumulated Depreciation (61,472,024) (58,520,156) Construction In Progress 1,141,344 3,667,121 Total $ 16,151,402 $ 17,580,361 8 The following reconciliation summarizes the change in Capital Assets, which is presented in detail on page 27 of the notes. TABLE 5 CHANGE IN CAPITAL ASSETS Business Type Activities Beginning Balance-4/01/02 $ 17,580,361 Additions 4,200,004 Retirements,Net of Depreciation (2,492,360) Depreciation and Amortization (3,136,603) Ending Balance-3/31/03 $ 16,151,402 This year's major additions are: Business-Type Activities Capital Improvements Programs -Modernization completed on variety of the Authority's Public Housing complexes $ 3,379,333 Furniture and Equipment Purchases 423,684 Section 8 Administrative Offices Leasehold Improvements 396,987 $ 4,200,004 9 Notes Payable Untstandin_g As of year-end,the Authority had$185,000 of nates payable outstanding, see Note 5 to the financial statements. ECONONHC FACTORS Significant economic factors affecting the Authority are as follows: • Federal funding of the Department of Housing and Urban Development • Local labor supply and demand,which can affect salary and wage rates • Local inflation,recession and employment trends, which can affect resident incomes and therefore the amount of rental income • Local rental market & economy that has direct effect on the ability to find viable privately owned rental properties that are available to our Housing Choice Voucher participants. • Inflationary pressure on utility rates, supplies and other costs FINANCIAL CONTACT The individual to be contacted regarding this report is Bakulesh Patel, CPA,Director of Finance of the Housing .Authority of the County of Contra Costa, at (925) 957-8014. Specific requests inay be submitted to Bakulesh Patel,CPA,Director of Finance,Housing Authority of the County of Contra Costa,P.O.Box 2759, 3133 Estudillo Street,Martinez,CA 94553. 10 Patel & Associates Telephone: (510)452-5051 2101 Webster Street, Suite 1650 Facsimile: (510)452-3432 Certified Public Accountant Oakland,California 94612 E-mail: Patelepa@aol.com INDEPENDENT AUDITOR'S REPORT Board of Commissioners Housing Authority of the County of Contra Costa Martinez,California We have audited the accompanying financial statements of the business-type activities, each major fund and the aggregate remaining fund information of Housing Authority of the County of Contra Costa (the Authority) as of and for the year ended March 31, 2003, which collectively comprise the Authority's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Authority's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 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 opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities, each major fund, and the aggregate remaining fund information of the Authority, as of March 31, 2003, and the respective changes in financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards,we have also issued our report dated August 8, 2003 on our consideration of the Authority'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. The management's discussion and analysis on pages 1 through 10 are not a required part of the basic financial statements but are supplementary information required by accounting principles generally accepted in the United States of America, We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. 11 Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Authority's basic financial statements. The combining nonmajor fund financial statements, are presented for the purposes of additional analysis and are not a required part of the basic financial statements. 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, and Non-Profit Organizations. Such information have been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, are fairly stated in all material respects in relation to the basic financial statements taken as a whole. V �r Oakland,California August 8, 2003 e 12 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA: STATEMENT OF NET ASSETS AR31,2003 ASSETS Cash and Gash Equivalents(Note 3) $ 901,651 Accounts Receivable-MUD 1,287,889 Accounts Receivable-Other 260,614 Accounts Receivable-Tenants 139,673 Accrued Interest Receivable 53,868 Prepaid Expenses,Deposits and Other Assets 193,950 Investments(Note 13) 4,728,770 Nates Receivable(Nate 9) 3,612,692 Capital Assets,net of accumulated depreciation(Note 12) Land 1,431,462 Construction in Progress 1,141,344 Buildings and Improvements 13,511,953 Furniture and Equipment 456,643 Total Assets 27,330,509 LIAR LITIES Accounts Payable 13,575 Accrued Compensated Absences-Current(dote 8) 325,153 Deferred Revenue 2,589,938 Tenants Security Deposits 278,915 Accrued Liabilities 431,871 Other Liabilities 576,773 Accrued Compensated Absences-Non-Current(Note 8) 61,350 Note Payable(Note 5) 185,000 Total Liabilities 4,462,575 NET ASSETS Invested in Capital Assets,net of related debt 16,151,402 Unrestricted Assets 6,716,532 Total Net Assets $ 22,867,934 The accompanying notes are an integral part of these financial statements 13 00 � cmo Fn v C° ren ea ami a rll• C r 04 cn m cn N 69 64 O Cm'.7 44 CT M v C14 Tr C� �' N 4r eat a W yyW. F+ 64 6/3 ao C o4 0 C7 Crt e+'t n ON vl� 6) ,Diad Ch N M t7 C7 1'•• : W 64 64 : Z„ N N RGA LtM M M M d O 6s vj c C c{v to t11 M in b btI va ,r, rs rE w00 r4 tn r— a M u t> a � rt on yr o 0o v� •�t «� r, tia 00 p N M IT N .-+ t7Ni00 � �'+ �� M � .ter T"• t� 00 uy 6s Fro D p � d4 Sh Ch r•+ � � 0 Cd Qd W kr, wl Sc In C} 00 G\ C'••• Ln M M Ch Rd h•^ N M a tl' Or. ac N 00 C7 1O v'f M m tp h 41^ %a v'1 a cV InC- C- a 1^ 0 't0 00 a M 00 M N d' ,n ON 00 %0 CS N 00 64 6 vd co tY b4 W rte •� � � � -� � � � � � � C4 CC tOu LS+ ` tow c N '1 0 9} V] V) G tg ra (in te a � HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA STATEMENT OF CASH FLOWS FOR TH�x�=Al?�r�rol U ItitAR : ,.2on3 Cash Flaws from operating Activities Cash collected from: HUD $ 77,151,959 Dwelling Rental 3,410,839 Other Revenues 334,845 Cash Paid for: Housing Assistance Payments (64,061,023) Employee expenses (8,128,380) Administrative Expenses (12,281,380) Net Cash Used by Operating activities (3,573,140) Cash from Investing Activities: Cash collected from: Interest&investment income 369,320 Cash provided by: Investments,net 864,449 Cash paid for: Notes Receivable (2,000,000) Net cash used for investing activities (766,231) Cash flow from capital&related financing activities, Cash paid for: Acquisition of Capital assets,net of disposal (819,186) Construction of Capital assets,net of soft costs written off (886,973) Net cash used for capital&related financing activities (1,706,159) Net decrease in cash and cash equivalents (6,045,530) Cash and cash equivalents at beginning of year 6,947,181 Cash and cash equivalents at end of year $ 901,651 Reconciliation of operating loss to net cash provided by operating activities: Operating loss $ (1,424,251) Adjustments to Reconcile Operating Loss to Net Cash Provided by Operating Activities: Depreciation expense 3,136,603 Decrease in Accounts Receivable-HUD 778,2.88 Increase in Accounts Receivable-other (139,595) Increase in Accounts Receivable-tenants (45,138) Increase in prepaid expenses&other assets (60,190) Increase in Interfund receivable (180,051) Decrease in Notes Receivable 45,906 Decrease in Accounts payable (644,371) Decrease in Accounts payable-HUD (853,571) Decrease in deferred revenue (5,116,208) Increase in other liabilities 336,162 Increase in accrued Compensared absences 19,987 Increase in accrued liabilities 402,164 Increase in Interfund Payable . 180,051 Decrease in Tenant security Deposits (8,926) Net cash provided by operating activities $ (3,573,140) The accompanying notes are an integral part of this financial statement 15 +-i iT <f m 00 a, C} N N N m m V1 00 M -+ v't N M C> n w I"- YY t i T ST F t m 4' oc 3t) V'J oo cl t"- r- lD arn Cl N n0 -- O9 CT rF r M 6.w ta h- 0 as m m w m N ^^+ lb si` M 01%to.•+00 M VJ V+ ter �t co VB 00 N cT CV N «.+ -� P* M �t? 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A, .7 a e7 0o cm�t C1 �n 00 v� o 00 00 irk rN 41 m •-+ M en 00 ��!!JJ � (`•• t 00 N M N Nbo FMa U # e p� 1" N M O M V•7 00 V1 M:( *0 00 •,* �1`f o0 t•- d �t W 00 O Ct, m lD N m C71 00 00 C7 of <t CT C C c7 cri et u; r <t 00 a ,o ,o v IT r- :4 r• cr M rn o, v ,a ,c 00 ro ll- CL ll: yy 0 z M M r' N ^ M N b M✓ v M Y7 O [.r b9 611, H ur: N- 0�y w 1~t v N ed ro ro vvyy t C u 04 ba K N b tll R LL1 � C7 tl p �: CS m ami # ami m © a O c sb c xxo H � HC7C7t� H o z pc7 w w HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA NOTES TO FINANCIAL STATEMENTS FOR THE YEAR.ENDED MARCH 31, 2003 NOTE 1: ORGANIZATION AND CONTRACTS A. Organization 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 Beard of Commissioners are appointed by the County of Contra Costa Board of Supervisors. The Authority is a legally separate Agency maintaining separate accounting records and staff from those of the County. 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 funds, and organizations over which Authority officials exercise oversight responsibility. The accompanying financial statements are those of the Low Rent Housing Program (Contract SF-477) and the Section 8 Housing Program (Contract SF- 473), which includes Moderate Rehabilitation Shelter Plus Care 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 Authority: 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 owned and maintained, pursuant to the United States Housing Act of 1937 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 low-income families. The Authority has financed these housing developments through the issuance of notes, under which HUD has guaranteed the debts and made specific annual debt and service contributions to the Authority. This debt has since been assumed by HUD and accordingly is no longer carried as debt on the Authority's books. C. Section 8 The Authority has contracted with the HUD(Contrast No. SF-473)to provide rent subsidy payments to low and moderate income families pursuant to the United States Housing Act of 1937 and the Department Of Housing and Urban Development Act. 18 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 for the tenant rent obligation (TRC) and the Authority makes monthly subsidy payments (HAP) to the owners. .Programs included in this annual contribution are the Section 8 Housing Choice Voucher, Moderate Rehabilitation and Shelter Plus Care. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Presentation and Measurement Focus The basic financial statements of the Authority are composed of the following • Government-wide financial statements • Fund financial statements • Notes to the financial statements Government-wide Financial Statements Government-wide financial statements report information on the nonfiduciary activities of the Authority. These statements, which include the statement of net assets and the statement of changes in net assets,would if applicable have separate columns for the government and business-type activities of the primary government (including its blended component units), as well as its discreetly presented component units. However, the Authority only has business-type activities. The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Funds received in advance for which services have not been performed are treated as deferred revenue. The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function of segment. Program revenues include rent charges to tenants and grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or program. Interfund activity has been eliminated from the government-wide financial statements. 29 Fund Financial Statements The underlying accounting system of the Authority is organized and operated on the basis of separate funds, each of which is considered to be a separate accounting entity. The operations of each fund are accounted for with a separate set of self- balancing elfbalancing accounts that comprise its assets, liabilities, net assets, revenues and expenses. Fund financial statements for the Authority are presented after the government- wide financial statements. These statements display information about major funds individually and non-major funds in the aggregate for the Authority's proprietary funds. GASB 34 requires that all funds which report at least 10 percent of any of the following: (a) total assets, (b) total liabilities, (c) total revenues, or (d)total expenses,be shown in detail as a major fund in the fund-wide statements. The major funds for the Authority for the year ended March 31, 2003 are Low Rent Aided Housing, Capital Grants, CDBG, Dental Rehabilitation and Housing Choice Voucher. All other non-major funds are combined and shown in one column as other enterprise funds. The combining statements of the non-major funds are presented as supplementary information following the notes to the financial statements. In the fund financial statements, proprietary funds are presented using the accrual basis of accounting as described above for the government-wide financial statements. Proprietary funds distinguish operating revenues.and expenses from non-operating items. Operating revenues and expenses generally result from providing services in connection with a proprietary fund's principal ongoing operations, Also these statements present increases and decreases in total net assets. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and enterprise funds, subject to this same limitation. The Authority has elected not to follow subsequent private-sector guidance. The Authority has an established 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 and 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: Years Computer Hardware and Software 3 Furniture and Equipment 5 Vehicles 5 Building Improvements 10 Buildings 27,5 20 B. Accounts Receivable Receivables are principally amounts due from l-IUI) and tenants. Allowance for doubtful accounts has not been provided due to immateri 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 do not present significant risk of changes in value due to changes in interest rates. NOTE 4: INTER-FUND RECEIVABLESIPAYABLES Due to Due From Low Rent - Aided Housing Capital Grants $ 77,382 CDBG 79,446 Rental Rehabilitation 4,130 Housing Choice Voucher 1,024,527 Drug Elimination 46,051 County Programs 72,236 $ 1,303,772 NOTE 5: NOTE PAYABLE On June 30, 1994 the Authority signed.a Demand Promissory Note promising to pay to the order of HACCC Casa Del Rio, Inc. a California Mon Profit Public Benefit Corporation on demand or in the event no demand has there-to-fore been made, on December 31, 2059 (the maturity date), the amount of$185,000, and all accrued but unpaid interest there on. The outstanding principal amount hereof shall bear interest until the maturity date at the lesser of 7.52% and the maximum rate permitted by lave. As of the date of this report there is no interest accrued as it has been forgiven by HACCC Casa-Del Rio,Inc. NOTE 6: PAYI LENT IN.LIED OF TAXES In connection4 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 I0%, of the dwelling rents net of utilities expense. At March 31, 2003, accrued liabilities include $69,718 for payment in lieu of taxes. NOTE 7: RETIREMENT PLAN 'I'he 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 115 participants at March 31, 2003. The 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. 22 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 $5,176,975 for the year ended March 31, 2003. Employer contributions were $1,094,109 and employee contributions were $170,074, representing 21.13% and 3.29% of payroll subject to contribution, respectively, for the fiscal year ended March 31, 2003. The ten-year trend analysis and other disclosures required by accounting principles generally accepted in the United States of America are described in the general- purpose financial statements of the County of Contra Costa, California as of lune 30, 2003. 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 at$386,503 as of March 31, 2003. 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. NOTE 9: CONTINGENT LIABILITIES AND RELATED PARTIES 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. De Anza Gardens,Inc./De Anza Gardens,Associates The Authority is Co-General Partner of the limited partnership of De Anza Gardens, Associates. As of March 31, 2003 the Authority has advanced a short-term loan of$2 million accruing interest at a simple rate of 6%. In June 2003 $1 million of the short- term loan was granted to De Anza Gardens, Inc. and the other $1 million was converted to long-term debt accruing interest at a simple rate of 3%. Casa del Rio,Associates Casa del Rio, Senior Housing Associates (CDR) was formed as a limited partnership on April 12, 1994 for the purpose of developing, owning and operating an 82-unit affordable housing rental complex (the project) located in Antioch, California. The Project qualifies for low-income housing tax credits under Section 42 of the Internal Revenue Service Code. Such projects are regulated under terms of a Regulatory Agreement,including rent charges, operating methods and other matters. 23 The general partner of the Partnership is HACCC Casa del Rio, Inc., a California public benefit corporation. The officers and Board members of HACCC Casa Del Rio, Inc. are employees of the Authority,which was the developer of the Project. Financing for construction of the Project was obtained through loans from the California Housing Finance Agency (CHFA) and Rental Housing Construction Program(RHCP). The influence the Authority could potentially exercise over the partnership is limited by the partnership agreement and the terms of the Regulatory Agreement. However, in connection with the relationship with the HACCC Casa Del Rio, Inc. and CDR. Senior Housing Associates, the Authority has certain potential liabilities. The Authority's potential liabilities are as follows. Pursuant to the Indemnification Agreement dated July 1, 1994, by and among the Authority,HACCC Casa Del Rio, Inc., CDR Senior Housing Associates, and MHIFED I Limited Partnership, the Authority could possibly be liable for deficiency, unpaid taxes, interest and penalties, cost to contest, operating deficiency and expenses of enforcement as identified in the Agreement. Pursuant to the Operating Deficit Guaranty Agreement dated July 1, 1994 by the Authority to and for the benefit of MHIFED I Limited Partnership, the Authority can possibly be liable for operating deficit and expenses of enforcement as identified in the Agreement. Pursuant to the Indemnity Agreement, dated July 1, 1994, by the Authority to and for the benefit of CDR Senior Housing Associates and MHIFED I Limited Partnership,the Authority can possibly be liable for any costs, expenses, and liabilities arising out of claims made by FPI (FPI Real Estate Group, FPI Mortgage Co. and FPI Management, Inc.)under the Development Agreement. Pursuant to the Demand Note dated June 30, 1994, from the Authority to HACCC Casa Del Rio, Inc., the Authority can possibly be liable to HACCC Casa Del Rio, Inc. for $185,000. Although the note is due upon demand the maturity date is December 31, 2059,the note will be called prior to maturity only in the event that there are operating deficits and there is not sufficient cash available to cover expenses. Pursuant to the Assignment and Assumption Agreement,the Authority can possibly be liable for any and all claims relating to the Assignment agreement arising prior to the date of the Assignment Agreement. Pursuant to the Department of Housing and Community Development Rental Housing Construction Program First Amendment to Regulatory Agreement (the "Amended HCD Agreement") dated November 14, 1994, by and among the Department of Housing and Community Development, CDR Senior Housing Associates, and the Authority, the Authority can possible'be liable for a sponsor's operating guaranty to provide sufficient staff or equipment to the general partner, as needed and remedies against sponsor for default under the Amended HCD Agreement. Summary financial information for CDR Senior Housing Associates and HACCC Casa Del Rio,Inc.as of December 31,2002 is presented below. 24 t Condensed Balance Sheet HACCC CDR Casa Del Rio, Senior Inc. Housing Total (Unaudited) Associates Assets: Cash $ 77,734 $ 103,453 $ 181,187 Notes Receivable(Current) 185,000 185,000 Investment in CDR Housing 200,233 200,233 Other Current Assets 54,645 69,664 124,309 Property Plant and Equipment 5,351;616 5,351,616 Replacement/Operating Reserves 522,754 568,754 Deferred costs 76,590 76,590 Total Assets $ 517,612 $ 6,124,077 $ 6,641,689 Liabilities: Current Liabilities $ 3,432 $ 93,763 $ 97,195 Accrued Interest Payable 751;793 751,793 Notes Payable,Net of current portion 3,161;270 3,161,270 Total Liabilities 3,432 4,006;826 4,010,258 Unrestricted Net Assets 514,180 514,180 Partners'capital 2,117,251 2,117,251 Total Unrestricted Net Assets/Partners' Capital 514,180 2,117,251 2,631,431 Total Liabilities,Unrestricted Net Assets and Partners'Capital $ 517,612 $ 6,124,077 $ 6,641,689 Condensed Statement of Operations Revenues: Rent,net of vacancy loss $ $ 384,074 $ 381,074 Interest and other income 27,935 16,402 44,337 Total Revenue 27,935 400,476 428,411 Project operating expenses 283;209 283,209 Partnership and financial expenses 136,644 136,644 Depreciation and Amortization 181,947 181,947 Other Expenses 14,872 14,872 Total Expenses 14,872 601,800 616,672 Net Profit(Loss)/Change in Net Assets $ 13,063 $ (201,324) $ (188,261) 25 Condensed Statement of Changes in Partners' Capital General Partner Limited.Partner HACCC MHIFED 94 Casa Del Rio, Limited Inc. Partnership Partnership interest 1% 99% Partners' capital,December 31,2001 $ 201,301 $ 2,117,274 Net Loss,December 31, 2002 (2,013) (199,311) Partners' capital December 31, 2002 $ 1.99,288 $ 1,917,963 The financial statements of CDR Senior Housing Associates were audited by other auditors whose report dated March 27, 2003 expressed an unqualified opinion on those statements. The summarized information was derived from those statements. NOTE 10: RISK MANAGEMENT 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 California Housing Authority Risk Management Agency(CHARMA),a Joint Powers Agreement(JPA). Excess insurance from $250,000 to $10,000,040 is carried through, the Housing Authorities Risk Retention Group(HARRG), a Housing Authority Insurance Pool. NOTE 11: EQUITY TRANSFERS Equity transfers in the amount of $3,765,503 consist of the transfer of the following completed Capital Grant Projects to the Low Rent Aided Program., CGP707 $1,526,330,CGP 708 $1,955,057 and CTAP 907 $284,116. The prior period equity in the amount of$1,121,282 has been transferred to Housing Choice Vouchers from Section 8 Certificate since the programs have been combined. Accordingly, all assets and liabilities of the Section 8 Certificate Program have been combined with that of Housing Choice Voucher. 26 NOTE 12: CAE LTAL_&&J= The following is a summary of land,cousituction in progress,building and improvements,and furniture and equipment as of March 31,2003 LOW RENT HOUSING AIDED CAPITAL CHOICE MODERATE MANAGEMENT UJUSCA12110A HOUSIN GRANTS YDVTJAR R&RABUTAIM EM IDJAL Capital assets not being depreciated: LffiuI Balance as of 3131102 1,029,663 S $ 3,057 Less donated land (3,258) (3,258) Total Land 1,026,405 5,057 1,031,462 Construptign in Pro= Balance as uf38 M2 3,667,121 3,667,121 Additions 3,379,333 3,379,333 Write off sob costs an open CFP projects (968,169) (969,169) Write off soft cow on completed CIAPICOP projects (1,514,220) (1,514,220) Transfer of completed projects to Aided (3,422,721) (3,422,721) Total Contraction In Progress 1,141,344 1,141,344 Total Capital Assets not being depreciated 1,026,405 1,141,344 S,g57 2,172,806 Capitol assets being depredated: BJWdin&L&JWZMX0Mr= Balance as of3/31/02 70,439,231 74,415 70,513,646 Additions-. Transfer of completed construction from Comp Grants(net of soft costs written off$1,379,091 3,422,721 3,422,721 Section 8 office leasehold improvements 396,987 396,987 Lem donated buildings&improvements (178,040) (178.040) Less accumulated depreciation: Accumulated depreciation as of 03131/02 (57,794,660) (74,415) (57,869,075) Depreciation on existing buildings&improvements (2,530,656) (2,530,656) Add back depreciation on donated fittifili4gs A iniprovem:anti 178,040 178,040 Depreciation an additions to buildings&improvements, (342j73} 79,397) (421,670) Buildings&Improvements,net of acaitted depreefaftcr 13,194,363 317,590 13,511,953 Balance as of3/31102 121,993 196,120 218,898 348,019 995,030 Additions: Capital Projects 275,321 275,321 Purchase of furniture&equipment 6,445 141,918 148,363 Transfer of equipment from capital grams to Aided 342,782 (342,782) Deletions: Expendable equipment written off (13,408) (13,408) Less accumulated depreciation t Accumulated deptecistion as of03/3 I ID2 (146,844) (156.219) (348,019) (651,081) Transfer prior year depreciation from Aided to Camp Grants 10,360 (10,160) Depreciation on existing furniture&equipment (39,855) (20,681) (59,536) Depreciation on existing furniture&equipment-Camp Grams (10,360) (10,360) Depreciation on additions to furniture&equipment (24.0.16) (86,536) Depreciation on additions to furniture&equipment-Comp Grants (21.150) Furniture&Equipment,net of accumulated depreciation 233,381 73,381 159,881 466,643 TOW capital S 14,454,149 S 1,214,725 S 477,471 S 5,057 1,6,151,402 27 00 rq sir a C� ccS W) 00 kn L 00 kn Cli 't _ aoi GQ r- 00 00 fV C7 p in "Cl •� � �D u7 ,� C'� •fid' � ,� � � c�� Tj „Q ""It �- 00 CN ON zo di � •YUy t/"� tiC5 C'V C5 6: i,,^ t� 'Lt M V 00 C� tip ` d3 d1 CS st '' cwt a Un 0o cv ,•-t � � � � � + " 7 a rn ° b cn 40. as ct a° .cn Uo 111 cn ami 1 cl cn � � SUPPLEMENTARY INFORMATION m v, v, 00 rr- 00 V) N 00 IT N 00 v1 ON a0 g .0 .... vi N 00 CT ry Il h b t v 45 N V7 00 Vl IFIm ^+ N UO vl ["- 41 00 00 Ch vY G7 OU M W Ch UO <Y OU UO � N b4 H H z th tJw M CT t-- r- C7 CS C� r b h Nary CM'iO C !h ON-+ *�-� 6 M m 00 ON N b C fi+3 yg _ 00 00 AGO Y.i W C!� 5y FA Q� C Ol ON LF C6 - 00 Uro 10 ON N N K'f n C� "I L7 C M H rq M O tt- LMh en d N C N LT. iit N N N N W4 69 x � z 00 a EA 64 In h CN fli 64 vii b �6Y1 N � w OR �n ai w > n s 5 of tli OS tl r�i K u Cd 78 8 Vl m 0T M N "T t' O 'n 'O 40 ;0. !"! M V7 V' N A 7 ^' V7 m V 00 00 w O o0 M S e! 00 uti N N N N -+ N 66 Ni 6 b O C�h � b9 fiI9 CA 14 m M a n m fY+ Odo vds ry 00 o01 W CA00 en Cn W a, CS Vary N N m V1 Vf V) Cl 80 W �+i Vj N N N VY H f Vim': F Z va rn .r u U v en w A In O � �� h uar'S N N Vari In � z � ril N d N N {Yr N N N N y FA b m 00 In CY [`; 1`4 N C7 '7 V !"'• O� �O H f/9 N 65 H •� LLip, G 3 fv'i � Y`i ryU❑ W � C�� 4..� 't'i .G 'd' y O F d F O HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE:YEAR ENDED MARCH 31,2003 FEDERAL, CFDA FEDERAL FEREEAL GRANTQPJI!ASS-THEQUGBGRANTOMROGRAM 111LE NUMBER ��►'I"E Dili, Fes, U.S.Department of Housing and Urban Development Direct Awards Moderate Rehabilitation 14,856 $ 120,781 Housing Choice Voucher 14.871 66,686,540 Drug Elimination 14.854 24.2,829 EDSS 14.664 57,405 ROSS 14,670 15,587 Shelter Plus Care 14.238 1,860,753 Low Rent Aided Housing 14.850 3,260,259 Capital Fund Programs 14.872 1,965,665 Comprehensive Improvement Assistance Program 14.652 82,392 Comprehensive Grant Program 14.859 1,854,935 Community Development Block Grant 14.218 107,536 Rental Rehabilitation N/A 34,105 Section 8 Community Investment Demonstration(Pension)Fund Program N/A 35,598 Total U.S.Department of Housing and Urban Development 76,344,405 Total Expenditures of Federal Awards S 76,344,405 i i ' i N/A; C:,`FDA Number is not avgilabW, Note: The accompanying schedule of expenditures of federal awards includes the federal grant activity of the Authority and is presented an the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of OMB 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 general-purpose financial statements. 31 I Pahl & Associates Telephone: (510)452-5051 2101 Webster Street,Suite 1650 Facsimile: (510)452-3432 f Certified Pudic Accountant Oakland,California 94612 E-mail: Patelcpa@aol.com INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT A UDIT NG STANDARDS 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 (the Authority) as of and for the year ended March 31, 2003, and have issued our report thereon dated August 8, 2003. We conducted our audio in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Compliance As part of obtaining reasonable assurance about whether the Authority's financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grants, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with 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 under Government auditing Standards. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Authority'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. Our consideration of the internal control over financial reporting would not necessarily disclose all matters in the internal control over financial reporting 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 misstatements in amounts that would be material in relation to the 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 over financial reporting and its operation that we consider to be material weaknesses. 32 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 ether than these specified parties. Oakland, California August 8, 2003 33 Patel & Associates Telephone: (510)452-5051 2101 Webster Street, Suite 1650 Facsimile: (510)452-3432 Certified Public Accountant Oakland, California 94612 E-mail: Patelepa@aol.com 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 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 (the Authority) with the types of compliance requirements described in the U.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, 2003. 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 auditing standards generally accepted in the United States of America; the standards applicable to financial; audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profits Organizations. 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, 2003. 34 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 Authority'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 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. Oakland, California August 8, 2003 35 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR.ENDED MARCH 31,2003 SECTION 1-SUMMARY 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? None 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 weaknesep. `� None reported 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 Name of Federal Program 14.871 Dousing Choice Voucher Program. 14.872 Capital Fund Programs 14.852 Comprehensive Improvement Assistance Program 14.859 Comprehensive Grant Program Dollar threshold used to distinguish between type A and type B programs: $2,290,332 Auditee qualified as low-risk auditee? Yes 36 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED MARCH 31, 2003 SECTION H-FINANCIAL STATEMENT FINDINGS No matters were reported. SECTION III-FEDERAL,AWARD FINDINGS AND QUESTIONED COSTS No matters were reported. 37 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA STATUS OF PRIOR YEAR FINDINGS AND RECOMMENDATIONS FOR.THE YEAR ENDED MARCH 31,2003 No findings were reported in the prior year. 38