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HomeMy WebLinkAboutMINUTES - 12192006 - HA.1 ' HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA TO: BOARD OF COMMISSIONERS l FROM: Rudy Tamayo, Executive Director DATE: December 19, 2006 SUBJECT: ACCEPTANCE OF AUDIT REPORT FOR FISCAL YEAR ENDED MARCH 31, 2006 SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION I. RECOMMENDED ACTION: ACCEPT financial audit report for the period April 1, 2005 through March 31, 2006, performed by Harn & Dolan CPA's, Walnut Creek, California, as recommended by the Advisory Housing Commission. II. FINANCIAL IMPACT: Funding has been provided for the audit contract in the Housing Authority's Fiscal Year 2005/2006 Consolidated Operating Budget. III. REASONS FOR RECOMMENDATION/BACKGROUND Harn & Dolan 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 findings identified and there were two non-financial reportable conditions made. Harn & Dolan listed 5 areas' that presented opportunities for strengthening internal controls and operating efficiencies issued in a Management Letter, a copy of which is attached. A full copy of the audit is on file at the office of the Clerk of the Board. 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 Harn & Dolan, 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 Rudy nayo,1: ccutive Director RECOMMENDATION OF EXECUTIVE DIRECTOR RECOMMENDATION OF BOARD COMMITTEE APPROVE OTHER SIGNATURE(S)- ACTION OF BOARD ON 0eCe_i'TL4Z)tr let 2-CDCp APPROVED AS RECOMMENDED V1 OTfiER VOTE OF COMMISSIONERS / I HEREBY CERTIFY THAT THIS IS A V UNANIMOUS (ABSENT , ) TRUE AND CORRECT COPY OF AN AYES: NOES: ACTION TAKEN AND ENTERED ON THE ABSENT: ABSTAIN: MINUTES OF THE BOARD OF V as .0 F"`�-a icv-rN,c,� -a COMMISSIONERS ON THE DATE SHOWN. ATTESTED �EQXI ZQC.�p JOHN CULLEN,CLERK OF THE BOARD OF COMMISSIONERS AND COUNTY ADMINISTRATOR BY DEPUTY ll:\.IudvHavcs\MSOFFICE\WINWORD\BOARD\130-AI.IDI"r FYE 3-31-06.doc Harn & Dolan Certified Public Accountants 2423 Stirrup Court Walnut Creek, California 94596-6526 (925) 280-1693 Fax (925) 938-4829 November 9, 2006 To the Board of Commissioners and Executive Director Housing Authority of the County of Contra Costa Martinez, California In planning and performing our audit of the financial statements of the Housing Authority of the County of Contra Costa (the Authority) for the year ended March 31, 2006, we considered the Authority's internal control structure to determine our auditing procedures for the purpose of expressing opinions on the financial statements and not to provide assurance on the internal control structure. However, during our audit we became aware of several matters that are opportunities for strengthening internal controls and operating efficiency. The items that accompany this letter summarize our comments and suggestions regarding those matters. We have issued a separate report on the Authority's internal control structures which is included in our financial report dated November 9, 2006. This letter does not affect our report dated November 9, 2006, on the financial statements of the Housing Authority of the County of Contra Costa. We will discuss the status of these comments during our next engagement. We have already discussed many of these comments and suggestions with various Authority personnel, and we will be pleased to discuss them in further detail at your convenience,to perform any additional study of these matters, or to assist you in implementing recommendations. Sincerely � i i JW- F Housing Authority of the County of Contra Costa November 9, 2006 Page 2 1. During our cash disbursement testing, we noted instances in which rent increases, that should have been absorbed and paid by Housing Choice Voucher participants,werepaid to the land lord by the Authority. This practice was a product of the Authority's noncompliance with HUD regulations regarding the recertification of family income, composition, and the determination of HAP on an annual basis (See finding III-2006-A). Since the recertifications were not being performed, then the landlords were not receiving requested rent increases. If annual recertifications had been done, then these rent increases would have been factored into the . calculation of HAP and in many cases required to be absorbed by the tenant. In the instances noted,'rent increases were paid to landlords retroactively for several months (from 5 to 18 months). These payments were processed by accounting upon approval by a line staff supervisor. These unusual payments were not approved a department head. Controls over the disbursements of HAP expenditures would be improved if the Authority developed procedures to ensure that all disbursements are properly approved by appropriate. personnel. Any unusual payment requests,such as the type noted above,should not be processed unless approved by a department head. Authority's Response -The Authority recognizes the need to establish added controls to improve the disbursements of unusual payment requests. The Authority has put into place a process were in any payment request that is for retro-active payments in excess of 60 days must be formally approved by a Department Head. 2. During our cash disbursement testing we noted a check that had been voided and reissued several months later using the same check number and date. The Authority's accounting software allowed for the creation of two documents with the same check number,date, and amount; but with different payees. Controls over cash disbursement would be improved if procedures were developed that prohibits the issuance of the same check number more than one time. Authority's Response - The Software security features have been adjusted to prohibit the re- issuing of a check. 3. During our review of the Community Development Block Grant (CDBG) and Rental Rehabilitation Loans we noted the following: a) The disbursements of loan funds to the borrowers are not always supported by proper documentation. We noted an instance in which a payment request was partially supported by proposals and estimates, but not by invoices. The same payment request was partially supported by, invoices, but the work appeared to have been done by the property owner's tenant, with no documentation as. to the tenant's qualifications for the type of work perfonned. Controls over loan disbursements would be improved if reimbursement requests were supported by proof that costs have actually been incurred by the borrower. Controls would further be improved if the Authority documented that the work performed was done by qualified persons. h Housing Authority of the County'of Contra Costa November 9, 2006 Page 3 - b) Notation in the loan disbursement,files could be improved. Two loans were issued to the same property owner for different, but similar, properties. Each property had an original CDBG loan covering 50%of the original rehabilitation contract. Each property required a change order and received an amendment to the amount of the loan for 50%of the increase in the costs. The change orders were ambiguous and appeared to include items already included in the original contract. No notations were included in the disbursement file to indicate why a change order was needed or to indicate that site visits were performed. Controls over these loans 1would be improved if clear notations were maintained in each disbursement file to document the need for and approval of change orders, that site visits were performed, and any other observations or information relevant to the rehabilitation project. c) A few CDBG and Rental Rehabilitation Loans have come due and not been paid. Little documentation exists in the loan files to explain why or describe the collection procedures followed to date. Controls over these loans would be improved if due dates were tracked, collection attempted on loans due and payable, and documentation maintained to show the attempts made at collection. Authority's Response-Controls over the Community Development Block Grant(CDBG)and Rental Rehabilitation Loan programs have been improved by implementing a review process by the Development Director or his subordinate. The review will include disbursements, change orders,work inspections,and other loan tracking documentation. In addition,the job description of the Rental Rehabilitation �Officer has been upgraded for the hiring of a new Housing Rehabilitation Officer. 4. Controls over the maintenance of the employee computer loan program should be improved. During our audit we noted that neither the general ledger nor the Computer Loan Program Repayment Status list contained an accurate and comprehensive receivable figure. During the year employees have terminated their employment without repaying their computer loan in full. Controls over the employee computer loan program should be improved to ensure the accuracy of the general ledger balance and to ensure that loans are repaid in accordance with the promissory note, including they payback of the loan at the termination of employment. Authority's Response - Controls over the computer loan program have been improved by implementing a quarterly review process by the finance department, in addition, prior to an employee's final termination a payback or settlement will occur. 5. During our audit we noted several payments made after the fiscal year end which were for costs incurred during the fiscal year. These costs were not accrued to the correct fiscal year. The bulk of these costs were associated with contractor costs for the modernizations projects funded by the Public Housing Capital Fwid Grants. In this case Net Assets was not effected. However, controls over financial reporting should be improved to ensure that all costs are recorded in the fiscal year incurred. Authority's Response-A contract monitoring process will be employed to ensure that accrued payments are incurred during the proper fiscal year. REQUEST-TO SPEAK FORM 3 Minute Limit I wish too"seai�� end. e Complete this form and place it in the upright box near the Date: speaker's podium, and wait to be called by the Chair. My comments will be: Er�G eneral Perso-naa 'information is optional. This speaker's card N,ill be incorporated into the public record of this meeting. ❑ For El Against Name: �� ra,� \ � � nA1 Address: �l`��� ET* Cs 1 wish to speak on the subject of: Sia� � �� ����P i City: ► `N eL —R!Z�O 106e.n Phone: ®1 P-42 = @� a 4 n Ra 7 n � I I am speaking for: Myself ❑ Organization: I ❑ i do not want to speak but would like to leave comments for the Board to consider (use the back of this farm) i I