Loading...
HomeMy WebLinkAboutMINUTES - 02122008 - C.2 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA TO: BOARD OF COMMISSIONERS FROM: Joseph Villarreal, Executive Director DATE: February 12, 2008 SUBJECT: ACCEPTANCE OF AUDIT REPORT FOR FISCAL YEAR ENDED MARCH 31, 2007 SPECIFIC REQUEST(S) OR RECOMMENDATION(S) & BACKGROUND AND JUSTIFICATION I. RECOMMENDED ACTION: ACCEPT financial audit report for the period April 1, 2006 through March 31, 2007, performed by Harn & Dolan CPA's, Walnut Creek, California. II. FINANCIAL IMPACT: Funding has been provided for the audit contract in the Housing Authority's Fiscal Year 2006/2007 Consolidated Operating Budget. III. REASONS FOR RECOMMENDATION/BACKGROUND The Authority (HACCC) is required by the U. S. Department of Housing & Urban Development (HUD) to complete an independent audit of its financial statements and business activities annually. 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. No material findings were identified. Two, non-financial reportable conditions were made. These findings are not financially material and so are not reported to HUD. However, they highlight programmatic deficiencies that need to be addressed. Harn & Dolan noted that during the previous year's audit, annual recertifications for Section 8 clients had not been conducted on a large majority of sample files. They also noted that the current audit showed errors in the amounts paid to graduates of the Authority's Family Self-sufficiency program (FSS). On the matter of recertifications, Harn & Dolan indicated that the Authority had developed and implemented internal control procedures during the fiscal year. However, because this was the first year these controls were implemented, they were not able to conclude whether or not they had been effective. They, or another auditor, since we are currently out to bid for auditing services, will make that determination in next year's audit. In the meantime, HACCC will continue implementation and use of these new controls. Concerning the FSS program, the Authority is currently conducting an internal audit of all payments made to graduates during the past fiscal CONTINUED ON ATTACHMENT: YES SIGNATURE Joseph Villarreal,Executive Director RECOMMENDATION OF EXECUTIVE DIRECTOR RECOMMENDATION OF BOARD COMMITTEE APPROVE OTHER SIGNATURE(S): ACTION OF BOARD ON ; bru�,r(a �Z� ��$ APPROVED AS RECOMMENDED V__�OT/ER VOTE OF COMMISSIONERS Q� I HEREBY CERTIFY THAT THIS IS A UNANIMOUS (ABSENT Y ) 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 Febn�, �I 12-1 ZAXO JOSEPH V LARK AL,CLERK OF THE BOARD OF COMMISSIONERS cc: CAO Office AND EXECUTIVE DIRECTOR BY6 b"L/ v�LDEPUTY 1-1:Uudyl-layes\MSOFI�ICE\WINWORD\BOARD\BO-Al-JDI-I'FYI=3-31-07.doc year. Corrections are being made as appropriate and new internal procedures are being developed to ensure that all graduate payments are calculated correctly. Harn & Dolan also addressed the status of two findings from the audit report for the fiscal year ending March 31, 2006. The first concerned controls over the posting of rent in the public housing program. That audit noted inconsistencies and inaccuracies in the posting of rent to both the general and tenant ledgers. There were also inconsistencies in the reimbursement of utility allowance expenses to clients. Harn & Dolan stated that the Authority has improved in these areas and did not list this item as a finding again. While there are still some inconsistencies that HACCC needs to address, the differences are immaterial. The second previous finding concerned the annual recertifications for Section 8 clients noted above. As stated previously, another year must pass before Harn & Dolan are able to assess the efficacy of these changes. The Auditor's Report, the report on internal controls over financial reports, the report on programmatic compliance, the Status of Prior Audit Findings and the Schedule of Findings and Questioned Costs are all attached. A full copy of the audit is on file with 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 to conduct an audit of HACCC's finances and programs. bo-audit Harn & Dolan Certified Public Accountants 2423 Stirrup Court Walnut Creek,California 94596-6526 (925)280-1693 Fax(925)938-4829 INDEPENDENT AUDITORS' REPORT To the 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, the aggregate discretely presented component units, and the major fund of the Housing Authority of the County of Contra Costa,California,as of and for the year ended March 31,2007,which collectively comprise the Authority's basic financial statements as listed in the table of contents. These financial statements are the responsibility of the Housing Authority of the County of Contra Costa, California's, management. Our responsibility is to express opinions on these financial statements based on our audit. We did not audit the financial statements of HACCC Casa Del Rio, Inc, a California Nonprofit Public Benefit Corporation and CDR Senior Housing Associates,a California Limited Partnership,which are combined and reported as blended component units titled Casa Del Rio Housing in the fund financial statements. We did not audit the financial statements ofDeAnza Housing Corporation,a California Nonprofit Public Benefit Corporation and DeAnza Gardens L.P. a California Limited Partnership,which are combined and reported as discretely presented component units titled Component Units in the Authority-wide financial statements. Those financial statements were audited by other auditors whose reports thereon have been furnished to us,and our opinion, insofar as it relates to the amounts included for Component Units and Casa Del Rio Housing is based on the reports of the other auditors. We conducted our audit 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 ofthe 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 significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit and the reports of other auditors provide a reasonable basis for our opinions. In our opinion,based on our audit and the reports of other auditors,the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities, the aggregate discretely presented component units, and the major fund of the Housing Authority of the County of Contra Costa,California,as of March 31,2007,and the respective changes in financial position and cash flows thereof 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 a report dated September 7, 2007, 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 grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. The management's discussion and analysis and the schedule of relevant statistics on pages 3 through 11 and page 62, 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 and the other auditors have applied certain limited procedures,which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Housing Authority of the County of Contra Costa,California,basic financial statements. The accompanying Schedule of Expenditures of Federal Awards is presented for the purpose of additional analysis as required by the U.S. Office of Management and Budget Circular A- 133,Audits of States, Local Governments, and Non-Profit Organizations, and is not a required part of the basic financial statements. The accompanying Financial Data Schedule is presented for purposes of additional analysis as required by U.S.Department of Housing and Urban Development, Real Estate Assessment Center and is not a required part of the basic financial statements. The accompanying Combining Schedules for Use in the County CAFR are presented for the purpose ofadditional analysis as required by the County of Contra Costa and are not a required part of the basic financial statements. Finally,the accompanying Statement of Completed Capital Fund Program Projects is presented for the purpose ofadditional analysis as required by the U.S.Department ofHousing and Urban Development and is not a required part ofthe basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and,in our opinion,is fairly stated,in all material respects, in relation to the basic financial statements taken as a whole. September 7,2007 2 Harn & Dolan Certified Public Accountants 2423 Stirrup Court Walnut Creek, California 94596-6526 (925) 280-1693 Fax(925) 938-4829 INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENTAUDITING STANDARDS To the Board of Commissioners Housing Authority of the County of Contra Costa Martinez, California We have audited the accompanying financial statements ofthe business-type activities,the aggregate discretely presented component units, and the major fund of the Housing Authority of the County of Contra Costa, California, as of and for the year ended March 31, 2007,which collectively comprise the Housing Authority of the County of Contra Costa,California's basic financial statements and have issued our report thereon dated September 7,2007. We conducted our audit 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. Internal Control Over Financial Reporting In planning and performing our audit, we considered the Housing Authority of the County of Contra Costa, California's internal control over financial reporting as a basis for designing our audit procedures for the purpose of expressing our opinions on the financial statements,but not for the purpose of expressing an opinion on the.effectiveness of the Housing Authority of the County of Contra Costa,California's internal control over financial reporting. Accordingly,we do not express an opinion on the effectiveness of the Housing Authority of the County of Contra Costa,California's internal control over financial reporting. A control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions,to prevent or detect misstatements on a timely basis. A significant deficiency is a control deficiency,or combination ofcontrol deficiencies,that adversely affects the Housing Authority of the County of Contra Costa,California's ability to initiate,authorize,record,process,or report financial data reliably in accordance with generally accepted accounting principles such that there is more than a remote likelihood that a misstatement of the Housing Authority County of Contra Costa, California's financial statements that is more than inconsequential will not be prevented or detected by the Housing Authority of the County of Contra Costa, California's internal control. A material weakness is a significant deficiency,or combination of significant deficiencies,that results in more than a remote likelihood that a material misstatement of the financial statements will not be prevented or detected by the Housing Authority of the County of Contra Costa, California's internal control. Our consideration of the.internal control over financial reporting was for the limited purpose described in the first paragraph of this section and would not necessarily identify all deficiencies in internal control that might be significant deficiencies or material weaknesses. We did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses, as defined above. 64 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Housing Authority of the County of Contra Costa, California's financial statements are free of material misstatement,we performed tests of its compliance with certain provisions of laws,regulations,contracts,and grant agreements,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 or other matters that are required to be reported under Government Auditing Standards. We noted certain matters that we reported to management of the Housing Authority of the County of Contra Costa, California, in a separate letter dated September 7, 2007. This report is intended solely for the information and use of the County Board of Supervisors,the Advisory Housing Commission,management, others within the organization,and 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. September 7,2007 65 Harn & Dolan Certified Public Accountants 2423 Stirrup Court Walnut Creek, California 94596-6526 (925) 280-1693 Fax(925) 938-4829 INDEPENDENT AUDITORS' REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM AND INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133 To the Board of Commissioners Housing Authority of the County of Contra Costa Martinez, California Compliance We have audited the compliance of the Housing Authority of the County of Contra Costa,California,with the types of compliance requirements described in the 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 31,2007. The Housing Authority of the County of Contra Costa,California'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 ofthe Housing Authority ofthe County of Contra Costa, California's management. Our responsibility is to express an opinion on the Housing Authority of the County of Contra Costa, California's compliance based on our audit. We conducted our audit of compliance 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-Profit Organizations. Those standards and OMB Circular 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 Housing Authority of the County of Contra Costa,California's compliance with those requirements and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination on the Housing Authority of the County of Contra Costa, California's compliance with those requirements. In our opinion the Housing Authority of the County of Contra Costa, California, complied, in all material respects,with the requirements referred to above that are applicable to each of its major federal programs for the year ended March 31, 2007. However, the results of our auditing procedures disclosed instances of noncompliance with those requirements,which are required to be reported in accordance with OMB Circular A-133 and which are described in the accompanying schedule of findings and questioned costs as items III- 2007-A and III-2007-13. Internal Control Over Compliance The management of the Housing Authority of the County of Contra Costa, California is responsible for establishing and maintaining effective internal control over compliance with requirements of laws,regulations, contracts,and grants applicable to federal programs. In planning and performing our audit,we considered the Housing Authority of the County of Contra Costa, California's internal control over compliance with 66 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, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly,we do not express an opinion on the effectiveness of the Housing Authority of the County of Contra Costa,California's internal control over compliance. Our consideration of the internal control over compliance was for the limited purpose described in the preceding paragraph and would not necessarily identify all deficiencies in the internal control that might be significant deficiencies or material weaknesses as defined below. However,as discussed below,we identified a certain deficiency in internal control over compliance that we consider to be a significant deficiency. A control deficiency in an entity's internal control over compliance exists when the design or operation of a control does not allow management or employees,in the normal course of performing their assigned functions, to prevent or detect noncompliance with a type of compliance requirement ofa federal program on a timely basis. A significant deficiency is a control deficiency,or combination of control deficiencies,that adversely affects the entity's ability to administer a federal program such that there is more than a remote likelihood that noncompliance with a type ofcompliance requirement ofa federal program that is more than inconsequential will not be prevented or detected by the entity's internal control. We consider the deficiency in internal control over compliance described in the accompanying schedule of findings and questioned costs as item II I-2007-B to be a significant deficiency. A material weakness is a significant deficiency,or combination of significant deficiencies,that results in more than a remote likelihood that material noncompliance with a type ofcompliance requirement ofa federal program will not be prevented or detected by the entity's internal control. We did not consider any ofthe deficiencies described in the accompanying schedule of findings and questioned costs to be material weaknesses. We have audited the financial statements of the business-type activities, the discretely presented component units and the major fund of the Housing Authority of the County of Contra Costa, California as of and for the year ended March 31, 2007, and have issued our report thereon dated September 7, 2007. Our audit was performed for the purpose of forming our opinions on the financial statements that collectively comprise the Housing Authority of the County of Contra Costa,California's basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes ofadditional analysis as required by OM B Circular A-133 and in not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. The Housing Authority of the County of Contra Costa, California's response to the findings identified in our audit are described in the accompanying schedule of findings and questioned costs. We did not audit the Housing Authority of the County of Contra Costa, California's response and, accordingly, we express no opinion on it. This report is intended solely for the information and use of the County Board of Supervisors, the Advisory Housing Commission, management, others within the organization, and 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. September 7, 2007 67 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA STATUS OF PRIOR AUDIT FINDINGS MARCH 31,2007 The audit report for the fiscal year ended March 31,2006,contained the following findings. The following is a discussion of the status of these findings. Finding II-2006-1 - Public Housing Programs - Controls over the Posting of Dwelling Rent(CFDA #14.850) During our prior audit,we noted inconsistencies and inaccuracies in the posting of the monthly rent to the general ledger and the tenant ledgers (subsidiary ledgers). We noted that adjustments were not always posted to the general ledger and the subsidiary ledger in the - same period, throwing the two out of agreement. We noted inconsistencies in the reimbursement of utility allowances owed to extremely low income families. These conditions caused us to question the accuracy of the dwelling rent revenue and tenant accounts receivable balance as of March 31,2006. We recommended that the Authority improve their controls over the accounting and recording of tenant rent revenue. Although it does appear that the Authority has made strides in the improvement of controls over the accounting and recording of the tenant rent revenue, we continued to note inconsistencies between the general ledger and the subsidiary ledgers. All differences are immaterial. We reported this matter to management of the Housing Authority of the County of Contra Costa, California in a separate letter dated September 7, 2007. Finding Ill.-2007-A Housing Choice Voucher Program-TenantEligibilityand Annual Recertification (CFDA#14.871) During our prior audit,we noted that recertifications of family income and composition were not being performed on an annual basis as required by HUD regulations. During our current audit, we noted improvement in the Authority's compliance with the HUD regulation requiring annual recertification of family income and composition. However,we continued to note instances in which more than fourteen months spanned the time between the current recertification and the last recertification. It will take another year's cycle to determine the Authority's full compliance with these regulations. See also item II1-2007-A in the schedule of finding and questioned costs. 68 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA SCHEDULE OF FINDINGS AND QUESTIONED COSTS MARCH 31,2007 Section I- Summary of Auditors' Results Financial Statements Type of auditors'report issued: unqualified Does the report contain a going concern explanatory paragraph? no Internal control over financial reporting: Material weaknesses identified? no Reportable conditions identified not considered to be material weaknesses? no Noncompliance material to financial statements noted? no Federal Awards Internal control over major programs: Material weaknesses identified? no Reportable conditions identified not considered to be material weaknesses? yes Are any known questioned costs reported? no Type of auditors' report issued on compliance for major programs: unqualified Any audit findings disclosed that are required to be reported in accordance with OMB Circular A-133, Section .510(a)? yes Identification of major programs: Shelter Plus Care Program 14.238 Public Housing Program 14.850 Housing Choice Voucher Program 14.871 Dollar threshold used to distinguish between Type A and Type B programs $ 2,581,314 Auditee qualified as low-risk auditee? no Section II-Financial Statement Findings None 69 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA SCHEDULE OF FINDINGS AND QUESTIONED COSTS MARCH 31,2007 (Continued) Section III- Federal Award Findings III-2007-A Housing Choice Voucher Program - Tenant Eligibility and Annual Recertification (CFDA#14.8711 Criteria - HUD requires the Authority to review each participating family's income and composition on an annual basis. The purpose of these annual recertifications is to establish the family's continued eligibility and to calculate the tenant's portion of the dwelling rent and the Housing Assistance Payment(HAP)owed by the Authority. Condition -During our prior review of the Housing Choice Voucher tenant files, we noted that annual recertifications had not been performed for a large majority of the samples selected. The gaps in recertifications ranged from 1 to 3 years. This condition improved during the current fiscal year, with most of the samples tested having a recertification performed during the current fiscal year. We noted one sample for which a recertification has not been completed since July 2005. Questioned Costs-There are no specific questioned costs. HAP would likely have changed if the annual recertification had been performed in a timely manner. It is unknown how this would have effected the Authority's financial statements. Cause- Internal control procedures were developed and implemented during the fiscal year ended March 31, 2007,to ensure that recertifications of family income and composition are being performed on an annual basis. However, due to the fact that this is the first year of implementation of these revised controls, we can not conclude on the effectiveness of these controls and whether or not recertifications are being completed on an annual basis. Another year of implementation is needed to make this conclusion. Effect-A control deficiency in the Authority's internal control over compliance with HUD regulations regarding the annual recertification of participant income,family composition,and the calculation of HAP continues to exist. Recommendation -We recommend that the Authority continue to improve and implement their controls to insure compliance with HUD regulations regarding the annual recertification of participant income, family composition and the determination of HAP. Authority's Response-As previously reported,a work plan was developed and put in place. This plan achieved getting most of the recertifications up to date, what we are now adding is a monitoring component to assure all recertifications are completed. III-2007-B Housing Choice Voucher Program -Family Self Sufficiency (CFDA#14.871) 70 1 HOUSING AUTHORITY OF THE COUNTY OF CONTRA COSTA SCHEDULE OF FINDINGS AND QUESTIONED COSTS MARCH 31,2007 (Continued) Criteria-HUD requires the Authority to administer a family self sufficiency(FSS)program. The program is offered to any interested clients of the Housing Choice Voucher Program. The program requires a five year commitment by the participant. During that time,the participant is required to set self sufficiency goals, seek employment, and perform other tasks to meet their self sufficiency goals. The Authority is required to support their clients self sufficiency needs by providing supportive services such as employment counseling,credit counseling,and other self-help workshops and sessions. The client is rewarded for their self sufficiency efforts with an escrow account that accumulates the increases in their rental payments, due to their self sufficiency efforts,until they graduate from the program. At graduation,they are entitled to receive the escrow account plus any interest earned on the account. The Authority is also required to provide an annual accounting of the balances in the escrow account to each participant. Condition - During our review of the FSS program we noted errors in the amounts paid to graduates of the program. We noted that escrow statements were not sent to the program participants for the fiscal year ended March 31, 2007. Questioned Costs - We tested 37% of the escrow payments made to graduates during the fiscal year ended March 31, 2007. Of the two payments tested; one was overpaid, while the other was underpaid. The net error was an underpayment of$709. The Authority will, in all likelihood,correct the underpaymenfby making an additional payment to the participant. This will leave the overpayment of$1,799 as outstanding. Cause- Effective internal control procedures have not been developed and implemented to ensure that the correct final escrow is paid to participants upon graduation from the FSS program. Effect-A significant deficiency exists in the Authority's controls over the administration of escrow balances and the final payment of escrow balances to participants of the FSS program. Recommendation -We recommend that the Authority improve their controls to insure that final payments to program participants are accurate. We also recommend that the Authority provide each participant with an annual statement of their escrow account. Authority's Response - The Authority is conducting an internal audit of all graduate payments during this fiscal year. Underpayments will be corrected, overpayments will be a reduction to HAP expense and incurred by administrative fees. Further,a new internal process will be established that will provide for a complete audit of all graduate payments that are made. 71