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Home My WebLink About; ; 1981-1983 Housing Authority Audit; 1983-10-03.r. _ �� a`� ,� ,,�� i � , �tb IS , ?1'A� �}C! ! .� .�� . t . � :� . � >' i" � • .t �' i� � � � 0 HOUSxrG AUTHOfiITY OF TiiE CITY OF CF?RLSBAD Carlsbad, Ca�ifornia Housing Assistance Payments Program Financial Statements, Supplemental Data, and Intexnal Accounting Control and Cnmpliance Matters J4ne 30, 1982 and ],983 (ti'ith Accountant's Reperrts Thereanx L� 0 .; f '] 0 5 � . yx � r � � � , �. ,� �� f� �tF ;� �� M_�. �'. � � HOUSING AUTHORZ'i'Y Or^ 'PHE CITY OF CARL&B}1U "�r`��}.��„ � uvw.�.Wii7 :0010441iLC rQY11tCl3Lr1 rlVtjiCilll Annual Contributi.�n Contract SF-535 - June 30, 1982 and 1983 �'ABiE OF CONTENTS AGcountants' Report on Financial Audit F�,nancial Statements Balance �hePt Statemen� of Revenues and Exr�enses Analysis of Fund Bal'ance Notes to �inar,cial Statements �n�lemental Data Conputation of Project Acco+.u�t Changes and Ar�nual Contributions Earned Computation of Provision for Opexatir.g Reserve Analys3s o� General. Fund Cash Schedule of Adjust3ng �ournal Entries: June 30, 1982 Juile 30, 1983 0 Exhibit Paqe 1 A B C 3 4 5 7 D 11. E 12 F 13 G(1) 14 G(2) 18 0 ! � � � � � � � � �� ,� � ,� .� ,� � � � � �d � � �# � � HOU5IN6 AUTHORITY OF TFiE CITY OF CARLSBAD Sect3on 8 Housing As�istance Payments Prograra Annual Contribution Contract SF-535 June 30, 1982 and 1983 TABLE OF CONTENTS (Continued) Internal Accounting Control and Complia'nce Mntters Accountants" Report on Internal Accounting Coz�trol and Compliance Matters Status of Prior Audit Findings 0 Paqe 20 24 � � s . , a t. . i � � � L CER7IFIED PUBLIC ACCOUNTANTS i A�C � FOURTEEt� CORPORATE PLAZ� DRIVE j,[ � � NEWPORT BEACH,CAIIFORNIA91660 714/759-0511 Board o£ Commissioners Housing Authority of the City of, Carlsbad Carlsbad, Ca23.fornia Regional Inspector General . far Audit Department of .Housing and Urban Development San I'zancisco, Californ:i.a We have examined the financial statements, as listed in the accompanying ta'r,le oi � cnntents pertaining to the Section 8 Housing Assistance Payments Program (AnnuaT Contribution Contract S�'-535) awarded to the iiousing Authority of the City of Carlsbad for the two ysars ended ,?;:;ae ;�, 2983, our examination was made in accordarice with generally accepted auditing standards and the audxt requirements set forth in the Department of 8ousing and Urban Development Audit Guide foz� Audits a� Pub13c Housing Agencies bv independent Public Accountants, as updated and t� amended, and accoxdingly included such tests of the ac�ountiny records and such other au@iting pro�edures as we aonsidered necessary in the circumstances. � As described in Note 2, the Authority's policy is to prepare its finaneial , statements on the basis oi accounting practices prescribed or permitted by the Departmen� of Housing and Urban Development. These practices diiier in some �! respect3 from generally accepted accountiag principles. Accordingly, the accompanying financial statements sre not in�ended to present financial position and results of oper�ta.ons in conformity wi�h generally accegted accounting *` principles. This repor} is in�ended solely �or filing with the Depa~rtment of Housing hnd Urbnn Devel�ptnent ar.d is not intended for any other purpose. • In our opinion, the aiorementioned financial statements presen� iairly the financial posi�ion of the Section 8 Housing Assis�ance Payments Program (Annual Contribution Contrac� SF-535) awazded to the Hausing Authazity of tY�e City oi Catrlsbad tts of June 30, 1982 anc� 1983 and �he results o£ its operations and changes in �und balance for the two years ended June 30, 1983 on the basis oE acaountiag describ�:d in Note 2, which, except for the change, with which we concur, in � accounting for prepaid housi.ng assistance payments (descrxbed more fully in note 3}, have been consisten�ly applied. ?�' � � � � -1- � . _ , �� i � Bo�rd of Commissioners Hausing Authority of the City of Carlsbad Page Two � • � � �� M � s � ��, � � �- � � Regional insp�ctor General for Audit Depaztment of Housing and Urban Deve2opment Our examination was made for the purgose of forming an opinion on the basic financial statements an pages 3 to 10 �aken as a whole. The sugplemental da�a presented on pages Yl to 13, although not pazt af the basic ffnancial statements, i� presented for nurposes of the Departm=nt of Housiny and t�zban Developmes�t, and has been subjected to aucliting rrocedures applied in the examination af the hasi,c iinancial statements. :[n our opinion, the supplemental dats is fairly stated in all material respects fn relation to the basic financial statements taken as a whole. �,,,Q-ytJf.k d � !s'SS�d Ct�r � October 4, 1983 _2_ L - .�y � , C: � � � E'ZNANCIAI, SyATEMENTS � � . 4 � t } „f .7 � s , � � � � r i` s � � - - :a 4 ti _ a _ � � � � HOUSING AU'�HaRITY OF THE CITY OF CAFLSBAD Section E� Houszng 1�ssistance Payments Program Annual Contributi.on Contract SF-535 Balance Sheet June 30, 1982 and 1983 . Assets � � Cash Tnvestments (note 6) Due from the City of Carlsbad (note b) � Miscellaneous acco�ants receivable ' Prepaid expenses (nate 7) ? � Furniture an8 equipment � , To�aZ.assets Liabili�ies and Fund Balance ,� Due to the City oi Carlsbad (note 5} Accrued expenses Due to FiCiD ( note 4) � Aeferred revenue (note 8) • Total liabilities i � Funi� b�slance (deficit) � ' Total liabilities and iund balance ! � 1982 $ 14,749 250,060 6, 656 7.8 48,980 8,263 �328,�26 � 1,908 295,793 ^ 247, i0Z 8J., �25 �328,726 , See accompanying notes to financial statements. , � � � '�� ..3_ � �xxzsz� A 1983 50 31�, Q76 6, 656 12 56,OOS � 8, 263 385, 062 151,322 2, 860 87,195 63, 966 305,347 79,715 385, 062 ,k ( � I ; �. � . EXHIBIT B � ji S i HOUSIPTG AVPHORITY OF THE CI�Y OF CARLSBAD � S��tion 8 Housing Assistance payments Program Annuai Contribution Contrac� SF-535 Statement of Revenues and Bxpenses i For the years ended June 30, 1982 and �.983 1982 1983 � '� Operating revenue: Interest on general fund , � investments $ 14 f 549 31,'727 Total operating revenue , 14'S�l9 � 3Z'727 � ' �' Operating expenses: Adrninistrative expenses 49,839 97.928 � General expenses 1,*l35 1,�634 i Housinq assistance payment� 595,617 627,?59 � �ota7, operatin� exper.ses 6'�6' 8�� 2�' 7�2� , 'Net income (loss) $(632,342) (694,994? � ;a � � i � , ,� i � ' See accomQanying notes to financial sta�ements. � ..q.. � '� . . �� , � ' "� _ � HOUSING AUTHORITY pF THE CTTY OF CARLSBaD Se�tion 8 Housing Assistance Payments Program � Annual Contribution Contract SF-535 Analysis of Fund Ba].ance For the two y�ars ended June 30, 1983 , � Unreser�red Suzplus ' Balanre per pxior audit ' at June 30, 1981 �� Fvr the year ended June 30, 1982: � Net loss , Provi'si.on for operating reserve Reduction of project account Bzlance at Jzne 30, 1982 � For 'the year �ended June 30, I983: 23et loss " Re@uction of operating re.�erve Reductiox� of project account BaZance at June 30,. 1983 � Resexved Surplus - Opera�ing Reserve Ba•lance pex prior audit at June 30, 1981 .Provision for Q�erating * reserve for the year ended June 30, 2982 , Balance at June 3a, 19g2 Reduction of opexating reserve £or the year ended June 30, 1983 +� ` Balance at June 30, 1983 ,� M � �5- > � i � EXHIBTT C . $(2;315,512') (632,342) (36,8�0j 25,262 ( 2, 959,. 431-) (694,594) 1, 31 Q 48,86� (3,E04,251) 59,912 36,840 96, 752 (1,310) 95, 4�;2 Con�inued , , � � L- _ . , � � � �� 1� : �� ; � r { :� � i � .� ; ,� � � � HOUSING AUTHOR:CTY OF THE CITY pF CARI,SBAD Sec4ion 8 Housing Assistance Payments Program Annual Contribution Contract SF-535 Ana2ysis of Fund Balance (Continued) Project Account - Unfunded � Balance per prior audit at June 30, 1981 Prior period afljustmen� (note 3) Balance at June 30, I981, as re:stated Reduction o£ project account for �he year ended June 30, 1982 Ba�ance at June 30, 1982 � Rec3uc�ion of groject account for �khe yeax ended June 30� 1983 Balance at June 3Q, 1983 Cumulative HtJD Contribuzior.s �BaZance per pra.or audit at June 30, 1981 Pri�r period adjustment (note 3) BaTance at June 30, 1981, as restated Annuai contxibutions for ^ the year ended��Tune 30, 1982 BaJ.ance at June 30, 1982 Annual'contribut3ons for the year ended June 30, 19i�3 Balance at June 30, 1983 Cumulative -_Donations (Section 23) Balance per prior audit at June 3a, 1981 (unchanged) Total -fund balance June 30, 1983 See accompanying no�es to financial statements -6- Exxi$z� c (Continued) $ 787,521 47,15'7 834,678 (25,262) '803, 416 (48,864) 760,552 1,531,290 (47,157) l, 484,133 57Q, 082 2,154, 215 693, 684 2,847.899 (19,927) ' $ 79, 715 � 0 � , ;� }.. . ,,,,, } � � HOUSING AUTHORITX OF THE CITY OF CARLSBAD Section 8 iiousing Assistance Payments Pzogram Annual Contxibution C.�ntract SF-535 21o�.es to Financial Statements � June 30, 1983 (1) Program Descri.�tion The Housing Authority of the City of Car�.sbad ( the Authority ) is operated as a local governmental unit under the jurisdzction of the eleated council members � of the City of Carlsbad. The Authority's act3vities have been included in Che finaracial statements og the City as one of the City's iunds. The Authority's primary goal is to provide decent housing in a suitable Zi�ving � . environment for families tha� cannot afford standard private housing. The � Section 8 Housing Assistar�ce Payments Program is funded under the Annual ; � Contribution Contr�ct 5F-535 of the Department of xousing and Uzban Developmel�t (HUa) pursuant to the United States Housing Act of 1937, as amended. As of June 30, 1983, the number of dwelling un3ts under contract in these projpcts weze: , , .� '� CA16-E077-QOl �:Azs-E077-003 CAl6-EO'77- 0 04 Number of Units 100 39 ioi 240 ( 2) Summaxy of Significant Accou�,tinc� Policies � �- Bssis of Accounting The Authority's policy is to prepare its financial. statements on �he basis o£ accounting practices prescribed or permitted by HUD which vary in some respec�s from generally accepted accounting"pzinciples. ` � A summary of the Authority's significant accounting policies applied in the , greparation of the financial statements follows: F�.xed Assets � Furniture and equipment axe stated at cost. In accordance with procedures prescribec� by HUD, the Authority does not include as exgenditures of its operating sta�ement the costs of fixed asset acquisitiox►s, as would be required by yenerally accepted accounting principles for lacal governmen�al units � ��_ � . # ; � � (2) Sunmary af Sim.�ificant Accountinq Policies (Continued) (got�ernmPntal fund types?. Furthermore, depreciation relating the cost oE �ixed assets to operations o�er the estimated service lives of the assets i.s nat pravided as would be required for generally accepted accounting principles for proprietary entities. �. �' Revenues Operating revenues are recognized in the accounting period in which thep are eaxned. Intergoveznmental grant revpnues in the farm of annuaZ contributions ' iram HUD are not reflected as revenues in the operating statement (Statement of � P,evenues and Expenses) as would be required by generally acceptec� accounting pxinciples. As directed by HUA, these revenues are recordeci as a direct increase in fund balance. Ex�enses � Expenses are recognized in the accounting period in which the related liability is incurred. Financial Sta�ement Pzesentation � The financia]. statements presented herein are prepared from only the accounts � of the Section 8 hous3ng assistanae paymznts program (ACC SF-535) of the Housing �u�narity of the City of Carlsbad an8, therefore, do not present the ` financial pasition or results of operations for otY�er honsing projects or funds � oi the Housing Authority of the C3ty of Carlsbad, or the City af Carlsbad. � 3 � (3) Prior Period Adjustment � Aa adjustment was made to reflect prepaid housing assistance payments at June � 30, 1981 as expenses for the year ended June 30, 1982. These amounts had originally been recorded as expenses far the year ended LTune 3Q, 1981. This resulted in an increase in the Unfunded Project Account and a correspondfng ' decrease in Cumulative HUD Contributions of $47,157. � � 0 � ^ 8.� � 0 0 4 i ..»' Y ✓ f � (4) Due to HW The balances reported as due to HUD as of June 30, 1982 and 19E33 xepresent the excess i"da�i��c:jcY; �� +s,o f»nd5.��a from the Department ot Housing and Urban • Aevelopment ove� (under) the eazned annual contribution revenue earned tor tne following periods: � � � � l� � . � � � , � � � Total Balance at June 30, 1981 $ 87,046 increase due to pre- ` paid housing assis- tance payments 48,980 Payment on 9/25/81 (31,So�) Advances over (under) contributions reported 146,853 Increase in contribu- tion for i.ncxease in housing assistance payments (5,201) Balance at June 30, 1982 .245,793 Rayments on 8/23/82 & 11l1�/82 (146,853� Advances over (under) contributions reported (18,766} Net increase in prepaid housing assistance payments 7,025 Bai:':�ce at June 30, 1983 �$7rZ99 Year en@ec� Year ended Year ended June 30, 1981 June 30, 198?. June 30, 1983 87,046 47,157 (31,885) 10_.-.— _._...__.- 102,318 1,823 146,853 ^ (5,201) 143,475 (146,853) (3,378) (18,766j 7,025 E11,741) _._.___._— (5) Related Party Transactions The Housing Authority reimburses the Ci�y °f �esesservices includesthe useaof services that are. pzovided to the Author�ovin warrant payments, process3ng and the City's personnel, pxocessing and app g receiving cash receipts, and ather accounting expenses. In ac�diti.on, other City depaztments provide services such as purchasing, legal assistance, and payroll px'eparation. Management is of the opinion that k+illings to the Autharity foz reimbursement represent a reasonable al.location of ths costs of those s�rvices provided by the Cit}. The balances reported as due to the City of Carlsbad xepresent the excess of amounts incurred by th The � moux►tbduelf�o the AutYiority over the related reimbursement to ttie City. lo ee benefi.ts the City represents payments made by the Authority for City emp y misallocated to the Housing Authority �n�• {6) Investments � The �ian Association. e During the audit•Speriod �hesenfundshear edlinteres��at and o �.he rate of approximately 10$. :.g_ � , � . . �� , � � (7) Prepaid Expenses � Prepaid expenses represent housing assistance payu!ents paid before the end of the fiscal wear that were a:;:�.ciated with the subsequent f3scal year. (8) Deferred Revenue Y • Deferred revenue repxesents pre�aid annual contributions received from the Department of Housing and Urban 'Aevelopment which are to be applied against grant expendi�ure� of Uhe subsequent fiscal year. � � ;� . � � � , � i ; Y S i , � 1 a � t � 0 �10- r � 4 r �� , � � � # � � �i � SUFPLEMENTAL DA'PA • ' � - � r a � * � � � � . ,�.� � HAiiCTNf: atTTCIfIATTV nF mvD nrmv �o nx_nre�e+ar •-� ��'��•� ��••��..�� V�' y��r� v.rM� Vv �rAlW�7LfiV Section 8 Housing Assistance Payments Program � Annu�l Contribution Contract SF-535 Computation of Project Account Changes and Annual Contri.bution Earned � , For the years ended June 30, 1982 and 1983 � � ,� � � Y �� 1982 Maximum Contribut�on Available Maximum annual contributinn authorized � 644,820 Project account balance at beginning of fiscal year 787,521 Prior period adjustment 47,157 Projeat account balan�e at beginning of fiscal y�ar, zs xestated 834,67,8 Maximum contribution available 1,479,4g8 Annual Cr�ntr3bution Rec�uired Housing assi.stance payments 595,617 Aclministr��ive iee 8�,01� Audit fee To�al funds required 684,631 I,ess project receigts other than annual. coritribution 14,549 `Satal annual contribution requ�red 670,0$2 Project Account Change Excess (deficit) of maximum annual contribution authorized over �innual contzibution required $ (25,262) Annual Contrfbut�on Earned Lesaez af maximum contrii+utioa nvai�able or annual contzibution required $ E70,082 �ee �avaompanying accountan�s' repezt -ii� r� EXHIBIT D 1983 644,820 t309, 416 803,416 1,454,236 627, 7.59 90,T52 7,500 725,411 31.727 693,684 (48.864) 693,684 � L . ,..,¢ � � L � iiOUSING 1�UTHORITY OF �'HE CITY OF CARLSBAD Section 8 Housing Assis�ance Payments Pro�ram Annual Contributian Con�ract SF-535 Co�rputation af Provision for Operating Reserve For the years ended.June 30, 1982 and 1983 • Operatinc� revenae �. Annual contr�.bution eaxned ; Total operating receipts � �perating expenses CapitaZ expen3itures Total opera�ing �xpenditures � Prot*ision ior (r�c?+��i:�r. �£) operati:�� rz�erve ; � . � � 1982 $ 14,549 �70,082 684,631 646,89; 900 647, 791 $ 36, 840 See accompanying accountants' repart , � � • .:22� f � Exxzsz� E 1983 31,727 " 693,684 725,411 ?2E,721 726,721 i1,310) E .,,, 4 � µ: � HOUSING AUTHORITY OF TiiE CITY OF CARLSBAD � 5eczion u ribusing yssiszance `raymenLs rrogram P,nnual Contribution Cantract SF-535 � Analysis of Gene-ral Fund Cash June 30, 1982 and 1983 C` .� Composition Before Ad�ustments tlet operati.r.g receipts retained: � Operating reserve Overpayment of annual contributions > Prepaid annual contributions Cumulative donations � Eguipment inclnde� in donations Advanced from the City of Carlsbad ♦ ' �omgosit3on be�ore ad�us�ments � � , Adjustments � Expenses not pai8: ' � Accrued expenses i Income not received: Otlier accounts receivable > ' Total adjustments ° � General fund cash available > � General Fund Ca�h , . ' I�Yvested 7 Advanced to athe� programs . � Appl;ed to pzepaid expenses f General fund cash > � See accompanying accountants' report � -13-- •� r. 1 � : s EXHIBIT F 1982 1983 � $ 96,�52 95,442 245,793 57,199 63,9b6 (19,927) (19,927) (4,063) (4,U63,) 151,322 318,555 373,939 1,908 2,860 (I8) (12} 1,890 2,8Q8 ` 320,A45 376,787 (250,460) (314,076) (6,656) • (6,656) (48,980) (55,005) � 14,�Q9 50 , a t . ,,. :� J d � Exxi$zm �(z) HOL'SING AUTHOF,ITY OF TIiE CTTY OF CARI,SBAD Section 8 H�using Assistance Payments Program g Annual Contribution Contract SF-535 Schedule of Adjustir.g Journa7. Entries r^or the year ende@ June 30, 1982 � Ac;ct. No. for Acct. No. for Audit �ceport Posting by Purposes Debit Credit Authority ` (1} Housing 1�ssistance Payments 4715 5,201 2810 �� Accounts payable 211I 5,201 2111 , To recognize as 6/3Q/82 housi.ng assistance psyments expense thos� � July 1981 HAP payments that had . been deferred at 6/30/81 by prior :� zuditors t ; (2) Due to F:UD 2118 5,203 2118 � Anr.ual contribution earned 80?.6 5,201 2840 'r � To recognize addi�tional annual con- �# tribution associated with additional � • housi.ng assis�ance payments for 6/30/82 ' (3) Pro�ect account - unfunded 2827 5,20J, 2g27 � • Unreserved surplus 7027 5,201 2810 � � Ta decrease provision for pzoject accoun� by increase oE annu�l � contribution earned � (4) Unresezved su.:plus 7016 5,201 2�1Q �� OQerating reserve 2826 5,201 2g25 To increase provi.si.on fox operating � . rtaserve by the increase in the annual contribution earned � ' � (5) Annual contribution earned �026 146,853 2g4p Due to HC71) 2218 146,853 2118 To xeclassi�y amounts received . in excess of annual cdntributian � earned � =1Q- e t ,.. .�, z. a i � HOUSZNG AUTHORITY OF THE C�.TY OF CARLSBAD � Section 8 Housing Assistance Payments Progr.am Annual Contribution Contract SF-535 Schedule of Adjustin�g Journal Entries � � For �the year ended Jt�ne 30, 1982 Acct. No. for Acct. No. for . Audit Report Posting by Purposes Debit Creciit Autt�ority � - (6) Unreserved stirplus 2810 635,621 2810 ` Cu.�nulative HUD contributian 2840 635,621 2840 p , To reclassify expenses and interest income improperly cZosed to cumula- , , � tive Hti� contribution z ' (7) Operating reserve 2526 5,201 2826 � Unreserved suzplus 7016 5,20I 2810 , To decrease pro�isinn by increase .� in h�using assistance payments � (8) Operating xeserve 2826 ?46,853 2826 ` Unreserved surplus 7Q16 1�6,853 2810 k ` � To decrease provision by dec:rease k 6� 3n contribution 4 ' (9) Operatinq reserve 2826 900 2825 � � Unreserved suz�lus 7016 90d 2810 � To decrease provision by Xncrease , '� in fixed assets � • (10) Sundry Adminis}rative expenses 4190 868 2810 Unreserved surplus 2810 86� 2810 To recla�sify expenses charged ta � suz�r�us (11) Operating reserve 7.826 868 2826 Unreserved'surplus 7016 868 28�.0 To decrease provision by incraase �' in expenses -15-- � EXHIBIT G(.1} (C'ontinued) � I �xhzBz� c(�) I �n„+; ,,,,o�a HOUSING 1�UTHORITX OF THE CITY OF CARLSBAD Section 8 Housing Assistance Payments Program Annual Contribution Contract SF-535 Schedule of Adjusting Journal Entries For the year ended June 30, 198� Acct. No. for Acct. No. fo� Audit Report Pasting by Fuxp�ses Debit Crec:it Authority (12) Due grom City I129 6,656 1129 Salaxy and benefit expense 4110 6,656 2810 To correct overcharginc� of fund , for fri.nge expenses (13) Unreserved surplus 7016 6,656 Operating reserve 2826 6�656 To increase grovision for operatinq reserve by the decrease in fringe rienefit expense (I�) Prepaid expenses 1290 48,98U Housing Assistance Payments 4715 48,980 To defer expenditure recognition for housing assistance payments made in June 82 applicable to July 82. (15) Housing Assi'stance Payatents 4715 47;157 Unreserved surplus 7016 47,157 To recagnize housing assistance payments expense for payments made in June 81 appliaable to J'uly 81. (16) Annual contribution earned 8026 48,980 Due to HUD 2118 48,980 To decrease revenue earned due to decrease in hausing assistance pay- ments �or de£erred payments �16- 28Z0 aaas 1290 2810 287. 0 2810 2840 2118 �i 1 � 2 . «-! . ,� , � � � � � � .� � �� .j � �' � �� 4.. ExxzatT ct1) (Continued} HOUSING AUTF10RtTX OF THE CITY 0� CARLSBAD Section 8 Hausing i�ssistance Paymen�s Program Annual Contribution Contract SF-535 Schedule of Adjusting Journal Entries For the year ended Jure 30, 1°E2 Acct. No. for Acct. No. tor Audit Report Posting by Purposes Debit Credit Authority (17) Cumulative HUD contribution 2840 47,157 2840 Annual contr�butions earned 8026 47,157 2840 To dAcrease prior year cnntributions , {ancl increase those for c�arrent year) applicab?.e to June 81 prepaid housing assistance payments. (18) Unreseryed surplus Pr4ject account - unfunded To increase current year provision for project account by decrease in annual con�ribution earned (for ne� increase.in prepai� housing assis- tance•payments} (19) Unreserved surpxus Project account - unEunded � Tn increase begirining balance of pxoject account by decrease in prior year contributions resulting from the prepayment of housing assistance payments in June 81. 7d16 2827 2810 2827 -17- Z,823 1, 823 47,157 47,157 2810 2827 2810 2827 r. < 1 t � :� �a � L � Exxzs�m c(2) HOUSING AUTHORITY OF TIiE CITY OF CAtZLBBAD Section t3 Housing Assistance Payments Program l�nnual CGntribution Contract SF-535 Schedule of Adjusting Journal Entries Far the year ended June 30, 1983 Acct. No. for Acct. lr'n. for Audit Report Posting by Purposes Debit Credit Authozftv � (1? Due to City 1129 6,E56 N/A Prepaid expense �.290 48,980 �H/p Unreserved surplus 28I0 487,000 N/A Operating reserve 2820 141,965 N/X , Accounts payable 2111 5,201 N/A Due to HUD 2118 I.90, 632 N/A � Pxoject account - untunded 2827 43,?79 N/A Cumulative HUD contributions 284Q 444,989 N/A Ta record effect of June 30, 1982 adjusting journal entries � (2) Ynvestments Prepaid annual contributions To record annual contribution received fox 83-84 fiscal year ,p (3) Unreserved surplus • Cuinulat.�ve HUD Contrihut:i.ons To reclassify closing of 6/30/83 contr3buti�n incorrectly closed to unreserved surplus � (4)Due �o HUD Unreserved suxplus T� rerlassify payments on 6/30/82 balance due to HUD charged to un- � reserved surpl.us � Ii � , 1162 53,966 2210 63,966 281Q 700,709 2840 700,709 2118 146,853 2�10 146,853 -18- 1162' 221Q 2810 2840 2118 281Q � s � �� : � � 1�► � � � � � � EXHIBIT G(2) (continued) 0 HOUSiNG AUTHORITY OF THE CITY OF CARLSBAD Sectian 8 Housing Assistance Payments Program Annual Contribution Contract SF-535 5chedule of Adjusting Journal Entries For the year ended June 30, 1933 Acct. No. for Acct. No. for Audit Report Posting by Purposes Debit Credit Authorit� ( 5) L'nreserved surplus 2810 55, ],61 ?.810 Due to HUD 2118 55,161 2118 To reverse cl,osing of 6/30/81 liability to unreserved suxplus (6) Housing Assistance Payments 9715 Prepaid expenses 1290 To reverse defezral of payments made June, 1982 relating to July 1982 ('7) Prepaid expenses 1290 Housing assistance pa}znents 4715 To defer housing assistance payments made �n June, 1983 relating �o July 1983 ex�,ense ( 8) Aiznual con�ra.bu�tion earned 8026 Due to HUD 2118 To reverse revenue recognition for housinq assistnnce payments attributable ta July 1983. ( 9 ) 'Due to iiUD 211Q Annual, contribution earned 8026 To increase revenue eax•ned due to increase iz� housinq assistance payments £or payments made �7une, 1982 but attributabl� to July 1982 (10 ) Unresezved surplus 70].6 Project account - unfunded 2827 To increase provision for project ac- count by decrease in contribution earneci -19- 48,980 A8,980 56,005 56,005 56,005 56,005 48,980 48,980 7, 025 7,025 2810 1290 1290 2 810 2840 2118 2118 2840 2810 2827 0 � i � L - e...� i � . . � �4 f 4 r � r � � � � � 0 IIQTER2�'AI. ACCOU'NTING CONTROL AI3D COMPLIANCE MATTERS � C7 :� � �, . ..,' � @� � i a �� • Board af Commissionexs Housing Authority of the ' City of Carlsbad 4 Carlsbad, California CERTlFIED PUBLICACCOUNTAN7S FOURTEEN CORPORATE PlAZ,� DRIVE NQ_WP(�RT RFAC_.H, (:ALIFQRNU �2660 7�4�754-0511 Regional znspector General tox' Audl� Department of Housing and Urban Development San Francisco, Cali�ornia We have exazni.ned the financial statements of the Housing Authori.ty of th� City of CaxZsbad for the two years ended June 30, 1983 pertaining to the Section 8 Housing � Assistance Payments Program (Annual Contribution Contract SF-535) and have issued our report thereon datzd October 4, 1983. Based on our tests of transactions and exami.nation of records as requixed by Appendix 2 of the Department of Housing and Urhan Aevelopment Audit Guide f'er Audits of Public Housing Agencies, dated August, 1978, except as otherwise evidenced by findings and comments in this report, we be3ieve �hat the Atthoxity has complied with the following: +4�A A. The financial terms and conditions of the contracts with iiUD. � , � ;� , � � � B. The regulations, policies, and procedures prescribed by the Department regarding the Low-Income Housing Program. C. The financ3al regulations and procedures prescribed by management and those of its governing board: As part of our examination, we reviewed and tested the Authority's system of internal accoun�ing control to the extent we considered aecessary to evaluate the �ystem as required by generally accQpted auditing standards. Under these standards the puzposes of such evaluations are to establish a bas3s for reliance on the system of internal accounting control in determining the nature, timing and extent of othex auditing procedures that are necessary for expressing �n opinion on the �inancial statements and to assist the auditor in planning and pErforming the examinafiion of the financial statements. Additionally, our examination incluc�ed proceduxes necessary i;� our judgment to determine compliance wa.th contractual tex�ms and conditions and rec�ulations, policies, and pracedures prescribed by HUD and by management and the governing board ot the Authority, insofax as suah compliance review was necessary under the provisions of Paragraph 20 in the Department of Housing and,Urban Development Audit Guide for Audits of Public Housing Agencies by zndependent Public Accountants, dated August, 1978. -20- �_ _ _ ! ; The objective of internal accounting cantrol is to pravide reasonable, but not � absolute, assurance as to the safequarding o� assets against loss from unauthorized use or disposition, and the reliability of financial recorcis for preparing financial statements and maintai.ning accountability for assets. The conaept oi reasonable assurance recngnizes that �he cost of a system of in��rnal accounting aon�.rol should not exceed the benefits derived and also recognizes that the evaluation of these factArs necessarily requires estima�es and judgments by �, managem�nt. 2here are inhe.:ent limitations that should be recognized in considering the poten,tial effectiveness of any system of internal aacounting control. In the performancE af most control procedures, errors can result from misunderstanding of instructions, mistakes of judgment, �arelessness, or other persanal factors. � Control procedures whose effectiveness depends upon segregation of du�ie� c�n be circumventied by collusion. Simflar:y, control procedures can be circumven�ed intentionally by management with respect either to the execution and recording of tran�actions or with respect to the estimates and judgments required 3n the , preparation of Einancial s�atements. Further, projection of any evaluation of internal accounting control to future periods is subject to the risk that the A procedures may become 3.nadequate because of changes in conditions, and that the degree of compliance with.the procedures may deteriorate. Our examination of the financ3al statements made in accordance ,�ith generally accepted auditing standards, including the study and evaluation of the Author3.ty's • system of internal accounting control for the two years ended June 30, 1983, that M�► was made ior the purposes set Forth in the first paragraph of this report, would not necessarily disclose all weaknesses in the system because it was based on selective tests of accounting records and related data. However, such study and evaluation disclosed the following conditions that we believe to be material weaknesses aad/or compliance violations: � C' i FINDINGS� REGOMMENDAT:LONS AND REPLIES The following audit findings were discussed with �7im Elliott (Finance Director), Mike Brooks (Admi.nistrative Assistant), and Ai Capuchino (Accountant) during the course of tihe audit. (1) Inspections Auxing our testing of housing assistance payments we noticed several cases wherein either the annual or ''�ove-in" inspections wexe not performed. Inspections are gerfozmed ioy City ins�e,�:tors who are also respansible for City-related fire arid � bailding ins�ections. Housing inspections have been given a low priority in favor o� these ather inspections. Consequently, the quality, cleanliness and sta�e of xepairs mi.yh� presently be worse than if ir;spections were done on a timely basis. Corrective Action Required r We recommend that the housing ir�spections be given a highez priority and be consistently performed on a timely b�sis. R, e�+ly � We are now scheduling the inspections and �akzng appointments for the inspectars �o ensure that they are being c�one on � timely ba�is. -z�- ♦ , . .�� ! �� y i2) Related Partiy Transactions nuring our raview of Autherity transactions with the Citv. wa ohacrvaA ��,n+. ��,� �� Ly nas not documen�ed the ra�iorale and calculations fnvolved in determininq estfmates of co�* charged to �he Authority. � Corrective Action Required We recozlmend that the City documsnt how charges �o the City were estimatea. �e,re� should be taken �hat oniy actual costs �o the City are included. The chazgeA should not be based upan the "going ra�s" �or those servic�s or facilities- provided. < Likewise, there wa�rld be no "cost" associated with �acili�ies � contributed under federal gran�s. TteP1Y We will document our analysis oE these estimatey. � � (3) Housing Assistance Payments Duzing our testing of housing assistance payments we observed the following incidents of non-compliance: , 1. Threa cases in whic;i the Iiousing assistanae payment was not in agzeement with the contract with the owner. , 2. Two cases wherein eligible �enant income used in calc+slating the housing � assistance payment was not in agreement with the verified income. � Corrective action reQuired We recomme�Yd that more time and a�tention be gaid to calculating housing assistance payments. Also, these should be reviewed by an independent person. Reply ;� • (4j E�nployee Benefits Employee beneEi�s incurred for City empioyees tised in Housing Autharity ac�,ivities repzes�ent 358 of the xelated salaries. However, the City m3saZlocated em�loyee benefits expense be�ween Housing Authority ac�iv;Lties and City activiti�s. As a � result af th�s misallocation, Housing Authori�y employ�e benefits were oversfia�ed by $6, 656. firie benefits charged to �he Housing Authori�y fund far the year ended June 30, 1982 repxesented 72� of Housir_g Autherity salazies. The efEect of this mi�alloca�ion was corrected by audit adjustmen�s retlec�ed iz� the accompany3.ng iinancial s�a�emen�s. A receivab].e due irom the City has been xecorded t'or �his use oi Oper�tting Reserve �onies for City expenses. � -22- � � 0 Most o�' these arose during a per3od when we were understaffad. Now with the addition oE an adminiatxative assis��snt reviewinq �he w�rk we fe:el we have this problem corrected. . - �.t J � Corrective hction Requ�red We zecoc�nend that the City liguidate this receivable by reimbursing the iiousing -- A�ith�r3 tv �ar thpse navments made on behalf of the Citys Reply � The City will reimi�urse the Housing Auth�rity for this misal2ocat3on. (5) Calculation of Administrative Fee � The Housinq Authority included portions of months in the ca)GuA�tion of "unit month" for purpos�s of calculatfng the ac3ministrative fee. Unless the units are rented at ba�h the beginning and the end of the month they sYsould not be included 3n �he acimfnistrative fee calculatic�n. A2thouyh it did not result in a material di�ference this year, this practic�* can result in a material overcharge to FiUD �nd ' shauld therefore be corrected. � Correc�ive Action Required We rscommead tha� the housing authority corxect its method of determining total unit months so that only units rented at th� beginning and end of the month are. 3nclucied in the administzativ� fee calculation. � Reply We �+ill make all efforts to calculate the administrative fee corzectly in the futuze. � cot�czUs=oH � The foxegoing conditions were considered in determininq the nature, timing, and extent o� r�udit tests to be appli.ed in oux examination of the financial sta,tements, and this report of such conditions 8oes not modiEy our report dated Oc�ober 4� 1983 on such fi.nanci�l statements. i This rep�rt is solely for the interna� use o� the Housing Authority o£ the City ot Gazlsbad and the Ttegional Inspector Gpnezal far Audit, Department of Hausing and ' Urban Aevelopment. ; . � k � # � � � �,� ��,�� - Oc�obex 4, 1983 �23- � � 0 HOITSING AUTHORTTY OF THE CITY OF CARLSBAD Con#-i�n t2 SIn+•ei..n Dn ni., O.. ..i-.� i�... ��.��r�� '.vv.r�.r��7 •wvrr.w✓VN/�VV wYj'��Gl�VO �iVy�4Y1 Annual Contribution Contract Sc'-535 Status of Prior Audit I'indings � �une 30, 1983 ThP predec�ssor auditors previously reparted their comments and Xecammendation� concexning ,ir�ternal accounting Cortrol for the two years endeci June 30, 1981 3n �p their report dated Ja�uary 25, 19a2 for �he Section 8 Housing Assistance �ayments Program (Annual Contribution Contract Number SF-535). The corrective actions taicen , by the Authori�ty with regard to these findings are as �ollows: , � i � � , � � e � � � 1 (1) Management Function Prior auditors noted that the Housir,g Authority was acting as manager of certain units under the Section 8 program. Corrective Action Taken Housing Au�hority is no longer performing any management funct�ons. f2) Administrative Plan Prior auditors noted that the Admin3strative Plan had not been forwarded to the HUD Office �oz approval. Corrective Action Taken The required document has been forwarded to HW. (3) Housinq Assistanae Paya►ents Prior ��aitors noted �hat the E+HA had not accurately computed tenan� rents and HAP payments and that i.ncame recert3ficati.on was not consistently performed. Corxective Action Taken This conaition continues to exist and is repeated in the current years' findings. (4) Tenan'� Utility Allowance Pr,ior auditors note3 tha� incorr.ect �;tilit�� allowances were used in computing HAPS. Corrective Action Tal�en A"u�i.lity a].lowance" survey was perf�rmed and HUD ap�roval utility allowances are now being used. -aa- ti .` � 't � ., �. � � � � g ,� I , � , ; . � � . ' t�i � , � t � � %; � i � � � � ! t. � �. u (5) Rent Reasonableness Form Pxioz auditors noted that ren� reasonableness foxms were not completed for renz i.ncreases. Corrective Action Taken �he Anthority is now cnmpleting rent rsasonablex►ess �orms for all rent increases. (6) Staff Training The PHA was not operating as e££iciently as is intended undez HUD c,fuzdelines. Correc'tive Action Taken Staff is attending monthly training zneetings of the San Da.ego County PHA's and there a.s some internal training. (7) Financial Reports Finar.cial reports were incorrectZy filed and the required monthiy cash requizements. were n�t submitteci. Correct:�ve Action Taken The avcour.ting function has been assigned to the finance department and a new acoountant has been hired to specialize in handling a11 financial reporting to HUD. (8) Comminglzng of Funds HUS funds and City funds were cammingled into one large pool of funds for purposes of investment. Corrective Actinn Taken A s,�+�arate intexest bearing account is now maintained for HUD iunds. (9) Inspecticns i Inspections of rental units were not perEormed on a timely basis and were incomplete as to content, date, and signature. Corrective Action Thi.s condi�ion cdntinues to exist and is rEpeated in the current years' �indinqs. � (10) Securi�y Deposits � Amount af security deposits exceeded the greater of the monthly fami.ly cantribution oz fifty dollars. =25- 0 i f � s' � � � J .� � r� u '� � <� � t � '� : �� .� .; Cc�rrective Act9.on Taken The Authority reviewed all files. Ce.:tain landlords reduced the deposit as a result Of tt2f5 review. Other a.RtldlcTY__c3S Y__Pfiifiari �iaratiaP �liaa rlonnai?� LT�fi ?�altq� yx'��AZ' �r --_— to �he time the tenant was iri the Sectian 8 program. (il� Cash disbursement Controls Suppor�ing documents for cash disbursements were not math-checked to ascex�ain that the total was a summation of ir,dividual amounts. Indi�Tidual amaunts did not agree with the su,pporting docwnents. , CorrectivP Action Taken mhis internal control weakness has beer_ corrected. (12) Budgetary Controls Budgetazt� contr.ols were not optimized b�cause salary allocations were n�t pronFrly set up :�n the compuferized accounting system. Corrective Ac�ion Taken � Proper budgetary administration is now being maintaine@. (13) Voucher Cancellation Invoices anc3 warrant request forms w�re not cancelled with a"paic�" stamp •when the warzant was prepared. Corxective Action Taken This a.nternal control weakness has been corrected. (14) Voucher Authoriza,tian Vduchers were•processed for payment without approval of a responsi.ble persan. Cozrective Action Taken Tnis internal contral weakness has been c.orreated. (15) HAP Contracts � � _ � EiF.;P cor.tracts had nat been signed or dated. Corrective Ac�ion Taken Controls are in effect that insure all appropriate documents are pro,perly dated and � sic,�ned. r � -26- , � , �� _ . .� i �{ , .* � (16) Tenant Income - �T�erianz xnccime was noz COIIb'1�zeiiz-iy Vei:;izicu: - �Corrective P.cticn Taken � Procedures aze now in effect to ensure that tenant incc+me is vexified. (�17) Tenant Certification . Tenant certification had not been compie�ted within the required time frame. � Corrective Action Taken . Files are nor+* mai.ntaiaed on a current basis. � (18) Section 23 Closeout ; The Housing Authority did not follow HUD regcxla�ions in clasing-out its Section 23 � a program. � r Cozzective Actinn Taken �` i � " � s The �Housing Authority subsewently submitted aocrzmentation that indica�ec� that the ' resultir.g effe�t of the closeoat procedures applied� was the same as would have � resulted from the �.�se of HUD-prescribed closeou� procedures. , � ,� }, i• ' � a {) 1 �I a } i � 1 � f � 1 ' a � i } . � �27� � i� " 4�� . � , '�