Loading...
Audit - 1984/1985/1986 --~'---"-"'""-'¡,)'T-""--:-'---" ..-. '--. _..-. ..- , '"" -'-" HOUSING AUTHORITY OF THE CITY OF SALINA SALINA, KANSAS REPORT ON EXAMINATION OF FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA TWENTY-FOUR MONTHS ENDED JUNE 30, 1986 LYNN T. BAXTER Certified Public Accountant 7509 NALL AVENUE, SUITE 3 PRAIRIE VILLAGE, KANSAS 66208 .., u TABLE OF CONTENTS EXHIBIT ACCOUNTANTS'REPORT FINANCIAL STATEMENTS BALANCE SHEET AT JUNE 30, 1986 A STATEMENT OF INCOME AND EXPENSES TWENTY-FOUR MONTHS ENDED JUNE 30, 1986 B SUPPLEMENTARY DATA ANALYSIS OF SURPLUS - TWENTY-FOUR MONTHS ENDED JUNE 30, 1986 C COMPUTATION OF RESIDUAL RECEIPTS AND ACCRUING ANNUAL CONTRIBUTION - PHA OWNED HOUSING D( 1 ) COMPUTATION OF ANNUAL CONTRIBUTIONS EARNED AND PROJECT ACCOUNT - OPERATING RESERVE CHANGES - HOUSING ASSISTANCE PAYMENTS PROGRAM D( 2) STATEMENT OF ACTUAL DEVELOPMENT COSTS UNCOMPLETED AT JUNE 30, 1986 E( 1 ) STATEMENT OF INITIAL OPERATING PERIOD INCOME AND EXPENSE E( 2) PHA'S STATEMENT OF MODERNIZATION COSTS - UNCOMPLETED F ANALYSIS OF GENERAL FUNDS AVAILABLE FOR REDUCTION OF ANNUAL CONTRIBUTION G COMMENTS ON COMPLIANCE AND ADMINISTRATIVE INTERNAL CONTROL STATUS OF PRIOR AUDIT FINDINGS FINDINGS, RECOMMENDATIONS AND REPLIES SCHEDULE OF ADJUSTING JOURNAL ENTRIES NOTES TO FINANCIAL STATEMENTS . PAGE 1 2 3-4 5-6 7 8 9 10 1 1 12 13-14 14 1 4-1 5 15 16 ~- \;7-------- v ACCOUNTANTS'REPORT Board of Commissioners Housing Authority of the City of Salina Salina, Kansas Regional Inspector General for Audit Office of Inspector General Dept. of Housing & Urban DevelopMent Kansas City, Missouri 64106 We have examined the financial stateMents listed in the Table of Contents of the Housing Authority of the City of Sallina pertaining to its low-incoMe housing program. Our examination was Madle in accordance with generally accepted auditing standards and the audit requireMents set forth in the DepartMent of Housing and Urban Developrl'Lent Audit Guide for Audits of Public Housing Agencies by Independent Public Accountants dated August, 1978, AttachMent P of Circular A-102 and Circular A-128 issued by the Office of ManageMent and Budget and accor'dingly included such tests of accounting records and other auditing procedures as we considered necessary in the circUMstances. The authority's policy is to prepare its financial s1;ateMents on the basis of accounting practices prescribed or perMitted by the DepartMent of Housing and Urban DevelopMent. These principlel~ differ in SOMe respects froM generally accepted accounting principles. Accordingly, the accoMpanying financial stateMents are not intended to present financial position and results of operations in ccJnforMity with generally accepted accounting principles. This report is intended solely for filing with the DepartMent of Housing and U ~ban DevelopMent and is not intended for any other purpose. In our opinion, the above-Mentioned financial stateMent;s present fairly the financial position of the Housing Authority of the City of Salina with respect to its Low-rent housing program at June 30, 1986, and the results of its operations for the twenty-four Months then ended in conforMity with generally accepted accounting principles applied on a basis consistent with prior periods and with HUD procedures. The suppleMental financial inforMation as listed in the Table of Contents has been tested by us as part of our auditing procedures followed in the examination of the financial stateMents Mentioned above, and in our opinion, it is fairly stated in all Material respects in relation to the financial stateMents taken as a whole. oY~ .J 'l5o.i~ ePA Lynn T. Baxter Certified Public Accountant SepteMber 12, 1986 ( 1 ) -- - - ,-..) Exhibit A HOUSING AUTHORITY OF THE CITY OF SALINA SALINA, KANSAS BALANCE SHEET AT JUNE 30. 1986 ASSETS Cash Accounts Receivable - Tenants Accounts Receivable - Other InvestMents HUD Annual Contribution Receivable Deferred Charges DeveloPMent Cost DeveloPMent Cost Contra Land Structures & EquipMent Total Assets LIABILITIES & SURPLUS Tenant Security Deposits Accounts Payable HUD Accounts Payable Other Interest Payable - DeveloPMent Tenant Prepaid Rents Deferred Credits - Other Project Loan Notes - HUD PILOT PerManent Notes - HUD Notes Total Liabilities Surplus - Exhibit C Total Liabilities & Surplus Annual Contribution Contract KC 1 029 --K-ç 7015 $ 108,519.23 777.46 308.00 93,350.61 5,028.00 2,168,878.70 ( 969,090.00) 987.792.00 $ 2.395.564.00 -------------- $ 7,300.00 2,200.77 68,951.91 753.35 956,732.00 49,925.30 1.038.909.20 $ 2,124,772.53 270.791.47 $ 2.395.564.00 -------------- - ,-. ~.....,JI~.] H.lI"n¡!;JJI>_""",."",~"""".,.", ( 2) $ 27,450.50 30,342.40 2.648.98 $ 60,,441.88 ------.------ $ 0.00 945.79 289.50 24, !590 . 00 0.00 $ 25, E125. 29 34 . ~, 1 6 . 59 $ 60.441.88 ------------ ...... v Exhibit B (1) HOUSING AUTHORITY OF THE CITY OF SALINA SALINA, KANSAS . STATEMENT OF INCOME AND EXPENSES - PHA OWNED HOUSING Twenty-four Months Ended June 30, 1986 Annual Contribution Contract KC 1029 Operatin~ Income Dwelling Rental Excess Utilities Total Rental Income Interest on General Fund InvestMents Other IncoMe Total Operating IncoMe Operatin~ Expenses Administration Utilities Ordinary Maintenance and Operations General Expenses Non Routine Maintenance Total Operating Expenses Net Operating IncoMe Other Char~es Interest on Notes & Bonds Payable Prior Period AdjustMent Affecting Residual Receipts Loss froM Disposition of Nonexpendable Equipment Total Other Charges Net (Loss) - Exhibit C _-'«"h""", Year Ended June 30. 1985 Year Ended June 30. 1986 $ 75,814.25 $ 78,787.46 32.33 0.00 $ 75,846.58 $ 78,787.46 3,251.49 5,300.80 3.303.73 4.222.09 $ 82.401.80 $ 88.310.35 $ 21 ,331 .13 3,161.79 22,978.94 18,576.32 220.36 $ 17,370.53 1 ,509.55 25,781.45 28,970.96 389.59 $ 66.268.54 $ 74.022.08 $ 1 6. 1 33.26 $ 14.288.27 $ 58,683.66 $ 58,593.26 840.61 250.09 86.91 443.00 $ 59 . 611 . 18 $ 59.286.35 $ ( 43.477.92) $ ( 44.998.08) ------------- ------------- ( 3) ., IU HOUSING AUTHORITY OF THE CITY OF SALINA SALINA, KANSAS STATEMENT OF INCOME AND EXPENSES Housing Assistance PaYMent Program Twenty-Four Months Ended June 30, 1986 Annual Contribution Contract KC 7015 Year Ended June 30. 1985 Operatin~ IncoMe Interest on General Fund InvestMents $ 1 .327 . 26 Total Operating IncoMe-Ex. D $ 1.327.26 Operatin~ Expenses Housing Assistance PaYMents Administrative Expenses PreliMinary Administrative Maintenance & Operation Other Expenses $ 224,477.72 30,500.99 Expense 1 77.47 4.285.79 Total Operating Expenses-Ex. D 259.441.97 $ Net Operating (Loss) $ (258.114.71) Other Debits Prior Period AdjustMent Affecting Residual Receipts NET (LOSS) - Exhibit C $ (258.114.71) ------------- (4 ) Exhibit B (2) Year Ended June 30. 1986 $ 1 .823.45 $ 1.823.45 t ~ ' $ 237,188.90 32,442.47 679.00 36 . 1 7 6.201.24 i;: ¡ :! $ 276.547.78 $ (274.724.33) $ 8.345.24 $ (283.069.57) ------------- " j ¡ I i # ' v v Exhibit C page 1 HOUSING AUTHORITY OF THE CITY OF SALINA SALINA, KANSAS ANALYSIS OF SURPLUS Twenty-Four Months Ended June 30, 1986 Unreserved Surplus Balance per audit - June 30, 1984 Prior audit adjustMent Balance per books - June 30, 1984 AdjustMent for FYE June 30, 1985 Net Loss for Year Ended June 30, 1985 Housing Assistance PaYMent Program Exhibit B Interest on Operating Reserve Net Loss for Year Ended June 30, 1986 Housing Assistance PaYMent Program Exhibit B Interest on Operating Reserve (Provision for) Reduction of Operating Reserve for Year Ended June 30, 1985 Housing Assistance PaYMent Program Exhibit D Project Account Unfunded (Provision for) Reduction of Operating Reserves for Year Ended June 30, 1986 Housing Assistance PaYMent Program Exhibit D Project Account Unfunded Balances, June 30, 1986 Operatin~ Reserve Annual Contribution Contract KC 1029 KC 7015 $(1,064,493.61) $( 1 ,236,554.83 ) 714.53 136.26 $( 1,063,779.08) $(1,236,418.57) 708.41 ( 43,477.92) ( 258 , 1 1 4 . 71 ) 2,110.37 ( 44,998.08) ( 283,069.57 ) 1,707.16 ( 18,372.65) ( 3,316.48) 23,559.24 ( 14,352.09) 803.66 0.00 ( 6.616.79) $ ( 1 . 1 84 . 979 . 82 ) $( 1 .758.647.28 ) Balance per prior audit June 30, 1984 $( 9,463. 1 8) $ 29,623.15 Prior audit adjustMent recorded in subsequent year 1 36.26 ) Provision for (Reduction of) Operating Reserves for Year Ended June 30, 1985 18,372.65 3,316.48 June 30, 1986 14.352.09 ( 803.66) Balances, June 30, 1986 $ 23.261.56 $ 31.999.71 ( 5 ) _.~.- ~ v HOUSING AUTHORITY OF THE CITY OF SALINA SALINA, KANSAS ANALYSIS OF SURPLUS (Continued) Twenty-Four Months Ended June 30, 1986 Housin~ Assistance Payment Project Project Account Unfunded Balance per Prior Audit June 30, 1984 AdjustMent by HUD - June 30, 1984 - June 30, 1985 Project Account for Year 30, 1985-Exhibit D Project Account for Year 30, 1986-Exhibit D Provision for Ended June Provision for Ended June Balances, June 30, 1986 CUMulative HUD Contributions Balance per Prior Audit June 30, 1984 $ Adjustment by HUD of Annual Contribution Annual Contribution for Year Ended June 30, 1985 Housing Assistance PaYMent Program Exhibit D Annual Contribution for Year Ended June 30, 1986 Housing Assistance PaYMent Program Exhibit D Operating Subsidy - June 30, 1985 Operating Subsidy - June 30, 1986 Balances, June 30, 1986 TOTAL SURPLUS - EXHIBIT A (6 ) Exhibit C page 2 Annual Contribution Contract KC 1029 KC 7015 1 ,226,195.31 8,473.20 93,350.61 93,350.61 3,080.00 8.060.00 $ 1.432.509.73 $ 270.791.47 ------------- $ 299,556.25 ( 136.26) 8,617.93 <23,559.24) 6.616.79 $ 291.095.47 $ 937,528.58 9,326.34) 259,551.24 282,415.21 0.00 $ 1.470.168.69 $ 34.616.59 ------------- '\ u Exhibi t D( 1 ) HOUSING AUTHORITY OF THE CITY OF SALINA SALINA, KANSAS COMPUTATION OF RESIDUAL RECEIPTS AND ACCRUING ANNUAL CONTRIBUTION - PHA OWNED HOUSING Annual Contribution Contract KC 1029 CoMPutation of Residual Receipts Year Ended June 30. 1985 Year Ended June 30. 1986 Operatin~ Receipts Operating IncoMe - Exhibit B (1) Receipts froM sale of nonexpendable equipMent not replaced Operating Subsidy - Exhibit C $ 82,401.80 $ 88,310.35 3.080.00 250.00 8.060.00 Total Operating Receipts $ 85.481.80 $ 96.620.35 Operatin~ Expenditures Operating Expenses - Exhibit B (1) Capital Expenditures: Property BetterMents and additions ReplaceMent of nonexpendable equipMent Prior Year's Adjustment Affecting Residual Receipts $ 66,268.54 $ 74,022.08 7,068.59 1 , 556 . 00 250.09 840.61 Total Operating Expenditures $ 67.109.15 $ 82.896.76 Residual Receipts per audit $ 18.372.65 $ 13,723.59 Audit AdjustMent (backed out) 628.50 Residual Receipts per PHA before Provision for Operating Reserve $ 18,372.65 $ 14,352.09 $ 18.372.65 $ 14.352.09 $ 0.00 $ 0.00 ------------- ------------- Provision for Reserve - Exhibit C Residual Receipts per PHA CoMPutation of Accruin~ Annual Contribution Fixed Annual Contribution $ 93,350.61 $ 93,350.61 0.00 $ 93.350.90 ------------- Less Residual Receipts 0.00 Accruing Annual Contribution - Exhibit C $ 93.350.61 ------------- ( 7) ,., v HOUSING AUTHORITY OF THE CITY OF SALINA SALINA, KANSAS Exhibit D(2) COMPUTATION OF ANNUAL CONTRIBUTIONS EARNED AND PROJECT ACCOUNT - OPERATING RESERVE CHANGES HOUSING ASSISTANCE PAYMENTS PROGRAM Annual Contributions Contract KC 7015 MaxiMUM Contribution Available MaximUM Annual Contribution Authorized Project Account Balance at Beginning of Fiscal Year Total Annual Contribution Available Annual Contribution Required Administrative Expenses Preliminary Administrative Expense Preliminary Administrative Expense Independent Public Accountant Audit Fee Hard to House Fee AdjustMent by HUD of preceding year Housing Assistance PaYMents Total Funds Required Project Receipts Other Than ACC Total Annual Contribution Required Proiect Account Chan~e Provision for Project Account Exhibit C Annual Contribution Earned - lesser of contribution available or contribution required - Exhibit C Operatin~ Reserve Chan~e Operating IncoMe-Exhibit B Interest on Operating Reserve Annual Contribution Earned Total Operating Receipts Operatin~ Expenditures Operating Expenses - Exhibit B Capital Expenditures Prior Period AdjustMent Affecting Residual Receipts Total Operating Expenditures Provision for Operating Receipts $ Available Audit Adjustments - backed out Provision for Operating Reserve Ex. C Year Ended June 30. 1985 $ 235,992.00 $ 299.692.68 535.684.68 $ 35,705.78 695.00 224.477.72 $ 260,878.50 1 . 327 . 26 $ 259.551.24 ------------- $ ( 23,559.24) $ 259,551.24 $ 1 , 327 . 26 2,110.37 259.551.24 262.988.87 $ $ 259,441.97 230.42 0.00 259.672.39 3,316.48 0.00 $ 3.316.48 ------------- (8 ) Year Ended June 30. 1986 $ 289,032.00 $ 284.478.68 573.510.68 $ 34,435.86 435.56 2,132.00 720.00 9,326.34 237.188.90 $ 284,238.66 1.823.45 $ 282.415.21 ------------- $ ( 6,616.79) $ 282,415.21 $ 1,823.45 1,707.16 282.415.21 285.945.82 $ $ 276,547.78 1,888.56 $ 8.345.24 286.781.58 ( 835.76) 32.10 $ ( 803.66) ------------- fíI Exhibit E HOUSING AUTHORITY OF THE CITY OF SALINA SALINA, KANSAS STATEMENT OF ACTUAL DEVELOPMENT COSTS - UNCOMPLETED AT JUNE 30, 1986 PROJECT KANSAS 38-3 Annual Contributions Contract KC 1029 The Actual DeveloPMent Costs - UncoMpleted are as follows: Classification Current Period Administration Interest Paid Interest Earned Planning IntialOperating Site Acquisition Construction and Relocation Costs $ 18,530.85 68,951.91 ( 4,502.36) 545.86 (19,731.80) 926,307.77 22,120.83 1.860.00. IncoMe Exhibit E(2) EquipMent Total Cost $ 1,014,083.06 Less interest payable to HUD 68.951 .91. Net Development Cost $ 945.131 .15. ------------- Funds Approved $ 1,413,920.00 Funds Expended ( 945.131 .15 ) Excess of Funds Approved $ 468.788.85 ------------- Funds Advanced $ 956,732.00 DevelopMent Costs ( 945.131 .15 ) Excess of Funds Advanced KS 38-3 $ 11.600.85 --------------- (9 ) . Exhibi't; E( 2 ) HOUSING AUTHORITY OF THE CITY OF SALINA SALINA, KANSAS STATEMENT OF INITIAL OPERATING PERIOD INCOME AND EXPENSE As of June 30, 1986 Project KS 38-3 Annual Contribution Contract KC 1029 Initial Operatin~ InCOMe Dwelling Rental Nondwelling Rental Other Income Interest on General Fund InvestMents $ 21 ,525.71 ( 100.00) 191.78 532.88 Total Initial Operating IncoMe $ 22.150.37 Initial Operatin~ Expense Administration Utilities Ordinary Maintenance & Operation General Expense $ 203.08 1 ,062.44 1,107.02 46.03 $ 2.418~ $ 19.731~ ------------ Total Initial Operating Expense Net Initial Operating IncoMe ( 10) .. . Exhibit F HOUSING AUTHORITY OF THE CITY OF SALINA SALINA, KANSAS PHA'S STATEMENT OF MODERNIZATION COSTS - UNCOMPLETED AT JUNE 30, 1986 The Modernization Costs to date are as follows: Excess of Funds Approved $ 250,000.00 185.705.64 $ 64.294.36 ------------- Funds Approved Funds Expended Funds Advanced $ 205,925.00 Funds Expended 185.705.64 \ Excess of Funds Advanced Exhibit G $ 20.219.36 ------------- ( 11 ) 'W' jl, f I Exhibit G HOUSING AUTHORITY OF THE CITY OF SALINA SALINA, KANSAS ANALYSIS OF GENERAL FUND CASH BALANCE AT JUNE 30. 1986 Annual Contribution Contract KC 1029 KC 7015 COMPosition Before AdiustMents: --.;: Net Operating Receipts Retained: Operating Reserves - Exhibit C $ 23,261.56 $ 31,999.71 Audit AdjustMent - backed out ( 628.50) ( 32 . 1 0 ) Excess Development Funds- Exhibit E 1 1 ,600.85 Excess Modernization Funds-Exhibit F 20,219.36 Security Deposits 7,300.00 AdjustMent: Expenses/Costs not Paid: Deferred Credits 2"1. , 590.00 Accounts Payable 2,200.77 289.50 Accounts Payable - HUD 945.79 Tenant Prepaid Rent 753.35 PaYMent in Lieu of Taxes 49,925.30 IncoMe not Received: Accounts Receivable - Tenants ( 777.46) Accounts Receivable - Other ( 308.00) General Fund Cash Available $ 113,547.23 $ 57,792.90 General Fund Cash: Invested 0.00 30,342.40 Applied to Deferred Charges 5.028.00 0.00 General Fund Cash - Exhibit A $ 108.519.23 $ 27.450.50 -------------- ------------- ( 12 ) \..~::.~.~..,P'~!!I"J ;--- ..... .. COMMENTS ON COMPLIANCE AND ADMINISTRATIVE INTERNAL CONTROL We have examined the financial stateMents of the Housing Authority of the City of Salina for the twenty-four months ended June 30, 1986, and have issued our report thereon dated SepteMber 12, 1986. Based on our tests of transactions and examination of records as required by Appendix 2, except as otherwise evidenced by the findings and comments in this report, we believe that the Housing Authority of the City of Salina has coMplied with the following: a. The financial terms and conditions of the contracts with HUD. b. The regulations, policies and procedures prescribed by DepartMent regarding the Low-income Housing Program. the c. The financial regulations and procedures ManageMent and those of its governing board. prescribed by d. The requireMents for accurate and coMplete financial reports and claiMs for advances or reiMbursements to federal agencies. As part of our examination, we reviewed and tested the PHA's systeM of internal control to the extent we considered necessary to evaluate the systeM as required by generally accepted auditing standards. Under these standards the purpose of such evaluations is to establish a basis for reliance on the system of internal accounting control in determining the nature, tiMing and extent of other auditing . procedures that are necessary for expressing an '~pinion on the financial stateMents and to assist the auditor in planning and perforMing the examination of the financial stateMents. Additionally, our examination included procedures necessary in Qur judgMent to deterMine compliance wi th contractual terMs and (~ondi tions and regulation, policies and procedures prescribed by HUD and by ManageMent and the governing board of the Authority, insofar as such coMpl iance review was necessary under the provision of ¡Paragraph 20 in the Department of Housing and Urban DevelopMent Audit Guide for Audits of Public Housing Agencies by Independent Public Accountants, dated August, 1978 and AttachMent P of Circular A-102 and Office of ManageMent and Budget's Circular A-128. For those U;eMs tested, no significant departures from prescribed procedures lolere noted and nothing was noted which led us to believe departures existed in the items not tested. The objective of internal accounting control is to provide reasonable, but not absolute, assurance as to the safeguarding of assets against loss from unauthorized use or dispo:¡;ition, and the reliability of financial records for preparing financial stateMents and maintaining accountability for assets. The concept of reasonable assurance recognizes that the cost of a system of inte¡-nal accounting control should not exceed the benefits derived and .also recognizes that the evaluation of these factors necessarily requires estimates and judgments by management. ( 13) """"-"","*""-"<,,,,,,,""""1"""","""" 'W" COMMENTS ON COMPLIANCE AND ADMINISTRATIVE INTERNAL CONTROL (Continued) There are inherent limitations that should be r"ecognized in considering the potential effectiveness of any system of internal accounting control. In the performance of most control procedures, errors can result from misunderstanding of instructions, mistakes of JudgMent, carelessness, or other personal factors. Control procedures whose effectiveness depends upon segregation of duties can be circUMvented by collusion. Similarly, control procedures can be circUMvented intentionally by management with respect E~ither to the execution and recording of transactions or with respect to the estiMates and judgeMents required in the preparation of financial stateMents. Further, projection of any evaluation of internal accounting control to future periods is subject to r'isk that the procedures May become inadequate because of changes in conditions, and that the degree of coMpliance with the procedures May detElriorate. . Our examination of the financial statements made in accordance with generally accepted auditing standards, including the study and evaluation of the PHA's systeM of internal accounting control for the year ended June 30, 1986, that was Made for 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. STATUS OF PRIOR AUDIT FINDINGS The prior audit for the period ending June 30, 1984 contained six findings. The corrective action taken by the PHA is described below: Board Minutes IncoMPlete: Minutes for the audit period WElre coMplete. Excessive Accounts Receivable: The authority still has excessive collection losses. See current finding. Filing: System Inadequate: The overall administrative sys~teM has been improved. Budg:et Overruns: Situation still exists. See current finding. Check Vouchers Used Out of Sequence: No evidence of this situation was noted during the current audit period. Reports Not Filed Currentlv: ImproveMent was noted in this area. FINDINGS. RECOMMENDATIONS AND REPLIES Budg:et Overruns Finding: Year were noted: The following budget overruns ending: June 30. 1986 Budg:et 25,140.00 26,740.00 June 30. 1985 21,000.00 2,600.00 Actual 25,781.45 28,342.46 Ç)verrun 641.45 1,602.46 Ordinary Maintenance General Expense Year endin~ Administration Utilities 21 ,331 .13 3,161.79 331 .13 561.79 Reco(TU11endation: going to occur. Revisions should when overruns are Budget be filed Reply: We will try to iMprove this area. ( 14) ...._,-,',_.. ..." \9 . FINDINGS. RECOMMENDATIONS AND REPLIES (Continued) Collection Losses/Tenant Accounts Receivable Finding: In reviewing the tenant account receivable and collection loss area, it was noted that for the year ending June 30, 1986, the collection losses of the authority were 5.2% of dwelling rental. The prior year, the losses were 0.926% of dwelling rental. The accounts receivable balance was within reasonable limits for the year ending June 30, 1986, but for the year ended June 30, 1985, it was $ 37.29 per unit. Reco(lUllendation: All legal Means should be used to colliact rents froM tenants. The authority should increase its efforts to collect rent due. Reply: The high collection losses for the year ending June 30, 1986 resulted from carryover of SOMe bad debts as accounts receivable from the prior year. We will do all that is possible to collect delinquent rents froM tenants and will try to prevent collection losses. DeveloPMent/Modernization Expense Misclassification Finding: $ 242.90 of Modernization coded to project 38-2's development. labor expenses were incorrectly Recommendation: The amounts should be rec lassi f ied. As~ a part of the regular Monthly review of the financial stateMents, t;he developMent costs of closed projects should be reviewed to ascertélin no expenses have been posted to these accounts. Reply: We will work with the fee accountant on this situation. We have tried to avoid such probleMS in coding our moderni~~ation expenses for project 38-2. SCHEDULE OF ADJUSTING JOURNAL ENTRIES A/C for Report A/C for Books CR DR Description 4510 Insurance (Prior Year AdjustMent Affecting Residual Receipts Prepaid Insurance 628.50 628.50 6010 1211 1211 To correct prepaid insurance to reflect policyexpiriation. correct nUMber of Months of 4190.18 1111.11 AdMinistration - Sundry Cash Section 8 32.10 6010 1111.11 32.10 To correct cash balance for service charges not posted to the books. ( 15) ~ HOUSING AUTHORITY OF THE CITY OF SALINA SALINA, KANSAS NOTES TO THE FINANCIAL STATEMENTS June 30, 1986 NOTE 1: OMISSION OF CERTAIN DISCLOSURES This audit report is intended solely for use by the Housing Authority and the DepartMent of Housing and Urban DevelopMent. HUD provides the Housing Authority with detailed manuals which prescribe and describe accounting principles and procedures to be used by the PHA. Any significant deviation from prescribed principles or' procedures are required to be reported as findings in the audit report. For this reason, an enUMeration of all significant policies has been oMitted froM this report. In addition, HUD deterMines and arranges for the teMpOrary and permanent financing for the PHA and provides the funding for repaYMent of this indebtedness thus created. As ël result, details concerning debt Maturities and terMs have been OMitted froM this report. HUD also controls and approves leases entered into in connection with leased housing projects, if any, operated by the PHA. Since HUD's invol veMent with leased housing proj ects is so e>ctensi ve, detai ls concerning the leases and COMmitMents thereunder have been oMitted froM this report. Also, in accordance with HUD accounting procedures, depreciation on structures and equipMent is not recorded in the financial stateMents. ( 16)