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Audit - 1991/1992 HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas Annual Contributions Contract FW-1114 Projects KS 38-2 & 38-3 FINANCIAL STATEMENTS Twelve Months Ended June 30, 1992 JOHN M. MIDDLETON CERTIFIED PUBLIC ACCOUNTANT 3315 W. 91st Street Leawood, Kansas 66206 (913) 648-3687 HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas TABLE OF CONTENTS Independent Auditor's Report FINANCIAL STATEMENTS Balance Sheet - Low Rent at June 30,1992 Balance Sheet - Section 8 at June 30,1992 Statement of Income and Expenses - Low Rent Twel ve Months Ended June 30, 1992 Statement of Income and Expenses - Section 8 Twel ve Months Ended June 30, 1992 Analysis of Surplus - Low Rent Twel ve Months Ended June 30, 1992 Analysis of Surplus - Section 8 Twel ve Months Ended June 30, 1992 Notes to the Financial Statements SUPPLEMENTARY I NFORMA T I ON Schedule of Federal Financial Assistance for the Twel ve Months Ended June 30, 1992 Computation of Residual Receipts and Accruing Annual Contributions Computation of Annual Contribution Earned - Project Account and Operating Reserve Changes EXHIBIT PAGE 1-2 A-1 3 A-2 4 B-1 5 B-2 6 C-1 7 C-2 8 9-10 C(l) 12 D-1 13 D-2 14 Statement of Actual Development Costs - Uncompleted F(l) Reconciliation of Development Advances to Development Costs Statement of Modernization Costs - Uncompleted Analysis of General Funds Available for Reduction of Annual Contributions - Low Rent Analysis of General Funds Available for Reduction of Annual Contributions - Low Rent 15 F(2) F(3) 16 17 G-1 18 G-2 19 Report on Compliance to Laws and Regulations Based on an Audit of Financial statements Perfonned in Accordance with Government Auditing Standards 20 Single Audit Opinion on Compliance with Specific Requirements Applicable to Major Federal Financial Assistance Programs 21-22 Independent Auditor's Report on the Housing Authority of Salina, Kansas' Compliance With General Requirements 23 Independent Auditor's Report on the Housing Authority of Salina, Kansas' Internal Control Structure as an Entity and OVer Its Federal Financial Assistance Programs 24-26 Findings, Recommendations and Replies 27-28 Adjusting Entries 29 John M. Middleton Certified Public Accountant 3315 W. 91st Street Leawood. Kansas 66206 913-648-3687 Board of Directors Salina Housing Authority Salina, Kansas 67402 Department of Housing and Urban DevelotrneIlt National Review Center 950 N. King's Highway Cherry Hill, New Jersey 08034-1518 Independent Auditor's Report I have audited the accompanying financial statements of the Housing Authority of the City of Salina, Kansas as of June 30, 1992 and for the year then ended. These financial statements are the responsibility of the Housing Authority's management. My responsibi li ty is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with general 1 y accepted auditing standards, Government Auditing Standards, and CMB Circular A-128. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free fran material misstatement. An audit incl udes examining, on a test basis, evidence supporting the aroounts and discI osures 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. I believe that my audit provides a reasonable basis for my opinion. As described in Note A, these financial statements were prepared in confornrity with the accounting practices prescribed or permitted by the Department of Housing and Urban Develo¡:ment, which is a comprehensive basis of accounting other than generally accepted accounting principles. In my opinion, the financial statements referred to above present fairly, in all material respects, the assets, liabilities, and surplus of the Housing Authority of the Ci ty of Salina, Kansas, as of June 30, 1992 and the resul ts of its operations and its changes in surplus for the twelve months then ended, on a basis of accounting described in Note A. ( continued) My audit was made for the purpose of fornring an opinion on the financial statements of the Housing Authority of the City of Salina, Kansas taken as a whole. The supplemental financial information as listed in the Table of Contents is presented for purposes of additional analysis and is not a required part of the financial statements. This information has been subjected to auditing procedures applied in the audit of the financial statements and, in my opinion. is fairly stated in all material respects in relation to the financial statements taken as a whole. This report is intended solely for the information and use of the Board of Directors, Management of the Housing Authority of the City of Salina and the Department of Housing and Urban Development and should not be used for any other purpose. <1d.~lcA C. Middl eton Certified Public Accountant September 30,1992 Leawood, Kansas 66206 Exhibit A - 1 HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas BALANCE SHEET As of June 30, 1992 Annual Contribution Contract FW-1114 Projects KS 38-2 & 38-3 Low Rent ASSETS Cash Petty Cash Accounts Receivable -- Tenants Accounts Receivable -- Others Investments HUD Annual Contributions Receivable Prepaid Insurance Development Costs Development Costs - Contra Land, Structures and Equipment Modernization Development in Progress $ 14,042.40 50.00 770.09 6,620.17 29,918..86 67,888.11 4,523.02 2,558,428.41 ( 2,558,428..41) 2,535,059.28 50,000.00 11,186.96 ------------.--- TOTAL ASSETS $ 2,720,058.89 --------------- --------------- LIABILITIES AND SURPLUS Tenants Security Deposits Other Accounts Payable PILOT Prepaid Rent Permanent Notes - HUD Permanent Notes - FFB $ 9,182.00 609.45 9,392.09 618.74 967,444.99 776,147.07 -------------- TOTAL LIABILITIES $ 1,763,394.34 Surplus - Exhibit C-1 956,664.55 -----------.--- TOTAL LIABILITIES AND SURPLUS $ 2,720,058.89 ------------.--- ------------.--- SEE ATTACHED INDEPENDENT AUDITOR'S REPORT NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS - 3 - Exhibit A - 2 HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas BALANCE SHEET As of June 30, 1992 Annual Contribution Contract FW-1114 Projects KS 38-2 & 38-3 Section 8 Existinq Vouchers ASSETS Cash AR -- HUD AR -- others Investments Land, Structures and Equipment $ 10,306.76 12,953.58 108.45 32,337.90 $ 16,437.30 9,053.40 799.88 --------------- -------------- TOTAL ASSETS $ 64,760.09 $ 17,237.18 --------------- --------------- -------------- -------------- LIABILITIES AND SURPLUS Other Accounts Payable Accounts Payable -- HUD $ 5,809.15 $ 734.47 16,454.25 -------------- -------------- TOTAL LIABILITIES $ 5,809.15 58,950.94 $ 17,188.72 48.46 Surplus - Exhibit C-2 -------------- -------------- TOTAL LIABILITIES AND SURPLUS $ 64,760.09 $ 17,237.18 --------------- --------------- -------------- -------------- SEE ATTACHED INDEPENDENT AUDITOR'S REPORT NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS - 4 - Exhibit B-1 HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas STATEMENT OF INCOME AND EXPENSES Twelve Months Ended June 30, 1992 Annual Contributions Contract FW-1114 Projects KS 38-2 & 38-3 Low Rent OPERATING INCOME Dwelling Rental Interest on General Fund Investments other Income $ 102,135.43 5,484..53 4,000.79 ------------- TOTAL OPERATING INCOME $ 111,620.75 OPERATING EXPENSES Administration utilities Ordinary Maintenance and Operations General Expense Non-Routine Maintenance $ 29,301.56 5,430,,73 75,186.82 36,015,,79 21,540.61 ------------- TOTAL OPERATING EXPENSE $ 167,475.51 ---------..-- NET LOSS BEFORE OTHER CHARGES $( 55,854.76) OTHER CREDITS AND (CHARGES) Gain from Disposition of Nonexpendable Equipment Prior Period Adjustment Affecting Residual Receipts Interest on Notes and Bonds Payable $ 1,534..57 498.12 ( 52,257.34) -------------- TOTAL OTHER CHARGES $( 50,224.65) -------------- NET (LOSS) - Exhibit C-1 $(106,079.41) ----------.--- ----------.--- SEE ATTACHED INDEPENDENT AUDITOR'S REPORT NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS - 5 - Exhibit B-2 HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas STATEMENT OF INCOME AND EXPENSES Twelve Months Ended June 30, 1992 Annual Contributions Contract FW-1114 Projects KS 38-2 & 38-3 Sectj. on ~ Existinq Votlchers OPERATING INCOME Interest Earned on Investments - Operating Reserve General Fund $ 2,814.62 2.61 $ 59.04 561.27 ------------- -------------- TOTAL OPERATING INCOME - Ex. D-2 $ 2,817.23 $ 620.31 OPERATING EXPENSES Administration Housing Assistance Payments Audit Costs Preliminary Expense $ 83,249.05 562,389.42 592.00 $ 9,899.09 84,361.25 74.00 1,639.88 ------------ -------------- TOTAL OPERATING EXPENSE - Ex. D-2 $ 646,230.47 $ 95,974.22 ------------ -------------- NET LOSS BEFORE OTHER CHARGES $(643,413.24) $( 95,353.91) OTHER CREDITS Income from Portable Vouchers $ 615.97 ------------- TOTAL OTHER CREDITS $ 615.97 ------------- ------------- NET (LOSS) - Exhibit C-2 $(642,797.27) $( 9!5,353.91) ------------- ------------- ------------- ------------- SEE ATTACHED INDEPENDENT AUDITOR'S REPORT NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS - 6 - Exhibit C - 1 HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas ANALYSIS OF SURPLUS Twelve Months Ended June 30, 1992 Annual Contributions Contract FW-1114 Projects KS 38-2 & 38-3 Low Rent UNRESERVED SURPLUS Balance, Audit June 30, 1991 Audit Adjustment Subsequently Posted Net (Loss) for the Year Ended June 30, 1992 - Exhibit B-1 Reduction of Operating Reserve - Exhibit D-1 BALANCE AT JUNE 30, 1992 RESERVED SURPLUS OPERATING RESERVE Balance Per Audit/Books at June 30, 1991 Reduction of Operating Reserve BALANCE AT JUNE 30, 1992 CUMULATIVE CONTRIBUTIONS Balance Per Audit/Books at June 30, 1991 Accruing Annual Contributions Year Ended June 30, 1992 - Exhibit D HUD Operating Subsidy - Exhibit D Development Interest Forgiven HUD Notes Forgiven BALANCE AT JUNE 30, 1992 CUMULATIVE CIAP GRANTS Balance at June 30, 1991 Grants Received BALANCE JUNE 30, 1992 TOTAL SURPLUS - Exhibit A $(1,626,188.66) ( 1,921.57) ( 106,079.41) 18,542.76 --------------- $(1,715,646.88) --------------- --------------- $ ( 64,65~).66 18,542.76) --------------- $ 46,112.90 --------------- --------------- $ 2,154,024.99 67,888.11 44,328..00 69,014.93 244,594.50 -----------,--- $ 2,579,850.53 -------------- -------------- $ 0.00 46,348.00 -------------- $ 46,348.00 -------------- -------------- $ 956,664.55 -------------- -------------- SEE ATTACHED INDEPENDENT AUDITOR'S REPORT NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS - 7 - Exhibit C - 2 HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas ANALYSIS OF SURPLUS Twelve Months Ended June 30, 1992 Annual Contributions Contract FW-1114 Projects KS 38-2 & 38-3 UNRESERVED SURPLUS Balance, Audit June 30,1991 Net (Loss) for the Year Ended June 30, 1992 - Exhibit B Provision for: Operating Reserve - Exhibit D Project Accounts Addition to Operating Reserve BALANCE AT JUNE 30, 1992 RESERVED SURPLUS OPERATING RESERVE Balance Per Audit at June 30, 1991 Provision for Operating Reserve Addi tion to Operating Reserve BALANCE AT JUNE 30, 1992 PROJECT ruND Balance per Audit at June 30, 1991 HUD Adjustment Provision for Project Account BALANCE AT JUNE 30, 1992 aJMULATIVE CONTRIBUTIONS Existinq Vouchers $(4,726,384.01) $( 140,957.12) 642,797.27) ( 95,353.91) ( 2,327.34) ( 706.63) ( 58,793.42) ( 115,992.46) ( 615.97) -------------- ------------.-- $(5,430,918.01) $( 353,010.12) -------------- --------------- -------------- --------------- $ 46,954.23 2,327.34 615.97 -------------- $ 49,897.54 -------------- -------------- $ ( 797,013.85 6,339.75) 58 ,793. 42 -------------- $ 849,467.52 -------------- -------------- Balance Per Audit at June 30, 1991 $ 3,938,423.56 Accruing Annual Contributions Year Ended June 30, 1992 - Ex. D 645,740.58 HUD Adjustment 6,339.75 BALANCE AT JUNE 30, 1992 TaI'AL SURPLUS - Exhibi t A -------------- $ 4,590,503.89 -------------- -------------- $ 58,950.94 $( 1,458.05) 706.63 -------------- -------------- --------------- $( 751.42) -------------.- -------------.- $ 112,122.79 115,992.46 --------------- $ 228,115.25 -------------.- -------------.- $ 29,634.21 96,060. :.4 -------------,- $ 125,694.75 ------------_.- -------------.- $ 48.46 -------------- -------------- SEE ATTACHED INDEPENDENT AUDITOR'S REPORT NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS - 8 - HOUSING AU'mORITY OF THE CITY OF SALINA Salina, Kansas June 30, 1992 Notes to the Financial Statements NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of the significant accounting policies of the Housing Authority of the City of Salina (HA) is presented to assist in understanding the HA's financial statements. The financial statements and notes are reprEsentations of the HA' s management, which is responsible for their intE!grity and objectivi ty. These accounting policies conform to practices prescribed or permitted by the Department of Housing and Urban Development (HUD) and have been consistently applied in the preparation of the financial statE~ts. Principles Used to Determine Scope of Entity The HA' s reporting entity includes the HA' s governing board and all reI ated organizations for which the HA exercises oversight responsibility. The HA has developed criteria to deternrine whether outside agencies should be incl uded wi thin its financial reporting entity. The criteria includes, but is not limited to, whether the HA exercises oversight responsibility (which includes financial interdependency, selection of governing authority, designation of management ability to significantly influence operations, and accountability for fiscal matters), scope of public service, and special financing relationships. The HA has determined that no other outside agency meets the abovle criteria and, therefore, no other agency has been included as a component Ul1it in the HA's financial statements. In addition, the HA is not aware of émy entity which would exercise such oversight responsibility which would result in the HA being considered a component uni t of that entity. Basis of Accounting The accounts of the HA are ITaintained, and the accompanying financial state- ments have been prepared, on the basis of accounting practices prescribed or permitted by HUD. These practices differ in some respects fran generally accepted accounting principles. Revenue is generally recognized when received rather than when earned except for federal financial assistance and tenant rent. Expenses are generally recognized when payments are ITade rather than when a liability is incurred. Accounts Receivable The HA uses the direct write-off method for bad debts. No allowance for doubtful accounts is used in the valuation of the receivables. - 9 - HOUSING AUTHORITY OF THE CITY OF SALINA Sal ina, Kansas June 30, 1992 Notes to the Financial Statements NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Land, Structures and Equipment Land, structures and equipment are stated at cost. No provision is ITade for the decrease in value of structure and equipment because of wear and tear or obsolescence and income is not charged for depreciation of such assets. Budqet and Budqetary Accountinq The HA prepares an annual operating budget which is approved by RUD. Budgeted amounts are as originally adopted, or as revised by thE! Board of Cœmissioners. Individual revisions were not ITaterial to the original appropriations which were approved. Vacation and Sick Pay Vacation time, personal business days and sick 1 eave are considel~ed as ex- penditures in the year paid. NOTE B - CASH As required by law, the depository is required to have FDIC insurao.ce. As of June 30,1992 the Housing Authority was fully insured. NOTE C - LONG TERM DEBT Permanent Notes - HUD Construction of the housing project was originally financed by the sale of pro ject notes. During 1987, HUD received budgetary authority to pay the permanent notes and has suspended payments on the annual contribution contract required for permanent note payments. Therefore, interest on the permanent notes has not been accrued during the year ended June 30, 1992. At June 30, 1992 the amount payable was $967,444.99 and no interest was paid for the year then ended. Loans amounting to $244,594.50 were forgiven during the year ended June 30, 1992. Permanent Notes - FFB Notes payabl e are from a 6.6% issue dated Jul y 8, 1983 in an original amount of $925,423.04. Bonds amounting to $149,275.97 have been retired leaving a balance due at June 30, 1992 of $776,147.07. Interest paid durinçr the year ended June 30, 1992 amounted to $52,257.34. The total annual payment is $67 ,888.11. This amount is due in each of the next five years and in each subsequent year until 2013. HUD has agreed to make all of these paYTIents. - 10 - SUPPLEMENTARY INFORMATION Exhibit C (J.) HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE For the Twelve Months Ended June 30,1992 Annual Contributions Contract FW-1114 Projects KS 38-2 & 38-3 Federal Grantor CFDA Number Expenditures - n --- -- ____--n__-_____n n n- -- n_- - n n n- - - - _n n - n_--- --------- ------- -- - ___n___--_-- - _n- -- _nn Department of Housing and urban Development Maior Proqram Lower Income Housing Assistance Payments 14.156 $ 645,740.58 Public and Indian Housing 14.850 42~),825.54 Nonmaior Proqrams Section 8 - Vouchers 14.177 96,060.54 Comprehensive Improvement Assistance Program 14.852 46,348.00 ------,------- Total Federal Financial Assistance $1,213,974.66 ------------- ------------- SEE ATTACHED INDEPENDENT AUDITOR'S REPORT - 12 - Exhibit D-l HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas COMPUTATION OF RESIDUAL RECEIPTS AND ACCRUING ANNUAL CONTRIBUTIONS Twelve Months Ended June 30, 1992 Annual Contributions Contract FW-1114 Projects KS 38-2 & 38-3 OPERATING RECEIPTS Operating Income - Exhibit B-1 HUD Subsidy - Exhibit C-1 Prior Period Adjustments Affecting Residual Receipts $ 111,620.75 44,328.00 498.12 ------------- TOTAL OPERATING RECEIPTS $ 156,446.87 OPERATING EXPENDITURES Operating Expenses - Exhibit B-1 Capital Expenditures: Property Betterments and Additions $ 167,475.51 7,016.00 ------------- TOTAL OPERATING EXPENDITURES $ 174,491.51 ------------- Residual Receipts per Audit Audit Adjustment Backed Out $( ( 18,044.64) 498.12) ------------- Reduction of Operating Reserve - Ex. C-1 $( 18,542.76) ------------- ACCRUING ANNUAL CONTRIBUTIONS Fixed Annual Contributions For Year Ended June 30, 1992 $ 67,888.11 ------------- ACCRUING ANNUAL CONTRIBUTION - Exhibit C-1 $ 67,888.11 ------------- ------------- SEE ATTACHED INDEPENDENT AUDITOR'S REPORT - 13 - Exhibit D-2 HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas COMPUTATION OF ANNUAL CONTRIBUTIONS EARNED - PROJECT ACCOUNT AND OPERATING RESERVE CHANGEE~ Twelve Months Ended June 30, 1992 Annual Contributions Contract FW-1114 Section 8 $ 2,817.23 $ 620.31 645,740.58 96,060.54 ------------- ------------- $ 648,557.81 $ 96,680.85 $ 646,230.47 $ 95,974.22 ------------- -----_._------ $ 646,230.47 $ 95,974.22 ------------- ------.------- Existinq Maximum Contribution Available Maximum Contribution Authorized Project Account Balance at June 30, 1991 $ 704,534.00 790,674.10 ------------- Total Contributions Available $1,495,208.10 ------------- ------------- Annual Contributions Required Housing Assistance Payments AdITånistrative Fees Hard-to-House Fees Independent Public Accountant Fees Preliminary Expenses Capi tal Expenses $ 562,389.42 82,131. 77 630.00 592.00 ------------- Total Funds Required Less: Other projeçt Receipts $ ( 645,743.19 2.61) ------------- Total Annual Contribution Required $ 645,740.58 ------------- ------------- Proiect Account Chanqe Provision for Project Account -- Ex. C-2 $ 58,793.42 ------------- ------------- Annual Contributions Earned Lesser of Contributions Available or Contributuion Required $ 645,740.58 ------------- ------------- Operatinq Reserve Chanqe Operating Receipts: Operating Income -- Ex. B-2 Annual Contribution Earned Total Operating Receipts Operating Expendtures: Operating Expenses -- Ex. B-2 Total Operating Expenditures Residual Receipts per Audit $ Provision for Operating Reserve - Ex. C-2 $( 2,327.34 2,327.34) ------------- Residual Receipts per LHA $ 0.00 ------------- ------------- Vouchers $ 212,053.00 112,122.79 ------------- $ 324,175.ì9 ------------- ------------- $ 84,361. 25 10,546.68 74.00 840.00 799.88 ------------- $ ( 96,621. 81 561. 27) ------,------- $ 96,060.54 ------.------- ------.------- $ 1;1.5,992.46 ------.------- ------------- $ 96,060.54 ------.------- ------.------- $ $( 706.63 706.63) -------------- $ 0.00 -------------- -------------- SEE ATTACHED INDEPENDENT AUDITOR'S REPORT - 14 - Exhibit F(l) HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas ACTUAL DEVELOPMENT COSTS - UNCOMPLETED Twelve Month Period Ended June 30, 1992 Annual contributions Contract FW-1114 Prior Audit Period Current Audit Period Total ------------- ---------- -------------- CLASSIFICATION Planning $ 0.00 $ 5,273.86 5,913.10 $ 5,273.86 Site Acquisition 0.00 5,913.10 ------------ ----------- ----.-------- TOTAL COST $ 0.00 $ 11,186.96 $ 11,186.96 ------------ ------------ ----------- ----------- ----.-------- ----.-------- SEE ATTACHED INDEPENDENT AUDITOR'S REPORT - 15 - Exhibit F(2) HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas RECONCILIATION OF DEVELOPMENT FUNDS ADVANCED WITH DEVELOPMENT COSTS June 30, 1992 Annual Contributions Contract FW-1114 Projects KS 38-2 & 38-3 The amount of Funds provided for Development and the Actual Development Costs are incurred as follows: DEVELOPMENT FUNDS ADVANCED $ 0.00 ---------.--- Actual Development Costs $ $ 0.00 TOTAL FUNDS ADVANCED 11,186.96 ---------.--- Deficiency of Funds Provided - Exhibit G $( 11,186.96) ------------ ------------ SEE ATTACHED INDEPENDENT AUDITOR'S REPORT - 16 - Exhibit F(3) HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas STATEMENT MODERNIZATION COSTS - UNCOMPLETED As of June 30, 1992 Annual Contributions Contract FW-1114 Projects KS 38-2 & 38-3 Funds Approved Funds Expended Pro'iect 903z $ 50,000.00 50,000.00 --------.---- EXCESS OF FUNDS APPROVED $ 0.00 --------.---- --------.---- Funds Advanced Funds Expended $ 46,34:8.00 50,000.00 ------------ DEFICIT OF FUNDS ADVANCED - Exhibit G $( 3,6~i2.00) ------------ ------------ SEE ATTACHED INDEPENDENT AUDITOR'S REPORT - 17 - Exhibit G-l HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas ANALYSIS OF GENERAL FUNDS AVAILABLE FOR REDUCTION OF ANNUAL CONTRIBUTIONS At June 30, 1992 Annual Contributions Contract FW-1114 Projects KS 38-2 & 38-3 Low Rent CASH AND OTHER ASSETS Cash Accounts Receivable Accounts Receivable Investments Prepaid Insurance -- Tenants -- Others TOTAL LIABILITIES, RESERVES, AND AMOUNTS AVAILABLE FOR CONTRIBUTIONS REDUCTION Tenants Security Deposits Accounts Payable - Other PILOT Prepaid Rent Operating Reserve Deficiency of Advances -- Development Deficiency of Advances -- Modernization Excess of Advances on Prior Year Development Audit Adjustment Added Back TOTAL $ 14,092.40 770.09 6,620.17 29,918.86 4,523.02 ------------ $ 55,924.54 ------------ ------------ $ 9,182.00 609.45 9,392.09 618.74 46,112.90 ( 11,186.96) ( 3,652.00) 4,350.20 498.12 ------------ $ 55,924.54 ------------ ------------ SEE ATTACHED INDEPENDENT AUDITOR'S REPORT - 18 - Exhibit G-2 HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas ANALYSIS OF GENERAL FUNDS AVAILABLE FOR REDUCTION OF ANNUAL CONTRIBUTIONS At June 30, 1992 Annual Contributions Contract FW-1114 Projects KS 38-2 & 38-3 Section 8 Existinq Vouchers Cash Accounts Receivable - HUD Accounts Receivable - Others Investments $ 10/306.76 12,953.58 108.45 32,337.90 $ 16,437.30 ------------ ------------- TOTAL $ 55,706.69 $ 16,4~37.30 ------------ ------------ -------.----- ------_._---- Accounts Payable - HUD Accounts Payable - Others Operating Reserve $ 16,4~54.25 734.47 751.42) $ 5,809.15 49,897.54 ------------ -------.----- TOTAL $ 55,706.69 $ 16,437.30 ------------ ------------ -------,----- -------,----- SEE ATTACHED INDEPENDENT AUDITOR'S REPORT - 19 - HOUSING AUTHORITY OF THE CITY OF SALINA Sal ina, Kansas REPORT ON CCMPLIANCE TO LAWS AND REGULATIONS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Twelve Months Ended June 30,1992 Annual Contributions Contract FW-1114 Projects KS 38-2 & 38-3 I have audited the financial statements of the Housing Authority of the City of Salina, Kansas as of June 30, 1992, and for the year then ended, and have issued my report thereon dated September 30,1992. I conducted my audit in accordance with generally accepted auditing standards and Government Auditinq Standards (1988 Revision), issued by the Comptroller General of the United States. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. Compliance with laws, regulations, contracts and grants applicable to the Housing Authority of Sal ina, Kansas is the responsibi li ty of the PHA' s management. As part of obtaining reasonabl e assurance about whether the financial statements are free of material misstatement I performed tests of the PHA t s compliance with certain provisions of laws, rE~ulations, contracts, and grants. However, my objective was not to provide an opinion on overall compliance with such provisions. The results of my tests indicate that, with respect to the items tested, the PHA complied in all material respects, with the provisions referred to in the preceding paragraph. With respect to items not tested, nothing came to my attention that caused me to believe that the PHA had not complied, in all material respects, with those provisions. Tl"D.s report is intended for the information of the Board of Directors, management, and the Department of Housing and Urban Development. This restriction is not intended to limit the distribution of this report, which is a matter of public record. 'John Middleton Certified Public Accountant September 30,1992 - 20 - HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas SINGLE AUDIT OPINION ON CCMPLIANCE WITH SPECIFIC REQUIREMENTS APPLICABLE TO MAJOR FEDERAL FINANCIAL ASSISTANCE PROGRAM:;; Twel ve Months Ended June 30, 1992 Annual Contributions Contract FW-1114 Project KS 38-2 & 38-3 I have audited the financial statements of the Housing Authority of the City of Salina, Kansas, as of and for the year ended June 30, 1992 and have issued my report thereon dated September 30,1992. I have also audited the Housing Authority of the City of Salina, Kansas's, compliance with the requirements governing types of services allowed or unallowed, eligibi 1 ity , matching, reporting, and special tests and provisions that are applicable to each of its major federal financial assistance programs, which are identified in the accompanying sçhedule of federal financial assistance, for the year ended June 30, 1992. The management of the Housing Authority of the City of Salina, Kansas is responsibl e for the Housing Authority of the City of Salina, Kansas's compliance with those requirements. My responsibility is to E~xpress an opinion on compliance with those requirements based on my audit. I conducted my audit of compliance with those requirements -in accordance with generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, and OMB Circular A- 128, "Audi ts of State and Local Governments." Those standards and OMB Circular A-128 require that I plan and perform the audit to obtain reasonabl e assurance about whether material nonccrnpliance with the requirements referred to above occurred. An audit includes examining, on a test basis, evidence about whether the Housing Authority of the City of Salina, Kansas's compliance with those requirements. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the Housing Authority of the City of Salina, Kansas, complied in all material respects with the requirements governing types of services allowed or unallowed, eligibility, matching, reporting, and special tests and provisions that are applicable to each of its major federal financial assistance programs for the year ended June 30, 1992. - 21 - This report is intended for the information of the management and the Department of Housing and Urban Development. However, this report is a matter of public record and its distribution is not limited. (l/,í .,.>~(!«{~ John Middleton Certified Public Accountant September 30, 1992 - 22 - HOUSING AUTHORITY OF THE CITY OF SALINA Sal ina, Kansas INDEPENDENT AUDITOR'S REPORT ON HOUSING AUTHORITY OF SALINA KANSAS' ro1PLIANCE WITH GENERAL REQUIREMENTS Twel ve Months Ended June 30, 1992 Annual Contributions Contract FW-1114 Project KS 38-2 & 38-3 I have audited the financial statements of the Housing Authority of the City of Sal ina, Kansas, as of and for the year ended June 30, 1992, and have issued my report thereon dated September 30, 1992. I have applied procedures to test the Housing Authority of the City of Salina, Kansas's compliance with the following requirements applicable to its federal financial assistance programs, which are identifiE~ in the schedule of federal financial assistance, for the year ended June 30, 1992: political activity, Davis-Bacon, civil rights, cash management, relocation assistance, federal financial reports, drug free workplace, and adITånistrative requirements. My procedures were limited to the applicable procedures described in the Office of Management and Budget's Ccmpliance Supplement for Single Audits of State and Local Governments. My procedures were substantially less in scope that an audit, the objective of which is to express an opinion on the Housing Authority of the City of Salina, Kansas's compliance with the requirements listed in the preceding paragraph. Accordingly, I do not express such an opinion. with respect to the items tested, the results of those procedures disclosed no material instances of noncompliance with the requirements listed in the first paragraph of this report. With respect to the items not tested, nothing came to my attention that caused me to believe that the Housing Authority of the City of Salina, Kansas, had not complied, in all rraterial respects, wi th those requi rements. However, the resul ts of my procedures disclosed imnaterial instances of noncompliance with those requirements, which are described in the accompanying schedule of findings. This report is intended for the information of the management and the Department of Housing and Urban Development. However, this report is a matter of public record and its distribution is not limited. , /'.'-~/. .l."...~, "f'. 1-,' I'?,Pt. 'II \ ",'¡JÍf/h/';/'j",,' -"r ,f' .(/I~./"'-' , " ¡' " 36hn Middleton Certified Public Accountant September 30,1992 - 23 - HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas INDEPENDENT AUDITOR'S REPORT ON THE HOUSING AUTHORITY OF SALINA, KANSAS ' INTERNAL CONTROL STRUCTURE AS AN ENTITY AND OVER ITS FEDERAL FINANCIAL ASSISTANCE PROGRAMS Twel ve Months Ended June 30, 1992 Annual Contributions Contract FW-1114 Projects KS 38-2 & 38-3 I have audited the financial statements of the Housing Authority of the City of Sal ina, Kansas, as of and for the year ended June 30 I 1992, and have issued my report thereon dated September 30,1992. I conducted my audits in accordance with generally accepted auditing stand- ards; Government Audi ting Standards, issued by the Comptroll er General of the United States; and the Office of Management and Budget(CMB) Circular A- 128, Audi ts of state and Local Governments. Those standards and Œ1B Circular A-128 require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. In planning and performing my audit for the year ended June 30, 1992, I considered the Housing Authority's internal control structure in order to deternrine my auditing procedures for the purpose of expressing my opinion on the Housing Authority's financial statements and not to provide assurance on the internal control structure. The management of the Housing Authori ty of the City of Sal ina, Kansas is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure and procedures. The objectives of internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management's authorization and recorded properly to pernri t the preparation of financial statements, and that federal financial assistance programs are managed in accordance with applicable laws and regulations. Because of inherent 1 imi tations in any internal control system, errors, irregularities, or instances of non-compliance may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures may become inadequate becauseDf changes in conditions or that the degree of compliance with the procedures may deteriorate. For the purpose of this report, I have classified the significant internal control structure policies and procedures in the following categories: 1. Accounting Controls a. Cash and cash equivalents b. Receivables f. Surplus g. Revenue - 24 - c. Land, structures and equipment d. Payables and accrued liabilities e. Debt service h. Expenditures i. Payroll j. Purchasing 2. AdITånistrative Controls a. Political activity b. Davis-Bacon Act c. Ci vi 1 rights d. Cash management e. Federal financial reports f. Budgets g. Relocation assistance and Real Property Acquisition h. Drug Free Workplace 3. Special Requirements For all of the internal control structure categories listed above, I obtained an understanding of the design of relevant policies and procedures and determined whether they have been placed in operation, and I assessed the control risk. During the year ended June 30, 1992, the FHA expended 88.27% of its total federal financial assistance under major federal financial assistance programs. I performed tests of controls, as required by <:ME Circular A-128, to eval uate the effectiveness of the design and operation of internal control structure policies and procedures that I have considered relevant to preventing or detecting material non-compliance with specific requirements, general requirements, and requirements governing claims for advances and reimbursements and amounts claimed or used for matching that are .applicable to the aforementioned nonmajor programs. My procedures were less in scope than would be necessary to render an opinion on these internal control structure policies and procedures. Accordingly, I do not express such an opinion. I noted certain matters involving the internal control structurE~ and its operation that I consider to be reportable conditions under standaJ:-ds estab- lished by the American Institute of Certified Public Accountants. ]~eportable condi tions involve matters coming to my attention relating to significant deficiencies in the design or operation of the internal control structure that, in my judgment, could adversely affect the Housing Authority's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements or to administer federal financial assistance programs in accordance with applicablE! laws and regulations. I noted a weakness in internal control in that separation of duties is not maintained for receipts, deposits, expenses, and bookkeeping. One person has control and/or access to all of the above functions and a separation of duties is not possible. Other controls that are in place to compEmsate for this weakness are prenumbered receipts, two signatures on a check, with one being a member of the Board of Directors, and all expenditures being reviewed by the Board of Directors. A material weakness is a reportable condition in which the design or - 25 - operation of one or more of the internal control structure elements does not reduce to a relatively low level the risk that errors or irregularities in amounts that would be material in relation to the financial statements being audited or that noncompliance with laws and regulations that would be material to a federal financial assistance program may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. My consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be report- able conditions and, accordingly, would not necessarily disclose all report- able conditions that are also considered to be material weëllinesses as defined above. However, I believe, that none of the reportable conditions described above is a material weakness. This report is intended for the information of the Board of Directors, management, and the Department of Housing and Urban Devel or;ment . This restriction is not intended to limit the distribution of this report, which is a matter of public record. John Middleton Certified Public Accountant September 30, 1992 - 26 - HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas FINDINGS, RECOMMENDATIONS AND REPLIES Twelve Months Period Ended June 30, 1992 Annual Contributions Contract FW-1114 Projects KS 38-2 & 38-3 Prior Audit Findings The budget was exceeded in several areas. This has not been corrected. See Finding 1 below. Current Audit Findings 1. FINDING The total operating expense budget was exceeded in total by approximately $6000 and the capital expenditures budget was exceeded for one budgeted item and an additional unbudqeted item was purchased. RECOMMENDATION The Di rector revise the budget when it becomes that additional expenditures are required. apparent REPLY We will do so. 2. FINDING The procedures used for moni toring Davis-Bacon c:ompl iance were inadequate. The Director obtained copies of time sheets which showed that the contractor complied but there was no confirmation of the hours and rates reported. I was unable to obtain further information. RECOMMENDATION The Director confirm that the wages and hours rE!ported to him by the contractors agree wi th the hours worked and wages received by the contractor's employees. REPLY We will do so. 3. FINDING SEE ATTACHED INDEPENDENT AUDITOR'S REPORT - 27 - The Housing Authority did not maintain adequate insurance on Non-Owned Autos. RECOMMENDATION The Director obtain adequate insurance as soon as possible. REPLY We will do so. SEE ATTACHED INDEPENDENT AUDITOR'S REPORT - 28 - HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas Journal Entries Twelve Month Period Ended June 30, 1992 Annual Contributions Contract FW-1114 Projects KS 38-2 & 38-3 1. Modernization Expenditures 1400.4M $ Prior Period Adjustments Affecting Residual Receipts 6010 498.12 Adjust Modernization Expenditures to amount spent. SEE ATTACHED INDEPENDENT AUDITOR'S REPORT - 29 - ~ ~ 498.12