Community Development Block Grant Funds - 1979
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CITY OF SALINA
Salina, Kansas
COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS
REPORT ON EXAMINATION
December 31, 1979
KENNEDY AND COE
Certified Public Accountants
Salina - Kansas
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Exhibit A-I
Exhibit A-2
Exhibit A-3
Exhibit A-4
Exhibit B-1
Exhibit B-2
Exhibit B-3
Exhibit B-4
CITY OF SALINA
Sfllina, Kansas
COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS
TABLE OF CONTENTS
ACCOUNTANTS' REPORT
STATEMENT OF SOURCE AND STATUS OF FUNDS, PROGRAM YEAR
1976
STATEMENT OF SOURCE AND STATUS OF FUNDS, PROGRAM YEAR
1977
STATEMENT OF SOURCE AND STATUS OF FUNDS, PROGRAM YEAR
1978
STATEMENT OF SOURCE AND STATUS OF FUNDS, PROGRAM YEAR
1979
STATEMENT OF PROGRAM COSTS - PROGRAM YEAR 1976.
STATEMENT OF PROGRAM COSTS - PROGRAM YEAR 1977
STATEMENT OF PROGRAM COSTS - PROGRAM YEAR 1978
STATEMENT OF PROGRAM COSTS - PROGRAM YEAR 1979
ACCOUNTANTS' COMMENTS
Table of Contents
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MEMI!IoERS
KENNEDY AND COE
CERTIFIED PUBLIC ACCOUNTANTS
OF'"F"ICES IN KANSAS
SALINA
CONCORDIA
GREAT BEND
COLBY
GOQOLANC
WICHITA
O.
AMERICAN INSTITUTE
O.
CERTlI"JED
PUBLIC ACC.OUNTANTS
The Mayor and
The Board of City Commissioners:
We have examined the Statements of Source and Status of Funds and the Statements of
Program Costs applicable to the following described Community Development Grant pro-
grams of the City of Salina, Kansas, for the period ended December 31, 1979.
Program
Year
Community
Development
Grant Number
1976
1977
1978
1979
B-76-HN-20-00lS
B-77-HN-20-00lS
B-78-HN-20-00lS
B-79-HN-20-00lS
Our examination was made in accordance with the prescribed auditing standards and
audit requirements set forth in the Department of Housing and Urban Development's
Audit Guide and Standards for Community Development Block Grant Recipients and
accordingly included such tests of,the accounting records and such other auditing
procedures as we considered necessary in the circumstances.
In our opinion, the accompanying statements present fairly the disposition and sta-
tus of the Community Development funds at December 31, 1979, in conformity with
generally accepted accounting principles applied on a consistent basis and the re-
quirements of HUD. Further, costs incurred are eligible under the Grant Agreement
and are in accordance with Federal Management Circular (FMC) 74-4.
We have also reviewed compliance and internal control matters in accordance with
the provisions of the HUD audit guide for the Community Development Block Grant
Program, and have included applicable comments on pages 11 to 13.
Salina, Kansas
May 29, 1980
Respectfully submitted,
I(~ ~~
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CITI OF SALINA
Salina, Kansas
Exhibit A-I
COMMUNITI DEVELOPMENT BLOCK GRANT FUNDS
Program Year 1976, CDBG No. B-76-HN-20-00l5
STATEMENT OF SOURCE AND STATUS OF FUNDS
June 5, 1976, to December 31, 1979
Grant
Amount
Total Program Year 1976 funds allocated to recipient
Less - Unobligated funds reprogrammed to Program Year 1977,
No. B-77-HN-20-00l5
$695,000.00
46,375.00
648,625.00
569,089.13
79.535.87
569,089.13
Total adjusted Program Year 1976 resources
Less - Total Program Year 1976. funds drawn down by recipient
Funds still available from HUD -' Program Year 1976
Total Program Year 1976 funds drawn down by recipient
Program income applicable to Program Year 1976
Total Program Year 1976 funds received
Funds applied to Program Year 1976 costs - Exhibit B-1
569,089.13
569,089.13
Total Program Year 1976 funds held by recipient
Total Program Year 1976 funds available for disposition
$ 79.535.87
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CITY OF SALINA
Salina, Kansas
COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS
Program Year 1977, CDBG No. B-77-HN-20-0015
,
STATEMENT OF SOURCE AND STATUS OF FUNDS
June 5, 1977, to December 31, 1979 .
Total Program Year 1977 funds allocated to recipient
Add - Unobligated funds reprogrammed from prior program years
Program Year 1975, No. B-75-HN-20-0015 $363,000.00
Program Year 1976, No. B-76-HN-20-0015 46,375.00
Add - Surplus from urban renewal settlement
Project No. KS A-8
Project No. KS R-29
73,141. 00
133,814.00
Total adjusted Program Year 1977 resources
Less - Tora1 Program Year 1977 funds drawn down by recipient
Funds still available from HUD - Program ~ear 1977
Total Program Year 1977 funds drawn down by recipient
Program income applicable to Program Year 1977
Total Program Year 1~77 funds received
Funds applied to Program Year 1977 costs - Exhibit B-2
Total Program Year 1977 funds held by recipient
Total Program Year 1977 funds available for disposition
Exhibit A-2
Grant
Amount
$ 695,000.00
409,375.00
206,955.00
1,311,330.00
1,107,199.48
204.130.52
1,107,199.48
49,976.00
1,157,175.48
1,157,175.48
$ 204.130.52
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CITY OF SALINA
Salina, Kansas
COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS
Program Year 1978, CDBG No. B-78-HN-20-0015
STATEMENT OF SOURCE AND STATUS OF FUNDS
June 5, 1978, to December 31, 1979
Total Program Year 1978 funds allocated to recipient
Less - Total Program Year 1978 funds drawn down by recipient
Funds still available from HUD - Program Year 1978
Total Program Year 1978 funds drawn down by recipient
Program income applicable to Program Year 1978
Total Program Year 1978 funds received
Funds applied to Program Year 1978 costs - Exhibit B-3
Total Program Year 1978 funds held by recipient
Total Program Year 1978 funds available for disposition
Exhibit A-3
Grant
Amount
$452,000.00
24,310.53
427.689.47
24,310.53
55,074.81
79,385.34
79,385.34
$427.689.47
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CITY OF SALINA
Salina, Kansas
COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS
Program Year 1979, CDBG No. B-79-HN-20-00l5
STATEMENT OF SOURCE AND STATUS OF FUNDS
June 5, 1979, to December 31, 1979
Total Program Year 1979 funds allocated ,to recipient
Less - Total Program Year 1979 funds drawn down by recipient _
Net of repayment
Funds still available from ROD - Program Year 1979
Total Program Year 1979 funds drawn down by recipient
Program income applicable to Program Year 1979
Total Program Year 1979 funds received
Funds applied to program;Year 1979 costs - Exhibit B-4
Total Program Year 1979 funds held by recipient
Total Program Year 1979 funds available for disposition
Exhibit A-4
Grant
Amount
$226,000.00
226.000.00
9,058.53
9,058.53
9.058.53
$235.058.53
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CITI OF SALINA
Salina, Kansas
COMMUNITI DEVELOPMENT GRANT FUNDS -
CDBG No. B-76-HN-20-0015
Program Year 1976, Program Year Period June 5, 1976, to June 4, 1977
STATEMENT OF PROGRAM COSTS
Period Ended December 31, 1979
Program Activity and Related Projects
Public Works, Facilities, Site
Improvements
(1) Multi-use neighborhood center
(2) Urban renewal project
Authorized
Costs
Expendi-
tures,
Year
Ended
12-31-79
Expendi-
tures,
Cumulative.
to 12-31~79
$250,000.00 $ 1,971.75 $228,178.30 $
20,136.00
270,136.00 1,971.75 228,178.30
Rehabilitiation Loans and Grants
(1) C D program area 209,000.00 209,000.00
Special Projects for Elderly and
Handicapped
(1) Senior citizen activity center
building improvements 35,000.00 35,000.00
Relocation Payments and Assistance
(1) Rehabilitation loa~/grant
program 50,000.00 27,127.28 27,127.28
Planning and Management Development
Administrative
Subtotals
30,000.00 3,655.83 30,000.00
30,000.00
30,000.00
624,136.00 32,754.86 559,305.58
Contingencies and/or Unspecified Local
Option Activities 24,489.00
Totals
9,783.55
$648.625.00$32.754.86 $569.089.13 $
Exhibit B-1
Ques-
tioned
Costs
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CITY OF SALINA
Salina, Kansas
Exhibit B-2
COMMUNITY DEVELOPMENT GRANT FUNDS -
CDBG No. B-77-HN-20-0015
Program Year 1977, Program Year Period June 5, 1977 to June 4, 1978
STATEMENT OF PROGRAM COSTS
Period Ended December 31, 1979
Program Activity and Related Projects
Public Works, Facilities, Site
Improvements
(1) Construction of Centennial
Neighborhood Center $
(2) Construction of Carver
Neighborhood Center
(3) Lower Indian Rock Park
improvements
(4) Street improvements - Rail-
road crossing repairs
Clearance, Demolition, Rehabili-
tation
(1) Carver Neighborhood Center
Rehabilitation Loans and Grants
(1) C D program area _
Provision of Public Services
(1) YWCA building improvements
for handicapped accessi-
bility
(2) Equipment for existing child
care facilities
(3) Sa1avation Army building
improvements
Payment of Non-Federal Shares
(1) Match for Title III winteri-
zation grants
Planning and Management Develop-
ment
Administrative
Subtotals
Contingencies and/or Unspecified
Local Option Activities
Totals
51.361.306.00 5452.533.86 51.157.175.48 5
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Author-
ized
Costs
Expendi-
tures,
Year
Ended
12-31-79
Expendi-
tures
Cumu-
.1ative
to
12-31-79
Ques-
tioned
_ Costs
7,694.32
48 , 208 . 66
11,865.68
118,236.06
159,799.92
3,500.00
10,815.18
77 ,613.00
91,928.18
25,000.00 17,283.12
77,000.00 49,409.03
63,806.00
1,297,500.00 436,656.31
300,000.00 $ 50,467.40 $
150,000.00
245,000.00
100,000.00
795,000.00
1,000.00
252,000.00
3,500.00
34,000.00
90,000.00
127,500.00
20,000.00
15,877 . 55
288,391. 40 $
150,000.00
205,504.45
20,410.63
664,306.48
500.00
252,000.00
3,500.00
33,173.05
90,000.00
126,673.05
5,469.00
17 ,283.12
75,066.28
15,877 .55
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CITY OF SALINA
Salina, Kansas
Exhibit B-3
COMMUNITY DEVELOPMENT GRANT FUNDS -
CDBG No. B-78-HN-20-00l5
Program Year 1978, Program Year Period June 5, 1978, to June 4, 1979
STATEMENT OF PROGRAM COSTS
Period Ended December 31, 1979
Authorized
Costs
Expendi-
tures,
Year
Ended
12-31-79
Expendi-
tures,
Cumulative
to 12-31-79
Ques-
tioned
Costs
Program Activity and Related Projects
Public Works, Facilities, Site.
Improvements
(1) Separation of storm/sanitary
sewers
$200,000.00 $ $ $
267,993.56 70,851. 47 79 ,851.47
10,000.00
477,993.56 70,851.47 79,385.34
29,081. 25
$507.074.81 $70.851.47 $79.385.34 $
Rehabilitation Loans and Grants
(1) C. D. program area
Planning and Management De~elopment
Subtotals
Contingencies and/or Unspecified
Local Option Activities
Totals
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CITY OF SALINA
Salina, Kansas
COMMUNITY DEVELOPMENT GRANT FUNDS
CDBG No. B-79-HN-20-0015
Program Year 1979, Program Year Period June 5, 1979, to June 4, 1980
STATEMENT OF PROGRAM COSTS
Period Ended December 31, 1979
Program Activity and Related Projects
Separation of storm/sanitary sewers
Contingencies and/or Unspecified Local
Op'tion Activities
Totals
Authorized
Costs
$215,000.00
20,058.53
$235.058.53
Expendi-
tures
Year
Ended
12-31-79
$
$
Exhibit B-4
Ques-
tioned
Costs
$
$
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CITY OF SALINA
Salina, Kansas
COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS
ACCOUNTANTS' COMMENTS
December 31, 1979
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CITY OF SAUNA
Salina, Kansas
COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS
COMMENTS ON COMPLIANCE AND INTERNAL CONTROL
We have examined the Statements of Source and Status of Funds and the Statements of
Program Costs applicable to the Community Development Block Grant programs of the
City of Salina, Kansas, for the period ended December 31, 1979, and have issued our
report thereon dated May 29, 1980. As a part of our examination, we reviewed and
tested the City's system of internal accounting 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 evaluation is to establish a basis for
reliance thereon in determining the nature, timing, and extent of other auditing
procedures that are necessary for expressing an opinion on the financial statements.
Additionally, our examination included procedures necessary in our judgement to de-
termine compliance with regulations, policies, and procedures prescribed by HUD,
insofar as such compliance review was necessary under the provisions set forth in
Paragraph 31 of the HUD Audit Guide for Community Development Block Grant Recip-
ients, dated May, 1976.
The objective of internal accounting control is to provide reasonable, but not ab-
solute, assurance as to the safeguarding of assets against loss from unauthorized
use or disposition, and the reliability of financial records for preparing finan-
cial statements and maintaining accountability for assets. The concept of reason-
able assurance recognizes that the cost of a system of internal accounting control
should not exceed the benefits derived and also recognizes that the evaluation of
these factors necessarily requires estimates and judgments by management.
There are inherent limitations that should be recognized in considering the poten-
tial 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 proc'edures can be circumvented intentionally by man-
agement with respect either to the execution and recording of transactions or with
respect to the estimates and judgments required in the preparation of fvnancial
statements. Further, projection of any evaluation of internal accounting control
to future periods is subject to the risk that the procedures may not be adequate
because of changes in conditions, and that the degree of compliance with the pro-
cedures may deteriorate,
Based on our study and evaluation of the City's system of internal accounting con-
trol and our review of its compliance with various statutes and regulations, as pre-
scribed in Paragraph 31 of the HUD Audit Guide for Community Development Block Grant
Recipients, the City has, in our opinion, complied with HUD's statutory and regul-
atory requirements except for those conditions described in the "Findings and Recom-
mendations" section on the following pages.
FINDINGS AND RECOMMENDATIONS
Finding - The City has not reported all program income or reduced amounts requested
for payment on Form TFS 7578 by all program income received.
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Condition - We found the City had not reported all program income on their requests
for payment, and the reductions in requested reimbursements from HUD
did not equal program income, which resulted in an excess of available
funds at December 31, 1979.
Criteria - United States Treasury and HUD policies require the reporting of program
income and that available funds be $5,000 or less at the time a request
for drawdown of funds is made.
Effect - The status of Federal funds on Form TFS 7578 is understated by program
income in the amount of $17,678.34, available funds at December 31, 1979,
are in excess of $5,000, and funds of $17,678.34 at December 31, 1979, had
not been applied as a reduction of reimbursable program costs.
Cause - The sale of real estate received under the closeout agreement of the City's
Urban Renewal Fund, loan repayments applicable to the rehabilitation loan
program, and interest on the savings account of the rehabilitation loan and
grant programs resulted in 'program income which was overlooked in determining
the status of Federal funds and requests for payments.
Recommendation - We recommend the City correct the status of their Federal funds by
including the unreported program income on their next request for
payment and 'reduce their next request for payment by the amount of
program income received which'has not been used to reduce a prior
payment request.
In addition, the City should continue their effort to secure timely
information on the rehabilitation and winterization savings account
to minimize the amount of unreported income in the future.
Grantee's Response - The City will correct the next request for payment by including
all program income not reported and reduce the next request for
payment to correctly report cumulative program income as a re-
duction of the reimbursable amount.
ALLOCATION OF INDIRECT COSTS
Indirect costs were not allocated to the CDBG program during the period under review.
OTHER COMMENTS
Funds totaling $200,000 applied to the rehabilitation loan and grant programs for
1975 and 1976 were deposited in a separate savings account for the purpose of making
loans and grants to qualified individuals. The composition of the assets available
at December 31, 1979, for future loans and grants is shown below.
Amount
Savings account
Loans and grants receivable
$166,641
61,531
$228.172
Total
The total amount available exceeds the $200,000 originally deposited because interest
earned on the savings account and loans has been redeposited for use in the program.
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The City maintains a detailed listing of current loan and grant balances based on
information supplied by the financial institution having custody of the savings
account, as we recommended following our 1978 examination of the CDBG funds.
Maintenance of the detailed listing requires an excessive amount of time, and the
City is in the process of revising the system to make it more efficient.
A first mortgage is obtained by the City on rehabilitation loans upon completion of
a project; however, we noticed one' loan where a partial payment was made to the con-
tractor for work completed before a first mortgage had been obtained. We suggest
the City Attorney draft an agreement which will provide security for partial payments
made prior to completion of a project.
An escrow checking account maintained to provide funds for payment of rehabilitation
and winterization work completed by contractors is not being reconciled on a monthly
basis. We recommend ,reconciliation of the account monthly.
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