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Audit - 1989/1990 HOUSING AUTHORITY OF THE CITY OF SALINA Salina, Kansas REPORT ON EXAMINATION OF FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA FOR THE TWELVE MONTHS ENDED Junè 30, 1990 ( SAUNDERS & ASSOCIATES Certified Public- Accountants P. O. Box 1406 630 E. 17th Ada, Oklahoma (405) 332-8548 (405) 436-5330 \ ~- Exhibit A-1 A-2 B-1 B-2 C-1 C-2 D E F G B-1 H-2 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS INDEX TO FINANCIAL STATEMENTS ,June 30, 1990 Independent Auditor's Report Balance Sheet - Low Rent Balance Sheet - Section 8 Existing Statement of Income and Expenses Low Rent Statement of Income and Expenses - Section 8 Existing Statement of Analysis of Surplus - Low Rent. Statement of Analysis of Surplus - Section 8 Existing Notes to Financial Statements. Supplemental Information: Independent Auditor's Report on Schedule of Federal Financial Assistance. Schedule of Federal Financial Assistance Schedule of Development Cost - Uncompleted Computation of Residual Receipts and Accruing Annual Contribution Computation of Annual Contributions Earned - Project Account and Operating Reserve changes Analysis of General Fund Cash - Low Rent Analysis of General Fund Cash - Section 8 Existing Schedule of Audit Adjustments. i Page 1 3 4 5 6 7 8 9 10 11 12 13 14 16 17 18 Exhibit HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS INDEX TO FINANCIAL STATEMENTS CONT'D ,June 30, 1990 Page Activities of the Housing Authority. 19 Independent Auditor's Report On Compliance Based On An Audit Of General Purpose Financial Statements Performed In Accordance With Government Auditing Standards. 20 Single Audit Report On Compliance With The General Requirements Applicable To Major Federal Financial Assistance Programs 22 Independent Auditor's Report On Compliance With Specific Requirements Applicable To Major Federal Financial Assistance Programs 24 Independent Auditor's Report On Internal Control Structure In Accordance With Government Auditing Standards 26 Independent Auditor's Report On Internal Control (Accounting & Administrative) - Based On A Study And Evaluation Made As A Part Of An Audit Of The General Purpose Financial Statements And Additional Tests Required By The Single Audit Act. 29 Schedule of Findings and Questioned Costs. 32 11 (1¡O5) 332-851¡8 S~cuuL~ ~~b~ 630 &. 17tÂ, CJ!,.ð. g3n~ H06 CLb, ð ~l(una- 71f 8:2 0 (1¡05) 1¡36-5330 Independent Auditor's Report Board of Commissioners Housing Authority of the City of Salina P.O. Box 1202 Salina, KS 67402-1202 Regional Inspector G~neral for Audit Office of the Inspector General Department of Housing and Urban Dev. Region VII, 400 Slate Avenue Kansas City, MO 66101-2406 We have audited the balance sheet of the Housing A:lthority of the City of Salina, Kansas, pertaining to its Low Rent Program and its Section 8 Program as of June 30, 1990 and the related statements of income and expenses and analysis of surplus. Our audit was made in accordance with generally accepted auditing standards, Office of Management and Budget Circular A-128, the OMB Circular supplement for Single Audits of State and Local Governments (revised) and Standard~) for Audits of Governmental Organizations, Programs, Activities and Functions (revised), issued by the U. S. General Accounting Office applicable to financial and compliance elements of an audit. These financial statements are the responsibility of the Housing Authority of the City of Salina's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by manaqement, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. As described in Note A, the authority's policy is to prepare its financial statements on the laws of accounting pra~tice:3 prescribed or permitted by the Department of Housing and Urban Development. These practices differ in some respects from generally accepted accounting principles. Accordingly, the accompanying finanrial statements are not intended to present financial position and results of operations in conformity with generally accepted accounting principles. This report is intended solely for filing with the cognizant agency and is not intended for any other purpose. 1 Independent Auditor's Report Page 2 of 2 In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Housing Authority of the City of Salina, Kansas, at June 30, 1990, and the results of its operations for the twelve months then ended, in conformity with accounting practices generally followed by local authorities applied on a basis consistent with the Department of Housing and Urban Development procedures. The supplemental financial data as listed in the Table of Contents has been tested by us as a part of our auditing procedure:3, followed in the examination of the financial statements mentioned above, and in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole, _.-~~9JJ- ~ ~~~~ SAUNDERS & ASSOCIATES Certified Public Accountants October 23, 1990 ') ¿. Exhibit A-1 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS BALANCE SHEET ,June 30, 1990 Low Rent KC-1029 Assets Cash (Exhibit H-l) Accounts receivable: Tenants HUD Other Investments Debt amortization funds - HUD annual contributions receivable Deferred charges prepaid lnsurance Development cost Development cost - contra Land, structures, and equipment $ 26,861.01 1,274.45 4,985.00 8,309.82 48,056.00 67,888.11 4,929.83 2,495,605.57 (2,495,605.57) 2,525,888.76 TOTAL ASSETS $ 2,688,192.98 ------------ ------------- Liabiliti..es and ~urplus Accounts payable: Tenants security deposits Other Accrued liabilities: Interest payable Payments in lieu of taxes Deferred credits - tenants prepaid Fixed liabilities: Permanent notes - HUD Permanent notes - FFB $ 8,642.00 4,855.86 rents 69,014.93 9,792.39 802.45 1,432,938.99 806,440.85 Total Liabilities 2,332,487.47 TOTAL LIABILITIES AND SURPLUS 355,705.51 $ 2,688,192.98 Surplus (Exhibit C-1) ------------ ------------ * The accompanying notes are an integral part of the financial !::ta tements . 3 Exhibit A-2 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS BALANCE SHEET ,June 30, 1990 Section 8 Existing KC-7015 Assets Cash (Exhibit H-2) Investments Land, structures, and equipment $ 18,315.18 28,808.96 5 , 138 . 83 52,262.97 TOTAL ASSETS $ ------------ ------------ Liabilitie_s and Surplus Accounts payable: HUD Other Total Liabilities $ 1,641.54 8,124.82 9,766.36 42,496.61 $ 52,262.97 ------------ ------------ Surplus (Exhibit C-2) TOTAL LIABILITIES AND SURPLUS * The accompanying notes are an integral part of the financial statements. 4 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS STATEMENT OF INCOME AND EXPENSES For the Twelve Months Ended June 30, 1990 Low Rent KC-1029 Q~eratin3-lDcome Dwelling rental Excess utilities Total Rental Income Interest on general fund investments Other income Total Operating Income (Exhibit F) Operati..!l9.. Expenses Administration Utilities Ordinary maintenance and operation General expense Nonroutine maintenance Total Operating Expenses (Exhibit F) Net Operating Income (Loss) Other Credits and (Charqe~ Interest on notes & bonds payable Prior year adjustments - affecting residual receipts NET INCOME (LOSS) (Exhibit C-l) Exhibit B-1 $ 104,808.97 0.00 104,808.97 6,132.50 3,999.69 114,941.16 30,243.34 5,108.13 55,686.74 32,399.29 16,770.37 140,207.87 25,266.71) 54,132.94) 5,405.01, $ ( 73,994.64) ------------ ------------- * The accompanying notes are an integral part of the financial statements. 5 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS STATEMENT OF INCOME AND EXPENSES For The Twelve Months Ended June 30, 1990 Section 8 Existing KC-7015 Qperating Income Interest earned on operating reserve investments Interest earned on general fund investments Total operating lncome QE3rating Expenses Administration Housing assistance payments Independent public accountant costs Total operating expenses Net operating income (loss) O~her Credits and (Charge~ Prior year adjustment - affecting residual receipts NET INCOME (LOSS) (Exhibit C-2) Exhibit B-2 $ 1,178.95 1,994.38 ~73.33 64,225.77 496,809.25 608.60 561,643.62 $ ( 558,470.29) 5,756.49 $ ( 564,226.78) ------------ ------------ * The accompanying notes are an integral part of the financial statements. (5 Exhibit C-l HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS STATEMENT OF ANALYSIS OF SURPLUS For the Twelve Months Ended June 30, 1990 Low Rent KC-I029 ynreserved Surplus Balance per audit June 30, 1989 Prior audit adjustments backed out $(1,379,354.05) ( 306.47) Balance per books June 30, 1989 (1,379,660.52) Net income (loss) for year ended June 30, 1990 (Exhibit B-1) Provision for operating reserve (Exhibit F) Balance at June 30, 1990 73,994.64) 15,373.62) (1,469,028.78) Operating Reserve Balance per audit June 30, 1989 Provision for operating reserve Balance at June 30, 1990 (Exhibit H-1) 56,060.59 15,373.62 71,434.21 Cumulative HUD Contributions Balance per audit June 30, 1989 Annual contribution for year ended June 30, 1990 (Exhibit F) HUD operating subsidy 1,648,204.97 67,888.11 37,207.00 TOTAL SURPLUS (Exhibit A-1) 1,753,300.08 355,705.51 Balance at June 30, 1990 $ ------------ ------------ * The accompanying notes are an integral part of the financial statements. 7 Exhibit C-2 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS STATEMENT OF ANALYSIS OF SURPLUS For the Twelve Months Ended June 30, 1990 Section 8 Existing KC-7015 Unreserved Surplus Balance per audit June 30, 1989 Net income (loss) for year ended June 30, 1990 (Exhibit B-2) Provision for operating reserve Provision for project account $(3,433,498.33) 564,226.78) 3,133.96) 62,202.54) Balance at June 30, 1990 (4,063,061.61) Opera~ing Reserve Balance per audit June 30, 1989 Provision for operating reserve Balance at June 30, 1990 (Exhibit H-2) 33,894.10 3,133.96 37,028.06 Proiect Account Balance per audit June 30, 1989 Provision for project account 656,695.13 62,202.54 Balance at June 30, 1990 718,897.67 Cumulative HUD Contributions Balance per audit June 30, 1989 Annual contribution for year ended June 30, 1990 Balance at June 30, 1990 2,781,942.03 567,690.46 3,349,632.49 TOTAL SURPLUS (Exhibit A-2) $ 42,496.61 ------------ ----------,-- * The accompanying notes are an integral part of the financial statements. 8 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS NOTES TO FINANCIAL STATEMENTS ,June 30, 1990 Note A: Summary of Significant Accounting Policies Basis of Accounting: The accounting records are maintained in accordance with the standards set forth by the U. S. Department of Housing and Urban Development for Public Housing Authorities. Note B: Land, Structures, and Equipment All costs related to the acquisition of land, original construction of the housing units, completed modernization costs, and equipment costs are carried in this account. * The accompanying notes are an integral part of the financial statements. 9 SUPPLEMENTAL INFORMATION (J¡O5) 332-85J¡8 S~£UUL~ ~~~ 630 fi>. 17tÂ, Çl.ð. ffiCMl/ H06 ßJa" <9~ 74820 (J¡05) J¡36-5330 Independent Auditor's Report on Schedule of Federal Financial Assistance Board of Commissioners Housing Authority of the City of Salina P.O. Box 1202 Salina, KS 67402-1202 Regional Inspector General for Audit Office of the Inspector General Department of Housing and Urban Dev. Region VII, 400 Slate Avenue Kansas City, MO 66101-2406 We have audited the financial statements of the Housing Authority of the City of Salina, Kansas, for the twelve month period ended June 30, 1990 and have issued our report thereon dated October 23, 1990. Our audit of such general purpose financial statements was made in accordance with generally accepted auditing standards and the standards for financial and compliance audits contained in the "Standards for Audit of Governmental Organizations, Programs, Activities, and Functions," issued by the U. S. General Accounting Office, and accordingly, included such test of the accounting records and such other auditing procedures as we considered necessary in the circumstances. Our audit was made for the purpose of forming an opinion on the general purpose financial statements taken as a whole. The accompanying schedule of federal financial assistance is presented for purpose of additional analysis and is not a required part of the general purpose financial statements. The information in that schedule has been subjected to the auditing procedures applied in the examination of the general purpose financial statements and, in our opinion, is fairly stated in all material respects in relation to the general purpose financial statements taken as a whole. ~U,-- ~.. ~¡KhJ.-/ SAUNDERS & ASSOCIATES Certified Public Accountants October 23, 1990 10 Exhibit D HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE For The Twelve Months Ended June 30, 1990 Federal Grantor - U.S. Department of Housing and Urban Development CFDA No. Grant ID No. Program Expenditures Low-Income Housing Annual contribution HUD operating subsidy Development expenditures KS-38-03 14.850 14,850 KC-1029 KC-1029 $ 67,888.11 37,207.00 Total Low Income 1/ 7,637.62 112,732.73 14.850 KC-1029 Section 8 Annual contribution 14.156 KC-7015 567,690.46 TOTAL HUD ASSISTANCE 2/$ 680,423.19 ------------ ------------ 1) At June 30, 1990, the Housing Authority of the City of Salina, Kansas was indebted to the Department of Housing and Urban Development for $1,432,938.99 and to the Federal Financing Bank for $806,440.85. Also, the Department of Housing and Urban Development has guarantees through the Annual Contribution Contract for the Housing Authority's indebtedness to the Federal Financing Bank. Debt is used to determine major or nonmajor federal program status. 2) Tenants' rents are subsidized through the Section 8 Department of Housing and Urban Development. program of the * The accompanying notes are an integral part of the financial statements. 11 Exhibit E HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS SCHEDULE OF DEVELOPMENT COST - UNCOMPLETED ..June 30, 1990 KS-38-03 Funds approved $ 1,270,607.00 Funds advanced (1,187,697.84) Interest to DOFA 69,014.93) EXCESS OF FUNDS APPROVED $ 13,894.23 ------------ ------------ Funds advanced $ 1,187,697.84 Interest to DOFA 69,014.93 Funds expended (1,257,823.57 ) EXCESS (DEFICIENCY) OF FUNDS ADVANCED (Exhibit H-l) $ ( 1,110.80) ------------ ------------ * The accompanying notes are an integral part of the financial statements. 12 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS COMPUTATION OF RESIDUAL RECEIPTS AND ACCRUING ANNUAL CONTRIBUTION For the Twelve Months Ended June 30, 1990 Low Rent KC-102..2, Computation of Residual Receipts Total Operating Income (Exhibit B-1) HUD operating subsidy Prior year adjustments - affecting residual receipts Total Operating Receipts Total Operating Expenses (Exhibit B-1) Capital expenditure Total Operating Expenditures Residual receipts per audit/PHA before provision for operating reserve Provision for operating reserve (Exhibit C-1) RESIDUAL RECEIPTS Computation of Accruing Annual Contribution Fixed annual contribution Adjustments per HUD ACCRUING ANNUAL CONTRIBUTION (Exhibit C-1) Exhibit F $ 114,941.16 37,207.00 5,405.01 157,553.17 140,207.87 1,971.68 142,179.55 15,373.62 15,373.62) $ 0.00 ------------ ------------ $ 67,888.11 0.00 $ 67,888.11 ------------ ------------ * The accompanying notes are an integral part of the financial statements. 13 Exhibit G HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS COMPUTATION OF ANNUAL CONTRIBUTIONS EARNED - PROJECT ACCOUNT AND OPERATING RESERVE CHANGES For The Twelve Months Ended June 30, 1990 Section 8 Existing KC-7015 Maximum Contribution Available - ' Maximum annual contribution authorized Project account balance at beginning of fiscal year $ 629,893.00 656,695.13 Total contribution available $ 1,286,588.13 ------------ ------------ Annual Contribution Required Total annual contribution required $ 496,809.25 71,636.99 630.00 608.60 569,684.84 1,994.38) $ 567,690.46 ------------ ------------ Housing assistance payments Administrative fee Hard-to-house fees earned Independent Public accountant costs Total funds required Less: Project receipts other than annual contributions PrQ~ect Account Change Provision for project account (Exhibit C-2) $ 62,202.54 ------------- ------------- Annual Contributions Earned Lesser of contribution available or contribution required (Exhibit C-2) $ 567,690.46 ------------- -- - - - - - --- --- * The accompanying notes are an integral part of the financial statements. 14 Exhibit G HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS COMPUTATION OF ANNUAL CONTRIBUTIONS EARNED - PROJECT ACCOUNT AND OPERATING RESERVE CHANGES CONT'D For The Twelve Months Ended June 30, 1990 Section 8 Existing KC-7015 Operating Reserve Change Operating receipts: Operating income (Exhibit B-2) Annual contribution earned Residual receipts per audit $ 3,173.33 567,690.46 570,863,79 561,643.62 5,756.49 567,400.11 3,463.68 329.72) 3,133.96 $ 3,133.96 ------------ ------------ Total operating receipts Operating expenditures: Operating expenses (Exhibit B-2) Prior year adjustments - affecting residual receipts Total operating expenditures Current audit adjustments backed out Residual receipts per PHA Provision for operating reserve * The accompanying notes are an integral part of the financial statements. 15 Exhibit H-1 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS ANALYSIS OF GENERAL FUND CASH ,June 30, 1990 Low Rent KC-1029 Composition Before Adjustments Net operating receipts retained: Operating reserve (Exhibit C-1) Tenants security deposits Excess (deficiency) in Dev. Funds advanced (Exhibit E) $ 71,434.21 8,642.00 1,110.80) Adjustments Expenses/costs not paid: Accounts payable - other Accrued liabilities - PILOT Deferred credits - tenants prepaid rents 4,855.86 9,792.39 802.45 Income not received: Accounts receivable: Tenants HUD Other 1,274.45) 4,985.00) 8,309.82) General Fund Cash Available 79,846.84 General Fund Cash Applied Investments Deferred charges - prepaid insurance 48,056.00) 4,929.83) GENERAL FUND CASH (Exhibit A-l) $ 26,861. 01 ------------ ------------ * The accompanying notes are an integral part of the financial statements. 16 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS ANALYSIS OF GENERAL FUND CASH ,June 30, 1990 Section 8 Existing KC-7015 Composition Before Adjustments Net operating receipts retained: Operating reserve (Exhibit C-2) Current audit adjustments Adjustments Expenses/costs not paid: Accounts payable: HUD Other General Fund Cash Available General Fund Cash Applied Investments GENERAL FUND CASH (Exhibit A-2) Exhibit H-2 $ 37,028.06 329.72 1,641.54 8,124.82 47,124.14 28,808.96) $ 18,315.18 ------------ ------------ * The accompanying notes are an integral part of the financial statements. 17 Audit Acct. 1111 2240 1162 3300 3300 1162 * HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS SCHEDULE OF AUDIT ADJUSTMENTS .June 30, 1990 Low Rent (1) Cash Tenants prepaid rents [To record prepaid rents deposited in the month of July] Section 8 (1) Investments Interest earned on operating reserve investments [To record interest earned on CD's for the year] ( 2 ) Interest earned on operating reserve investments Investments [To correct entry recording a withdrawal from investments as interest] The accompanying statements. an integral financial notes are 18 PHA DR. CR. Acct. $ 472.45 1111 $ 472.45 2240 $2,322.98 1162 $2,322.98 6010 $1,993.26 6010 1162 $1,993.26 part of the HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS ACTIVITIES OF THE HOUSING AUTHORITY At June 30, 1990 the Housing Authority of the City had the following units under management: of Salina, Kansas Low Rent 100 Section 8 216 TOTAL UNITS 316 Subsequent to June 30, 1990, the Housing Authority of the City of Salina, Kansas, has received notification from HUD for the addition of the following units: Section 8 Existing 20 Section 8 Voucher TOTAL ~9 49 * The accompanying notes are an integral part of the financial statements. 19 (405) 332,8548 S~cuuL~ ~~~ 630 &. 17~, ÇE.ð. ffi<= H06 éìk, ð~ 7-'1820 (405) 436,5330 Independent Auditor's Report on Compliance Based On An Audit of General Purpose Financial Statements Performed In Accordance With Government Auditing Standards Board of Commissioners Housing Authority of the City of Salina P.O. Box 1202 Salina, KS 67402-1202 Regional Inspector General for Audit Office of the Inspector General Department of Housing and Urban Dev. Region VII, 400 Slate Avenue Kansas City, MO 66101-2406 We have audited the financial statements of the Housing Authority of the City of Salina, Kansas, for the twelve months ended June 30, 1990, and have issued our report thereon dated October 23, 1990. Our audit was made in accordance with generally accepted auditing standards; the General Accounting Office Standards for Audit of Governmental Organizations, Programs, Activities and Functions, as they pertain to financial and compliance audits; the provisions of the Office of Management and Budget's (OMB) Compliance Supplement for Si~ Audits of State and Local Governments; and the provisions of OMB's Circular A-128, "Audits of State and Local Governments." These standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. Compliance with laws, regulations, contracts, and grants applicable to the Housing Authority is the responsibility of the Housing Authority of the City of Salina, Kansas. As part of obtaining reasonable assurance about whether the general purpose financial statements are free of material misstatement, we performed tests of the Housing Authority's compliance with certain provisions of laws, regulations, contracts, and grants. However, our objective was not to provide an opinion on overall compliance with such provisions. The results of our tests indicate that, with respect to the items tested, the Housing Authority of the City of Salina, Kansas, complied, in all material respects, with the provisions referred to in the preceding paragraph. With respect to items not tested, nothing came to our attention that caused us to believe that the Hou~;ing Authority had not complied, in all material respects, with those provisions. 20 Page 2 of 2 This report is intended for the information of the audit committee, 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. L~Q.M '1> ~~~'1ri- SAUNDERS & ASSOCIATES Certified Public Accountants October 23, 1990 21 (J¡O5) 332,85J¡8 S~cuuL~ ~~~ 630 &. 17tß" Ç,Rð. 93<= H06 ßk, <9 ~ 71f 8 2 0 (J¡05) J¡36,5330 Single Audit Report on Compliance with the General Requirements Applicable to Major Federal Financial Assistance Programs Board of Commissioners Housing Authority of the City of Salina P.O. Box 1202 Salina, KS 67402-1202 Regional Inspector General for Audit Office of the Inspector General Department of Housing and Urban Dev. Region VII, 400 Slate Avenue Kansas City, MO 66101-2406 We have applied procedures to test the Housing Authority of the City of Salina, Kansas, compliance with the following requirements applicable to each of its major federal financial assistance programs, which are identified in the schedule of federal financial assistance. for the twelve months ended June 30, 1990: (1) Political activity (2) Davis-Bacon Act Compliance (3) Civil Rights (4) Cash management (5) Real property acquisition and relocation (6) Federal financial reports Our study included all the control categories listed above which are applicable to this Housing Authority. Our procedures were limited to the applicable procedures described in the Office of Management and Budget's Compliance Supplement for Single Audits of State and Local Governments. Our procedures were substantially less in scope than an audit, the objective of which is the expression of an opinion on the Housing Authority of the City of Salina, Kansas, compliance with the requirements listed in the preceding paragraph. Accordingly, we 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 items not tested, nothing came to our attention that caused us to believe that the Housing Authority of the City of Salina, Kansas, had not complied, in all material respects, with those requirements. However, 22 Page 2 of 2 the results of our procedures disclosed immaterial instances of noncompliance with those requirements, which are de~)cribed in the accompanying schedule of findings and questioned costs. This report is intended for the information of the audit committee, 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. ~~~~. SAUNDERS & ASSOCIATES Certified Public Accountants October 23, 1990 23 (-'105) 332-85-'18 S~cuuL~ ~~~ 630 &. 17~, 92.(9. ffiOð</ H06 CîJa" (9 ~ 711820 (-'105) -'136,5330 Independent Auditor's Report on Compliance With Specific Requirements Applicable to Major Federal Financial Assistance Programs Board of Commissioners Housing Authority of the City of Salina P.O. Box 1202 Salina, KS 67402-1202 Regional Inspector General for Audit Office of the Inspector General Department of Housing and Urban Dev. Region VII, 400 Slate Avenue Kansas City, MO 66101-2406 We have audited the Housing Authority of the City of Sôlina, Kansas, compliance with the requirements governing types of services allowed or unallowed; eligibility, special tests and provisions, matching, level of effort, or ear-marking; reporting, claims for advances and reimbursements; and amounts claimed or used for matching that are applicable to each of its major federal financial assistance programs, which are identified in the accompanying schedule of federal financial assistance, for the twelve months ended June 30, 1990. The management of Housing Authority of the City of Salina, Kansas, is responsible for compliance with those requirements. Our responsibility is to express an opinion on compliance with those requirements based on our audit. We conducted our audit in accordance with generally accepted auditing standards, Government Auditing Standard~issued by the Comptroller General of the United States, and Office of Management and Budget Circular A-128, "Audit of State and Local Governments." Those standards and OMB Circular A-128 require that we plan and perform the audit to obtain reasonable assurance about whether material noncompliance with the requirements referred to above occurred. An audit includes examining, on a test basis, evidence about compliance with those requirements. We believe that our audit provides a reasonable basis for our opinion. I The results of our audit procedures disclosed immaterial instances of noncompliance with the requirements referred to above, which are described in the accompanying schedule of findings Ôlnd questioned costs. We considered these instances of noncompliance in forming our opinion on compliance, which is expressed in the following paragraph. 24 Page 2 of 2 In our opinion, Housing Authority of the City of Salina, Kansas, complied, in all material respects, with the requirements governing types of services allowed or unallowed; eligibility; special tests and provisions, matching, level of effort, or earmarking; reporting; claims for advances and reimbursements; and amounts claimed or used for matching that are applicable to each of its major federal financi~l assistance programs for the twelve months ended June 30, 1990. ~l , ,} chhÞ SAUNDERS & ASSOCIATES Certified Public Accountants ~ C~~~U&~.- October 23, 1990 25 (J¡O5) 332,85J¡8 S~cuuL~ ~~~ 630 {i;. 17úl, Çl.ð, 93<=- H06 ctb, ð~ 711820 (J¡05) J¡36-5330 Independent Auditor's Report on Internal Control :3tructure In Accordance With Government Auditing Standards Board of Commissioners Housing Authority of the City of Salina P.O. Box 1202 Salina, KS 67402-1202 Regional Inspector General for Audit Office of the Inspector General Department of Housing and Urban Dev. Region VII, 400 Slate Avenue Kansas City, MO 66101-2406 We have audited the general purpose financial statements of the Housing Authority of the City of Salina, Kansas, as of and for the twelve months ended June 30, 1990, and have issued our report thereon dated October 23, 1990. We conducted our audit in accordance with generally accepted auditing standards and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the general purpose financial statements are free of material misstatement. In planning and performing our audit of the general purpose financial statements of the Housing Authority, for the twelve months ended June 30, 1990 we considered its internal control structure in order to determine our auditing procedures for the purpose of expressing our opinion on the general purpose financial statements and not to provide assurance on the internal control structure. The management of the Housing Authority 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 policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not' absolute, assurance that assets êLre safeguarded against loss from unauthorized use or disposition, and that transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of general purpose financial statements in accordance ~rith generally accepted accounting principles. Because of inherent limitations in 26 Page 2 of 3 any internal control structure, errors or irregularities 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 because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. For the purpose of this report, we have classified the significant internal control structure policies and procedures in the following categories: (1) Payroll/Personnel (2) Revenue/Cash Receipts/Receivables (3) Expenditures/Cash Disbursements/Payables (4) Property and Equipment For all of the applicable control structure categories listed above, we obtained an understanding of the design of relevant policies and procedures and whether they have been placed in operation, and we assessed control risk. We noted certain matters involving the internal control structure and its operation that we consider to be reportable conditions under standards established by the American Institute of Certified Public Accountants. Reportable conditions involve matters coming to our attention relating to significant deficiencies in the design or operation of the internal control structure that, in our judgment, could adversely affect the entity's ability to record, process, summarize, and report financial data consistent with the assertions of management in the financial statements. Due to the limited number of personnel involved in the operation of the fiscal office, most of those aspects of internal accounting control which rely upon an adequate segregation of duties, are for all practical purposes, missing in the Housing Authority's system. However, we recognize that the Housing Authority's administration is not large enough to make the employment of additional persons for the purpose of segrega~ing duties practicable from a cost-benefit standpoint. A material weakness is a reportable condition in which the design or 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 may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. 27 Page 3 of 3 Our consideration of the internal control structure necessarily disclose all matters in the internal control that might be reportable conditions and, accordingly, necessarily disclose all reportable conditions that considered to be material weaknesses as defined above. believe none of the reportable conditions described material weakness. would not structure would not are also However, we above is a This report is intended for the information of the audit committee, 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. ~ SAUNDERS & ASSOCIATES Certified Public Accountants October 23, 1990 28 (1tO5) 332-851t8 S~cuuL~ ~~~ 630 &. 17~, çæ.ð, ill=- H06 ctIa., ð ~ 7118:2 0 (1tO5) 1t36,5330 Independent Auditor's Report On Internal Control (Accounting And Administrative) - Based On A Study And Evaluation Made As A Part Of An Audit Of The General Purpose Financial Statements And Additional Tests Required By The Single Audit Act Board of Colnmissioners Housing Authority of the City of Salina P.O. Box 1202 Salina, KS 67402-1202 Regional Inspector General for Audit Office of the Inspector General Department of Housing and Urban Dev. Region VII, 400 Slate Avenue Kansas City, MO 66101-2406 We have audited the general purpose financial statements of the Housing Authority of the City of Salina, Kansas, for the twelve months ended June 30, 1990 and have issued our report thereon dated October 23, 1990. As a part of our audit, we made a study and evaluation of the internal control systems, including applicable internal administrative controls, used in administering federal financial assistance programs to the extent we considered necessary to evaluate the systems as required by generally accepted auditing standards, Government Auditing Standards, issued by the Comptroller General of the United States, the Single Audit Act of 1984, and the provisions of Office of Management and Budget Circular A-128, "Audits of State and Local Governments." For the purpose of this report, we have classified the significant internal controls into the following categories: (1) Payroll/Personnel (2) Revenue/Cash Receipts/Receivables (3) Expenditures/Cash disbursements (4) Property and Equipment Further, we have classified the significant administrative controls designed to provide reasonable assurance that federal programs are being managed in ~ompliance with laws and regulations into the following categories: (1) Political activity (2) Davis-Bacon Act compliance (3) Civi 1 Rights (4) Cash management (5) Eligibilities (6) Real property acquisition and relocation (7) Federal financial reports (8) Reporting (9) Special tests & provisions 29 Page 2 of 3 The management of the Housing Authority is re~)Ponsible for establishing and maintaining internal control systems used in administering federal financial assistance programs. In fulfilling that responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of control procedures. The objectives of internal control systems used in administering federal financial assistance programs are to provide management with reasonable, but not absolute, assurance that, with respect to federal financial assistance programs, resource use is consistent with laws, regulations, and policies; resources are safeguarded against waste, loss, and misuse; and reliable data are obtained, maintained, and fairly disclosed in reports. Because of inherent limitations in any system of internal accounting and administrative controls used in administering federal financial assistance programs, errors or irregularities may nevertheless occur and not be detected. Also, projection of any evaluation of the systems to future periods is subject to the risk that procedures may become inadequate because of changes in conditions or that the degree of compliance with the procedures may deteriorate. Our study included all of the applicable control categories listed above. During the twelve months ended June 30, 1990, the Housing Authority of the City of Salina, Kansas, expended 100 percent of its total federal financial assistance under major federal financial assistance programs. With respect to internal control systems used in administering major federal financial assistance programs, our study and evaluation included considering the types of errors and irregularities that could occur, determining the internal control procedures that should prevent or detect such errors and irregularities, determining whether the necessary procedures are prescribed and are being followed satisfactorily, and evaluating any weaknesses. Our study and evaluation was more limited than would be necessary to express an opinion on the internal control systems used in administering the federal financial assistance programs of the Housing Authority. Accordingly, we do not express an opinion on the internal control systems used in administering the federal financial assistance programs of the Housing Authority of the City of Salina, Kansas. However, our study and evaluation and our audit disclosed the following conditions that we believe result in more than a relatively low risk that errors or irregularities in amounts that would be material to a federal financial assistance program amy occur and not be detected within a timely period. 30 Page 3 of 3 Due to the limited number of personnel involved in the operation of the fiscal office, most of those aspects of internal accounting control which rely upon an adequate segregation of duties, are for all practical purposes, missing in the Housing Authority's system. However, we recognize that the Housing Authority's administration is not large enough to make the employment of additional persons for the purpose of segregating duties practicable from ö cost-benefit standpoint. These conditions were considered in determining the nature, timing, and extent of the audit tests to be applied in (1) our audit of the 1990 general purpose financial statements and (2) our audit and review of the Salina Housing Authority's compliance with laws and regulations dated October 23, 1990. This report is intended solely for the use of mana~rement and the Department of Housing and Urban Development and should not be used for any other purpose. This restriction is not intended to limit the distribution of this report, which, upon acceptance by the Housing Authority of the City of Salina, Kansas, is a matter of public record. ~ SAUNDERS & ASSOCIATES Certified Public Accountants October 23, 1990 31 HOUSING AUTHORITY OF THE CITY OF SALINA, KANSAS SCHEDULE OF FIND I NGS AND QUEST I ONED CO~::TS ,June 30, 1990 Prior Audit Findings 1. Annual Unit Inspections: During our tenant file examination we did not note any inspections that had not been performed during the current year. This finding is cleared. 2. Excessive Accounts Receivable - Tenants: The balance of accounts receivable - tenants did not appear to be excessive at June 30, 1990. This finding is cleared. Current Audit Findings None. * The accompanying statements. notes are an integral part of the financial 32