Audit - 1978
CITY OF SALINA
Salina, Kansas
COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS
REPORT ON EXAMINATION
December 31, 1978
KENNEDY AND COE
Certified Public Accountants
Salina - Kansas
Exhibit A-l
Exhibit A-2
Exhibit A-3
Exhibit A-4
Exhibit B-1
Exhibit B-2
Exhibit B-3
Exhibit B-4
CITY OF SALINA
Salina, Kansas
COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS
TABLE OF CONTENTS
Page
ACCOUNTANTS' REPORT
1
STATEMENT OF SOURCE AND STATUS OF FUNDS, PROGRAM YEAR
1975
2
STATEMENT OF SOURCE AND STATUS OF FUNDS, PROGRAM YEAR
1976
3
STATEMENT OF SOURCE AND STATUS OF FUNDS, PROGRAM YEAR
1977
4
STATEMENT OF SOURCE AND STATUS OF FUNDS, PROGRAM YEAR
1978
5
STATEMENT OF PROGRAM COSTS - PROGRAM YEAR 1975
6
STATEMENT OF PROGRAM COSTS - PROGRAM YEAR 1976
7
STATEMENT OF PROGRAM COSTS - PROGRAM YEAR 1977
8
STATEMENT OF PROGRAM COSTS - PROGRAM YEAR 1978
9
ACCOUNTANTS' COMMENTS
10-13
Table of Contents
KENNEDY AND COE
MEMBERS
CERTIFIED PUBLIC ACCOUNTANTS
OFFICES IN KANSAS
SALINA
CONCORDIA
G~EAT BEND
COLBY
GOOD LAND
WICH ITA
OF
AMERICAN INSTITUTE
OF
CERTlF'IED
PUBLIC ACCOUNTANTS
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, 1978.
Program
Year
Community
Development
Grant Number
1975
1976
1977
1978
B-75-HN-20-00l5
B-76-HN-20-00l5
B-77-HN-20-00l5
B- 78-HN-20-00l5
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, 1978, 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.
Respectfully submitted,
Salina, Kansas
May 23, 1979
;f~~~
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CITY OF SALINA
Salina, Kansas
Exhibit A-l
COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS
Program Year 1975, CDBG No. B-75-HN-20-00l5
STATEMENT OF SOURCE AND STATUS OF FUNDS
June 5, 1975, to December 31, 1978
Grant
Amount
Total Program Year 1975 funds allocated to recipient
Less - Unobligated funds reprogrammed to Program Year 1977,
No. B-77-HN-20-00l5
$695,000.00
363,000.00
Total adjusted Program Year 1975 resources
Less - Total Program Year 1975 funds drawn down by recipient _
Net of repayment
332,000.00
332,000.00
Funds still available from HUD - Program Year 1975
Total Program Year 1975 funds drawn down by recipient
Program income applicable to Program Year 1975
332,000.00
Total Program Year 1975 funds received
Funds applied to Program Year 1975 costs - Exhibit B-1
Total Program Year 1975 funds held by recipient
Total Program Year 1975 funds available for disposition $
332,000.00
332,000.00
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CITY OF SALINA
Salina, Kansas
Exhibit A-2
COMMUNITY 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, 1978
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
Total adjusted Program Year 1976 resources
Less - Total Program Year 1976 funds drawn down by recipient
648,625.00
536,334.27
Funds still available from HUD - Program Year 1976
112.290.73
Total Program Year 1976 funds drawn down by recipient
Program income applicable to Program Year 1976
536,334.27
Total Program Year 1976 funds received
Funds applied to Program Year 1976 cos ts - Exhibit B-2
Total Program Year 1976 funds held by recipient
Total Program Year 1976 funds available for disposition
536,334.27
536,334.27
$112.290.73
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CITY OF SALINA
Salina, Kansas
COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS
Program Year 1977, CDBG No. B-77-HN-20-00l5
STATEMENT OF SOURCE AND STATUS OF FUNDS
June 5, 1977, to December 31, 1978
Total Program Year 1977 funds allocated to recipient
Add - Unobligated funds reprogrammed from
Program Year 1975, No. B-75-HN-20-0015
Program Year 1976, No. B-76-HN-20-00l5
prior program years
$363,000.00
46,375.00
Add - Surplus from urban renewal settlement
Project No. KS A-8
Project No. KS R-29
Total adjusted Program Year 1977 resources
Less - Total Program Year 1977 funds drawn down by recipient
Funds still available from HUD - Program Year 1977
Total Program Year 1977 funds drawn down by recipient
Program income applicable to Program Year 1977
Total Program Year 1977 funds received
Funds applied to Program Year 1977 costs - Exhibit B-3
Total Program Year 1977 funds held by recipient
Total Program Year 1977 funds available for disposition
73,141.00
133,814.00
Exhibit A-3
Grant
Amount
$ 695,000.00
409,375.00
206,955.00
1,311,330.00
704,556.30
606.773.70
704,556.30
49,976.00
754,532.30
704,641. 62
49.890.68
$ 656.664.38
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CITY OF SALINA
Salina, Kansas
Exhibit A-4
COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS
Program Year 1978, CDBG No. B-78-HN-20-00l5
STATEMENT OF SOURCE AND STATUS OF FUNDS
June 5, 1978, to December 31, 1978
Grant
Amount
Total Program Year 1978 funds allocated to recipient
Less - Total Program Year 1978 funds drawn down by recipient
$452,000.00
Funds still available from HUD - Program Year 1978
452.000.00
Total Program Year 1978 funds drawn down by recipient
Program income applicable to Program Year 1978
8,533.87
Total Program Year 1978 funds received
Funds applied to Program Year 1978 costs - Exhibit B-4
Total Program Year 1978 funds held by recipient
Total Program Year 1978 funds available for disposition
8,533.87
~533.87
$452.000.00
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CITY OF SALINA
Salina, Kansas
COMMUNITY DEVELOPMENT GRANT FUNDS
CDBG No. B-75-HN-20-00l5
Program Year 1975, Program Year Period June 5, 1975, to June 4, 1976
STATEMENT OF PROGRAM COSTS
January 1, 1977, to December 31, 1978
Authorized
Cos ts
Expendi-
tures,
Period
Ended
12-31-78
Expendi-
tures,
Cumulative
to 12-31-78
Program Activity and Related Projects
Code Enforcement $ 16,500.00 $ 8,501.20 $ 16,500.00 $
Clearance, Demolition, Rehabilitation
(1) Carver Neighborhood Center 1,000.00 1,000.00 1,000.00
Rehabilitation Loans and Grants
(1) C D Program area 209,000.00 108,595.00 209,000.00
Planning and Management Development 61,000.00 4,478.27 61,000.00
Administrative 39,500.00 28,977.63 39,500.00
Subtotals 327,000.00 151,552.10 327,000.00
Contingencies and/or Unspecified Local
Option Activities 5,000.00 5,000.00 5,000.00
Totals $332.000.00 $156.552.10 $332.000.00 $
Exhibit B-1
Ques-
tioned
Cos ts
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CITY OF SALINA
Salina, Kansas
Exhibit B- 2
COMMUNITY DEVELOPMENT GRANT FUNDS -
CDBG No. B-76-HN-20-00l5
Program Year 1976, Program Year Period June 5, 1976, to June 4, 1977
STATEMENT OF PROGRAM COSTS
January 1, 1977, to December 31, 1978
Authorized
Costs
Expendi-
tures,
Period
Ended
12-31-78
Expendi-
tures, Ques-
Cumulative tioned
to 12-31-78 Costs
Program Activity and Related Projects
Public Works, Facilities, Site
Improvements
(1) Multi-use neighborhood center
(2) Urban renewal project
$250,000.00 $226,206.55 $226,206.55 $
20,136.00
270,136.00 226,206.55 226,206.55
Rehabi1itiation Loans and Grants
(1) C D program area
209,000.00 109,000.00 209,000.00
Special Projects for Elderly and
Handicapped
(1) Senior citizen activity center
building improvements
35,000.00 33,934.25 35,000.00
Relocation Payments and Assistance
(1) Rehabilitation loan/grant
program
50,000.00
Planning and Management Development 30,000.00 26,344.17 26,344.17
Administrative 30,000.00 30,000.00 30,000.00
Subtotals 624,136.00 425,484.97 526,550.72
Contingencies and/or Unspecified Local
Option Activities 24,489.00 9,783.55 9,783.55
Totals
$648.625.00 $435.268.52 $536.334.27 $
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CITY OF SALINA
Salina, Kansas
Exhibit B-3
COMMUNITY DEVELOPMENT GRANT FUNDS -
CDBG No. B-77-HN-20-00l5
Program Year 1977, Program Year Period June 5, 1977, to June 4, 1978
STATEMENT OF PROGRAM COSTS
June 5, 1977, to December 31, 1978
Program Activity and Related Projects
Public
( 1)
Works, Facilities, Site Improvements
Construction of Centennial Neighborhood
Center $
Construction of Carver Neighborhood Center
Lower Indian Rock Park improvements
Street improvements - Railroad crossing
repairs
(2)
(3 )
(4)
Clearance, Demolition, Rehabilitation
(1) Carver Neighborhood Center
Rehabilitation Loans and Grants
(1) C D program area
Provision of Public Services
(1) YWCA building improvements for handi-
capped accessibility
(2) Equipment for existing child care facilities
(3) Salvation Army building improvements
Payment of Non-Federal Shares
(1) Match for Title III winterization grants
Planning and Management Development
Administrative
Subtotals
Contingencies and/or Unspecified Local Option
Activities
Totals
300,000.00 $237,924.00 $
150,000.00 142,305.68
245,000.00 157,295.79
100,000.00 8,544.95
795,000.00 546,070.42
1,000.00 500.00
Authorized
Costs
252,000.00
3,500.00
34,000.00
90,000.00
127,500.00
20,000.00
25,000.00
Expendi-
tures,
Period
Ended
12-31-78
92,200.08
22,357.87
12,387.00
34,744.87
5,469.00
77,000.00 25,657.25
1,297,500.00 704,641.62
63,806.00
Ques-
tioned
Costs
$1.361.306.00 $704.641.62 $
-8-
CITY OF SALINA
Salina, Kansas
Exhibit B-4
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
June 5, 1978, to December 31, 1978
Authorized
Costs
Program Activity and Related Projects
Public Works, Facilities, Site Improvements
(1) Separation of storm/sanitary sewers
$200,000.00 $
Rehabilitation Loans and Grants
(1) C. D. program area
Expendi-
tures,
Period
Ended
12-31-78
229,000.00 8,533.87
Planning and Management Development
10,000.00
Subtotals
439,000.00 8,533.87
Contingencies and/or Unspecified Local Option
Activities
21,533.00
Totals
Ques-
tioned
Costs
$
$460.533.00 $8.533.87 $
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CITY OF SALINA
Salina, Kansas
COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS
ACCOUNTANTS' COMMENTS
December 31, 1978
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CITY OF SALINA
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 Grant programs of the City of
Salina, Kansas, for the period ended December 31, 1978, and have issued our report
thereon dated May 23, 1979. As a part of our examination, we reviewed and tested
the City's system of internal accounting control to the extent we considered neces-
sary 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 judgment 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 theHUD 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 procedures 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 financial
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 page.
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r.---~-----~------
The City does not maintain a detailed listing of current loan and grant balances,
although such a listing is available at the financial institution having custody
of the savings account. We believe such a listing should be maintained on a current
basis by the City to facilitate the collection of past due amounts and provide
greater control over the funds.
A revision in the City's personnel manual to meet the HUD political activity and
personal gain requirements has received approval of the U.S. Department of Housing
and Urban Development. We recommended the City develop a system to meet the require-
ments of the regulations in our report on examination for the period ended December
31, 1976.
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FINDINGS AND RECOMMENDATIONS
Finding - The City has not reduced amounts requested for payment on Form TFS 7578
by program income received.
Condition - We found the City has correctly reported program income on their CDBG
applications; however, cash received was not used to reduce requested
reimbursements from HUD.
Criteria - United States Treasury and HUD policy requires that available funds be
$10,000 or less at the time a request for draw down of funds is made.
Effect - The City had program funds available of $48,890.68 at Dl'cember 31, 1978,
which 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 resulted in program income which was overlooked in deter-
mining requests for payment subsequent to August, 1977.
Recommendation - We recommend the City reduce their next request for payment by the
cumulative amount of program income received.
Grantee's Response - They will determine the cumulative amount of program income
which should be used to reduce program costs and adjust their
next request for payment to correct the error.
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, 1978, for future loans and grants is shown below.
Amount
Savings account
Loans and grants receivable
$171,384
47,142
Total
$218.526
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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