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Audit - 1980 CITY OF SALINA Salina, Kansas COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS REPORT ON EXAMINATION December 31, 1980 KENNEDY AND COE Certified Public Accountants Salina, Kansas CITY OF SALINA Salina, Kansas COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS TABLE OF CONTENTS Page ACCOUNTANTS I REPORT 1 Exhibit A-l STATEMENT OF SOURCE AND STATUS OF FUNDS, PROGRAM YEAR 1976 2 Exhibit A-2 STATEMENT OF SOURCE AND STATUS OF FUNDS, PROGRAM YEAR 1977 3 Exhibit A-3 STATEMENT OF SOURCE AND STATUS OF FUNDS, PROGRAM YEAR 1978 4 Exhib it A-4 STATEMENT OF SOURCE AND STATUS OF FUNDS, PROGRAM YEAR 1979 5 Exhibit B-1 STATEMENT OF PROGRAM COSTS - PROGRAM YEAR 1976 6 Exhibit B-2 STATEMENT OF PROGRAM COSTS - PROGRAM YEAR 1977 7-8 Exhibit B-3 STATEMENT OF PROGRAM COSTS - PROGRAM YEAR 1978 9 Exhibit B-4 STATEMENT OF PROGRAM COSTS - PROGRAM YEAR 1979 10 ACCOUNTili1\!TS I COMMENT S 11-14 Table of Contents KENNEDY AND Co E CERTIFIED PUBLIC ACCOUNTANTS HOME OFFICE: OFFICES IN P.O BOX 1179 KANSAS SALINA, KANSAS 67401 NE8RASKA OKLAHOMA COLORADO 913-825-1561 The Hayor ;md 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 programs of the City of Salina, Kansas, for the period ended December 31, 1980. Program Year Community Development Grant Number 1976 1977 1978 1979 B-76-HN-20-00l5 B-77-HN-20-00l5 B-78-HN-20-00l5 B-79-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 status of the Community Development funds at December 31, 1980, in conformity with generally accepted accounting principles applied on a consistent basis and the requirements 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 Hun audit guide for the Community Development Block Grant Program, and have included applicable comments on pages 11 to 14. Respectfully submitted, Salina, Kansas February 26, 1981 K~ ~. (l-p- -1- MEMBERS OF, AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS SEe AND PRIVATE COMPANIES PRACTICE SECTIONS OF AICPA CITY OF SALINA Salina, Kansas Exhibit A-l CO~IUNITY DEVELOPMENT BLOCK GRANT FUNDS Program Year 1976, CDBG No. B-76-HN-20-0015 STATEMENT OF SOURCE AND STATUS OF FUNDS June 5, 1976, to December 31, 1980 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 do\m by recipient 648,625.00 643,102.59 Funds still available from HUD - Program Year 1976 5.522.41 Total Program Year 1976 funds drawn down by recipient Program income applicable to Program Year 1976 643,102.59 Total Program Year 1976 funds received Funds applied to Program Year 1976 costs - Exhibit B-1 Total Program Year 1976 funds held by recipient Total Program Year 1976 funds available for disposition 643,102.59 643,102.59 $ 5.522.41 -2- 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, 1980 Total Program year 1977 funds allocated to reclplent Add - Unobligated funds reprogrammed from prior program years Program Year 1975, No. B-75-HN-20-00l5 $363,000.00 Program Year 1976, No. B-76-HN-20-00l5 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 - Total Program Year 1977 funds drawn down by recipient Funds still available from BUD - 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-2 Total Program Year 1977 funds held by recipient Total Program Year 1977 funds available for disposition Exhibit A-2 Grant Amoun t $ 695,000.00 409,375.00 206,000.00 1,311,330.00 1,282,554.31 28.775.69 1,282,554.31 49,976.00 1,332,530.31 1,332,530.31 _$ 28.775.69 -3- CITY OF SALINA Salina, Kansas Exhibit A-3 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, 1980 Grant Amount Total Program Year 1978 funds allocated to recipient Less - Total Program Year 1978 funds drawn dO\ill by recipient $452,000.00 426,350.02 Funds still available from HUD - Program Year 1978 _ 25,649.98 Total Program Year 1978 funds dra\ill down by recipient Program income applicable to Program Year 1978 426,350.02 16,081. 25 Total Program Year 1978 funds received Funds applied to Program Year 1978 costs - Exhib it B-3 Total Program Year 1978 funds held by recipient Total Program Year 1978 funds available for disposition 442,431. 77 442,431. 77 lfl,649.98 -4- CITY OF SALINA Salina, Kansas Exhibit A-4 COMNUNITY DEVELOPMENT BLOCK GRANT FUNDS Program Year 1979, CDBG No. B-79-HN-20-00l5 STATEHENT OF SOURCE AND STATUS OF FUNDS June 5, 1979, to December 31, 1980 Gr an t Amount Total Program Year 1979 funds allocated to recipient Less - Total Program Year 1979 funds drawn down by recipient $226,000.00 103,255.14 Funds still available from BUD - Program Year 1979 l22,744.8Q Total Program Year 1979 funds drawn down by recipient Program income applicable to Program Year 1979 103,255.14 23,558.33 Total Program Year 1979 funds received Funds applied to Program Year 1979 costs - Exhib it B-4 Total Program Year 1979 funds held by recipient Total Pro gram Year 1979 funds available for disposition 126,813.47 126,813.47 $122,744.86 -5- CITY OF SALINA Salina, Kansas Exhibit B-1 CO~~UNITY 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 Period Ended December 31, 1980 Program Activity and Related Projects Public Works, Facilities, Site Improvements (1) Nulti-use neighborhood center (2) Urban renewal project Rehabilitation Loans and Grants (1) C D program area Special Projects for Elderly and Handicapped (1) Senior citizen activity center building improvements Relocation Payments and Assistance (1) Rehabilitation loan/grant program Authorized Costs $278,605.59 16,326.26 --T94:-9-3T~85 228,405.52 ----- 35,000.00 ----1~,_2 2 6~l~ Expendi- tures, Year Ended 12-31-80 $49,171.89 49,171.89 19,405.52 Expendi- tures, CumuLI t i ve to 12--31-80 $277,350.19 16,326.26 --2 9:f;676. 45 228,405.52 35,000.00 1,099.27 28,226.55 --- Ques- tioned Costs $ Planning and Management Development 30,000.00 4,336.78 27,794.07 ~._._--~ ~-~-- Administrative 30,000.00 30,000.00 ~--_._~- Subtotals 646,563.92 74,013.46 643,102.59 Con t ingenc ies and/or Unspecified Local Option Activities __2,0~~_ ~._- --- Totals ~8,625,~ _~liLLClLl.__L& 8643.102.59 $ -~----- ~-- -6- CITY OF SALINA Salina, Kansas Exhibit B-2 CO~lUNITY DEVELOPNENT GRANT FUNDS - CDBG No. B-77-HN-20-00l5 Program Year 1977, Program Year Period June 5, 1977 to June 4, 1978 STATEHENT OF PROGRAM COSTS Period Ended December 31, 1980 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) Salvation Army building improvements Author- ized Costs Expendi- tures, Year Ended 12-31-80 Expendi- tures, Cumu- lat:Lve to 12-31-80 Ques- tioned Costs $ 304,000.00 $ 1,737.75 $ 304,000.00 $ 150,000.00 150,000.00 245,000.00 33,853.40 239,473.16 ___J_OO, O_()Q~go ___2L,--~~~,-~~ 77 ,431.13 799,000.00 92,611.65 770,904.29 --~--~ -- 500.61 _~J"Q--,-54 __iJ~145. 54 5,359.48 35,017.22 90,000.00 ~_.._._--- 130,376.70 1,844.17 1,844.17 Payment of Non-Federal Shares (1) Match for Title III winteri- za t ion gran t s ___~gOQ. 00 _ 14-,--2)l~~ Planning and Management Develop- ment 17,283.15 500.61 3l7,145.5~ 5,359.48 35,017.22 90,000.00 -~~--- 130,376.70 20,000.00 17,283.15 -7- CITY OF SALINA Salina, K;:msas Exhibit B-2 (Contd.) COMMUNITY DEVELOPNENT GRANT FUNDS - CDBG No. B-77-llli-20-00l5 Program Year 1977, Program Year Period June 5, 1977 to June 4, 1978 STATEHENT OF PROCH-AN COSTS Period Ended December 31, 1980 Author- ized Costs Expendi- t ure s , Year Ended 12-31-80 Program Activity and Related Projects (Contd. ) Admin is t rat i ve$~~----.ZL, 000~9_Q_ l-=-~.l?1~!+2 $ Subtotals Contingencies and/or Unspecified Local Option Activities Totals Expendi- tures, Cumu- lative to 12-31-80 1,361,306.00 175,354.83 1,332,530.31 76,320.02 $ Ques- t ioned Costs $l--L16~306.00 $175,354.83 $1,332,530.31 _~~__ --~-~------ ._~- -- -8- CITY OF SALINA Salina, Kansas Exhibit B-3 CO~IUNITY DEVELOPMENT GRANT FUNDS - CDBG No. B-78-HN-20-0015 Program Year 1978, Program Year Period June 5, 1978, to June 4, 1979 STATEHENT OF PROGRAl'[ COSTS Period Ended December 31, 1980 Authorized Costs Expendi- tures, Year Ended 12-31-80 Expendi- tures, Cumulative to 12-31-80 Ques- tioned Costs Program Activity and Related Projects Public Works, Facilities, Site Improvements (1) Separation of storm/sanitary sewers $200,000.00 $200,000.00 $200,000.00 $ Rehabilitation Loans and Grants (1) C D Program area 247,081.25 171 , 580 . 30 242, '431. 77 Planning and Management Develop- ment 21,000.00 Subtotals 468,081. 25 371,580.30 442 ,'~31. 77 Contingencies and/or Unspecified Local Option Activities Totals _$468.081.25$371,580.30 $442,1+31.77 $ -9- 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, 1980 Authorized Costs Program Activity and Related Projects Expendi- tures, Year Ended 12-31-80 Expendi- tures, Cumulative to 12--31-80 Exhib it B-4 Ques- tioned Costs Separation of storm/sanitary sewers $215,000.00 $126,813.47 $126,813.47 $ Contingencies and/or Unspecified Local Option Activities ~~l_~_~)] Totals $249,558.33 l126,813.47 $126.813.47 -10- CITY OF SALINA Salina, Kansas COMMUNITY DEVELOPMENT BLOCK GRANT FUNDS ACCOUNTANTS' CONrlENTS December 31, 1980 -11- CITY OF SALINA Salina, Kansas CO~frlUNITY DEVELOPMENT BLOCK GRANT FUNDS CO~~ENTS ON COHPLIANCE AND INTERNAL CONTROL He have examined the Statements of Source and St;1tus of Funds ;:md 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, 1980, and have issued our report thereon dated February 26, 1981. As a part of our examination, we reviewed and tested the City's system of internal accounting control to the extent we con- sidered necessary to evaluate the system as required by generally accepted auditing standards. Under these standards, the purpose of such evaluation is i~O 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 determine compliance with regulations, policies, and procedures pre- scribed 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 Recipients, 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 financial statements and maintaining accountability for assets. The concept of reasonable 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 potential effectiveness of any system of internal accounting control. In the performance of most control procedures, errors can result from misunderstanding of instructions, mistakes of judgment, carelessness, or other personal factors. Control procedures whose effectiveness depends upon segregation of duties can be circumvented by collusion. Similarly, control procedures can be circumvented intentionally by 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 ,vith HUD' s statutory and regula- tory requirements except for those conditions described in the "Findings and Recom- mendations" section on the following pages. FINDINGS AND RECO~frlENDATIONS Finding - The City has not reported all program income or reduced amounts requested for payment on Form TFS 7578 by all program income received. -12- Condition - We found the City had not reported $1,000 program income from the sale of land acquired in connection with the relocation of a family. Criteria - United States Treasury and HUD policies require the reporting of program income. Effect - The status of Federal funds on Form TFS 7578 is understated by program income in the amount of $1,000, "hich had not been appli_ed as a reduction of reimbursable program costs. Cause - Proceeds from the sale of real estate purchased under the City's relocation program was overlooked in determining the status of Federal funds and re- quests 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 ",hich has not been used to reduce a prior payment request. 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 program income as a reduction of the reimbursable amount. ALLOCATION OF INDIRECT COSTS Indirect costs were not allocated to the CDBG program during the period under review. OTHER COl-!}1ENT S REHABILITATION LOAN AND GRANT PROGRfu~S 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, 1980, for future loans and grants .LS shmm below. Amount Savings account Loans receivable $174,503 66,140 Total $240.643 The total amount available exceeds the $200,000 originally deposited because interest received on the savings account and loans has been redeposited for use in the pro- gram as sho\m in the following schedule for the year 1980. Assets available, December 31, 1979 Interest received Savings account Loans $228,,172 $11,153 1,318 12,,471 Assets Available, December 31, 1980 $240.643 -~_._- -13- The City granted twenty-seven loans totaling $21,239 during the year ended December 31, 1980 and received loan repayments totaling $16,630. Interest received and loan repayments totaling $38,994 through December 31, 1979, were previously considered program income and included with authorized costs for rehabilitation loans and grants in program year 1978; however, to clarify the pres- entation of authorized costs interest and loan repayments have been eliminated from authorized costs for 1980 and accounted for as changes in the separate savings account as explained above. Program income in the amount of $89,616 from the sale of land received upon dissolution of the City's urban renewal program and other program income has been added to authorized costs in accordance with HUD policy. ESCROH CHECKING ACCOUNT 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. C~IULATIVE EXPENDITURES Certain reclassifications in the amounts shmm as cumulative expenditures at December 31, 1979 have been made to reflect changes in the use of funds available. -14-