Report 2009-037 All Recommendation Responses

Report 2009-037: Department of Housing and Community Development: Housing Bond Funds Generally Have Been Awarded Promptly and in Compliance With Law, but Monitoring Continues to Need Improvement (Release Date: November 2009)

Recommendation #1 To: Housing and Community Development, Department of

To ensure that data maintained in CAPES are accurate and complete, HCD should complete its review of the accuracy of the data transferred to CAPES.

Annual Follow-Up Agency Response From October 2014

HCD developed and fully implemented its strategy to verify the data transferred to CAPES is accurate and complete. The data verification process completed during the past year, included reconciliation of financial and business relevant programmatic data to accounting records and source documents. As of June 30, 2014, the CAPES data has been reconciled successfully. The following documents (submitted via email) support the implementation of this audit finding - Attachment A "CAPES data conversion clean-up process-Oct2014", Attachment B "CBR prop 46 06-30-14 Draft 9-29-14", and Attachment C "CAPES Cumulative Prop 46 Bond Awards through 06-30-2014".

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Annual Follow-Up Agency Response From November 2013

The current remediation plan continues to move forward after some unexpected redirection of staff to other HCD mission critical priorities, during 2013. Reconciliation and validation of CAPES data elements is on-going, and will continue for another 3-6 months. The expected remediation timeframe has been adjusted to April 30, 2014.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Annual Follow-Up Agency Response From September 2012

Complete the validation of identified critical CAPES fields, including those that converted from legacy systems and those that have been entered since conversion, by documenting business rules for comparing CAPES data to source documents and by making any needed corrections to these fields. Designate specific staff, including at least one retired annuitant, to complete the data clean up.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Recommendation #2 To: Housing and Community Development, Department of

HCD should ensure that its cleanup efforts are thoroughly documented and retained for future reference.

Annual Follow-Up Agency Response From October 2014

HCD thoroughly documented the cleanup effort for future reference. HCD Admin Division staff recorded all activities during the entire process and have retained all relevant documentation (e.g., CAPES and reconciliation reports, source documents, accounting logs, multiple program reports, process and procedural steps, etc.) for this process. Both hard copy and electronic copies have been stored appropriately for future reference. Copies of this documentation will also be retained by HCD's Audit and Evaluation Division. Further, a document outlining the specific clean-up process, as well as summary reconciliation reports have been provided in this annual follow-up response; see Attachment A "CAPES data conversion clean-up process-Oct2014", Attachment B "CBR prop 46 06-30-14 Draft 9-29-14", and Attachment C "CAPES Cumulative Prop 46 Bond Awards through 06-30-2014".

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Annual Follow-Up Agency Response From November 2013

The current remediation plan continues to move forward after some unexpected redirection of staff to other HCD mission critical priorities, during 2013. Reconciliation and validation of CAPES data elements is on-going, and will continue for another 3-6 months. The expected remediation timeframe has been adjusted to April 30, 2014.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Annual Follow-Up Agency Response From September 2012

Complete the documentation of identified critical field clean up by making hard copies of:

• screen shots of identified critical database fields, and

• business rules for these fields

By ensuring staff and/or managers initial and date the hard copy documentation after verification and by storing these hard copy documents in an organized manner.

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented

Recommendation #3 To: Housing and Community Development, Department of

HCD should continue its efforts to monitor recipients of housing bond funds by following its procedures on restrictions of bond fund advances that exceed 25 percent of the total award under the CalHome Program.

1-Year Agency Response

HCD explained that CalHome Program’s ability to grant an advance in excess of 25 percent under special circumstances is important to mitigate risks to participants (occupants) who might otherwise lose an opportunity to own and occupy a home. Therefore, HCD developed procedures for granting advances in excess of 25 percent to recipients of its CalHome Program that requires the following: substantiation from the recipient, addition of the request to the tracking report, and review and approval by the manager. The request is then documented, processed, and filed in the recipient’s file. HCD believes this procedure ensures that the appropriate controls are in place. Further, HCD asserted that the two instances of noncompliance identified by the bureau were traced back to two staff members who no longer work for HCD. To ensure that subsequent infractions of the procedure do not occur, HCD indicated it has reissued the procedure to all CalHome Program staff members. Further, according to HCD, status reports from recipients of its CalHome Program are due 30 days after the end of every quarter. HCD provided us with a copy of its report-tracking log that it currently uses to record the dates it receives and reviews quarterly status reports from CalHome recipients. If the reports are late, HCD stated that its staff will call or email the contractor and note on the log who called, who the contact was, date called, and the result. It also indicated that the log will be reviewed periodically by the manager and follow-ups performed as necessary. (2011-406, p. 196)

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #4 To: Housing and Community Development, Department of

HCD should continue its efforts to monitor recipients of housing bond funds by ensuring that it receives and reviews required status reports from recipients of its CalHome Program.

1-Year Agency Response

HCD explained that CalHome Program’s ability to grant an advance in excess of 25 percent under special circumstances is important to mitigate risks to participants (occupants) who might otherwise lose an opportunity to own and occupy a home. Therefore, HCD developed procedures for granting advances in excess of 25 percent to recipients of its CalHome Program that requires the following: substantiation from the recipient, addition of the request to the tracking report, and review and approval by the manager. The request is then documented, processed, and filed in the recipient’s file. HCD believes this procedure ensures that the appropriate controls are in place. Further, HCD asserted that the two instances of noncompliance identified by the bureau were traced back to two staff members who no longer work for HCD. To ensure that subsequent infractions of the procedure do not occur, HCD indicated it has reissued the procedure to all CalHome Program staff members. Further, according to HCD, status reports from recipients of its CalHome Program are due 30 days after the end of every quarter. HCD provided us with a copy of its report-tracking log that it currently uses to record the dates it receives and reviews quarterly status reports from CalHome recipients. If the reports are late, HCD stated that its staff will call or email the contractor and note on the log who called, who the contact was, date called, and the result. It also indicated that the log will be reviewed periodically by the manager and follow-ups performed as necessary. (2011-406, p. 196)

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #5 To: Housing and Community Development, Department of

HCD should continue its efforts to monitor recipients of housing bond funds by adopting a risk-based, on site monitoring approach for its CalHome and Supportive Housing programs similar to the monitoring methodology used for the Emergency Housing Program when practical.

1-Year Agency Response

HCD stated that it has adopted a risk-based, on-site monitoring approach for its CalHome and Supportive Housing programs similar to the monitoring methodology used for the Emergency Housing Program and it provided a copy of its risk assessment tool. Further, HCD’s current manager developed and implemented a centralized tracking log for the site monitoring, which contains the name of the recipient (contractor) and the dates of the following: site visit and completion, letter of findings, and clearance of findings. In addition, on April 1, 2010, HCD began tracking this same information in the Consolidated Automated Program Enterprise System (CAPES). (2011-046, p. 197).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #6 To: Housing and Community Development, Department of

HCD should continue its efforts to monitor recipients of housing bond funds by promptly communicating concerns and findings identified during on site visits conducted for its CalHome Program and ensure that recipients provide a timely response to the concerns and findings.

1-Year Agency Response

HCD stated that it has adopted a risk-based, on-site monitoring approach for its CalHome and Supportive Housing programs similar to the monitoring methodology used for the Emergency Housing Program and it provided a copy of its risk assessment tool. Further, HCD’s current manager developed and implemented a centralized tracking log for the site monitoring, which contains the name of the recipient (contractor) and the dates of the following: site visit and completion, letter of findings, and clearance of findings. In addition, on April 1, 2010, HCD began tracking this same information in the Consolidated Automated Program Enterprise System (CAPES). (2011-046, p. 197).

California State Auditor's Assessment of 1-Year Status: Fully Implemented

Recommendation #7 To: Housing and Community Development, Department of

To ensure that sponsors are using properties for the intended purposes of the Residential Development Loan Program, the Finance Agency should obtain signed copies of recorded regulatory agreements before disbursing funds to them.

1-Year Agency Response

HCD explained that CalHome Program’s ability to grant an advance in excess of 25 percent under special circumstances is important to mitigate risks to participants (occupants) who might otherwise lose an opportunity to own and occupy a home. Therefore, HCD developed procedures for granting advances in excess of 25 percent to recipients of its CalHome Program that requires the following: substantiation from the recipient, addition of the request to the tracking report, and review and approval by the manager. The request is then documented, processed, and filed in the recipient’s file. HCD believes this procedure ensures that the appropriate controls are in place. Further, HCD asserted that the two instances of noncompliance identified by the bureau were traced back to two staff members who no longer work for HCD. To ensure that subsequent infractions of the procedure do not occur, HCD indicated it has reissued the procedure to all CalHome Program staff members. Further, according to HCD, status reports from recipients of its CalHome Program are due 30 days after the end of every quarter. HCD provided us with a copy of its report-tracking log that it currently uses to record the dates it receives and reviews quarterly status reports from CalHome recipients. If the reports are late, HCD stated that its staff will call or email the contractor and note on the log who called, who the contact was, date called, and the result. It also indicated that the log will be reviewed periodically by the manager and follow-ups performed as necessary. (2011-406, p. 196)

California State Auditor's Assessment of 1-Year Status: Fully Implemented

All Recommendations in 2009-037

Agency responses received after June 2013 are posted verbatim.