Report 2012-037 All Recommendation Responses

Report 2012-037: Department of Housing and Community Development: Awards of Housing Bond Funds Are Appropriate, but Cash Balances Are High and Monitoring Continues to Need Improvement (Release Date: October 2012)

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

To ensure that it does not exceed the maximum amount specified in state law for administrative costs for the BEGIN Program, HCD should continue to reevaluate, as appropriate, its administrative support costs projection and continue to monitor its future costs.

60-Day Agency Response

HCD currently forecasts all costs for the life of the program and has a monitoring process to inform management of the need to adjust program administration to keep costs within statutory requirements. HCD indicated that it will continue to re-evaluate its administrative support cost projections and continue to monitor actual program costs. As such, HCD explained that it will maintain documentation of these business practices as needed. (See 2013-406, p. 107)

California State Auditor's Assessment of 60-Day Status: Fully Implemented

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

Going forward, to the extent that Finance or HCD believes the State needs to issue bonds in excess of cash needs, it should document an analysis demonstrating the appropriateness of the bond sale amount and the circumstances.

60-Day Agency Response

HCD stated that it agrees with our recommendations and will fully document any special circumstance that may require bonds to be issued in excess of the immediate cash need. HCD stated that Finance requests a Bond Cash Flow Analysis (drill) twice per year. As part of HCD's processes and procedures for this drill, HCD indicated that documentation is available that demonstrates whether or not it recommends a bond sale. HCD explained that it will now document the considerations and circumstances should Finance's final bond decision not match HCD's bond recommendation. According to HCD, Finance has the full authority over this process and makes the final decision on whether or not a bond sale is initiated. HCD stated that as the need arises, it will document the decisions and considerations made during these drills and that it will maintain the documentation and present the material when necessary. (See 2013-406, p. 108)

California State Auditor's Assessment of 60-Day Status: Fully Implemented

Recommendation #3 To: Finance, Department of

Going forward, to the extent that Finance or HCD believes the State needs to issue bonds in excess of cash needs, it should document an analysis demonstrating the appropriateness of the bond sale amount and the circumstances.

60-Day Agency Response

Finance stated that it agrees with our recommendation and explained that it has significantly increased the level of analysis that it conducts regarding the level of bond program cash needs by routinely surveying departments, analyzing usage rates, and assessing future demand. Finance indicated that it is retaining these analyses so that they will be available for any future audits. (See 2013-406, p. 108)

California State Auditor's Assessment of 60-Day Status: Fully Implemented

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

HCD should continue its efforts to monitor sponsors that receive awards of housing bond funds by requiring staff to follow its procedures related to centrally tracking advances to sponsors under the CalHome Program.

6-Month Agency Response

The CalHome program has developed and implemented the use of a centralized tracking log for advance transactions. It included written policies in its CalHome Program Manual describing when and how staff are to update the tracking log for those advance transactions. HCD management continues to reiterate the importance of using these policies and procedures to ensure proper tracking.

California State Auditor's Assessment of 6-Month Status: Fully Implemented

60-Day Agency Response

HCD stated that by March 2013, it will review and update all Proposition 1C and 45 CalHome disbursements through September 2012 in the centralized system to track and log advances to ensure current, complete, and accurate information. In addition, HCD explained that current processes for management approval and tracking advances have been implemented and were communicated to all appropriate staff on or about September 27, 2012. Further, a centralized tracking log has been developed and implemented for advance transactions. HCD stated that written policies regarding when and how staff is to update the tracking log have been developed but are currently under management review and not ready for finalization. HCD explained that management will continue to reiterate the importance of using these policies and procedures to ensure proper tracking. (See 2013-406, p. 108)

California State Auditor's Assessment of 60-Day Status: Partially Implemented

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

HCD should continue its efforts to monitor sponsors that receive awards of housing bond funds by ensuring that it receives, reviews, and centrally tracks required status reports from sponsors under its CalHome and BEGIN programs.

1-Year Agency Response

CalHome programs have developed and implemented procedures that will allow program managers the ability to assess sponsor quarterly and annual reporting compliance. Monitoring of reporting compliance is a key performance indicator for both staff and management. On 11/1/12, HCD initiated the process of updating all CalHome files to collect all past due reports.

The BEGIN Program developed and implemented procedures that will allow program managers the ability to assess recipient quarterly and annual reporting compliance. Monitoring of reporting compliance is a key performance indicator for both staff and management. As of September 2013, BEGIN staff are continuting to receive and log quarterly and annual reports.

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

6-Month Agency Response

HCD recongizes that monitoring of reporting compliance is a key performance indicator for both staff and management. CalHome management has developed and implemented procedures that allow program managers the ability to assess sponsor quarterly and annual reporting compliance, and on November 1, 2012, program staff initiated the process of updating CalHome files to collect all past due reports.

BEGIN program manangement are currently reviewing procedures for the BEGIN program and expect to complete their review by September 30, 2013, and provide those finalized procedures with the one-year status report.

As of April 4, 2013, CalHome staff continue to receive and log all quarterly and annual reports, and BEGIN staff are actively contacting recipients regarding missing status reports. Additionally, due to monitoring and technical assistance efforts that began in January 2013, HCD has seen a slight increase in report submittals.

California State Auditor's Assessment of 6-Month Status: Partially Implemented

60-Day Agency Response

HCD explained that at the beginning of each quarter staff will contact their assigned sponsors via e-mail to request the required quarterly reports. HCD indicated that this will ensure that program staff are proactively requesting the information and documenting the request. Upon receipt, HCD stated that staff will review and record the report in the established centralized tracking report file. In those instances when a sponsor fails to submit a report, HCD asserted that the program manager will takes steps to obtain the report and document the response in the file and the centralized tracking report. HCD also explained that the CalHome and BEGIN programs have developed procedures, currently under review by program management, which will give program managers the ability to assess sponsor quarterly and annual reporting compliance. HCD stated that it anticipates completion of the written procedures on or before May 31, 2013. HCD also indicated that monitoring of reporting compliance is a key performance indicator for both staff and management. (See 2013-406, pp. 108-109)

California State Auditor's Assessment of 60-Day Status: Partially Implemented

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

HCD should continue its efforts to monitor sponsors that receive awards of housing bond funds by, upon finalizing monitoring procedures for the BEGIN Program, ensuring that staff implement and follow them.

60-Day Agency Response

HCD has developed a written monitoring process, including a risk assessment tool and checklist to be used for the monitoring of BEGIN projects. HCD explained that it finalized and implemented this process during October 2012. Further, HCD stated that BEGIN staff completed training by the end of November 2012 and staff are currently applying the risk assessment tool to develop the monitoring schedule. HCD indicated that once each recipient has been given a final score, they will be entered on the monitoring spreadsheet and sorted to identify those recipients that are at higher risk. HCD implemented the monitoring plan in December 2012 and scheduled its first monitoring visit for January 2013. (See 2013-406, p. 109)

California State Auditor's Assessment of 60-Day Status: Fully Implemented

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

As it relates to selecting which sponsors to monitor, HCD should continue its efforts to monitor sponsors that receive awards of housing bond funds by adopting a risk-based, on-site monitoring approach for its CalHome and BEGIN programs. For the CalHome Program, HCD should evaluate the criteria in its risk assessment tool and require staff to use a centralized tracking log for on-site monitoring visits, which should indicate when findings are resolved.

60-Day Agency Response

The BEGIN Program has developed a written monitoring process, including a risk-assessment tool and checklist to be used for the monitoring of BEGIN projects and it implemented the process in December 2012. Additionally, HCD explained that CalHome management has evaluated and approved the criteria in its risk assessment tool. Further, HCD stated that the CalHome staff and management team has developed and implemented a centralized tracking log, which will be maintained by staff for all audit findings and monitored by CalHome management to ensure resolution to findings. (See 2013-406, p. 109)

California State Auditor's Assessment of 60-Day Status: Fully Implemented

All Recommendations in 2012-037

Agency responses received after June 2013 are posted verbatim.