Report 2018-037 Recommendation 18 Responses
Report 2018-037: California Department of Housing and Community Development: Its Oversight of Housing Bond Funds Remains Inconsistent (Release Date: September 2018)
Recommendation #18 To: Housing and Community Development, Department of
To ensure that it complies with state law, prudently uses administrative funding, and promotes transparency, HCD should calculate and retain only funds equal to its actual administrative costs in instances when it does not disburse awarded funds to a recipient and subsequently grants the funds to another recipient.
Annual Follow-Up Agency Response From October 2023
HCD believes that the steps described on the last response addresses the CSA Recommendations. As mentioned prior. HCD created the FMR which tracks bond program appropriations by administrative and local assistance budget, encumbrance, and actual expenditures. That process has identified errors in erroneously revised budgets that conflicted with bond program administrative caps. and HCD has resolved the administrative cap issue HCD processed budget revisions to comply with state law as mentioned in the prior responses. Therefore, HCD believes the current process timely addresses CSA's concerns and additional procedures would not be necessary to materially improve the process.
- Completion Date: September 2022
California State Auditor's Assessment of Annual Follow-Up Status: Pending
HCD previously provided us with an example of its Financial Management Report, which shows the actual amount used compared to the administrative limits. HCD also provided a budget letter that discusses how to make budget adjustments. However, neither the Financial Management Report nor the budget letter makes clear how HCD should calculate and retain only funds equal to its actual administrative costs in instances when it does not disburse awarded funds to a recipient and subsequently grants the funds to another recipient.
- Auditee did not address all aspects of the recommendation
Annual Follow-Up Agency Response From September 2022
To address administrative cap issues California Department of Housing and Community Development (HCD) has taken two steps which involve creating a Financial Management Report (FMR) to identify bond program local assistance and administrative appropriations and submitting budget revisions to realign local assistance and administrative appropriations with applicable bond administrative caps. HCD created the FMR which tracks bond program appropriations by administrative and local assistance budget, encumbrance, and actual expenditures. HCD found that certain programs had erroneously revised budgets that conflicted with bond program administrative caps. To resolve the administrative cap issue HCD processed budget revisions to comply with state law.
- Completion Date: August 2022
California State Auditor's Assessment of Annual Follow-Up Status: Pending
HCD provided us with an example of its Financial Management Report, which shows the actual amount used compared to the administrative limits. HCD also provided a budget letter that discusses how to make budget adjustments. However, neither the Financial Management Report nor the budget letter makes clear how HCD should calculate and retain only funds equal to its actual administrative costs in instances when it does not disburse awarded funds to a recipient and subsequently grants the funds to another recipient.
- Auditee did not address all aspects of the recommendation
Annual Follow-Up Agency Response From September 2021
To address administrative cap issues California Department of Housing and Community Development (HCD) has taken two steps which involve creating a Financial Management Report (FMR) to identify bond program local assistance and administrative appropriations and submitting budget revisions to realign local assistance and administrative appropriations with applicable bond administrative caps. HCD created the FMR which tracks bond program appropriations by administrative and local assistance budget, encumbrance, and actual expenditures. HCD found that certain programs had erroneously revised budgets that conflicted with bond program administrative caps. To resolve the administrative cap issue HCD processed budget revisions to comply with state law.
- Estimated Completion Date: 6/30/2022
California State Auditor's Assessment of Annual Follow-Up Status: Pending
Annual Follow-Up Agency Response From September 2020
HCD has entered into a financial consulting service contract to develop and improve upon processes to reconcile financial data in CAPES. This service contract will be used to implement best practices and develop financial tools and procedures to streamline complex budgetary controls, including bond management, loan management, and monitoring and controlling administrative expenditures to maintain compliance with statutorily authorized administrative caps. This service contract will assist in addressing the CSA findings.
- Estimated Completion Date: December 2021
California State Auditor's Assessment of Annual Follow-Up Status: Pending
1-Year Agency Response
The PeopleSoft system has been implemented by the Department, however, upon further review of the current PeopleSoft system, it has become clear that this tool still does not give the Department the capacity to adequately track actual administrative spending. Disencumbrances can occur various times in the project's life and may be partial, such that monitoring continues, making estimation of costs associated with disencumbrances equally difficult. HCD believes that 5% is an appropriate percentage of administration funding to take on the re-award of disencumbered funds.
- Completion Date: August 2019
- Response Date: September 2019
California State Auditor's Assessment of 1-Year Status: Pending
As we state in our report, we believe that it is unnecessary for HCD to retain the full 5 percent for administering the original award because its only costs should have been for making the award and for any limited monitoring it performed. If HCD only retains the actual costs for administering the original award, taking 5 percent for re-awarding funds should be appropriate.
6-Month Agency Response
HCD is in the process of implementing a new software system (PeopleSoft) which will allow for more accurate tracking of program administrative cost. This system is scheduled to be fully implemented by 5/15/19.
- Estimated Completion Date: 05/15/2019
- Response Date: March 2019
California State Auditor's Assessment of 6-Month Status: Pending
60-Day Agency Response
Consistent with the plan described in the response to Recommendation 3A, HCD will calculate allowable administrative costs. The Budget Office, in conjunction with DFA management, will ensure that staff costs are allocated to the bond programs based on actual time worked by employees on the programs. HCD is in the process of improving its time accounting system, which will help provide more accurate accounting.
- Estimated Completion Date: 12/31/2018
- Response Date: November 2018
California State Auditor's Assessment of 60-Day Status: Pending
All Recommendations in 2018-037
Agency responses received are posted verbatim.