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Home My WebLink AboutAUDIT 1973I I I I I I ! I I I JOHN J. LYONS TO~N CLERK Ng.' A~ggY[R, MASS, 01845 REPORT ON THE EXAMINATION OF T~ ACCOUNTS OFT HE NORTH ANDOVER HOUSING AUTHORITy FROM JANUARY 1, 1973 TO DECEMBER 31, 1973- DEPARTM EN OF TH E STATE AUDITOR I I I I I I I THADDEUS BU~ZKO STATE AUDITOR I 50M-2-74-091445 "Guardian of the Commonwealth" 74-4-A-31 TABLE OF CONTENTS Organization Statutory References Statistical Data Introduc tion Scope of Audit Notes and Comments Financial Statements: III P~oject 200-1 I Balance Sheet, December 31, 1973 II Comparative Operating Statement, Two Fiscal Years Ended September 30, 1973 IV Balance Sheet, December 31, 1973 Project 667-C-2 Consolidated Operating Statement, Fiscal Year Ended September 30, 1973 PAGE 1 2 2- 4 5 5- 6 7 - 11 12 13 14 - 15 16 ! ! 74-4-A-31 -1- ORGANIZATION December 31, 1973 The North Andover Housing Authority is authorized by Section 3 of Chapter 12lB of the General Laws, as amended. The office of the Authority is located at 16 Fountain Drive, North And~ver. Name Thomas L. Foulds 76 Buckingham Road North Andover James D. McCabe 6 Water Street North Andover Bernard W. Bingham 16 Faulkner Road North Andover Nicholas M. Debttetto 33 Stonington Street North Andover Joseph J. Morkeski 394 Sutton Street North Andover Members Title Term Expires Treasurer March 1974' Chairman March 1975' Vice-Chairman March 1976' Member and State July Appointee Assistant Treasurer 27, 1976 March 1979' * Terms expire at the annual Town elections which are held on the first Monday in March. Name Stewart P. Wilson Officer Title Executive Director and Accountant Positions Bonded' Annual Salary. $4,800 00 bond of the Division of Community Development in the Department of Community Affairs. All positions are bonded in the amount of $30,000.00 each under the blanket ! ! 74-4-A-31 -2- ~TATUTORY REFERENCES 1. Housing and Urban Renewal Law: Chapter 12lB of the General Laws, as amended 2. Veterans and Relocation }lousing: Sections 34 - 37 of Chapter 12lB of the General Laws, as amended 3. Housing for the Elderly and the Handicapped: Sections 38 to 41 of Chapter 12lB of the General Laws, as amended Location Architect General contractor Number of units ~ Number of units occupied Bonds outstanding Interest rate Due date of bonds Maximum annual subsidy Final subsidy payment Average rent - December 1973 Contract for Financial Assistance, dated March 3, 1949, as amended August 31, 1950: Development Cost Number of Units Total $234,000 O0 STATISTICAL DATA project 200-1 Permanent Financing Per Unit $9,750 00 Baldwin Street, Francis Street Adden, Parker, Clinch and Crimp, Boston George Fichera, Lawrence 24 23 $120,000 O0 1 3/4Z Serially until October 1, 1990 $14,040 00 For year ending September 30, 1990 $65 91 N~mber of, Buildings 6 Description 2 1/2 story, row, wood-frame, asphalt shingles, some brick veneer ! ! ! ! ! ! I ! i [ i i I i ! ! I I i Rents: -3- STATISTICAL DATA (CONTINUED - 2) Project 200-1 (C. ont.) Number of Persons Percentage of Admission Continued Income Used Income Occupancy In Computing Limit Limit Rents 0me $6,000 00 $ 7,800. 00 Two 6,300 00 8,190 00 Three 6,800 00 8,840 00 Four 7,300 00 9,940 00 Five 7,700 00 10,010 00 Six 8,100 00 10,530 00 Seven 8,400 00 10,920 00 Eight 8,700 00 11,310 00 25% 25[ 25% 25% 25% 25% 25:[ 25% For each person in. addition to 8, $200.00 shall be added to the net income for admission, and net income for continued occupancy shall be 130% of net income for admission Project 667-C-2 TemporarY F.i.nan cing Location: Section 667-1 Section 667-2 Section 667-3 Fountain Drive BinghamWay Fould's Terrace Architect: Section 667-1 Section 667-2 Section 667-3 Pearson Associates, Lawrence Pearson Associates, Lawrence Pearson Associates, Lawrence Contractor: Section 667-1 Section 667-2 Section 667-3 Fred J. Findlen & Sons, Dedham Fletcher Construction Co., Inc., Salem Coronis Construction Co., Inc., Winchester Number of units 134 Number of units occupied 134 Notes outstanding Fourth Series $975,000 00 Notes outstanding Seventh Series $923,000 00 Interest race 6.92% Premium received none 74-4-A-31 Date of notes Due date of notes Maximum annual subsidy Final subsidy payment: Section 667-1 Section 667-2 Section 667-3 Average rent - December 1973: Contract for Financial Assistance, dated January 25, 1968: Section 667-1 Number of Units -4- STATISTICAL DATA (CONTINUED Project 667-C-2 (Cg_nt.)_ 667-2 42 Development Cost Total 495,000 00 667-3 52 Y34 570,000 00 990,000 O0 ,$2,055,00p 00 Per Unit $12,375 00 Number of Buildingp 8 September 11, 1973 September 12, 1974 $123,300 00 September 30, 2002 September 30, 2007 -September 30, 2012 $47 61 13,571 43 6 19,038 46 6 i story, wood-frame, brick veneer Community building 2 story, wood-frame, brick veneer Community building 2 story, wood-frame, brick veneer Community building .Rents: Single individuals Couples Percentage of Admission Continued IncOme Used Income Occupancy In Computing Limit Limit Rents $4,500 00 $5,850 00 5,000 00 6,500 00 25% Rental charge includes all utilities. Federa.l.ly-aided IlousinB Projects There are no Federally-aided housing projects under the supervision of the North Andover Housing Authority~ ~4-4-A-31 -5- In conformance with Section 29 of Chapter 12lB of the General Laws, as amended, an examination has been made of the accounts of the North Andover Housing Authority covering the period from January 1, 1973 to December 31, 1973. This audit was initiated on January 9, 1974. The Authority maintains a separate set of books for each project under its direction. The financial records of the Authority. which are subject, to audit follow: Project 200-1 Project 667-C-2 SCOPE OF AUDIT General: Trial balances were taken of the general ledgers as of December 31, 1973, and necessary adjustments were made for audit purposes. The financial reports sent to the Division of Community Development during the period under audit were checked to the Authority's books. The minutes of the meetings were read. The insurance policies were examined and listed. CAsh: The cash was balanced and the bank accounts were reconciled as of December 31, 1973 and January 11, 1974. Cashbook footings were tested. Bank deposit slips were test checked to the cashbooks and the tenants' rent receipts. Income: A trial balance was taken of the tenants' accounts as of December 31, 1973 and January 11, 1974, and the outstanding accounts of Project 200-C were verified by correspondence. The recorded rental income was checked by applying the proper percentages outlined in the management resolution to the income reported by tenants. The potential income thus determined was checked to the rent schedules. Used rent receipts were checked to the cashbook and the tenants' accounts. An inven- tory was taken of the unused rent receipts. The miscell~neous income was verified. Investments: Investments were verified by correspondence with the deposi- tories and the fiscal agent. Potential investment income was reconciled with amounts received from investments. The investment account was analyzed. ! ! ! ! I ! I ! ! -6- Notes and Contracts: The temporary note issues and contract awards were checked for the propriety of the awards. Expenditures: The expenditures were test checked to the canceled checks and paid invoices. Authorizations for the employment of personnel and rates of pay were checked to the minutes of the meetings. State Financial Assistance: The contracts between the Commonwealth of Massachusetts, acting through the Division of Community Development, and the Authority relevant to the guaranty of the bonds and notes of the Authority issued to finance the cost of the projects were reviewed. Development Costs - Project 667-3: The development costs were checked and analyzed. Payments under contract were examined and compared with the terms of the contract. The change orders~were examined and checked for;proper approvals. ! i ! i ! i I ! I 74-4-A-31 -7- NOTES AND COb~[ENTS Audit Review: At the conclusion of the audit a draft of this report was reviewed with }Ir. Stewart P. Wilson, the Executive Director of ttle Authority. General: 1. Inaccurate Accounts Receivable Balances: The previous audit report commented as follows: "T~e Authority has, in many instances, posted in the cashbook as rents received monies that, according to the date on the rent receipts, were not received until 5 to 10 days later. As a result the accounts receivable amount in the general ledger is smaller than the the actual receivables. The cash account is also inflated by the same amount~" As of the date of the current audit, the above conditions had not been corrected. 2. Checks Outstanding: Tile Authority's bank reconciliations showed that there were nineteen checks which have been outstanding since December 28, 1972. These checks were payable to the Internal Revenue Service and the Commonwealth of }~assachusetts for taxes withheld from employees. Copies of the reporting forms were on file in the Authority's office. During the audit visit the Executive Director contacted the Internal Revenue Service in Andover, and he was advised that the Authority's account was in order. He was also advised to request in writing a transcript of the account for the period involved. A separate contact was made with the same individual at the Internal Revenue Service by a representative of the Department of the State Auditor. The revenue agent stated that the North Andover Housing account appeared to be in order based on the fact there was no outstanding delinquency in the Authority's account. When questioned about the outstanding checks of the Authority, the agent replied that it was a firm policy of the Internal Revenue Service that all checks received must be endorsed for deposit immediately. Since it will require approximately six weeks to obtain a transcript of the Authority's account from the Internal Reven~e Serwice, this problem could not be re~olved ! I I I ! i I I I I I I I I ! I I I I 74-4-A-31 during this audit. -8- The Executive Director was advised to notify the Department of the State Auditor when he was informed of the statu§ of the account and the whereabouts of the missing checks. The bank reconciliations also revealed that there were eight checks outstanding since September 1972 covering rent refunds to elderly tenants who could not be located. These checks were on-hand in the Authortty's office. Proper disposition of these checks should be made as soon as possible. 3. Deposit of Cash: The deposit of cash from tenants' rents is not made promptly. This situation was also noted in the previous audit report. In this connection it was noted that rent receipts collected January 8, 1974 were not deposited until January 14, 1974. It was not possible to determine the frequency of this practice since the rent receipts for cash collected January 8, 1974 are dated December 31, 1973. The Executive Director was again advised that rent receipts should be da~ed the same day the cash is received and the deposits should be made promptly thereafter. Project 200-1: 1. Tenants' Accounts Receivable: The Authority has failed to take monthly trial balances of the tenants' ledger to verify the balance of the general ledger control account. Project 200-1 consists of twenty-four units and the amount owed by tenants increased from $775.00 as of December 31, i972 to $5,886.00 as of December 31, 1973. When this was brought to the attention of the Executive Director, he stated that the balances owing are due to a variety of hardship problems, but he emphasized that all balances will be collected. 2. Commonwealth Contributions: Chapter 200 of the Acts of 1948 was enacted by the General Court to provide housing principally for veterans of low income. Since the rental rat~s charged tenants are set at a comparatively low level, an annual deficit from operations would generally result if it were not for the annual subsidy paid by the Commonwealth. 74-4-A-31 -9- The current maximum Commonwealth contribution, as authorized by Paragraph (b) of Section 34 of Chapter 12lB of the General Laws, as amended, is 6% of the development cost of the project, or $14,040.00. Annual contributions by the Commonwealth toward the operations of this Chapter 200 project since it acquired management status on October 1, 1950 have been, as follows: Fiscal Year Ended September 30 Amount 1951 through 1971' $66,063 16 1972 8,310 O0 1973 8~205 O0 During the six fiscal years, 1965 through 1970, this project operated without any financial subsidy from the Commonwealth 3. Operatin~ Reserve: As of the audit date the balance of the Operating Reserve amount was $21,383.45, which is $11,783.45 in excess of the prescribed maximum of $9,600.00. The excess includes $10,977.98 which was the transfer of surplus for the fiscal year ended September 30, 1972. During the period under audit the Authority made the following charges to the Operating Reserve: Remodeling and roofing contract Tenants' rent rebates Project 667-C-2: 1. Administration Fund: $4,449 00 1,648 O0 $6~097 O0 The ~onsolidation of Section 667-3 into Project 667-C-2 was completed September 30, 1973; however, the Authority continues to maintain two separate bank accounts for Project 667-C-1 and Section 667-3. The Authority reconciles the Administration Fund by verifying the checkbook balance with two bank accounts, without reconciling with the general ledger Administration Fund account. Three audit adjustments were made to bring the account into balance. 74-4-A-31 -10- 2. Accrued Interest on Notes: Interest accrued on notes outstanding appeared on the' books as a current liability. However, this accrual of $1,545.00 applied to September 30, 1972, and it was previously charged to the development costs of Section 667-C. An adjusting entry was made and credited to the Operating Reserve account. 3. Commonwealth Contributions: Chapter 667 of the Acts of 1954 was enacted by the General Court to provide housing for elderly persons of low income. Since the rental rates charged tenants are set at a comparatively low level, an annual deficit from operations would result if it were not for ttle annual subsidy paid by the Commonwealth. The current maximum Commonwealth contribution, as authorized by Section 41 of Chapter 12lB of the General Laws, as amended, is 6% of the development cost of the project or $123,300.00. Annual contributions by the Commonwealth toward the operations of the Chapter 667 projects since Section 667-1 acquired management status were as follows: Fiscal Year Ended September 30 Amount 1963 through 1971 $223,625 O0 1972 57,844 59 1973 93~191 4? $374~661 06 4. Operatin~ Reserve: The balance of the Operating Reserve account as of the audit date was $48,318.86, which is $5,281.14 below the prescribed maximum of $53,600.00. Accruals are being made to this account at the present time. During the period under audit the Authority charged $921.81 to the Reserve for the following: Description Tenants' rent rebates Prior year - audit adjustment Amount $222 O0 699 81 $921 81 74-4-A-31 -11- 5. TemporarZ Financing: The Fourth Series Notes in the amount of $975,000.00 and the Seventh Series Notes in the amount of $923,000.00, totaling $1,898,000.00, were purchased by the First National Bank and Associates, with a low bid of 6.92% interest. The notes are dated September 11, 1973 and are payable September 12, 1974. The proceeds from sale of the notes, together with funds available from other sources, were applied to tile payment of the maturing notes as follows: Funds Provided Sale of Four, th Series Notes Sale of Seventh Series Notes Commonwealth contribution Funds of Authority Premium on Sixth Series Notes 975,000 00 923,000 O0 93,191 47 10,000 00 990 08 $2,002,181 47 Funds Applied Payment - Third Series Notes Payment - Sixth Series Notes Interest - Third Series I{otes Interest - Sixth Series Notes $1,000,000 00 941,000 O0 30,985 83 30,195 64 $2~002.;181 47 Section 667-3: 1..Development:' In a letter dated June 29, 1973, the Division of Community Development instructed the Authority to close out the development stage of Section 667-3 at a final cost of $990,000.00 and to consolidate all sections into Project 667-C-2 as of September 30, 1972. The consolidation of the books of record was not completed until the close of tile fiscal year, September 30, 1973. Tile books of Section 667-3 have not been closed out as of the audit date and continue to show open balances, even though these balances are included in the books of.Project 667-C-2. Closing entries should be made to eliminate tile balances in the books of Section 667-3. FINANCIAL STATE;lENTS The financial statements listed in the "Table of Contents" follow:' 74-4-A-31 -12- Schedule No. I Project 200-1 Balance Sheet December 31, 1973 Assets Administration Fund Cash Accounts Receivable: Tenants' Commonwealth Contribution Investments: Arlington Trust Company~ Lawrence: Savings Account #65069 Certificate of Deposit #10955 Other Assets: Prepaid Insurance Development Cost Less: Development Cost Liquidation Liabilities and Surplus Payroll Withholdings: Federal Income Tax State Income Tax Accrued Liabilities: Matured Interest and Principal Bonds Authorized and Issued Less: Bonds Retired Reserves: Debt Service Operating Surplus * Age Analysis One }~nth Two Months Three Months Over Three ~[onths' $5,886 00' 2,o,~5 o0 $11,974 14 20~000 O0 $234,000 00 114~000 00 $32 2O 7 79 $234,000 00 ,,1,1~,000 O0 $ 8,701 O0 21,383 4.5 $1,395 00 1,001 00 808 00 2,682 O0 ~5,886 00 $ 519 18 7,911 00 31,974 14 76 80 , ~20,o00 00 ~160,481 12 $ 39 99 2,025 O0 120,000 00 30,084 45 8,331 68 .$~60,481 12 74-4-A-31 -13- Schedule No. II Project 200-1 .Comparative Operating Statement Two Fiscal Years Ended September 30, 1973 Project Income: Dwelling Rent Miscellaneous Total Project Income Operating Expenses: Management Utilities Repairs, ~Iaintenance and Replacements Insurance Payment in Lieu of Taxes Total Operating Expenses Operating Income Other Charges: Debt Service Expense Total Other Charges Profit (Loss) before Commonwealth Contribution Commonwealth Contribution Surplus .September 30* Distribution of Surplus: To Operating Reserve 1972 $19,544 O0 442 09 $~9~986 09 $1,769 78 687 40 5,493 73 193 20 864 O0 . 9,oo8 11 $10,977 98 $8~310 O0 $8,310 00 $ 2,667 98 .. 8}310 O0 $10,977 98 $10~977 98 1973 $18,774 O0 159 87 $18~93387 $ 1,742 03 630 80 11m738 27 361 20 864 O0 $15~336 30 $3,597 57 $8,205 O0 $8,205 00 $(4,607 43) 8~205 00 $3,597 57 $3,597 57 I I I I I I I I I I I I I I I I I I 74-4-A-31 -14- Schedule No. III Project 667-C-2 Balance Sheet December 31, 1973 Assets Administration Fund-Cash Accounts Receivable: Tenants' Accounts Accrued Conmonwealth Contribution Investments: Andover Savings Bank, Andover Savings Account #87887 Arlington Trust Company, Lawrence, Savings Account #127787 Arlington Trust Company, Lawrence, Savings Account #1857460 Arlington Trust Company, Lawrence Federal Securities Participation #20841 Other Assets: Prepaid Insurance Development Cost Less: Development Cost Liquidation Incompleted Contracts Liabilities and Surplus Accounts Payable-Oevelopment Payroll Withholdings: Federal Income Tax State Income Tax Accrued Liabilities: Matured Interest and Principal Deferred Income: Tenants' Prepaid Rents Notes Authorized and Issued Less: Notes Retired Contract Awards Reserves: Debt Service Operating Surplus** $ 1,633 00' 30~825 po $11,512 42 11,413 75 23,927 37 35y000 O0 $2,055,000 00 157~000 O0 $426 90 147 42 $2,055,000 O0 ... 157'~000 O0 $23,815 00 48,318 86 $ 9,987 76 32,458 00 81,853 54 2,100 19 $1,898,000 00 1,312 80 $2,025,712 29 $ 6,172 59 574 32 40,541 43 54 00 1,898,000 00 1,312 80 72,133 86 6,923 29 .~2~02.5~712 .29. I I I I I I I I I I I I I I I I I I I 74-4-A-31 -15- ?ro]ect 667-C-2 Balance Sheet December 31, 1973 * Age Analysis One Month Two ~nths Three Months Over ~ree Months $1,119 O0 256 50 132 50 125 O0 $1,633 O0 Surplus: Fiscal Year Ended September 30, 1973 Current Year to Date (Loss) $10,759 81 ..(3~836 52) $6,923 29 74-4-A-31 -16- Schedule No. IV ~roJect 667-C-2 Consolidated Operatin~ Statement Fiscal Year Ended September 30, 1973 Project Income: Dwelling Rent Miscellaneous Total Project Income Operating Expenses: Management Utilities Repairs, Haintenance and Replacements Insurance Total Operating Expenses Operating Income Other Charges: Provisions for Operating Reserve Provisions for Debt Service Reserve Debt'Service Expense Total Other Charges Loss before Commonwealth Contribution 'Commonwealth Contribution Surplus September 30* Distribution of Surplus: Undistributed 1973 $76,728 50 5~860 75 ~82,58~ 25 $ 4,717 10 29,256 88 23,556 66 ...3.~911 77 $61~442 41 $21~146 84 $ 6,432 00 5,147 00 ..... p2,000 00 $103~579 00 $82,432 16 ...93.t191 47 $10~759 31