Report 2018-037 Recommendation 16 Responses
Report 2018-037: California Department of Housing and Community Development: Its Oversight of Housing Bond Funds Remains Inconsistent (Release Date: September 2018)
Recommendation #16 To: Housing and Community Development, Department of
To ensure that it is able to meet its administrative monitoring obligations and that it uses housing bond funds in compliance with state law, regulations, and program guidelines, HCD should develop a long-term plan by January 1, 2019, for how it will avoid exceeding the administrative cost limits of those programs in the most immediate danger of overage and for how it will address instances when it has exceeded administrative cost limits. The plan should identify the programs at risk of exceeding the limit; the actions HCD will take for each program to gain efficiencies; its plan for moving staff between programs; a request for more money or legislative changes such as modifying the statutory limit on administrative spending, if necessary; and an evaluation of the consequences of not fulfilling its monitoring obligations.
Annual Follow-Up Agency Response From October 2023
HCD believes that the steps described on the last response addresses the CSA Recommendations. HCD followed up with CSA regarding why they believed our response was not considered fully implemented, but upon further discussion HCD does not believes the additional suggested steps are applicable to the established process and procedures established by DOF. On an annual basis California Department of Housing and Community Development (HCD) uses the Baseline Bond Adjustment (BBA) drill to Department of Finance (DOF) to plan and document administrative costs. HCD has not exceeded the 5% statutory administrative cap; therefore, HCD believes the steps laid out in the last response are sufficient.
- Completion Date: September 2022
California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented
HCD provided its financial management report, which shows the current status of spending compared to administrative costs limits. However, as we state in our report, HCD has exceeded administrative spending limits for at least two of its programs. We stand by our recommendation that HCD should provide documentation of a plan for how it will address instances when it exceeded the administrative costs limits, such as requesting more funding or considering another option.
- Auditee did not substantiate its claim of full implementation
Annual Follow-Up Agency Response From September 2022
On an annual basis California Department of Housing and Community Development (HCD) uses the Baseline Bond Adjustment (BBA) drill to Department of Finance (DOF) to plan and document administrative costs that will be charged to given bond programs. On a monthly basis HCD management reviews a Financial Management Report (FMR) that tracks administrative caps to total program allotments. The FMR allows HCD to identify program administrative costs that are near the statutory cap. Currently Chapter 4(5) of Prop 46 is closest to hitting the administrative cap but HCD has not exceeded the Chapter 4(5) cap. To ensure HCD does not go over the cap of Chapter (4)5 HCD has submitted budget revisions to align the administrative appropriation with the 5% statutory administrative cap. HCD will continue to project administrative costs in the BBA and monitor the budgets using the FMR over the next twenty years to ensure no administrative caps are exceeded. Besides using budget revisions as controls HCD uses HR PeopleSoft to control labor expenditures and can deactivate spending against identified appropriations. HCD will be able to fulfill monitoring requirements associated with Chapter 4(5) by using other sources of funding.
- Completion Date: August 2022
California State Auditor's Assessment of Annual Follow-Up Status: Partially Implemented
HCD provided its financial management report, which shows the current status of spending compared to administrative costs limits. However, as we state in our report, HCD has exceeded administrative spending limits for at least two of its programs. HCD did not provide documentation of a plan for how it will address instances when it exceeded the administrative costs limits, such as requesting more funding or considering another option.
- Auditee did not address all aspects of the recommendation
Annual Follow-Up Agency Response From September 2021
On an annual basis California Department of Housing and Community Development (HCD) uses the Baseline Bond Adjustment (BBA) drill to Department of Finance (DOF) to plan and document administrative costs that will be charged to given bond programs. On a monthly basis HCD management reviews a Financial Management Report (FMR) that tracks administrative caps to total program allotments. The FMR allows HCD to identify program administrative costs that are near the statutory cap. Currently Chapter 4(5) of Prop 46 is closest to hitting the administrative cap but HCD has not exceeded the Chapter 4(5) cap. To ensure HCD does not go over the cap of Chapter (4)5 HCD has submitted budget revisions to align the administrative appropriation with the 5% statutory administrative cap. HCD will continue to project administrative costs in the BBA and monitor the budgets using the FMR over the next twenty years to ensure no administrative caps are exceeded. Besides using budget revisions as controls HCD uses HR PeopleSoft to control labor expenditures and can deactivate spending against identified appropriations. HCD will be able to fulfill monitoring requirements associated with Chapter 4(5) by using other sources of funding.
- 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
HCD has developed a tool which tracks the projected administrative set aside need for each program. This tool will be reviewed on a quarterly basis with the Budgets unit, and updated bi-annually in conjunction with the staffing needs associated with long-term monitoring identified in the staff management tool (SMT). The projections show that HCD will fall within the statutory spending limit for ongoing programs, assuming that 5% of disencumbrances are available for administrative expenses.
- Completion Date: February 2019
- Response Date: September 2019
California State Auditor's Assessment of 1-Year Status: Pending
As we state in our report, HCD has exceeded administrative spending limits for at least two of its programs. HCD did not provide documentation of a plan for how it will address instances when it exceeded the administrative costs limits, such as requesting more funding, or considering another option.
6-Month Agency Response
HCD has reviewed allowable administrative costs, current administrative set asides and projected workload associated with future program monitoring, and developed a tracking tool to assist in quarterly review of the actual expenditures. The attached risk assessment is the basis for on-going discussions with departmental leadership on programs in danger of exceeding or currently in excess of the administrative limits, and the development of solutions to resolve or mitigate these issues. A hard copy of the risk assessment will be provided
- Completion Date: February 2019
- Response Date: March 2019
California State Auditor's Assessment of 6-Month Status: Pending
Although HCD identified the programs that already exceeded the limit or are at risk of exceeding the limit, HCD did not provide a plan for how it will cover the costs, whether it will need to request more funding, or another option.
- Auditee did not address all aspects of the recommendation
60-Day Agency Response
HCD will update its long-term plan and include the following actions:
- Review of the set aside for administrative costs to determine consistency with statutes and regulations. These limits are not in the Proposition 46 and 1C bond statutes, but rather in the statutes for many of HCD programs.
- Review the amounts set aside for Proposition 46 and 1C bond programs and determine whether they are consistent with these statutory limits
- Identify workload associated with administering and monitoring awards
- Calculate staffing requirements and cost of positions
- Estimate total costs to administer bond programs, including monitoring responsibilities. Annually prepare expenditure plans, which are consistent with long-term administrative plan.
- On a quarterly basis, monitor actual expenditures by program for consistency with the expenditure plans.
- The Budget Office, in conjunction with the Division of Financial Assistance (DFA) management, will monitor expenditure projections on a quarterly basis to ensure resources are sufficient for program activities and requirements.
- The Budget Office and DFA will present any identified variation from the plan or other challenges, as well as suggested resolutions to departmental leadership. The initial review will identify any programs where HCD is at risk of exceeding allowable administrative costs, along with options to address the risk.
- 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.