Numbered findings
14
Control and compliance issues in the report
Independent municipal audit · CY2014
14 control and compliance findings.
Here is what they mean.
The regulatory-basis opinion was clean, but grant reconciliation remained a material weakness. HOME, HOPWA, and CDBG compliance opinions were qualified.
At a glance
Material weaknesses
1
The highest financial-reporting control category
Repeat findings
3
Issues reported in at least one earlier audit
Opinion scope
See report opinion
Opinion scope varies by report year and accounting basis
The opinion is not a pass/fail grade
Most regulatory statements received clean opinions—with an important exception.
Unmodified regulatory-basis opinion; qualified HOME, HOPWA, and CDBG compliance opinions; adverse GAAP-basis opinion.
Read the three opinion scopes
- New Jersey regulatory basis: Unmodified.
- U.S. GAAP: Adverse because the mandated regulatory basis differs from GAAP.
- Fixed assets: None
Every numbered finding
What needs to change
“Material weakness” is an audit-control classification, not an allegation of fraud. Open a finding for the condition, why it matters, the auditor's recommendation, repeat history, and the City's separately labeled response.
2014-001 · noncompliance material to basic financial statements
· Repeat since 2012
Aged unfunded capital costs
Unfinanced costs totaling $37,692,303 for capital projects over five years old remained on the City's books, including $27,790,616 for general and school projects and $9,901,687 for water projects.
2014-001 · noncompliance material to basic financial statements
· Repeat since 2012
Aged unfunded capital costs
Unfinanced costs totaling $37,692,303 for capital projects over five years old remained on the City's books, including $27,790,616 for general and school projects and $9,901,687 for water projects.
Why it matters
The aged balances created cash-flow concerns and did not comply with State capital-funding requirements.
Auditor recommendation
Fund all Unfunded Deferred Charges to Future Taxation and Water Rents over five years old for which unfinanced costs have been paid.
Official report p. 313 · Includes a compliance issue
2014-002 · material weakness
· Repeat since 2012
Grant, UEZ, and capital-account reconciliations
HUD grant balances were not reconciled to IDIS, UEZ balances were not reconciled to JCEDC, and capital-improvement and grant-reserve balances did not agree with subsidiary ledgers.
2014-002 · material weakness
· Repeat since 2012
Grant, UEZ, and capital-account reconciliations
HUD grant balances were not reconciled to IDIS, UEZ balances were not reconciled to JCEDC, and capital-improvement and grant-reserve balances did not agree with subsidiary ledgers.
Why it matters
Grant and UEZ balances could not be validated, while unreconciled capital and grant reserves could be misstated or overexpended.
Auditor recommendation
Adopt closing procedures requiring reconciliation of HUD and UEZ grants, grant reserves, capital improvement authorizations, and other applicable accounts to underlying records and oversight-agency reports.
Questioned costs: None noted.
City response · unaudited
The City stated that Community Development would retain year-end IDIS reports, close temporary HUD grant accounts, and reconcile UEZ accounts with JCEDC.
Official report pp. 314–315, 318–319
2014-003 · significant deficiency
· Repeat since 2013
Fixed-asset inventory and tracking
Twenty-two of 50 sampled assets could not be located, no disposals were recorded during the year, identifying information was incomplete, and departmental tagging, transfer, and disposal policies were not followed.
2014-003 · significant deficiency
· Repeat since 2013
Fixed-asset inventory and tracking
Twenty-two of 50 sampled assets could not be located, no disposals were recorded during the year, identifying information was incomplete, and departmental tagging, transfer, and disposal policies were not followed.
Why it matters
The inventory did not comply with N.J.A.C. 5:30-5.6 and could become materially misstated and unreliable.
Auditor recommendation
Make every asset traceable through tags or other identifiers and enforce existing disposal and transfer procedures.
Official report pp. 316–317 · Includes a compliance issue
2014-004 · compliance finding
Late HOPWA performance report
The HOPWA CAPER due July 1, 2014 was not submitted until January 22, 2015.
2014-004 · compliance finding
Late HOPWA performance report
The HOPWA CAPER due July 1, 2014 was not submitted until January 22, 2015.
Why it matters
The City did not comply with HOPWA reporting requirements.
Auditor recommendation
Submit HOPWA CAPER reports within 90 days after program year end.
Questioned costs: None noted.
City response · unaudited
The City stated that it hired a HOPWA Grant Manager in January 2015, submitted the 2014–15 CAPER on time, and would ensure future timely submissions.
Official report pp. 319–320 · Includes a compliance issue
2014-005 · compliance finding
Missing Davis-Bacon semiannual report
The City had not filed HUD Form 4710 for the April 1 through September 30, 2014 semiannual period.
2014-005 · compliance finding
Missing Davis-Bacon semiannual report
The City had not filed HUD Form 4710 for the April 1 through September 30, 2014 semiannual period.
Why it matters
The City did not comply with HOME reporting requirements under the Davis-Bacon and Related Acts.
Auditor recommendation
Submit HOME semiannual Form HUD 4710 reports on time.
Questioned costs: None noted.
City response · unaudited
The City attributed the omission to a staff vacancy, stated that the vacancy had been filled, and reported that the form was being prepared for HUD.
Official report pp. 320–321 · Includes a compliance issue
2014-006 · compliance finding
Unrecorded and uncommitted HUD program income
The 2013 CDBG CAPER showed $29,927 of program income absent from IDIS, and $513,852 of 2012 HOME program income remained uncommitted in IDIS.
2014-006 · compliance finding
Unrecorded and uncommitted HUD program income
The 2013 CDBG CAPER showed $29,927 of program income absent from IDIS, and $513,852 of 2012 HOME program income remained uncommitted in IDIS.
Why it matters
The City did not comply with 24 CFR §570.504.
Auditor recommendation
Record all program income correctly in IDIS and commit it before drawing additional entitlement funds.
Questioned costs: None noted.
City response · unaudited
The City reported reclassifying $513,852 as entitlement funds, allocating it in IDIS, expending $148,395.16 to date, and committing to record program income correctly.
Official report pp. 321–322 · Includes a compliance issue
2014-007 · compliance finding
Overdue HOME housing-quality inspections
Two HOME-assisted properties subject to annual housing-quality inspections had not been inspected during the audit year or by the 2015 testing date.
2014-007 · compliance finding
Overdue HOME housing-quality inspections
Two HOME-assisted properties subject to annual housing-quality inspections had not been inspected during the audit year or by the 2015 testing date.
Why it matters
The City could not determine whether the units met HOME housing-quality standards.
Auditor recommendation
Perform all required annual HOME housing-quality inspections for applicable properties with 25 or more units.
Questioned costs: None noted.
City response · unaudited
The City stated that both projects were subsequently inspected and that Community Development updated its database to flag due inspections while evaluating monitoring software.
Official report pp. 322–323 · Includes a compliance issue
2014-008 · compliance finding
Incomplete first-time homebuyer eligibility review
One of four reviewed files omitted unemployment income and a bonus when determining first-time homebuyer eligibility, and the applicant appeared ineligible when all income was considered.
2014-008 · compliance finding
Incomplete first-time homebuyer eligibility review
One of four reviewed files omitted unemployment income and a bonus when determining first-time homebuyer eligibility, and the applicant appeared ineligible when all income was considered.
Why it matters
The City may have approved an ineligible applicant.
Auditor recommendation
Examine and consider every form of income required by 24 CFR §92.203 when determining program eligibility.
Questioned costs: None noted.
City response · unaudited
The City described the exception as an isolated oversight, required loan advisors to attend HUD training, and updated HOME policies and procedures.
Official report p. 324 · Includes a compliance issue
2014-009 · significant deficiency
HOME allowable-cost controls and HUD findings
HUD's disposition of four inspector-general findings and 41 recommendations identified unsupported, ineligible, excessive administrative, and unsecured HOME costs with potential City liability of $3,859,421, as well as reserve reductions and funds to be reobligated.
2014-009 · significant deficiency
HOME allowable-cost controls and HUD findings
HUD's disposition of four inspector-general findings and 41 recommendations identified unsupported, ineligible, excessive administrative, and unsecured HOME costs with potential City liability of $3,859,421, as well as reserve reductions and funds to be reobligated.
Why it matters
The City was liable to reimburse HOME for costs questioned by HUD.
Auditor recommendation
Strengthen and implement HOME controls as directed by HUD's Office of Inspector General and Newark Field Office.
Questioned costs: $515,834 under the agreement between the City and HUD.
City response · unaudited
The City stated that it was strengthening HOME controls and that it reimbursed the HOME program $515,834 in September 2015.
Official report pp. 325–326 · Includes a compliance issue
Comment 1 · control deficiency
Grant receipts posted to incorrect lines
Testing found grant receipts posted to incorrect grant lines.
Comment 1 · control deficiency
Grant receipts posted to incorrect lines
Testing found grant receipts posted to incorrect grant lines.
Why it matters
The report does not state a separate effect.
Auditor recommendation
Post receipts to the correct grants and grant years and coordinate grant receipts between program departments and Accounts and Control.
Official report p. 333
Comment 2 · control deficiency
Dormant grant receivables and reserves
The grants fund carried $56,644,575 of receivables and $48,279,426 of appropriated reserves, including aged balances likely to be uncollectible or inactive, plus $368,984 of Local Law Enforcement Block Grant money.
Comment 2 · control deficiency
Dormant grant receivables and reserves
The grants fund carried $56,644,575 of receivables and $48,279,426 of appropriated reserves, including aged balances likely to be uncollectible or inactive, plus $368,984 of Local Law Enforcement Block Grant money.
Why it matters
The report does not state a separate effect.
Auditor recommendation
Investigate dormant receivable and reserve balances for collectability, posting to correct grant years, proper disposition, expenditure eligibility, or return to grantors.
Official report p. 333
Comment 3 · control deficiency
Unavailable payroll-deduction support
Testing of employee deductions and W-4 authorizations could not be completed because supporting documents were archived, stored, or otherwise unavailable.
Comment 3 · control deficiency
Unavailable payroll-deduction support
Testing of employee deductions and W-4 authorizations could not be completed because supporting documents were archived, stored, or otherwise unavailable.
Why it matters
The report does not state a separate effect.
Auditor recommendation
Permanently retain W-4 forms and employee-deduction support in personnel files.
Official report p. 334
Comment 4 · compliance finding
Purchases exceeding bid threshold
Two vendors were paid more than the bid threshold without public bidding or a documented Local Public Contracts Law exception.
Comment 4 · compliance finding
Purchases exceeding bid threshold
Two vendors were paid more than the bid threshold without public bidding or a documented Local Public Contracts Law exception.
Why it matters
The report does not state a separate effect.
Auditor recommendation
Monitor aggregate vendor payments and advertise publicly when expected payments reach bid thresholds.
Official report p. 334 · Includes a compliance issue
Comment 5 · compliance finding
Insufficient bid-advertisement period
One bid advertisement was published only seven days before bids were received rather than the ten days required by N.J.S.A. 40A:11-23.
Comment 5 · compliance finding
Insufficient bid-advertisement period
One bid advertisement was published only seven days before bids were received rather than the ten days required by N.J.S.A. 40A:11-23.
Why it matters
The report does not state a separate effect.
Auditor recommendation
Publish bid advertisements in accordance with N.J.S.A. 40A:11-23.
Official report p. 334 · Includes a compliance issue
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2010
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