The Cranky Taxpayer

No Wonder

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Crime Rate | Vice Locations | RRHA | 400-600 Westover Hills | Forest Hill Neighborhood | George Wythe


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As I read the KPMG management letter of 11/22/02, RRHA is not in control of its finances.   It doesn't know what it has or what it is spending.  RRHA employees and a consultant have been cooking the books.  RRHA has been loaning money to its staff, managers, and Board members and has not collected some of the loans.  RRHA doesn't have control of its employees and the Board doesn't know what is going on.  No wonder RRHA is not in control of its property.

The KPMG letter is fifteen pages long and filled with the cautious language that auditors use.  Here is my view of the plain English translation of some of the high points:

What the Auditors Said What That Means in English
[Newly established] procedures . . . Were not timely and consistently followed in the 2001 fiscal year. RRHA is ignoring its new fiscal procedures.
The general ledger and subsidiary ledgers closing process was inadequately completed in an accurate and timely manner RRHA is behind in its bookkeeping
Lack of adequate supporting documentation and analyses for significant balances and accounts recorded in the Authority's general ledger and books . . .  RRHA is creating bookkeeping entries out of whole cloth
Lack of timely completion of the reconciliation process for significant accounts and financial statement captions . . .  RRHA is behind in its bookkeeping
[T]he Authority continues to experience difficulty in reporting its financial information in a timely manner RRHA is and has been behind in its bookkeeping
[T]he Authority is not currently able to properly report its financial information in a timely manner. As a result, RRHA is late in reporting its financial condition.
[T]here is no formal process for comparison of the budget to actual results on a periodic basis to ensure that the Authority's resources are being utilized in the most efficient and effective manner and for the purpose for which they were intended. RRHA doesn't know where its money is going.
The lack of formal budget monitoring for the Authority's current operations could result in significant overages in budget line items . . .  Because of that, there's nothing to stop RRHA from overspending the budget.
Additionally, the Authority's ability to project future cash needs or requirements to fulfill program operations based on established grant awards could be significantly impacted. Also RRHA can't know whether it can meet its grant commitments.
This . . . Will significantly impact the Board of Commissioner's (sic) ability to make informed decisions regarding future projects or funding for continuing projects or programs sponsored by the Authority. Also the Board can only guess about RRHA's ability to operate and take on new projects.
We believe the financial and operational information provided to the Board of Commissioners and senior management on a monthly basis regarding the financial activity of the Authority should be significantly modified and enhanced to facility in decision making regarding managing the Authority's business. The Board is in the dark.
[W]e further recommend the committees of the Board of Commissioners . . . Conduct periodic meetings to discuss the status of ongoing projects and any issues identified with the Authority's internal and external auditors and then report upon these discussions to the bull Board of Commissioners. Neither the Board nor its committees knows what is going on as to project status or finances.  Their current practices will not cure that lack of knowledge.
We noted several instances where internal control policies and procedures established by management were not being followed by employees of the Authority. RRHA employees have been violating the required procedures and policies.
Detailed listings of fixed assets were not being maintained and updated for the majority of the Authority's fixed asset accounts. RRHA employees are not accounting for most of the fixed assets.
[T]he required reconciliations of fixed asset detailed listing to the Authority's general ledger accounts were not being performed or monitored for accuracy on a periodic basis. RRHA employees were not keeping the books as required for fixed assets.
Cash reconciliations for the Authority's bank accounts were not being monitored to ensure that the reconciliations were preformed timely and accurately. Nobody was balancing the checkbook.
Physical inventories for the Authority's warehouses were not performed in the current year as the individual responsible for this process neglected to schedule the inventories. The person responsible for the warehouses did not schedule an inventory.
Certain instances where journal entries were recorded by members of the Finance Department that were booked without sufficient supporting documentation to justify the entries recorded. Employees in the Finance Department were cooking the books.
As a result of the lack of adequate and functioning internal controls and an effective internal control structure, the Authority is at increased risk for inappropriate transactions and is also at risk for poor or inefficient utilization of resources for programs that are not reimbursable under existing grant agreements. Because of lack of a proper control system, the employees can steal RRHA blind and RRHA can violate the reimbursement requirements of its grants.
[W]e recommend . . . [f]illing the vacated Internal Audit staff positions with qualified individuals . . .  RRHA has vacant internal audit positions.  It should fill them with qualified people.
Awareness can be obtained through additional training of existing employee's (sic) and increasing focus by the Finance Department and the Operational Program Directors regarding compliance with existing policies and procedures. RRHA should train its finance employees and require its managers to enforce the existing rules.
[W]e recommend . . . [e]stablishing effective procedures that will require employees to comply with internal controls . . .  RRHA should make its employees obey the existing rules.
Senior Management should continue to closely monitor of (sic) control procedures and policies currently in place in the individual departments through periodic discussions with department managers to ensure continued attention towards strengthening the internal control system. The Big Bosses should hold their managers accountable for compliance with the existing rules.
[W]e noted certain instances where Finance Department employees were recording journal entries related to their respective ledgers and accounts without sufficient support for the adjustments made. Employees in the Finance Department were cooking the books.
Also, several journal entries prepared by Casterline Associates (outside consultant which assists the Authority in regulatory submissions) lacked supporting documentation. Likewise a consultant was cooking the books.
[W]e noted several instances where unsecured and non-interest bearing advances were made to members of staff, management and the Board of Commissioners.  Many of these advances date aback several years . . . RRHA has been loaning money to its staff, managers, and Board members and has not collected some of the loans.
[Management should implement] new policies and procedures that should eliminate write offs of related party accounts receivable. RRHA has been writing off loans to its employees, managers, or Board members.  It should stop doing that.
[The Authority is unable] to reconcile the loans serviced by outside parties . . .  Nobody was balancing the account for mortgages that RRHA had hired others to service.
[W]e recommend . . . [c]ompletion of an inventory project to identify all loans originated and outstanding.  Using the completed listing of outstanding loans, a comprehensive reconciliation between loan balances . . .  RRHA doesn't know what loans it has or what the balances are.
The Authority does not currently maintain an accurate perpetual inventory listing with items properly identified to their specific locations. RRHA doesn't know what's in its inventory.
The Authority does not maintain separate shipping and receiving records for its warehouses.  All work order documentation is maintained within individual customer files . . .  RRHA has to go to individual customer files to find out what has been shipped or received.
We observed several instances where the Authority was not preparing  requests for reimbursement timely or where collection efforts were significantly delayed due to lack of accurate and timely information. This disorder in its accounting system is costing RRHA money.
The Authority is not currently in compliance with the [HUD] requirements for submission of audited financial statements within  the prescribed deadlines for fiscal year 2001. This disorder has delayed the audits and has resulted in violation of the HUD requirements.
The Authority does not currently have in place policies or procedures to ensure the proper implementation of new accounting or regulatory standards and principles related to public housing authorities.  The lack of a process to monitor new developments which impact the Authority's financial statements can result in significant delays and additional costs when changes in accounting or regulatory standards are required to be implemented. RRHA isn't keeping up with accounting and regulatory requirements.  This is costing them money.

It is little wonder that RRHA is firing the auditor for blowing this whistle on them.  It's a bigger wonder that Richmond is allowing this bunch to maintain the biggest public nuisance in the City.

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Last updated 04/01/12
Please send questions or comments to John Butcher