Report 2014-037 Recommendation 7 Responses

Report 2014-037: California Department of Housing and Community Development: Inconsistent Oversight Has Resulted in the Questionable Use of Some Housing Bond Funds (Release Date: September 2014)

Recommendation #7 To: Housing and Community Development, Department of

To ensure that recipients spend advanced funds promptly and that it has accurate information about outstanding advanced funds, HCD should do the following:

- Clarify when recipients must return unspent advances either by revising its policies and procedures or by seeking regulatory change, if needed. For example, HCD could consider requiring recipients to return advanced funds held more than 90 days, to pay an interest penalty on the outstanding funds, or to face other corrective action.

1-Year Agency Response

The DFA CalHome program has updated their desk manual (pg 55) to specifically require documented justification by senior management on waivers to the policy. Per CSA, this type of documentation would resolve their concern. This issue is fully implemented.

California State Auditor's Assessment of 1-Year Status: Fully Implemented

6-Month Agency Response

DFA BEGIN issued a Management Memo to notify recipients of the requirements associated with advanced funds (AF7a-1). BEGIN updated its desk manual to include the modified policy and procedures for funds advancements (AF7a-3, red text). BEGIN updated its Operations manual to include the modified policy and procedures for funds advancement (AF7a-4).

CalHome implemented a Management Memo outlining its advanced funds policy (AF7b-1) and updated its Desk Manual with staff instructions on the new policy for unused advanced funds (AF7b-2, red text).

California State Auditor's Assessment of 6-Month Status: Partially Implemented

Although HCD updated its policies to clarify its policy regarding unspent advances for its BEGIN and CalHome programs, those policies allow the CalHome program manager to waive its advance policy at his or her discretion, increasing the risk that HCD will experience the same problems with advances we found in our report.

60-Day Agency Response

DFA staff and management are revising policies and procedures to clarify when recipients must return unused funds.

California State Auditor's Assessment of 60-Day Status: Pending

All Recommendations in 2014-037

Agency responses received are posted verbatim.