Coachellita Affordable Housing Agreement Audit and Investigatory Report Summary of Financial Findings City of Coachella Redevelopment Agency July 27, 2011 Presented by: Grover Trask Best Best & Krieger LLP (BBK) Ernie Cooper Vicenti, Lloyd & Stutzman LLP (VLS) 1
Introduction Vicenti Lloyd Stutzman, CPA s 58 Years CPA, forensic accounting firm Team includes: CPAs, Certified in Financial Forensics Certified Fraud Examiners, Certified Internal Auditors Ernest C. Cooper CPA, CFF, CFE Retired FBI Special Agent 25 years forensic accounting, fraud investigations Assisted by Priscilla Osborn Flores, CPA, CFE 2
Scope of Work Performed On June 19, 2009: forensic audit/investigation initiated by City Council 2007 Coachellita Affordable Housing Contract: issues raised by staff about $6 million loan to Rancho Housing Alliance (RHA) Tierra Bonita Development: $3.6 million dollar loan by the City to RHA for the development of 40 owner occupied single family homes Calle Verde Development: $2.4 million dollar loan by the City to RHA for the development of 50 owner occupied single family homes 46 Page Report with Findings, Recommendations and Forensic Audit Results 3
Summary of Financial Procedures Performed 1. Reviewed the 2007 Coachellita Affordable Housing Agreement between RHA and the Redevelopment Agency 2. Reviewed and analyzed numerous City accounting records and documents re: the $6 million dollar disbursement to RHA 3. Reviewed the financial spreadsheets, receipts, and documents provided by RHA to the City documenting their disbursements 4. Visited RHA and reviewed the accounting records for RHA concerning the Tierra Bonita and Calle Verde projects 4
Summary of Financial Procedures Performed 5. Interviewed City staff and RHA personnel including Mr. Hays 6. Performed review and financial analysis of the $6 million loan received by RHA and the disbursements of these monies 7. Participated in various meetings with Mr. Hays and City staff for follow-up and analysis of our findings 8. Provided the City with recommendations concerning improvements to internal controls and financial operations 9. Prepared final report of financial findings 5
Tierra Bonita Loan from City to RHA on 7/30/2007 for Tierra Bonita $3,600,000 ($3,600,000 was used for purchase of Tierra Bonita land) RHA improperly reallocated $300,000 from Calle Verde to Tierra Bonita and this $300,000 should be returned to the City*. The $300,000 was disbursed improperly as follows: Improperly expended for Tierra Bonita II (owned by Fredrick Street Partners, LLC $144,377 Unallowable under contract (property tax, etc): 148,608 Other unallowable expenditures: 7,015 Subtotal.. $300,000* * $300,000 plus the property should be returned to the City 6
Calle Verde Loan from City to RHA for Calle Verde Project: $2,400,000 (11/08/07 - $939,006) (12/19/07 - $500,000) (07/03/08 - $975,994) Funds expended pursuant to agreement (1,862,790) RHA improperly reallocated from Calle Verde: (300,000) Funds should be returned to the City $ 237,210* *$237,210 plus the property should be returned to the city. 7
Highlights of Unallowable Uses of Funds By RHA Improperly used Calle Verde funds for Tierra Bonita project - $300,000 Improperly used Tierra Bonita funds for nonauthorized project Tierra Bonita II Improperly used both Tierra Bonita and Calle Verde funds for unallowable uses property taxes and administrative expenses 9
Summary of Funds Due to City at December 31, 2009 Tierra Bonita Loan City funds to be returned $300,000 Interest on loan through 12/31/09 261,863 Subtotal 561,863 Calle Verde Loan City funds to be returned $237,210 Interest on loan through 12/31/09 136,207 Subtotal 373,417 Total Funds Due from RHA to City $935,280 10
Audit & Investigatory Financial Findings* I. RHA General Ledger Audit Findings II. Flow Chart Overview and Summary (*Exhibit I & II of Investigatory Report) 11