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DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT AUDIT DIVISION on {200 Thi Seat Se 30 q Socomeme, OA 92522080, grasses ae Faxtote)aes-zz0 December 23, 2002 John Sprague Director Roseville Redevelopment Agency: 311 Vernon Street Roseville, CA 95678 Dear Mr. Sprague: Enclosed, please find our final audit report regarding the Roseville Redevelopment ‘Agency's compliance with statutory housing and housing fund requirements. We have incorporated your responses to the draft audit report into the final report and attached your response letter—see Attachment A. We are also enclosing a questionnaire (and return envelope) concerning the quality and effectiveness of the completed audit, We hope you will complete and return the questionnaire to assist our efforts to monitor and improve our audit performance. We greatly appreciated the cooperation of Agency and City staffs during the course of the audit, If you have any questions conceming the final report, please feel free to contact me at (916) 324-9763 or by email at epfost@hed.ca.gov. Sincerely, Eric Pfost Chief, Audit Division Enclosure ‘STATE CALIFORNIA SUSINESS, TRANSPORTATION, AND HOUSING AGENCY, DEPARTMENT OF HOUSING AND COMMUNITY DEVELOPMENT AUDIT DIVISION 4900 The street, Sute G10 P.O, Box 952060, Sacrament, cA 94252-2050, (Gio) s2estes Fax tore acs.z2e9 December 23, 2002 Ms. Julie Bomstein, Director Department of Housing and Community Development Background: California Health and Safety Code Section 50464 states that the Department of Housing and Community Development (Department) may make investigations of housing and community development, may study the operation and enforcement of redevelopment programs, and may examine the records of redevelopment agencies and secure copies of their records at any time. The Department has elected to initiate a program to review the housing assistance activities of various redevelopment agencies. The following report documents our findings and recommendations based upon our field work in accordance with audit guidelines promulgated by the State Controller's Office (SCO) for the review of redevelopment agencies. Scope: The purpose of our review was to evaluate the Roseville Redevelopment Agency's (Agency) compliance with statutory housing requirements including administration and use of the Low and Moderate Income Housing Fund (LMIHF) for fiscal years 1997/1998, 1998/1999, and 1999/2000. Certain issues required the review of information and records outside this audit, period, Our review was conducted in accordance with Generally Accepted Governmental ‘Auditing Standards as published by the Comptroller General of the United States. We used the Guidelines for Compliance Audits of California Redevelopment Agencies as issued by the SCO. During our audit we interviewed the following Agency/City representatives: Carol Stuart, Economic and Community Services Manager Jan Shonkwiler, Administrative Analyst Jeannie Kegley, Accountant ‘We reviewed the following records and materials during the course of the audit: annual reports submitted to the Department; LMIHF financial statements audited by their independent certified public accounting firm; trial balances and the supporting general ledgers; cash receipts and cash disbursements registers; revenue and expenditure journals; adopted findings of the Agency; loan and development agreements; county property tax remittance statements; the Agency budget; and the housing component of the redevelopment implementation plan. We finished our audit fieldwork in Roseville on August 27, 2002 and issued a draft report to the Agency dated October 16, 2002. The Agency responded to the draft report on November 21, 2002. We have incorporated their responses into this report and have attached their response letter (see “Attachment A”). We greatly appreciated the diligence and cooperation of City staff during the course of the audit. This report is solely intended for the use of the Department and the Roseville Redevelopment ‘Agency's management. However, this is not intended to limit distribution of this report which, when final, is a matter of public record. Sincerely, Ex, Cpt Eric Pfost Chief, Audit Division Finding Number One: The Implementation Plan does not accurately report the Agency’s affordable housing production requirements and progress. Condition: The updated 1999 Implementation Plan (page 7) indicates the Agency's affordable housing production requirement is for 50 units based upon the construction of 336 new units within the project area since the beginning of the Plan. ‘The Plan, however, does not acknowledge whether there was any “rehabilitation” within the project area prior to January 1, 1994 or “substantial rehabilitation” within the project area after this date. ‘The statute requires that affordable housing production requirements be based upon the construction and rehabilitation (substantial rehabilitation after 1993) of housing units within the project area ‘The Plan also credits the Agency with having assisted the development of 184 affordable production units and, thereby, exceeding its current production requirements. According to ‘Agency staff, at least 143 of these units are in developments located outside the project area (Manzanita Place and Maidu Village) and were completed prior to the effective date of Assembly Bill 1290, Agency staff were unable to immediately identify the location of the other 41 units during our short field visit. Prior to the passage of AB 1290, agencies were not allowed to credit units assisted outside.an adopted project area towards fulfillment of the Section 33413(b)(2) project area production requirements. Units completed since the effective date of AB 1290 (and subsequent extension legislation) may be credited on a two-for-one basis towards meeting an agency's production requirements. As a result, the 143 units in the Manzanita Place and Maidu Village developments are not eligible to be credited towards meeting the project area production requirements of Section 33413(b)(2). Criteria: Health and Safety Code Section 33413(b)(2) specifies project area production requirements for three periods. The first period is prior to January 1, 1994. The second is the interim period from January 1, 1994 through December 31, 2006, initiated by AB 1290 in 1993 and most recently extended by AB 637 in 2001, The third period is operative after expiration of the interim AB 637 legislation in 2006. Prior to January 1, 1994, atleast 15 percent of all new and rehabilitated units developed within a project area by public or private persons or entities other than the agency are required to be affordable to lower- and moderate-income households. Between January 1, 1994 and December 31, 2006, at least 15 percent of all new and substantially-rehabilitated units developed within a project area by public or private persons or entities other than the agency are required to be affordable to lower- and moderate-income houseliolds. To satisfy these requirements, the Agency may cause by regulation or agreement two units, available at affordable housing cost, outside a project area for each unit that otherwise ‘would have had to be available inside a project area. After January 1, 2006, at least 15 percent of all new and rehabilitated units developed within a project area by public or private persons or entities other than the agency are required to be affordable to lower- and moderate-income households. Health and Safety Code Section 33490(a)(2)(B)(iii) requires that the implementation plan identify the number of lower- and moderate-income units that have been developed within one or ‘more project areas that meet the requirements of Section 33413(b)(2). Recommendations: 1. The Agency should revise the Implementation Plan to clearly identify the number of units (if any) rehabilitated in the project area prior to January'1, 1994 (and substantially rehabilitated after this date), the affordable rehabilitation need generated, and the ‘Agency's progress in meeting this component of the production requirement, 2. The Agency should revise the Implementation Plan to ensure that only eligible units are credited towards meeting affordable housing production obligations. ‘The Plan should inventory and describe the name, location and completion dates of assisted units to better ensure that only eligible units are credited towards production progress and that sufficient lower- and moderate-income production units are made available within statutory deadlines. Agency Response: Once Redevelopment Agency staff has reviewed and accurately counted the rehabilitated and substantially rehabilitated units and affordable housing production, the Agency Implementation Plan will be revised to include the number of rehabilitated and substantially rehabilitated units within the project area, the affordable rehabilitation need generated, an inventory identifying the name, location, completion date and affordability period for the newly constructed, affordable units counted toward the Agency’s affordable housing production requirement. The review and revision of the Implementation Plan will be completed by March 31, 2003. Auditor’s Conclusion: The Agency’s response fully satisfies our audit recommendation. We appreciate the Agency's cooperation.

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