new orleans redevelopment unlimited, inc. · new orleans redevelopment unlimited, inc. financial...

NEW ORLEANS REDEVELOPMENT UNLIMITED, INC.

FINANCIAL AND COMPLIANCE AUDIT TOGETHER WITH

INDEPENDENT AUDITORS' REPORT

FOR THE YEAR ENDED DECEMBER 31, 2017

~Bruno& Tervalon LLP ,,Certified Public Accountants

TABLE OF CONTENTS

PAGE

INDEPENDENT AUDITORS' REPORT......................................................... 1

STATEMENT OF FINANCIAL POSITION- DECEMBER 31, 2017 ............ 4

STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2017 ....................................... 5

STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2017 ....................................... 6

STATEMENT OF CASH FLOW FOR THE YEAR ENDED DECEMBER 31, 2017 ........................................ 7

NOTES TO THE FINANCIAL STATEMENTS .............................................. 8

SUPPLEMENTARY INFORMATION: Independent Auditors' Report On Supplementary Information.................... 20

SCHEDULE I- Schedule of Expenditures of Federal Awards For the Year Ended December 31, 20 17 .... .. .. .... .. .. .. .. .. .. 22

SCHEDULE II- Schedule of Compensation, Benefits and Other Payments to Executive Director For the Year Ended December 31,2017 ....................... 23

TABLE OF CONTENTS, CONTINUED

PAGE

SUPPLEMENTARY INFORMATION:

EXI-IIBIT A - Combining Statement of Financial Position December 31, 2017 ....................................................... 24

EXI-IIBIT B - Combining Statement of Activities For the Year Ended December 31, 20 17 . . . . . . . . . . . .. . . . . .. . . 25

EXI-IIBIT C - Combining Statement ofFunctiona1 Expenses For the Year Ended December 31, 20 17 . . . . . . . . ... .. . . .. . . .. 26

INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS.............................................. 27

SUMMARY SCHEDULE OF FINDINGS AND RESPONSES FOR THE YEAR ENDED DECEMBER 31, 2017:

Section I - Summary of Auditors' Results....................................... 30 Section II - Financial Statement Findings and Questioned Costs ..... 32 Section III - Federal Award Findings and Questioned Costs............. 32 Section IV - Status of Prior Year's Findings and Questioned Costs.. 33

EXIT CONFERENCE ........................................................................................ 35

Member American Institute of

Certified Public Accountants Society of Lou1siana

Certified Public Accountants


INDEPENDENT AUDITORS' REPORT

To the Board of Directors New Orleans Redevelopment Unlimited, Inc. New Orleans, Louisiana

Report on the Financial Statements

Alcide J. Tervalon, Jr., CPA Waldo J. Moret, Jr., CPA Paul K. Andoh, Sr., CPA

Joseph A. AkanJi, CPA

We have audited the accompanying fmancial statements of New Orleans Redevelopment Unlimited, Inc. (NORU) which comprise the statement of financial position as of December 31, 2017, and the related statements of activities, functional expenses and cash flows for the year then ended, and the related notes to the financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of fmancial statements that are free from material misstatement, whether due to fraud or error.

4298 ELYSIAN FIELDS AVENUE NEW ORLEANS. LA 70122 (50 lJ 284-8733 FAX (504\ 284 8296

909 N. PRESIDENT STREET JACKSON, MS 39202

(601) 714-0306 FAX {601) 714-0308

INDEPENDENT AUDITORS' REPORT (CONTINUED)


Auditors' Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States of America.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves perfonning procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of NORD's financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to NORD's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of NORD's internal control. Accordingly, we express no snch opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

2

INDEPENDENT AUDITORS' REPORT (CONTINUED)


Opinion

In our opinion, the financial statements previously referred to present fairly, in all material respects, the fmancial position ofNORU as ofDecember 31,2017, and the changes in its net assets, functional expenses and cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated June 8, 2018 on our consideration of NORU' s internal ·control over financial reporting and on our tests ofits compliance with certain provisions oflaws, regulations, contracts and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering NORD's internal control over financial reporting and compliance.

BRUNO & TERV ALON LLP CERTIFIED PUBLIC ACCOUNT ANTS New Orleans, Louisiana

June 8, 2018

.JBruno& Tervalon LLP ,,Certified Public Accountants

3

NEW ORLEANS REDEVELOPMENT UNLIMITED, INC. STATEMENT OF FINANCIAL POSITION

DECEMBER 31, 2017

ASSETS

Current assets: Cash (NOTE 3) Land, unimproved land m1d structures (NOTE 4) Current portion ofloans receivable (NOTES 5, II and 15) Prepaid items m1d other assets Amounts receivable, net (NOTES 6 and 9) Grants receivable (NOTE 17) Accrued interest receivable Investment (NOTE 18)

Total current assets

Noncurrent assets: Loans receivable, net (NOTES 5, II and 15)

Total noncurrent assets

Total assets

LIABILITillS AND NET ASSETS

Current liabilities: Salaries payable Amounts payable (NOTE 13) Current portion ofunem-ned chm·ges (NOTES 5, ll m1d 15) Due to primmy government, net

Total current liabilities

Noncurrent liabilities: Revolving loan (NOTES 5 and II) Unem·ned charges (NOTE 15)

Total noncurrent liabilities

Total liabilities

CONTINGENCIES (NOTE 9)

Net assets: Unrestricted

Total net assets

Total liabilities and net assets

The accompanying notes are an integral part of these financial statements.

4

$ 201,565 -0-

71,465 487

1,212 264,910

476 782.736

1.322,851

650 576

650 576

$1.973.427

$ 12,620 170,778 71,465 56.526

311 389

1,271,320 335 570

1.606,890

1,918,279

55 148

55 148

$1,973.427

NEW ORLEANS REDEVELOPMENT UNLIMITED, INC. STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED DECEMBER 31,2017

Revenues: Grants - construction lending $ 458,751 Interest income 7,738 Rental income 250 Other income 316,367 Proceeds from sale of real property 535,875

Total revenues 1.318.981

Expenses: Program services 2,223,879 Supporting services 45 636

Total expenses 2,269.515

Change in net assets (950,534)

Net assets, beginning of year 1,005,682

Net assets, end of year $ 55 148


5

NEW ORLEANS REDEVELOPMENT UNLIMITED, INC. STATEMENT OF FUNCTIONAL EXPENSES


Program Supporting Services Services

Personnel salaries and wages $ 80,523 $12,994 Personnel services employee benefits 18,505 2,920 Purchased professional and technical

services 11,900 14,809 Purchased property services 3,806 1,188 Insurance 138 7,090 Other purchased services 1,264 32 Property 1,487,048 -0-Program 581,475 -0-Administrative expenses 39,220 6,603

Total $2,223,879 $45,636

Total

$ 93,517 21,425

26,709 4,994 7,228 1,296

1,487,048 581,475

45 823

$2,269,515


6

NEW ORLEANS REDEVELOPMENT UNLIMITED, INC. STATEMENT OF CASH FLOWS


Cash Flows Provided by Operating Activities: Change in net assets

Adjustments to reconcile change in operating assets and liabilities to net cash provided by operating activities:

Decrease in amounts payable Decrease in prepaid items and other assets Increase in interfund, net Decrease in salaries payable Decrease in amounts receivable Decrease in grants receivable Decrease in deposits held Decrease in unimproved land and structures

Net cash provided by operating activities

Cash Flows from Investing Activities: Disbursement of loans Purchase of investment

Cash used in investing activities

Cash Flows from Financing Activities: Disbursement of revolving loans Grants and unearned charges

Net cash used by financing activities

Net decrease in cash

Cash, beginning of year

Cash, end of year

Interest paid

$ (950,534)

$

(534,651) 5,127

88,295 (1,353) 10,400

441,841 (28,390)

1,496,725

527 460

(213,559) (782.736)

(996.295)

(232,641) 139 667

(92.974)

(561,809)

763 374

201,565

$ -0-


7

NEW ORLEANS REDEVELOPMENT UNLIMITED, INC. NOTES TO THE FINANCIAL STATEMENTS

NOTE 1- BACKGROUND GENERAL DATA:

Background

New Orleans Redevelopment Unlimited, Inc. (NORU) was formed in 2004 as a nonprofit corporation.

The purposes ofNORU include:

o Eliminate and prevent the development or spread of slmns. o Promote neighborhood revitalization, blight removal, community

development and construction of affordable housing that is decent, safe and sanitary for low and moderate income families, including support of efforts of entities so engaged through loans with repayment.

o Allow the rehabilitation, clearance and redevelopment of slums and blighted areas in the City of New Orleans to include but not limited to community improvement plans or projects approved by the governing body of the City of New Orleans.

o Acquire property by negotiation or gift. o Dispose of property by sale, lease or gift. o Own real estate, to buy or sell, develop or lease, and generally handle,

moveable and hmnovable property of every nature and kind. o Do any and all things necessary with full authority to perform all acts

necessary or proper to accomplish the purposes expressed or implied in these Articles, or that may be incidental thereto.

General

As of December 31,2017, NORU is primarily engaged in the implementation of a Loan Fund pursuant to Section 1 05(a)(l5) ofthe Housing and Cmmnuni1y Development Act of 1974 for revolving construction loans to facilitate the construction of residential housing in a memorandum agreement with New Orleans Redevelopment Authority.

Housing Opportunity Zones

This program uses State CDBG funds to finance the development of affordable housing on NORA -owned property located in the nine City-designated Housing Opportunity Zones.

8

NEW ORLEANS REDEVELOPMENT UNLIMITED, INC. NOTES TO THE FINANCIAL STATEMENTS, CONTINUED

NOTE 1- J3ACKGROUND GENERAL DATA, CONTINUED:

NOTE2-

Orleans Housing Investment Program

Th newest phase of NORD's Residential Construction Lending Program, is funded through HUD CDBG Locally-held Program Income derived from sale of former Road Home properties. NORA will fund the development of primarily single-family affordable homes in neighborhoods like Central City, Seventh Ward, Gentilly, and New Orleans East.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

.Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimated.

J3asis ofPresentation

NORD's basic financial statements consist of the statement of financial position, statements of activities, statements of functional expenses and cash flows. The statements are prepared in accordance with accounting principles generally accepted in the United States of America.

Financial Statement Presentation

As required by Financial Accounting Standards Board's Accounting Standards Codification (FASB ASC) sections ASC Sections 958-205 and 605 (Not-forProfit Entities Presentation ofFinancial Statements and Revenue Recognition), NORU recognizes contributions received as revenue, including unconditional promises to give, in the period received at their fair value. At the same time, contributions made, including unconditional promises to give, are recognized as expenses in the period made at their fair value.

9

NOTE2-


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

Financial Statement Presentation, Continued

Also, NORU reports information where applicable, regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. At December 31, 2017, NORU's unrestricted net assets reports the results of revenues generated by providing services, receiving unrestricted contributions, grants, interest from investments, disposition of real property, less expenses incurred in providing program and supporting related services. In addition, NORU presents a statement of cash flows in the accompanying financial statements.

Statement of Cash Flows

For purposes of the statement of cash flows, NORU considers all highly liquid investments with an original maturity of ninety (90) days or less when pmchased to be cash equivalents.

Loans Receivable

Loans receivable are recorded at the face value of the note at point of execution. The revolving construction loan program is used to suppott economic and rehabilitation development activities.

NORU uses the allowance method (based on prior year's experience and analysis) to determine uncollectibility of loans receivable.

Land, Unimproved Land and Structures

Land, unimproved land and structures are recorded at estimated fair value at point of donation. Gain or loss resulting from the sale of the related properties is reflected in income in the period of sale.

10

NOTE2-


SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:

Land. Unimproved Land and Structures, Continued

The cost of normal maintenance and repairs that do not add to the value of an asset or materially extend the asset's life is not included in or capitalized in the land, unimproved land and building structures account.

Investment

Investment consist of participation in Louisiana Asset Management Pool (LAMP). The portfolio includes only securities and other obligations in which Local govermnents in Louisiana are authorized to invest in accordance with LA-R.S. 33:2955.

Revolving Loan:

Revolving loan is recorded at face value at point of disbursement. The loan is used to further the construction loan program aimed at economic and rehabilitation development activities.

NOTE 3 - CASH:

At December 31, 20 17 the carrying amount ofN 0 RU' s deposits was $20 1,565 and the collected bank balance was $229,462. The cumulative collected bank balance at December 31, 2017 is covered by federal deposit insurance and through the pledge of securities in NORA's (parent entity) name. Custodial credit risk, is the risk that in the event of a failure by the financial institution, NORD's deposits may not be returned to it. NORU has a deposit policy for custodial credit risk.

11


NOTE 4- LAND. UNIMPROVED LAND AND STRUCTURES:

NOTES-

At December 31, 20 17, land, unimproved land and structures consisted of the following:

Balance Balance Janmuy 1, December 31, 2017 Retirement Other 2017

Structures $ 20,000 $ -0- $ (20,000) $ -0-Land and

unimproved laud 1,476,725 --.::Q: (1,476,725) --.::Q:

Total $1,496,725 $ -0- $(1 ,496, 725) $ -0-

In January 2017 the Board of Directors ofNORU transferred through board action all land, unimproved land and structures to NORA (related party).

LOANS RECEIVABLE. NET:

At December 31, 2017, loans receivable consisted of the following:

Unsecured loan to a corporation at a rate of 2.0% per annum due in full in thirty-six (36) months commencing February 24, 2017. Payments shall commence on the principal loan amom1t plus interest in 36 equal monthly installments on the 1 ''day of the month following completion of the last unit in that Phase. $ 33,000

Unsecured loan to a corporation at a rate of 2.0% per annmn due in full in thirty-six (36) months cmmnencing February 24, 2017. Loan shall be forgiven at NORU's sole discretion, provided no event of default has occurred. 75,000

12


NOTE 5 - LOANS RECEIVABLE. NET, CONTINUED:

Unsecured loan to a corporation at a rate of2.0% per annum due in full in thirty-six (36) months cmmnencing May 12, 2016. Payments shall cmmnence on the principal loan amount plus interest in 36 equal monthly installments on the I st day of the month following completion of the last unit in that phase. $132,006

Unsecured loan to a corporation at a rate of2.0% per annum due in full in thirty-six (36) months commencing May 12, 2016. Loan shall be forgiven at NORD's sole discretion, provided no event of default has occurred. 75,000

Loans to a non-profit corporation secured by real property. Payment is due upon sale, lease other transfer of property or the fulfillment of prescribed requirements. 37,800

Residential construction loan (home buyer assistance) mortgage with varying amounts executed in 2016 and expiring on various dates through October 13, 2027. 335,570

Credit sales loans which are forgivable based on the accomplislunent of defined terms 33.665

Subtotal 722,041

Less: current portion (71.465)

Total noncurrent $650.576

13


NOTE 6 - AMOUNTS RECEIVABLE, NET:

At December 31,2017 amounts receivable, net is as follows:

Funds due from sale of land, unimproved land and structures from NORD's inventory Loan to corporation which is currently in default

Subtotal

Less: allowance for doubtful accounts

Total

NOTE 7- RISK MANAGEMENT:

$ 1,212 328.728

329,940

(328.728)

$ 1,212

NORD is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets for which NORU carries cmmnercial insurance. Liabilities are reported when it is probable that a loss has occurred and the amount of the loss can be reasonably estimated.

NOTE 8- CONCENTRATION OF CREDIT RISK:

NORU receives primarily all of its revenues from NORA as a pass-through the State ofLouisiana, and through donations. If the amount of revenues received from NORA and others fall below contract levels, NORU's operating results could be adversely affected.

NOTE 9- CONTINGENCIES:

NORD is subject to possible examinations by regulatory agencies who determine compliance with laws and regulations governing grants provided to NORD. These examinations may result in required refunds by NORD to agencies and/or program beneficiaries.

14


NOTE 9 - CONTINGENCIES, CONTINUED:

NORU obtained judgment on May 25, 2018 in connection with a loan agreement with a developer for the balance of loan funds totaling $365,864. It is Counsel's opinion at December 31, 2017 and June 8, 2018, that there are no other matters that will have a material effect on the financial condition of NORU. Accordingly, no additional provision has been made in the fmancia1 statements for that contingency other than as described in NOTE 6.

NOTE 10 - PER DIEM FOR DIRECTORS:

During the year ended December 31, 2017, no board member received per diem in his/her capacity as a Director.

NOTE 11 - REVOLVING LOAN:

Revolving loan at December 31,2017 of$1,271,320 represents the balance of funds provided to NORU through a memorandum of understanding with NORA. The funds are to be used to implement a loan fund pursuant to section 105(a)(l5) of the Housing and Cmmnunity Development Act of 1974 for revolving construction loans to facilitate the construction of residential housing in accordance with policies and procedures and as otherwise approved by NORU. See NOTE 5, for additional discussion.

NOTE 12 - RELATED PARTY TRANSACTIONS_:

NORU paid fees and made various reimbursements for cost incurred on NORD's behalftotaling $132,340 to NORA for the year ended December 31, 2017 of which management fees paid was $3,970.

15

NEW ORLEANS REDEVELOPMENT UNLIMITED, INC. NOTES TO THE FINANCIAL STATEJ\.1ENTS, CONTINUED

NOTE 12- RELATED PARTY TRANSACTIONS, CONTINUED:

NORU, during the year ended December 31,2017, continued to administer a construction lending fund contract totaling $581,4 75 for construction projects on behalf of NORA. At December 31, 2017, the total cumulative amount disbmsed, net of repayments results to a total revolving loan balance of $458,751. Fmther dming 2017, NORA funded through the Construction Lending program $33,665 in a forgivable loan to a nonprofit corporation (see NOTES).

Also, see NOTE 4 for land, unimproved land and structures totaling $1,496,725 transferred to NORA during 2017.

NOTE 13- AMOUNTS PAYABLE:

At December 31, 2017, amounts payable consisted of outstanding obligations to vendors for services perfonned totaling $170,778.

NOTE 14 - SUBSEQUENT EVENTS:

NORU is required to evaluate events or transactions that may have occurred after the statement of financial position date for potential recognition or disclosure in the financial statements. NORU perfonned such an evaluation through June 8, 2018, the date which financial statements were available to be issued, and noted no subsequent events or transactions that occurred after the statement of financial position date that required recognition or disclosure.

NOTE 15- PROVISION FOR FORGIVABLE LOANS:

NORU continues to participate with NORA (related party) in several real estate loan transactions resulting in the provision by NORA to the benefit of the respective home buyers forgivable mortgage loans totaling $335,570 for the year ended December 31, 20 17.

16


NOTE 16- OPERATING LOSS:

For the year ended December 31, 2017 NORU incurr-ed an operating loss in the amount of$950,534. The operating loss was primarily due to the donation to NORA, its related party of$1,496,725 in real property. See NOTES 4 and 12 for additional discussion.

NOTE 17 - GRANTS RECEIVABLE:

At December 31, 2017, grants receivable represents funds expended on the Construction Lending Extended program and pending reimbursement from the state.

NOTE 18 - INVESTMENT:

At December 31, 2017, investment of $782,736 consisted of shares in Louisiana Asset Management Pool, Inc.'s (LAMP) investment pool.

LAMP is an investment pool that, to the extent practical, invests in a manner consistent with GASB Statement No. 79. The following facts are relevant for the investment pools.

• Credit risk: LAMP is rated AAAm by Standard & Pool's.

• Custodial credit risk: LAMP participants' investment in the pool are evidenced by shares of the pool. Investments in pools should be disclosed, but not categorized because they are not evidenced by securities that exist in physical or book-entry form. NORU's investment is with the pool, not the securities that make up the pool; therefore, no disclosure is required.

17


NOTE 18- INVESTMENT, CONTINUED:

• Concentration of Credit risk: Pooled investments are excluded from the 5 percent disclosure requirement.

• Interest rate risk: LAMP is designed to be highly liquid to give its participants immediate access to the account balances. LAMP prepares its own interest rate risk disclosure using the weighted average maturity (W AM) method. The W AM of LAMP assets is restricted to not more than 90 days, and consists of no securities with a maturity in excess of 397 days or 762 days for U.S. Government :floating/variable rate investments. TheW AM for LAMP's total investments is (NUMBERdays) (from LAMP's monthly Portfolio Holdings) as of (DATE -Month-end).

The investment in LAMP at December 31, 2017 is stated at fair value. The fair value is determined on a weekly basis by LAMP and the value of the position in the extemal investment pool is the same as the net asset value of the pool shares.

NOTE 19- RECENT ACCOUNTING PRONOUNCEMENTS:

The Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2016-14 affecting ASC 958, Not-for-Profit Entities, which establishes standards for external financial reporting by not-for-profit organizations. The primary objective of this update is to make certain improvements to the current reporting practices of not-for-profit entities. The amendments in this update are effective for annual financial standards issued for fiscal years beginning after December 15, 2017 and for interim periods within fiscal years beghming after December 15,2018.

NORU is currently assessing the impact of this new pronouncement on its financial statements.

18

SUPPLEMENTARY INFORMATION


Certified Public Accountants Society of Louisiana


.:IBruno& Tervalon LLP ,,Certified Public Accountants

INDEPENDENT AUDITORS' REPORT ON

SUPPLEMENTARY INFORMATION


Other Matters


Joseph A. Akanji, CPA

Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance

We have audited the fmancial statements of New Orleans Redevelopment Unlimited (NORD) as of and for the year ended December 31, 2017, and have issued our report dated June 8, 2018, which contained an urunodified opinion on the financial statements as a whole.

Our audit was conducted for the purpose of fanning an opinion on the financial statements as a whole. The accompanying Schedule of Expenditures of Federal Awards (Schedule I) is presented for the purposes of additional analysis as required by the Uniform Guidance and is not a required part of the financial statements. The infonnation in Schedule I is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such infonnation directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the accompanying Schedule I is fairly stated, in all material respects, in relation to the basic fmancial statements taken as a whole.

4298 ELYSIAN FIELDS AVENUE NEW ORLEANS, LA 70122 (504) 284-8733 FAX (504) 284-8296

20 909 N. PRESIDENT STREET JACKSON, MS 39202

(601) 714-0306 FAX (601) 714-0308

INDEPENDENT AUDITORS' REPORT ON

SUPPLEMENTARY INFORMATION (CONTINUED)

Other Matters, Continued

Supplementary Other Information

The supplementary information Schedule of Compensation Benefits and Over Payments to Executive Director (Schedule II), Combining Statements ofFinancial Position and Activities (Exhibits A and B) is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit ofthe basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the accompanying supplementary infonnation (Schedule II, Exhibits A, and B) is fairly stated, in all material respects, in relation to the basic financial statements as a whole.

BRUNO & TERV ALON LLP CERTIFIED PUBLIC ACCOUNTANTS New Orleans, Louisiana

June 8, 2018

.:IBruno& Tervalon LLP ,,Certified Public Accountants 21

SCHEDULE I

NEW ORLEANS REDEVELOPMENT UNLIMITED, INC. SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS


---------------------------

Program Grantor/Title

PROGRAM FUNDED BY THE U.S. DEPARTMENT OF HOUSING

AND URBAN DEVELOPMENT

Pass-Through New Orleans Redevelopment Authority as Subgrantee of the State of Louisiana:

CFDA

Office ofCmmnunity Development 14.228 (Construction Lending)

Total U.S. Department of Housing and Urban Development

Federal Expenditures

$458.751

$458.751

NOTE: Basis of Presentation: The accompanying Schedule of Expenditures of Federal Awards includes all Federal activity of NORD and is presented on a modified accrual basis of accounting.

NOTE: NORD has not elected to use the 10% de minimis indirect cost rate.

See Independent Auditors' Repoti on Supplementary Infonnation.

22

SCHEDULE II

NEW ORLEANS REDEVELOPMENT UNLIMITED, INC. SCHEDULE OF COMPENSATION, BENEFITS AND OTHER

PAYMENTS TO EXECUTIVE DIRECTOR FOR THE YEAR ENDED DECEMBER 31, 2017

Executive Directors Name: Mrs. Brenda M. Breaux

PURPOSE AMOUNT

NONE

NOTE: New Orleans Redevelopment Unlimited, (NORU) does not have any paid employees. NORU is managed by the Executive Director of New Orleans Redevelopment Authority. NORU is assessed a management fee by New Orleans Redevelopment Authority for services provided. A schedule of New Orleans Redevelopment Authority's Executive Director's" Compensation, Benefits and Other Payments" is included in New Orleans Redevelopment Authority's annual audit for fiscal year ended December 31, 2017.

See Independent Auditors' Report on Supplementary Infonnation.

23


Current Cash Current portion of loans receivable Prepaid items and other assets Grants receivable Accrued interest receivable -0~ Amounts receivable, net Due from other funds Investment

Total current assets

Noncurrent assets Loans receivable, net

Total noncurrent assets

Total assets

COMBINING STATEMENT OF FINANCIAL POSITION DECEMBER3I, 20I7

$ 20I,565 7I,465

487 -0-

476 I,2I2

3I,769 782 736

1,089,234

-0-

-0-

$1,089,234

Construction Lending

Extended

$ -0--0--0-

264,910 476 -0-

47,449 ~

3I2,835

650,576

650 576

$9634II

LIABILITIES AND NET ASSETS

Current liabilities: Amounts payable- vendors Salaries payable Current portion of unearned charges Due to primary government

Total current liabilities

Noncurrent liabilities: Revolving loan Unearned charges

953,936

Total noncurrent liabilities

Total liabilities

Net Assets: Unrestricted

Total net assets

Total liabilities and nel assets

$ -0- $I70,778 8,685 3,935

7I,465 -0--0- 135,744

80 I 50 3I0457

3I7,384 I,27I,320 -0- 335,570

953 936 652 954

I 034,QM2 963 4II

55 I48 ~

55 I48 ~

$I,089,234 $963 4II

See Independent Auditors' Report on Supplementary Information.

24

EXHIBIT A

Total

$ 201,565 7I,465

487 264,9IO

I,2I2 79,2I8

782 736

1,402,069

650 576

650 576

$2,052,645

$ 170,778 I2,620 71,465

I35 744

390 607

335 570

I 606 890

I 997 497

55 I48

55 I48

$2,052,645

EXHffiiTB

NEW ORLEANS REDEVELOPMENT UNLIMITED, INC. COMBINING STATEMENT OF ACTIVITIES


Construction Lending

General Extended REVENUES

Grant $ -0- $458,751 Interest income 7,738 -0-Rental income 250 -0-Other income 306,532 9,835 Proceeds from sale of real property 535,875 -0-

Total revenues, net 850,395 468,586

EXPENSES

Program services 1,791,394 432,485 Supporting services 9 535 36 101

Total expenses 1,800,929 468,586

Change in net assets (950,534) -0-

Net assets, beginning of year 1.005,682 -0-

Net assets, end of year $ 55 148 $ -0-

Total

$ 458,751 7,738

250 316,367 535,875

1,318,981

2,223,879 45 636

2,269,515

(950,534)

1.005,682

$ 55 148


25

Personnel salaries and wages

NEW ORLEANS REDEVELOPMENT UNLIMITED, INC. COMBINING STATEMENT OF FUNCTIONAL EXPENSES

FOR THE YEAR ENDED DECEMBER31, 2017

CONSTRUCTION GENERAL LENDING EXTENDED

Program Supporting Program Supporting Services Services Services Services

$ -0- $ -0- $ 80,523 $12,994 Personnel services employee benefits -0- -0- 18,505 2,920 Purchased professional and technical

services -0- 2,425 11,900 12,384 Purchased property services -0- 3 3,806 1,185 Insurance -0- 7,075 138 15 Other purchased services 1,264 32 -0- -0-Supplies -0- -0- -0- -0-Property 1,487,025 -0- 23 -0-Program 303,105 -0- 278,370 -0-Bad debt -0- -0- -0- -0-Administrative expenses -0- __± 39.220 6,603

Total $1791.394 $9,535 $432,485 $36.101


26

EXIDBITC

TOTAL Program Supporting Services Services

$ 80,523 $12.994 18,505 2,920

11,900 14,809 3,806 1,188

138 7,090 1,264 32

-0- -0-1,487,048 -0-

581,475 -0--0- -0-

39,220 6,603

$2,223,879 $45,636

.:IBruno & Tervalon LLP ,,Certified Public Accountants

Member American Institute of Alcide J. Tervalon. Jr., CPA

Waldo J. Moret, Jr., CPA Paul K. Andoh, Sr., CPA

Joseph A. Akanji. CPA



INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

AND ON COMPLIANCE AND OTHER MATIERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN

ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS


We have audited in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States of America, the financial statements of New Orleans Redevelopment Unlimited, Inc. (NORU) which comprise the statement of fmancial position, as of December 31, 2017, and the related statements of activities, functional expenses and cash flows for the year then ended, and the related notes to the fmancial statements and have issued our report thereon dated June 8, 2018.

Internal Control Over Financial Reporting

In planning and perfonning our audit of the financial statements, we considered NORU's internal control over fmancial reporting to detennine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the fmancial statements, but not for the purpose of expressing an opinion on the effectiveness of NORU's internal control over fmancial reporting. Accordingly, we do not express an opinion on the effectiveness ofNORU's internal control over fmancial reporting.

4298 ELYSIAN FIELDS AVENUE NEW ORLEANS. LA 70122 f504) 284-8733 FAX (504} 284 ·8296

27 909 N. PRESIDENT STREET

JACKSON, MS 39202 (601) 714-0306 FAX (601) 714-0308


AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN

ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS (CONTINUED)

Internal Control Over Financial Reporting, Continued

Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control over financial reporting that might be significant deficiencies or material weaknesses. Given these limitations, during our audit we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

A deficiency in internal control over financial repmiing exists when the design or operation of a control does not allow management or employees in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis.

A significant deficiency over financial reporting is a deficiency, or a combination of deficiencies in intemal control over financial reporting, that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

A material weakness over financial reporting is a deficiency or a combination of deficiencies in intemal control over financial reporting such that there is a reasonable possibility that a material misstatement of NORD's financial statements will not be prevented, or detected and corrected in a timely basis.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether NORD's financial statements are free from material misstatement, we perfonned tests ofits compliance with ce1iain provisions of laws, regulations, contracts and grant agreements, noncompliance with which could have a direct and material effect on the detennination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance that are required to be repmied under Government Auditing Standards.

28


AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN

ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS (CONTINUED)

Purpose of this Report

The purpose of this report is solely to describe the scope of our testing of internal control over fmancial reporting and compliance and the result of that testing and not to provide an opinion on the effectiveness of NORU's internal control over fmancial reporting or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering NORD's internal control over financial reporting and compliance. Accordingly, this communication is not suitable for any other purpose.

BRUNO & TERV ALON LLP CERTIFIED PUBLIC ACCOUNTANTS New Orleans, Louisiana

June 8, 2018


29

NEW ORLEANS REDEVELOPMENT UNLIMITED, INC. SUMMARY SCHEDULE OF FINDINGS AND RESPONSES


Section I - Summary of Auditors' Results

Financial Statements

Type of Auditor's report issued: Unmodified

Internal control over financial reporting: • Material weakness( es) identified? • Significant deficiency(ies) identified?

Noncompliance material to financial statements noted?

Federal Awards

Internal control over major programs: o Material weakness( es) identified? o Significant deficiency(ies) identified?

Type of auditor's report issued on compliance for major programs:

Any audit findings disclosed that are required to be reported in accordance with section 51 O(a) of the Uniform Guidance?

30

No None Reported

No

N/A N/A

N/A

N/A

NEW ORLEANS REDEVELOPMENT UNLIMITED, INC. SUMMARY SCHEDULE OF FINDINGS AND RESPONSES, CONTINUED


Section I- Summary of Auditors' Results, Continued

Federal A wards, Continued

Identification of major programs:

CFDANumber

N/A

Dollar threshold used to distinguish between type A and type B programs:

Auditee qualified as low-risk auditee?

N/A- Not Applicable

Name of Federal Program or Cluster

N/A

N/A

31



Section II- Financial Statement Findings and Questioned Costs

No financial statement findings were reported for the year ended December 31, 2017.

Section III- Federal Award Findings and Questioned Costs

No federal award findings were reported for the year ended December 31, 20 17.

32


FOR TI-lE YEAR ENDED DECEMBER 31, 2017

Section IV- Status of Prior Year's Findings and Questioned Costs

Reference Numbers 2016-001 and 2016-002

Federal Award Program

Construction Lending Extended (see Schedule of Expenditures of Federal Awards).

Criteria

Management must establish internal control objectives to provide reasonable assurance regarding the achievement of objectives in the areas of effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable contracts, laws and regulations.

Condition

Our review of the current design and operation ofNORU's internal control over financial reporting revealed the following significant conditions:

• Docwnentation of the components of internal control over the financial reporting processes to include alignment with the new software system.

• Failure to perfonn timely reconciliations and analysis of significant general ledger accounts.

• Accounting for all financial transactions.

This condition is similar to prior year findings reference numbers 2015-001 and 2015-002.

Questioned Costs

None.

33


FOR THE YEAR ENDED DECEMBER31, 2017

Section IV- Status of Prior Year's Fiudiugs and Questioned Costs

;Reference Numbers, Continued 2016-001 and 2016-002

Context

Total amount of federal awards expended for the year ended December 31, 2016 were $1,580,295.

Effect or Potential Effect

The potential effect of the referenced condition includes incomplete financial statements from which management and the board will rely on to make informed decisions.

NORU does not have a stand along net working system.

Recommendation

Management ofNORU should continue the assessment of its operations aimed at theredesign, and documentation of required processes and procedures to ensure the implementation of an effective and efficient design and operation of its intemal control over financial reporting. The assessment should also consider the need to perform account analysis no later than on a quarterly basis to reduce the impact of resource cmmnitment needed for year end closing. Such a system should facilitate a timely and complete monthly and year end closing process. Further, the process should help minimize the number of adjustments required to fairly state account balances at year end.

Current Status

Partially resolved.

34


EXIT CONFERENCE

Exit conferences were held with representatives ofNORU. The contents ofthis report were discussed and management indicated their concurrence in all material respects. The following were in attendance and/or participated in various discussions:


Mr. Wayne Woods *Ms. Brenda M. Breaux Mr. Derrick Muse

Board President Executive Director Chief Financial Officer

BRUNO & TERVALON LLP, CERTIFIED PUBLIC ACCOUNTANTS

Mr. PaulK. Andoh, Sr., CPA, MBA, CGFM, CGMA -- Partner

*Ms. Brenda M. Breaux has primary responsibility for the responses and action plans in connection with all findings listed in this report.

35

NEW ORLEANS REDEVELOPMENT UNLIMITED

INDEPENDENT ACCOUNTANTS' REPORT ON

APPLYING STATEWIDE AGREED-UPON PROCEDURES


.4Bruno & Tervalon LLP ,,Certified Public Accountants

4Bruno& Tervalon LLP ,,Certified Public Accountants




Joseph A. Akanji, CPA Certified Public Accountants


APPLYING STATEWIDE AGREED-UPON PROCEDURES

To the Board of Directors New Orleans Redevelopment Unlimited New Orleans, Louisiana

We have performed the procedures enumerated below, which were agreed to by New Orleans Redevelopment Unlimited (NORU) and the Louisiana Legislative Auditor (LLA) on the control and compliance areas identified in the Louisiana Legislative Auditor's Statewide Agreed-Upon Procedures (SAUP) for the fiscal period from January 1, 2017 through December 31, 2017. NORU's management is responsible for those compliance and control areas identified in the SAUP.

This agreed-upon procedures engagement was petformed in accordance with attestation standards established by the American Institute of Certified Public Accountants and applicable standards of Government Auditing Standards. The sufficiency of these procedures is solely the responsibility of the specified users of the report. Consequently, we make no representation regarding the sufficiency of the following procedures described eitl1er for ilie purpose for which this report has been requested or for any otl1er purpose.

4298 ELYSIAN FIELDS AVENUE NEW ORLEANS, LA 70122 (504) 284-8733 FAX (504) 284-8296

909 N. PRESIDENT STf1EET JACKSON, MS 39202

(601) 714-0306 FAX (601) 714-0308


APPLYING STATEWIDE AGREED-UPON PROCEDURES (CONTINUED)

The procedures and related findings to the SAUP are as follows:

Written Policies and Procedures

1. Procedure

We obtained NORD's written policies and procedures to determine whether the policies and procedures address each of the following financial/business functions, as applicable:

a) Budgeting including preparing, adopting, monitoring, and an1ending the budget.

Finding

NORU (a component unit of NORA) adheres to the written Finance and Compliance Policies and Procedures of NORA (amended at NORA's December 2017 board meeting). It is our understanding through discussions with management that NORD's board is expected to formally adopt the referenced to include all other policies and procedures at its next board meeting, as an amendment to its formal policy and procedures previously approved and dated in 2012.

NORA's Finance and Compliance Policies and Procedures Manual, specifically addresses policies and procedures to address NORD's budget preparation, adoption and monitoring.

b) Purchasing including (1) how purchases are initiated; (2) how vendors are added to the vendor list; (3) the preparation and approval process of purchase requisitions and purchase orders; (4) controls to ensure compliance with the public bid law; and (5) documentation required to be maintained for all bids and price quotes.

Finding

NORU adheres to NORA's February 2017, revised Procurement Policy and Procedures Manual, which specifically addresses the use of purchase requisitions for all procurement except direct payments (utilities, etc). The policies and procedures further directs, the preparation and approval process to include the requirements of the Louisiana Public Bid Law and maintenance of procurement records.

c) Disbursements including processing, reviewing, and approving.

2



Written Policies and Procedures, Continued

Finding

NORU uses NORA's revised Finance and Compliance Policies and Procedures Manual which specifically addresses all disbursements from the initiation through approval phase.

d) Receipts including receiving, recording, and preparing deposits.

Finding

NORU follows NORA's revised Finance and Compliance Policies and Procedures Manual which addresses the collection of funds to include its recordation and deposit. '

e) Payroll/Persollllel including (1) payroll processing, and (2) reviewing and approving time and attendance records, including leave and overtime worked.

Finding

NORU has no employees except that payroll burden allocated to NORU, is based on NORA's employees with assigned tasks that impact NORU. Those NORA employees follow NORA's Human Resources Policies and Procedures Manual and its Finance and Compliance Policies and Procedures Manual which specifically address its human resources administration to include payroll processing approval.

i) Contracting including (1) types of services requiring written contracts, (2) standard terms and conditions, (3) legal review, (4) approval process, and (5) monitoring process.

Finding

NORU adheres to NORA's Procurement Policies and Procedures Manual revised in February 2017, which specifically addresses contracting from initiation through approval and monitoring phase.

g) Credit cards including (1) how cards are to be controlled, (2) allowable business uses, (3) documentation requirements, (4) required approvers, and (5) monitoring card usage.

3



Written Policies and Procedures, Continued

Finding

Currently, NORU does not have any credit cards issued in its name. However, NORU intends to formally adopt NORA's Procurement, Finance and Compliance Policies and Procedures which specifically addresses credit card administration.

h) Travel and expense reimbursement including (1) allowable expenses, (2) dollar thresholds by category of expense, (3) documentation requirements, and (4) required approvers.

Finding

Currently, NORU has no employees. However, NORU intends to adopt NORA's Human Resources Policies and Procedures which specifically addresses travel and reimbursement administration.

I) Ethics, including (1) the prohibitions as defined in Louisiana Revised Statute 42:1111-1121, (2) actions to be taken if an ethics violation takes place, (3) system to monitor possible ethics violations, and ( 4) requirement that all employees, including elected officials, ammally attest through signature verification that they have read NORD's ethics policy.

Finding

NORU intends to formally adopt NORA's Human Resources Policies and Procedures Manual which specifically addresses via incorporation Louisiana Revised Statute 42:1111-1121, where applicable.

j) Debt service, including (1) debt issuance approval, (2) EMMA reporting requirements, (3) debt reserve requirements, and ( 4) debt service requirements.

Finding

Not applicable to NORU.

4



Board or Finance Committee

2. Procedure

We obtained and reviewed Board minutes for the fiscal period to determine whether:

a) the Board met (with a quorum) at least monthly, or on a frequency in accordance with the Board's enabling legislation, charter, or other equivalent document.

Finding

NORD's board met three (3) times during the fiscal year with a quorum within the dictates of its by-laws. The by-laws call for one (1) regular meeting.

b) the Board minutes referenced or included monthly budget-to-actual comparisons on NORD's funds, and if the bndget-to-actual comparisons showed that management was deficit spending during the fiscal period, there is a formal/written plan to eliminate the deficit spending for those entities with a fund balance deficit. If there is a fom1al/writien plan, report whether the meeting minutes for at least one board meeting during the fiscal period reflect that the board is monitoring the plan.

Finding

Our review of the board minutes revealed presentation by management of budget to actual 1·eports. Further, we noted no planned deficit spending during the year ended December 31, 2017.

c) The minutes referenced or included non-budgetary financial information (e.g. approval of contracts and disbursements) for at least one meeting during the fiscal period.

Finding

The minutes provided to us for review included reference to selected non-budgetary financial information.

5



Bank Reconciliations

3. Procedure

We obtained a listing of client baok accounts from management and management's representation that the listing is complete.

Finding

No exceptions noted.

4. Procedure

From the listing provided by management, we selected NORU's bank account and obtained bank statements and reconciliations for all months in the fiscal period to determine whether:

a) No exceptions noted;

Finding


b) Bank reconciliations include evidence that a member of management or a board member (with no involvement in the transactions associated with the bank account) has reviewed each baok reconciliation.

Finding


c) If applicable, management has documentation reflecting that it has researched reconciling items that have been outstanding for more than 6 months as of the end of the fiscal period.

Finding


6


APPLYING STATEWIDE AGREED-UPON PROCEDURES. (CONTINUED)

Cash Collections

5. Procedure

We obtained a listing of cash/check/money order (cash) collection locations and management's representation that the listing is complete.

Finding


6. Procedure

From the listing provided by management, we selected NORD's only cash collection location and:

a) Obtained existing written documentation (e.g. insurance policy, policy manual, job description) to determine whether each person responsible for collecting cash is ( 1) bonded, (2) not responsible for depositing the cash in the bank, recording the related transaction, or reconciling the related bank account (report if there are compensating controls performed by an outside party), and (3) not required to share the san1e cash register or drawer with another employee.

Finding

NORU has no employees, as such we noted the following:

1) NORA has written documentation to include insurance policy, policy and procedures manual, and job descriptions that identify all individuals responsible for cash collection. Further, we noted that each listed person responsible for cash collection is under NORA's bond policy.

2) Through the year ended December 31, 2017, selected number of individuals had job responsibilities that included custodial, recordation and reconciliation responsibilities of the related bank accounts.

3) There are no cash registers in place.

7



Cash Collections, Continued

Management's Response

In accordance with the operational agreement between NORA and NORU, NORA shall provide legal, finance, administrative and progranunatic staff for NORU. All NORA staff members handling NORU financial transactions are bonded as employees of NORA. Each of NORA's staff member assigned to NORU and designated to accept revenue have specific job descriptions designating such. NORA utilizes a collection station model appointing user defined collection stations representing all computers that will be used to take in cash receipts. Since NORA provides all staff for NORU, NORA is responsible for ensuring that all staff are bonded and insured.

b) Obtained existing written documentation (e.g. sequentially numbered receipts system report, reconciliation worksheets, policy manual) to determine whether NORU has a formal process to reconcile cash collections to the general ledger and/or subsidiary ledgers, by revenue source and/or agency fund additions, by a person who is not responsible for cash collections in the cash collection location selected.

Finding

NORU adheres to the established procedures for the reconciliation of cash collections to the general ledger by revenue source. However, we noted the lack of segregation in duties between custodial and recordation responsibilities for selected employees.


NORA's Board has approved a revisions to the Finance and Compliance Policies and Procedures to include a segregation of duties between a person that collects cash and prepares bank statements. This policy and procedure was made effective January 1, 2018. NORA will request that NORU's Board adopt NORA's Finance and Compliance Policies and Procedures.

8




c) Selected the highest (dollar) week of cash collections from the general ledger or other accounting records during the fiscal period and:

1) Using NORD's collection documentation, deposit slips, and bank statements, traced daily collections to the deposit date on the corresponding bank statement to determine whether the deposits were made within one day of collection.

Finding

In three (3) instances, we noted deposits outside of the one (1) day and three (3) days ofNORU's policy.


NORA's Board has approved a revision to the Finance and Compliance Policies and Procedmes to include a Revenue Collection Processing Manual and policies governing its use. All checks shall be endorsed, receipted, and deposited by designated personnel no later than 5 business day of receipt, into NORA's bank account. This policy and procedure was made effective January 1, 2018. NORA will request that NORD's Board adopt NORA's Finance and Compliance Policies and Procedures.

2) Using sequentially numbered receipts system reports, or other related collection documentation, verify that the daily cash collections are completely supported by documentation and report any exceptions.

Finding

NORD's cunent procedures manual does not specifically dictate the use of a receipt or log system at point of cash collection. The computerized system (Logos.Net, formally New Worlds System) issues receipt numbers upon recordation in its subledger or general ledger accounts.

9





NORU will review its revenue collection system using the receipt log to promptly record all receipts of cash before recordation in Logos.Net, formerly New World Systems.

7. Procedure

We obtained existing written documentation (e.g. policy manual, written procedure) to determine whether NORU has a process specifically defined (identified as such by NORU) to determine completeness of all collections, including electronic transfers, for each revenue source and agency fund additions (e.g. periodic confirmation with outside parties, reconciliation to utility billing after cutoff procedures, reconciliation of traffic ticket number sequences, agency fund forfeiture monies confirmation) by a person who is not responsible for collections.

Disbursements- General (excluding credit card(s)/debit,fuel and P-cards purchases or payments)

Finding

NORD's current procedures manual does not specifically define a process to ensure the contpleteness of all collections (cash and electronic transfers), by an individual without custodial and recordation responsibilities.


NORA's Board has approved a reviSion to the Finance and Compliance Policies and Procedures to include a segregation of duties between a person that collects cash and prepares bank statements. This policy and procedure was made effective January 1, 2018. NORA will request that NORD's Board adopt NORA's Finance and Compliance Policies and Procedures.

10



Disbursements- General (excluding credit card(s)/debit,juel andP-cards purchases or payments), Continued

8. Procedure

We obtained NORD's check register for the year ended December 31, 2017. We obtained management's representation that its check register population was complete.

Finding


9. Procedure

Using the disbursement population from #8, we randomly selected 25 disbursements, excluding credit card/debit cm·dffuel cm·d!P-card purchases or payments. We obtained supporting documentation (e.g. purchase requisitions, system screens/logs) for each transaction to determine whether the supporting documentation for each tra11saction demonstrated that:

a) Purchases were initiated using a requisition/purchase order system or an equivalent electronic system that separates initiation from approval functions in the sa111e manner as a requisition/purchase order system.

11



Disbursements- General (excluding credit card(s)/debit,Juel and P-cards JJ_urcllases or pavments), Continued

Finding


b) Purchase orders, or an electronic equivalent, were approved by a person who did not initiate tl1e pmchase.

Finding


c) Payments for purchases were not processed without (1) an approved requisition and/or purchase order, or electronic equivalent; (2) a receiving report showing receipt of goods purchased, or electronic equivalent; and (3) an approved invoice.

Finding


10. Procedure

We reviewed NORD's documentation (e.g. electronic system control documentation, policy manual, written procedure) to determine whether the person responsible for processing payments is prohibited from adding vendors to NORD's purchasing/disbursement system.

Finding


12



Disbursements- General (excluding credit card(s)ldebit,juel and P-cards purchases or payments/, Continued

11. Procedure

We reviewed NORD's documentation (e.g. electronic system control documentation, policy manual, written procedure) to determine whether the persons with signatory authority or who makes the final authorization for disbursements have no responsibility for initiating or recording purchases.

Finding


12. Procedure

We inquired of management and observed the supply of unused checks to determine whether unused checks are maintained in a locked location, with access restricted to those persons that do not have signatory authority.

Finding


13. Procedure

We inquired of the individual with a signature stamp whether his or her signature is maintained under his or her control or is used only with his or her knowledge and consent. We also inquired whether signed checks are likewise maintained under the control of the signer or authorized user until mailed.

13



Disbursements- General (excluding credit card(s)ldebit,juel and P-cards purchases or payments), Continued

Finding

NORD's checi{S are manually signed and held by signer until mailed by a designated person.

Credit Cards

14. Procedure

We obtained from management a listing of all active credit cards, including the card nmnbers and the names of the persons who maintained possession of the cards and we obtained management's representation that the listing i? complete.

Finding

NORU does not have any credit cards issued in its name.

15. Procedure

Using the listing prepared by management where applicable, we selected credit cards maintained and used during the fiscal period, and obtained the monthly statements. We selected the monthly statement with the largest dollar activity for the card to determine whether:

a) there is evidence that the monthly statement and supporting docmnentation were reviewed and approved, in writing, by someone otl1er than the authorized card holder.

14



Credit Cards, Continued

Finding

Not applicable.

b) finance charges and/or late fees were assessed on the selected statements.

Finding

Not applicable.

16. Procedure

Using the monthly statements selected under #15 above, we obtained supporting documentation for all transactions for the selected card.

a) We reviewed each transaction to determine whether the transaction is supported by:

1) An original itemized receipt (i.e., identifies precisely what was purchased)

15



Credit Cards, Continued

Finding

Not applicable.

Finding

2) Documentation of the business/public purpose. For meal charges, there should also be documentation of the individuals participating.

Not applicable.

Finding

3) Other documentation that may be required by written policy (e.g. purchase order, written authorization).

Not applicable.

b) For each transaction, we reviewed the transaction's detail (nature of purchase, dollar amount of purchase, supporting documentation) for compliance with NORD's written purchasing/disbursement policies and the Louisiana Public Bid Law (i.e. transaction is a large or recurring purchase requiring the solicitation of bids or quotes).

Finding

Not applicable.

c) For each transaction, we compared NORU's documentation of the business/public purpose to the requirements of Article 7, Section 14 of the Louisiana Constitution, which prohibits the loan, pledge, or donation of funds, credit, property, or things of value, and report any exceptions (e.g. cash advances or non-business purchases, regardless whether they are reimbursed).

Finding

Not applicable.

16



Travel and Expense Reimbursemmt

17. Procedure

We obtained the check register for the year ended December 31,2017 and filtered for travel reimbursements. We obtained management's representation that the check register population is complete.

Finding


18. Procedure

We obtained NORD's written policies related to travel and expense reimbursements and compared the amonnts in the policies to the per diem and mileage rates established by the U.S. General Services Administration (GSA) (www.gsa.gov) to determine whether there are any amounts that exceed GSA rates.

Finding

Currently, NORU adheres to NORA's J}olicies related to travel. Noted no variance in excess of adopted policy rates in comparison to the GSA rates.

19. Procedure

Using the proceeding transactions from # 17, we selected as applicable three (3) individuals who incurred the largest travel costs during the fiscal period. We obtained the expense reimbursement reports or prepaid expense documentation of the selected person, including the supporting docU11lentation, and chose the largest travel expense for the selected persons to review in detail. For the travel expense selected:

a) We compared expense documentation to written policies to determine whether each expense was reimbursed or prepaid in accordance with written policy (e.g., rates established for meals, mileage, lodging).

17



Travel and Expense Reimbursement, Continued

Finding

Not applicable.

b) We determined whether each expense is supported by:

1) An original itemized receipt that identifies precisely what was purchased.

Finding

Not applicable.

2) Documentation of the business/public purpose (Note: For meal charges, there should also be docmnentation of the individuals participating).

Finding

Not applicable.

3) Other documentation as may be required by written policy (e.g., authorization for travel, conference brochure, cettificate of attendance).

Finding

Not applicable.

c) We compared NORD's documentation of the business/public purpose to the requirements of Article 7, Section 14 of the Louisiana Constitution, which prohibits the loan, pledge, or donation of funds, credit, propetty, or things of value.

Finding

Not applicable.

18



Travel and Expense Reimbursement, Continued

Procedure, Continued

d) We determined whether each expense and related documentation were reviewed and approved, in writing, by someone other than the person receiving reimbursement.

Finding

Not applicable.

Contracts

20. Procedure

We obtained a listing of all contracts in effect during the fiscal period and obtained the check register for the year ended December 31, 2017 and filtered for contract payments. We obtained management's representation that the check register population is complete.

Finding


21. Procedure

Using the listing above, we selected five (5) contract vendors that were paid the most money during the fiscal period, and excluding purchases on state contract and payments to the practitioner. We obtained the related contracts and paid invoices and:

a) We determined whether there is a formal/written contract that supports the services mrangement and tl1e mnount paid.

19



Contracts. Continued

Finding


b) We compared each contract's detail to the Louisiana Public Bid Law or Procurement Code to determine whether each contract is subject to the Louisiana Public Bid Law or Procurement Code and:

Finding

1) If yes, we obtained and compared supporting contract documentation to legal requirements to determine whether NORU complied with all legal requirements (e.g., solicited quotes or bids, advertisement, selected lowest bidder).


Finding

2) If no, we obtained suppmiing contract documentation to determine whether NORU solicited quotes as a best practice.


20



Contracts. Continued

c) We determined whether the contract was amended, and if so, we determined whether the original contract terms contemplated or provided for such an amendment.

Finding


d) We selected the largest payment from each of the five contracts, obtained the suppotiing invoice, and compared the invoice to the contract terms, to determine whether the invoice and related payment complied with the terms and conditions of the contract.

Finding


e) We obtained and reviewed contract docmnentation and board minutes to detennine whether there is documentation of board approval, if required by policy or law (e.g. Lawrason Act or Home Ru1e Charter).

finding


21



Payroll and Personnel

22. Procedure

We obtained a listing of employees with their related salaries and we obtained managements representation that the listing is complete. We randomly selected five (5) employees, obtained their persmmel files, and:

a) Reviewed compensation paid to each employee during the fiscal period to determine whether payments were made in strict accordance with the terms and conditions of the employment contract or pay rate structnre.

Finding

NORU has no employees. It's operations are managed by NORA with an allocated charge for such services.

b) Reviewed changes made to hourly pay rates/salaries dnring the fiscal period to determine whether those changes were approved in writing and in accordance with written policy.

Finding

Not applicable.

23. Procedure

We obtained attendance and leave records and randomly selected one pay period in which leave was taken by at least one employee. Within that pay period, we randomly selected twenty-five (25) employees on payroll to determine whether:

a) all selected employees/officials documented their daily attendance and leave (e.g., vacation, sick, compensatory).

22



Pavroll and Personnel, Continued

finding

Not applicable.

b) there is written documentation that supervisors approved, electronically or in writing, the attendance aod leave of the selected employees.

Finding

Not applicable.

c) there is written documentation that NORU maintained written leave records (e.g., hours earned, hours used, and balaoce available) on those selected employees that earn leave.

Finding

Not applicable.

24. l'rocedure

We obtained from management a list of those employees/officials that terminated during the fiscal period and management's representation that the list is complete. We selected the two (2) largest termination payments (e.g., vacation, sick, compensatory time) made during the fiscal period and obtained the personnel files for the two (2) employees. We reviewed the termination payments to determine whether they was made in strict accordance with policy and/or contract aod approved by management.

Finding

Not applicable.

23



Pavroll and Personnel, Continued

25. Procedure

Etltics

We obtained suppmting documentation (e.g. caucelled checks, EFT documentation) relating to payroll taxes aud retirement contributions dming the fiscal period to determine whether the employee and employer portions of payroll taxes aud retirement contributions, as well as the required reporting forms, were submitted to the applicable agencies by the required deadlines.

Finding

Not applicable.

26. Procedure

Using the five (5) randomly selected employees from procedure #22 under "Payroll aud Persom1el" caption, we obtained ethics compliauce documentation Jl'om mauagement to determine whether NORD maintained documentation to demonstrate that required ethics training was completed. We also reviewed the employee files for the employees selected to determine whether there was a signed verification of having read the ethics policy included in the file.

Finding

Not applicable.

24



Ethics, Continued

27. Procedure

We inquired of management whether any alleged ethics violations were reported to NORU during the fiscal period and, if applicable, reviewed documentation demonstrating that management investigated alleged ethics violations, the corrective actions taken, and whether management's actions complied with NORD's ethics policy.

Finding

Based on discussions with management, no ethics violations were reported to NORU during the year ended December 31, 2017.

Debt Service

28. Procedure

If debt was issued during the fiscal period, we obtained supporting documentation from NORU to determine whether State Bond Commission approval was obtained.

Finding

Not applicable.

29. Procedure

If NORU had outstanding debt during the fiscal period, we obtained supporting documentation from NORD and report whether NORU made scheduled debt service payments and maintained debt reserves, as required by debt covenants.

Finding

Not applicable.

25



Debt Service, Continued

30. Procedure

If NORU had tax millages relating to debt service, we obtained supporting documentation to determine whether millage collections exceeded debt service payments by more than 10% during the fiscal period.

Finding

Not applicable.

31. Procedure

We inquired of management whether NORU had any misappropriations of public funds or assets. If so, we obtained and reviewed supporting documentation to determine whether NORU reported the misappropriation to the Louisiana Legislative Auditor and the District Attorney of Orleans Parish.

Finding

Not applicable.

32. Procedure

We observed NORD's premises and website to determine whether NORU posted the notice required by R.S. 24:523.1.

Finding

NORU does not have a website.

26



Other, Continued

33. Procedure

If the practitioner observes or otherwise identifies any exceptions regarding management's representations in the procedures above, report the nature of each exception.

Finding

Not exceptions noted.

*******************************************************

We were not engaged to, and did not, perform an exan1ination, the objective of which would be the expression of an opinion on management's assetiions, respectively, on those compliance and control areas identified in the SAUP. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.

The purpose of this report is solely to describe the scope of testing performed on those compliance and control areas identified in the SAUP, and the result of that testing, and not to provide an opinion on control or compliance. Accordingly, this repoti is not suitable for any other purpose. Under Louisiana Revised Statute 24:513, this report is distributed by the Legislative Auditor as a public document.

BRUNO & TERVALON LLP CERTIFIED PUBLIC ACCOUNTANTS New Orleans, Louisiana

June 8, 2018

27

~Bruno& Tervalon Ill' ,,Certified Public Accountants

Member Amencan Institute of Alc1de J. Tervalon, Jr .• CPA

Waldo J . Moret, Jr., CPA Paul K. Andoh, Sr., CPA

Joseph A. Akanji, CPA



INDEPENDENT AUDITORS' REPORT ON OTHER MATTERS RELATEDTOINTERNALCONTROL

Ms. Brenda Breaux, Executive Director New Orleans Redevelopment Unlimited, Inc. New Orleans, Louisiana

Management of New Orleans Redevelopment Unlimited, Inc. (NORU) is responsible for establishing and maintaining effective internal control over fmancial reporting. In planning and performing our audit of the fmancial statements ofNORU, as of and for the year ended December 31, 2017 in accordance with auditing standards generally accepted in the United States of America, we considered NORU's internal control to determine our auditing procedures for the purpose of expressing an opinion on the financial statements and not for the purpose of expressing an opinion on the effectiveness of NORU's internal control. Accordingly, we do not express an opinion on the effectiveness ofNORU's internal control.

As a part of our audit, we noted a certain other matter that are opportunities for strengthening internal control and operating efficiency. We previously reported on NORU's internal control in our report dated June 8, 2018 . This letter does not affect our report dated June 8, 2018 on the financial statements or internal control ofNORU.

We will review the status of this other matter during our next audit engagement. We have already discussed this othermatterwithNORU's management, and will be pleased to discuss this other matter in further detail at your convenience.

4298 ELYSIAN FIELDS AVENUE NEW ORLEANS. LA 70122 CS04) 284-8733 FAX (504) 284-8296

909 N. PRESIDENT STREET JACKSON, MS 39202

(601) 714-0306 FAX (601) 714-0308

INDEPENDENT AUDITORS' REPORT ON OTHER MATTERS RELATED TO INTERNAL CONTROL

(CONTINUED)

Current Year's Other .Matters

Our discussion of current year's other matters follows:

Reference Number OM 2017-001

Criteria

Management must establish internal control objectives to provide reasonable assurance regarding the achievement of objectives in the areas of effectiveness and efficiency of operations, reliability of financial reporting and compliance with applicable contracts, laws, regulations and board policy.

Condition

Based on our review of Exhibit A of the cooperative endeavor agreement between the City ofNew Orleans and the New Orleans Redevelopment Authority for "IT" Services, we were unable to detennine ifthe "Enterprise Security" section of the referenced agreement and the Logos.Net (formerly New World System) network system used by NORU specifically, addresses access, transactional and general controls to include periodic access updates as a matter of policy.

It is our understanding through discussion with management that the referenced system has features for implementation of said controls.

Questioned Costs

None.

Context

Total revenues and expenses for the year ended December 31, 2017 were $1,318,981 and $2,269,515.

2


(CONTINUED)

Current Year's Other Matters, Continued

Reference Number, Continued OM2017-001

Cause

No clearly defined written process.


Potential for unauthorized access.

Recommendation

Management should review as a part of its risk assessment.

Management's Response and Planned Corrective Action

The City of New Orleans provides basic Infonnation Technology (IT) support required for NORA's daily operations, including IT infrastructure, desktop support and application hosting. Annual release updates to the Tyler Logos.Net software, formerly New World Systems is server based therefore requiring City IT administrator access. Management will assign staff to work with City IT to further define mutually agreed upon procedures for installing periodic updates to the Tyler Logos.Net software and amend Exhibit A of the cooperative endeavor agreement to include said procedures.

3


Reference Number OM2017-002

Criteria

(CONTINUED)



Condition

Our review of one (!) vendor for compliance with the requirements for debarment and suspension resulted in our inability to verifY documented evidence of verification through the "SAM" website in compliance with NORD's policy.

The referenced contract was "piggy-backed" using a procured contract dated October 3, 2011 by NORA. Further, we noted that a "SAM's search was performed on January 10,2017 for the contract executed by the vendor on January 9, 2017.

Questioned Costs

None.

Context

Total expenses incurred for the year ended December 31, 2017 were $2,269,515.

4


(CONTINUED)


Reference Number, Continued OM2017-002


Noncompliance with the requirements of 21 CFR regarding procurement, debarment and suspension.

Cause

Lack of an adequate oversight to ensure consistency in application of the requirements of21 CFR regarding procurement, debannent and suspension.

Recommendation

Management should consider the use of periodic sampling to ensure compliance with its policy and procedure regarding procurement, debarment and suspension of vendors prior to a contractual relationship.


Management will strengthen its controls to ensure all Piggy-Back contractors are not debarred, suspended, or otherwise excluded from or ineligible for participation in federal assistance programs or activities.

5

INDEPENDENT AUDITORS' REPORT ON OTHER MATTERS RELATEDTOINTERNALCONTROL

(CONTINUED)


Reference Number OM 2017-003

Criteria


Condition

In one (1) instance of three (3) selected cash collections for testing, we noted a variance between the receipt date (dated August 30, 2017, and the general ledger posted date August 25, 20 17). Also, our review revealed the untimely deposit of the collected funds with NORU policy of within three (3) days.

Questioned Costs

None.

Context

Total expenses incurred for the year ended December 31, 20 17 were $2,269,515.


The potential effect of the referenced condition includes incomplete financial statements from which management and the board will rely on to make infonned decisions.

6


(CONTINUED)


Reference Number, Continued OM 2017-003

Cause

Lack of a written defined policy regarding the dating of transactions.

Recommendation

Management ofNORU should continue the risk assessment ofits operations aimed at theredesign, and documentation of required processes and procedures to ensure the implementation of an effective and efficient design and operation of its internal control over financial reporting.


Management has revised its Finance and Compliance Policies and Procedures to include Revenue Collections Processing Manual describing the steps and options available for revenue collection, printing, and posting. Those procedures were made effective January 1, 2018. Management will further revise those procedures and provide staff training specifically geared to defining general ledger, payment dates, and scenarios for deposits.

7


(CONTINUED)

Status of Prior Year's Other Matter

The status of prior year's other matter follows:

Reference Number OM2016-001

Criteria

Management of resources through budgetary constraints.

Condition

For the year ended December 31,2016 NORU incurred operating losses of$133,945.

This condition is similar to a prior year other matter reference number OM 2015-002.

Cause

Level of grant funds.


Continuing negative impact on net assets

Recommendation

We recmmnend that management continues to develop and implement a strategy aimed at enhancing the revenue stream for NORU to include a containment of expenses.

Current Status

The condition is a one-time expense due to donated property and NORU did not have the sufficient revenue. Management will continue to develop strategies to enhance the revenue stream for NORU.

8


(CONTINUED)

NORU's response to the other matters identified in our audit is described in the accompanying report under the caption "Management's Response and Planned Corrective Action". We did not audit NORD's response and, accordingly, we express no opinion on it.

*'*******************************************************

As always, we appreciate the courtesies extended to us by you and your staff during our audit. Should you have any questions and/or require further detail, please do not hesitate to call.

This report is intended solely for the information and use of management, the Board of Directors and is not intended to be and should be used by anyone other than these specified parties.

BRUNO & TERVALON LLP CERTIFIED PUBLIC ACCOUNTANTS New Orleans, Louisiana

June 8, 2018

9

new orleans redevelopment unlimited, inc. · new orleans redevelopment unlimited, inc. financial...

Documents