Box 21, Folder 43, Document 67

Box 21, Folder 43, Document 67

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EDWIN L. STERNE
CHAIRMAN

GEORGE 6. CRAFT
VICE CHAIRMAN

J. B&B. BLAYTON
JOHN ©. CHILES
FRANK G. ETHERIDGE

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OUuany ONIX
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M. B. SATTERFIELD
EXECUTIVE DIRECTOR ANO SECRETARY

CARLTON GARRETT
DIRECTOR OF FINANCE

GILBERT H. BOGGS
DIRECTOR OF HOUSING

GEORGE R. SANDER
TECHNICAL DIRECTOR



824 HURT BUILDING

ATLANTA, GEORGIA 30303
JACKSON 3-6074

February 17, 1967

The Honorable Fletcher Thompson
Member of Congress

House of Representatives
Washington, D. C.

Dear Sir:

Thank you for your letter of February 9, 1967, which arrived in my
absence from the city. I am glad to have this opportunity to supplement
and clarify the facts surrounding the report by the Comptroller General
to the Congress, a copy of which you sent me.

As I am sure you know, the function of the General Accounting
Office is to investigate the policies, procedures and performance of
Federal agencies and not to conduct fiscal audits on local housing
authorities. In this instance the General Accounting Office was re-
viewing the PHA policy on investments of funds held by housing authorities.
Fiscal audits of all housing authorities are conducted by auditors of the
PHA (now the HAA) itself.

The requirements of the PHA for the period covered were that there
should be a forecast made quarterly to determine cash operating needs
for that quarter, and to schedule the retention of ready cash for the
purpose of meeting these needs. This requirement was being fully complied
with for the entire period. The basis for that policy is found in the
Annual Contributions Contract between the Atlanta Housing Authority and
the PHA, Section 202, Paragraph E of Part II: “If at any time the Local
Authority has monies on deposit in the General Fund in excess of the
prudently estimated needs for the next 90 days, such excess funds shall
be invested, etc." The fiscal audits conducted by PHA for the period
1960 through 1963 investigated our investments and found no fault. The
PHA auditor in 1963, however, pointed out that the Atlanta Housing Autho-
rity had $10,000 of operating funds, not excess funds, on deposit in
three dormant bank accounts which could have been invested. This was
done. In retrospect, after GAO had raised the question, PHA took the
position that their auditors had been too conservative in previous years.
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The Honorable Fletcher Thompson -2- February 17, 1967

Reference to this will be found on Page 2) of the GAO Report in Appendix
No. II. In the 196) audit, which was conducted after GAO had visited us,
the PHA audit recommended use of a method outlined in the Local Housing
Authority Handbook. This suggested method was not available to us for
the first 3 1/4 years of the report period. Furthermore, even after
receiving it we were using a 60-day projection period instead of the

90 days required, and felt that our years of experience provided an e-
qually sound and accurate basis for cash requirement estimates as did
the guidelines.

We disagree with the General Accounting estimates as to how much
might have been earned on additional interest revenue during the 12 months
ended May 31, 1964. Balances on hand fluctuate sharply so that the average
cash balance is no index of the continuing opportunity to invest funds. A
large number of separate accounts is involved. Dates of large payments
are sometimes deferred for good reason. However, when looking back at
what had occurred in previous months, the GAO was able to cite as a pos-
sibility a narrow margin between cash on hand and estimated needs. More
importantly, to achieve the narrow margin which the GAO achieved, could-
not be done in advance without very frequent reviews requiring a large
increase in the amount of employee time required, and the increased
interest earnings would be gross, and not net, savings.

While the GAO estimated that an earning of $12,000 could have been
made, an audit by PHA immediately afterward came up with a smaller figure.
It was our estimate at that time that the net saving, taking into con-
sideration employee time and other overhead, would be a smaller portion
of the $12,000 and, in fact, might be virtually offsetting. At any rate,
as you will see from our remarks on pages 26, 27 and 28 that we went far
beyond the guidelines proposed by the Management Manual"and adopted a
regular semi-monthly review, plus individual reviews when large funds
were received between semi-monthly reviews. This was done prior to
September 9, 1965. Shortly thereafter we went to regular weekly reviews,
a practice which we suggested to PHA be made national policy. Although
PHA did not accept our suggestion in that form, we understand that this
is being recommended and used widely.

We in the Authority were surprised and disappointed that both Atlanta
newspapers released the story without giving us an opportunity to respond
and that the story, which was filed from Washington, appeared to have
overlooked the material contained in Appendix III of the report itself,
which if carefully read throws a somewhat different light on the report.

Please let us know if there is any additional information which
you wish.

Sincerely,

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Pid Saal
M. B. Satterfield/
MBS: dm Executive Director