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CalHFA auditors report clean opinion for FY2023; board urged to monitor allowances as lending activity increases
Summary
CliftonLarsonAllen told the CalHFA Audit Committee the agencys financial statements for the year ended June 30, 2023 received an unmodified (clean) opinion and no federal audit findings. Auditors highlighted higher cash and investments tied to SB 2 and AB 101 receipts, increased loan production, and recommended continued monitoring of allowances and upcoming GASB changes.
CalHFAs Audit Committee heard on a clean audit for the fiscal year ending June 30, 2023, when auditors from CliftonLarsonAllen reported an unmodified opinion and no audit findings for the financial statements or federal awards.
"You all did fabulous," Mandy Merchant, principal at CliftonLarsonAllen, told the committee as she presented the audit conclusions. The firm said the agencys financials were completed earlier than in prior years, with controller Oksana Glushenko noting the state provided information sooner than expected: "we completed this year financials almost 4 months earlier than last year." The auditors reported no uncorrected misstatements and no disagreements with management.
The auditors summarized key year-over-year changes: cash and investments rose materially, which Liz Richardson, senior associate, attributed in part to receipts for the SB 2 and AB 101 programs and more favorable market rates (the auditor cited roughly a $155.8 million increase). Program loans receivable also grew substantially; Richardson said that increase was largely from additional loans funded in FY23 (auditors cited approximately $99.4 million).
Auditors emphasized areas they test each year: internal controls, revenue recognition and significant estimates such as allowance for loan losses and state-provided pension and OPEB actuarial inputs. "If you're going to be getting back more into these markets, just keep an eye on these allowances," Merchant said, urging close monitoring if production expands and markets change.
The presentation also addressed debt management and hedging. Auditors and staff said orphan interest-rate swaps tied to older variable bonds were terminated in FY22-23 and the agency is now using forward swaps to manage multifamily rate exposure. Richardson noted loans payable increased in FY23 due in part to financing from the Federal Financing Bank and increased use of a Braeburn credit facility; long-term bond payables decreased due to special redemptions under an HMRB indenture.
Staff and board discussed upcoming changes in accounting standards. The auditors flagged GASB 96 (subscription-based IT arrangements) and two incoming standards, GASB 100 and GASB 101, the latter affecting compensated absences disclosure and potentially increasing required footnote reporting. Merchant said GASB 96 had no material impact on the agencys reporting this year.
CalHFA staff committed to quarterly updates on operating results and loan production. Erwin Chan, describing the agencys budget process, said the board would see quarterly revenue and production updates and be asked to amend forecasts if needed. Committee members encouraged staff to return with proposals when CalHFA issues an RFQ for future audit services; the current auditor contract will conclude after FY24-25 and staff said they have begun RFQ preparations.
The committee adjourned after hearing public comment and additional staff remarks; no formal audit-related motions beyond approval of the prior meeting minutes were recorded.
