The Northwest Georgia Housing Authority is in good financial condition, but an outside auditor called its bookkeeping process disastrous.

Dale Rector, with Rector and Reeder PC, presented the results of the 2011 audit to the housing authority board Wednesday and said the authority’s current assets are valued at $7.4 million, compared to $6.9 at the end of 2010. Unrestricted assets grew from $4.9 million at the end of 2010 to $5.3 million at the end of 2011.

Rector reported that grant funding to the authority decreased by 17.9 percent in 2011. Eighty-three percent of the authority’s revenue is derived from federal grant funding. Tenant revenue was up by 9.1 percent to $1.6 million.

“Agency-wide you have good quick ratio, you have good operating leverage, and you have good working capital,” Rector said. “In my opinion, that’s pretty strong.”

That was the end of the good news.

“You had board reports, you had financial reports that you’ve gotten every month in the prior year that in our opinion were not reliable and were not accurate,” Rector said.

The quality of those reports jeopardizes the agency’s standing as a high performing housing authority.

Rector’s audit revealed that the authority misstated $4.6 million in total assets; total liabilities were misstated by $2 million; and total equity was misstated by approximately $2.6 million.

“That’s the first finding — failure to properly file, properly report your end-of-the-year financial data to HUD,” Rector said. “It shocked me, it shocked me.”

Debra Toothman served as the authority’s financial director for just more than a year before resigning June 29 of this year.

Rector said the audit did not reveal that any money was missing.

“We had problems with journal entries, we had problems with the general ledger reconciliation,” Rector said.

Records retention was also a significant problem. The audit revealed that the lack of a uniform records retention or filing system has resulted in confusion about compliance and documentation requirements for many grants and programs.

“Many requested documents were located only with great difficulty, if at all,” according to the audit report.

Nonetheless, the auditor told the NWGHA board that the housing agency is in good shape financially.

“We need to seriously work on our accounting department and what that looks like,” Rector said. “The finance department can sink the ship.”

Board member Jim Keaten asked Rector how the agency could ensure it doesn’t get into the same situation again, and Rector said that, in addition to hiring a new chief financial officer, that the housing authority should also hire an experienced accountant.

NWGHA Executive Director Sandra Hudson said the agency has interviewed several people for the CFO position and is currently checking references on a prospect from Arizona who has ties to Georgia and has indicated a willingness to join the NWGHA.

Ed Stockton, the CPA who has been brought in to help clean up the books, told the board that they basically have had no internal controls for the past year.

“We’re going to get this straightened out,” Board member Lee Hight said emphatically.

In other business, Assistant Director of Technical Services Doug Braden told the board the he hopes to use Federal Neighborhood Stabilization Program III funds to acquire nine parcels next to the Overlook at Fairgrounds property off Martin Luther King Jr. Drive. Construction of the gated public housing community is not expected to get under way for several months.

Hudson briefed the board on continuing efforts to transform the Willingham Village public housing complex in West Rome to a Rental Assistance Demonstration site. Some 151 units need to be completely renovated. Braden estimated that it would take $85,000 per unit to upgrade the old housing units.

Participation in the RAD program would require the housing authority to partner with a developer and seek 9 percent tax credit financing from the Georgia Department of Community Affairs.