2007/2008
 ANNUAL FINANCIAL
REPORTING PACKAGE
           For
Public Housing Authorities
This report package presents a Generally Accepted Accounting
Principles financial reporting model for Housing Authorities....
ANNUAL REPORT




                 ________________________________________
                                              ...
PUBLIC HOUSING AUTHORITIES
                                                       REPORTING PACKAGE



                   ...
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State Auditor’s Office
                             Local Government Audit Managers

BELLINGHAM TEAM                      ...
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MCAG NUMBERS

Your district MCAG identification number is below. Identify your number and use in the upper left hand
corne...
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Public Housing Authorities                   2-2                   (1/08)
MANAGEMENT’S DISCUSSION AND
                                         ANALYSIS (MD&A)

The MD&A should include all of the c...
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Public Housing Authorities                   3-2                   (1/08)
1/
                        STATEMENT OF NET ASSETS (or BALANCE SHEET)


The information for this statement should be taken...
your authority has a component unit as defined by GASB Statement 14 you will need to make the appropriate
modifications to...
MCAG No.
                                                       (Authority Name)                                     Page ...
MCAG No. _______
                                                   (Authority Name)                               Page 2 ...
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS
                                 (or FUND EQUITY)

The inf...
MCAG No. _________                       __________________________
                                               (Author...
MCAG No. _________                       __________________________
                                               (Author...
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Public Housing Authorities                   5-4                   (1/08)
STATEMENT OF CASH FLOWS


The authority must present a statement of cash flows. The only acceptable method of presentation...
•   Transfers to and from other funds (except when a transfer is received for capital purposes).
     •   Tax receipts not...
MCAG No. _________                          __________________________
                                                   ...
Page 2 of 2

RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES

Operating inco...
CASH FLOW WORKSHEET


This worksheet is not mandatory, but it may help you prepare the statement of cash flows.

Cash rece...
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Public Housing Authorities                   6-6                   (1/08)
NOTES TO FINANCIAL STATEMENTS


The notes which follow were designed to provide example disclosures required for most hous...
1/
                                   _________________________________________
                                       NOT...
NOTES TO PREPARER: (Continued)

       will be reported as either a discretely presented or blended component unit. GASB r...
b.       Basis Of Accounting And Presentation

         The accounting records of the authority are maintained and reporte...
e.       Restricted Assets

         In accordance with bond resolutions (and certain related agreements) separate restric...
1/
h.       Investments


                                        2/
i.       Operating Revenues/Expenses
         The aut...
j.       Compensated Absences


         Compensated absences are absences for which employees will be paid, such as vacat...
1/
NOTE 2 − STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY

                                                2/
NOTE 3 − DEPOSI...
NOTES TO PREPARER: (Continued)

         Indicate type of investment(s)
         Disclose custodial credit risk for invest...
4/
         If the investment reported in the notes does not tie to the investment amount reported on the statements we re...
1/
c.       Derivates And Similar Transactions

                            2/
d.       Securities Lending

              ...
b.      Realized gains and losses on investments that had been held in more than one fiscal year and sold
            in t...
NOTE 4 - CAPITAL ASSETS

Major expenses for capital assets, including capital leases and major repairs that increase usefu...
(During 20___, the authority capitalized $__________of net interest costs for funds borrowed to finance the
construction o...
NOTE 5 - CONSTRUCTION IN PROGRESS


Construction in progress represents expenses to date on projects whose authorizations ...
NOTE 7 - LEASE COMMITMENTS

a.      Operating Lease(s) 1/


        The (authority) is committed under various leases for ...
b.      Capital Lease(s)


        The (authority) has entered into (a) lease agreement(s) for financing the acquisition o...
NOTE 8 - LONG-TERM DEBT AND LIABILITIES

Long-Term Debt

a.     Revenue Bonds:

       The authority issues revenue bonds ...
NOTES TO PREPARER: (Continued)

2/    If you prepare comparative financial statements show the amortization amounts beginn...
This advance refunding was undertaken to (reduce total debt service payments over the next ____ years by
$__________, etc....
d.    Changes in Long-Term Liabilities

      During the year ended                      , 20     , the following changes ...
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Public Housing Authorities

  1. 1. 2007/2008 ANNUAL FINANCIAL REPORTING PACKAGE For Public Housing Authorities
  2. 2. This report package presents a Generally Accepted Accounting Principles financial reporting model for Housing Authorities. This model is an example and in some cases will require modification to customize the report for your specific reporting entity. When modifying the presentation be aware that deviation from required GAAP presentation can result in a qualification in the authorities financial audit opinion. Reports submitted to SAO should not use tax based accounting criteria.
  3. 3. ANNUAL REPORT ________________________________________ (Name) ____________________ MCAG No. Submitted pursuant to RCW 43.09.230 to the STATE AUDITOR’S OFFICE FOR THE FISCAL YEAR ENDED ___________________________________, 20__________ Certified correct this _________________________ day of _________________________, 20__________ to the best of my knowledge and belief: NAME__________________________________________ TITLE__________________________________________ PREPARED BY__________________________________ TELEPHONE NUMBER___________________________ FAX NUMBER___________________________________ E-MAIL ADDRESS________________________________ HOME PAGE ADDRESS____________________________
  4. 4. PUBLIC HOUSING AUTHORITIES REPORTING PACKAGE Table of Contents Local Government Audit Managers.......................................................................................................1-1 MCAG Numbers....................................................................................................................................2-1 Management Discussion and Analysis (MD&A)..................................................................................3-1 Statement of Net Assets (or Balance Sheet)..........................................................................................4-1 Statements of Revenues, Expenses and Changes in Fund Net Assets (or Fund Equity)......................................................................................................................5-1 Statement of Cash Flows........................................................................................................................6-1 Notes to Financial Statements................................................................................................................7-1 Required Supplementary Information (RSI)..........................................................................................8-1 Supplemental Schedules.........................................................................................................................9-1
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  6. 6. State Auditor’s Office Local Government Audit Managers BELLINGHAM TEAM SOUTH KING COUNTY TEAM San Juan, Skagit, Whatcom King (Cities) Sadie Armijo Jim Griggs, CPA Audit Manager Audit Manager Phone: 360-676-2165 Phone: 253-372-6250, ext. 101 FAX: 360-676-2091 FAX: 253-372-6252 CENTRAL KING COUNTY TEAM SPOKANE TEAM King County, City of Seattle, Seattle SD, Sound Pend Oreille, Spokane (North), Stevens Transit, Port of Seattle, Seattle HA, Seattle Mono Cody Zimbleman Rail and a number of regional planning agencies, Audit Manager stadium authorities, public facility districts and Phone: 509-456-2700 development authorities located in downtown FAX: 509-456-4476 Seattle Evans Anglin, CPA TACOMA TEAM Audit Manager Pierce Phone: (206) 615-0555 Mark Rapozo, CPA FAX: (206) 464-7292 Audit Manager Phone: 253-593-2047, ext. 111 EVERETT TEAM FAX: 253-597-4146 Island, Snohomish Chris Capek, CPA TRI CITIES TEAM Audit Manager Benton, Columbia, Franklin, Walla Walla Phone: 425-257-2137 Carol Ehlinger FAX: 425-257-2149 Audit Manager Phone: 509-734-7105 NORTH KING COUNTY TEAM FAX: 509-734-7108 North and East King Counties, Higher Education Beth Mauch, CPA VANCOUVER TEAM Audit Manager Clark, Cowlitz, Skamania, Wahkiakum Phone: 425-739-1801, ext. 104 Jasen McEathron FAX: 425-739-1800 Audit Manager Phone: 360-260-6408, ext. 104 OLYMPIA TEAM FAX: 360-260-6417 Grays Harbor, Lewis, Pacific, Thurston Angela Cady WENATCHEE TEAM Audit Manager Chelan, Douglas, Ferry, Grant, Okanogan Phone: 360-725-5376 Juan Esparza FAX: 360-664-0157 Audit Manager Phone: 509-662-0440 PORT ORCHARD TEAM FAX: 509-664-6396 Clallam, Jefferson, Kitsap, Mason George Amburn YAKIMA TEAM Audit Manager Kittitas, Klickitat, Yakima Phone: 360-895-6133 Sarah Walker, CFE FAX: 360-895-6138 Audit Manager Phone: 509-454-7848 PULLMAN TEAM FAX: 509-575-2166 Adams, Asotin, Garfield, Lincoln, Spokane (South), Whitman Debbie Pennick, CPA Audit Manager Phone: 509-335-5868 FAX: 509-335-3714 Public Housing Authorities 1-1 (1/08)
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  8. 8. MCAG NUMBERS Your district MCAG identification number is below. Identify your number and use in the upper left hand corner on all report forms. MCAG 1515 Anacortes Housing Authority 1496 Asotin County Housing Authority 1522 Bellingham Housing Authority 1512 Bremerton Housing Authority 1312 Brewster Housing Authority 1498 Clallam Housing Authority 2845 Columbia Gorge Housing Authority 1517 Everett Housing Authority 1505 Grant County Housing Authority 1506 Grays Harbor County Housing Authority 1503 Housing Authority of the City of Pasco & Franklin Co. 1507 Island County Housing Authority 0592 Jefferson County Housing Authority 1501 Kalama Housing Authority 1502 Kelso Housing Authority 1497 Kennewick Housing Authority 2635 King County Housing Authority 0346 Kitsap County Consolidated Housing Authority 1513 Kittitas County Housing Authority 0354 Longview Housing Authority 0348 Mason County Housing Authority 1146 Okanogan County Housing Authority 1313 Oroville Housing Authority 1495 Othello Housing Authority 0151 Pierce County Housing Authority 2637 Puyallup Housing Authority 1508 Renton Housing Authority 0815 Republic-Ferry County Housing Authority 0568 Richland Housing Authority 1511 Seattle Housing Authority 1516 Sedro Woolley Housing Authority 0491 Skagit County Housing Authority 1518 Snohomish County Housing Authority 1519 Spokane Housing Authority 1523 Sunnyside Housing Authority 1514 Tacoma Housing Authority 1520 Thurston County Housing Authority 1499 Vancouver Housing Authority 1521 Walla Walla Housing Authority 0404 Walla Walla County Housing Authority 0439 Wenatchee Housing Authority 0159 Whatcom County Housing Authority 2639 Yakima Housing Authority Public Housing Authorities 2-1 (1/08)
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  10. 10. MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) The MD&A should include all of the components of MD&A discussed in the GASBS 34 to the extent they apply:  A brief overview of the entity and a discussion of basic financial statements.  Condensed comparative financial information:1/ Statement of net assets - other assets - capital assets - total assets - other liabilities - long-term liabilities - total liabilities - invested in net assets, net of related debt - restricted net assets - unrestricted net assets Statement of revenues, expenses, and changes in net assets - operating revenues by major source - nonoperating revenues by major source - total revenues - operating expenses - nonoperating expenses - capital contributions - special/extraordinary items - transfers - change in net assets - ending net assets  Analysis of the authority’s overall financial position and results of operations. REAC is increasing scrutiny of changes in account balances be sure to include reasons for fluctuations.  Analysis of significant changes in balances and transactions of individual programs. REAC is increasing scrutiny of changes in account balances be sure to include reasons for fluctuations.  Description of significant capital assets and long-term debt activity.  Description of significant changes in condition and estimated maintenance expenses for infrastructure assets.  Discussion of currently known facts, decision, or conditions. The MD&A should not go beyond the required elements listed above. / 1 If comparative statements are presented (i.e., 2 years financial information) the condensed comparative information should include 3 years of information. Public Housing Authorities 3-1 (1/08)
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  12. 12. 1/ STATEMENT OF NET ASSETS (or BALANCE SHEET) The information for this statement should be taken from the authority’s general ledger after closing entries are posted. The statement of net assets should include those general ledger accounts used by your authority. The titles shown on the statement were taken from SAO’s Budgeting Accounting Reporting System manual and the GFOA’s Governmental Accounting, Auditing, and Financial Reporting publication. These accounts are deemed to be at the appropriate level of detail for reporting. However, in some instances, other accounts may be necessary. Use these blank spaces as necessary. The statement model presented is for current year information. In GASBS 34 reporting standalone enterprise funds usually do not present comparative statements because the MD&A is used to present comparative information. If the comparative statement format is chosen GAAP requires the presentation of three years of data in the MD&A. The authority may report as a single enterprise fund (one column) or as a group of programs (multiple 2/ columns) . If the authority uses the multiple column (program) presentation a total enterprise fund column is necessary. If the authority chooses a single column presentation, the underlying program financial statements should be prepared for HUD reporting and audit purposes. These statements do not need to be included in the basic financial statements. However, they can be included as supplemental information. If the multiple column presentation is used, it will require additional audit resources. 3/ In June of 1991, the Governmental Accounting Standards Board (GASB) issued its Statement 14 which defines the financial reporting entity. The Statement is effective for financial statements for periods beginning after December 15, 1992, and requires governmental entities to evaluate their relationships with other organizations (both governmental and nongovernmental). If the authority has contracts that form Tax Credit Partnerships (TCP), the agreements need to be reviewed to determine how the entity should be reported. In almost all cases they are a part of the reporting entity and will be reported as either a discretely presented or blended component unit (depending on the relationship). GASB recommends reporting TCPs as component units (CUs) using discrete presentation; however, blended presentation may also be used. When blended presentation is used it may be performed with either single column or multiple column presentation. Single column presentation reports the entity and CU in aggregate in one column. All duplicating transactions eliminated must be eliminated from the single business activities column. The multicolumn presentation requires reporting of separate columns for the primary government (HA), blended component (TCP) and the total of the CU and HA account balance less eliminations. All duplicating transactions must be eliminated in the total column. The use of an additional eliminations column is optional. If the multicolumn presentation is used and an elimination column is not presented the eliminations information needs to be disclosed in the notes to the financial statements. GASB has indicated they prefer the multicolumn presentation for blended of CUs. However, because GASB has made exceptions SAO will not require the standalone business activities to use the multicolumn approach to blended CU presentation. Application of the GASB Statement 14 may result in the addition of a Component Units column (or columns) in the financial statements of the authority. The following forms do not contain provisions for component units. If / 1 The statement presentation used is for a stand alone enterprise fund. If the authority chooses to report using a governmental fund model, refer to GAAP BARS Manual. / 2 Additional financial statement audit requirements apply when multiple column presentation is used. This is due to additional opinion units. / 3 As updated by the GASBS 39, Determining Whether Certain Organizations Are Component Units. Public Housing Authorities 4-1 (1/08)
  13. 13. your authority has a component unit as defined by GASB Statement 14 you will need to make the appropriate modifications to your statements. The GAAP BARS manual discusses the reporting entity and potential component units in Part 4, Chapter 1 and provides examples of financial statements which include component units. For further information, refer to the BARS manual and the GASB Statement 14. In June 1999, GASB approved Statement 34, Basic Financial Statements − and Management Discussion and Analysis − for State and Local Governments. This and consecutive statements are reflected in this reporting package. If an authority reports a TCP using discrete presentation they may also optionally report an asset for their equity. The asset is reported as Investment in Tax Credit Partnership (see example on Statement of Net Assets). This asset represents the authority equity as calculated by the contractual provisions forming the TCP. The amount reported must tie to the authority equity reported on the TCP’s statement of owner’s equity. Caution: The use of revenue allocation for the calculation of owner’s equity may result in an incorrect amount for the Investment in TCP. The TCP contracts have separate owner’s equity calculations and revenue/loss allocation sections. If an authority reports the Investment in TCP disclosure of the TCP as a discretely presented component unit with joint venture characteristics is required in the notes to the financial statements. Housing authorities should not report capitalized start-up costs of Tax Credit Partnerships on either the primary government or Tax Credit Partnership financial statements. Proper classification of grant and loan transactions require the analysis of the underlying documentation. The criteria for determining if a funding source is a grant or loan is the existence of a note payable or loan contract. Transactions should be reported as loans even if the grantor does not require payments, if a note payable is outstanding (i.e., loan with forgiveness clause). Assets reported from loans with forgiveness clauses must be reported with a corresponding liability (loan payable) while the note payable or a loan contract is outstanding. Terms of these transactions need to be presented in the notes to the financial statement. The disclosures should include the assets acquired with the funds, conditions to be met for the transaction to become a grant, what conditions require repayment, and the amount to be repaid (interest, appreciated value, etc.). When an authority has satisfied the note payable or loan contract grant revenue can be recognized and the liability removed. If the authority has received a recoverable grant the conditions for recoverability must be disclosed in the notes to the financial statements. A recoverable grant is a contract where the grantor can require repayment if the HA fails to provide low income housing with the funding. The grant contract also contains a stipulation that the asset acquired with grant funds be maintained as low income housing for 20 to 40 years. Recoverable grant contracts do not require a note payable or loan contract as a condition of funding. If the grantee sells or converts the asset to non-low income housing before the time requirement has expired the proceeds must be returned to the grantor. Some recoverable grant contracts also require return of the appreciation in value of the asset as well as the original funding amount. The items requiring disclosure include: the asset the grantor has an interest in, the amount the grantor can require to be returned, and the conditions that trigger return of the grantor interest. Recoverable grants are non exchange transactions and should be reported as revenue when the eligibility requirements are met. Grant eligibility requirements are considered to be met when the asset is in place and being used for low income purposes. A time requirement for maintaining low income housing by it’s self is not an eligibility requirement, placing the asset in use for low income purposes is the requirement. GASB has recently issued new guidance on the reporting of other postemployment benefits (OPEB) in GASBS 43 and 45. If the housing authority pays for OPEB benefits it will need to report the associated assets, liabilities and expenses. For information to determine if the statements are applicable, reporting requirements, and implementation dates refer to the 2008 GAAP BARS manual, Part 3, Chapter 12, Interpretation 21, Other Postemployment Benefit (OPEB), located on the SAO website at http://www.sao.wa.gov/LocalGovernment/BARS/Index.htm. Public Housing Authorities 4-2 (1/08)
  14. 14. MCAG No. (Authority Name) Page 1 of 2 1/ STATEMENT OF NET ASSETS (or BALANCE SHEET ) , 20____ ASSETS Current Assets: Cash and Cash Equivalents $________________ Deposits with Fiscal Agents/Trustees _________________ Temporary Investments _________________ Receivables (Net): _________________ ____________________ _________________ ____________________ _________________ ____________________ _________________ Inventories _________________ Prepayments 2/ Restricted Assets: (see footnote 2/ net assets) Debt Service _________________ Tenant Deposits _________________ Other Current Assets _________________ TOTAL CURRENT ASSETS _________________ Noncurrent Assets: ____________________ _________________ 2/ Restricted Assets: (see footnote 2/ net assets) Debt Service _________________ 3/ Investment in Tax Credit Partnership _________________ 4/ Capital Assets Land _________________ Buildings _________________ Capital Leases _________________ Equipment _________________ Construction in Progress _________________ _________________ _________________ _________________ _________________ Less Accumulated Depreciation (_______________) Total Capital Assets (Net) _________________ TOTAL NONCURRENT ASSETS _________________ TOTAL ASSETS $ The notes to financial statements are an integral part of this statement. / 1 Presentation of the Total Net Assets and Liabilities line is made on a balance sheet only. / 2 GFOA has indicated it has reversed its position on allowing an intermediate category between current and non current sections on the statement of position. Restricted assets should be categorized as either current or noncurrent depending upon the nature of the liability. The portion of restricted assets associated with the current portion of debt service should be classified as current. This will prevent the distortion of working capital. 3 3/ The authority’s asset, Investment in Tax Credit Partnership, may be shown if the TCP is discretely presented. The equity balance must be calculated using the contractual provisions and tie to the HA equity reported on the TCP’s statement of owners equity. Caution: The use of revenue allocation percentage for calculation may result in an incorrect amount for Investment in TCP. Owners’ equity calculations are usually contained in a distinct separate section from the revenue/loss allocation terms. / 4 Presentation of details is optional. Public Housing Authorities 4-3 (1/08)
  15. 15. MCAG No. _______ (Authority Name) Page 2 of 2 1/ STATEMENT OF NET ASSETS (or BALANCE SHEET ) , 20____ LIABILITIES Current Liabilities: Accounts Payable $_________________ Current Portion of Mortgage Payable _________________ Current Portion of Capital Leases _________________ Tenant Deposits __________________ Current Portion of Bond Principal __________________ Current Portion of Bond Interest __________________ ____________________ _________________ ____________________ _________________ ____________________ _________________ TOTAL CURRENT LIABILITIES _________________ Noncurrent Liabilities: Compensated Absences _________________ Revenue Bonds _________________ Mortgage Payable _________________ ____________________ _________________ ____________________ _________________ TOTAL NONCURRENT LIABILITIES _________________ TOTAL LIABILITIES _________________ NET ASSETS Invested in Capital Assets, Net of Related Debt _________________ 2/ Restricted for _________________ Unrestricted _________________ TOTAL NET ASSETS _________________ 1/ TOTAL NET ASSETS AND LIABILITIES $ The notes to financial statements are an integral part of this statement. 1/ Presentation of the Total Net Assets and Liabilities line is made on a balance sheet only. 2/ Resources with external restrictions must be reported as restricted assets. The corresponding net assets (equity) related to these assets must also be presented as restricted. Some HUD funding may require that their assets and equity be presented as unrestricted at the program level (FDS). Unless the HUD program funding can be used for any general cost by incurred by the PHA it must be reported as restricted on the GAAP statements. If program equity is reported as unrestricted on the FDS restricted on the GAAP statements we recommend putting a comment on the FDS to alert reviewers there is a difference to prevent rejection. Public Housing Authorities 4-4 (1/08)
  16. 16. STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS (or FUND EQUITY) The information for this statement should be taken from the authority’s revenue and expense ledgers after year- end adjustments are posted but before closing the books. The titles shown on the statement were taken from SAO’s BARS GAAP manual and the GFOA’s Governmental Accounting, Auditing, and Financial Reporting publication. The statement model presented is for current year information. In GASBS 34 reporting standalone enterprise funds usually do not present comparative statements because the MD&A is used to present comparative information. If the comparative statement format is chosen GAAP requires the presentation of three years of data in the MD&A. The authority may report as a single enterprise fund (one column) or as a group of programs (multiple 1/ columns) . If the authority uses a multiple column (program) presentation a total column is necessary. If the authority chooses a single column presentation, the underlying program financial statements should be prepared for HUD reporting and audit purposes. These statements do not need to be included in the basic financial statements. However, they can be included as supplemental information. If the multiple column presentation is used, it will require additional audit resources. GASBS 34 requires that internal transactions between programs/funds that are duplicative in nature be eliminated in the top level (government wide) statements. If programs in the authority have transactions that are not external in nature they should be eliminated (i.e., internal revenues and expenses). The elimination is also done to minimize the grossing up effect on assets (receivables) and liabilities (payables) on the statement of net assets. The following forms do not contain provisions for component units. If your authority has a component unit as 1/ defined by GASB Statement 14 you will need to make the appropriate modifications to your statements. The Category 1 BARS manual discusses the reporting entity and potential component units in Part 4, Chapter 1 and provides examples of financial statements which include component units. For further information, refer to the BARS manual and the GASB Statement 14. In June 1999, GASB approved Statement 34, Basic Financial Statements − and Management Discussion and Analysis − for State and Local Governments. This and consecutive statements are reflected in this reporting package. GAAP, as interpreted by the GASB, requires reporting HUD operating subsidies and grants as nonoperating revenues. When HUD issued GAAP implementation guidance they interpreted this standard differently and advised authorities to report these grants as operating revenue. Because HUD is the primary user of the financial statements, the SAO has taken the position that this is not a material departure from GAAP. This allows the authorities an option in reporting HUD grants. However, if the authority elects to classify operating subsidies and grants as operating revenues, this must be clearly disclosed in Note 1, Summary of Significant Accounting Policies, Operating Revenues/Expenses. See note 1 for an example disclosure. Classification of operating grants should not effect expenses. If an expense is operating it should be reported as operating regardless of the source of revenue to pay it. GASBS 33 and 34 requires a new format for capital contributions. If the authority has received a capital grant it must be classified as a Capital Contribution, not nonoperating revenue. Recognition of grant revenue: Recoverable grants are nonexchange transactions and should be reported as revenue when the eligibility requirements are met. Grant eligibility requirements are considered to be met when the asset is in place and being used for low income purposes. A time requirement for maintaining low income housing by it’s self is not an eligibility requirement, placing the asset in use for low income purposes is the requirement. These transactions require disclosure of the recoverability conditions in the notes. Loans with forgiveness clauses do not meet the definition of grant revenue due to the existence of a note payable or loan contract. Until the note payable or loan contract terms are met or removed, a liability must be reported. These transactions also require disclosure in the notes. / 1 As updated by the GASBS 39, Determining Whether Certain Organizations Are Component Units. Public Housing Authorities 5-1 (1/08)
  17. 17. MCAG No. _________ __________________________ (Authority Name) Page 1 of 2 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS (or FUND EQUITY) For the Year Ended , 20____ OPERATING REVENUES: Tenant Rental Revenue $_________________ Commercial Revenue _________________ Other Operating Revenue _________________ ____________________ _________________ ____________________ _________________ ____________________ _________________ Total Operating Revenues _________________ OPERATING EXPENSES: Tenant Services _________________ Utilities _________________ Maintenance _________________ Customer Services and Marketing _________________ Administrative _________________ Depreciation _________________ Housing Assistance Payments _________________ Other Operating Expenses _________________ ______________________ _________________ ______________________ _________________ Total Operating Expenses _________________ OPERATING INCOME (LOSS) $ The notes to financial statements are an integral part of this statement. Public Housing Authorities 5-2 (1/08)
  18. 18. MCAG No. _________ __________________________ (Authority Name) Page 2 of 2 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN FUND NET ASSETS (or FUND EQUITY) For the Year Ended , 20____ NONOPERATING REVENUES (EXPENSES): 1/ HUD Operating Subsidies _________________ 1/ Other Government Grants _________________ Interest and Dividend Income _________________ (Interest Expense and Related Charges) _________________ Equity in Income (Loss) of Joint Ventures _________________ Gains (Losses) on Capital Asset Disposition _________________ Other Nonoperating Revenues _________________ (Other Nonoperating Expenses) _________________ Total Nonoperating Revenues (Expenses) _________________ Income before Contributions, Transfers, Extraordinary and Special Items _________________ CAPITAL CONTRIBUTIONS HUD Capital Grant _________________ TRANSFERS In (Out) _________________ EXTRAORDINARY/SPECIAL ITEMS _________________ CHANGE IN NET ASSETS _________________ BEGINNING TOTAL NET ASSETS, Date $_________________ ENDING TOTAL NET ASSETS, Date $ The notes to financial statements are an integral part of this statement. / 1 If operating grants and subsidies are shown as operating revenues (optional presentation) note disclosure is required in the summary of significant accounting policies. Public Housing Authorities 5-3 (1/08)
  19. 19. THIS PAGE LEFT BLANK INTENTIONALLY. Public Housing Authorities 5-4 (1/08)
  20. 20. STATEMENT OF CASH FLOWS The authority must present a statement of cash flows. The only acceptable method of presentation is the direct method. In using the direct method, a reconciliation of operating cash flows to operating income is required. The statement of cash flows is prepared for governmental proprietary funds using four activities: • Cash Flows from Operating Activities, • Cash Flows from Noncapital Financing Activities, • Cash Flows from Capital and Related Financing Activities, and • Cash Flows from Investing Activities. Cash Flows from Operating Activities: In reporting cash flows from operating activities, authorities should report major classes of gross cash receipts and gross cash payments and their sum − the net cash flow from operating activities. Cash flows from operations include all cash related to transactions and events reported as components of operating income in the statement of revenues, expenses, and changes in fund net assets. In addition, the operating activities category is used for any cash inflow or outflow that cannot properly be classified in one of the other three categories. Authorities should, at a minimum, report separately these classes of operating cash receipts and payments: a. Cash receipts from customers, b. Cash receipts from interfund services provided, c. Other operating cash receipts (if any), d. Cash payments to employees for services, cash payments to other suppliers of goods or services, e. Cash payments for interfund services used, including payments in lieu of taxes that are payments for, and reasonably equivalent in value to, services provided, f. Other operating cash payments (if any) The cash flows for cash receipts from customers, cash paid to employees and suppliers (item a, d and e above) may be difficult to determine, so the authority may indirectly calculate these amounts. (See the worksheet at the end of this section.) Further detail of operating cash receipts and payments should be provided if the detail is useful. Interest receipts usually do not qualify to be a part of cash flows from operating activities. Exceptions to this rule are loans that: 1) fulfill government social programs rather than for income or profit; and 2) directly benefit individual constituents of government Program loans typically refer to loans that meet both of these exceptions. The collection of principal payments related to program loans is reported as a cash inflow in this section. GAAP requires operating subsidies and grants to be reported in cash flows from non capital financing activities. If the authority deviates from GAAP and reports operating subsidies and grants in cash flows from operating activities it must be disclosed in Note 1, Summary of Significant Accounting Policies. Cash Flows from Noncapital Financing Activities: This portion of the cash flows statement includes: • Operating subsidies (grant proceeds) not specifically restricted to capital purposes. • Grant payments (both capital and otherwise) to other governments. • Borrowing and repayments (principal and interest) of debt that is not clearly attributable to capital purposes. Capital purposes include capital acquisition, construction, or improvement, including capital lease repayments. • Borrowing to finance program loans. Public Housing Authorities 6-1 (1/08)
  21. 21. • Transfers to and from other funds (except when a transfer is received for capital purposes). • Tax receipts not attributable to capital purposes. • Interest paid on noncapital-related vendor payables. Cash Flows from Capital and Related Financing Activities: This portion of the cash flows statement includes: • Borrowing and repayment (principal and interest) of debt clearly attributable to capital purposes. • Proceeds of capital grants and contributions. • Transfers from other funds for capital purposes. • Payments related to the acquisition, construction, or improvement of capital assets. • Sale or involuntary conversion of capital assets (such as insurance proceeds resulting from the loss of a capital asset). • Capital-type special assessments. • Taxes levied specifically for capital purposes or related debt service. Interest capitalization is ignored for purposes of the statement of cash flows. Interest payments should be reported as interest payments rather than as capital acquisition, even though the payments may be capitalized in the statement of net assets and not reported as interest expense in the statement of revenues, expenses, and changes in fund net assets. Cash Flows from Investing Activities: This portion of the cash flows statement includes: • Receipt of interest (except on certain program loans). • Loan collections (except for certain program loans). • Proceeds from the sale of investments. • Receipt of interest on customer deposits. • Changes in the fair value of investments subject to fair value reporting and classified as cash equivalents. Cash outflows in the investing activities category includes: • Loans made to others (except for program loans). • Purchase of investments. Reconciliation Authorities are required to provide a reconciliation of the difference between cash flows from operating activities and operating income. This reconciliation should be presented either within the statement of cash flows or as an accompanying schedule to the statement. Noncash investing, capital, or financing transactions The statement of cash flows is limited to actual inflows and outflow of cash (and cash equivalents). Therefore, financial statement users still need information on certain noncash activities that otherwise would fail to be reported either in the statement of revenues, expenses, and changes in fund net assets or in the statement of cash flows. Specifically, information is needed regarding noncash transactions that meet two criteria: 1. The transaction affects recognized assets or liabilities, and 2. The transaction would not properly have been classified as cash flows from operating activities. This information can be presented either in a narrative or tabular format on a separate schedule accompanying the statement of cash flows. Public Housing Authorities 6-2 (1/08)
  22. 22. MCAG No. _________ __________________________ (Authority Name) Page 1 of 2 STATEMENT OF CASH FLOWS For the Year Ended , 20____ CASH FLOWS FROM OPERATING ACTIVITIES Receipts from tenants  (Worksheet Reference) Payments to suppliers () Payments to employees () Other receipts (payments)  Net cash provided (used) by operating activities  CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES 1/ Operating subsidies and grants CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Proceeds from capital debt Capital contributions Purchases of capital assets Principal paid on capital debt Interest paid on capital debt Other receipts (payments) Net cash provided (used) by capital and related financing activities CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sales and maturities of investments Interest and dividends Net cash provided by investing activities Net increase (decrease) in cash and cash equivalents Balances – beginning of the year Balances – end of the year NONCASH INVESTING, CAPITAL AND FINANCING ACTIVITIES Borrowing under capital lease Contribution of capital asset from Increase in fair value of investment / 1 If operating grants and subsidies are shown in the Cash Flows from Operating Activities section a note disclosure is required in the summary of significant accounting policies. This is a departure from GAAP. Public Housing Authorities 6-3 (1/08)
  23. 23. Page 2 of 2 RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES Operating income (loss) Adjustments to reconcile operating income to net Cash provided (used) by operating activities: Depreciation expense Change in assets and liabilities: Receivables, net Inventories Accounts and other payables Accrued expenses Net cash provided by operating activities  The notes to financial statements are an integral part of this statement. Public Housing Authorities 6-4 (1/08)
  24. 24. CASH FLOW WORKSHEET This worksheet is not mandatory, but it may help you prepare the statement of cash flows. Cash received from customers: Operating Revenues Add: Tenant Receivables – Beginning Less: Tenant Receivables – Ending Less: Increase in Bad Debt Net Cash Received from Customers  See Statement of Cash Flows Cash paid to suppliers: Supplies and Materials Add: Repairs and Maintenance Add: Utilities Add: Other Operating Expenses Sub total Total Expenses Requiring Cash Add: Accounts Payable – Beginning Less: Accounts Payable – Ending Net Cash Paid to Suppliers  See Statement of Cash Flows Cash paid to employees: Salaries and Benefits Add: Salaries and Benefits Payable – Beginning Less: Salaries and Benefits Payable – Ending Add: Compensated Absences Payable – Beginning Less Compensated Absences Payable – Ending Net Cash Paid to Employees  See Statement of Cash Flows Cash flows from operations: Cash Received from Customers  Other Operating Cash Receipts (Uses)  Add receipts/Less uses Less: Cash Paid to Suppliers  Less: Cash paid to Employees  Net Cash Provided (Used) by Operating Activities  See Statement of Cash Flows Public Housing Authorities 6-5 (1/08)
  25. 25. THIS PAGE LEFT BLANK INTENTIONALLY. Public Housing Authorities 6-6 (1/08)
  26. 26. NOTES TO FINANCIAL STATEMENTS The notes which follow were designed to provide example disclosures required for most housing authorities. These samples are intended to furnish you with a guide to phrasing the required disclosures. These notes are illustrative only and should be adapted to unique circumstances of your authority. Some notes may not be applicable and should be deleted. Other notes may be necessary to assist readers in understanding the financial statements and should be added. The notes to financial statements are an integral part of the statements. Once you have edited these notes so that they do provide the necessary information about your authority, you should print and attach them to your financial statements. REAC has indicated they are increasing the scrutiny of authority financial statement disclosures. It is recommended authorities assure adequate disclosure be given for: 1. Presentation method for TCPs, including Investment in TCP account if used. 2. Loans with forgiveness clauses. 3. Formation of not for profit entities and specific uses/services they provide the authority. 4. Interlocal agreements. Public Housing Authorities 7-1 (1/08)
  27. 27. 1/ _________________________________________ NOTES TO FINANCIAL STATEMENTS For the Year Ended , 20____ These notes are an integral part of the accompanying financial statements. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1/ The accounting policies of the (authority) conform to generally accepted accounting principles (GAAP) as applicable to proprietary funds of governments. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. In June 1999, GASB approved Statement 34, Basic Financial Statements − and Management Discussion and Analysis − for State and Local Governments. This and consecutive statements are reflected in the accompanying financial statements (including notes to financial statements). The following is a summary of the most significant policies (including identification of those policies which result in departures from generally accepted accounting principles): 2/ This year is the first year the authority has implemented GASB Statement ___. a. Reporting Entity 1/ 3/ The (authority) is a municipal corporation governed by an appointed __________ member board. As required by generally accepted accounting principles, management has considered all potential component 1/ units in defining the reporting entity. (The (authority) has no component units.) (These financial 1/ statements present the (authority) (the primary government) and its component units. The component units discussed below are included in the district’s reporting entity because of the significance of their 4/ operational or financial relationships with the authority.) NOTES TO PREPARER: (The portions of these notes in parentheses are alternatives or additions you may need to use, depending on the particular circumstances.) 1/ Insert the official name of the authority. 2/ Insert GASB pronouncement number implemented and the name of the statement. 3/ Indicate the number of members on your board. 4/ Component units are defined in GASB Statements 14 and 39 (also see Part 4, Chapter 1 of the GAAP Budgeting, Accounting and Reporting System (BARS) manual). If the authority has a component unit(s) for which it is financially accountable, further disclosure of the relationship(s) is required. If the authority qualifies as a component unit of another government, disclosure of that relationship is also required. In addition, GASB Statement 14 requires disclosures concerning related organizations, joint ventures and jointly governed organizations. Refer to the GAAP BARS manual and GASB Statements 14 and 39 for further information. If the authority has contracts that form Tax Credit Partnerships, the agreements need to be reviewed to determine how the entity should be reported. In almost all cases they are a part of the reporting entity and Public Housing Authorities 7-2 (1/08)
  28. 28. NOTES TO PREPARER: (Continued) will be reported as either a discretely presented or blended component unit. GASB recommends reporting TCPs as component units, preferably using discrete presentation. Blended presentation may be used; however, it is more complex. If blended presentation is selected the statements must use multiple column presentation. If the authority uses discrete presentation of a TCP and reports the asset, Investment in TCP, the TCP should be identified as component unit with joint venture characteristics. The amount reported as Investment in TCP reported should also be given with the method used to calculate it (i.e., equity interest). This reporting method is discussed in the GASBS 14, paragraphs 72 and 78. Public Housing Authorities 7-3 (1/08)
  29. 29. b. Basis Of Accounting And Presentation The accounting records of the authority are maintained and reported in accordance with methods prescribed by the State Auditor under the authority of Chapter 43.09 RCW and the Federal Department of Housing and Urban Development. The authority must report using GAAP; however, it has the option to use either the single enterprise proprietary fund or special purpose governmental fund model. 1/ The (authority) has elected to report as a single-enterprise proprietary fund and uses the accrual basis of accounting. The measurement focus is on the flow of economic resources. The proprietary fund is composed of a number of programs. These programs are designed to provide low income individuals with housing. 2/ (Insert description of programs). Proprietary funds are used to account for activities that are operated in a manner similar to private enterprise business. Under this method revenues are recognized when earned and expenses are recognized 3/ when incurred. Capital asset purchases are capitalized and long-term liabilities are accounted for in the fund. 4/ The (authority) applies GASB pronouncements and has (has not) elected to apply Financial Accounting Standard Board (FASB) statements and Accounting Principles Board (APB) pronouncements issued after November 30, 1989. c. Cash And Cash Equivalents For purposes of the statement of cash flows, the authority considers all highly liquid investments (including restricted assets) with a maturity of three months or less when purchased to be cash equivalents. d. Capital Assets 5/ See Note _____. NOTES TO PREPARER: (The portions of these notes in parentheses are alternatives or additions you may need to use, depending on the particular circumstances.) 1/ If the authority has elected to report as a governmental fund the section of note 1 needs to be revised. 2/ If the authority wants to list programs, insert their descriptions here. 3/ If assessment interest and penalties are not accrued, or if other modified-accrual recognition principles are used, be sure to disclose them and to disclose that such approaches are not in accordance with general accepted accounting principles (GAAP). 4/ Indicate the election chosen for GASBS 20, i.e. whether the authority follows FASB statements that were issued after November 30, 1989, and do not conflict with GASB statements. 5/ Insert the note number for disclosure of capital assets. Public Housing Authorities 7-4 (1/08)
  30. 30. e. Restricted Assets In accordance with bond resolutions (and certain related agreements) separate restricted accounts are required to be established. The assets held in these accounts are restricted for specific uses, including (construction,) debt service and other special reserve requirements. Restricted resources currently include 1/ the following: Construction $__________ Debt Service $__________ Tenant Deposits $__________ Assets and liabilities shown as current in the accompanying statement of net assets (or balance sheet) exclude current maturities on revenue bonds and accrued interest thereon because debt service accounts are provided for their payment. 2/ f. Receivables g. Inventories 3/ Inventories are valued at _____________________ which approximates the market value. NOTES TO PREPARER: (The portions of these notes in parentheses are alternatives or additions you may need to use, depending on your particular circumstances.) 1/ If the statement of net assets (or balance sheet) lists these restricted resources separately, omit this sentence. Otherwise, furnish descriptive titles for the various restricted funds in use. 2/ Describe your receivables and disclose your policy for estimating and writing off uncollectible accounts. 3/ Insert “FIFO - first in, first out” “average cost,” etc. If “LIFO - last in, first out,” is used, omit the phrase about market value. Public Housing Authorities 7-5 (1/08)
  31. 31. 1/ h. Investments 2/ i. Operating Revenues/Expenses The authority reports operating revenues as defined in GASBS 9. Operating revenues result from fees and charges from providing services in connection with the ongoing operations of providing low income housing. Operating subsidies and grants are reported as non-operating revenues and are presented as cash flows from non-capital financing activities in the statement of cash flows. Operating expenses are those expenses that are directly incurred in the operation of providing low income housing. NOTES TO PREPARER: (The portions of these notes in parentheses are alternatives or additions you may need to use, depending on your particular circumstances.) 1/ Disclose the following: a. The methods and significant assumptions used to estimate the fair value of investments, if that fair value if based on other than quoted market prices. b. The policy for determining which investments, if any, are reported at amortized cost. c. For any investments in external investment pools that are not SEC-registered, a brief description of any regulatory oversight for the pool and whether the fair value of the position in the pool is the same as the value of the pool shares. d. Any involuntary participation in an external investment pool. e. If the authority cannot obtain information from a pool sponsor to allow it to determine the fair value of its investment in the pool, the methods used and significant assumptions made in determining that fair value and the reasons for having had to make such an estimate. f. Any income from investments associated with one fund that is assigned to another fund. (For more details, see the GASBS 31 as amended by the GASBS 40.) For various risks related to the investments see Deposits and Investments Note No. . The authority may disclose the above information in its investment note. 2/ If operating subsidies and operating grants are included in operating revenue the disclosure needs to be made indicating the authority’s composition of operating revenue and expenses. Example disclosure showing the departure from GAAP: Operating revenues include fees and charges from providing services in connection with the ongoing operations of providing low income housing. Operating revenues also include operating subsidies and grants provided by Housing and Urban Development (HUD). The use of this classification is based on guidance from HUD, the primary user of the financial statements. Operating expenses are those expenses that are directly incurred while in the operation of providing low income housing. This presentation results in an operating income that is higher than a non-operating revenue presentation by the amount of the subsidies and/or grants. Overall it does not affect the presentation of net income or the change in net assets in the statement of revenues, expenses, and changes in net assets, or the presentation of cash and cash equivalents in the statement of cash flows. Public Housing Authorities 7-6 (1/08)
  32. 32. j. Compensated Absences Compensated absences are absences for which employees will be paid, such as vacation (and sick) leave. The authority records unpaid leave for compensated absences as an expense and liability when incurred. Vacation pay, which may be accumulated up to (maximum days or weeks) , is payable upon 1/ resignation, retirement or death. Sick leave may accumulate (indefinitely or up to _____ hours). k. Unamortized Debt Expenses Costs relating to the sale of bonds are deferred and amortized over the lives of the various bond issues. 2/ l. Construction Financing 3/ m. Purchase Commitments NOTES TO PREPARER: 1/ Only sick leave which is a part of retirement or termination benefit should be disclosed in this note (GASB Statement 16). Describe the policy regarding sick leave. For example: (Upon resignation, any outstanding sick leave is lost.) (If an employee terminates with at least ten years of service, he or she will be paid for sick leave balances up to thirty days, at one-half his/her final pay rate.) 2/ This note should disclose any cost-sharing agreements or other long-term financing or credit agreements that the authority has entered into. 3/ This note should disclose any long-term purchase commitments, take-or-pay agreements, etc. Public Housing Authorities 7-7 (1/08)
  33. 33. 1/ NOTE 2 − STEWARDSHIP, COMPLIANCE AND ACCOUNTABILITY 2/ NOTE 3 − DEPOSITS AND INVESTMENTS a. Deposits The (authority’s) deposits and certificates of deposit are entirely covered by federal depository insurance (FDIC) or by collateral held in a multiple financial institution collateral pool administered by the Washington Public Deposit Protection Commission (PDPC). b. Investments As of the year ended , 20 , the (authority) had the following investments: Investments Value State investment pool U.S. Treasuries Bankers’ acceptance 3/ Repurchase agreements Total Custodial credit risk is the risk that in event of a failure of the counterparty to an investment transaction the (authority) would not be able to recover the value of the investment or collateral securities. Of the (authority’s) total position of $ in ,$ is exposed to custodial credit risk because the investments are held by the (authority’s) brokerage firm, which is also the counterparty in those particular securities. NOTES TO PREPARER: (The portions of these notes in parentheses are alternatives or additions you may need to use, depending on your particular circumstances.) 1/ If there was a violation of finance-related legal or contractual provisions, the authority should disclose both: a) the description of the violation(s), and b) the actions(s) taken to address the violation(s). 2/ If an authority has deposits at the end of a fiscal period that are exposed to custodial credit risk, it should disclose the amount of those bank balances, the fact that the balances are uninsured, and whether the balances are exposed on the basis of being either (1) uncollaterized, (2) collaterized with securities held by the pledging financial institution, or (3) collaterized with securities held by the pledging financial institution’s trust department or agent but not in the depositor-government’s name. If the authority’s deposits are exposed to foreign currency risk, the authority should disclose the U.S. dollar balances of such deposits, organized by currency domination. Include all investments not evidenced by securities that exist in physical or book-entry form. The investments should be disclosed at their book value (which normally, but not always, equals fair value). Disclosure is limited to types of investment held at year end. Risk disclosures applicable to investments should be reported separately by investment type. Dissimilar securities should not be aggregated into a single investment type. Public Housing Authorities 7-8 (1/08)
  34. 34. NOTES TO PREPARER: (Continued) Indicate type of investment(s) Disclose custodial credit risk for investments only if unregistered/uninsured securities are held either by the counterparty or by the counterparty’s trust department or agent, but not in authority’s name. If applicable, provide additional disclosures for following types of risk: • Credit risk − disclose credit ratings for investments in debt securities, whether held directly or indirectly. If a rating is not available, that fact should be disclosed. (This requirement does not apply to the debt securities of the U.S. government or obligations of the U.S. government agencies that are explicitly guaranteed by the U.S. government.) • Concentration risk − disclose amount and issuer of investments in any one issuer that represents 5 percent or more of total investments. (This requirement does not apply to investments issued or explicitly guaranteed by the U.S. government and investments in mutual funds, external investment pools, and other pooled investments.) • Interest rate risk − information should be organized by investment type and amount using one of the following methods: - segmented time distribution - specific identification - weighted average maturity - duration - simulation model. Any assumption made in process of applying these methods need to be disclosed. An authority that participates in a pooled arrangement (other than a 2a7 – like external pools investment pool) should disclose interest rate risk for the pooling arrangement. An authority should also disclose (if not disclosed already) any contractual terms for debt investments that expose those investments to the risk of significant changes in fair value resulting from interest rate fluctuation. • Foreign currency risk − disclose value of investment hold in foreign currency in U.S. dollars. Separate disclosure is necessary for each different foreign currency denomination and different type of investment within a given currency. An authority should disclose all of its policies relevant to each of different types of risks, but only for those types of risks actually faced by the government. If the authority does not have a policy that covers one or more of the risks it is facing, that fact must itself be disclosed. (For more information see GASBS 3, 28 and 40.) Disclosures required by the GASBS 40 should also be made for securities lending collateral that is reported in the statement of net assets (or balance sheet) and for the underlying securities. (See GASBS 28, as amended by GASBS 40.) 3/ If the authority uses reverse repurchase agreements, include the following: State statutes permit the (authority) to enter into reverse repurchase agreements, that is, a sale of securities with a simultaneous agreement to repurchase them in the future at the same price plus a contracted rate of interest. The fair value of the securities underlying reverse repurchase agreements normally exceeds the cash received, providing the dealers a margin against a decline in fair value of the securities. If the dealers default on their obligations to resell these securities to the (authority) or provide securities or cash of equal value, the (authority) would suffer an economic loss equal to the difference between the fair value plus accrued interest of the underlying securities and the agreement obligation, including accrued interest. The credit exposure at year end was $______________. All sales of investments under reverse repurchase agreements are for fixed terms. In investing the proceeds of reverse repurchase agreements, the (authority)’s policy is for the term to maturity of the investment to be the same as the term of the reverse repurchase agreement. Such matching existed at the year end. Public Housing Authorities 7-9 (1/08)
  35. 35. 4/ If the investment reported in the notes does not tie to the investment amount reported on the statements we recommend the authority make a comment on the FDS describing the reason for the difference. This should be done to prevent rejection. Public Housing Authorities 7-10 (1/08)
  36. 36. 1/ c. Derivates And Similar Transactions 2/ d. Securities Lending 3/ e. Gains And Loses On Investments NOTES TO PREPARER: 1/ The authority should provide the following disclosures for derivatives outstanding at the end of fiscal period, if the derivatives are not reported at fair value on the face of the financial statements: (1) Objective of the derivative, (2) Significant terms, (3) Fair value, (4) Associated debt, and (5) Risks (credit risk, interest rate risk, basic risk, termination risk, rollover risk, market − access risk). Risks should be disclosed only to the extent they are actually present. (For details see the Technical Bulletin 2003-1, Disclosure Requirements for Derivatives Not Reported at Fair Value on the Statement of Net Assets.) 2/ If in the period covered by the financial statements, the authority participated in the securities lending transactions, the following information should be disclosed:  source of legal or contractual authorization for the securities lending transactions;  general description of the securities lending transactions; − type of securities lent, − type of collateral received, − whether the authority has the ability to pledge or sell collateral securities without a borrower default, − the amount by which the value of the collateral provided is required to exceed the value of underlying securities, − any restrictions on the amount of the loans that can be made, − any loss indemnification (i.e., a securities lending agent’s guarantee that it will protect the lender from certain losses), − fair values of underlying securities at the statement of net assets (or balance sheet) date;  whether the maturities of the investments made with cash collateral generally match the maturities of their securities loans, as well as the extent of such matching at the statement of net assets (or balance sheet) date;  the amount of credit risk, if any, related to the securities lending transactions (if the lender has not credit risk, that fact should be stated);  the amount of any losses on the securities lending transactions during the period resulting from the default of a borrower or lending agent and amounts recovered from prior period losses, if not separately disclosed in the operating statement. (For more details, see the GASB Statement 28, Accounting and Financial Reporting for Securities Lending Transactions) 3/ Authorities may disclose realized gains and losses computed as the difference between the proceeds of the sale and the original cost of the investments sold. They also should disclose that: a. The calculation of realized gains and losses is independent of a calculation of the net change in the fair value of investments. Public Housing Authorities 7-11 (1/08)
  37. 37. b. Realized gains and losses on investments that had been held in more than one fiscal year and sold in the current year were included as a change in the fair value of investments reported in the prior year(s) and the current year. (For more details, see the GASB Statement 31.) Public Housing Authorities 7-12 (1/08)
  38. 38. NOTE 4 - CAPITAL ASSETS Major expenses for capital assets, including capital leases and major repairs that increase useful lives, are capitalized. Maintenance, repairs, and minor renewals are accounted for as expenses when incurred. (Obligations under capital leases are disclosed in Note (Lease Commitments Note No. ) . Capital assets are defined by the authority as assets with an initial individual cost of more than $___________ and an estimated useful life in excess of _______ years. Capital assets are recorded at cost (where the historical cost is 1/ known). Where historical cost is not known, assets are recorded at _______________ Donations are recorded at fair market value at the time of donation or the appraised value. Capital asset activity for the year ended , 20 was as follows: Beginning Ending Increase Decrease Balance Balance Capital assets not being depreciated: Land Construction in progress Total capital assets not being depreciated Capital assets being depreciated: Buildings Equipment Total capital assets being depreciated Less accumulated depreciation for: Buildings Equipment Total accumulated depreciation Total capital assets being depreciated, net TOTAL CAPITAL ASSETS, NET (The original cost of operating property retired or otherwise deposed of and the cost of installation, less salvage, is charged to accumulated depreciation.) (However, in the case of the sale of a significant operating unit or system, the original cost is removed from the capital asset accounts, accumulated depreciation is charged with the accumulated depreciation related to the property sold, and the net gain or loss on disposition is credited or charged to income.) NOTES TO PREPARER: (The portions of these notes in parentheses are alternatives or additions you may need to use, depending on your particular circumstances.) 1/ Describe the method of valuation (e.g., fair market value at date of donation). Public Housing Authorities 7-13 (1/08)
  39. 39. (During 20___, the authority capitalized $__________of net interest costs for funds borrowed to finance the construction of capital assets. Interest costs of $__________ in 20___ were offset by interest income of $__________ .) Depreciation is computed on the __________ 1/ method with useful lives of _____ 2/ to _____ 2/ years. (Initial depreciation on a capital asset is recorded in the year subsequent to purchase.) (Preliminary costs incurred for proposed projects are deferred pending construction of the facility. Costs relating to projects ultimately constructed are transferred to the project; charges that related to abandoned projects are expensed.) expenses include an impairment loss of due to . 3/ NOTES TO PREPARER: (The portions of these notes in parentheses are alternatives or additions you may need to use, depending on your particular circumstances.) 1/ Insert “straight-line” or the particular accelerated method used. 2/ Insert minimum and maximum useful lives. 3/ If it is not otherwise apparent from the face of the financial statements, the authority should disclose a general description, the amount, and the financial statement classification of the impairment loss. If the authority received an insurance recovery related to the impaired asset, its amount and financial statement classification should be disclosed. The authority needs to disclose the carrying amount of impaired capital assets that are idle at year-end, regardless whether the impairment is considered permanent or temporary. (For more details see the GASBS 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries and the GAAP BARS manual, Volume 1, Part 3, Chapter 7, Section F.) Provide the same information and level of details about capital assets for the discretely presented component units. Public Housing Authorities 7-14 (1/08)
  40. 40. NOTE 5 - CONSTRUCTION IN PROGRESS Construction in progress represents expenses to date on projects whose authorizations total $_______________________. 1/ Of the committed balance of $_______________________, the authority will be required to raise $_______________________ in future financing. 2/ NOTE 6 − SHORT-TERM DEBT3/ Short-term activities for the year ended , 20 were as follows: Beginning Balance Ending Balance Debt Issued Redeemed ( Date ) ( Date ) $ $ $ $ NOTES TO PREPARER: 1/ Total construction project budgets should be included here. 2/ If there are numerous construction projects, this information should be presented in a schedule like the example below: Construction in progress is composed of the following: Required Project Expended Future Authorization to (Date) Committed Financing Housing Project A 600,000 - 600,000 $600,000 Housing Project B 250,000 215,000 35,000 None Housing Project C 250,000 196,150 53,850 None $1,100,000 $411,150 $ 688,850 $600,000 3/ The authority should provide the information about short-term debt activities (e.g., anticipation notes, use of line of credit and similar loans, etc.) during year, even if no short-term debt is outstanding at the year end. The authority should describe the purpose for which the short-term debt was issued. Public Housing Authorities 7-15 (1/08)
  41. 41. NOTE 7 - LEASE COMMITMENTS a. Operating Lease(s) 1/ The (authority) is committed under various leases for __________2/. These leases are considered operating leases for accounting purposes. Lease expenses for the year ended , 20___ amounted to $__________. Future minimum rental commitments for these leases are as follows: Fiscal Year Ending : 3/ 20___ $_________ 20___ __________ 20___ __________ 20___ __________ 20___ __________ 20___-20___ __________ Total $ NOTES TO PREPARER: 1/ Prepare this part of the note for leases which are not capitalized. 2/ List the types of operating leases your authority has. 3/ List the payments by year for the next five years, then add lines to show payments in five-year increments thereafter. Public Housing Authorities 7-16 (1/08)
  42. 42. b. Capital Lease(s) The (authority) has entered into (a) lease agreement(s) for financing the acquisition of ____________________1/. These lease agreements qualify as capital leases for accounting purposes and are recorded as assets and as long-term liabilities at the present value of the future minimum lease payments as of the date of their inception. The authority records lease payments as reductions of the long-term liability and as interest expense over the life of the lease. The future minimum lease payments under these lease agreements are as follows: Fiscal Year Ending : 2/ 20___ $_________ 20___ __________ 20___ __________ 20___ __________ 20___ __________ 20___-20___ __________ Less amount representing interest __________ Present Value of Future Minimum Lease Payments $ Depreciation policy for capitalized assets is described in (Capital Assets Note No. ) . NOTES TO PREPARER: 1/ List the assets acquired through capital leases. 2/ List the payments by year for the next five years, then add lines to show payments in five-year increments thereafter. Public Housing Authorities 7-17 (1/08)
  43. 43. NOTE 8 - LONG-TERM DEBT AND LIABILITIES Long-Term Debt a. Revenue Bonds: The authority issues revenue bonds to finance the purchase of __________ and the acquisition of 1/ construction of __________. The revenue bonds are being repaid by the authority’s revenues. The revenue bonds currently outstanding are as follows: Amount Purpose Original Amount Issue Date Interest Rate Outstanding $ $ Total $ Revenue bond debt service requirements to maturity are as follows: 2/ Year Ending 3/ Principal Interest ( Date ) 20__ $ $ 20__ 20__ 20__ 20__ 20__ - 20__ Total $ $ (Interest on the variable – rate revenue bonds is paid at the rate and is reset semiannually.) There is $___________________ in restricted assets of the authority. These represent sinking funds and reserve requirements as contained in the various indentures. There are a number of other limitations and restrictions contained in the various bond indentures. The 4/ authority is in compliance with all significant limitations and restrictions. The (district) has pledged future (identify pledged revenue) revenue, net of (e.g., specified operating expenses, etc.) , to repay $ in revenue bonds issued in , 20 . Proceeds from the bonds provided financing for (describe the purpose) . The bonds are payable solely from (identify pledged revenue) revenue and are payable through 20 . Annual principal and interest payments on the bonds are expected to require less than % of net revenues. The total principal and interest remaining to be paid on the bonds is $ . Principal and interest paid for the current year and total (identify pledged 5/ revenue) were $ and $ , respectively. b. Refunding Bonds The following bond issues have been refunded as of , 20___. Bond Issue Amount Outstanding $ $ $ Total Refunded Bonds Outstanding $ NOTES TO PREPARER: 1/ If your authority has additional debt that has been authorized but not issued, the unissued amounts should be listed here in a separate paragraph.
  44. 44. NOTES TO PREPARER: (Continued) 2/ If you prepare comparative financial statements show the amortization amounts beginning with the year proceeding the year of your annual report. List the payments by year for the next five years and then in five-year increments. 3/ You may present separate columns for different types of debt. 4/ You may want to disclose the details of your authorities compliance with some restrictions, such as the ratio of operating revenues to debt service requirements. Also, consider disclosing the detail of changes in restricted assets. 5/ For more details see GASBS 48, Sales and Pledges of Receivables and Future Revenues and Intra-Entity Transfer of Assets and Future Revenues, paragraph 21. The disclosures in this paragraph are not required for legally separate entities that report as stand-alone business-type activities whose operations are financial primarily by a single major revenue source. If a specific revenue stream is pledged as security for multiple debt issuances, the required disclosures may be combined in a single note. For this disclosure, pledged revenues recognized curing the period may be presented net of specified operating expenses, based on the provisions of the pledged agreement; however, the amount should not be netted in the financial statements.
  45. 45. This advance refunding was undertaken to (reduce total debt service payments over the next ____ years by $__________, etc.) and resulted in an economic gain of $__________1/ Debt service on these bonds is met by cash and investments held by the refunding trustee(s). As of , 20___, the trustee(s) was (were) holding cash and investments of $____________________ which are expected to fund debt service fully. These refunded bonds constitute a contingent liability of the district but are excluded from the financial statements. c. Real Estate Mortgages The authority has long term loans secured by capital assets. These loans were used to acquire capital assets that provide low income housing. They are being repaid from revenues generated by the authority. Amount Purpose Original Amount Issue Date Interest Rate Outstanding $ $ Total $ Service requirements to maturity for mortgages are as follows: Year Ending Principal Interest ( Date ) 20__ $ $ 20__ 20__ 20__ 20__ 20__ - 20__ Total $ $ NOTES TO PREPARER: (The portions of these notes in parentheses are alternatives or additions you may need to use, depending on your particular circumstances.) 1/ The economic gain or loss on a refunding transaction is calculated in the following manner: • The present value of the debt service payments related to the refunding debt is calculated using the following formula: Face amount of bonds + Premium (or - original issue discount) + Accrued interest - Costs not recoverable through escrow earnings _________________________________________ Present value of debt service payments on refunding debt; • A calculation is made to determine what effective interest rate applied to the debt service payments on the refunding bonds would result in the present value determined in the previous calculation; • The effective interest rate calculated for the refunding bonds is then applied to the debt service on the refunded bonds to calculate the present value of debt service on the latter; • The difference between the present value of the two debt service streams (refunding debt and refunded debt) constitutes the economic gain or loss on the transaction. • If a bond refunding occurred in prior years that resulted in an in-substance defeasance then the authority must disclose the fact until the debt is legally defeased. that the amount to pay for the bonds is held in trust.
  46. 46. d. Changes in Long-Term Liabilities During the year ended , 20 , the following changes occurred in long-term liabilities: Beginning Ending Due Balance Additions Reductions Balance Within (Date) (Date) One Year Bonds payable: $ $ $ $ $ Revenue Bonds Less Deferred amounts: For issuance discounts On refunding Total bonds payable: Mortgages payable: Capital leases Compensated absences Claims and judgment Total long-term liabilities e. Conduit Debt 1/ (No SAMPLE TEXT is provided because each circumstance will be unique.) NOTES TO PREPARER: 1/ GAAP allow two reporting options for conduit debt. The debt can be shown on the face of the financials offset by a receivable with note disclosure. GAAP also allow the government to choose note disclosure only. In either case the conduit note is required to contain the following information: • A general description of the conduit transaction. • The aggregate amount of all conduit debt obligations at the balance sheet date. If the amount of debt issued prior to January 1, 1996 (or prior to the date of implementation of GASB Interpretation 2) is not determinable or cannot be reasonably estimated, the district may provide the aggregate original issue amount. • A clear indication that the authority has no obligation for debt beyond the resources provided by the related leases or loans.

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