As noted in GAQC Alert No. 96, in December 2008, the U.S. Department of Housing and Urban Development (HUD) issued guidance titled, Revised SAS 29 Audited Submission Procedure for Public Housing Agencies (PHAs) With Fiscal Year End of June 30, 2008. That guidance explained how Public Housing Agencies (PHAs) could meet the requirements for preparing the required financial data schedule (FDS), as well as the related auditor reporting, in light of delays in the availability of a revised FDS format. You should refer to GAQC Alert No. 96 for more background and a refresher on the two options that HUD provided for meeting the FDS requirements in its December Notice.
Since then, HUD has issued another Notice to PHAs on its Web site titled, Un-Audited Financial Submission Procedure for Public Housing Agencies With Fiscal Year Ends of June 30, 2008 Through March 31, 2009, announcing the availability of the previously promised Excel tool version of the updated FDS (the FDS tool) and instructions for submitting it. The main purpose of this Alert is to make you aware of the new HUD Notice and several considerations for auditors that are issuing the SAS No. 29, Reporting on Information Accompanying the Basic Financial Statements in Auditor-Submitted Documents (AICPA, Professional Standards, vol. 1, AU section 551), "in relation to" reporting (SAS 29 opinion) on the FDS.
What is in the Latest HUD Guidance for PHAs?
The new HUD Notice instructs PHAs on how to complete and submit electronically the new FDS tool. It also provides an FDS User Manual, a Full Accrual Version of the tool, a Modified Accrual Version of the Tool, and a Frequently Asked Questions document. In summary, the PHA submission process of the FDS tool will work as follows: (1) The PHA will complete the appropriate FDS tool (that is, either accrual or modified accrual); and (2) The PHA will make the "unaudited" submission of the FDS tool to HUD using the Comments Link contained in the Financial Assessment Subsystem (FASS) on-line system. PHAs with fiscal years ending 6/30/08, 9/30/08, and 12/31/08, have until April 13, 2009, to complete this submission. PHAs with fiscal year ending 3/31/09, will have until June 30, 2009, to complete their submissions.
HUD considers this submission "unaudited" in that it does not include the upload of the audited financial statements and other required materials or the required agreed-upon procedures engagement comparing the hard copy FDS to the electronic FASS submission. Currently, HUD is continuing to update the FASS to, among other things, add audit system functionality. Once the system update is completed, which HUD expects to occur sometime in April, HUD will communicate how PHAs can make their "audited" submission. At that time, the system will allow for the required agreed-upon procedures engagement and will include the six tabs for uploading the management's discussion and analysis, the financial statements, notes to the financial statements, audit reports, audit findings, and the corrective action plan. HUD will post another Notice to its Web site notifying PHAs when the next phase is complete and the audited submission can occur.
What about the Status of the In-Relation-To Reporting Requirement?
HUD states in its Frequently Asked Questions document that, even though the final "audited" submission to HUD will not be able to be made by PHAs for several more months, PHAs can use the newly released FDS tool for purposes of having their auditors issue the required SAS 29 opinion. Accordingly, HUD states that PHAs may print the completed "un-audited" FDS tool and the PHA auditor can perform the necessary audit procedures in order to issue the SAS 29 opinion on the FDS.
Auditor Subsequent Event Considerations
Now that HUD has released the FDS tool, PHAs will likely begin asking their auditors to complete the necessary procedures in order to issue the SAS 29 opinion on the FDS. Auditors should keep in mind their potential subsequent event responsibilities under AU section 560, Subsequent Events, relating to each of the two options that HUD provided for meeting the preparation and reporting requirements for the FDS (see HUD's December Notice and GAQC Alert No. 96). In both cases, the auditor performs the subsequent audit procedures to ascertain whether there have been any subsequent events that may require adjustment or disclosure to a fair presentation of the financial statements. AU section 560, paragraphs 10 – 12 discuss auditing procedures in a subsequent period in more detail.
Option 1. This option stated that PHAs needing to issue their audited financial statements for purposes other than for filing with HUD could do so and later have the PHA auditor perform necessary audit procedures to issue a separate SAS 29 opinion on the FDS. HUD noted that under this option, the separate SAS 29 opinion may carry a later date than that of the auditor's report on the basic financial statements. [Note that while generally the SAS 29 opinion is to carry the same date as the financial statement opinion, in this unusual HUD scenario it is permissible for the auditor's SAS 29 opinion to carry a later date than the separate financial statement opinion.] Under Option 1 where the auditor has previously released an opinion on the basic financial statements, the auditor should perform auditing procedures as deemed necessary in the subsequent period through the date of the separate SAS 29 opinion on the FDS. An illustrative report is provided in the next section of this GAQC Alert (and also attached to this Alert as a separate PDF file) that can be used to report separately on the FDS for situations where the audit of a PHA’s financial statements has already been issued.
Option 2. This option allowed PHAs that had no need for the financial statements to be issued in advance of the issuance of the FDS tool to wait and have the PHA auditor issue the opinion on the financial statements and SAS 29 opinion on the FDS in the same report once the FDS tool was made available. Under Option 2 where the auditor has not completed his or her audit of the basic financial statements, the auditor should perform auditing procedures as deemed necessary in the subsequent period through the date of the combined financial statement/SAS 29 opinion.
Report Illustration for Separate SAS 29 Opinion
The following illustration (which is also attached to this Alert as a separate PDF file) may be used by auditors for the purpose of reporting separately on the FDS tool under Option 1:
[Addressee]
We have audited the financial statements of [list applicable opinion units such as: the governmental activities, the business-type activities, the aggregate discretely presented component units, each major fund, and the aggregate remaining fund information] of Example Public Housing Agency (PHA) as of and for the year ended June 30, 20XX, and have issued our report thereon dated August 15, 20XX. Our audit was performed for the purpose of forming our opinions on the financial statements that collectively comprise Example PHA's basic financial statements.
The accompanying Financial Data Schedule is presented for purposes of additional analysis as required by the U.S. Department of Housing and Urban Development and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, is fairly stated, in all material respects, in relation to the basic financial statements taken as a whole.1
[Signature]
[Date]
1 When reporting on the supplementary information, the auditor should consider the effect of any modifications to the report on the basic financial statements (for example, a qualified opinion, a modification as to consistency because of a change in accounting principle, or a reference to the report of other auditors). Furthermore, if the report on supplementary information is other than unqualified, this paragraph should be modified accordingly. Guidance for reporting in these circumstances is described in paragraphs .09–.11 and .13–.14 of AU section 551, Reporting on Information Accompanying the Basic Financial Statements in Auditor-Submitted Documents (AICPA, Professional Standards, vol. 1).
Watch future GAQC Alerts and other communications for further updates on HUD’s progress in updating the FASS to, among other things, add audit system functionality. You can also periodically check the GAQC HUD information page for news