Today, the U.S. Department of Housing and Urban Development (HUD) issued guidance providing Public Housing Agencies (PHAs) with guidance on how to meet the requirements for preparing the required financial data schedule (FDS), as well as the related auditor reporting. The HUD guidance was necessary in that there has been a delay in the availability of a revised FDS format by HUD. This GAQC Alert is intended to inform our member firms that perform audits of PHAs about the new HUD guidance and what to expect going forward. The HUD guidance titled, Revised SAS 29 Audited Submission Procedure for Public Housing Agencies (PHAs) With Fiscal Year End of June 30, 2008, can be accessed on the HUD Financial Assessment of Public Housing Agencies Web page, or directly by clicking here.
Why the Need for this Guidance?
HUD has been in the process of revising the Public Housing Assessment System (PHAS) to support a transition to reporting financial information at the asset management project (AMP) level. Previously, PHAS was an entity-wide assessment system whereas asset management utilizes project-based budgeting and accounting. HUD has been working to make system changes, as well as changes to the format of the FDS, to capture the property-specific information. The FDS is a spreadsheet that includes financial information that PHAs submit electronically to HUD each year. Prior to its submission to HUD, the FDS has historically been printed out and accompanies the audited financial statements of the PHA as supplementary information. The auditor is required to report on the FDS "in-relation-to" the basic financial statements under SAS No. 29, Reporting on Information Accompanying the Basic Financial Statements in Auditor-Submitted Documents (AICPA, Professional Standards, vol. 1, AU section 551), and such reporting has typically been included by the auditor as a separate paragraph in the auditor’s financial statement report.
Under HUD rules, PHAs are required to prepare and submit an updated version of the FDS (reflecting the property-specific focus changes made to transition to asset management), for their June 30, 2008, year-ends. Unfortunately, HUD has not yet been able to complete the revised FDS format. The HUD guidance that was just issued today indicates that an Excel tool version of the updated FDS will be available in late December 2008. Questions have arisen from both PHAs and their auditors that would like to finalize and issue their financial statement audits prior to HUD's issuance of a revised FDS. Their questions have focused on concerns about how to meet the HUD reporting requirements on the FDS given that the updated version is not yet ready. Today's HUD guidance permits PHAs to finalize their financial statement audits and to follow-up later with the completion of the FDS and related auditor reporting. Read on for more about the HUD guidance and the various options available.
What is in the HUD Guidance?
HUD provides two options for PHAs in terms of meeting the preparation and reporting requirements relating to the FDS. The following summarizes both options:
Option 1. For PHAs that may need to issue their audited financial statements for purposes other than for filing with HUD prior to the availability of the FDS (for example, to meet state statutory filing deadlines or for other normal business purposes), HUD states that the PHA may do so but should not submit those financial statements to HUD at this time. When the FDS is available, PHAs will need to complete it. At that time, the PHA auditor will need to perform necessary audit procedures in order to issue a separate SAS 29 opinion on the FDS. Consequently, the separate auditor’s opinion on the FDS may carry a later date than that of the auditor’s report on the basic financial statements.
Option 2. For situations where there is no need for the financial statements to be issued in advance of the FDS being available, HUD states that the PHA auditor may issue their opinions on the financial statements and FDS at the same time; thereby having the same report date. At that time, once the auditor has performed the necessary audit procedures, the auditor would issue their opinion on the audited financial statements, including the SAS 29 opinion on the FDS.
Auditor Guidance
The Governmental Audit Quality Center (GAQC) consulted with HUD as it developed the guidance that was issued today. We informed them that the GAQC would follow-up with guidance to auditors reminding them about their potential subsequent events responsibilities relating to both Option 1 and Option 2, as well as to provide auditors with PHA clients that choose Option 1 with an illustrative report example. Now that HUD has issued its guidance, the GAQC will begin working on the auditor guidance and will issue it prior to HUD's release of the revised FDS.
What About the HUD Electronic Submission?
Another part of the process affected by the HUD change to asset management for PHAs, is the normal electronic submission process that occurs upon completion of the financial statement audit and related reporting on the FDS. HUD's guidance also indicates that it is continuing to update the FASS-PH electronic submission templates to be compliant with asset management and, as a result, PHAs are also not yet able to electronically submit their June 30, 2008, year-end audited financial information. HUD states that it will post another notice to its Web site notifying PHAs when the electronic submission process is ready. The GAQC will inform you as soon as HUD issues additional guidance in this area.
Watch future GAQC Alerts and other communications for further updates, as well as the availability of the auditor guidance referred to above. You can also periodically check the GAQC HUD information page for news