An MD&A is a special report representing the Public Housing Authority Management’s explanation and interpretation of facts concerning its financial statements. The MD&A is a supplement which management includes with the Public Housing Authority’s audited or reviewed financial statements. By “financial statements” we mean the “Statement of Assets, Liabilities, and Net Assets” and the “Statement of Revenues, Expenses, and Changes in Net Assets.” (These are traditionally known as the “Balance Sheet” and “Income Statement”, respectively, which is somewhat outdated terminology that has been replaced by more appropriate names.) This is a recent action taken by the Department of Housing and Urban Development (HUD) to make Public Housing Authority accounting rules more consistent with those of municipal governments.

It is required because of specific guidelines stated in Governmental Accounting Standards Board Statement (GASB )No. 34, an authoritative accounting pronouncement that applies to all governmental entities, including those which are operated as enterprises. Since a Public Housing Authority is an enterprise, it is therefore subject to this pronouncement.

No, not all. Only those Public Housing Authorities which are required by Federal or state regulations to issue an audit or a review (also known to some as an “agreed-upon procedures audit”) of their financial statements are required to include the MD&A supplement.

The MD&A is bound with the Public Housing Authority’s audited or reviewed financial statements as a type of supplement to them. Therefore, the MD&A should be prepared in advance of the audit or review so that the auditors can study the information contained in it, to make sure it is consistent with the final audited or reviewed financial statements.

It is packed with lots of information in a concise, condensed format that takes about 8 or more pages to document. MD&A requirements are general rather than specific to encourage financial managers to effectively report only the most relevant information and avoid “boilerplate” discussion. Here is a synopsis from GASB 34 of what should be included in the MD&A at a minimum:

1. A brief discussion of the basic financial statements, including the relationships of the statements to each other, and the significant differences in the information they provide.
2. Condensed financial information derived from Public Housing Authority’s financial statements comparing the current year to the prior year. At a minimum, Authorities should present the following elements:Total assets, distinguishing between capital and other assets
   Total liabilities, distinguishing between long-term liabilities and other liabilities
   Total net assets, distinguishing among amounts invested in capital assets, net of related debt; restricted amounts; and unrestricted amounts
   Program revenues, by major source
   General revenues, by major source
   Total revenues
   Program expenses, at a minimum by function
   Total expenses
   Excess (deficiency) before contributions to term and permanent endowments or permanent fund principal, special and extraordinary items, and transfers
3. Finally, there is a written narrative which forms the most useful part of the report:An analysis of overall financial position and results of operations for Public Housing Authority business-type activities using the information above as a starting point
   A discussion of significant transactions and changes in individual funds.
   A discussion of what happened with the budget this year
   A description of capital asset and long-term debt activity during the year
   A description of what happened to infrastructure assets
   A description of any currently known facts, decisions, or conditions expected to have a significant effect on next year and beyond.

No, he or she cannot. They are prohibited from doing so because the MD&A is a management report, not an auditor report or opinion. For the auditor to be involved in the writing of the MD&A would compromise their independence in performing the audit, which is considered unethical by the public accounting profession.

Yes, because the MD&A is supposed to be a management report, and therefore it is the Executive Director’s primary responsibility. This can put a very tough burden on some Executive Directors. Due to the technicalities of implementing the GASB 34 accounting standards (mentioned in FAQ no. 2, and described in summary in FAQ no. 5 above), Housing Solutions Alliance advises that the Executive Director of any Public Housing Authority should involve professional help in writing the MD&A.

Housing Solutions Alliance advises that the Executive Director should not “go it alone” in preparing the MD&A, to avoid weakening the Authority’s published audit report. We advise that the most logical choice of professional for assisting the Executive Director in preparing an MD&A should be the Public Housing Authority’s contracted fee accountant if they prepare and submit the Authority’s Real Estate Assessment Center (REAC) report for HUD. However, we recognize that Public Housing Authorities can opt to involve an outside CPA who is not employed or related to its audit firm, or a staff accountant of the Authority who is properly trained. For these options, other qualities such as professionalism, experience, timeliness, additional services, and relative cost should be evaluated.

Housing Solutions Alliance has properly trained staff, including our own CPA, to prepare the MD&A in compliance with GASB 34’s requirements. The preparation of the MD&A is a natural extension of our work with Public Housing Authorities as fee accountants, especially when we prepare and submit the Authorities’ Real Estate Assessment Center (REAC) reports for HUD:
Our staff will analyze a Public Housing Authority’s ledgers, audits, and REAC submissions for the current and prior fiscal years.
After discussing details with the Executive Director, we will prepare a preliminary draft of the MD&A for the Director to edit.
After preliminary corrections, the Director can send the edited draft to the Authority’s audit firm for their review.
At the conclusion of the audit, we will work directly with the Authority’s auditors to include any audit adjustments and additional editorial corrections suggested by them in a final draft of the MD&A.
The Executive Director will be requested to sign a representation letter accepting responsibility for the finished MD&A, which will be released to the auditors for publication in the audit or review report.
All stages of this process can be conducted by email if the Authority and/or its auditors utilize Microsoft Office 97 software or greater. Housing Solutions Alliance is also able to prepare MD&As for Authorities which do not utilize our fee accounting or REAC services.

No. Housing Solutions Alliance charges $85 per hour for this valuable service, up to a maximum of 10 hours for its standard report, which includes revisions and audit adjustments. Unless there are unforeseen problems with the Public Housing Authority’s financial records, it usually takes our staff about half the maximum hours to prepare the draft. The maximum of 10 hours applies only to clients for whom Housing Solutions Alliance provides both fee accounting and REAC submission services.

A SCCF is a financial statement detailing the Public Housing Authority’s various sources and uses of cash, known as cash flow, resulting in the change in the Authority’s cash balances from prior to current fiscal year. The SCCF is an additional statement included with the Public Housing Authority’s audited or reviewed financial statements. By “financial statements” we mean the “Statement of Assets, Liabilities, and Net Assets” and the “Statement of Revenues, Expenses, and Changes in Net Assets.” (These are traditionally known as the “Balance Sheet” and “Income Statement”, respectively, which is somewhat outdated terminology that has been replaced by more appropriate names.) All entities which present the Statement of Assets, Liabilities, and Net Assets and the Statement of Revenues, Expenses, and Changes in Net Assets must also present a Statement of Changes in Cash Flow.

It is required because of specific guidelines stated in Governmental Accounting Standards Board Statement (GASB ) No. 34, an authoritative accounting pronouncement that applies to all governmental entities, including those which are operated as enterprises. Since a Public Housing Authority is an enterprise, it is therefore subject to this pronouncement.

No, not all. Only those Public Housing Authorities which are required by Federal or state regulations to issue an audit or a review (also known to some as an “agreed-upon procedures audit”) of their financial statements are required to include the SCCF.

The SCCF is considered one of the Public Housing Authority’s basic audited or reviewed financial statements. Therefore, the SCCF should be prepared in advance of the audit or review so that the auditors can study the information contained in it, to make sure it is consistent with the final audited or reviewed financial statements.

The SCCF for Public Housing Authorities contains the following elements:
a. A detailed listing of the various sources of cash provided and used by:
Operating Activities
Non-operating Activities
Financing Activities
Investing Activities
b. The total net change in cash flow
c. The beginning and ending balances of cash and cash equivalents from the current and prior fiscal years.
d. A reconciliation between the “Net Operating Profit or Loss” shown in the “Statement of Changes in Revenues, Expenses, and Net Assets” with the “Total Cash Provided or Used by Operations” from the SCCF.
e. A further complicating factor is that the SCCF should be segregated by the Public Housing Authority’s different funds.

Yes they can. However, the public accounting profession is divided in opinion about who should prepare the SCCF. Some (but not all) auditors believe that the SCCF should be prepared by the Public Housing Authority, or its contracted fee accountants, since they are also involved in preparing the “Statement of Assets, Liabilities, and Net Assets” and the “Statement of Revenues, Expenses, and Changes in Net Assets.” These auditors feel that involvement in the preparation of the SCCF would compromise their independence in performing the audit, which is considered unethical by the public accounting profession. Recent lawsuits that were unfavorable to the public accounting profession support this contention.

Yes, because the financial statements, including the SCCF, are supposed to be the Housing Authority’s report, and therefore it is the Executive Director’s primary responsibility. This can put a very tough burden on some Authority’s staffs. Due to the technicalities of implementing the GASB 34 accounting standards (mentioned in FAQ no. 2, and described in summary in FAQ no. 5 above), Housing Solutions Alliance advises that the Executive Director of any Public Housing Authority should involve professional help in preparing the SCCF.

Housing Solutions Alliance advises that the Executive Director and his/her staff should not “go it alone” in preparing the SCCF, to avoid delays in finalization of the Authority’s published audit report. We advise that the most logical choice of professional for assisting the Authority in preparing a SCCF should be their contracted fee accountant, if they prepare and submit the Authority’s Real Estate Assessment Center (REAC) report for HUD. However, we recognize that Public Housing Authorities can opt to involve an outside CPA who is not employed or related to its audit firm, or a staff accountant of the Authority who is properly trained. For these options, other qualities such as professionalism, experience, timeliness, additional services, and relative cost should be evaluated.

Housing Solutions Alliance has properly trained staff, including our own CPA, to prepare the SCCF in compliance with GASB 34’s requirements. The preparation of the SCCF is a natural extension of our work with Public Housing Authorities as fee accountants, especially when we prepare and submit the Authorities’ Real Estate Assessment Center (REAC) reports for HUD:

Our staff will analyze a Public Housing Authority’s ledgers, audits, and REAC submissions for the current and prior fiscal years.
After discussing details with the Executive Director, we will prepare a preliminary draft of the SCCF for the Director to edit.
After preliminary corrections, the Director can send the edited draft to the Authority’s audit firm for their review.
At the conclusion of the audit, we will work directly with the Authority’s auditors to include any audit adjustments and additional editorial corrections suggested by them in a final draft of the SCCF.
The Executive Director will be requested to sign a representation letter accepting responsibility for the finished SCCF, which will be released to the auditors for publication in the audit or review report.
All stages of this process can be conducted by email if the Authority and/or its auditors utilize Microsoft Office 97 software or greater. Housing Solutions Alliance is also able to prepare SCCFs for Authorities which do not utilize our fee accounting or REAC services.

No. Housing Solutions Alliance charges $75 per hour for this valuable service, up to a maximum of 10 hours for its standard report, which includes revisions and audit adjustments. Unless there are unforeseen problems with the Public Housing Authority’s financial records, it usually takes our staff about half the maximum hours to prepare the draft. The maximum of 10 hours applies only to clients for whom Housing Solutions Alliance provides both fee accounting and REAC submission services.