U. S. Department of Housing and Urban Development

Office of Public and Indian Housing

Special Attention of: NOTICE PIH 2002-17 (TDHEs)

ONAP Administrators; Issued: June 28, 2002

Tribes; and Tribally Expires: June 30, 2003

Designated Housing

Entities

Cross Reference: 24 CFR Part 1000, OMB Circular A-87 and OMB Circular
A-133

Subject: Financial Audit Requirements

1.  **What is the purpose of this notice?** This Notice provides
    specific guidance on the financial audit requirements for the
    participants in the Indian Housing Block Grant (IHBG), Indian
    Community Development Block Grant (ICDBG) and other Office of Native
    American Programs (ONAP) grant programs, such as Rural Housing and
    Economic Development, and Public and Indian Housing Drug Elimination
    Program.

2.  **What are the financial audit requirements for IHBG recipients?**
    Title 24 CFR §1000.544 requires recipients to comply with the
    requirements of the Single Audit Act and OMB Circular A-133 by
    obtaining annual audits if a recipient expends \$300,000 or more in
    Federal funds in a fiscal year.

3.  **What are the financial audit requirements for ICDBG and other
    grant program recipients?** Title 24 CFR §1003.501 incorporates 24
    CFR Part 85 in the requirements that apply to ICDBG recipients.
    Title 24 CFR §85.26, Non-Federal Audits, states, "Grantees and
    sub-grantees are responsible for obtaining audits in accordance with
    the Single Audit Act Amendments of 1996 (31 U.S.C. 7501-7507) and
    revised OMB Circular A-133, 'Audits of States, Local Governments,
    and Non-Profit Organizations.'" The other programs available to ONAP
    recipients contain similar language and requirements.

4.  **What is the purpose of OMB Circular A-133, *Audits of States,
    Local Governments, and Non-Profit Organizations*, (Circular
    A‑133)?** The purpose of Circular A-133 is to set forth standards to
    obtain consistency and uniformity for audits of non-Federal entities
    expending Federal awards.

5.  **What** **is the basic requirement for audits contained in Circular
    A-133?** Circular A-133 requires that "non-Federal entities that
    expend \$300,000 or more in a year in Federal awards shall have a
    single or program-specific audit conducted for that year in
    accordance with the provisions of this part."

6.  **Who are non-Federal entities?** Non-Federal entities are defined
    in Circular A‑133 to be "States, local governments, or non-profit
    organizations." Tribes are included as a state government for the
    purposes of this requirement. Section 405(a) of Native American
    Housing Assistance and Self --Determination Act of 1996 (NAHASDA)
    states "An entity designated by an Indian tribe as a housing entity
    \[Tribally Designated Housing Entity (TDHE)\] shall be treated . . .
    as a non-Federal entity that is subject to the audit requirements
    that apply to non-Federal entities . . .."

7.  **What are the basic audit requirements?** The basic requirements
    contained in Circular A-133 are:

-   Obtain an audit if an entity expends \$300,000 or more in Federal
    grant awards in a reporting period;

-   Submit the audit reporting package to the Federal Audit
    Clearinghouse and concerned Federal agencies; and

-   Include in the audit report package the Financial Statements,
    Schedule of Federal Award Expenditures, Summary Schedule of Prior
    Audit Findings, auditor's report(s) and corrective action plan.

8.  **Has ONAP expanded on the basic audit requirements?** ONAP has
    augmented the requirements of Circular A-133 by requesting
    recipients to:

-   Identify in the Schedule of Federal Award Expenditures cumulative
    grant expenditures and current period expenditures for each open
    grant.

-   Submit a copy of the audit report package to ONAP when the package
    is submitted to the Federal Audit Clearinghouse. (Note: Title 24 CFR
    §1000.548 requires a recipient to submit a copy of their latest
    audit with their Annual Performance Report (APR). ONAP requests a
    copy of the audit be provided to ONAP concurrent with the submission
    to the Federal Audit Clearinghouse in lieu of with the APR.).

9.  **How often must an audit be conducted?** Circular A-133 requires
    annual audits, except where (a) a tribe is required by tribal law,
    which was in effect on January 1, 1987, to undergo its audits less
    frequently than annually. If this requirement is still in effect for
    the biennial period under audit, the tribe may undergo its audits
    biennially; or (b) a non-profit organization that for the periods
    between July 1, 1992, and January 1, 1995, had biennial audits may
    continue with biennial audits.

10. **What are the audit responsibilities of ONAP recipients?** The
    audit responsibilities of a recipient as stated in Circular A-133
    are:

-   Identify, in its accounts, all Federal awards received and expended
    and the Federal programs under which they were received.

-   Maintain internal control over Federal programs that provides
    reasonable assurance that the recipient is managing Federal awards
    in compliance with laws, regulations, and the provisions of
    contracts or grant agreements that could have a material effect on
    each of its Federal programs.

-   Comply with laws, regulations, and the provisions of contracts or
    grant agreements related to each of its Federal programs.

-   Prepare appropriate financial statements, including the Schedule of
    Expenditures of Federal Awards.

-   Ensure that audits required by Circular A-133 are properly performed
    and submitted when due.

-   Follow up and take corrective action on audit findings, including
    preparation of a summary schedule of prior audit findings and a
    corrective action plan.

11. **What requirements must the auditor meet?** Circular A-133 requires
    that an auditor shall:

-   Conduct the audit according to generally accepted governmental
    auditing standards.

-   Obtain an understanding of the recipient's internal control
    procedures and perform tests to determine the effectiveness of the
    internal control procedures.

-   Perform tests to determine if the recipient complied with the laws,
    regulations and the provisions of contracts or grant agreements that
    may have a direct and material effect on each of its major federal
    programs.

-   Follow-up on prior audit findings, determine the reasonableness of
    recipient's summary schedule of prior audit findings and report as a
    current audit finding any instances of material misrepresentations
    in the summary schedule.

12. **What are the cognizant federal agency audit responsibilities?**
    Recipients expending more than \$25 million in federal awards a year
    shall have a cognizant audit agency. The cognizant agency will be
    the Federal agency providing the largest amount of funding, unless
    the Office of Management and Budget makes a specific assignment. The
    cognizant audit agency will:

-   Provide technical audit advice and liaison to recipients and
    auditors.

-   Review recipient extension requests for audit submission. The
    cognizant agency may grant an extension for good cause.

-   Obtain or conduct quality control reviews of selected audits made by
    non-Federal auditors and provide the results, when appropriate, to
    other interested organizations.

-   Inform appropriate Federal officials of irregularities or illegal
    acts.

-   Advise the auditor and, where appropriate, the recipient of any
    deficiencies found in the audits that require corrective action by
    the auditor.

-   Coordinate any additional audits or reviews so that the audits or
    reviews build upon work performed during the A-133 audit.

-   Coordinate a management decision for audit findings that affect
    programs of more than one Federal agency.

-   Coordinate the work and reporting responsibilities among auditors to
    obtain the most cost-effective audit.

-   Consider requests to qualify as low-risk from recipients receiving
    biennial audits.

13. **What are the oversight Federal agency responsibilities?**
    Recipients expending \$25 million or less in federal awards shall
    have an oversight agency for audit. The oversight agency will be the
    Federal agency providing the largest amount of funding. The
    oversight agency will:

-   Provide technical advice to recipients and auditors.

-   Assume all or some of the responsibilities of the cognizant audit
    agency.

    HUD will assume all of the cognizant audit agency responsibilities
    for those recipients for which HUD is the oversight agency.**\
    **

14. **What are federal awards for ONAP recipients?** Federal awards to
    ONAP recipients mean Federal financial assistance in the form of
    grants and loan guarantees that recipients or subrecipients receive
    directly from ONAP, other Federal agencies or indirectly from
    pass-through entities.

15. **How are federal awards identified in the audit report?** ONAP
    recipients are required to identify all Federal funds received and
    expended and the Federal programs under which the funds were
    received. Federal program identification includes the Catalog of
    Federal Domestic Assistance (CFDA) title and number, award number
    and year, awarding Federal agency, and any pass-through entities.
    CFDA titles and numbers may be found on the Internet at
    http://aspe.os.dhhs.gov/cfda/idept.htm.

16. **What CFDA titles and numbers apply to ONAP programs?** The CFDA
    titles and numbers applicable to ONAP may be found on the Internet
    at http://www.hud.gov/cfda/cfda.cfm and are provided below:

-   14.250 Rural Housing and Economic Development

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-   14.850 Public and Indian Housing

-   14.854 Public and Indian Housing Drug Elimination Program

-   14.862 Indian Community Development Block Grant Program

-   14.865 Public and Indian Housing: Indian Loan Guarantee Program

-   14.867 Indian Housing Block Grants

-   14.869 Title VI Federal Guarantees for Financing Tribal Housing
    Activities

-   14.870 Resident Opportunity and Supportive Services

17. **What are the financial statement requirements?** An ONAP recipient
    is required to prepare financial statements that reflect its
    financial position, results of operations, and cash flows for the
    fiscal year; that is the Balance Sheet, Statement of Revenues and
    Expenses, and Statement of Cash Flows.

18. **Are there any other required statements?** ONAP recipients are
    also required to prepare a Schedule of Expenditures of Federal
    Awards and a Summary Schedule of Prior Audit Findings.

19. **What is required to be included in the Schedule of Expenditures of
    Federal Awards?** The schedule shall:

-   Identify individual programs by Federal agency.

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-   Identify Federal awards received as a subrecipient, the name of the
    pass-through entity and identifying number assigned by the
    pass-through entity.

-   Provide the total amount expended for each Federal grant award and
    the CFDA number. [ONAP recipients should identify cumulative
    expenditures to-date and expenditures for the current period for
    each open ONAP grant.]{.underline}

-   Describe significant accounting policies used in preparing the
    schedule.

-   Identify the total amount provided to subrecipients from each
    Federal program.

-   Identify the value of non-cash assistance, amount of insurance in
    effect during the year and loans or loan guarantees outstanding at
    the year's end.

20. **When are audit reports due?** ONAP recipients are to submit a
    complete audit report package to the Federal Audit Clearinghouse
    within 30 days of receipt from the auditor or nine months after the
    end of the recipient's fiscal year, whichever occurs earlier. [ONAP
    program recipients are requested to submit a copy of the audit
    report package to the appropriate ONAP Area Office when the package
    is submitted to the Clearinghouse.]{.underline}

21. **What is included in the audit report package?** The audit report
    package is comprised of the financial statements and Schedule of
    Expenditures of Federal Awards, summary schedule of prior audit
    findings, the auditor's report(s), and a corrective action plan. A
    sample audit report package and a Data Collection Form are attached.

22. **What is the address of the Federal Audit Clearinghouse?** The
    audit report package and a Data Collection Form for Reporting on
    Audits of States, Local Governments, and Non-Profit Organizations
    (Form SF-SAC, also attached) are to be submitted to the Federal
    Audit Clearinghouse. The address for the Clearinghouse is:

> Federal Audit Clearinghouse
>
> Bureau of the Census
>
> 1201 E. 10^th^ Street
>
> Jeffersonville, IN 47132

23. **How many copies of the reporting package should be submitted?** In
    addition to the audit report package for the Clearinghouse, Federal
    program participants are required to include additional copies of
    the report package for the each Federal awarding agency when the
    schedule of findings and questioned costs disclosed audit findings
    relating to Federal awards that the Federal awarding agency provided
    directly. Also, copies must be submitted for each Federal awarding
    agency when the summary schedule of prior audit findings reported
    the status of any audit findings relating to Federal awards that the
    Federal awarding agency provided directly.

24. **What happens if an audit is not performed and submitted?**
    Circular A-133 provides that no audit costs may be charged to
    Federal awards if the financial reviews have not been performed
    according to the Circular requirements. In instances of inability or
    unwillingness to comply with Circular A-133, Federal agencies may
    take appropriate actions using sanctions, such as:

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a.  withholding a percentage of the Federal award until the audit is
    satisfactorily completed;

b.  withholding or disallowing overhead costs;

c.  suspending Federal awards until the audit is conducted; or

d.  terminating the Federal award.

> Any sanction for failure to meet the audit requirements of
> Circular A‑133 by NAHASDA program recipients would follow the sanction
> process provided for in NAHASDA Title IV and Subpart F of 24 CFR Part
> 1000.

25. **Are audit costs eligible IHBG costs?** Title 24 CFR Section
    1000.546 states that audit costs are an eligible program or
    administrative expense.

26. **May a financial review be charged to IHBG?** Title 24 CFR Section
    1000.546 allows IHBG funds to be used to obtain a financial review
    for those ONAP recipients expending less than \$300,000 in Federal
    awards in a fiscal year. [Recipients who obtain such a financial
    review are to submit a copy of the review to ONAP when it is
    received from the auditor]{.underline}. ONAP recipients are not
    required to submit the financial review to the Federal Audit
    Clearinghouse.

27. **What are the work paper retention requirements for Auditors?**
    Auditors are required by Circular A-133 to retain their audit
    working papers and reports for a minimum of three years after the
    date of issuance of the auditor's report(s) to the recipient unless
    notified in writing by the cognizant or oversight agency for audit
    or the pass-through entity to extend the retention period.

28. **Who may review the Auditor's work papers?** Audit working papers
    shall be made available upon request to the cognizant or oversight
    agency for audit or its designee, a Federal agency providing direct
    or indirect funding or the United States General Accounting Office.
    ONAP has delegated its responsibility to conduct quality control
    reviews of audit working papers to the Real Estate Assessment
    Center's Quality Assurance Subsystem (QASS) Team for those entities
    for which HUD is the oversight agency. The QASS Team will conduct
    such reviews beginning in Federal Fiscal Year 2002.

If you have any questions regarding this policy, please contact your
assigned Grants Evaluation Specialist in the local ONAP Area Office.

/s/\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\
Assistant Secretary for Public and Indian Housing

**SAMPLE AUDIT REPORT PACKAGE**

**APPENDIX**

  -------------------------------------------------------------- --------
                                                                 Page

  Independent Auditors' Report                                   2

                                                                 

  Combined Balance Sheet                                         3

                                                                 

  Combined Statement of Revenues and Expenses                    4

                                                                 

  Combined Statement of Changes in Equity                        5

                                                                 

  Combined Statement of Cash Flows                               6

                                                                 

  Notes to Financial Statements                                  7

                                                                 

  Schedule of Expenditures of Federal Awards                     12

                                                                 

  Report on Compliance                                           13

                                                                 

  Schedule of Findings and Questioned Costs                      15

                                                                 

  Summary Schedule of Prior Audit Findings                       17

                                                                 

  Data Collection Form                                           20

                                                                 
  -------------------------------------------------------------- --------

**INDEPENDENT AUDITORS' REPORT**

We have audited the accompanying financial statements of the Any Indian
Housing Authority as of September 30, 200X, and for the year then ended.
These financial statements are the responsibility of the Any Indian
Housing Authority's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing
standards and the standards applicable to financial and compliance
audits contained in *Governmental Auditing Standards*, issued by the
Comptroller General of the United States. Those standards require that
we plan and perform our audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of the Any
Housing Authority, Anywhere, USA, as of September 30, 200X and the
results of its operations and changes in its retained earnings for the
year then ended in conformity with generally accepted accounting
principles.

In accordance with Government Auditing Standards, we have also issued
our report dated May 15, 200X on our consideration of the Any Indian
Housing Authority's internal control over financial reporting and our
tests of its compliance with certain provisions of laws, regulations,
contracts, and grants. That report is an integral part of an audit
performed in accordance with *Government Auditing Standards* and should
be read in conjunction with this report in considering the results of
our audit.

Our audit was made for the purpose of forming an opinion on the
financial statements taken as a whole. The accompanying schedule of
expenditures of federal awards is presented for purposes of additional
analysis as required by U.S. Office of Management and Budget A-133,
*Audits of States, Local Governments, and Non-Profit Organizations,* and
is not a required part of the financial statement. Such information has
been subjected to the auditing procedures applied in the audit of the
financial statements taken as a whole.

May 15, 200X

  ----------------------------------------------------- --------------------------
  ANY INDIAN HOUSING AUTHORITY                          

  COMBINED BALANCE SHEET                                

  For the Year Ended September 30, 200X                 

  [ASSETS]{.underline}                                  

  Current Assets                                        

  Cash                                                  75,000

  Investments                                           [125,000]{.underline}

  Total Cash and Cash Equivalents                       200,000

  Receivables                                           

  Grants                                                300,000

  Tenants                                               72,000

  Miscellaneous                                         [8,050]{.underline}

  Total Accounts Receivables                            [380,050]{.underline}

  Total Current Assets                                  580,050

  Property, Plant and Equipment                         

  Development Costs                                     1,985,067

  Land, Structures and Equipment                        [18,456,865]{.underline}

  Total Property, Plant and Equipment                   20,441,932

  [TOTAL ASSETS]{.underline}                            21,021,982

  [LIABILITIES AND EQUITY]{.underline}                  

  Current Liabilities                                   

  Accounts Payable                                      45,025

  Accrued Expenses                                      86,142

  Tenant Security Deposits                              [52,457]{.underline}

  Total Current Liabilities                             183,624

  Equity                                                [20,838,358]{.underline}

  [TOTAL LIABILITES AND EQUITY]{.underline}             21,021,982
  ----------------------------------------------------- --------------------------

ANY INDIAN HOUSING AUTHORITY

COMBINED STATEMENT OF REVENUES AND EXPENSES

For the Year Ended September 30, 200X

  ---------------------------------------------------------- ----------------------
  Revenues                                                   

  Dwelling Rental revenue                                    \$ 78,920

  Other Income                                               [14,567]{.underline}

  Total revenues                                             \$ 93,487

  Expenses                                                   

  Administrative                                             \$ 38,765

  Tenant services                                            14,965

  Utilities                                                  11,345

  Ordinary Maintenance                                       11,367

  General                                                    9,673

  Non-routine Maintenance                                    [5,092]{.underline}

  Total operating expenses                                   \$
                                                             [91,207]{.underline}

  Excess Operating Revenue over Operating Expenses           \$ 2,280

  Non-Operating Income (Expenses)                            

  Investment Income                                          \$ 5,813

  Prior year adjustments affecting receipts                  [587]{.underline}

  Total Non-Operating Income (Expenses)                      \$ [6,400]{.underline}

  Net Income                                                 \$ 8,680
  ---------------------------------------------------------- ----------------------

ANY INDIAN HOUSING AUTHORITY

COMBINED STATEMENT OF CHANGES IN EQUITY

For the Year Ended September 30, 200X

+-----------------------------------------+----------------------------+
| # Retained Earnings                     |                            |
+-----------------------------------------+----------------------------+
| Balance -- October 1, 200X              | \$ 20,824,005              |
+-----------------------------------------+----------------------------+
| Prior Period Adjustment                 | [5,673]{.underline}        |
+-----------------------------------------+----------------------------+
| Balance -- October 1, 200X, as restated | \$ 20,829,678              |
+-----------------------------------------+----------------------------+
| Net Income                              | [8,680]{.underline}        |
+-----------------------------------------+----------------------------+
| Balance -- September 30, 200X           | \$ 20,838,358              |
+-----------------------------------------+----------------------------+

ANY INDIAN HOUSING AUTHORITY

COMBINED STATEMENT OF CASH FLOWS

For the Year Ended September 30, 200X

  ----------------------------------------------------- ------------------------
  Cash Flow From Operating Activities                   

  Operating Income                                      \$ 2,280

  Changes in assets and liabilities:                    

  (Increase) decrease in receivables                    (65,956)

  Increase (decrease) in accounts payable               14,814

  Increase (decrease) in accrued expenses               514

  Increase (decrease) in tenant security deposits       [1,556]{.underline}

  Net Cash Provided (Used) By Operating Activities      \$
                                                        [(46,792)]{.underline}

  Cash Flows from Capital & Related Financing           
  Activities:                                           

  Acquisition & construction of capital assets          \$ (19,673)

  Cash Flows from Investing Activities:                 

  Sale of Investments                                   \$ 50,000

  Investment Income                                     [5,813]{.underline}

  Net Cash Provided by Investing Activities             \$ 55,813

  Net Increase (Decrease) in Cash and Cash Equivalents  (10,652)

  Cash and Cash Equivalents -- Beginning of the Year    [210,652]{.underline}

  Cash and Cash Equivalents -- End of the Year          \$ 200,000
  ----------------------------------------------------- ------------------------

ANY INDIAN HOUSING AUTHORITY

NOTES TO FINANCIAL STATEMENTS

For the Year Ended September 30, 200X

**[NOTE 1]{.underline} -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

## Nature of Operations

The Any Indian Housing Authority (Housing Authority) was created under
an ordinance of the Any Indian Tribe (Tribe) to engage in or assist in
the development and operation of low rent housing for qualified
individuals.

## Reporting Entity

The Authority is a federally recognized governmental entity. The
Authority is governed by a Board of Directors appointed by the Tribe and
has governance responsibilities over all activities related to the
Authority and its operation. The Authority receives funding from federal
government sources and must comply with the applicable requirements of
those funding sources. The Authority is not included in any other
governmental "reporting entity" as defined in Section 2100 *Codification
of Governmental Accounting and Financial Reporting Standards* since the
Board members, while they are appointed by the Tribe, have decision
making authority, the power to designate management, the responsibility
to significantly influence operations, and primary accountability for
fiscal matters.

The criteria used in determining the scope of the Authority for
financial reporting purposes is as follows:

-   The ability of the Board to exercise supervision of a component
    unit's financial interdependency.

-   The Board's governing authority extends to the fiscal decision
    making authority and is held primarily accountable for decisions.

-   The ability of the Board to significantly influence operations
    through budgetary approvals, sign and authorize contracts, exercise
    control over facilities, and approve the hiring or retention of key
    management personnel.

-   The ability of the Board to have absolute authority over all funds
    of the Authority and to have accountability in fiscal matters.

The Authority follows the criteria in GASB statement #14, "The Financial
Reporting Entity", to determine the organizations for which the
authority is financially accountable. Criteria, included in GASB
statement #14, used to determine if a particular entity is financially
accountable are an authority official appointing a voting majority of
the entity's governing body and (1) the ability of the authority to
impose its will on that entity or (2) the potential for the entity to
provide specific financial benefits to, or impose specific financial
burdens on the authority.

> The Authority has determined that no other outside agency meets the
> above criteria and, therefore, no other agency has been included as a
> component unit in the Authority's financial statements.

######### FUND ACCOUNTING

> The accounts of the Authority are organized on the basis of funds. The
> activities of the various funds are accounted for with a separate set
> of self-balancing accounts that comprise its assets, liabilities,
> reserves, fund balance, revenues and expenses. The various funds are
> summarized by type in the financial statements. The following funds
> are used by the Authority:
>
> Enterprise Funds -- to account for operations (a) that are financed
> and operated in a manner similar to private business enterprises --
> where the intent of the governing body is that the costs of providing
> goods or services to the general public on a continuing basis by
> financed or recovered primarily thorough user charges; or (b) where
> the governing body has decided that periodic determination of revenue
> earned, expenses incurred, and/or net income is appropriate for
> capital maintenance, public policy, management control,
> accountability, or other purposes.
>
> The Authority's policy is to prepare its financial statements for all
> fund types on the basis of generally accepted accounting principles.
> Due to the passage of the Native American Housing Assistance
> Self-Determination Act of 1996 (NAHASDA), the financial statements for
> this audit are prepared on the basis of proprietary fund accounting.

######### BASIS OF ACCOUNTING

> The accounting and financial reporting treatment applied to a fund is
> determined by its measurement focus.
>
> The accrual basis is followed by the proprietary fund types. Under the
> accrual basis of accounting, revenues are recorded when earned.
> Expenditures are recorded when the related fund liability is incurred,
> if measurable.

a.  Revenue and expense items on projects which are in the development
    stage are capitalized rather than recorded as revenue or expenses in
    the current period.

b.  Construction-in-progress on projects which are in the development or
    modernization states are reflected in the Development Costs account
    on the balance sheet.

c.  Land, structures and equipment are stated at cost. Depreciation
    expense or related accumulated depreciation is reflected in the
    accompanying financial statements.

d.  Contracts which have been entered into, but not performed, are
    recorded as payables and expenses based on the expenditures being
    included in the current year budget.

e.  A comparison of actual to budget is not presented in these financial
    statements.

f.  Accrued vacation and sick leave expenses have been recorded as
    liabilities in these financial statements.

######## BUDGET

The Authority prepares its budget for the fiscal year using the same
basis of accounting as the financial statements.

#### NOTE 2 -- CASH AND INVESTMENTS

The Authority's investments consist entirely of money market accounts
with the designated depositories. Investments are stated at cost and are
properly secured by FDIC insurance coverage and are with designated
depositories which meet or exceed the Governmental National Mortgage
Association Ratings. Other cash deposits are with the designated
depositories and are properly secured at all times.

At September 30, 200X, the carrying amount of the Authority's deposits
and investments were \$125,000, and the bank balance was \$75,000.

Of the bank balance, \$100,000 was covered by federal depository
insurance. The remaining \$100,000 is unsecured. However, the Authority
has taken steps suggested by HUD to document that the bank isn't likely
to fail, and therefore is in compliance.

#### NOTE 3 - ACCOUNTS RECEIVABLE

Accounts receivable at September 30, 200X consist of the following
items:

  ----------------------------------- -----------------------------------
  Indian Housing Block Grant          \$ 300,000

  Low Rent Tenants                    12,000

  Miscellaneous                       [8,050]{.underline}

  Total                               328,050
  ----------------------------------- -----------------------------------

Accounts deemed uncollectible are recognized as an expense when written
off.

**[NOTE 4]{.underline} -- ACCRUED LIABILIATIES**

Accrued expenses at September 30, 200X, consist of user fees payable to
the Any Indian Tribe of \$50,000 and \$36,142 in accrued vacation and
sick leave expenses.

**[NOTE 5]{.underline} -- RETIREMENT PLAN**

All full time employees are given a retirement benefit that is invested
in employee-directed investment plans with two insurance companies. The
benefit is a defined contribution of 8 percent of employee wages. The
benefit amounted to \$65,923 for the year ended September 30, 200X.

**[NOTE 6]{.underline} -- ECONOMIC DEPENDENCY**

The Authority receives the majority of the funds used for housing
projects from the US Department of Housing and Urban Development.

**[NOTE 7]{.underline} -- PRIOR PERIOD ADJUSTMENTS**

Certain prior years adjustments (affecting and not affecting residual
receipts) were recorded to correct/reclassify various prior year project
expenditures.

**[NOTE 8]{.underline} -- RISK MANAGEMENT**

In the normal course of business, the Any Indian Housing Authority is
exposed to various risks of loss related to torts; theft of, damage to
and destruction of assets; errors and omissions; and natural disasters
for which the Authority carries commercial insurance.

The Any Indian Housing Authority participates in the State Worker's
Compensation Bureau.

Settle claims resulting from these risks have not materially exceeded
insurance coverage in any of the past three fiscal years.

**[NOTE 9]{.underline} -- COMMITMENTS AND CONTINGENCIES**

## ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

[GRANTS]{.underline}

The Authority participants in federal grant programs, which are governed
by various rules and regulations of the grantor agency. Costs charged to
the respective grant programs are subject to audit and adjustment by the
grantor agency; therefore, to the extent that the Authority has not
complied with the rules and regulations governing the grants, refunds of
any money received may be required and the collectibility of any related
receivable at September 30, 200X, may be impaired. In the opinion of the
Authority, there are no significant contingent liabilities relating to
compliance with the rules and regulations governing the respective
grants; therefore, no provision has been recorded in the accompanying
combined financial statements for such contingencies. The Authority is
subject to possible examination by Federal authorities that determine
compliance with terms, conditions, laws and regulations governing grants
given to the Authority in the current and prior years.

**[NOTE 10]{.underline} -- RELATED PARTY TRANSACTIONS**

The Authority is the general partner for the Lodges of Any Reservation,
a low income tax credit project. The Authority collects rents and
performs management functions for the project. The Authority has \$510
in rent collections that has not been remitted to the partnership as of
September 30, 200X.

ANY INDIAN HOUSING AUTHORITY

SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

For the Year Ended September 30, 200X

![](media/image1.wmf)

REPORT ON COMPLIANCE WITH REQUIREMENTS APPLICABLE TO EACH MAJOR PROGRAM
AND INTERNAL CONTORL OVER COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR
A-133

Board of Commissioners Office of Native American Programs

And Executive Director Department of Housing and Urban

Any Indian Housing Authority Development

Anytown, USA

### Compliance

We have audited the compliance of Any Indian Housing Authority with the
types of compliance requirements described in the *U.S. Office of
Management and Budget (OMB) Circular A-133 Compliance Supplement* that
are applicable to each of its major federal programs for the year ended
September 30, 200X. Any Indian Housing Authority's major federal
programs are identified in the summary of auditor's results section of
the accompanying Schedule of Findings and Questions Costs. Compliance
with the requirements of laws, regulations, contracts and grants
applicable to each of its major federal program is the responsibility of
Any Indian Housing Authority's management. Our responsibility is to
express an opinion on Any Indian Housing Authority's compliance based on
our audit.

We conducted our audit of compliance in accordance with generally
accepted auditing standards, the standards applicable to financial
audits contained in *Government Auditing Standards*, issued by the
Comptroller General of the United States; and OMB Circular A-133,
*Audits of States, Local Governments, and Non-Profit Organizations.*
Those standards and OMB Circular A-133 require that we plan and perform
the audit to obtain reasonable assurance about whether noncompliance
with the types of compliance requirements referred to above that could
have a direct and material effect on a major federal program occurred.
An audit includes examining, on a test basis, evidence about Any Indian
Housing Authority's compliance with those requirements and performing
such other procedures, as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion.
Our audit does not provide a legal determination on Any Indian Housing
Authority's compliance with those requirements.

As described in finding number 0X-1 in the accompanying Schedule of
Findings and Questioned Costs, the Housing Authority maintained
excessive tenants accounts receivable in relation to the rental receipts
received during the year.

Compliance with the above-mentioned requirements is necessary in our
opinion for the Housing Authority to comply with requirements applicable
to those programs.

In our opinion, except for the noncompliance described in the preceding
paragraph, the Any Indian Housing Authority complied, in all material
respects, with the requirements referred to above that are applicable to
each of its major federal programs for the year ended September 30,
200X.

#### Internal Control Over Compliance

The management of the Any Indian Housing Authority is responsible for
establishing and maintaining effective internal control over compliance
with requirements of laws, regulations, contracts and grants applicable
to federal programs. In planning and performing our audit, we considered
the Any Indian Housing Authority's internal control over compliance with
requirements that could have a direct and material effect on a major
federal program in order to determine our auditing procedures for the
purpose of expressing our opinion on compliance and to test and report
on internal control over compliance in accordance with OMB Circular
A-133.

We noted certain matters involving the internal control over compliance
and its operation that we consider to be reportable conditions.
Reportable conditions involve matters coming to our attention relating
to significant deficiencies in the design or operation of the internal
control over compliance that, in our judgment, could adversely affect
the Housing authority's ability to administer a major federal program in
accordance with applicable requirements of laws, regulations, contracts
and grants. Reportable conditions are described in the accompanying
Schedule of Findings and Questioned Costs as item 0X-1.

A material weakness is a condition in which the design or operation of
one or more of the internal control components does not reduce to a
relatively low level the risk that compliance with applicable laws,
regulations, contracts and grants that would be material in relation to
a major federal program being audited may occur and not be detected
within a timely period by employees in the normal course of performing
their assigned functions. Our consideration of the internal control over
compliance would not necessarily disclose all matters in the internal
control that might be reportable conditions, and accordingly, would not
necessarily disclose all reportable conditions identified above to be
material weaknesses. However, we believe none of the reportable
conditions described above are not material weaknesses.

This report is intended solely for the information of the Board of
Commissioners, management and federal awards agencies and pass-through
entities and is not intended to be and should not be used by anyone
other than these specified parties.

Denver, Colorado

October 29, 200X

Any Indian Housing Authority

##### SCHEDULE OF FINDINGS AND QUESTIONED COSTS

For the Year Ended September 30, 200X

###### Section I -- Summary of Auditor's Results

## Financial Statements

Type of auditors report issued -- unqualified

Internal control over financial reporting

-   Material weaknesses identified? - no

-   Reportable conditions identified that are not considered to be
    material weaknesses? - no

Noncompliance material to financial statements noted? -- no

######## Federal Awards

Internal control over major programs:

-   Material weaknesses identified? -- no

-   Reportable conditions identified that are not considered to be
    material weaknesses? - yes

Type of auditor's report issued on compliance for major programs --
qualified

Any audit findings that are require to be reported in accordance with
Section 510(a) of Circular A-133? - yes

Identification of major programs:

[CFDA Number]{.underline} [Name of Federal Program]{.underline}

14.850 Public and Indian Housing

> 14.867 Indian Housing Block Grant

Dollar threshold used to distinguish between Type A and Type B
programs - \$300,000

Auditee qualified as low-risk auditee? - no

Any Indian Housing Authority

**SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED)**

For the Year Ended September 30, 200X

####### Section II -- Financial Statement Findings

No matters reported.

####### Section III -- Federal Award Findings and Questioned Costs

######## Finding Number 0X-1 -- Low Rent and Mutual Help Operations

As noted in prior audit, tenant accounts receivable continue to be
excessive. Balance at September 30, 200X was \$72,000. This amount is
extremely excessive when considering that total dwelling rental for the
fiscal year was \$78,920 for both Low Rent and Mutual Help Programs.
This situation may affect the Authority's ability to meet current
financial obligations as they become due.

We recommend that management should aggressively seek payments or
institute termination and eviction procedures as required by the
Authority's procedures manual.

[Management's Response]{.underline}

The Any Indian Housing Authority Counselor continues to work with the
tenants in entering into repayment plans and agreements. The Any Indian
Housing Authority is also trying to obtain further backing from their
Tribal Council to ensure that rent payments are considered mandatory
deductions for all Tribal Employees.

The Any Indian Housing Authority's Counseling Program has been working
with the Crisis Team in an effort to assist families in developing
household budgets and meeting their bills each month. In the case of
tenants who will not cooperate, the Housing Authority will begin
eviction processed through the Tribal Courts.

Any Indian Housing Authority

**SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS**

For the Year Ended September 30, 200X

U.S. Department of Housing and Urban Development

*Finding No. 0X-1 Low Rent & Mutual Help Programs*

[Condition]{.underline} -- Tenant accounts receivable were excessive.

[Recommendation]{.underline} -- Aggressive collection action was
recommended.

[Current status]{.underline} -- Still a finding. See current Schedule of
Findings and Questioned Costs.

*Finding No. 0X-2 Low Rent & Mutual Help Programs*

[Condition]{.underline} -- Has not performed an annual inventory.

[Recommendation]{.underline} -- It was recommended to perform an annual
inventory.

[Current status]{.underline} -- An annual inventory was conducted.
Finding is closed.