Finding Text
Finding No: 2022-001
Relevant Federal Programs: None
Condition:
The Authority has entered into a master development agreement and ownership with private investors to plan, design, build, and manage a multi-phase, combined housing development. The Authority maintains majority control of the development and the development will be functionally integrated into the operations of the Authority. The Authority failed to correctly apply and classify this investment with the equity method of accounting for investments and classify it as a blended component unit. No Federal funds are involved.
Criteria:
Generally accepted accounting principles accepted in the United States of America (GAAP) require that investments in legally separate entities be treated as component units.
Cause:
The Authority development team did not adequately communicate the ownership structure to the finance department.
Effect:
The Authority did not correctly report the new component unit correctly in draft financial statements.
Questions Costs:
No questioned costs.
Recommendation:
The Authority should add additional internal controls to adequately inform the finance department of ongoing development activities for correct classification and inclusion for financial reporting.