Issue: Is the Housing Finance Authority a component unit of the County?

Reference:

GASB 34, par. 124:

The financial statements of the reporting entity should allow users to distinguish between the primary government and its component units by communicating information about the component units and their relationships with the primary government rather than creating the perception that the primary government and all of its component units are one legal entity.

GASB 14, par. 20:

Definition of component units. Component units are legally separate organizations for which the elected officials of the primary government are financially accountable.

GASB 14, par. 21:

The following circumstances set forth a primary government's financial accountability for a legally separate organization.

A). The primary government is financially accountable if it appoints a voting majority of the organization's governing body and (1) it is able to impose its will on that organization or (2) there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government.

B). The primary government may be financially accountable if an organization is fiscally dependent on the primary government regardless of whether the organization has (1) a separately elected governing board, (2) a governing board appointed by a higher level government, or (3) a jointly appointed board.

Evaluation:

The Housing Finance Authority (HFA) was created by the County in accordance with Florida Housing Finance Authority Law, Part IV, Title XI, Chapter 159. The County appoints the thirteen members of the board of the Housing Finance Authority. The County has the authority to alter, change or terminate the HFA.

The HFA is a separate legal entity from the county and is fiscally independent since it poses no financial burden to the County nor provides any financial benefit to the County.

Position:

The HFA is a component unit of the County due to the County having financial accountability for the HFA. The financial accountability is due to the County appointing the majority of the board and the County having the ability to impose its will on the board. Imposition of will is evident in that the County may remove a board member without cause by 3/5 vote of the County's vote, or for neglect of duty or misconduct in office by a majority vote (F.S. 159.607).

In the County's financial statements, the discrete-presentation method should be used for the HFA component unit. This means the HFA information should be reported separately from the financial information for the primary government (the County). This can be achieved by presenting the HFA information in a separate column in the government-wide statements to the right of a total column for governmental and business-type activities. A total column for the reporting entity is optional.

The blending method of presentation does not apply since it requires that a component unit have a similar governing body to the primary government (it does not) or that it mainly serve the primary government.

The following note disclosure is needed:

• A brief description of the HFA
• Relationship of the County with the HFA
• Disclosure of criteria used for including the HFA as a component unit
• Identification of the method used (discrete presentation or blending) to incorporate the component unit in the County's financial statements
• Identification of how financial statements of the HFA may be obtained
• The nature and amount of significant transactions between the County and the HFA