Appendix to Guidelines for 
Minnesota Housing Audits

October 2018

The Minnesota Housing Finance Agency does not discriminate on the basis of race, color, creed, national origin, sex, religion, marital status, status with regard to public assistance, disability, familial status, gender identity, or sexual orientation in the provision of services.

An equal opportunity employer.

This information will be made available in alternative format upon request. 
Table of Contents

Chapter 1 – General Information
1.01	 Independent Auditor’s Report
1.02	 Illegal Activities
1.03	 Security Deposit Account
Chapter 2 – Financial (Comparative) Statements
2.01	Balance Sheets
2.02	Statement of Operations
2.03	Statement of Cash Flows
2.04	Statement of Partners’ Capital
Chapter 3 – Supplemental Information
3.01	 Schedule of Revenues and Expenses*
3.02	 Schedule of Cash Balances*
3.03	 Schedule of Accounts Payable
3.04	 Schedule of Non-tenant Receivables*
3.05	 Schedule of Accrued Expenses*
3.06	 Statement of Changes in Fixed Asset Accounts
3.07	 Schedule of Restricted Escrow Deposits and Reserves
3.08	 Reconciliation of Approved and Paid Distributions*
3.09	 Net Operating Income Computation*
3.10	 Computation of Surplus Cash, Distributions and Residual Receipts
3.11	 Report on Internal Control
3.12	 Schedule of Partners
3.13	 Mortgagor Certification

Chapter 1 – General Information
1.01		Independent Auditor’s Report
At a minimum, the following must be included in the CPA’s report:
1.	Financial statements that “present fairly” the financial position of the entity being audited
2.	Verification that audits were conducted in accordance with Generally Accepted Accounting Principles (GAAP), which are the “auditing standards generally accepted in the United States of America” 

1.02		Illegal Activities
If, during or in connection with an audit required by this audit guide, independent auditors become aware of illegal activity(ies) or indications of such activity(ies), independent auditors must report the information to Minnesota Housing. 

1.03		Security Deposit Account
Minnesota Housing’s Regulatory Agreement requires that tenant security deposit accounts be kept in the name of the project and separate from all other funds of the project, and they must be held with a bank or other financial institution whose deposits are FDIC insured. In addition, the balance of this account must at all times equal or exceed the aggregate amount of all outstanding obligations under that account. Interest earned on these accounts, in excess of the increased liability to the tenants, should not be recognized as income to operations until the funds have been physically transferred to an operating account. 

Chapter 2 – Financial (Comparative) Statements
2.01	Balance Sheet
Balance Sheet
Years Ended December 31, 20xx
ASSETS
	Month	Month
Current Assets	20xx	20xx
Checking-operations
Savings-operations
Petty cash
Other operating cash (specify)
Partnership cash (specify)
Accounts receivable – tenants
Accounts receivable – subsidy
Due from general partners
Accounts receivable – other (specify)
Prepaid property insurance
Other prepaid expenses
       Total Current Assets	____________         ____________
		
Deposits Held in Trust Fund
Tenant security deposits	____________ 	 ____________

Restricted Deposits and Funded Reserves
Real estate tax and insurance escrow 
Development cost escrow
Residual receipts reserve
Miscellaneous
Other (specify)
Replacement cost reserves
              Total Restricted Deposits and Funded Reserves   	____________	         ____________

Investment in Real Estate
Land
Buildings and improvements
Furniture and equipment
Less: accumulated depreciation
       Net Investment in Real Estate	____________ 	____________

Other Assets
Mortgage costs (net)
Tax credit fees (net)
Other (specify)
       Total Other Assets	____________	 ____________

TOTAL ASSETS	=========	 =========

LIABILITIES AND PARTNERS’ EQUITY
								Month		Month
Current Liabilities	20xx                      20xx
Current maturities of mortgage payable 
Accounts payable – trade
Accrued management fees
Accrued interest – Minnesota Housing amortizing debts
Accrued interest – others
Accrued real estate taxes
Accrued payroll taxes
Other accrued expenses
Prepaid rent
Payable – Partnership (specify)
       Total Current Liabilities	____________	 ____________

Deposits Liabilities
Tenant security deposits	____________	 ____________

Long Term Liabilities
Mortgage payable, net of current maturities
Due to general partners
Due to related parties
Development fee payable
Accrued interest – deferred loans
Other
Partners’ Equity/Deficit	____________	 ____________

     TOTAL LIABILITIES AND PARTNERS’ EQUITY			=========  	         =========

2.02	Statement of Operations

Statement of Operations
Years Ended December 31, 20xx

Revenues	20xx	20xx               
Rental income
Apartment
Commercial
Less: vacancy loss

Total Rental Revenues	____________    	____________

Financial and other revenue
Interest income
Other income	

      Total Revenues	____________	____________

Expenses
Administrative and marketing
Maintenance and operating
Utilities
Property and liability insurance
Real estate taxes

Total Operating Expenses	____________	 ____________

Net Operating Income (Loss) 	____________	 ____________

Financial Expenses and Partnership Income/Expense
Interest – Minnesota Housing mortgages payable
Interest – Other mortgages
Minnesota Housing annual fee
Other financial expenses – operations (specify)
Partnership management fee
Other partnership expenses
Interest on partnership reserves
Total Financial Expenses and Partnership 	____________	 ____________

Net Income (Loss) before 
Depreciation & Amortization	____________ 	____________

Depreciation and Amortization	____________	 ____________

Total Net Income (Loss) 	=========	 =========
2.03	
Statement of Cash Flows

Statement of Cash Flows
Years Ended December 31, 20xx

    Cash Flow from Operating Activities	20xx		20xx	
Net Income (loss)
Adjustments to reconcile net income (loss) to net cash provided by (used for) operating activities:
Depreciation 
Amortization
Decrease (increase) in operating assets:
Tenant accounts receivable
Subsidy receivable
Other receivable
Prepaid property insurance
Other prepaid expenses
Tenant security deposits				
Increase (decrease) in operating liabilities:
Accounts payable – trade
Accrued management fees
Accrued interests payable
Accrued real estate taxes
Other accrued expenses
Prepaid rent
Tenant security deposits				
Net Cash Provided by (used) Operating Activities				

    Cash Flow from Investing Activities				
Payments for buildings and improvements
Payments for furniture and equipment
Payments for capitalized costs
Tax and insurance escrow, net – Minnesota Housing
(Deposits) to reserves – Minnesota Housing
Withdrawals from reserves – Minnesota Housing
Partnership reserves (net)
Other investing activities (specify)				
Net Cash Provided by (used) Investing Activities 				

   Cash Flow from Financing Activities				
	Mortgage proceeds 				
	Advances from partners				
	Repayment of advances from partners				
	Principal payment on mortgages				
	Distribution to partners
 Other financing activities (specify)				
        Net Cash Provided by (used) Financing Activities	_________		_________	
				
Net Increase (Decrease) in Cash and Cash Equivalents	_________		_________	
				
Cash and Cash Equivalents Beginning of Year	_________		_________	
				
Cash and Cash Equivalents End of Year	=======		=======	

2.04	Statement of Partners’ Capital

Statement of Partners’ Capital
Years Ended December 31, 20xx

Partners’ Equity (Deficit) 1/1/20XX

Net Income (Loss)
			20xx		20xx	
Partner’s Contribution (Distributions)			
________		
________	

Partners’ Equity (Deficit) 12/31/20XX			

	

			=======	 	=======	

Chapter 3 – Supplemental Information
3.01		Schedule of Revenues and Expenses*

(Comparative) Schedule of Revenues and Expenses*
Years Ended December 31, 20xx

	20xx		20xx	
Revenues				
Gross potential rent – tenants
Gross potential rent – subsidy 
Less: vacancy loss
Gross potential rent – commercial 
Less: vacancy loss
Tenant fees
Other income (specify)
Laundry and vending income
Forfeited security deposits
   Interest income (include interest on escrow/reserves)				
Total Revenues	____________ 		____________	
				
        Expenses				
Advertising and marketing				
Property management fee				
Legal				
Auditing				
Applicant screening/collection expenses
Site office expense
Onsite management payroll
Bad debts
Other administrative expenses				
Total Administrative	____________		____________	
Elevator maintenance/contract				
Security				
Rubbish removal
Snow removal				
Other contract services				
Unique operating expenses**				
Maintenance/janitor supplies				
Grounds maintenance				
Snow removal				
Heating and A/C repair services				
General repair services				
Painting and decorating materials				
Maintenance and janitorial payroll 				
Other maintenance and operating expenses				
Total Maintenance and Operating Expenses	____________		____________	

				
Electricity				
Water and sewer				
Gas and oil				
Total Utilities	____________		____________	
				
Property and liability insurance				
Real estate taxes				
Interest – Minnesota Housing mortgages payable
Interest – other mortgages (specify)				
Minnesota Housing annual fee
Other financial expenses (specify)				

Total Insurance, Taxes and Financial	
____________		
____________	
Partnership management fee
Partnership incentive fee
Other partnership fees
Interest on partnership reserves

           Income (Loss) Before
           Depreciation &  Amortization 	

____________		

____________	

Depreciation
Amortization 
           
Total Expenses

____________		

____________	
       Net Income (Loss)	==========		==========	

 *This schedule may be omitted if the detail is included in the Statement of Operations.
**Applicable to developments with supportive services. E.g., front desk operations and interpretive services 

3.02		Schedule of Cash Balances*

(Comparative) Schedule of Cash Balances*
Years Ended December 31, 20xx

	20xx		20xx	
Operating Account				
Checking				
Savings				
Certificates of deposit				
Payroll account				
Petty cash				
Other (identify each)				
Total Operating Cash	
==========		
==========	
				
Tenant Security Deposit Cash				
Checking				
Savings				
Certificates of deposit				
Other (identify each)				
Total Tenant Security Deposit Cash	
==========		
==========	
				
Partnership Cash				
Checking				
Savings				
Other (identify each)				
Total Partnership Cash	
==========		
==========	

3.03		Schedule of Accounts Payable
Please include the client’s aging accounts payable schedule as Schedule of Accounts Payable (3.03).

3.04		Schedule of Non-tenant Receivables*
(Comparative) Schedule of Non-tenant Receivables* 
Years Ended December 31, 20xx

	20xx		20xx	
Accounts receivable – HUD
Account receivable – subsidy
Due from general partners
Due from other properties
Other (specify)				
Total Non-tenant Receivables	
==========		
==========	

*This schedule may be omitted if detail is included in the Balance Sheet. 

3.05		Schedule of Accrued Expenses*
(Comparative) Schedule of Accrued Expenses*
Years Ended December 31, 20xx

	20xx		20xx	
Accrued management fees				
Accrued interest – Minnesota Housing amortizing debts				
Accrued interest – other (identify each)
Accrued real estate taxes				
Accrued payroll taxes				
Other accrued expenses (identify each)				
Total Accrued Expenses	
==========		
==========	

*This schedule may be omitted if the detail is included in the Balance Sheet. 

3.06		Statement of Changes in Fixed Asset Accounts

Statement of Changes in Fixed Asset Accounts
Year Ended December 31, 20xx

Property and Equipment

	Beginning						Ending	
	Balance		Additions		Disposals		Balance	
Land								
Building								
Improvements								
Furnishings
Equipment								
Other	__________		    __________		  __________		  __________	
								
Totals								
								
Accumulated depreciation	__________		     __________		  __________		  __________	

Net Property and Equipment	
=========
   						
   =========

3.07		Schedule of Restricted Escrow Deposits and Reserves
Schedule of Restricted Escrow Deposits and Reserves
Year Ended December 31, 20xx

	
Beginning		
Net			
Ending	
	Balance	Additions	Transfers	Interest	Withdrawals	Balance	
Held by Minnesota Housing:
Real estate tax 							
Insurance 	_________	__________	__________	__________	    __________	________	

Development cost escrow							

Residual receipts

Miscellaneous

Other (specify)

Replacement cost reserve

_________	

__________	

__________	

__________	

__________	

________	

Total	
=======	
========	
========	
========	
========	
======	
							
Held by Title Company:  Construction escrow	

_________	

__________	

__________	

__________	

__________	

________	
							
Held by Partnership:  Partnership reserves	

_________	

_________	

_________	

__________	

__________	

________	

Total	
=======	
=======	
=======	
========	
========	
======	

3.08		Reconciliation of Approved and Paid Distributions*
Reconciliation of Approved and Paid Distributions*
Years Ended December 31, 20xx

	20xx	    20xx

Minnesota Housing Approved Distribution:			__________     		__________

Distribution used for:
	Cash paid to partners
	Investor services fee
	Other partnership fee paid (explain)
Held in checking                                                                		__________     		__________

Total								========                          ========

*The purpose of this supplemental information is to reconcile the Minnesota Housing approved owner distribution.

3.09		Net Operating Income Computation*
Net Operating Income Computation*
Year Ended December 31, 20xx

	Revenues:					
	Apartments	 		
	Commercial			 	                 	
	Less: vacancy loss		               	
	Less FAF savings (if applicable)			 	
	Other operating income			 	
	Interest Income			 	
	Total Revenues
			                	
	Expenses:					
	Administrative & Marketing		 	
	Maintenance & Operating 	 	
	Utilities				 	
	Property & Liability Insurance				 	
	Real estate taxes				 	
	Other (specify)				 	
	Total Operating Expenses		            	
	Net Operating Income (before Debt Service)	                 	
		==========	

*This schedule may be omitted if the detail is included in the statement of operations. 

3.10		Computation of Surplus Cash, Distributions and Residual Receipts
Download an Excel version (sample below) along with instructions from Minnesota Housing’s website at www.mnhousing.gov. Under Multifamily Rental Partners, click Management, Compliance & Servicing. 

3.11		Report on Internal Control 
Report on Internal Control

In this report, the auditor should, at a minimum:

1.	State that the audit was conducted in accordance with Generally Accepted Accounting Principles (GAAP), which are the auditing standards generally accepted in the United States of America, and the audit was designed to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatements.

2.	Communicate deficiencies, if any, in internal controls that are considered material weaknesses or significant deficiencies.

3.	State specific findings, if any, and recommendations.

3.12		Schedule of Partners
Schedule of Partners
Years Ended December 31, 20xx

General Partners *	20xx	20xx	
XYZ
XYZ	

Limited Partners **			
XYZ
XYZ
Partners with less than 25%	

_____________	

_____________	

Total Owned (should be 100%):	

==========	==========	
							
* All general partners must be listed.
** Limited partners with 25 percent or more ownership equity must be listed individually. Those with less than 25 percent may be combined. 

3.13		Mortgagor Certification
Mortgagor Certification
Year Ended December 31, 20xx

We hereby certify that we have examined the accompanying financial statements, notes and supplemental information of (partnership name), and, to the best of our knowledge and belief, the same is complete and accurate. 

(At least one general partner’s signature is required.)

Signature: ___________________________		Date: _______________________

Name: ______________________________	

Title: ________________________________