The Case of the Acme County Housing Authority, United Kingdom

Due date: Friday of Week 6, by 10pm
Word count or equivalent: na
Proportion of total marks: 20 %

Details

Carefully read the following case, adapted from Jan van Helden and Ron Hodges (2015), Public Sector Accounting & Budgeting for Non-Specialists, London: Palgrave. Then submit the complete balance sheet, income statement, and cash flow statement to FLO.

The Case of the Acme County Housing Authority, United Kingdom

The Acme County Housing Authority manages the rent collection and maintenance of three publicly owned housing estates (areas A, B, and C). The Authority owns the properties on the estates and these are mainly financed by long-term debt. It has two main income streams. First, it charges rent to its tenants. Second, it receives payments from the government (housing benefits) that are essentially a rent subsidy awarded from the government to the tenants but paid directly by the government to the Acme County Housing Authority. The Authority is liable to pay a wide range of costs for each tenant (electricity, water, gas, heat, rubbish collection, etc…), but these costs are entirely recovered from the tenants. These costs are referred to as “service charges” in the Authority’s documents.

The housing estates were all built in 2010. They cost $150 million and are expected to be utilised for 50 years. An additional $10 million was spent in internal fittings, which are expected to last for 10 years. Finally, $3 million was spent in machinery (e.g. tools, vehicles, etc…), and they are expected to last 10 years. For simplicity, we will assume that all of these items (i.e., housing estate, internal fittings, and machinery) are kept in pristine conditions at all times and that their market value remains constant indefinitely (i.e., there will be no depreciation).

All financial information related to the Acme County Housing Authority is summarised below. With this information, you should be able to compile, for the current year, the Acme County Housing Authority’s:

• balance sheet
• income statement
• cash flow statement

In doing so, you must choose how to classify income and cost. There are two ways to do so (the third way, “programme-type classification” may be too hard to apply to a single-programme agency such as this one):

1. Classify income and cost according to their type (e.g., rent, housing benefit, staff cost, etc…)
2. Classify income and cost according to their source (e.g., area A, area B, area C, etc…)

Available financial information of the Acme County Housing Authority:

1. a) Assets at the beginning of the year:

• $______ in housing properties
• $______ in house property internal fittings
• $______ in machinery
• $0.3 million in rent due from tenants from previous year
• $0.2 million in cash in the agency’s bank account

1. b) Liabilities at the beginning of the year:

• $80 million in long-term debt
• $1 million owed to sub-contractors

1. c) Income received during the year:

• $1.2 million in rent from area A
• $2.4 million in rent from area B
• $3 million in rent from area C
• $0.8 million in housing benefits from area A
• $1.6 million in housing benefits from area B
• $2 million in housing benefits from area C
• $0.6 million in service charges from area A
• $1 million in service charges from area B
• $1.5 million in service charges from area C

1. d) Money still owed by tenants at the end of the year:

• $0.2 million from area A
• $0.1 million from area B
• $0.2 million from area C

1. e) Costs paid during the year:

• $0.4 million in staff costs for area A
• $0.8 million in staff costs for area B
• $1.3 million in staff costs for area C
• $1.5 million in sub-contracting costs for area A
• $0.9 million in sub-contracting costs for area B
• $1.4 million in sub-contracting costs for area C
• $0.3 million in sub-contracting costs to repair common parking area
• $0.6 million in service costs for area A
• $1.1 million in service costs for area B
• $1.7 million in service costs for area C
• $5.8 million in general head office costs
• $0.7 million in interest for the long-term debt
• $2.5 million in mandatory repayment of long-term debt

1. f) Money still owed by the Authority at the end of the year:

• $0.1 million in staff costs for area A
• $0.3 million in staff costs for area B
• $0.2 million in staff costs for area C
• $1.3 million in sub-contracting costs for area A
• $0.1 million in sub-contracting costs for area B
• $0.4 million in sub-contracting costs for area C

To be successful in this assignment you will need to have demonstrated that you have:

• A sound understanding of the three main financial documents (i.e., the balance sheet, the income statement, and the cash flow statement), including what type of information they should contain and how they should be organised
• Critically approached the idea of income in the public sector and cost in the public sector, including the possible different ways to classify income and cost
• The ability to organise a large amount of financial information, once provided some context about the organisation at hand

In Assignment 1C, you are asked to generate the three accounts for Acme County Housing Authority

1. Balance Sheet
2. Income Statement
3. Cash Flow Statement

It says “you must choose how to classify income and cost”

• It would be useful to explain briefly which method you use and why

Very important. It’s a very good idea to show your workings. That is, do not simply write your answer for each item, but show the components. The reason for this is that if I can see you have used the right components, but make a mistake in adding up or writing the answer, I can still give you some marks.

If you have zero Reference List, you are saying you did not study anything for the assignment.  That would not look good in a university (ie make sure you have a Reference Lis