We have a new client which is a PHA for a City.  The PHA is a component unit of the city and their financial statements are included in with the audit of the City, which we have audited for a few years.  The PHA has indicated to us that the prior auditor had not correctly presented the financials in the past and performed a GAGAS/KMAAG audit without the yellow book reports.  The funding received is well below the single audit threshold.  We have done some research and for a PHA, it appears an audit may not be necessary, that there is some alternative reporting, one option would be AUP.  We are trying to determine the correct approach here before sending them an engagement letter.  What is your opinion of what the right approach would be here, especially considering what would be necessary as far as compliance testing for HUD and REAC submission requirements.  The PHA receives rent subsidies and also capital fund grants – the total of both of these are around $300,000, so very small.  We have found some guidance, but not much – if you can point us in the right direction for guidance that would help as well – this is just a unique situation. I’ve attached some of the grant docs.

Thank you for your help!!