Question

The Town of Littleton's Housing Authority provides loans to low-income families within the Town. It is governed by a Board appointed by the Town of Littleton's Manager, and its debt is guaranteed by the Town. In what manner should the Housing Authority be reported?

A. As a separate legal entity.
B. As a component unit.
C. As a fiduciary fund.
D. As part of the Town's financial results.

Answer 1

The Housing Authority of Littleton should be reported as a component unit.

Step-by-step explanation:

The Housing Authority of Littleton should be reported as a component unit.

A component unit is a legally separate entity that is affiliated with a primary government but is not part of the primary government's reporting entity. The Housing Authority has a separate governing board appointed by the Town Manager and its debt is guaranteed by the Town, which indicates the level of control the Town has over the Authority. Therefore, it meets the criteria for being reported as a component unit.