Finding 2020-001: Inadequate Controls over Financial Reporting (Material Weakness)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Housing Choice Voucher Cluster
Federal Assistance Listing Number: 14.871
Compliance Requirement: Reporting
Criteria: The Commission should maintain appropriate controls over the financial reporting process to
prevent or detect material misstatements.
Condition: The Commission did not have adequate controls over the financial reporting process and, as
a result, material restatement adjustments related to the prior year were required.
Context: The Commission identified prior-period errors in financial reporting during the audit process
for the year ended December 31, 2020. The prior period errors resulted in the restatement of the
opening balances in the financial statements for the year ended December 31, 2020, and therefore,
inaccurate reporting to the financial statement users.
Effect: The Authority recorded adjustments for the corrections of errors related to removal of a loan of
$100,000, the placement in service of two development projects totaling $379,086 and the related
recording of accumulated depreciation of $22,422, and the inclusion of a discretely presented
component unit previously omitted from financial reporting. These adjustments resulted in an increase
to beginning net position of $77,578 and the presentation of the discretely presented component unit's
opening net position of $(340,064).
Cause: The Commission did not have the appropriate controls over the financial reporting process to
prevent or detect material misstatements.
Repeat Finding: This is a repeat of Finding 2019-001.
Questioned Costs: None.
Auditor's Recommendation: The Commission should review and enhance its internal controls, policies
and procedures to ensure that year-end adjustments and reconciliations are performed in a timely and
accurate manner.
Views of Responsible Officials: The Commission will review and enhance our policies and procedures
over year end close, to ensure all adjustments are made timely. In addition, we create policy and
procedures to perform an assessment for component unit determination of any new legally separate
organization that is established.
Finding 2020-002: Collateralization of Deposits (Significant Deficiency)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Housing Choice Voucher Cluster
Federal Assistance Listing Number: 14.871
Compliance Requirement: Activities Allowed and Unallowed
Criteria: The U.S. Department of Housing and Urban Development ("HUD") requires deposits to
either be covered by federal depository insurance or be collateralized with securities held by a thirdparty
custodian in the Commission's name.
Condition: The Commission did not secure its deposits by either covering them with federal depository
insurance or collateralizing them with securities held by a third-party custodian.
Context: The Commission has four financial institutions, any of which may have deposits in excess of
Federal Deposit Insurance Corporation ("FDIC") coverage during a given year, and two of which did
have deposits in excess of FDIC coverage at December 31, 2020.
Effect: The Commission risks violating federal regulations and exposure to credit risk by not
maintaining proper safeguards over federal funds.
Cause: The Commission did not have the internal controls or compliance procedures in place to ensure
deposits are properly collateralized or covered in accordance with HUD.
Repeat Finding: This is not a repeat finding.
Questioned Costs: None.
Auditor's Recommendation: We recommend that the Commission review and enhance its internal
controls, policies and procedures regarding collateralization or coverage of deposits.
Views of Responsible Officials: The Commission will work with the Bank to establish proper
collateralization of our accounts and set up sweeps if needed.
Finding 2020-003: Missing Depository Agreements (Significant Deficiency)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Housing Choice Voucher Cluster
Federal Assistance Listing Number: 14.871
Compliance Requirement: Special Tests and Provisions
Criteria: Per 24 CFR Section 982.156, housing authorities are required to enter into depository
agreements with their financial institutions in the form required by the U.S. Department of Housing
and Urban Development ("HUD").
Condition: The Housing Commission of Talbot (the "Commission") did not set up depository
agreements with its financial institutions.
Context: The Commission has financial institutions that require depository agreements.
Effect: The Commission risks violating federal regulations, not maintaining proper safeguards over
federal funds, and not providing third-party rights to HUD.
Cause: The Commission did not have the internal controls over compliance or compliance procedures
in place to set up a depository agreement with their financial institutions.
Repeat Finding: This is not a repeat finding.
Questioned Costs: None.
Auditor's Recommendation: We recommend that the Commission review and enhance its internal
controls over compliance, policies and procedures regarding depository agreements with its financial
institutions and obtain depository agreements with all of its financial institutions.
Views of Responsible Officials: The Commission has had prior communications with the Bank
regarding the depository agreements requirements. The Bank would not sign due to internal policies.
The Commission will coordinate discussions between our HUD local field office and the Bank to
discuss the requirements for obtaining a depository agreement.
Finding 2020-001: Inadequate Controls over Financial Reporting (Material Weakness)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Housing Choice Voucher Cluster
Federal Assistance Listing Number: 14.871
Compliance Requirement: Reporting
Criteria: The Commission should maintain appropriate controls over the financial reporting process to
prevent or detect material misstatements.
Condition: The Commission did not have adequate controls over the financial reporting process and, as
a result, material restatement adjustments related to the prior year were required.
Context: The Commission identified prior-period errors in financial reporting during the audit process
for the year ended December 31, 2020. The prior period errors resulted in the restatement of the
opening balances in the financial statements for the year ended December 31, 2020, and therefore,
inaccurate reporting to the financial statement users.
Effect: The Authority recorded adjustments for the corrections of errors related to removal of a loan of
$100,000, the placement in service of two development projects totaling $379,086 and the related
recording of accumulated depreciation of $22,422, and the inclusion of a discretely presented
component unit previously omitted from financial reporting. These adjustments resulted in an increase
to beginning net position of $77,578 and the presentation of the discretely presented component unit's
opening net position of $(340,064).
Cause: The Commission did not have the appropriate controls over the financial reporting process to
prevent or detect material misstatements.
Repeat Finding: This is a repeat of Finding 2019-001.
Questioned Costs: None.
Auditor's Recommendation: The Commission should review and enhance its internal controls, policies
and procedures to ensure that year-end adjustments and reconciliations are performed in a timely and
accurate manner.
Views of Responsible Officials: The Commission will review and enhance our policies and procedures
over year end close, to ensure all adjustments are made timely. In addition, we create policy and
procedures to perform an assessment for component unit determination of any new legally separate
organization that is established.
Finding 2020-002: Collateralization of Deposits (Significant Deficiency)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Housing Choice Voucher Cluster
Federal Assistance Listing Number: 14.871
Compliance Requirement: Activities Allowed and Unallowed
Criteria: The U.S. Department of Housing and Urban Development ("HUD") requires deposits to
either be covered by federal depository insurance or be collateralized with securities held by a thirdparty
custodian in the Commission's name.
Condition: The Commission did not secure its deposits by either covering them with federal depository
insurance or collateralizing them with securities held by a third-party custodian.
Context: The Commission has four financial institutions, any of which may have deposits in excess of
Federal Deposit Insurance Corporation ("FDIC") coverage during a given year, and two of which did
have deposits in excess of FDIC coverage at December 31, 2020.
Effect: The Commission risks violating federal regulations and exposure to credit risk by not
maintaining proper safeguards over federal funds.
Cause: The Commission did not have the internal controls or compliance procedures in place to ensure
deposits are properly collateralized or covered in accordance with HUD.
Repeat Finding: This is not a repeat finding.
Questioned Costs: None.
Auditor's Recommendation: We recommend that the Commission review and enhance its internal
controls, policies and procedures regarding collateralization or coverage of deposits.
Views of Responsible Officials: The Commission will work with the Bank to establish proper
collateralization of our accounts and set up sweeps if needed.
Finding 2020-003: Missing Depository Agreements (Significant Deficiency)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Housing Choice Voucher Cluster
Federal Assistance Listing Number: 14.871
Compliance Requirement: Special Tests and Provisions
Criteria: Per 24 CFR Section 982.156, housing authorities are required to enter into depository
agreements with their financial institutions in the form required by the U.S. Department of Housing
and Urban Development ("HUD").
Condition: The Housing Commission of Talbot (the "Commission") did not set up depository
agreements with its financial institutions.
Context: The Commission has financial institutions that require depository agreements.
Effect: The Commission risks violating federal regulations, not maintaining proper safeguards over
federal funds, and not providing third-party rights to HUD.
Cause: The Commission did not have the internal controls over compliance or compliance procedures
in place to set up a depository agreement with their financial institutions.
Repeat Finding: This is not a repeat finding.
Questioned Costs: None.
Auditor's Recommendation: We recommend that the Commission review and enhance its internal
controls over compliance, policies and procedures regarding depository agreements with its financial
institutions and obtain depository agreements with all of its financial institutions.
Views of Responsible Officials: The Commission has had prior communications with the Bank
regarding the depository agreements requirements. The Bank would not sign due to internal policies.
The Commission will coordinate discussions between our HUD local field office and the Bank to
discuss the requirements for obtaining a depository agreement.
Finding 2020-001: Inadequate Controls over Financial Reporting (Material Weakness)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Housing Choice Voucher Cluster
Federal Assistance Listing Number: 14.871
Compliance Requirement: Reporting
Criteria: The Commission should maintain appropriate controls over the financial reporting process to
prevent or detect material misstatements.
Condition: The Commission did not have adequate controls over the financial reporting process and, as
a result, material restatement adjustments related to the prior year were required.
Context: The Commission identified prior-period errors in financial reporting during the audit process
for the year ended December 31, 2020. The prior period errors resulted in the restatement of the
opening balances in the financial statements for the year ended December 31, 2020, and therefore,
inaccurate reporting to the financial statement users.
Effect: The Authority recorded adjustments for the corrections of errors related to removal of a loan of
$100,000, the placement in service of two development projects totaling $379,086 and the related
recording of accumulated depreciation of $22,422, and the inclusion of a discretely presented
component unit previously omitted from financial reporting. These adjustments resulted in an increase
to beginning net position of $77,578 and the presentation of the discretely presented component unit's
opening net position of $(340,064).
Cause: The Commission did not have the appropriate controls over the financial reporting process to
prevent or detect material misstatements.
Repeat Finding: This is a repeat of Finding 2019-001.
Questioned Costs: None.
Auditor's Recommendation: The Commission should review and enhance its internal controls, policies
and procedures to ensure that year-end adjustments and reconciliations are performed in a timely and
accurate manner.
Views of Responsible Officials: The Commission will review and enhance our policies and procedures
over year end close, to ensure all adjustments are made timely. In addition, we create policy and
procedures to perform an assessment for component unit determination of any new legally separate
organization that is established.
Finding 2020-002: Collateralization of Deposits (Significant Deficiency)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Housing Choice Voucher Cluster
Federal Assistance Listing Number: 14.871
Compliance Requirement: Activities Allowed and Unallowed
Criteria: The U.S. Department of Housing and Urban Development ("HUD") requires deposits to
either be covered by federal depository insurance or be collateralized with securities held by a thirdparty
custodian in the Commission's name.
Condition: The Commission did not secure its deposits by either covering them with federal depository
insurance or collateralizing them with securities held by a third-party custodian.
Context: The Commission has four financial institutions, any of which may have deposits in excess of
Federal Deposit Insurance Corporation ("FDIC") coverage during a given year, and two of which did
have deposits in excess of FDIC coverage at December 31, 2020.
Effect: The Commission risks violating federal regulations and exposure to credit risk by not
maintaining proper safeguards over federal funds.
Cause: The Commission did not have the internal controls or compliance procedures in place to ensure
deposits are properly collateralized or covered in accordance with HUD.
Repeat Finding: This is not a repeat finding.
Questioned Costs: None.
Auditor's Recommendation: We recommend that the Commission review and enhance its internal
controls, policies and procedures regarding collateralization or coverage of deposits.
Views of Responsible Officials: The Commission will work with the Bank to establish proper
collateralization of our accounts and set up sweeps if needed.
Finding 2020-003: Missing Depository Agreements (Significant Deficiency)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Housing Choice Voucher Cluster
Federal Assistance Listing Number: 14.871
Compliance Requirement: Special Tests and Provisions
Criteria: Per 24 CFR Section 982.156, housing authorities are required to enter into depository
agreements with their financial institutions in the form required by the U.S. Department of Housing
and Urban Development ("HUD").
Condition: The Housing Commission of Talbot (the "Commission") did not set up depository
agreements with its financial institutions.
Context: The Commission has financial institutions that require depository agreements.
Effect: The Commission risks violating federal regulations, not maintaining proper safeguards over
federal funds, and not providing third-party rights to HUD.
Cause: The Commission did not have the internal controls over compliance or compliance procedures
in place to set up a depository agreement with their financial institutions.
Repeat Finding: This is not a repeat finding.
Questioned Costs: None.
Auditor's Recommendation: We recommend that the Commission review and enhance its internal
controls over compliance, policies and procedures regarding depository agreements with its financial
institutions and obtain depository agreements with all of its financial institutions.
Views of Responsible Officials: The Commission has had prior communications with the Bank
regarding the depository agreements requirements. The Bank would not sign due to internal policies.
The Commission will coordinate discussions between our HUD local field office and the Bank to
discuss the requirements for obtaining a depository agreement.
Finding 2020-001: Inadequate Controls over Financial Reporting (Material Weakness)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Housing Choice Voucher Cluster
Federal Assistance Listing Number: 14.871
Compliance Requirement: Reporting
Criteria: The Commission should maintain appropriate controls over the financial reporting process to
prevent or detect material misstatements.
Condition: The Commission did not have adequate controls over the financial reporting process and, as
a result, material restatement adjustments related to the prior year were required.
Context: The Commission identified prior-period errors in financial reporting during the audit process
for the year ended December 31, 2020. The prior period errors resulted in the restatement of the
opening balances in the financial statements for the year ended December 31, 2020, and therefore,
inaccurate reporting to the financial statement users.
Effect: The Authority recorded adjustments for the corrections of errors related to removal of a loan of
$100,000, the placement in service of two development projects totaling $379,086 and the related
recording of accumulated depreciation of $22,422, and the inclusion of a discretely presented
component unit previously omitted from financial reporting. These adjustments resulted in an increase
to beginning net position of $77,578 and the presentation of the discretely presented component unit's
opening net position of $(340,064).
Cause: The Commission did not have the appropriate controls over the financial reporting process to
prevent or detect material misstatements.
Repeat Finding: This is a repeat of Finding 2019-001.
Questioned Costs: None.
Auditor's Recommendation: The Commission should review and enhance its internal controls, policies
and procedures to ensure that year-end adjustments and reconciliations are performed in a timely and
accurate manner.
Views of Responsible Officials: The Commission will review and enhance our policies and procedures
over year end close, to ensure all adjustments are made timely. In addition, we create policy and
procedures to perform an assessment for component unit determination of any new legally separate
organization that is established.
Finding 2020-002: Collateralization of Deposits (Significant Deficiency)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Housing Choice Voucher Cluster
Federal Assistance Listing Number: 14.871
Compliance Requirement: Activities Allowed and Unallowed
Criteria: The U.S. Department of Housing and Urban Development ("HUD") requires deposits to
either be covered by federal depository insurance or be collateralized with securities held by a thirdparty
custodian in the Commission's name.
Condition: The Commission did not secure its deposits by either covering them with federal depository
insurance or collateralizing them with securities held by a third-party custodian.
Context: The Commission has four financial institutions, any of which may have deposits in excess of
Federal Deposit Insurance Corporation ("FDIC") coverage during a given year, and two of which did
have deposits in excess of FDIC coverage at December 31, 2020.
Effect: The Commission risks violating federal regulations and exposure to credit risk by not
maintaining proper safeguards over federal funds.
Cause: The Commission did not have the internal controls or compliance procedures in place to ensure
deposits are properly collateralized or covered in accordance with HUD.
Repeat Finding: This is not a repeat finding.
Questioned Costs: None.
Auditor's Recommendation: We recommend that the Commission review and enhance its internal
controls, policies and procedures regarding collateralization or coverage of deposits.
Views of Responsible Officials: The Commission will work with the Bank to establish proper
collateralization of our accounts and set up sweeps if needed.
Finding 2020-003: Missing Depository Agreements (Significant Deficiency)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Housing Choice Voucher Cluster
Federal Assistance Listing Number: 14.871
Compliance Requirement: Special Tests and Provisions
Criteria: Per 24 CFR Section 982.156, housing authorities are required to enter into depository
agreements with their financial institutions in the form required by the U.S. Department of Housing
and Urban Development ("HUD").
Condition: The Housing Commission of Talbot (the "Commission") did not set up depository
agreements with its financial institutions.
Context: The Commission has financial institutions that require depository agreements.
Effect: The Commission risks violating federal regulations, not maintaining proper safeguards over
federal funds, and not providing third-party rights to HUD.
Cause: The Commission did not have the internal controls over compliance or compliance procedures
in place to set up a depository agreement with their financial institutions.
Repeat Finding: This is not a repeat finding.
Questioned Costs: None.
Auditor's Recommendation: We recommend that the Commission review and enhance its internal
controls over compliance, policies and procedures regarding depository agreements with its financial
institutions and obtain depository agreements with all of its financial institutions.
Views of Responsible Officials: The Commission has had prior communications with the Bank
regarding the depository agreements requirements. The Bank would not sign due to internal policies.
The Commission will coordinate discussions between our HUD local field office and the Bank to
discuss the requirements for obtaining a depository agreement.