Audit 782

Finding 2023-001: HUD Depository Agreements Housing Choice Voucher Cluster, 14.871 and 14.879 Material Weakness/Noncompliance – Special Tests and Provisions Criteria: The Agency is required to enter into depository agreements with its financial institutions in the form required by HUD. The agreements serve as safeguards for federal funds and provide third-party rights to HUD. That agreement states: Any portion of HA Funds not insured by a Federal insurance organization shall be fully (100%) and continuously collateralized with specific and identifiable U.S. Government or Agency securities prescribed by HUD in a notice. Collateralization is required on a daily basis at the end of the business day. Such securities shall be pledged and set aside in accordance with applicable law or Federal regulations. The HA shall have possession of the securities (or the HA will take possession of the securities) or an independent custodian (or an independent third party) holds the securities on behalf of the HA as a bailee (evidenced by safe keeping receipt and a written bailment for hire contract) and will be maintained for the full term of deposit. Condition: The Agency did have the required depository agreements with its banks but was not monitoring the type of collateral pledged by the bank for the deposits that exceeded the FDIC insurance. As a result, the bank did not pledge collateral that meets the requirements within the depository agreement. The bank does participate in the Single Bank Pooled Collateral Program administered by the Nebraska Banker’s Association for which HUD has determined does not meet the requirements of the depository agreement. Cause: The Agency was not aware the Single Bank Pooled Collateral Program did not meet the requirements of the HUD Depository Agreement. Effect or Potential Effect: The Agency was in noncompliance with HUD’s requirement to have proper depository agreements. Recommendation: The Agency should contact its financial institutions and review the depository agreement and follow the terms which includes proper collateralization. The Agency should monitor to ensure the securities pledged are adequate to cover the Agency’s deposits at the bank. View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding.

Finding 2023-002: Tenant File Internal Controls Housing Choice Voucher Cluster, 14.871 and 14.879 Material Weakness – Eligibility Criteria: The Agency is required to establish effective controls to ensure the Agency complies with the applicable federal requirements governing eligibility. Condition: The Agency’s internal control documentation dictates a supervisor perform monthly internal audits of the tenant files to ensure compliance with eligibility and this review should be documented with a checklist within the tenant file and a log of the reviews be maintained. During our audit, we noted the Agency only did the supervisory reviews in the last month of the fiscal year and was not doing them monthly as in accordance with the Agency’s Standard Operating Procedures. Further, the Agency had a new staff that was responsible for calculation tenant eligibility that did not have documented supervisory reviews for his first five months of employment. Cause: The Agency’s staff indicated they were behind on reviews. Effect or Potential Effect: The Agency did not have effective controls over tenant eligibility. Recommendation: The Agency follow its internal control procedures it has established. The log should be completed by the supervisor monthly and the Executive Director should monitor to ensure its being done. View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding.

Finding 2023-001: HUD Depository Agreements Housing Choice Voucher Cluster, 14.871 and 14.879 Material Weakness/Noncompliance – Special Tests and Provisions Criteria: The Agency is required to enter into depository agreements with its financial institutions in the form required by HUD. The agreements serve as safeguards for federal funds and provide third-party rights to HUD. That agreement states: Any portion of HA Funds not insured by a Federal insurance organization shall be fully (100%) and continuously collateralized with specific and identifiable U.S. Government or Agency securities prescribed by HUD in a notice. Collateralization is required on a daily basis at the end of the business day. Such securities shall be pledged and set aside in accordance with applicable law or Federal regulations. The HA shall have possession of the securities (or the HA will take possession of the securities) or an independent custodian (or an independent third party) holds the securities on behalf of the HA as a bailee (evidenced by safe keeping receipt and a written bailment for hire contract) and will be maintained for the full term of deposit. Condition: The Agency did have the required depository agreements with its banks but was not monitoring the type of collateral pledged by the bank for the deposits that exceeded the FDIC insurance. As a result, the bank did not pledge collateral that meets the requirements within the depository agreement. The bank does participate in the Single Bank Pooled Collateral Program administered by the Nebraska Banker’s Association for which HUD has determined does not meet the requirements of the depository agreement. Cause: The Agency was not aware the Single Bank Pooled Collateral Program did not meet the requirements of the HUD Depository Agreement. Effect or Potential Effect: The Agency was in noncompliance with HUD’s requirement to have proper depository agreements. Recommendation: The Agency should contact its financial institutions and review the depository agreement and follow the terms which includes proper collateralization. The Agency should monitor to ensure the securities pledged are adequate to cover the Agency’s deposits at the bank. View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding.

Finding 2023-002: Tenant File Internal Controls Housing Choice Voucher Cluster, 14.871 and 14.879 Material Weakness – Eligibility Criteria: The Agency is required to establish effective controls to ensure the Agency complies with the applicable federal requirements governing eligibility. Condition: The Agency’s internal control documentation dictates a supervisor perform monthly internal audits of the tenant files to ensure compliance with eligibility and this review should be documented with a checklist within the tenant file and a log of the reviews be maintained. During our audit, we noted the Agency only did the supervisory reviews in the last month of the fiscal year and was not doing them monthly as in accordance with the Agency’s Standard Operating Procedures. Further, the Agency had a new staff that was responsible for calculation tenant eligibility that did not have documented supervisory reviews for his first five months of employment. Cause: The Agency’s staff indicated they were behind on reviews. Effect or Potential Effect: The Agency did not have effective controls over tenant eligibility. Recommendation: The Agency follow its internal control procedures it has established. The log should be completed by the supervisor monthly and the Executive Director should monitor to ensure its being done. View of the Responsible Officials of the Auditee: The auditee's management agrees with the finding.