Finding 1055605 (2023-001)

Finding 2023-001, Collateralization of Deposits Public Housing Program, Assistance Listing #14.850 Material Weakness/Noncompliance Criteria – As required by HUD Cash Management Policies PIH Notice 96-33, the Authority is required to have the financial institution continuously and fully secure all deposits whether regular, savings, or time that are in excess of the $250,000 FDIC insured amount. In addition, as required by Minn. Stat. Section 118A.03, the Authority must obtain a bond or collateral which, when computed at its market value, shall be at least 10 percent more than the amount of the excess deposit at the close of the banking day. Condition - During our audit we noted Authority had bank deposits in the amount of $134,801 which were not insured or collateralized according to HUD requirements and $220,173 was uncollateralized according to State Statute as of December 31, 2023. Cause – The Authority’s internal controls over the monitoring of deposits that exceed the FDIC threshold were not adequate. Effect or Potential Effect: The Authority was in noncompliance with HUD regulations and State Statute. Recommendation - We recommend the Authority review its collateral needs on a quarterly basis to determine that pledging requirements are adequate to ensure compliance with HUD requirements and State Statute. View of Responsible Official: Management agrees with the Finding.