Finding 1062029 (2024-002)

Finding 2024-002: Special Tests and Provisions Housing Choice Voucher/Public Housing Material Weakness/Noncompliance Criteria: PHAs are required to enter into depository agreements with their financial institutions in the form required by HUD. The agreements serve as safeguards for federal funds and provide third party rights to HUD. Among the terms in many agreements are requirements for funds to be placed in an interest-bearing account (24 CFR section 982.156). Condition: The General Depository Agreement, Form HUD 51999, requires that Authority funds not insured by a Federal insurance organization be fully and continuously collateralized with specific and identifiable U.S. Government or Agency securities prescribed by HUD in a notice. During our audit, we noted one bank had pledged local government investments which did not meet the terms of the General Depository Agreement. As a result, $269,065.12 of deposits at March 31, 2024 were not properly collateralized. We further noted the Authority did have the depository agreements signed by the bank but the Authority did not sign the agreements. Cause: The Authority did not have procedures in place to monitor that pledges of collateral met the requirements of the General Depository Agreement. Effect or Potential Effect: The Authority was in noncompliance. Recommendation: The Authority should review the General Depository Agreement so that it is aware of the terms and establish procedures to monitor the all Public Housing and Housing Choice Voucher funds are either insured or properly collateralized at all times. Further, the Authority should make have the General Depository Agreements signed by all parties. View of the Responsible Officials of the Auditee: The auditee’s management agrees with the finding.