Finding Text
2022-014 Collateralization of Advanced Federal Dollars This is a repeat finding. The prior-year’s auditing finding number is 2021-014. Condition: As of March 31, 2022, the federal grant advance dollars held by the St. Croix Chippewa Housing Authority, recorded as unearned revenue, was $1,537,125. Bank deposits for the Housing Authority totaled $306,414 of which $250,000 was FDIC/SPIC insured. Estimated uninsured/uncollateralized dollars, as of March 31, 2022, totaled $56,414. Criteria or specific requirement: The OMB Compliance Supplement cites 25 USC 450e-3 which requires that advanced federal funding be collateralized by / invested in obligations of the United States or in obligations or securities that are guaranteed or insured by the United States, or mutual (or other) funds registered with the Securities and Exchange Commission and which only invest in obligations of the United States or securities that are guaranteed or insured by the United States. Cause: No collateralization agreement was in place to handle the increase in federal advance funding. Effect: There is an increased potential for loss of deposited funds in the event of a bank failure and noncompliance with federal requirements as outlined above. Recommendation: Establish a collateralization agreement with the bank that sufficiently covers bank deposits which exceed the FDIC insurance limits. Views of Responsible Officials: See Corrective Action Plan.