Finding Text
2024 – 013 - Depository Agreement Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Housing Voucher Cluster and Public Housing Operating Fund Assistance Listing Number: 14.871;14.879 and 14.850 Federal Award Identification Number and Year: FL007, 2024 Award Period: July 1, 2023 to June 30, 2024 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: Public Housing Agencies (PHAs) are required to deposit and hold all program funds in accordance with HUD requirements. Under 24 CFR section 982.156 (Housing Choice Voucher Program) and 24 CFR section 990.200 and the Annual Contributions Contract (ACC) for the Low Rent Public Housing Program, the PHA must enter into a General Depository Agreement (HUD-51999) with each financial institution holding HCV and Public Housing program funds. The depository agreement must be executed in the form prescribed by HUD and must require the financial institution to pledge collateral for any program funds on deposit in excess of the amount insured by the Federal Deposit Insurance Corporation (FDIC), in accordance with 24 CFR sections 982.156(b) and the ACC. 2024 – 013 - Depository Agreement Criteria or specific requirement: In addition, 2 CFR sections 200.302 and 200.303 require the PHA to maintain effective financial management systems and internal controls to safeguard federal funds and ensure that cash is properly managed in accordance with federal requirements. The PHA must maintain complete and accurate accounts and records for all program transactions in accordance with 24 CFR section 982.158(a). Condition: During the testing of special tests for the Housing Choice Voucher Program and the Low Rent Public Housing Program, we requested executed General Depository Agreements (HUD-51999) for each financial institution holding federal program funds. The Authority was unable to provide an executed General Depository Agreement for the HCVP or Public Housing program funds on deposit. As a result, federal program funds are being held at financial institutions without the HUD-required depository agreement and without evidence that collateral has been pledged for amounts on deposit in excess of FDIC insurance limits. Questioned costs: N/A Context: The Authority did not have an executed General Depository Agreement (HUD-51999) on file for any of the financial institutions holding HCVP or Public Housing program funds during the audit period. Cause: The Authority does not have adequate internal controls designed to ensure that a HUD-required General Depository Agreement is executed and maintained for each financial institution holding federal program funds, and that collateral is pledged for amounts in excess of FDIC insurance limits. Effect: The Authority is not in compliance with federal regulations regarding special tests and the safeguarding of federal program funds. Without an executed General Depository Agreement, federal funds on deposit in excess of FDIC insurance limits are not protected by pledged collateral, exposing the HCVP and Public Housing programs to potential loss. Repeat Finding: N/A Recommendation: We recommend that the Authority designate an individual to obtain and execute a General Depository Agreement (HUD-51999) with each financial institution holding HCVP and Public Housing program funds, ensure that collateral is pledged for amounts on deposit in excess of FDIC insurance limits, and maintain the executed agreements in a centralized file for ongoing monitoring. Views of responsible officials: There is no disagreement with the audit finding.