Finding Text
Audit Finding 2025-002 – Insufficient Collateral Criteria: A good system of internal control contemplates an adequate system for monitoring the requirements of pledged collateral. Condition: The HUD Financial Management Handbook requires that any portion of Housing Authority 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 Authority had insufficient pledged collateral as of December 31, 2025. The Authority’s deposits were under collateralized by approximately $1,408,814 at December 31, 2025. Cause: The Authority does not have an internal control system designed to properly monitor the requirements of pledged collateral. Effect: At year-end, the Authority did not have sufficient collateral pledged and was not in compliance with HUD regulations. Additionally, non-compliance increases the custodial risk of the Authority. Recommendation: We recommend the Authority monitor all deposits to determine if there is adequate collateral pledged to secure deposits in accordance with HUD regulations. View of Responsible Officials: The management of the Authority is in agreement with the finding.