Finding Text
required by HUD. The agreements serve as safeguards for federal funds and provide third-party rights to HUD. That agreement states: Any portion of HA 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 HA shall have possession of the securities (or the HA will take possession of the securities) or an independent custodian (or an independent third party) holds the securities on behalf of the HA as a bailee (evidenced by safe keeping receipt and a written bailment for hire contract) and will be maintained for the full term of deposit. Condition: The Agency did have the required depositor agreement with the bank that has both Housing Choice Voucher and Public Housing funds, however, the Agency was not monitoring to ensure that bank was pledging collateral for the deposits that exceeded the FDIC insurance. As a result, the bank had not collateralized the deposits with specific securities. However, the uninsured balance of $350,291.83 was collateralized with securities held by the pledging financial institution. Cause: The Agency did not have procedures in place to monitor that its deposits were continuously insured or collateralized. Effect or Potential Effect: The Agency was in noncompliance with HUD?s requirement to have proper depository agreements and to ensure any portion of Agency funds not insured by a Federal insurance organization are fully (100%) and continuously collateralized with specific and identifiable U.S. Government or Agency securities prescribed by HUD in a notice. LOW RENT HOUSING AGENCY OF KNOXVILLE, IOWA SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONT?D) March 31, 2022 Recommendation: The Agency should contact its financial institutions and review the depository agreement and follow the terms which includes proper collateralization. The Agency should monitor to ensure the securities pledged are adequate to cover the Agency?s deposits at the bank. View of the Responsible Officials of the Auditee: The auditee?s management agrees with the finding.