Finding Text
2022-002 – Insufficient Collateral
Criteria: A good system of internal control contemplates an adequate system for monitoring the requirements of
pledged collateral
Condition: The Rural Development Audit Guide 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 Rural Development 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 no pledged collateral as of December 31, 2022. The
Authority’s deposits were under collateralized by approximately $215,340 at December 31, 2022.
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 RD
regulations. Additionally, non-compliance increases the custodial risk of the Authority.
Recommendation: We recommend the Authority monitor all deposits to determine there is adequate collateral
pledged to secure deposits in accordance with RD regulations.
View of Responsible Officials: The management of the Authority is in agreement with the finding.