Finding Text
Finding 2020-002: Collateralization of Deposits (Significant Deficiency)
Federal Agency: U.S. Department of Housing and Urban Development
Federal Program Title: Housing Choice Voucher Cluster
Federal Assistance Listing Number: 14.871
Compliance Requirement: Activities Allowed and Unallowed
Criteria: The U.S. Department of Housing and Urban Development ("HUD") requires deposits to
either be covered by federal depository insurance or be collateralized with securities held by a thirdparty
custodian in the Commission's name.
Condition: The Commission did not secure its deposits by either covering them with federal depository
insurance or collateralizing them with securities held by a third-party custodian.
Context: The Commission has four financial institutions, any of which may have deposits in excess of
Federal Deposit Insurance Corporation ("FDIC") coverage during a given year, and two of which did
have deposits in excess of FDIC coverage at December 31, 2020.
Effect: The Commission risks violating federal regulations and exposure to credit risk by not
maintaining proper safeguards over federal funds.
Cause: The Commission did not have the internal controls or compliance procedures in place to ensure
deposits are properly collateralized or covered in accordance with HUD.
Repeat Finding: This is not a repeat finding.
Questioned Costs: None.
Auditor's Recommendation: We recommend that the Commission review and enhance its internal
controls, policies and procedures regarding collateralization or coverage of deposits.
Views of Responsible Officials: The Commission will work with the Bank to establish proper
collateralization of our accounts and set up sweeps if needed.