Finding Text
Identifying Number: 2023-001
Information on the Federal Program: ALN#14.129, U.S. Department of Housing and Urban Development: Mortgage Insurance – Nursing Homes, Intermediate Care Facilities, Board and Care Homes and Assisted Living Facilities.
Criteria or Specific Requirement: The regulatory agreement (form HUD 92466-E) specifies in Paragraph 4(c): “Mortgagor shall not without the prior written approval of the Secretary [of HUD]: remodel, reconstruct or demolish any part of the mortgaged property or subtract from any real or personal property of the project.”
Condition:The Organization received approval from HUD to begin the construction of a dining room and physical therapy addition to the mortgaged property. This approval was contingent on the Organization meeting certain conditions set forth by HUD. One such condition was that the total cost of the project be funded by a contribution from Community Living Options, Inc. (CLO), and that this contribution would not be paid back to CLO. The Organization has recorded a payable owed to CLO and therefore did not meet the terms of the HUD approval.
Cause: The Organization did not follow the conditions of the HUD approval prior to starting the construction project of the addition to the mortgaged property.
Effect: Noncompliance with the HUD compliance requirements per the regulatory agreement.
Questioned Costs: Not Applicable
Context: The construction project population was tested 100%, and therefore was statistically valid. This instance is isolated to this one construction project.
Repeat finding: This finding is a repeat finding (2022-001, 2021-001, 2020-001, 2019-001, 2018 001, 2017-001, 2016-001, 2015-001, 2014-001 and 2013-1).
Recommendation: Procedures should be implemented and placed in service to ensure HUD approval, for which all conditions can be met, is obtained before any construction is started on the mortgaged property. The Organization should also obtain approval after-the-fact for the specific construction project noted above.
Views of Responsible Officials: Management disagrees with finding 2023-001.