Finding 1094017 (2024-002)

Finding 2024-002 – Special Tests and Provisions: Criteria In accordance with chapter 2.14 of HUD Handbook 4381.5, each project must have fidelity bond or employee dishonesty coverage for at least the value of two months’ gross potential income for the project. If the bond covers more than one project, this minimum must be computed using the project with the highest gross potential income. Condition For the year ended June 30, 2024, the project’s fidelity bond coverage was underfunded in the amount of $56,000. On August 16, 2024, management agent made policy changes to increase fidelity bond/employee dishonesty coverage to meet the minimum coverage requirements prescribed by HUD. Effect For the year ended June 30, 2024, the project’s fidelity bond coverage was insufficient. Cause The project’s fidelity bond coverage was underfunded by $56,000. Questioned Costs $56,000. Context The project’s fidelity bond coverage was not in compliance with HUD rules and regulations. Repeat Finding No. Recommendation Management should ensure fidelity bond coverage for the project meets the minimum requirements prescribed by HUD. Auditor Noncompliance Code Z – Other; Special Tests and Provisions –Management Functions. Finding Resolution Status Resolved. Reporting Views of Responsible Officials. Management will ensure that fidelity bond coverage is in accordance with HUD rules and regulations.