Finding Text
Federal agency: U.S. Department of Housing and Urban Development
Federal program title: Mortgage Insurance Nursing Homes, Intermediate Care Facilities, Board and Care Homes, and Assisted Living Facilities
Assistance Listing Number: 14.129
Type of Finding: Significant Deficiency in Internal Control over Compliance
Criteria or specific requirement: Per the HUD loan agreement and HUD handbook, HUD requires fidelity bond (crime/dishonesty) insurance coverage equal to at least two (2) months effective gross income.
Condition: During our audit of the Foundation for the period ending April 30, 2025, we noted that the Foundation did not maintain fidelity bond insurance coverage in accordance with the requirements outlined by HUD.
Questioned Costs: None
Context: Prior to affiliating with Silverstone Living, the Foundation had a separate endorsement included in their Property Coverage policy that included increased crime coverage to comply with HUD requirements.
Cause: Due to the affiliation with Silverstone Living, the Foundation is now covered under Silverstone Living’s insurance policies. The increased crime coverage did not get added into the Silverstone Living policies to keep the Foundation in compliance.
Effect: Failure to maintain adequate insurance coverage can lead to noncompliance with HUD regulations and increased financial risk in the event of employee crime or theft.
Recommendation: We recommend that management ensure fidelity bond insurance coverage is reviewed annually and adjusted as necessary to meet HUD requirements.
Views of responsible officials: The Foundation is actively working with its insurance provider to increase coverage to the required level. The revised policy is expected to be in place by July 31, 2025.