Finding Text
Program: U.S. Department of Housing and Urban Development (HUD) Mortgage Insurance - Nursing Homes, Intermediate Care Facilities, Board and Care Homes, and Assisted Living Facilities (Section 232) Assistance Listing #14.129. Condition: During 2024, the Home received an additional related-party loan without obtaining prior HUD approval. Criteria: The HUD regulatory agreement states the borrower shall not enter into any contract, agreement or arrangement to borrow funds or finance any purchase or incur any liability, direct or contingent, other than in accordance the loan documents without prior written approval of HUD. Context: During testing of debt, it was noted that the Home entered into a loan agreement with a related party. Cause: The Home continued to experience decreased occupancy, increased labor, benefits, and supply expenditures as a lingering impact of the COVID-19 pandemic. It utilized the loan as a means to cover operating expenses. Effect: Failure to obtain written approval from HUD constitutes noncompliance with the HUD regulatory agreement. Gross amount loaned from the related party amounted to $250,000 during 2024. Recommendation: Adhere to the HUD regulatory agreement in relation to obtaining prior written approval from HUD before encumbering the Project. Views of Responsible Official of the Auditee: The Home obtained the related party loan as a prudent business decision to meet operating expenses.