Finding Text
Criteria: The owner or management agent must obtain a fidelity bond in accordance with HUD Handbook 4381.5 The Management Agent Handbook Section 2. Procedures For HUD Approval of Management Agent 2.14 Bonding Requirement for Agents. The owner or the management agent must be insured for at least the value of two months’ gross potential income for the project.
Condition: During the testing of fidelity bond insurance coverage, we noted that the Project could not provide support for fidelity bond coverage for at least the value of two months’ gross potential income for the Project.
Cause: Due to staff turnover, the fidelity bond coverage for the proper coverage of two months’ gross potential income could not be located.
Effect: The test to determine whether the owner has obtained a fidelity bond in accordance with Chapter 2.14 of HUD Handbook 4381.5 could not be performed.
Recommendation: We recommend that the Project contact its fidelity bond company to determine if the Project has coverage for two months’ gross potential income during the audit period.
Views of Responsible Officials and Corrective Action Plan: No disagreements with the audit finding.