Finding 504118 (2024-001)

Federal Agency - U.S. Department of Housing and Urban Development Office of Housing - Federal Housing Commissioner Assistance Listing Number 14.129 - Mortgage Insurance - Nursing Homes, Intermediate Care Facilities, Board and Care Homes and Assisted Living Facilities (Section 232) Material Weakness and noncompliance Category of Finding - Unauthorized management fees Criteria - The HUD Regulatory Agreement requires HUD approval for any changes in the management agent of the Project and/or management fees charged to the Project. Condition - The Project signed a new management agreement effective July 1, 2022. The agreement is with a new management company that is wholly owned by the previous management company, and also increases the management fees charged to the Project. These changes have not been approved by HUD. Cause - The Project was required to make the change in management companies due to updated requirements for assisted living facilities required by the State of Minnesota. Management began the process of requesting HUD approval for these changes but did not receive approval from HUD before making the changes. Effect - The Project was not in compliance with the Regulatory Agreement. Identification of Repeat Finding - 2023-001 Questioned Costs - $125,797 Recommendation - Management should ensure that HUD approval is obtained before making any changes in management agent or management fees.