Finding Text
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.