Finding Text
Finding 2019-003 – Special Tests and Provisions – Material Weakness
Name of Federal Agency: Department of Housing and Urban Development
Federal Program Name and Assistance Listing Number: Supportive Housing for Persons
with Disabilities (Section 811), Assistance Listing 14.181
Federal Award Identification Number and Year: N/A and 1997
Name of Pass-through Entity: N/A
Criteria
HUD regulations at HUD Handbook 4381.5, the Management Agent, require HES's management
agent to have fidelity bond coverage equal to the greater of $50,000 or the value of two months’
gross potential rent. If the policy covers more than one project, this minimum must be computed
using HES with the highest gross potential rent.
Condition
Management did not maintain fidelity bond coverage as required by HUD regulations.
Cause
Internal controls were not in place to fidelity bond coverage was in place.
Effect or Potential Effect
Management did not maintain fidelity bond coverage in violation of HUD regulations.
Questioned Costs
None.
Context
See the context of the finding detailed in the condition section above.
Identification as a Repeat Finding
This finding is not a repeat finding.
Recommendation
Management should obtain fidelity bond coverage as required by HUD regulations immediately.
Auditor Noncompliance Code: Z- Other
Finding Resolution Status: Unresolved.
Views of Responsible Officials
HES agrees with the finding and the auditor's recommendations have been adopted.