Finding 564312 (2024-001)

Significant Deficiency
Requirement
N
Questioned Costs
-
Year
2024
Accepted
2025-06-10
Audit: 358457
Organization: College Town Apartments (CA)
Auditor: Cohnreznick LLP

AI Summary

  • Core Issue: Management did not know about the required minimum fidelity bond coverage.
  • Impacted Requirements: HUD regulations mandate coverage of at least $50,000 or two months' gross potential rent, whichever is higher.
  • Recommended Follow-Up: Management should secure the necessary fidelity coverage immediately to avoid potential disallowance of assistance costs.

Finding Text

Criteria HUD regulations require the project'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 the project with the highest gross potential rent. Cause Management was unaware of the required minimum coverage. Effect or Potential Effect The cost of the assistance may be disallowed. Recommendation Management should obtain fidelity coverage as required by HUD regulations immediately. Auditor Noncompliance Code: Section N - Special Tests and Provisions Views of Responsible Officials Auditee has submitted the application to update/increase the Fidelity Bond Coverage to $500,000 through the insurance broker. Coverage is expected to be changed by 4-1-25.

Corrective Action Plan

Auditee has submitted the application to update/increase the Fidelity Bond Coverage to $500,000 through the insurance broker. Coverage is expected to be changed by 4-1-25.

Categories

Special Tests & Provisions HUD Housing Programs

Other Findings in this Audit

  • 1140754 2024-001
    Significant Deficiency

Programs in Audit

ALN Program Name Expenditures
14.155 Mortgage Insurance for the Purchase Or Refinancing of Existing Multifamily Housing Projects $3.21M