Finding 576119 (2025-001)

Significant Deficiency Repeat Finding

Requirement

Questioned Costs

Year

2025

Accepted

2025-09-10

Audit: 366047

Organization: Berkshire Retirement Home INC (MA)

Auditor: Cliftonlarsonallen LLP

AI Summary

Core Issue: The Project's fidelity bond coverage is below the required minimum of two months' gross potential collections.
Impacted Requirements: Compliance with HUD's fidelity bond coverage criteria is not met, leading to a significant deficiency in internal controls.
Recommended Follow-Up: Management should increase the coverage amount and establish policies to regularly monitor and maintain compliance with coverage requirements.

Finding Text

2025 – 001 Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Section 232 Mortgage Insurance for Nursing Homes Assistance Listing Number: 14.129 Award Period: June 1, 2024 – May 31, 2025 Type of Finding: • Significant Deficiency in Internal Control Over Compliance • Other Matters Criteria or specific requirement: The Project must obtain a fidelity bond that is equal to or exceeds two months gross potential collections. Condition: Actual fidelity bond coverage amount in FY2025 was less than 2 months of calculated gross potential collections. Questioned costs: $0 Context: No sampling, entire population tested. Cause: The Project did not update coverage amount to keep pace with revenue growth. Effect: Result of the finding is that actual fidelity bond coverage amount fell below the required minimum. Repeat finding: Yes Recommendation: The auditor recommends that management increase their coverage amount to come into compliance with HUD requirements, as well as develop policies and procedures to monitor required coverage minimums to ensure that actual coverage amount is kept at least at that level. Views of responsible officials: There is no disagreement with the audit finding.

Corrective Action Plan

FINDINGS-FEDERAL AWARD PROGRAMS AUDITS United States Department of Housing and Urban Development Berkshire Retirement Home, Inc. Audit period: June 1, 2024 - May 31 , 2025 2025-001 Section 232 Mortgage Insurance for Nursing Homes -Assistance Listing No. 14.157 Recommendation: The Project should increase their coverage amount to come into compliance with HUD requirements, as well as develop policies and procedures to monitor required coverage minimums to ensure that actual coverage amount is kept at least at that level. Explanation of disagreement with audit finding: There is no disagreement with the audit finding. Action taken in response to finding: Fidelity Bond insurance coverage was increased from $1,182,615 to $1 ,282,815 effective 6/1/2025 with annual insurance renewals to be above the minimum required threshold. The new process implemented will now assess the budgeted potential organizational revenue growth prospectively in the current fiscal year and any calculation increase required will be made prior to the end of the current fiscal year before the insurance renewal for the next fiscal year to maintain at least the minimum required coverage threshold. Name(s) of the contact person(s) responsible for corrective action: Edward Forfa Completion date for corrective action plan: 06/01/2025 If the U.S. Department of Housing and Urban Development has questions regarding this plan, please call Edward Forfa, Executive Director at 413-445-4056 ext. 160.

Other Findings in this Audit

1152561 2025-001

Significant Deficiency Repeat

Programs in Audit

ALN	Program Name	Expenditures
14.129	Mortgage Insurance Nursing Homes, Intermediate Care Facilities, Board and Care Homes and Assisted Living Facilities	$10.70M