Carbondale Senior Housing Phase II

Finding: Special Tests and Provisions Federal Assistance Listing 14.157 Supportive Housing for the Elderly – Section 202 Capital Advance Program Department of Housing and Urban Development Criteria: The Capital Advance Program Regulatory Agreement (“Regulatory Agreement”) entered into August 27, 1996 between CSHC Phase II and HUD requires CSHC Phase II to establish and maintain certain insurance coverage, including a minimum of $50,000 of employee dishonesty coverage. Condition: CSHC Phase II’s property insurance renewal in October 2023 only included $25,000 of employee dishonesty coverage, which is less than the HUD-required minimum of $50,000. Questioned Costs: None. Context: We reviewed CSHC Phase II’s insurance renewal documents to ensure compliance with HUD standards. Effect: CSHC Phase II is currently in violation of the Regulatory Agreement and is required to revise its insurance coverage to ensure compliance with HUD requirements. Cause: CSHC Phase II renews its insurance annually. In the October 2023 renewal, its insurance carrier mistakenly lowered CSHC Phase II’s employee dishonesty coverage below the HUD-required minimum. This change was not caught by management prior to renewing insurance coverage. Identification as a repeat finding: Not applicable. Recommendation: Management should update its insurance coverage to comply with UUD minimums. All future withdrawals of these funds are required to be approved by HUD. Additionally, upon renewing its annual insurance coverage, management should review to ensure that all coverage is the same as previous coverage and that amounts are in compliance with HUD-required minimums. Views of Responsible Officials and Planned Corrective Action: CSHC Phase II agrees with the finding. See separate auditee document for planned corrective action.