Where must security deposits be kept according to regulations?

The correct answer is that security deposits must be kept in a special account separate from facility funds. This regulation is essential to ensure the protection of residents' funds and to maintain financial transparency and accountability within the nursing home facility. Keeping security deposits in a separate account ensures that these funds are not mixed with the operating funds of the facility, which can be used for day-to-day expenses.

This separation helps prevent misuse of residents' money and provides clear documentation of the funds held for each resident. In many jurisdictions, including California, this practice protects residents' rights and prepares the facility to return the deposits when residents vacate, according to the established laws.

The other options presented do not comply with the regulations governing the handling of security deposits. Keeping the deposits in the same account as facility reserves or in facility funds could lead to potential misuse or mismanagement of the residents' money. An interest-bearing account option is also not the primary requirement for safeguarding the deposits, even though it can be a good practice if done properly alongside other regulations.