AUDIT REPORT
USE OF PROJECT FUNDS
TIMBERLAKE CARE CENTER
KANSAS CITY, MISSOURI
2004-KC-1002
March 10, 2004
OFFICE OF AUDIT, REGION 7
KANSAS CITY, KS
Table of Contents
Issue Date
March 10, 2004
Audit Case Number
2004-KC-1002
TO: Herman Ransom, Director, Office of Multifamily Housing, Kansas City Hub, 7AHM
FROM: Ronald J. Hosking, Acting Regional Inspector General for Audit, 7AGA
SUBJECT: Use of Project Funds
Timberlake Care Center
Kansas City, Missouri
We have completed an audit of Timberlake Care Center, a Section 232 Nursing Home located in
Kansas City, Missouri. We selected the project based on an audit request from your office that
indicated there were unallowable disbursements from project funds. Our overall audit objective
was to determine if the owner/management agent used project funds in accordance with applicable
requirements.
Our report contains two findings with recommendations requiring oversight by your office. The
first finding addresses unsupported and/or unallowable disbursements made during the audit period.
The second finding addresses Timberlake Care Center’s failure to perform monthly bank
reconciliations.
In accordance with HUD Handbook 2000.06 REV-3, within 60 days please provide us, for each
recommendation without management decisions, a status report on: (1) the corrective action taken;
(2) the proposed corrective action and the date to be completed; or (3) why action is considered
unnecessary. Additional status reports are required at 90 days and 120 days after report issuance for
any recommendation without a management decision. Also, please furnish us copies of any
correspondence or directives issued because of the audit.
Should you or your staff have any questions, please contact me at (913) 551-5870.
Table of Contents
Management Memorandum
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2004-KC-1002 Page ii
Executive Summary
We have completed an audit of Timberlake Care Center, a Section 232 Nursing Home located in
Kansas City, Missouri. We selected the project based on an audit request from the Office of
Multifamily Housing, Kansas City Hub, which indicated there were unallowable disbursements
from project funds. Our overall audit objective was to determine if the owner/management agent
used project funds in accordance with applicable requirements.
Timberlake Care Center made payments for other than
Timberlake Made reasonable operating expenses and necessary repairs of the
Unsupported and/or project. Timberlake paid $76,192 in unsupported and/or
Unallowable unallowable disbursements from the operating account
Disbursements during fiscal years 2002 and 2003. Timberlake’s owner did
not alter property operations to ensure HUD rules and
regulations were followed after Timberlake obtained HUD
insured financing in August 2001. As a result, funds that
should have been used to pay the operating expenses of the
property were used for unsupported and/or unallowable
purposes, contributing to Timberlake’s negative surplus
cash position.
Timberlake Care Center did not reconcile the operating
Timberlake Did Not account bank statements to the general ledger each month to
Perform Bank ensure the amounts balanced. Over the two-year audit period,
Reconciliations the operating account general ledger balance was understated by
$17,590. Timberlake’s staff was aware that the operating
account bank statements did not reconcile to the general ledger
balance. However, they did not know how to correct the
problems, and therefore, took no action.
We provided a discussion draft of our audit report to the
auditee following the audit. We held an exit conference with
the auditee on January 29, 2004. The auditee provided
written comments to our findings on March 1, 2004. We
incorporated excerpts of the comments into our report as
appropriate. The complete text of the comments is contained
in Appendix B.
We recommend that the Director, Office of Multifamily
Recommendations Housing, Kansas City Hub, ensure Timberlake Care Center
owners develop and implement policies and procedures to
control funds in accordance with HUD requirements, and
require that Timberlake’s operating account be reimbursed
$76,192 for the unsupported and/or unallowable
disbursements paid during our audit period.
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Executive Summary
We also recommend that the Director ensure Timberlake
Care Center owners provide adequate support for the
adjusting entry to cash made at the end of fiscal year 2002,
and properly correct the fiscal year 2003 general ledger, or
repay Timberlake’s general operating account the amount
that cannot be supported up to $17,590. Finally, we
recommend that the Director verify that Timberlake Care
Center owners are correctly reconciling the bank statements
to the general ledger each month, and if they are unable to
determine how to identify and resolve all reconciling items,
have obtained outside assistance in doing so.
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Table of Contents
Management Memorandum i
Executive Summary iii
Introduction 1
Findings
1. Timberlake Made Unsupported and/or Unallowable Disbursements From Operating 3
Funds
2. Timberlake Did Not Reconcile Bank Accounts 11
Management Controls 15
Follow Up On Prior Audits 17
Appendices
A. Schedule of Questioned Costs and Funds Put to Better Use 19
B. Auditee Comments 21
C. Unallowable Disbursements 35
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2004-KC-1002 Page vi
Introduction
Mission Lake Convalescent Center, Inc. owns and operates a 150-bed licensed nursing facility
doing business as Timberlake Care Center in Kansas City, Missouri. The Project is financed
with a mortgage loan insured by the U.S. Department of Housing and Urban Development
(HUD), under Section 232 of the National Housing Act. The mortgage was endorsed on August
16, 2001. Timberlake Care Center is an owner-managed property.
We selected Timberlake Care Center for review based on an audit request from HUD’s Office of
Multifamily Housing, Kansas City HUB. The request was sent in regards to a management
review performed at Timberlake Care Center on July 30, 2003. The management review
indicated there were unallowable disbursements made from project funds. As a result of this
review, HUD requested an extensive review of Timberlake’s books and records created after
August 15, 2001.
Our overall audit objective was to determine if the
Audit Objectives owner/management agent used project funds in accordance
with applicable requirements. Specifically, our audit
objectives were to determine whether all cash transactions
were recorded in the project’s books for fiscal years 2002
and 2003, to determine if funds disbursed from the project
accounts to the owner/management agent were for
allowable and supported purposes, and to determine if other
funds disbursed from the project accounts were for
allowable and supported purposes.
We performed on-site work from September through
Audit Scope and November 2003. During our audit, we interviewed HUD
Methodology program staff to obtain background information on the
project, and to obtain more details related to the Office of
Housing’s audit request. We interviewed the project’s
owner and management staff to gain an understanding of
the staff’s responsibilities and operational processes. We
also interviewed the project’s independent certified public
accountant to obtain financial data.
To determine whether project funds were used in accordance
with applicable requirements, we reviewed HUD project files
for background information, including the Regulatory
Agreement, Management Certification, and Management
Review performed by HUD in July 2003. We reviewed
Timberlake’s bank statements, cash receipts and deposits,
and general ledgers from Fiscal years 2002 and 2003 to
perform a Proof of Cash analysis. We also reviewed check
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Introduction
registers and invoices along with the above information for
those items selected in our sample for further review.
Our sample included all payments made to the
owner/management agent or any principles of the
owner/management agent and/or related parties during fiscal
years 2002 and 2003, all payments made to those accounts
identified in the HUD audit referral, the five largest payments
each year recorded in each “high risk” account identified by
scanning the general ledger that had not already been chosen
for review, all payments to cash, to employees (for other than
payroll expenses), and to other related parties (including
identity-of-interest vendors or contractors), the largest
disbursement made each month, and 20 disbursements from
each fiscal year selected at random from the remainder of all
payments not previously selected. Further, we reviewed
Reserve for Replacement Withdrawals and the project’s
year-end financial statements for the periods ended May 31,
2002 and 2003.
The audit covered the period from August 15, 2001, the date
Timberlake Care Center obtained a HUD insured mortgage,
through May 31, 2003. We conducted the audit in
accordance with generally accepted government auditing
standards.
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Finding 1
Timberlake Care Center Made Unsupported
and/or Unallowable Disbursements from
Operating Funds
Timberlake Care Center made payments for other than reasonable operating expenses and
necessary repairs of the project. Timberlake paid $76,192 in unsupported and/or unallowable
disbursements from the operating account during fiscal years 2002 and 2003. Timberlake’s
owner did not alter property operations to ensure HUD rules and regulations were followed after
Timberlake obtained HUD insured financing in August 2001. As a result, funds that should have
been used to pay the operating expenses of the property were used for unsupported and/or
unallowable purposes, contributing to Timberlake’s negative surplus cash position.
HUD Handbook 4370.2, Financial Operations and
HUD Regulations Accounting Procedures for Insured Multi-Family Projects,
Chapter 2, states that the regular operating account “is used
to pay operating expenses of general administration
including mortgage payments, management fees, utilities,
and maintenance.” Project funds are to be used for the
following purposes only: 1) to make mortgage payments; 2)
to make the required deposits to the Reserve Fund for
Replacements; 3) to pay reasonable expenses necessary for
the operation and maintenance of the project; and 4) to make
distributions of surplus cash permitted and to repay owner
advances authorized by HUD.
The Regulatory Agreement between HUD and Timberlake
Care Center, Paragraph 6, states that “Owners shall not
without prior written approval of the Secretary: (b) Assign,
transfer, dispose of, or encumber any personal property of
the project, including rents, or pay out any funds except
from surplus cash, except for reasonable operating expenses
and necessary repairs, and (e) Make, or receive and retain,
any distribution of assets or any income of any kind of the
project except surplus cash.”
Timberlake Care Center made payments for other than
Unsupported and/or reasonable operating expenses and necessary repairs of the
Unallowable project. Timberlake paid a total of $76,192 in unallowable
Disbursements and/or unsupported disbursements from the operating
account during fiscal years 2002 and 2003.
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Finding 1
During fiscal year 2002, all of Timberlake Care Center’s
Unallowable disbursements that we reviewed were adequately supported;
Disbursements however, they paid $26,272 in unallowable disbursements
as follows (See Appendix C, Fiscal Year 2002, for details
of transactions)
· Four disbursements to Allstate Insurance Co. to
insure four of the owner’s personal vehicles,
totaling $1,944.
· Eight disbursements to the owner’s personal Amoco
credit card for purchases unrelated to the property,
totaling $1,656.
· Two disbursements to Citibank VISA for food
purchases unrelated to the property, totaling $75.
· Nine disbursements to General Motors Acceptance
Corporation for leases on two of the owner’s
personal vehicles, totaling $8,352.
· Nine disbursements to Smith Trust that were for
debt unrelated to the property, totaling $6,637.
· Four disbursements to Mass Mutual Life Insurance
to pay the monthly premium of $1,500 for a life
insurance policy on the owner, totaling $7,500.
· Two disbursements related to repairs on the owner’s
personal vehicles, totaling $108.
During fiscal year 2003, Timberlake Care Center paid
$44,397 in unallowable disbursements(see Appendix C,
Fiscal Year 2003, for details of transactions) as follows:
· Four disbursements to Allstate Insurance Co. to
insure four of the owner’s personal vehicles,
totaling $1,338.
· Eight disbursements to the owner’s personal Amoco
credit card for purchases unrelated to the property,
totaling $1,640.
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Finding 1
· Four disbursements to Citibank VISA for food
purchases unrelated to the property, totaling $276.
· Thirteen disbursements to General Motors
Acceptance Corporation for leases on two of the
owner’s personal vehicles, totaling $13,066.
· Eleven disbursements to Smith Trust that were for
debt unrelated to the property, totaling $8,112.
· Nine disbursemetns to Mass Mutual Life Insurance
to pay the monthly premium of $1,500 for a life
insurance policy on the owner, totaling $13,500.
· Two disbursements related to repairs on the owner’s
personal vehicles, totaling $1,076.
· One disbursement to O’Conner Heating and
Cooling to pay for repairs to the owner’s personal
air conditioner, totaling $5,390.
Also during fiscal year 2003, Timberlake Care Center paid
Unsupported $5,523 in unsupported disbursments (see table below for
Disbursements each of these disbursements).
Check # Payee Date Amount Unsupported
3404 Rea Law Office 12/18/2002 $2,000 $ 1,520
3803 Rea Law Office 2/11/2003 $2,003 $ 2,003
4082 Rea Law Office 4/14/2003 $2,000 $ 2,000
A TOTALS $6,003 $ 5,523
During the first several years of operation, Timberlake Care
Owner Did Not Change Center was financed with a conventional loan. During this
Mode of Operation time, there were no restrictions on the operating funds.
Since August 15, 2001, when the loan was refinanced as a
HUD insured loan through the Section 232 loan program,
the owner of Timberlake continued to operate the property
as if it were still financed thorugh a conventional loan
program. The operations of the property were not altered to
ensure HUD rules and regulations were being followed.
As a result, funds that should have been used to pay the
Disbursements Impact operating expenses of the property were used for
Financial Position unsupported and/or unallowable purposes during a time
when Timberlake was in a negative surplus cash position.
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Finding 1
Excerpts from Timberlake Care Center’s comments on our
Auditee Comments draft audit report follow. Appendix B contains the
complete text of the comments.
Summary:
A) There were eight disbursements, totaling $3,282 to
Allstate Insurance Company in 2002 and 2003 for
insurance on the owner’s personal vehicles. Timberlake
stated that this practice was discontinued immediately
and the owner agreed to repay the total amount.
B) There were 16 disbursements, totaling $3,296 to the
owner's personal Amoco credit card in 2002 and 2003.
Timberlake maintains that much, if not most, of the fuel
expense was used in connection with the business but
was not documented. To correct the problem, they
currently document the use and where the fuel goes.
Timberlake has asked our office to consider reducing
the total amount owed.
C) There were six disbursements to Citibank VISA, totaling
$351, for food purchases unrelated to the property in
2002 and 2003. Timberlake's owner agreed to repay the
total amount.
D) There were 22 disbursements to GMAC, totaling
$21,418, for the leases on two of the owner's personal
vehicles in 2002 and 2003. Timberlake maintains that
the payments are for one car and one truck. The truck is
used exclusively by the nursing home in
maintenance/supply and seems an obvious appropriate
expense. Timberlake also claims that the car is used by
the owner in representing Timberlake with their
providers, contract doctors, and HMO affiliates. They
claim this is a legitimate "company car" and is almost
standard practice in their industry.
Timberlake claims, regardless of the above information,
the accumulated amount of car payments were deducted
from the owner's salary at the end of calendar years
2002 and 2003. They also stated that the owner has
been personally making the payments since September
2004-KC-1002 Page 6
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Finding 1
2003, so this is no longer an issue. Timberlake
provided a copy of their ledger and claimed that the
ledger shows the car payments being deducted out of
the owner's salary.
E) There were 20 disbursements to Smith Trust, totaling
$14,749, for debt unrelated to the property made in
2002 and 2003. Timberlake claims that the note was
for land that the nursing home is partially built on and
that it became an unsecured note only after the
acquisition of a HUD-insured mortgage kept
Timberlake from carrying the second mortgage.
Timberlake claims that common sense shows HUD
should be delighted to have access to these five acres
and that the value of the property would be substantially
decreased, or perhaps not even viable, without the
property. Therefore, they maintain that Timberlake
should continue to make the payments and the owner
should not have to pay back the $14,749.
F) There were 13 disbursements to Mass Mutual Life
Insurance, totaling $21,000, for life insurance premiums
on the owner. Timberlake claims this is intended to be
"key man" insurance in order for Timberlake to be able
to continue if something were to happen to the owner.
They claim 25% of the proceeds are assigned directly to
Timberlake and the remaining 75% are assigned to
family members with instructions on how to proceed in
the will. According to their attorney, this is common
practice and Timberlake continues to make the
payments.
G) There were four disbursements to repair the owner's
personal vehicle, totaling $1,184, in 2002 and 2003.
Timberlake's owner agreed to repay the total amount.
H) There was one disbursement for O'Conner Heating and
Cooling, totaling $5,390, in 2003. Although
Timberlake claims the bill included some property
repairs, they have no documentation to substantiate
percentages, so Timberlake's owner agreed to repay the
total amount.
I) Timberlake paid $5,523 in unsupported disbursements to
Rea Law Office in 2003. Timberlake claims that the
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Finding 1
law office is their legal council on all legal matters that
affect Timberlake/Mission Lake. They provided
additional billings from the law office that they claim
support these payments, and stated that all monies paid
to Rea Law Office since the inception of the HUD-
insured mortgage are legitimate Mission Lake expenses.
Our evaluation of auditee comments addresses each of the
OIG Evaluation of above sections in which Timberlake Care Center disagreed
Auditee Comments with our recommendations:
B) Timberlake Care Center had a business account with
Amoco that was used to purchase fuel for nursing home
vehicles. The amount disallowed will not be reduced
because the owner made the above purchases on his
personal account, not the business account. Therefore,
we will not alter our recommendation for the $3,296 to
be repaid by the owner.
D) The disbursements included in our finding did not
include payments for a truck. The payments were for
two of the owner's personal cars. HUD Handbook
4370.2, states that project funds are to be used for the
following purposes only: 1) to make mortgage
payments; 2) to make the required deposits to the
Reserve Fund for Replacements; 3) to pay reasonable
expenses necessary for the operation and maintenance of
the project; and 4) to make distributions of surplus cash
permitted and to repay owner advances authorized by
HUD. Therefore, payments for the owner's personal
vehicles are not allowable.
Timberlake provided an account activity report for their
Auto Expense - Officer's Vehicle Account for fiscal year
2003. They did not provide information from fiscal year
2002, and did not provide any payroll information
showing the claimed deductions from the owner's salary.
The information provided is not enough to reduce the
disallowed amount; therefore, we will not alter our
recommendation for $21,418 to be repaid by the owner.
E) Timberlake explained in our exit conference that the
nursing home initially sat on the land in question;
however, prior to the HUD insured mortgage being
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Finding 1
closed, the 5 acre tract was surveyed into the property
used to secure the HUD insured mortgage, and the
original loan for that land was converted to an unsecured
note. Therefore, the note does not cover the property the
building is currently sitting on. Also, the loan from
Smith Trust is unsecured. Therefore, we will not alter
our recommendation for the $14,749 to be repaid by the
owner, and suggest the owner discontinue using
operating funds to pay this note.
F) No documentation was provided by Timberlake to
support their claim that the insurance policy benefits the
nursing home. We asked them to provide more
information on the policy so we could determine if it
was an asset to the property. They did not provide any
new information in their written comments; therefore,
we will not alter our recommendation for the $21,000 to
be repaid by the owner, and suggest the owner
discontinue using operating funds to pay the premiums.
I) The additional billings provided by Timberlake do not
provide enough information to separate the bills that
legitimately relate to Timberlake project operations and
those that relate to the owner, and the ownership entity,
Mission Lake. Therefore, we will not alter our
recommendation for the $5,390 in unsupported
disbursements to be repaid by the owner, and suggest the
property discontinue using operating funds to pay for
legal services not specifically related to project
operations.
Recommendations We recommend the Director, Office of Multifamily Housing,
Kansas City Hub ensure Timberlake Care Center owners:
1A. Develop and implement policies and procedures to
control funds in accordance with HUD requirements.
1B. Reimburse Timberlake Care Center’s operating
account for the $76,192 in unsupported and/or
unallowable disbursements paid during fiscal years
2002 and 2003.
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Finding 2
Timberlake Did Not Reconcile Bank Accounts
Timberlake Care Center did not reconcile the operating account bank statements to the general ledger
each month to ensure the amounts balanced. Over our two-year audit period, the operating account
general ledger balance was understated by $17,590. Timberlake’s staff was aware that the operating
account bank statements did not reconcile to the general ledger balance. However, they did not know
how to correct the problems, and therefore, took no action.
HUD Handbook 4370.2, REV-1, Financial Operations and
HUD Requirements Accounting Procedures for Insured Multi-Family Projects,
Chapter 2-12, Cash Management Controls, Section A,
Receipt Controls, states that bank statements shall be
reconciled promptly to the formal accounting records.
Section B, Disbursement Controls, states that a monthly
reconciliation shall be performed to ensure that all checks
disbursed are accounted for (i.e. cashed, outstanding, or
void).
Timberlake Care Center did not reconcile the operating
Bank Accounts Were account bank statements to the general ledger each month
Not Reconciled to ensure the amounts balanced. Timberlake staff reviewed
the bank statements each month to compile a list of
outstanding withdrawals and deposits, and to determine
what the ending balance should be in the operating account;
however, this amount was never reconciled with the general
ledger balance.
Timberlake made an unsupported adjusting entry to the
General Ledger Balance operating account at the end of fiscal year 2002 for $18,419
Was Incorrect to correct the irreconcilable balance. In addition, the general
ledger balance was understated at the end of fiscal year 2003
by $829. Therefore, over the two-year period $17,590 in the
operating account general ledger balance was unsupported.
Timberlake Care Center’s accounting staff was aware that
Staff Did Not Know the operating account bank statements did not reconcile to
How to Correct the general ledger balance. However, they did not know
Problems how to bring them in balance. Therefore, they took no
action. The staff stopped performing the reconciliations
during fiscal year 2002. They are currently trying to
determine how to correctly balance the general ledger to the
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Finding 2
bank statements. It is important for Timberlake to reconcile
bank accounts to ensure all funds are correctly disbursed
and accounted for.
Auditee Comments Excerpts from Timberlake Care Center’s comments on our
draft audit report follow. Appendix B contains the
complete text of the comments.
Summary: Timberlake Care Center claims extensive
training has recently been provided to its employees and, as
of January 2004, the operating account reconciles to the
general ledger. In the future, any variance will be
investigated and errors will be corrected immediately.
Timberlake claims that the adjusting entry to cash made in
May 2002 related to improper recording of actual payroll
nets to the cash account done by the previous accounting
manager. They provided payroll and general ledger detail
that illustrates that operating cash account for net payroll in
the general ledger detail is not what is reflected in the
actual payroll detail; however, the payroll detail does match
the reconciled bank account.
OIG Evaluation of We commend Timberlake for taking the necessary steps to
Auditee Comments train its employees in this area and on its plan to investigate
any variance and immediately correct errors. Although
Timberlake provided documentation showing discrepancies
between the operating cash account for net payroll in the
general ledger and the actual payroll detail, they did not
correlate this amount to the $18,419 adjusting entry to cash
that was made in May 2002. The payroll discrepancy
shown by the information provided by Timberlake is
$103,568. Therefore, we will not alter our recommendation
for Timberlake to provide adequate support for the $18,419
adjustment to cash made at the end of fiscal year 2002, and
properly correct the fiscal year 2003 general ledger, or
repay the general operating account the amount that cannot
be supported up to $17,590.
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Finding 2
Based on Timberlake's statement claiming they have
obtained outside assistance to provided training on
reconciling the bank statements to the general ledger, and
are currently doing this, we will alter our recommendation
to request the Director, Office of Multifamily Housing,
Kansas City Hub, verify that Timberlake Care Center is
correctly reconciling the bank statements to the general
ledger each month and, if they are unable to determine how
to identify and resolve all reconciling items, has obtained
outside assistance in doing so.
Recommendations We recommend the Director, Office of Multifamily Housing,
Kansas City Hub:
2A. Ensure that Timberlake Care Center owners provide
adequate support for the $18,419 adjustment to cash
made at the end of fiscal year 2002, and properly
correct the fiscal year 2003 general ledger, or repay
Timberlake Care Center’s general operating account
the amount that cannot be supported up to $17,590.
2B. Verify that Timberlake Care Center owners are
correctly reconciling the bank statements to the
general ledger each month, and if they are unable to
determine how to identify and resolve all reconciling
items, have obtained outside assistance in doing so.
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Management Controls
Management controls include the plan of organization, methods and procedures adopted by
management to ensure that its goals are met. Management controls include the processes for
planning, organizing, directing, and controlling program operations. They include the systems
for measuring, reporting, and monitoring program performance.
We determined the following management controls were
Relevant Management
relevant to our audit objectives:
Controls
· Controls over cash disbursements.
· Controls over financial recording and reporting.
We assessed the relevant controls identified above.
It is a significant weakness if management controls do not
provide reasonable assurance that the process for planning,
organizing, directing, and controlling program operations
will meet an organization’s objectives.
Based on our review, we believe the following items are
Significant Weaknesses significant weaknesses:
· Timberlake did not have policies and procedures in
place to ensure that payments were made only for
reasonable operating expenses and necessary repairs
of the project. Timberlake made unsupported and/or
unallowable disbursements from the operating
account during fiscal years 2002 and 2003. (See
Finding 1).
· Timberlake did not reconcile the operating account
bank statements to the general ledger each month to
ensure the amounts balance, and that all cash
transactions are properly recorded in the project's
books for fiscal years 2002 and 2003 (Finding 2).
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Follow Up On Prior Audits
This is the first Office of Inspector General audit of Timberlake Care Center, a Section 232
Nursing Home located in Kansas City, Missouri.
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Appendix A
Schedule of Questioned Costs
and Funds Put to Better Use
Recommendation Type of Questioned Cost Funds Put to
Number Ineligible 1/ Unsupported 2/ Better Use 3/
1B $70,669 $5,523
2B $17,590
1/ Ineligible costs are costs charged to a HUD-financed or HUD-insured program or activity
that the auditor believes are not allowable by law, contract or Federal, State or local
policies or regulations.
2/ Unsupported costs are costs charged to a HUD-financed or HUD-insured program or
activity and eligibility cannot be determined at the time of audit. The costs are not
supported by adequate documentation or there is a need for a legal or administrative
determination on the eligibility of the costs. Unsupported costs require a future decision
by HUD program officials. This decision, in addition to obtaining supporting
documentation, might involve a legal interpretation or clarification of Departmental
policies and procedures.
3/ Funds Put to Better Use are costs that will not be expended in the future if our
recommendations are implemented.
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Appendix B
Auditee Comments
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Appendix B
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Appendix B
2004-KC-1002 Page 32
Table of Contents
Appendix B
Please Note: Due to space considerations, the appendices to the auditee’s response are not
included in this report, but are available on request.
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Appendix B
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2004-KC-1002 Page 34
Appendix C
Schedule of Unallowable Disbursements
Fiscal Year 2002
Check # Date Written Date Cleared Payee Amount Comments
31461 9/12/2001 9/17/2001 Allstate Insurance Co. $ 581.00 Personal Vehicles
31710 10/19/2001 10/25/2001 Allstate Insurance Co. $ 581.18 Personal Vehicles
1005 12/21/2001 12/31/2001 Allstate Insurance Co. $ 285.91 Personal Vehicles
1931 5/10/2002 5/15/2002 Allstate Insurance Co. $ 496.17 Personal Vehicles
31460 9/12/2001 9/19/2001 Amoco $ 206.75 Unrelated Expense
31590 10/9/2001 10/15/2001 Amoco $ 244.17 Unrelated Expense
31779 11/2/2001 11/8/2001 Amoco $ 159.15 Unrelated Expense
32026 12/7/2001 12/14/2001 Amoco $ 133.05 Unrelated Expense
1251 1/18/2002 1/24/2002 Amoco $ 127.23 Unrelated Expense
1516 3/6/2002 3/12/2002 Amoco $ 455.73 Unrelated Expense
1806 4/10/2002 4/17/2002 Amoco $ 79.79 Unrelated Expense
2025 5/23/2002 5/31/2002 Amoco $ 250.03 Unrelated Expense
1817 4/17/2002 4/24/2002 Citibank VISA $ 21.03 $1,128.05 Check Amt.
1939 5/10/2002 5/16/2002 Citibank VISA $ 54.20 $174.52 Check Amt.
31407 9/1/2001 9/11/2001 GMAC $ 927.96 Personal Vehicles
31601 10/9/2001 10/12/2001 GMAC $ 927.96 Personal Vehicles
31830 11/8/2001 11/14/2001 GMAC $ 927.96 Personal Vehicles
32025 12/7/2001 12/12/2001 GMAC $ 927.96 Personal Vehicles
1189 1/10/2002 1/17/2002 GMAC $ 927.96 Personal Vehicles
1357 2/6/2002 2/13/2002 GMAC $ 927.96 Personal Vehicles
1527 3/6/2002 3/12/2002 GMAC $ 927.96 Personal Vehicles
1746 4/5/2002 4/12/2002 GMAC $ 927.96 Personal Vehicles
1955 5/10/2002 5/15/2002 GMAC $ 927.96 Personal Vehicles
31394 9/5/2001 9/14/2001 Smith Trust $ 737.41 Unrelated Debt
31612 10/10/2001 10/17/2001 Smith Trust $ 737.41 Unrelated Debt
31834 11/8/2001 11/15/2001 Smith Trust $ 737.41 Unrelated Debt
32014 12/7/2001 12/13/2001 Smith Trust $ 737.41 Unrelated Debt
1171 1/3/2002 1/16/2002 Smith Trust $ 737.41 Unrelated Debt
1336 2/4/2002 2/13/2002 Smith Trust $ 737.41 Unrelated Debt
1572 3/6/2002 3/15/2002 Smith Trust $ 737.41 Unrelated Debt
1777 4/5/2002 4/17/2002 Smith Trust $ 737.41 Unrelated Debt
1998 5/10/2002 5/20/2002 Smith Trust $ 737.41 Unrelated Debt
Transfer 2/28/2002 N/A Mass Mutual Life $ 3,000.00 Personal Insurance
Transfer 3/29/2002 N/A Mass Mutual Life $ 1,500.00 Personal Insurance
Transfer 4/29/2002 N/A Mass Mutual Life $ 1,500.00 Personal Insurance
Transfer 5/28/2002 N/A Mass Mutual Life $ 1,500.00 Personal Insurance
31873 11/15/2001 11/19/2001 Superior Buick Cadillac $ 80.26 Personal Vehicles
32037 12/13/2001 12/17/2001 Jiffy Lube $ 27.99 Personal Vehicles
TOTAL $26,271.97
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Appendix C
Fiscal Year 2003
Check # Date Written Date Cleared Payee Amount Comments
2519 8/1/2002 8/7/2002 Allstate Insurance Co. $ 144.39 Personal Vehicles
2557 8/9/2002 8/15/2002 Allstate Insurance Co. $ 161.89 Personal Vehicles
3189 11/21/2002 11/26/2002 Allstate Insurance Co. $ 962.64 Personal Vehicles
3235 12/6/2002 12/11/2002 Allstate Insurance Co. $ 69.41 Personal Vehicles
2097 6/5/2002 6/12/2002 Amoco $ 281.87 Unrelated Expense
2423 7/25/2002 8/5/2002 Amoco $ 223.95 Unrelated Expense
2561 8/19/2002 8/19/2002 Amoco $ 177.98 Unrelated Expense
3137 11/25/2002 11/25/2002 Amoco $ 102.33 Unrelated Expense
3237 12/6/2002 12/11/2002 Amoco $ 325.59 Unrelated Expense
3579 1/24/2003 2/3/2003 Amoco $ 168.99 Unrelated Expense
3693 2/6/2003 2/12/2003 Amoco $ 208.01 Unrelated Expense
3927 3/12/2003 3/20/2003 Amoco $ 150.92 Unrelated Expense
2754 9/11/2002 9/17/2002 Citibank VISA $ 69.25 $1,450.00 Check Amt.
3144 11/10/2002 11/26/2002 Citibank VISA $ 84.00 $681.29 Check Amt.
3245 12/6/2002 12/10/2002 Citibank VISA $ 84.75 $249.32 Check Amt.
4033 4/9/2003 4/15/2003 Citibank VISA $ 38.36 $254.87 Check Amt.
2115 6/5/2002 6/12/2002 GMAC $ 927.96 Personal Vehicles
2303 7/10/2002 7/17/2002 GMAC $ 927.96 Personal Vehicles
2576 8/9/2002 8/16/2002 GMAC $ 927.96 Personal Vehicles
2710 9/5/2002 9/12/2002 GMAC $ 927.96 Personal Vehicles
2916 10/7/2002 10/16/2002 GMAC $ 927.96 Personal Vehicles
3181 11/19/2002 11/26/2002 GMAC $ 978.15 Personal Vehicles
3260 12/6/2002 12/17/2002 GMAC $ 978.15 Personal Vehicles
3503 1/8/2003 1/16/2003 GMAC $ 978.15 Personal Vehicles
3718 2/6/2003 2/19/2003 GMAC $ 978.15 Personal Vehicles
3890 3/7/2003 3/19/2003 GMAC $ 978.15 Personal Vehicles
4039 4/9/2003 4/17/2003 GMAC $ 978.15 Personal Vehicles
4238 5/19/2003 5/27/2003 GMAC $ 978.15 Personal Vehicles
4041 4/9/2003 4/15/2003 GMAC $ 1,579.10 Personal Vehicles
2157 6/5/2002 6/26/2002 Smith Trust $ 737.41 Unrelated Debt
2309 7/10/2002 7/17/2002 Smith Trust $ 737.41 Unrelated Debt
2730 9/5/2002 9/30/2002 Smith Trust $ 737.41 Unrelated Debt
2980 10/7/2002 10/11/2002 Smith Trust $ 737.41 Unrelated Debt
3187 11/21/2002 12/4/2002 Smith Trust $ 737.41 Unrelated Debt
3307 12/6/2002 12/13/2002 Smith Trust $ 737.41 Unrelated Debt
3532 1/8/2003 1/23/2003 Smith Trust $ 737.41 Unrelated Debt
3767 2/6/2003 2/20/2003 Smith Trust $ 737.41 Unrelated Debt
3903 3/7/2003 3/27/2003 Smith Trust $ 737.41 Unrelated Debt
4075 4/9/2003 4/14/2003 Smith Trust $ 737.41 Unrelated Debt
4215 5/7/2003 5/15/2003 Smith Trust $ 737.41 Unrelated Debt
Transfer 10/28/2002 N/A Mass Mutual Life $ 1,500.00 Personal Insurance
Transfer 11/29/2002 N/A Mass Mutual Life $ 1,500.00 Personal Insurance
Transfer 6/28/2002 N/A Mass Mutual Life $ 1,500.00 Personal Insurance
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Appendix C
Transfer 7/29/2002 N/A Mass Mutual Life $ 1,500.00 Personal Insurance
Transfer 8/28/2002 N/A Mass Mutual Life $ 1,500.00 Personal Insurance
Transfer 9/30/2002 N/A Mass Mutual Life $ 1,500.00 Personal Insurance
Transfer 1/28/2003 N/A Mass Mutual Life $ 1,500.00 Personal Insurance
Transfer 5/28/2003 N/A Mass Mutual Life $ 1,500.00 Personal Insurance
Transfer 2/28/2003 N/A Mass Mutual Life $ 1,500.00 Personal Insurance
32224 10/28/2002 11/1/2002 Major Cadillac $1,039.50 Personal Vehicles
32320 5/15/2003 5/20/2003 Valvoline Instant Oil Change $36.56 Personal Vehicles
32318 5/10/2003 5/13/2003 O'Conner Heating & Cooling $5,389.70 Unrelated Expense
TOTAL $44,397.55
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Use of Project Funds, Timberlake Care Center, Kansas City, Missouri
Published by the Department of Housing and Urban Development, Office of Inspector General on 2004-03-10.
Below is a raw (and likely hideous) rendition of the original report. (PDF)