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 THIS PAGE LEFT BLANK INTENTIONALLY 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. Page iii 2004-KC-1002 Table of Contents 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. 2004-KC-1002 Page iv Table of Contents 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 Page v 2004-KC-1002 Table of Contents THIS PAGE LEFT BLANK INTENTIONALLY 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 Page 1 2004-KC-1002 Table of Contents 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. 2004-KC-1002 Page 2 Table of Contents 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. Page 3 2004-KC-1002 Table of Contents 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. 2004-KC-1002 Page 4 Table of Contents 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. Page 5 2004-KC-1002 Table of Contents 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 Table of Contents 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 Page 7 2004-KC-1002 Table of Contents 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 2004-KC-1002 Page 8 Table of Contents 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. Page 9 2004-KC-1002 Table of Contents Finding 1 THIS PAGE LEFT BLANK INTENTIONALLY Page 10 2004-KC-1002 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 Page 11 2004-KC-1002 Table of Contents 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. 2004-KC-1002 Page 12 Table of Contents 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. Page 13 2004-KC-1002 Table of Contents Finding 2 THIS PAGE LEFT BLANK INTENTIONALLY 2004-KC-1002 Page 14 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). Page 15 2004-KC-1002 Table of Contents Management Controls THIS PAGE LEFT BLANK INTENTIONALLY 2004-KC-1002 Page 16 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. Page 17 2004-KC-1002 Table of Contents Follow Up On Prior Audits THIS PAGE LEFT BLANK INTENTIONALLY 2004-KC-1002 Page 18 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. Page 19 2004-KC-1002 Table of Contents Appendix A THIS PAGE LEFT BLANK INTENTIONALLY 2004-KC-1002 Page 20 Appendix B Auditee Comments Page 21 2004-KC-1002 Table of Contents Appendix B 2004-KC-1002 Page 22 Table of Contents Appendix B Page 23 2004-KC-1002 Table of Contents Appendix B 2004-KC-1002 Page 24 Table of Contents Appendix B Page 25 2004-KC-1002 Table of Contents Appendix B 2004-KC-1002 Page 26 Table of Contents Appendix B Page 27 2004-KC-1002 Table of Contents Appendix B 2004-KC-1002 Page 28 Table of Contents Appendix B Page 29 2004-KC-1002 Table of Contents Appendix B 2004-KC-1002 Page 30 Table of Contents Appendix B Page 31 2004-KC-1002 Table of Contents 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. Page 33 2004-KC-1002 Table of Contents Appendix B THIS PAGE LEFT BLANK INTENTIONALLY 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 Page 35 2004-KC-1002 Table of Contents 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 2004-KC-1002 Page 36 Table of Contents 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 Page 37 2004-KC-1002 Table of Contents
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)