Belle Maison Nursing Home,
Hammond, LA
Section 232 Loan Program
Office of Audit, Region 6 Audit Report Number: 2015-FW-1006
Fort Worth, TX September 23, 2015
To: Roger Lewis
Director, Office of Residential Care Facilities,
Office of Healthcare Programs, 0HP
//signed//
From: Gerald Kirkland
Regional Inspector General for Audit, 6AGA
Subject: Belle Maison Nursing Home, Hammond, LA, Generally Complied With the
Owner and Operator Regulatory Agreements and HUD Requirements for Its
Section 232 Loan
Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) results of our review of the Belle Maison Nursing Home’s compliance with its
regulatory agreements and HUD requirements for its Section 232 loan.
HUD Handbook 2000.06, REV-4, sets specific timeframes for management decisions on
recommended corrective actions. For each recommendation without a management decision,
please respond and provide status reports in accordance with the HUD Handbook. Please furnish
us copies of any correspondence or directives issued because of the audit.
The Inspector General Act, Title 5 United States Code, section 8M, requires that OIG post its
publicly available reports on the OIG Web site. Accordingly, this report will be posted at
http://www.hudoig.gov.
If you have any questions or comments about this report, please do not hesitate to call me at 817-
978-9309.
Audit Report Number: 2015-FW-1006
Date: September 23, 2015
Belle Maison Nursing Home, Hammond, LA, Generally Complied With the
Owner and Operator Regulatory Agreements and HUD Requirements for Its
Section 232 Loan
Highlights
What We Audited and Why
As part of the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s annual audit plan, we audited the Belle Maison Nursing Home. We selected the
facility for review based on a risk analysis. Our objective was to determine whether the facility
complied with the executed owner and operator regulatory agreements and HUD requirements.
What We Found
The facility generally complied with the terms of the owner and operator regulatory agreements
and HUD requirements and cleared a minor issue identified during the audit.
What We Recommend
This report contains no recommendations.
Table of Contents
Background and Objective......................................................................................3
Results of Audit ........................................................................................................4
Finding: The Facility Generally Complied With the Owner and Operator
Regulatory Agreements and HUD Requirements.......................................................... 4
Scope and Methodology ...........................................................................................5
Internal Controls ......................................................................................................7
Appendix ...................................................................................................................8
A. Auditee Comments and OIG's Evaluation ............................................................... 8
2
Background and Objective
Section 232 of the National Housing Act authorizes the Federal Housing Administration to
insure mortgages made by private lenders to finance the development of nursing homes,
intermediate care facilities, board and care homes, and assisted living facilities. The Office of
Residential Care Facilities, under the U.S. Department of Housing and Urban Development’s
(HUD) Office of Healthcare Programs, manages the Section 232 program. Federal regulations at
24 CFR (Code of Federal Regulations) 200.105(a) state that as long as HUD is the insurer or
holder of the mortgage, HUD will regulate the borrower by means of a regulatory agreement,
providing terms, conditions, and standards established by HUD, or by other prescribed means.
HUD also holds the mortgage lender responsible for ensuring that the owner and operator
comply with the terms of the regulatory agreements.
Belle Maison Nursing Home, located at 15704 Medical Arts Plaza, Hammond, LA, operates 140
licensed and certified beds. The owner, Belle Maison Healthcare Facility, is a single-member
limited liability asset company owned by Ponchatoula Nursing Home, LLC. Ponchatoula
Nursing Home, LLC, leases the nursing home from the owner and operates the nursing home,
doing business as Belle Maison Nursing Home. On December 1, 2011, the owner refinanced the
mortgage loan and executed a mortgage and note with Capital Funding (mortgage lender) for
$3.7 million. HUD executed owner and operator regulatory agreements, effective December 1,
2011, and insured the $3.7 million mortgage on the facility under the Section 232 program.
Our objective was to determine whether the facility complied with the executed owner and
operator regulatory agreements and HUD requirements.
3
Results of Audit
Finding: The Facility Generally Complied With the Owner and
Operator Regulatory Agreements and HUD Requirements
The facility generally complied with the terms of the owner and operator regulatory agreements
and HUD requirements and cleared a minor issue identified during the audit.
The Facility Generally Complied With Requirements
In accordance with its owner and operator regulatory agreements and HUD requirements, the
facility generally (1) made prompt mortgage payments, (2) established and maintained a reserve
fund for replacements, (3) provided HUD annual financial reports in a timely manner, and there
were no material deficiencies relevant to our objective, (4) did not show signs of potential
operational deficiencies, (5) deposited and recorded receipts generated, (6) adequately supported
disbursements, and (7) maintained the property in good condition.
The Facility Cleared a Minor Issue Identified During the Audit
During the audit, we identified a minor issue related to changes made to the property by the
facility. Specifically, we determined that the facility made renovations, costing $106,465, to its
special care common area and special care bedrooms and bathrooms without prior HUD
approval as required by the owner’s regulatory agreement, section 6(d) and deemed those costs
unsupported. After we issued the draft report, HUD provided additional criteria to support that
the scope of the renovations did not require prior HUD approval. Additionally, the facility and
HUD provided the requests authorizing reimbursement from the facility’s reserve for
replacement fund, which we determined was sufficient to support that HUD approved these
renovation costs. Since the facility met HUD requirements when making changes to the
property, we removed this issue from the final report.
Conclusion
The facility followed its regulatory agreements and HUD requirements and cleared the minor
issue identified during the audit.
Recommendations
Since the facility generally complied with the regulatory agreements and HUD requirements, and
cleared the minor issue identified during the audit, there are no recommendations.
4
Scope and Methodology
We conducted the audit at the Belle Maison Nursing Home in Hammond, LA, and our office in
New Orleans, LA, from May through August 2015. The audit scope generally covered January
1, 2013, through December 31, 2014. We expanded the scope to April 2012 to identify
additional remodeling expenses and to July 2015 to include currently occupied units for
inspection.
To accomplish our objective, we
• Reviewed relevant regulations and program guidance;
• Reviewed the facility’s organizational chart;
• Reviewed mortgage loan and escrow activity reports covering January 1, 2013, through
December 31, 2014;
• Reviewed audited financial statements;
• Reviewed the following areas: (1) Centers for Medicaid and Medicare Services
participation, (2) timeliness of loan and other payments, (3) cash and cash equivalents on
hand, (4) responsiveness to HUD requests, (5) accounts payable and receivable, (6) legal
representation, and (7) timeliness of reimbursements from Medicaid and Medicare;
• Reviewed receipts and disbursements;
• Inspected the physical condition of the facility; and
• Interviewed the facility’s staff and obtained clarification from HUD as needed.
For the receipts review, using the facility’s monthly tenant reports, we selected a nonstatistical
random sample of 14 resident rent payments totaling $116,289 from a universe of more than
$15.7 million for the period January 1, 2013, to December 31, 2014. We reviewed the receipts to
determine whether the facility maintained adequate supporting documentation, deposited the
receipts into its bank account, and recorded the receipts in its books and records. Through file
reviews, we determined that the computer-processed data related to rent receipts were generally
reliable.
For the disbursements review, we selected our sample using the facility’s check register reports
for the period January 1, 2013, to December 31, 2014. We selected our sample by focusing on
payees that did not appear to be for an ordinary or reasonable expense. We selected a
nonstatistical sample of 60 disbursements totaling $384,609 from a universe of more than $16.2
million. During the survey, we reviewed 14 of the 60 sampled disbursements totaling $250,343
to determine whether the facility maintained adequate supporting documentation and complied
with the regulatory agreement and HUD requirements. Because the issues identified were not
significant, we did not review the additional 46 disbursements sampled. However, we did
expand our review to capture all reimbursements from the reserve for replacement fund for
remodeling expenses. Through file reviews, we determined that the computer-processed data
related to disbursements were generally reliable.
5
Using the facility’s daily census report as of July 6, 2015, we selected a nonstatistical random
sample of 14 occupied units from an adjusted universe of 119. We inspected the physical
condition of the 14 occupied units, along with the building exterior, building systems, and
common areas, to determine whether the facility maintained the property in good repair. Based
upon a comparison of the unit and resident name in the census report and the resident residing in
the units during the inspections, we determined that the computer-processed data were generally
reliable.
We conducted the audit in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit
objective(s). We believe that the evidence obtained provides a reasonable basis for our findings
and conclusions based on our audit objective.
6
Internal Controls
Internal control is a process adopted by those charged with governance and management,
designed to provide reasonable assurance about the achievement of the organization’s mission,
goals, and objectives with regard to
• Effectiveness and efficiency of operations,
• Reliability of financial reporting, and
• Compliance with applicable laws and regulations.
Internal controls comprise the plans, policies, methods, and procedures used to meet the
organization’s mission, goals, and objectives. Internal controls include the processes and
procedures for planning, organizing, directing, and controlling program operations as well as the
systems for measuring, reporting, and monitoring program performance.
Relevant Internal Controls
We determined that the following internal controls were relevant to our audit objective:
• Effectiveness and efficiency of policies and procedures used to ensure compliance with the
Section 232 regulatory agreement and HUD requirements;
• Relevance and reliability of information used for making decisions and ensuring that
information in external reports is relevant, reliable, and fairly disclosed; and
• Compliance with applicable Federal requirements.
We assessed the relevant controls identified above.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, the
reasonable opportunity to prevent, detect, or correct (1) impairments to effectiveness or
efficiency of operations, (2) misstatements in financial or performance information, or (3)
violations of laws and regulations on a timely basis.
We evaluated internal controls related to the audit objective in accordance with generally
accepted government auditing standards. Our evaluation of internal controls was not designed to
provide assurance regarding the effectiveness of the internal control structure as a whole.
Accordingly, we do not express an opinion on the effectiveness of the facility’s internal control
as a whole.
7
Appendixes
Appendix A
Auditee Comments and OIG’s Evaluation
Ref to OIG
Auditee Comments
Evaluation
Comment 1
8
Comment 1
Comment 2
Comment 1
9
OIG Evaluation of Auditee Comments
Comment 1 The facility believed that de-facto retroactive HUD approval for its remodeling
activities was obtained when HUD approved the reserve for replacement requests;
and that information related to remodeling activities from December 2011 to July
2015 had been provided to HUD via the reserve for replacement request forms
and accompanying supporting documentation. The facility also asserted that it
and its lender were aware that remodeling projects required HUD approval. It
further asserted that the only potential misunderstanding was regarding how to
determine when the scope of the remodel project required prior HUD approval
and it did not believe that the cosmetic renovations (discussed in the draft report)
required prior HUD approval.
After we issued the draft report, the facility and HUD provided additional criteria
and documentation that was initially requested during the audit. Based upon our
review of this additional criteria and documentation, we agree that the renovations
did not require prior HUD approval. Additionally, the facility had sufficient
documentation to support that it had HUD approval after the renovations were
completed when HUD authorized reimbursements from the facility’s reserve for
replacement fund. Therefore, we revised the report accordingly.
Comment 2 The facility believed that recommendation 3 (recommendation 1C in the draft
report) represented best practices and plans to draft a written policy that includes
procedures for determining and documenting whether renovations require prior
HUD approval. We acknowledge the facility for updating its policies and
procedures.
10
Belle Maison Nursing Home, Hammond, LA, Generally Complied With the Owner and Operator Regulatory Agreements and HUD Requirements for Its Section 232 Loan
Published by the Department of Housing and Urban Development, Office of Inspector General on 2015-09-23.
Below is a raw (and likely hideous) rendition of the original report. (PDF)