oversight

    Christian Care Home, St. Louis, MO
    Section 232 Healthcare Mortgage Insurance Program




Office of Audit, Region 7     Audit Report Number: 2015-KC-1003
Kansas City, MO                                     June 30, 2015
To:            Roger Lewis, Director, Office of Residential Care Facilities, OHP

               //signed//
From:          Ronald J. Hosking, Regional Inspector General for Audit, 7AGA

Subject:       Christian Care Home Did Not Always Accurately Maintain Resident Trusts and
               Accounts Receivable




Attached is the U.S. Department of Housing and Urban Development (HUD), Office of Inspector
General’s (OIG) final results of our review of Christian Care Home’s resident trusts and accounts
receivable.
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 913-
551-5870.
                   Audit Report Number: 2015-KC-1003
                   Date: June 30, 2015

                   Christian Care Home Did Not Always Properly Maintain Resident Trusts
                   and Accounts Receivable




Highlights

What We Audited and Why

We audited Christian Care Home because it received the second largest U.S. Department of
Housing and Urban Development (HUD)-insured loan among the nursing homes with the lowest
quality ratings in Region 7 (Kansas, Missouri, Iowa, and Nebraska). In addition, it reported
negative surplus cash of almost $1.2 million in 2014 and had prior instances of fraud and
embezzlement. Our audit objective was to determine whether Christian Care Home properly
maintained the residents’ trust balances and accounts receivable.

What We Found
Christian Care Home’s books and accounts for its individual resident trusts and accounts
receivable were not always accurate and complete as required by its regulatory agreement. In
particular, the nursing home did not accurately record transactions for resident trusts and
accounts receivable for 16 of the 30 residents reviewed. These errors financially impacted some
residents.

What We Recommend
We recommend that HUD require Christian Care Home to develop and implement procedures to
periodically review its resident trusts and accounts receivable for accuracy and complete the
necessary corrections.
Table of Contents
Background and Objective......................................................................................3

Results of Audit ........................................................................................................3
         Finding: Christian Care Home Did Not Always Properly Maintain Resident
         Trusts and Accounts Receivable ...................................................................................... 4

Scope and Methodology ...........................................................................................6

Internal Controls ......................................................................................................7

Appendixes ................................................................................................................8
         A. Auditee Comments and OIG’s Evaluation ............................................................... 8




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Background and Objective
Christian Care Home is a licensed, full-service, 150-bed skilled nursing facility and a 28-bed
residential care facility located in Ferguson, MO. It provides care for private pay, Medicare, and
Medicaid residents. Christian Women’s Benevolent Association is a nonprofit organization,
which owns and operates the nursing facility.
In 2010, the U.S. Department of Housing and Urban Development (HUD) insured a $15.3
million loan for the facility under Section 232 of the National Housing Act. Section 232 is a
Federal Housing Administration-insured loan program, which provides mortgage insurance for
residential care facilities, such as assisted living facilities, nursing homes, intermediate care
facilities, and board and care homes. It may be used to finance the purchase, to refinance, for
new construction, or for substantial rehabilitation of a project.
Section 232 requires all borrowers and operators to execute a regulatory agreement governing
the operation of the project to comply with program obligations, the requirements of the National
Housing Act, and the regulations adopted by HUD. Borrowers and operators are responsible for
violations of the regulatory agreement and may be subject to adverse actions if violations occur.
One of the regulatory agreement requirements is to keep the financial records of the project
complete, accurate, and current at all times.
Christian Care Home maintains a resident trust account to hold residents’ funds for safe keeping.
The resident trust also serves as a pass-through account for the residents’ payments from the
Social Security Administration, Missouri grant assistance, and other sources. The payments are
transferred to the nursing home operating account to pay for the residents’ room and board and
recorded to offset the outstanding accounts receivable. In fiscal year 2014, the nursing home
reported close to $72,000 in resident deposits held in trust and almost $1 million in gross
accounts receivable.
Our audit objective was to determine whether Christian Care Home properly maintained the
residents’ trust balances and accounts receivable.




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Results of Audit

Finding: Christian Care Home Did Not Always Properly Maintain
Resident Trusts and Accounts Receivable
Christian Care Home’s books and accounts for its resident trusts and accounts receivable were
not always accurate and complete. The nursing home did not have adequate controls to monitor
the accuracy of the resident trust balances and accounts receivable. As a result, the errors in
recording the resident trusts and accounts receivable transactions financially impacted some
residents.
Inaccurate Transactions in Resident Trusts and Accounts Receivable
Christian Care Home’s books and accounts for the resident trusts and accounts receivable were
not always accurate and complete. Its regulatory agreement requires the financial records of the
project to be complete, accurate, and current at all times. Christian Care Home did not
accurately record transactions for 16 of the 30 resident trusts and accounts receivable reviewed.

                                        Number of accounts            Number of inaccurate
                                            reviewed                      accounts
          Resident trusts                       30                             10
       Accounts receivable                      30                             11
              Totals                            30                             16*
* Some residents’ accounts had errors in both the resident trust and accounts receivable.

Inaccurate Recording in Resident Trusts
Christian Care Home did not accurately record transactions for 10 resident trusts. In several
instances, the nursing home did not consistently record the personal needs allowance from the
residents’ Social Security payments. The Social Security Administration required nursing homes
to keep $40 monthly deposits in the resident trusts in 2013 and $45 in 2014 before paying for the
residents’ room and board. Christian Care Home sometimes did not leave the monthly deposits
or retained extra funds in the resident trusts.
Inaccurate Recording in Accounts Receivable
Christian Care Home did not accurately record transactions for 11 accounts receivable. In
several instances, it applied the Social Security payments to the wrong accounts, which affected
the accounts receivable of five residents. It also charged one resident for the entire month in
which she died instead of charging her for part of the month. The nursing home sometimes
improperly moved funds from the resident trust to pay for room and board or improperly retained
funds in the resident trust that should have been applied toward patient liability.



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Inadequate Controls
Christian Care Home did not have adequate controls to monitor the accuracy of the resident trust
balances and accounts receivable. The acting chief financial officer did not review individual
accounts receivable balances on a monthly basis. He reconciled the overall resident trust
accounts and accounts receivable with the bank statements. However, Christian Care Home had
no procedures in place to regularly verify postings to the individual accounts receivable or the
resident trusts.
Financial Impact on the Residents
Christian Care Home’s errors financially impacted some residents. Some residents did not have
access to the personal trust funds that they were entitled to keep, while others overspent their
funds. Although most of the errors in the resident trusts were small, the residents who were
impacted by these errors could have used additional funds to enhance their living conditions in
the nursing home or improperly benefited from extra funds, which should have been used to pay
for their room and board.
In addition, residents did not pay the correct amounts for their room and board. Accounts
receivable balances that were either overstated or understated sometimes impacted the amount of
the refund issued to the residents or their families or the amount of future payments and writeoffs
on their account.

Conclusion
Christian Care Home did not always accurately record transactions for the residents’ trusts and
accounts receivable. These errors financially impacted some residents, and Christian Care Home
needs to improve its procedures to prevent errors from going undetected. While Christian Care
Home had corrected many of the errors during the audit, it needs to ensure that it has corrected
all of them.

Recommendations
We recommend that the Director of the Office of Residential Care Facilities

1A.    Require Christian Care Home to complete the corrections for the 16 residents with errors
       identified during our audit.
1B.    Require Christian Care Home to develop and implement procedures to periodically
       review the resident trusts and accounts receivable (patient liability accounts) for accuracy
       and correct errors in a timely manner.




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Scope and Methodology
Our audit period generally covered January 1, 2013, through December 31, 2014. We performed
our audit work from February through June 2015 at the Christian Care Home office located at
800 Chambers Road, Ferguson, MO.
To accomplish our objective, we

   Reviewed applicable HUD requirements and the borrower’s and operator’s regulatory
    agreements,
   Reviewed the audited financial statements,
   Analyzed the residents’ trust and accounts receivable transactions,
   Reviewed relevant documents in the residents’ files,
   Interviewed Christian Care Home employees, and
   Followed up with HUD employees.
We selected a sample of the resident trusts and accounts receivable of 30 residents of Christian
Care Home. To select a sample, we used the resident trust account ledgers of the Christian Care
Home skilled nursing and residential branches between January 1, 2013, and December 31,
2014, which included 274 residents. We selected two residents with the largest amount of
disbursements in the skilled nursing ledger and one resident with the largest amount of
disbursements in the residential ledger. We also selected 24 skilled nursing residents and 3
residential tenants who had payments recorded in the resident ledger that were different from the
recurring payments from the Social Security Administration, pensions, or other sources. We
traced these deposits to the bank statements to confirm that they were received on behalf of the
sampled residents. For the 30 sampled residents, we analyzed the resident trust transactions and
the accounts receivable transactions that were recorded in the Christian Care Home accounting
system. We also reviewed the residents’ files for documentation relevant to the transactions for
the resident trusts and accounts receivable.
We used computer-processed data from Christian Care Home’s MatrixCare account billing
system and its resident trust account ledgers. We used this information for sample selection and
as support that was confirmed by other evidence as described above. We determined that the
data were sufficiently reliable for the purposes of this report.
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:

   Controls over the accuracy of the resident trust balances and accounts receivable in
    accordance with the regulatory agreement.
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.
Significant Deficiency
Based on our review, we believe that the following item is a significant deficiency:

   Christian Care Home did not have adequate controls to monitor the accuracy of the
    individual resident trust balances and accounts receivable.




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Appendixes

Appendix A


             Auditee Comments and OIG’s Evaluation


Ref to OIG
Evaluation
              Auditee Comments




Comment 1




                               8
                       OIG Evaluation of Auditee Comments


Comment 1   Christian Care Home agreed to implement our recommendations. HUD will need
            to obtain documentation verifying the items are completed to close the
            recommendations.




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