We audited Morris Park Nursing and Rehabilitation Center based on a risk assessment we performed on nursing homes located in New York and New Jersey. Morris Park has a Section 232 HUD-insured loan in the amount of $7.4 million. The objective of the audit was to determine whether Morris Park officials managed funds in compliance with the regulatory agreement and applicable HUD requirements.
Morris Park officials generally managed funds in accordance with the regulatory agreement and HUD requirements. However, in 2013 and 2014, they made two $60,000 distributions to the nursing home’s owner, 1235 Pelham Parkway Realty, LLC, in violation of the regulatory agreement. In addition, officials did not perform monthly reconciliations of accounting records and submit audited financial statements in a timely manner. These conditions occurred because nursing home officials were not aware of all necessary requirements, compliance with HUD requirements was not emphasized, and accounting procedures were not documented. As a result, nursing home officials could not ensure that the distributions complied with the regulatory agreement, accounting records were reconciled monthly, and audited financial statements were provided in a timely manner.
We recommend that the Director of HUD’s Office of Residential Care Facilities instruct nursing home officials to (1) establish and implement procedures requiring any distributions to the owner to comply with the regulatory agreement and HUD requirements, (2) establish and implement written accounting procedures to ensure that books and records are maintained in accordance with HUD requirements, (3) ensure that accounting records are reconciled monthly, and (4) implement procedures to ensure the timely preparation of audited financial statements.