We audited the Federal Housing Administration-insured Burrillville Nursing Home, Incorporated, doing business as Pine Grove Health Center, based on a U.S. Department of Housing and Urban Development (HUD), Office of Inspector General risk assessment. Additionally, HUD identified Pine Grove as a high financial risk and a potentially troubled facility, and Pine Grove’s auditors reported substantial doubt regarding its ability to continue as a going concern due to recurring operating deficits, large receivables, accounts payable, current liabilities balances, and high bad debt expense. Our objective was to determine whether the owner managed Pine Grove’s operations in compliance with HUD’s regulatory requirements and other laws and regulations.
Overall, Pine Grove’s owner complied with the regulatory requirements tested, with the exception of the management services and compensation provisions of the management agreement. During 2014 and 2015, the owner paid onsite staffing costs of $322,314, and the management agent charged Pine Grove $139,027. We also estimated that the owner charged the project $353,420 prior to 2014 for employee services that should have been included as part of the management fee. This occurred because the owner used a management certification that conflicted with the approved management agreement and because the owner lacked controls over payments for services that, according to the management agreement, were part of the management fee.
We recommend that the Director of HUD’s Office of Residential Care Facilities require Pine Grove’s owner to (1) require its management agent to repay $322,314 for ineligible salary and benefits paid for a clerk and bookkeeper, (2) remove $139,027 in payables to the management agent for ineligible employee services during 2014 and 2015, (3) support or remove an estimated $353,420 in payables to the management agent charged before 2014, and (4) develop and implement controls over payments to include ensuring that its management agreement clearly identifies services that are be provided and paid for by the management agent and to ensure that charges are not made for services that are part of the management fee.
Recommendations
Housing
-
Status2017-BO-1003-001-AOpenClosed$322,314.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Closed on December 13, 2018Obtain repayment of $322,314 from nonproject funds from the management agent for the ineligible bookkeeper and accounts payable clerk’s salary and benefits, incurred during 2014 and 2015.
-
Status2017-BO-1003-001-BOpenClosed$139,027.00Funds Put to Better Use
Recommendations that funds be put to better use estimate funds that could be used more efficiently. For example, recommendations that funds be put to better use could result in reductions in spending, deobligation of funds, or avoidance of unnecessary spending.
Closed on December 13, 2018Decrease the payable to the management agent by $139,027 for ineligible employee services billed during 2014 and 2015, thereby reducing future expenditures because project funds will not be used for these ineligible expenses when funds become available.
-
Status2017-BO-1003-001-COpenClosed$353,420.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Closed on December 13, 2018Support or decrease the payables to its management agent for the amounts related to ineligible employee services charges before January 1, 2014, which we estimated to be $353,420.
-
Status2017-BO-1003-001-DOpenClosedClosed on March 22, 2018
Develop and implement controls over payments to include; ensuring that its management agreement clearly identifies services that are be provided by the management agent and paid for as part of the management fee, and the project is not charged for services that are part of the management fee.