We audited the U.S. Department of Housing and Urban Development’s (HUD) monitoring of the financial performance of Section 232 nursing homes based on the size of their program, the inherent risks in the program, the length of time since our last audit, and the inclusion of this review in the annual audit plan. Our audit objective was to determine whether HUD had sufficient financial information and used this information to adequately assess and monitor the financial status of the nursing homes.
HUD did not always have and use sufficient financial information to adequately assess and monitor nursing homes. Specifically, it (1) allowed four defaulted nursing homes to remain in its portfolio for up to 6½ years; (2) made a partial payment to help one nursing home return to solvency, and it went bankrupt 14 months later; (3) insured a nursing home that did not operate as a single-asset entity and a nursing home that did not submit a marketing plan; (4) did not enforce its regulatory agreements at six nursing homes; and (5) did not properly classify nine nursing homes as troubled. In addition, HUD did not require owners, operators, and lenders to routinely submit financial data that were sufficient, accurate, complete, and timely. These deficiencies occurred because HUD’s actions did not always identify and address the root causes of a nursing home’s financial challenges. As a result, HUD could lose more than $32.1 million for the defaulted mortgages and owed more than $10 million in carrying costs. It did not act on ineligible expenses of more than $7.8 million, unsupported expenses of more than $8.9 million, and accrued expenses of more than $44.4 million. Additionally, nine nursing homes, with more than $82.4 million in HUD-insured mortgages, were at risk of default.
We recommend that the Director of Asset Management and Lender Relations, Office of Residential Care Facilities, (1) develop, implement, and enforce action plans with defined completion dates to address each nursing home’s challenges; (2) require support for more than $8.9 million in expenses and documentation for the validity of the more than $44.4 million in accounts payable; (3) require repayment of more than $7.8 million in ineligible expenses; and (4) follow up on inaccurate, incomplete, conflicting, and late financial data.
Recommendations
Housing
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Status2018-BO-0001-001-AOpenClosedClosed on December 10, 2019
Work with the owners, lenders, operators, and management agents (as applicable) to develop and implement an action plan for potentially troubled and troubled nursing homes. Each plan should include an analysis of the root causes of that nursing home’s challenges and define specific and measureable steps that address the root causes. Each step should have a defined completion date.
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Status2018-BO-0001-001-BOpenClosed$41,435,357.00Funds 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 March 04, 2021Implement the action plan for the four defaulted nursing homes to protect HUD’s investment of $41,435,357. This amount represents the collective funds put to better use for these nursing homes. Appendix E lists the funds to be put to better use by nursing home
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Status2018-BO-0001-001-COpenClosedClosed on December 10, 2019
Develop and implement policies and procedures to address delinquent or defaulted mortgages that would not benefit from refinancing.
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Status2018-BO-0001-001-DOpenClosedClosed on November 19, 2019
Refer regulatory agreement violations to the Departmental Enforcement Center within 30 days of HUD having identified it and work with the Departmental Enforcement Center to develop a plan for resolving the violation. Any revisions to the plan must be accepted by the Departmental Enforcement Center.
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Status2018-BO-0001-001-EOpenClosedClosed on August 19, 2019
Review and revise the policies and procedures for making partial payments of claims to check that each decision to make a partial payment of claim ensures that the payment restores the subject nursing home to financial viability to avoid a repeat of the situation that led to the loss on Hebrew Home.
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Status2018-BO-0001-001-FOpenClosed$8,974,000.00Questioned 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 January 05, 2024Require Jamaica Hospital Nursing Home to provide support for $8,974,000 paid to its related company. Any amount that the owner cannot support as reasonable in price and necessary to the nursing home should be repaid to the nursing home.
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Status2018-BO-0001-001-GOpenClosed$44,483,000.00Funds 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 January 05, 2024Require Jamaica Hospital Nursing Home to provide support for $44,483,000 in accounts payable. Any amount that the owner cannot support as reasonable in price and necessary to the nursing home should be removed from the accounts payable
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Status2018-BO-0001-001-HOpenClosed$7,027,289.00Questioned 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 July 13, 2022Require the owners of Bishop Wicke Health and Rehabilitation Center, Plaza Village Senior Living, Golden Hill Health Care Center, Immanuel Campus of Care, and their related companies to reimburse the nursing homes for the ineligible expenses of $7,027,289.
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Status2018-BO-0001-001-IOpenClosed$815,973.00Questioned 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 November 19, 2019Require Shawnee Christian Nursing Center to return 27 beds to operation or pay down the mortgage by $815,973
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Status2018-BO-0001-001-JOpenClosedClosed on October 15, 2019
Define the troubled and potentially troubled classifications for nursing homes and develop specific measures to identify when and how nursing homes are classified.
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Status2018-BO-0001-001-KOpenClosedClosed on October 15, 2019
Develop and implement policies and procedures to revisit the classifications at least annually.
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Status2018-BO-0001-002-AOpenClosedClosed on September 05, 2023
Develop and implement computerized controls to flag blank data fields and illogical financial data.
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Status2018-BO-0001-002-BOpenClosedClosed on September 05, 2023
Develop and implement procedures to require owners, operators, and lenders to submit accurate and complete financial data.
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Status2018-BO-0001-002-COpenClosedClosed on August 13, 2019
Develop and implement internal controls to routinely compare financial data on mortgage payments to Multifamily Delinquency and Default Reporting System data on mortgage payments and follow up on any conflicting data.
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Status2018-BO-0001-002-DOpenClosedClosed on October 15, 2019
Develop and implement procedures for referring operators who fail to provide required financial statements to the Departmental Enforcement Center.
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Status2018-BO-0001-002-EOpenClosedClosed on October 15, 2019
Develop and implement metrics to evaluate each nursing home’s financial data for changes in utilization, payments, profitability, and solvency (debt service credit ratios).