Audit: Nursing home funds were stolen

The last full-year audit of Bedford County Nursing Home before it was leased to an outside operator found serious deficiencies in financial control which allowed an employee to issue $1,100 in unauthorized payroll checks, according to discussion at Tuesday night's meeting of Bedford County Financial Management Committee.

On Aug. 1, the county-owned facility was leased to a subsidiary of Johnson City-based Care Centers Management Group. The facility is now known as Christian Care Center of Bedford County. The audit, by Jobe, Hastings & Associates of Murfreesboro, covers the 2008-2009 fiscal year which ended on June 30.

The audit findings revealed that there was not enough segregation of duties or management supervision. Even though the nursing home had a policy of requiring two signatures on checks, those signatures were stored electronically and one employee had access to both of them, in effect negating the effectiveness of a two-signature system.

County Finance Director Robert Daniel told the committee that an employee stole $1,100 because of the lack of controls. He said she was fired and the money was recovered. Daniel said it was the nursing home's staff, not the auditors, who originally discovered the discrepancy.

The management responses to the audit note that the facility has now been leased.

"As a result of the transfer of operation, new management systems have been put in place and will correct the issue," according to the management statement.

The term "segregation of duties" means that certain financial tasks are divided up among different people or departments, so that more people are involved and have the opportunity to notice irregularities. In the case of the nursing home, the same employee who wrote the unauthorized checks was responsible for reconciling the checkbook. If those duties had been performed by different people, said Daniel, the inappropriate checks might have been discovered sooner.

But Daniel noted that the segregation of duties issue is not restricted to the nursing home.

"This could apply in other areas of the county," said auditor James Jobe of Jobe, Hastings and Associates.

Audits of county government, which are conducted by the state, frequently cite courthouse offices for their lack of segregation of duties. Courthouse officials, particularly the "constitutional offices" which are not under direct control of the county mayor's office, often say that their staffs are too small to properly separate duties. But Daniel said the state has suggested methods and policies that can be used even by small offices and said he is working with the constitutional offices to encourage them to implement such policies.

The constitutional offices, called that because they are established and required by the state constitution, are sheriff, trustee, register of deeds, county clerk, and assessor of property.

Finance committee members said they need better information about which offices make corrections in response to the annual audit and which ones do not.

In other discussion, the committee voted to work with Jobe, Hastings and Associates on collection of delinquent accounts from Medicaid and Medicare from when the county owned the nursing home. Attorney Ralph McBride is working on collection of delinquent private pay accounts.

The committee wants to hear a report next month from Bedford County Emergency Medical Services, which had gotten behind on its collection of Medicare and Medicaid accounts. Daniel said the ambulance service is catching up, but committee members said they want to know how the service got behind in the first place.

The committee also recommended moving $39,000 from the county's debt service fund into the account which pays for the construction debt on the Tennessee Rehabilitation Center on Railroad Avenue. Each month, the county makes a payment on the construction loan for the facility, and then the state pays the county a lease payment which covers the debt. But Daniel said there are cash flow issues and the county needs more of a financial cushion in that account.