Trustees hear recommendations on handling project finances

Posted January 10, 2013 at 6:00 am

by Julie Ann Madden

With completely new management at the helm, Akron Care Center administration and trustees are working through the construction project’s financial details.

“To pay for the building, we have started drawing down on the line of credit from the banks,” explained Akron Councilor Liaison Chad Ericson to the Akron Care Center Trustees at their Dec. 18 meeting. “We have already expended all of the General Obligation money at the city level — that’s $1.25 million — and the last invoice of approximately $1.1 million came out of the line of credit.”

“We’re going to draw down that building loan,” he said, “and pay the interest internally on the building loan because we think USDA will give us the ability to use that as an expense.”

“We’ve drawn down on all these lines first even though we have all this cash here — about $500,000,” said Ericson, “because when we go to close, we want to know where we’re at. We don’t want to expend (the cash) and come to closing and find out we’ve got to get another small loan because we didn’t think about a couple hundred thousand (dollars) here or there.”

“This is what we’ve discussed at the city level,” he said, explaining Care Center Business Manager Sue Gabel will not have anyone calling to ask for money from the Care Center’s coffers at this point.

“If we do have some money left over, what we will probably do with those funds is put them in the depreciation and debt set-aside accounts USDA requires us to have,” said Ericson. “That will hopefully help us, on a monthly basis, make it easier for (Care Center Administrator Brandon Verros) to manage the cash flow.”

Someone from the outside might wonder why we’d be spending loan dollars when the cash is setting there, he said, but that is why.

“We want to have the flexibility,” said Ericson. “We want to keep the cash.”

Every month, Care Center administration is putting $10,000 in the New Care Center Project set-aside accounts, said Business Manager Sue Gabel, noting the Care Center has 90 percent occupancy.

She told the trustees they are getting “good response” from letters sent to those who had pledged annual donations for the New Care Center Project.

Ericson commended administration for improving the Care Center’s operating budget. It was about $50,000 more than it had been on a monthly basis for a long time.

Ericson recommended for the time being, administration stop putting the 8-plex loan payment money in its account. Trustees agreed the approximately $2,800 per month could go into the reserve account, along with the $10,000.

Trustee Brad Britton made the motion, and Trustee Bob Watson seconded it. The vote was unanimous, 3-0 with Trustees Dan Rexwinkel and Margaret Correia absent. The consensus was to leave the repayment account open at this time. This repayment account was for the Care Center to repay the loans it has with the City of Akron.

Verros informed the trustees the Care Center must switch computer software programs because the company they had been using had been sold. The staff will begin immediately, and it will cost about $40 more a month once they use all components of this new software system. One advantage of the new system is electronic charting of residents’ care.

They also have changed the Care Center’s postage system, he said, adding the Care Center Auxiliary has purchased a pop machine for the Care Center.

After reviewing the financial documents presented by Gabel, Trustee Iola Frerichs made the motion to accept the Treasurer’s Report and Watson seconded it. The vote was unanimous.

In the Care Center’s recent annual financial audit, Williams & Company Certified Public Accountant David Radke reported, the Care Center was given a “standard clean opinion — nothing came to our attention.”

For fiscal year July 1, 2011 – June 30, 2012, Akron Care Center Inc. had assets totaling $4,381,217 and total liabilities of $2,046,369.

During this period, the entity took in $2,463,831 in operating revenues and had total operating expenses of $2,466,909, which overall was an operating income loss of $3,078. However, there was also $1,522,679 of non-operating revenues from donations, memorials and contributions from the City of Akron.

The Care Center purchases its electricity, water, sewer and garbage services from the City of Akron. For FY 2012, the cost was $33,904.

Contributions to the Iowa Public Employees Retirement System (IPERS) for employees totaled $99,821.

As of the end of FY 2012, the Care Center had net total capital assets of $1,088,491 — an increase of $262,663 from FY 2011.

Debts

The Akron Care Center Inc. has three notes payable with the City of Akron. The first two were for operating needs: $40,000 and $100,000 with 0 percent and 4.5 percent interest rates respectively that were entered into in February 2009. The third is for $1.25 million for the New Care Center Project construction with a variable interest rate ranging between 0.65 and 3.75 percent.

The entity also has a $625,000 loan for the construction of the Village Senior North Apartment (8-plex) from December 2003. This loan was refinanced in November 2008 for $375,000 at a 4.25 percent interest rate. At the end of FY 2012, the balance due was $284,621.

Akron Care Center Inc. has a $4 million loan from the United States Department of Agriculture Rural Development. The City of Akron arranged short-term financing through Peoples Bank. Once the new nursing home facility is completed, USDA will pay off the People’s Bank short-term loan and the Akron Care Center Inc. will pay the City of Akron who will in turn pay USDA.

Auditors found “material weaknesses” in the Care Center staff’s internal control over financing reporting. A material weakness is “a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements, will not be prevented, or detected and corrected on a timely basis.”

The material weaknesses found were:

1) Segregation of Duties: the cash receipts listing, bank deposits and the posting of cash receipts to the cash recipients journal are all done by the same person. Due to the limited number of office employees, segregation of duties is very difficult. However, the manager will review receipts, posting and payroll on a test basis.

2) Financial Reporting: material amounts of receivables, payables and capital asset additions were not adjusted in the Care Center’s financial statements. Current procedures will be revised to ensure the proper amounts are in the financial statements.

3) Payment of Paid Time Off: 100 percent of Paid Time Off (PTO) was being paid out to employees who have resigned or have provided advance written notice. According to the current Employees Handbook, PTO is to be paid out at 75 percent. The trustees will review this policy and determine which percentage is to be paid out.

4) Fundraising Committee: No formal written minutes of the Fundraising Committee were found, and the fundraising bank account was not being reconciled. It was recommended the Fundraising Committee have formal written minutes documenting amounts pledged and collected, along with a bank reconciliation of the fund-raising account. In addition, the committee should give a report to the trustees on a quarterly basis. The trustees will discuss appropriate procedures with the Fundraising Committee.

Overall, the results of auditors’ tests of compliance (for reasonable assurance that the Care Center’s financial statements are free of material misstatement), “disclosed no instance of noncompliance or other matters that are required to be reported under Government Auditing Standards.”

Comments are closed.

Bla