F0837

D

Governing body failed to oversee administrator, payroll, and facility bank account

Union City, Tennessee Survey Completed on 01-20-2026

Penalty

No penalty information released

Summary

The deficiency involves the governing body’s failure to provide effective oversight of facility management and financial operations, including payroll and the primary facility bank account into which Medicare, Medicaid, insurance, and private resident payments were deposited. Facility policy dated 10/9/2025 stated that the governing body was legally responsible for establishing and implementing policies for management and operation of the facility, appointing an administrator who was responsible for management, and ensuring a process for the administrator to report on audits, budgets, staffing, and supplies. The facility was unable to produce any governing body policy that was in effect prior to 10/9/2025. Board members and the chairman described their role as mainly policy-making and oversight, with the administrator as the only employee of the board, but they relied largely on verbal reports and limited written financial information from the administrator.

Governing body minutes showed that payroll had been brought back in-house after previously being outsourced, and that a new bookkeeping system was implemented. Over multiple meetings, the board received high-level financial reports from a CPA, including reports of profits and losses, but there were gaps in financial reporting, such as a meeting where financials were not reported due to the absence of the administrator and CPA. The minutes also documented that personnel manuals from 2022 and 2023 were never presented to the board for approval, even though earlier manuals had been approved, and that key office positions such as Social Services, Human Resources, and Business Office Manager were vacant. Board members later learned that policy manuals had been revised without board approval and that multiple versions of the policy manual were in circulation.

A spreadsheet from CPA Firm #1 covering a 19‑month period showed that the administrator and two bookkeeping staff cashed out a total of $142,627.44 over the maximum benefit allowed by facility policy. An analysis from the CPA identified three employees who far exceeded the window for payroll payouts after payroll was brought back in-house and recommended that the board review prior auditors’ accruals for vacation, holiday, and sick leave and interview prior administrators about vacation restrictions during COVID. The chairman later acknowledged that he did not think the board had reviewed those accruals or discussed the CPA’s letter. Interviews with board members revealed that their primary checks and balances were annual audits and review of summarized financial statements, that they did not have detailed visibility into payroll or individual salaries, and that they were unaware of staff turning in hours worked at home. The board members stated they were blindsided when an external auditor identified significant unexplained salary increases for the administrator and two bookkeeping staff, and they acknowledged that the governing body had “dropped the ball” on ensuring the administrator was held accountable and that policy changes and financial operations were properly reviewed. The failure of the governing body to oversee the administrator, payroll system, and bank account was determined to have the potential to affect all 45 residents in the facility.

The chairman reported that during the tenure of a prior administrator, payroll had been outsourced to an out-of-state firm without the board’s knowledge, which contributed to that administrator’s departure. Afterward, the administrator and a bookkeeper recommended bringing payroll back in-house, and the board accepted their assurances that there were no problems. The chairman stated that he questioned the administrator and visited the facility but relied on the information provided and did not receive the level of financial detail he felt was needed. Board members described that they received total salary figures as a blanket line item and general expense breakdowns, but not detailed salary registers or clear tracking of compensated absences. One board member stated that the governing body’s oversight and visibility into operations were limited and that they had not been given copies of the policy manual, despite the policy requiring a process for holding the administrator accountable for reporting on management and operations. Another board member linked the unapproved 2023 personnel handbook changes, including wording that allowed staff to cash in time, to the financial issues, noting that the way the policy was written contributed to increased payouts. Throughout interviews, board members and the chairman acknowledged that they relied heavily on trust in the administrator and did not implement or follow through on robust checks and balances to detect or prevent mismanagement of payroll and the facility’s bank account.