City of Carmi Seeks State Audit of Phoenix Rehab and Nursing

Jun 17th, 2014

The City of Carmi will seek a state audit of Phoenix Rehab and Nursing.  The skilled care facility owes the city approximately $500,000 in revolving loan fund payments and utility expenses. 

In May, aldermen instructed Administrator Lil Fortner to turn over general ledgers and related financial documents to City Attorney Greg Stewart for review.  He has yet to receive any documents from Phoenix.

Stewart did receive a call from the board on Monday afternoon.  He was told that a $1.477 million payment from the state to Phoenix had been processed.  The net which Phoenix Nursing Home received was $1.186 million. 

“That’s about $300,000 short of what the projection was in the fax.  The state retained those monies from Phoenix for the nursing home bed tax that was apparently overdue and owed to the state and for certain licensing fees.” 

The $1.186 million has been directed to the Internal Revenue Service because of tax liens.  Stewart says that money remains “parked” with the IRS.

“I was told by the board that it is expected, the IRS will retain $289,000 for overdue trust fund tax issues.  If you do the math, that leaves you around $900,000 net that the board believes will eventually come to them from the Internal Revenue Service.  I was not given a time frame as to when that money will be in their possession or control.”   

Stewart reminded the council of the $305,000 federal court judgment against Phoenix.  An attorney for Badger Acquisition of Kentucky, LLC filed a citation to discover assets on April 3rd

Stewart says the judgment creditor will have a lien on Phoenix’s assets and incoming money. 

“I don’t know how many other creditors there are but you are one of them.”    

The board has retained a CPA firm to conduct a 2013 audit on Phoenix.  Stewart was not told if the audit would be performed on the foundation, nursing home, or both entities. 

“I was told the audit would be completed at any time.  I was not given a date.  But I was told it was soon to happen.”

Stewart says the CPA firm will also conduct an audit for 2014 year to date.  He expects the city will receive an audit paper with some data from 2013-2014.  But Stewart has been given “no hope” of receiving information from 2012 and back. 

The city attorney told the council that the state can audit grant recipients to ensure that funds are being expended properly.  Stewart requested authorization to contact the state about performing an audit on Phoenix. 

“Because I think that’s a question that all of you were getting at when Lil Fortner and Dr. Saqib were in here.  Where’s the money?  Show me the money.  That’s the answer we’ve never received.”

“We have the right and we have demanded that pursuant to the terms of the revolving loan fund agreement.  Is that going to help you collect the money?  Finding out what happened to the books three or four years ago?  Probably not.  But it may give you a better idea if a nursing home or hospital is viable from Phoenix.” 

Stewart says it’s possible the state won’t or cannot perform an audit due to budgetary issues.  But the council gave him authorization to contact the state about a review.  Stewart has been given a contact that might elevate the audit request to a higher level. 

“When requests have been made in the past and there is a sizable amount of money, they have gotten at it fairly quickly.  There was a situation with the Rend Lake Conservancy District where that happened.” 

“The state came in and performed an audit.  I was told it was about three weeks in span.  A lot of information came from it.  But you only get as good of information as you can look at.  I don’t know what they will be able to see or determine.”

Alderman Doug Hays believes the requested audit will be a sign to the state that the city is trying to collect on the revolving loan. 

Stewart did not want to imply that Phoenix is “not viable or can’t make this work.”  He said it was a legal issue where the city made a demand for information.  Stewart wants the council to have the facts to make solid decisions. 

“I am pretty confident that the powers that be at Phoenix are very concerned about what comes out of this meeting because it’s my understanding the census has been dropping.”

“If the census drops any more, whether they are wrong or right about the money…the action of reporting this could send them into a spiral that kills them.  That’s not my purpose or desire.  I’m sure it’s not yours.” 

Stewart thought the nursing home census was 29 or 30 residents when he first brought the matter to the council’s attention on May 5th.  The council heard the census has fallen to 17 residents at the facility. 

“They’ve hit hard times.  Whether it’s because of the reporting of the facts…I don’t know.  But I’m sure they have a lot of fires they are trying to put out.”