Audit brings scrutiny of N.O. care provider

A New Orleans firm that provides government-funded services for the severely disabled at Southeast Louisiana Hospital in Mandeville owes almost $940,000 in state and federal payroll taxes, penalties and interest, according to an audit.

The audit was conducted by an independent certified public accountant contracted with the state.

The audit also found that personal expenses, such as car repairs and sporting event tickets, were paid with business funds; company checks were written to cash; and its officers advanced money to cover the corporation’s operational expenses.

The audit of Alternatives Living Inc. caught the attention of Legislative Auditor Daryl Purpera, who said Thursday that he is preparing to send in a team to do more work.

“Any time you have an entity not paying payroll taxes, there’s a risk they won’t be able to continue in operation. Then you have government services you are depending on that won’t be able to be accomplished,” Purpera said.

Purpera said Alternatives Living Inc. had “equally as bad a report about a year ago, which put it on our radar.”

Purpera said he has discussed the situation with state Department of Health and Hospitals Secretary Kathy Kliebert.

Alternatives Living manages two housing units at Southeast Louisiana Hospital that provide staffing 24 hours a day, seven days a week for the supervision and training of residents to prepare them for more independent living. DHH said 526 individuals are served by the company through the Permanent Supportive Housing program.

The company also operates under the New Opportunity Waiver agreement, providing day and night companions for eight developmentally disabled clients in New Orleans, according to the health agency.

On Thursday, DHH spokeswoman Olivia Watkins said the agency is conducting two separate site visits this week — one by its audit staff and the other by the fiscal arm of the Office of Aging and Adult Services “to make sure that appropriate accounting practices” are being used in regard to the supportive living program.

“At this time there is no impact to recipient services as a result of the audit finding,” Watkins said.

The independent audit, which covered the fiscal year that ended June 30, was done by Duplantier, Hrapmann, Hogan & Maher.

According to the audit, federal and state income tax withholdings, as well as FICA taxes and withholdings were not paid to the federal and state government in a timely manner for the period July 1, 2008 through March 31.

Federal taxes subsequent to March 31, 2013, are current. State taxes were paid in full as of June 30, 2013.

“The company is not in compliance with federal and state laws. Failure to pay payroll taxes has resulted in significant penalty and interest charges. Penalties and interest are not allowable costs under federal grant rules; therefore, the company will need to seek additional funding sources to pay the federal penalties and interest accrued. Additionally, the penalties and interest have created a deficit balance in the company’s net assets,” auditors said.

The CPA firm said personal expenses charged to the company could impact the tax-exempt status of Alternatives Living.

In its response, Alternatives Living Inc. management told auditors it was seeking additional funding sources and would perform a thorough analysis of operations and cash flows to prevent the situation from occurring in the future.