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Updated: Audit shows more than $55 million transferred from King veterans home as facility projects delayed

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The Wisconsin Veterans Home at King is located in Waupaca County.

Over more than a decade, the Wisconsin Department of Veterans Affairs transferred $55 million away from the King veterans home as it delayed facilities improvements, including failing to replace soiled carpeting for more than seven years, according to an audit of the nursing home's finances released Friday.   

The finances of the Wisconsin Veterans Home at King, the state's largest nursing home for veterans and their spouses, was detailed in the audit following an investigation by the Cap Times in August that showed the state was increasingly transferring money away from the home as it remained understaffed and care for veterans there suffered. The audit reviewed financial information at King from 2003-04 through 2015-16.

Both Democratic and Republican state lawmakers said the results of the audit will affect budget negotiations next week. Gov. Scott Walker's office did not immediately respond to a request for comment on the audit results.

In a letter of response included in the audit, state Department of Veterans Affairs Secretary Dan Zimmerman said the agency strives to be transparent and is working to make improvements and implement the Legislature’s recommendations.

“This audit is an opportunity to improve our financial and planning practices, and in turn our service to veterans and their families,” said Zimmerman, who took office in February after former Secretary John Scocos resigned in November. “Your analysis is a valuable tool for the department. It is our obligation to not only ensure that all veterans and their families have access to the critical programs, benefits and services they have earned, but also to do so in a responsible and transparent manner.”

The department generated surplus revenue from King, but did not have a plan for how to allocate that money and did not make improvements to the facility promptly, the audit found.

From 2010 to 2016, staff at King provided care to an average of 685 veterans and their spouses, bringing in more revenue as the number of residents at the home increased. The agency tried to maximize the number of residents in the home to facilitate “its ability to generate revenue in excess of expenditures,” according to the audit.

Since 2011, the agency tried to keep the occupancy rate at 92 percent or more, about 10 percent higher than the national average. The audit found that the average annual occupancy rate at King was at least 95 percent from 2012 through 2016.

From July 2011 through December 2016, 19 of the 29 capital projects King requested began, but not all were started in a timely manner, "including the replacement of soiled carpeting in one of its skilled nursing facilities that took more than seven years to initiate," according to the audit. It also did not create a 10-year facilities plan for the home, according to the audit. 

Both Democratic and Republican lawmakers said the results will affect budget discussions and could lead to more legislative oversight over how King’s money is managed. The money transfers included $28.4 million to the Wisconsin Veterans Home at Union Grove and more than $20.1 million to the Veterans Trust Fund. The Veterans Trust Fund is an internal fund at the agency that funds some veterans benefit programs.

The Legislature’s Joint Finance Committee is scheduled to vote on the state Department of Veterans Affairs budget on May 11.

State Sen. Luther Olsen, R-Ripon, a member of the Joint Finance Committee whose district includes the King home, said the committee should have more oversight over how King money is spent.

“The thing that concerns me is why there wasn’t any initiative to say, ‘We have this money here, we need to invest it in the home.’ Maybe at the state level, we need to say, ‘We’re going to take this money, Joint Finance, and put it in this account and you can come to us…and we can determine if this is the right thing,’” he said. “We have to figure out what is the right thing to do here.”

State Sen. Jon Erpenbach, D-Middleton, who also sits on the Joint Finance Committee, said the audit shows the need for more oversight. He filed a bill this session that would require WDVA to get legislative approval to make any money transfers from the home.

“It’s quite clear that several things need to be done and the first step is to make sure there’s legislative oversight on any transfer,” he said. “Obviously we get calls, other offices get calls on the conditions up at King and what we heard on the phone was very different from what we heard from the previous secretary.

“It’s really upsetting,” Erpenbach said. “We are supposed to do the best we possibly can do to take care of our veterans and the administration failed miserably. I would tend to think transfers for the time being probably won’t be happening as they did in the last 10 years.”

Yet Zimmerman has said that he still plans to transfer at least $9 million away from King to the Veterans Trust Fund this year. In his budget proposal for the agency, Zimmerman has estimated that the fund will need $18.6 million over the next two fiscal years. 

Despite the transfers, the King home’s year-end cash balance increased from $17.3 million at the end of FY 2011-12 to $35.2 million at the end of FY 2015-16, or by 103.5 percent, according to the audit.

How veterans are charged for their care at the King is another issue highlighted in the audit that WDVA has failed to address for nearly a decade. In 2010, auditors recommended that the agency put a process in place to set rates and calculate the costs of care, but the agency failed to do so.

There is still no formula for calculating how much veterans are charged for their care at King and why. Zimmerman said he agrees there needs to be a plan and is working on it.

“DVA staff indicated that the process was delayed when DVA transitioned from a board-governed agency to one governed directly by DVA’s secretary in July 2011. DVA indicated it is currently revising a draft statement of scope for the administrative rule,” according to the audit.

State Sen. Robert Cowles, R-Green Bay, a co-chairman of the state committee that authorized the audit, said he is concerned that the agency failed to implement recommendations from the last audit in 2010. He said he plans to call for a public hearing in the coming weeks to discuss the audit results.

“We have to ask the question, ‘Why were there diversions when that wasn’t done and why weren’t the private pay rates clarified so individuals going into the home knew what they were paying and why?” he said. “Perhaps they’re paying too much and that’s why the balance is there.”

Cowles said he opposes any more money transfers from the home until infrastructure issues there are fixed.

Zimmerman said the agency has been responsive to infrastructure needs and is working on a long-term plan that has identified where improvements to King facilities are needed. He defended the delay of the soiled carpet replacement that auditors highlighted, saying that the agency was being a “good steward of state resources” to clean it instead of replacing it.

“We share the concern regarding the flooring project that was initiated in the 2005-2007 budget. As good stewards of state resources, King staff responsibly employed other measures to adequately mitigate the carpet damage. After these mitigation measures were no longer adequate, WDVA requested and DOA approved the flooring project again in September 2012 and it was completed in November 2013.” 

Zimmerman said that outside the carpet example, the agency has allocated more than $118 million for capital projects at the home.

WDVA receives several streams of state and federal money to fund the King home. The largest increase in revenue has been federal service-connected disability payments, according to the audit. The service-connected disability program pays veterans for injuries and disabilities they sustained during their time in the military, money which goes directly to the home.

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The revenues from that program increased by $9 million, 173.4 percent, from fiscal year 2011-12 to 2015-16, according to the audit. The home took in $5.2 million in service-connected disability payments in 2011-12, growing to $14.2 million payments in the last fiscal year, according to the audit.

That increase is due to “an increase in payment rates and an increase in the number of residents eligible for these payments,” according to the audit.

The other portion of the audit, which will include an analysis of health care needs, and how the home complies with federal and state regulations, will be released later this year. 

The Legislature requested the audit in September following a Cap Times investigation that highlighted persistent staff shortages, negligent care and deteriorating facilities. 

In the weeks following, the federal government issued several citations to the home and dropped its federal ratings for two of its residence halls.

State inspectors found dozens of instances of medical errors there, which were a part of 14 total federal citations issued to the home following a two-week inspection in late September.

In December, seven citations were issued by the Centers for Medicare and Medicaid services for separate incidents involving residents' medical care. CMS substantiated a complaint from earlier this year alleging that King staff mishandled liquid oxygen, though there was no evidence that it leaked into the home's ventilation system.

Several high-ranking officials, including former Secretary Scocos and his deputy secretary Dan Buttery, also resigned in the months that followed.

Auditors also noted that there are few limitations on how WDVA spends the money it makes from the King home and recommended  that the department develop a plan for how it is spent in the future.  Auditors said the agency should consider using excess money to improve “the overall quality of life for King residents, such as providing certain goods and services that have been eliminated or have not been funded in recent years as cost-savings measures,” according to the audit.

Last year the department cut its popular coffee shop with its homemade food and replaced it with vending machines to save money. Zimmerman has said he is working to restore the coffee shop.

Auditors also said DVA could also use money to improve employee satisfaction and retention, as understaffing continues to be a problem there. Zimmerman has pledged to make staffing issues at King a priority. He said he has launched several initiatives to recruit and retain direct care staff there. 

Extra money could also be used to fix deferred maintenance projects that the agency has asked the Legislature to fund.  

“In July 2016, DVA submitted to DOA a list of 21 deferred maintenance projects at King. Of these 21 projects, 3 projects totaling $5.7 million were included as part of DVA’s 2017-19 capital budget request, and funding for 18 projects,” according to the audit.

Auditors directed the agency to report back by Sept. 1 on the progress of its recommendations.

Correction: This story has been updated to accurately reflect earlier reporting about the liquid oxygen incident at King. The home was cited, but the federal government found no evidence that it leaked into the ventilation system. 


Katelyn Ferral is The Cap Times' public affairs and investigative reporter. She joined the paper in 2015 and previously covered the energy industry for the Pittsburgh Tribune Review. She's also covered state politics and government in North Carolina.