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Audit: Northern Nevada veterans home plagued by contract violations, financial errors

The home, which has failed health inspections, is run by a company that auditors say has not been transparent in disclosing the home’s financial situation.
Eric Neugeboren
Eric Neugeboren
Health Care
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The company managing the Northern Nevada State Veterans Home has not been transparent about its finances and violated certain contract requirements, according to a state audit released Thursday.

The findings were presented during a Thursday meeting of the state’s Executive Branch Audit Committee, a panel of state officials including the governor, treasurer and attorney general. Gov. Joe Lombardo and Treasurer Zach Conine were frustrated over problems revealed in the audit, especially as the veterans home has faced dozens of health violations. 

Lombardo called for an annual audit of the veterans home, which has 96 beds for veterans and offers short and long term nursing care, as well as care for veterans with dementia.

“I’ve been on this board for five years. I’ve never seen anything like this. It’s awful,” Conine said.

Officials with Avalon — the company that manages the veterans home — said at Thursday’s meeting they were unaware that the state did not have access to certain financial details, and that they are “more than happy to cooperate” with what the state asks of them.

Avalon has controlled essentially all of the veterans home’s finances since it began operating in 2019. Construction funding for the home was fronted by state dollars under an arrangement reached by then-Gov. Brian Sandoval.

However, financial reports provided to state officials have lacked detailed information, which auditors said violated the contract and prevented the Nevada Department of Veterans Services (NDVS) from independently verifying the home’s financial situation.

In addition, the management company did not provide NDVS with any excess cash until August — four years after the contract went into effect and despite it being a contract requirement. The audit found this was because the management company had erred in calculating how much money they had to keep reserved in the bank.

Avalon also has made regular withdrawals to reimburse itself for certain funds and fees, according to the audit, despite there being no documentation to support the transactions.

Since opening in 2019, the facility has faced scrutiny from state and federal regulators. 

In April 2022, the Centers for Medicare and Medicaid Services (CMS) issued 37 health citations to the home, nearly five times the national average and three times the average for Nevada facilities inspected by CMS.

The home received a two out of five-star rating from CMS because of health inspection failures, including several for deficiencies in quality of life, infection control and pharmacy service. A goal of the contract with Avalon was to maintain a five-star rating, and the management company officials said that is achievable within three years.

The veterans home in Southern Nevada, which is run by the state, is rated five stars.

The audit recommended several changes to the agreement between the state and Avalon. It called for procedures that allow the state to independently verify the home’s financial situation, link contract fees to specific services provided by Avalon and revise how Avalon calculates how much money needs to remain in the bank. 

The audit also recommended increased oversight of the contract and for financial statements to be presented on a fiscal year basis.

Avalon officials said on Thursday that they agreed to provide more financial details with the state and that they hoped to extend the contract when it expires next year.

Conine, the state treasurer, pressed Department of Veterans Affairs officials over how the contract could be terminated, but they were unable to provide exact details on how to terminate the contract during the Thursday meeting. 

Updated on 11/3/2023 at 10:22 a.m. to correct that Treasurer Zach Conine asked Department of Affairs officials about how to cancel the contract, not state audit officials.

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