Finding 1186766 (2025-011)

Finding Number 2025-011 Assistance Listing Number 64.053 Program Name Payments to States for Programs to Promote the Hiring and Retention of Nurses at State Veterans Homes Federal Agency Department of Veterans Affairs State Agency State Veterans’ Homes Board Federal Award Identification Number N/A Federal Award Year 2025 Finding Type Noncompliance Compliance Requirement Activities Allowed or Unallowed Allowable Costs/Cost Principles Repeat Finding N/A Pass-Through Entity N/A Questioned Costs $94,375 FINDING Tennessee State Veterans’ Homes Board management improperly claimed reimbursement from the federal nurse retention grant BACKGROUND In 2022, the U.S. Department of Veterans Affairs (VA) established a nurse retention grant program to help state veterans’ homes hire or retain nurses who provide direct clinical care to residents. For federal fiscal year 2025, the VA approved the Tennessee State Veterans’ Home Board’s (the board’s) application for grants for the Clarksville, Humboldt, Knoxville, and Murfreesboro veterans’ homes, as these homes had struggled with nursing turnover. The board used the grant funds to implement financial incentives to encourage nurses to join their staff, including bonuses for new-hire retention, referrals, and mentoring.(23) Figure 1 summarizes each financial incentive program. See Schedule of Findings and Questioned Costs for footnote. See Schedule of Findings and Questioned Costs for figure. Based on our discussions with management and a review of the incentive programs management described to us, management pays employees quarterly for the retention bonus and mentor incentive programs if the employee remains employed for that time. The referral bonus is paid after 90 and 180 days of successful employment. Each quarter, the executive office staff submits a reimbursement invoice to VA to recover 50% of the incentives/bonuses paid to the employees. CONDITION AND CRITERIA As part of the veterans’ homes’ grant application process, the VA approved the veterans’ homes’ referral and mentor bonuses, as well as the tuition/student loan reimbursement, as these programs aligned with the federal grant’s purpose to improve the nursing shortage each home faced. Based on our review of the grant application and agreement, however, we found that VA had not specifically approved the new-hire retention bonus as an allowable program for federal reimbursement. Furthermore, the VA approval letter for each nursing home states, The funds are to be used solely for the purpose of the specific employee incentive programs. In the original VA grant application, management did not include a description of new-hire retention bonuses in its description of the planned incentive programs. As such, the VA was not aware of the new-hire retention bonus program when it approved the other incentive programs. Based on our review of grant reimbursement records, we found that, even though the program was not specifically approved, management invoiced $94,375 in new-hire retention bonus payments under the approved mentor program category. In addition, we noted instances of employees participating simultaneously in both the mentor program and the new-hire retention bonus program, and management sought reimbursement for both programs through the mentor program category. CAUSE Based on our discussion with management, the new-hire retention bonus program was not explicitly described in the grant application, but management asserts that the program was included as part of the mentor program. EFFECT When management improperly invoices the federal grantor for unapproved programs, there may be fewer funds available for the approved incentive programs. For example, as of March 2025, management had exhausted all its federal nurse retention grant funds for its Clarksville home because they included the new-hire retention bonuses. Furthermore, management has submitted false claims to the federal grantor and may be required to pay back the improperly used funds. Federal regulations address actions that federal agencies may impose if a state entity does not comply with the U.S. Constitution, federal statutes, regulations, or the terms and conditions of a federal award. According to Title 2, Code of Federal Regulations (CFR), Part 200, Section 208(c), “Specific conditions,” these conditions may include (1) Requiring payments as reimbursement rather than advance payments; (2) Withholding authority to proceed to the next phase until receipt of evidence of acceptable performance; (3) Requiring additional or more detailed financial reports; (4) Requiring additional project monitoring; (5) Requiring the recipient or subrecipient to obtain technical or management assistance; or (6) Establishing additional prior approvals. If the federal agency determines the state agency cannot remedy its noncompliance through the above actions, 2 CFR 200.339, “Remedies for noncompliance,” outlines additional actions the federal agency may take. Depending on the circumstances, these actions may include • temporarily withholding payments until the noncompliance has been corrected, • denying the use of funds, • partly or fully suspending or terminating the federal award, • suspending or debarring the agency, • declining to award additional federal funds, or • pursuing other available legal remedies. RECOMMENDATION Management should seek specific approval from VA to use the nurse retention grant funds to assist with the new-hire employee retention bonus program or use veterans’ homes funds to pay for the new-hire bonuses. Management should contact the federal grantor for guidance on how to remedy the improper billings. MANAGEMENT’S COMMENT We concur in part: While our grant application did not explicitly itemize retention bonuses, their use is consistent with the framework and intent of the grant, as defined in 38 CFR Part 53.11(b), which states the purpose is for an “employee incentive program to reduce the shortage of nurses at the TSVH.” We are also actively consulting with the VA to clarify the status of prior billings and determine the appropriate path forward if any are deemed improper. As of the date of this update, we have not received a response. AUDITOR’S COMMENT As of the date of this report, the Veterans’ Home Board's management has not received explicit approval from the VA to use the nurse retention grant funds to support the new-hire employee retention bonus program.