Posted in the Searcy Forum
#1 Oct 30, 2012
CPA: Health Resources of Arkansas of Batesville in Financial Trouble
by Associated Press
22 hours ago
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BATESVILLE - A Batesville-based behavioral health services provider faces closure after its accountant said the nonprofit is in debt to the Internal Revenue Service and isn't bringing enough money to cover its obligations.
Certified public accountant Michele L. Kemp of Little Rock said the pension plan for Health Resources of Arkansas is also underfunded. Combined with the debt to the IRS and area banks, the corporation owes more than $6 million.
Kemp, who said previous managers of the nonprofit are responsible, said Arkansas State Police have been asked to investigate.
"We owe IRS right now, for this quarter alone,$672,000 and we owe $146,000 from the last quarter," she told the board Thursday. "The IRS has not penalized you (the board) yet for this quarter, which will be another $30,000 a month."
Kemp added that the center also hasn't paid its unemployment obligations, the Batesville Daily Guard reported.
"There's no hope right now of that trend stopping. You're five years behind, about $200,000, on your pension plan. You're five years behind on your audit," she said.
Kemp said HRA is also $5 million in debt to Citizens Bank. And that bank officials asked for an update and said they had downgraded the loan to "risky."
"The bank is nervous," she said.
HRA does business in 22 counties, with 306 employees and a total annual budget of $22 million. It offers a full range of medical and health-related services and other services such as housing in 17 counties. It provides alcohol and drug-related services only in another five counties.
Searcy Mayor David Morris, an HRA board member, said his community needs the jobs and the services that the agency provides, particularly treatment of people with drug and alcohol addictions.
"I came on board in November of last year and was told we have a rosy financial future," Morris said. "In the spring we hit an iceberg. Now every rock we turn over has two or three snakes under that rock.
"We are learning information none of us knew about. Why are we serving as a board? We need to figure how to right this ship or part it out and save it while we can," he said.
Kemp said there is evidence of fraud in the books and that the people behind it were very clever.
As an example, Kemp said a housing project in Fulton County was on the books, drawing money from the U.S. Department of Housing and Urban Development. She said the project was moved several years ago to Ash Flat in Sharp County but was also showing an account with $60,000 in it under a different tax ID number.
That's a non-existent HUD project, she said.
Kemp said state police want a detailed audit, known as a forensic audit, and the board authorized spending $200,000 to do so in hopes of determining the depth of the agency's problems.
(Copyright 2012 The Associated Press. All rights reserved. This material may not be published, rewritten, broadcast or distributed.)
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