REPORT ON THE RATE SETTING AUDIT EMERALD VILLAGE POMONA, CALIFORNIA NATIONAL PROVIDER IDENTIFIER: FISCAL PERIOD ENDED DECEMBER 31, 2011

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1 REPORT ON THE RATE SETTING AUDIT POMONA, CALIFORNIA NATIONAL PROVIDER IDENTIFIER: FISCAL PERIOD ENDED DECEMBER 1, 2011 Audits Section Rancho Cucamonga Financial Audits Branch Audits and Investigations Section Chief: Julio M. Cueto Audit Supervisor: Lucia Martinez Auditor: Margarita Gamboa

2 State of California Health and Human Services Agency TOBY DOUGL DIRECTOR EDMUND G. BROWN JR. GOVERNOR May 10, 201 Lilly Daniel, President Community Education sociates, Inc. P.O. Box 908 Long Beach, CA NATIONAL PROVIDER IDENTIFIER (NPI) FISCAL PERIOD ENDED DECEMBER 1, 2011 We have examined the facility's financial records/medi-cal Cost Report for the above-referenced fiscal period. Our exa mination was made under the authority of Section of the Welfare and Institutions Code and, accordingly, included such tests of the accounting records and such other auditing procedures as we considered necessary in the circumstances. In our opinion, the data presented in the accompanying audit report schedules represent a proper determination of the allowable costs and patient days for the above fiscal period in accordance with Medi-Cal reimbursement principles. The results of our examination are as follows: COST AND COST PER DAY COST COST PER DAY Reported Cost/Cost Per Day $ 271,491 $ Net Audit Adjustment (45,74) (9.12) Audited Cost/Cost Per Day $ 225,748 $ This audit report includes the: 1. Audit Report Schedules 1 and 2 2. Audit Adjustments Schedule Future Medi-Cal long-term care prospective rates may be affected by this examination. The extent to which the rates change will be determined by the Department's Fee-For- Service Rates Dev elopment Division. Financial Audits Branch/Audits Section Rancho Cucamonga 949 Archibald Avenue, Suite 107, MS 2105, Rancho Cucamonga, CA 9170 (909) / (909) fax Internet Address:

3 Lilly Daniel Page 2 Notwithstanding this audit report, overpayments to the provider are subject to recovery pursuant to Section , Article 6 of Division, Title 22, California Code of Regulations. If you disagree with the decision of the Department, you may appeal by writing to: Chief Office of Administrative Hearings and Appeals 1029 J Street, Suite 200 Sacramento, CA (916) The written notice of disagreement must be received by the Department within 60 calendar days from the day you receive this letter. A copy of this notice should be sent to: United States Postal Service (USPS) Courier (UPS, FedEx, etc.) sistant Chief Counsel sistant Chief Counsel Office of Legal Services Office of Legal Services MS 0010 MS 0010 PO Box Capitol Avenue, Suite Sacramento, CA Sacramento, CA (916) The procedures that govern an appeal are contained in Welfare and Institutions Code, Section 14171, and California Code of Regulations, Title 22, Section 51016, et seq. If you have questions regarding this report, you may call the Audits Section Rancho Cucamonga at (909) Original Signed By Julio M. Cueto, Chief Audits Section Rancho Cucamonga Financial Audits Branch Certified

4 STATE OF CALIFORNIA DDH/DDN SCHEDULE 1 SUMMARY OF AUDITED FACILITY CENSUS AND AUDITED CLIENT COST PER DAY Provider: Fiscal Period: JANUARY 1, 2011 THROUGH DECEMBER 1, 2011 Provider NPI: SUMMARY OF AUDITED FACILITY CENSUS REPORTED AUDITED AND AUDITED CLIENT COST PER DAY 1. Medi-Cal Client Days (Adjs 14, 15) 0 1,76 2. Medi-Cal Managed Care Days (Adj 14) 1, Other Client Days (Adj ) 0 4. Total Client Days 1,624 1,76 5. Total Client Care Expenses (From Sch. 2) $ 271,491 $ 225, AVERAGE CLIENT COST PER DAY (Line 4 / Line ) $ $ SHARE OF COST 1. Share of Cost Audit Adjustment (Adj ) $ NA $ 0 OVERPAYMENTS 1. Duplicate Payments (Adj ) $ $ 0 2. Credit Balances (Adj ) $ $ 0. Total Overpayments $ 0 $ 0

5 STATE OF CALIFORNIA DDH/DDN SCHEDULE 2 SUMMARY OF AUDITED FACILITY EXPENSES Provider: Fiscal Period: JANUARY 1, 2011 THROUGH DECEMBER 1, 2011 Provider NPI: Line No. DESCRIPTION ADJ NO. REPORTED Col. 1 AUDIT ADJUSTMENT Col. 2 AUDITED Col. EXPENSES: CLIENT SERVICES Basic Facility Cost - Property Expenses 045 Depreciation and Amortization 2, $ 5,067 $ (450) $ 4, Leases and Rentals 4 8,400 (8,400) Real Property Taxes 2 0,452, Personal Property Taxes Mortgage Interest ,999 17, Property Insurance TOTAL PROPERTY EXPENSES (Lines 045 through 070) $ 4,467 $ (16,747) $ 26,720 Basic Facility Cost - General Home Expenses 080 Home Operations and Maintenance 5, 6 $ 4,458 $ (,760) $ Utilities,15, Client Transportation (excluding Adult Day Services) 1 2,556 (652) 1, Dietary 10,009 10, Personal Care and Laundry 7, 8 1,728 (1,282) TOTAL GENERAL HOME EXPENSES (Lines 080 through 100) $ 21,904 $ (5,694) $ 16, TOTAL BIC FACILITY COST (Lines 075 plus 105) $ 65,71 $ (22,441) $ 42,90 EXPENSES: DIRECT CARE STAFF COSTS 115 QMRP Salaries $ $ $ QMRP Fringe Benefits Lead Salaries 0 10 Lead Fringe Benefits 0 15 Aides Salaries 9 92,650 (17,867) 74, Aides Fringe Benefits 10, 11 17,976 (,86) 14, Other Salaries Other Fringe Benefits TOTAL DIRECT CARE STAFF COSTS (Lines 115 through 150) $ 110,626 $ (21,70) $ 88,92 Page 1 of 2

6 STATE OF CALIFORNIA DDH/DDN SCHEDULE 2 SUMMARY OF AUDITED FACILITY EXPENSES Provider: Fiscal Period: JANUARY 1, 2011 THROUGH DECEMBER 1, 2011 Provider NPI: Line No. DESCRIPTION ADJ REPORTED NO. Col. 1 AUDIT ADJUSTMENT Col. 2 AUDITED Col. EXPENSES: CONSULTANT COSTS 160 Dietician Consultant 12 $ 796 $ (72) $ Speech Pathology Consultant , Physical Therapy Consultant Occupational Therapy Consultant (8) Pharmacist Consultant (187) Nurse Consultant 12,986 (47), Psychologist Consultant Physician Consultant Recreational Consultant Social Service Consultant Other Consultant (75) TOTAL CONSULTANT COST (Lines 160 through 210) $ 6,427 $ (799) $ 5,628 EXPENSES: ADMINISTRATIVE COSTS 220 Administrative Salaries ** $ $ $ Administrative Fringe Benefits Quality surance Fees (excluding Adult Day Services) 24,665 24, Other General and Administrative*** (excluding Adult Day Services) 1 64,402 (800) 6, TOTAL ADMINISTRATIVE COST (Lines 220 through 20) $ 89,067 $ (800) $ 88,267 TOTAL COSTS RELATED TO CLIENT CARE (Lines 110, 155, 215 and 25) $ 271,491 $ (45,74) $ 225,748 (To Sch. 1) (To Sch. 1) NON-CLIENT CARE EXPENSES 240 Non-Program Services $ $ $ Adult Day Services and Related Transportation TOTAL FACILITY EXPENSES (Lines 110, 155, 215, 25, 240 and 241) $ 271,491 $ (45,74) $ 225,748 ** List only direct administrative salaries incurred at the facility level *** List allocated administrative costs on Line 20 Page 2 of 2

7 State of California Provider Name Report References Cost Report Audit Report DHS 076 Adj. Page or No. Exhibit Line Col. Sch. Line Col Fiscal Period JANUARY 1, 2011 THROUGH DECEMBER 1, 2011 Explanation of Audit Adjustments RECLSIFICATION OF REPORTED COSTS Provider NPI Adjustments Reported Increase (Decrease) Adjusted Property Insurance Client Transportation To reclassify property insurance expense to the appropriate cost center for proper cost determination. 42 CFR and CMS Pub. 15-1, Sections 200, 202.4, and $0 2,556 $652 (652) $652 1,904 Page 1

8 State of California Provider Name Report References Cost Report Audit Report DHS 076 Adj. Page or No. Exhibit Line Col. Sch. Line Col Fiscal Period JANUARY 1, 2011 THROUGH DECEMBER 1, 2011 Explanation of Audit Adjustments ADJUSTMENTS TO REPORTED COSTS Provider NPI Adjustments Reported Increase (Decrease) Adjusted Depreciation and Amortization Real Property Taxes Mortgage Interest To include cost of ownership in lieu of related party lease expenses. 42 CFR 41.17, 41.14(h), 41.20, and CMS Pub. 15-1, Sections 1005, , , 200, and 204 $5, $4,617,452 17,999 $9,684 *,452 17, Depreciation and Amortization To eliminate depreciation expense due to lack of documentation. 42 CFR and CMS Pub. 15-1, Sections 200 and 204 * $9,684 ($5,067) $4, Leases and Rentals To eliminate rental/lease expenses paid to a related party. 42 CFR 41.17, 41.14(h), 41.20, and CMS Pub. 15-1, Sections 1005, , , 200, and 204 $8,400 ($8,400) $ Home Operations and Maintenance $4,458 5 To eliminate gardener expenses due to lack of documentation. 42 CFR and CMS Pub. 15-1, Sections 200 and 204 ($718) 6 To eliminate building repair expenses due to lack of documentation. 42 CFR and CMS Pub. 15-1, Sections 200 and 204 (,042) ($,760) $698 *Balance carried forward from prior/to subsequent adjustments Page 2

9 State of California Provider Name Report References Cost Report Audit Report DHS 076 Adj. Page or No. Exhibit Line Col. Sch. Line Col Fiscal Period JANUARY 1, 2011 THROUGH DECEMBER 1, 2011 Explanation of Audit Adjustments ADJUSTMENTS TO REPORTED COSTS Provider NPI Adjustments Reported Increase (Decrease) Adjusted Personal Care and Laundry $1,728 7 To eliminate other expenses due to lack of documentation. 42 CFR and CMS Pub. 15-1, Sections 200 and 204 ($561) 8 To eliminate entertainment expenses due to lack of documentation. 42 CFR and CMS Pub. 15-1, Sections 200 and 204 (721) ($1,282) $ Aides Salaries To adjust aides salaries to agree with the payroll records. 42 CFR and CMS Pub. 15-1, Sections 200 and 204 $92,650 ($17,867) $74, Aides Fringe Benefits $17, To adjust aides benefits to agree with the payroll records. 42 CFR and CMS Pub. 15-1, Sections 200 and 204 ($2,741) 11 To adjust workers compensation to agree with provider's records. 42 CFR and CMS Pub. 15-1, Sections 200 and 204 (1,095) ($,86) $14,140 Page

10 State of California Provider Name Report References Cost Report Audit Report DHS 076 Adj. Page or No. Exhibit Line Col. Sch. Line Col Fiscal Period JANUARY 1, 2011 THROUGH DECEMBER 1, 2011 Explanation of Audit Adjustments ADJUSTMENTS TO REPORTED COSTS Provider NPI Adjustments Reported Increase (Decrease) Adjusted Dietician Consultant Speech Pathology Consultant Occupational Therapy Consultant Pharmacist Consultant Nurse Consultant Other Consultant To adjust consultant expenses to agree with the provider's invoices, payroll master list, disallow prior period expenses, and due to lack of documentation. 42 CFR 41.5, 41.20, and CMS Pub. 15-1, Sections 200, 202.1, 204, and 206 $ , ($72) 46 (8) (187) (47) (75) $424 1, , Other General and Administrative To adjust Time Warner and American Express expenses to agree with supporting documentation, and also due to insufficient documentation. 42 CFR and CMS Pub. 15-1, Sections 200 and 204 $64,402 ($800) $6,602 Page 4

11 State of California Provider Name Report References Cost Report Audit Report DHS 076 Adj. Page or No. Exhibit Line Col. Sch. Line Col Fiscal Period JANUARY 1, 2011 THROUGH DECEMBER 1, 2011 Explanation of Audit Adjustments ADJUSTMENTS TO REPORTED PATIENT DAYS Provider NPI Adjustments Reported Increase (Decrease) Adjusted Medi-Cal Managed Care Days Medi-Cal Client Days To reclassify client days to agree with the provider's census records and Fiscal Intermediary Payment Data. 42 CFR 41.20, 41.24, and CMS Pub. 15-1, Sections 2205, 200, and 204 1,624 0 (1,624) 1, ,624 * Medi-Cal Client Days Total Client Days To adjust total patient days to agree with the provider's patient census reports. 42 CFR 41.20, 41.24, and CMS Pub. 15-1, Sections 2205, 200, and 204 * 1,624 1, ,76 1,76 *Balance carried forward from prior/to subsequent adjustments Page 5