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Managing resident personal funds

March 3, 2014
by Tom Ealey, CPA, and Marcy Corbat
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In October 2013, USA Today published several horrifying stories on theft from nursing home residents, focusing on theft of and errors in resident personal fund accounts. 

These stories highlighted that some long-term care (LTC) operators are not implementing critical controls, specifically controls required on all personal fund accounts,1 and the basic financial internal controls needed in all businesses.

One of the stories references 1,500 survey citations on resident personal accounts, with 100 of them being large thefts. How does this happen? We know everyone is busy with little time for checking and double checking. And, assumptions about performance are made too easily.


Nursing home residents supported by Medicaid are entitled to maintain a small personal funds accounts, to be used for personal preference items. Many facilities also manage personal funds for Medicare and privately funded residents.

The monthly amount and the allowable maximum depends on state regulations. The fiduciary standards are found in federal and state regulations and in state theft laws.2

Residents are not required to entrust personal funds to the facility, but many do. Residents often have no one willing or able to maintain the funds. Most do not have a formal guardian, many have no formal general power of attorney, and many cannot depend on family either to maintain the funds or to do the shopping. Many residents do not have the cognitive ability to maintain or monitor their personal funds. These factors create inherent financial vulnerabilities.

The operational details for compliance can be found in the state regulations. If a facility has been cited previously on this issue, strict compliance becomes even more important.


A Medicaid resident has the right to a small personal allowance each month, usually from his/her Social Security income, to use for personal purposes. The resident may entrust the funds to the facility, but is not required to do so. The facility is required to accept and serve as fiduciary for those residents. The allowable amount is set by the state.

A resident who is self-financing may also choose to have the facility serve as fiduciary. This requires an enhanced set of policies and should be approached with caution.

The resident has wide latitude in selecting personal purchases. Just about anything is allowable if the resident can afford the product or service and it does not violate physician orders.

The facility cannot use the personal funds to purchase supplies or services that must be provided by the facility. State regulations specify which items must be provided by the facility and that cannot be purchased with personal funds.


The facility reimbursement is to cover a wide range of necessities (but not luxuries) for the resident, specified in state regulations. A typical list of necessities covered by the facility would include nursing services, meals and standard snacks, activities, cleaning, personal hygiene items, medical supplies, utility costs (excluding optional cable TV), therapy or podiatry services, standard telephone access and others.

When in doubt, it is safer for the facility to cover some or all of the costs of the products. The facility is required to provide personal hygiene items, but many residents have personal preferences. A written shopping list from the resident should be kept with the receipt. There is no requirement for the resident to use the money wisely, just legally and without endangering themselves.

Gifts to staff members should be discouraged, but some residents insist on giving small gifts (and refusing could be hurtful). Large gifts cannot be allowed.

The facility is not required to cover money shortages until the next month, but some facilities will allow small negative balances and settle with next the month’s deposit. Facilities should be cautious about this practice.


Residents should have access to their resident funds and records during normal business hours, Monday through Friday, excepting holidays. A “reasonable accommodation” standard will be acceptable.

Many facilities make group shopping trips on a regular basis, often by someone in the activities or social services departments, making a list for each resident and doing all of the shopping (weekly, bi-weekly, monthly).

A facility’s own gift shop or store should sell items at or very near cost, to eliminate any appearance of a profit motive, unless the profits are going to the residents' council or some fundraiser approved by the residents' council.

If the facility allows special services such as enhanced cable TV, landline phones, etc., the facility should supervise any on-site work by the vendor. Service calls may be more problematic, especially on weekends.


What to do with residents who are not able to make spending decisions? Due to the “excess funds” problem of accumulating more than $1,500—a problem that can impact any Medicaid resident—the money must be spent.

If possible, a spouse, close next of kin, power of attorney or guardian should collaborate with social services staff on how to reduce the personal funds account in a proper or at least reasonable manner.

If there is no available advocate or representative for the resident, the burden will likely fall on social services. Consult state regulations and possibly the long-term care ombudsmen for guidance. The more transparent the process, the safer for all parties.