The Legislative Audit Committee voted to release a performance audit finding that four state-run Veterans Community Living Centers are not fiscally sustainable under current operating revenues, expenditures and resident census.

The audit, prepared by the Office of the State Auditor with contracted work by MGT Impact Solutions LLC, concluded “the living centers are not fiscally sustainable based on the existing operating revenues, expenditures, and patient census,” Marissa Edwards, deputy state auditor, told the committee. The committee moved and seconded a motion to release the audit and proceeded to hear the report and responses from the Department of Human Services.

The audit covered the four VCLCs operated by the Department of Human Services. Ricardo Seapin, a director with MGT, summarized the report’s structure and findings, saying the audit included an overview of the centers and a second chapter with findings and recommendations. The report identified four findings and corresponding recommendations aimed at improving financial operations.

The auditors told the committee the centers’ combined operating revenues dropped substantially: operating revenue fell about 18% between fiscal 2020 and fiscal 2023, the centers recorded a combined operating loss of more than $10.3 million in fiscal 2023, and a net loss of $388,000 in fiscal 2024. The audit said the primary driver of revenue is resident census and that census declined significantly beginning in fiscal 2020 during the COVID‑19 pandemic.

Auditors also flagged staffing and rate‑setting issues. The report noted personnel costs were about 77% of total operating expenses in fiscal year 2024 and personnel costs increased roughly 26% between fiscal years 2019 and 2024 while resident census fell by about 21% over the same period. The auditors found errors and omissions in the budgeting process, including use of incorrect or outdated reimbursement rates in the fiscal 2024 budget.

Department leaders at the table agreed with most findings and described steps underway. Executive Director Barnes of the Department of Human Services told the committee the department “fully agree[s] with 3 of the 4 audit findings and are partially agree[able] with the fourth,” and described work already under way on fiscal management and oversight. Erin Wester, office director for adult aging and disability services, said the division was improving marketing, outreach and community engagement and planned implementation of parts of its marketing and outreach plan by March 2026; she said an analysis of the feasibility of offering adult day health care as an additional revenue stream was scheduled for completion by January 2026.

On staffing, Ryan Bermude, director of the division that oversees the VCLCs, told the committee the centers rely on a mix of permanent state employees, temporary employees and agency staff to meet federal and state staffing requirements; he said agency staff are two to three times more expensive than state employees. Bermude and Wester said the division is developing written processes to forecast staffing needs and account for resident acuity; Wester said that work would be completed by April of the year specified in the presentation.

Committee members questioned timeframes and thresholds. Representative Brooks asked when the centers must demonstrate financial viability to retain enterprise status under the Taxpayer Bill of Rights; deputy state auditor Edwards replied that enterprise status is determined annually and that the centers must meet the TABOR enterprise test each fiscal year by June 30 as part of the financial audit. Senators and representatives on the committee also asked about occupancy comparisons with other long‑term care facilities and about the impact of union requirements on minimum staffing (PPD) that began in January 2023.

The audit recommended: develop and implement comprehensive marketing plans and partnerships to increase census; incorporate accurate payer rates into budgeting and document the review process; develop forecasting processes for staffing that reflect resident acuity and census; and evaluate the veteran population near centers when setting census goals and pursue partnerships to increase referrals. Department officials agreed with most recommendations and gave target dates for implementing specific items.

The committee released the audit for public distribution after the motion to release was moved by Senator Michaelson Janae and seconded by Senator Belton; the committee proceeded with the presentation and discussion following that vote.

The audit noted potential consequences if centers cannot regain financial sustainability, including potential loss of TABOR enterprise status and the possibility of center closures that would require residents to find other accommodations. Department officials said they are pursuing marketing, partnership and staffing changes intended to improve census and financial performance.

The committee asked auditors and department staff for follow‑up on implementation progress and timelines; department leaders cited several milestones (January 2026 and March/April target dates for specific actions) and said they have already rebranded marketing materials, increased outreach at veteran organizations and were developing standardized financial reporting tools for budgets.