What it means
Many residents of care homes have little ability to manage cash themselves, yet they still receive small amounts of income, such as pension payments, allowances or gifts from family. A resident can ask the facility to hold this money for safekeeping.
The facility then keeps a record for each person, takes in deposits and pays out money when the resident asks for it or for items they have agreed to buy. In the United States, federal rules for facilities taking part in Medicare and Medicaid require that the facility not force residents to deposit their money, and that if a resident chooses to do so, the funds are held, safeguarded and accounted for properly.
The money must be kept separate from the facility's own operating funds, and larger balances are typically expected to earn interest for the resident. Other countries have their own regulations, but the principle of protecting the resident's money is much the same.
Good controls are essential. A well-run facility keeps an individual ledger for every resident, requires signed authorisation for withdrawals, reconciles the bank account to the ledgers every month and gives each resident or their representative regular statements.
It also separates duties, so that the person who handles cash is not the one who approves and records the entries. When a resident leaves the facility or passes away, the facility must return the balance promptly to the resident or to the estate or legal representative, usually within a time limit set by regulation.
Many facilities also carry a surety bond or equivalent protection to cover losses from theft or error. For owners, auditors and regulators, the trust fund is a high-risk area precisely because the amounts are small and the oversight can be weak.
Misuse of resident funds, even through poor record keeping rather than theft, can lead to fines, loss of licence and reputational damage.
In practice
Real-world examples.
Example
A resident asks the business office to hold $300 a month of her pension for personal spending. The office records each deposit and withdrawal in her ledger and gives her a statement every quarter.
Example
A care home administrator receives a $500 cash gift for a resident from his daughter. Rather than keeping it in a drawer, the administrator deposits it into the trust account and issues a receipt to the family.
Example
A care home's external auditor tests the resident trust fund by comparing the bank balance with the total of all individual ledgers. A $240 difference is traced to a withdrawal recorded in the wrong resident's account and corrected.
Formula
Calculation
Ending balance = Opening balance + Deposits + Interest earned - Withdrawals
Suppose a resident's account has an opening balance of $4,200 at the start of the month. During the month, $1,800 of pension income is deposited, $6 of interest is earned and $1,350 is withdrawn for clothing, a dental visit and personal supplies. Ending balance = $4,200 + $1,800 + $6 - $1,350 = $4,656, which should match the resident's ledger and be included in the facility's bank reconciliation.Case study
Seen in the real world.
Willowbrook Care Home is a fictional facility with 90 residents, around 35 of whom had personal funds held by the facility. A new finance manager noticed that the trust bank account had not been reconciled for four months and that the total of the resident ledgers was $1,900 higher than the bank balance.
She traced the gap to several cash withdrawals that had been paid out without signed receipts. The administrator agreed to cover the shortfall from the home's own funds, and the manager introduced a monthly reconciliation reviewed by a second person, signed withdrawal slips and quarterly statements for every resident.
In this illustrative story, the next regulatory inspection found no issues with the trust fund. The finance manager also trained the front desk staff on the rules, because most errors in these accounts begin with small, well-meant shortcuts rather than deliberate wrongdoing.
Watch out
Common mistakes.
- Mixing resident money with the facility's operating funds. Resident funds must be kept separate and never used for the facility's own expenses.
- Skipping the monthly reconciliation. Without it, errors and losses can go undetected for months.
- Paying out cash without documentation. Every withdrawal should have a signed request or receipt that links to the resident.
Questions
People also ask.
Must a resident use the trust fund?
No, in the United States facilities generally cannot require residents to hand over their money, so the choice belongs to the resident or their representative.
What happens to the balance when a resident dies?
It is returned to the estate or legal representative, normally within a time period set by regulation.
Who can see the account records?
The resident, their legal representative and regulators can generally ask for the information.
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