A cashier may have stolen $6,800 or more from at least 20 residents at the state-owned Minneapolis Veterans Home over 18 months, the Minnesota legislative auditor said on Thursday in a special report.

The cashier, a longtime employee, had been given "incompatible duties" allowing him to accept, account for and prepare bank deposits for about $10.5 million in cash, checks and other funds on behalf of residents in the 18 months on which the audit focused. Promised internal spot audits never occurred, the report said.

"It wasn't like they hadn't been warned," said Mike Hassing, who supervised the special audit looking for fraud. His broader audits in 2008 and 2010 noted that this exact problem could occur.

The home, which now says it has tight controls in place, sought the special audit on July 6, a day after relatives of a resident notified the home of an apparent discrepancy in the resident's account. The audit covered January 2010 through June 2011.

The employee, who was not identified in the report, was on leave during the audit, Hassing said.

State Veterans Affairs Commissioner Larry Shellito said the department's internal investigation is continuing and would not say whether the man still works at the home.

The legislative auditor's finding was sent to the state attorney general and Hennepin County attorney, who will decide whether to pursue civil or criminal charges, spokesmen for the two agencies said.

The Minneapolis home, with 341 nursing home and boarding-care residents, has struggled on and off for years with both care issues and financial controls. In November 2007, after scores of rule violations and several deaths at the home, Gov. Tim Pawlenty disbanded a governance board he had appointed and transferred the five-home system to the Minnesota Department of Veterans Affairs.

The Minneapolis home has made dramatic improvements since then in resident care, said Darcy Miner, who supervises nursing home inspections for the Minnesota Department of Health.

Inspectors, she said, are finding fewer infractions and "a noticeable improvement in morale and care over the years." An annual inspection in September found three infractions, compared to an average of seven in Minnesota nursing homes. Last year there were 18 violations.

'Still have more to do'

"I'm very proud of the people at the home and the actions we've taken, both to improve our internal [financial] controls and to make sure we're giving our veterans the very best care we can," said Shellito, who became commissioner in January. "But we still have more to do."

Shellito is conducting a second national search to replace Deputy Commissioner Gil Acevedo, credited with many improvements at the Minneapolis home, who left the department to join a long-term care nonprofit earlier this year.

Legislative audit reports since 2005 have warned of lax controls that might not detect waste and fraud, including potential problems in the home's business office.

The facility "was taking some action earlier, but not enough," Hassing said. He said he has not reviewed whether new controls put in place will do the job.

In this case, auditors found that the cashier at times would collect checks and cash to pay for care or to provide personal funds for residents. He apparently would deposit checks but not always the cash -- in once case, depositing a $16.69 check but not $1,396.69 in cash for the same resident.

Since he had control of the money and the accounting, the problems did not come to light until families spotted errors in residents' accounts.

"The home had an unacceptable risk that error fraud could occur without detection," the report said. "As a result, the home was dependant on residents or their representatives to monitor the accuracy of financial activity ... [and that] is not acceptable."

Another $16,500 in residents' money was deposited weeks or months after it was received, the audit said, "which could be an indication of fraud" in which new receipts were used to cover money taken in the past.

To read the legislative auditor's report, go to www.auditor.leg.state.mn.us.

Warren Wolfe • 612-673-7253