Lancaster Manor lost more than $2 million in the past two years because of bad management, state Auditor Mike Foley said Tuesday.

"The manor is losing lots of money, boatloads of money," and most of it was lost the second year of the two-year audit, Foley said as he released his report on the county-run nursing home at a news conference Tuesday.

Foley pointed to enormous billing problems, unaccountable increases in staffing during the second year of the audit and a one-time accounting maneuver as part of the reason for the "unprecedented losses."

The manor lost $300,000 in fiscal year 2008 and $1.7 million in the 2009 fiscal year, based on Foley's audit.

The audit comes as the county prepares to sell the nursing home to an Illinois company -- a proposed sale generating heated opposition from union employees and concerns from families of patients.

The losses are a new problem, Foley said.

For decades, Lancaster Manor operated in the black, paid its bills, paid off more than $9 million in bonds and was debt-free, Foley said.

But "in the last two years the bottom has fallen out," he said.

Ron Fetters was hired as the manor administrator in 2007. He succeeded Larry Van Hunnik, who held the post for more than 16 years. Fetters gave no reason when he resigned in October 2008.

There is no evidence of criminal wrongdoing, Foley said. The manor has simply not been well-run during the past two years.

"It's a question of management practices," Foley said.

Foley offered two options for stopping the money drain: Fix things the audit uncovered or sell the manor "and get a fair price."

That means getting a second, newer appraisal, Foley recommended.

But several commissioners said their previous appraiser said paying for a new appraisal would not be worth the price.

About one-third of the 2009 loss is the result of a one-time decision that the nursing home pay its allocation for services it gets from the county, or $600,000.

Only the Department of Corrections and the manor paid their share of the central costs -- like legal services, payroll, accounting and budgeting -- that year.

The manor's director at that time, Fetters, suggested the manor could afford to pay its share of the costs, said Dennis Meyer, Lancaster County budget director.

The county was having a financial crunch, so it needed the $600,000. And Fetters' budget showed the nursing home would make a lot of money in the 2009 fiscal year, Meyer said.

Instead, the manor lost $1.7 million that fiscal year.

"What we thought was a good thing blew up in our face," he said.

The manor is not paying that cost this year, he said.

The problems are not the result of the high number of Medicaid patients or intrinsic to a government-run facility, according to Foley.

Other nursing homes operate in the black with as high a percentage of Medicaid patients, he said.

County commissioners on both sides of the controversy of whether to sell the manor said the report supported their view.

"There are no surprises in this report ... absolutely none," said County Board Chairman Bernie Heier, who supports the sale.

Even though the manor operated in the black for decades, that doesn't mean the county should continue to operate it, said Commissioner Deb Schorr, who supports the sale.

The scope of long-term care has changed in the 30 years of the manor.

"Reimbursement rates changed, the type of residents has changed, too many things have changed," Schorr said.

"We can't keep doing the same thing we have always done," she said.

The manor was doing well until Van Hunnik left, said Commissioner Larry Hudkins, who opposes the sale.

"What we needed to do was hire a fully licensed, experienced person" to run the nursing home, he said.

"But the rest of the board wanted to run it in the ground and sell it," he said.

Reach Nancy Hicks at 473-7250 or nhicks@journalstar.com.