[PPT] - Alameda Health System Audit Committee Thank you for your continued PowerPoint Presentation

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2019 Audit Planning Presentation Alameda Health System

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Alameda Health System

Audit Committee

Thank you for your continued engagement of Moss Adams LLP, the provider of choice for health care organizations. We are pleased to present our audit plan for Alameda Health System for the year ending June 30, 2019. We would also like to discuss current-year developments and auditing standard changes that will affect our audit. We welcome any questions or input you may have regarding our audit plan and we look forward to working with you.

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Your Dedicated Team

Brian Conner

Partner Engagement Reviewer

Liz Dollar

Partner Foundation Concurring Reviewer

Katherine Jackson

Partner Concurring Reviewer

Rich Croghan

Tax Partner

Other Team Members: Kinman Tong

Single Audit Reviewer

Elizabeth Lasnier

Audit Manager

Headshot goes here

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Later

Significant audit findings
Qualitative aspects of accounting practices
Difficulties encountered in performing the audit
Corrected and uncorrected misstatements
Management representations
Management consultations with other independent accountants
Other audit findings or issues

Required Communications to Those Charged with Governance

Now

Auditor’s responsibility under U.S. auditing standards and

Government Auditing Standards

Planned scope and timing of audit

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To express our opinion on whether the consolidated financial statements prepared by management with your oversight are fairly presented, in all material respects, and in accordance with U.S.

GAAP. However, our audit

does not relieve you or management of your responsibilities.

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Our responsibility under U.S. Generally Accepted Auditing Standards and Government Auditing Standards.

Our Responsibility

To perform an audit in accordance with generally accepted auditing standards issued by the AICPA, Government Auditing Standards issued by the Comptroller General of the United States, and the California (CA) Code of Regulations, Title 2, Section 1131.2, State Controller’s Minimum Audit Requirements for CA Special Districts, and design the audit to obtain reasonable, rather than absolute, assurance about whether the consolidated financial statements are free

f material misstatement.

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To consider internal control over financial reporting and internal control over compliance as a basis for designing audit procedures but not for the purpose of expressing an

pinion on its

effectiveness or to provide assurance concerning such internal control.

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To communicate findings that, in our judgment, are relevant to your responsibilities in

verseeing the financial

reporting process and administering federal

awards. However, we are

not required to design procedures for the purpose of identifying

ther matters to

communicate to you.

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Audit Process

Includes information technology Revenues and expenses Trends, comparisons, and expectations Confirmation of account balances Vouching to supporting documentation Representations from attorneys and management Examining objective evidence

Analytical Procedures Internal Controls Substantive Procedures

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How It’s Calculated:

Using certain quantitative (e.g., total assets) and qualitative

factors (e.g., covenants, expectations, or industry factors)

It’s Used To Identify:

Significant risk areas
Nature, timing, extent, and scope of test work
Findings or misstatements

What is Materiality?

The amount of a misstatement that could influence the economic decisions of users, taken

n the basis of the

consolidated financial statements.

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Patient accounts receivable and net patient service revenue
Receivables and payables with the County
Supplemental revenue program revenues and related balance sheet accruals
Medicare settlements
ACERA and other retirement plans
Self insured portion of insured reserves
Federal compliance under Uniform Guidance

Significant Audit Areas

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How we gather information to identify fraud-related risks of material misstatement:

Brainstorm with team
Conduct personnel interviews
Document understanding of internal control
Consider unusual or unexpected relationships identified in

planning and performing the audit

Procedures to be performed:

Examine general journal entries for nonstandard transactions
Evaluate policies and accounting for revenue recognition
Test and analyze significant accounting estimates for biases
Evaluate the business rationale for significant unusual

transactions

Consideration of Fraud

Auditors must consider fraud to “improve the likelihood that auditors will detect material misstatements due to fraud in a financial statement audit.”

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Non-attest services:

Assist in drafting of the consolidated financial statements of

Alameda Health System, excluding Management’s Discussion and Analysis

Tax preparation services

Deliverables

We will issue the following reports:

Audit reports on the consolidated financial statements of

Alameda Health System as of and for the year ended June 30, 2019

Report to those charged with governance

➢ Communicating required matters and other matters of interest

Report to management and the audit committee

➢ Communicating required internal control related matters identified during the audit

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Timeline

JUNE 4 -7 Interim audit procedures on site JUNE 13 Audit Committee meeting Planning presentation AUGUST 5 Year-end audit fieldwork Single audit SEPTEMBER 16 Year-end audit fieldwork Alameda Health System SEPTEMBER 27 All adjusting entries finalized NOVEMBER 14 Audit Committee meeting Exit presentation 2019

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Accounting Standards Update

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GASB 85 | Omnibus 2017

New Standards

This Statement addresses a variety of topics including issues related to blending component

units, goodwill, fair value measurement and application, and postemployment benefits (pensions and other postemployment benefits [OPEB]).

This Statement addresses the following topics (and others):

1. Blending a component unit in circumstances in which the primary government is a business-type activity that reports in a single column for financial statement presentation. 2. Reporting amounts previously reported as goodwill and “negative” goodwill 3. Timing of the measurement of pension or OPEB liabilities and expenditures recognized in financial statements prepared using the current financial resources measurement focus 4. Recognizing on-behalf payments for pensions or OPEB in employer financial statements

Effective for reporting periods beginning after June 15, 2017. Earlier application is

encouraged.

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GASB 86 | Certain Debt Extinguishment Issues

New Standards

The primary objective of this Statement is to improve consistency in accounting and financial

reporting for in-substance defeasance of debt by providing guidance for transactions in which cash and other monetary assets acquired with only existing resources—resources other than the proceeds of refunding debt—are placed in an irrevocable trust for the sole purpose of extinguishing debt.

This Statement also improves accounting and financial reporting for prepaid insurance on debt

that is extinguished and notes to financial statements for debt that is defeased in substance.

Effective for reporting periods beginning after June 15, 2017. Earlier application is

encouraged.

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GASB 84 | Fiduciary Activities

New Standards

Clarifies fiduciary activities as having the following characteristics:

Would require stand alone business-type entities (i.e. hospitals) with pension and OPEB trusts
r patient custodial accounts to report separate fiduciary fund financial statements within the

financial statements.

Effective for reporting periods beginning after December 15, 2018. Earlier application is

encouraged. 1. Government controls the assets of the activity. 2. Those assets are not derived solely from the government’s own source revenue. 3. One of the following: ➢ The assets result from a pass-through grant or trust agreement. ➢ Assets are used to benefit individuals not typical recipients of the government’s goods and services (i.e. employees receive the benefit instead of patients.) ➢ Assets are to be used to benefit other organizations or governments.

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GASB 88 | Certain Disclosures Related to Debt, including Direct Borrowings and Direct Placements

New Standards

Objective to improve consistency and sufficiency of debt disclosures.
Defines debt as a liability arising from a contractual obligation to pay cash or other assets in

lieu of cash to settle an amount fixed at the date the contractual obligation is established. For disclosure purposes, debt does not include leases as leases should follow disclosure requirements outlined in GASB 87.

Requires the following additional disclosures: 1) Amount of unused line of credit; 2) assets

pledged as collateral for debt; 3) Significant debt terms such as events of default with finance- related consequences, termination events with finance related circumstances, and subjective acceleration clauses.

Note disclosures should separate information for direct borrowings from direct placements of

debt.

Effective for reporting periods beginning after June 15, 2018. Earlier application is

encouraged.

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GASB 90 | Majority Equity Interests (an amendment of GASB Statement No. 14 and No. 61)

New Standards

Governments that acquire a majority interest in a separate organization as an investment (i.e.

has the ability to generate its own cash flow and was acquired for the primary purpose of generating income/profit) should measure the investment using the equity method.

Special-purpose governments engaged only in fiduciary activities (i.e. a benefit or pension

plan) should measure the investment at fair value.

Governments that acquire a majority interest that does not meet the definition of investment

should report the separate organization as a component unit.

Governments that acquire 100% equity interest that meets the criteria of a component unit

should follow guidance of a government combination in GASB 69.

Effective for reporting periods beginning after December 15, 2018. Earlier application is
encouraged. Should be applied retroactively with the exception of bullets 3 and 4 above that

should be applied prospectively.

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GASB 87 | Leases

New Standards

Would treat all leases as financings (no classification of capital v. operating) similar to FASB

ASU 2016-02.

Includes non-cancellable period + periods covered by options to renew if reasonably certain to

be exercised.

Lessee would record an intangible asset (amortized over the shorter of its useful life or lease

term) and present value of future lease payments as a liability.

Lessor would record a lease receivable and deferred inflow of resources for cash received up

front + future payments (revenue recognized over lease term in a systematic and rational basis).

Effective for reporting periods beginning after December 15, 2019. Earlier application is

encouraged.

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GASB 89 | Interest Cost Incurred before the End of a Construction Period

New Standards

Interest incurred during construction of an asset that was once eligible for capitalization must

now be expensed as a period cost. The only exception applies to regulated entities (rate setting agencies such as utilities).

The objective was to enhance comparability for the cost of borrowing and simplify the

accounting.

Respondents to the Exposure Draft argued that stand-alone business type entities (like

hospitals) would no long be comparable to non-governmental counterparts; however, GASB decided not to establish separate objectives for general government vs. business-type activities.

Effective for reporting periods beginning after December 15, 2019. Earlier application is
encouraged. The Statement should be applied prospectively.

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On the Horizon – Exposure Drafts and Preliminary Views

Financial Reporting Model Improvements – Proposes defining “operating” vs. “non-
perating” activities; proposes requiring combining financial statements as supplementary

information for blended component units; proposes classification of government-wide expenses by function or program.

Revenue and Expense Recognition – Better differentiates exchange from non-exchange

transactions; proposes a uniform revenue recognition standard with 3 models to be evaluated.

Conduit Debt Obligations – Would define a conduit debt obligation and would eliminate the

existing option for issuers to report conduit debt as their own obligations. The proposed standard would require annual evaluation of whether certain criteria were met to classify the

bligation as conduit debt – if not met the obligation would then be required to be reported as
debt. The standard also proposes the requirement to disclose general information about

conduit debt such as the aggregate outstanding principle and a description of each type of

commitment. Proposed effective date would be for reporting periods beginning after

December 15, 2020.

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About Moss Adams

SLIDE 22 22 Crater Lake— A monument to perseverance, North America’s deepest lake filled to 1,949 feet over 720 years. Grand Canyon— At 277 miles long and up to 18 miles wide, this icon serves as a testament to determination and time.

Reach Expertise

106

years in business

3,200+

professionals

30+

industries served

25+

locations west of the Mississippi

100+

countries served through Praxity, AISBL

$690M

in revenue earned Data as of January 2018

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National Health Care Practice

Increased federal and state regulations and shifting patient populations create an opportunity for fresh perspectives and novel approaches to effectively

perating in the marketplace. Solve your most complex

challenges by engaging a team that understands the unique obstacles you face, backed by decades of experience in health care. Health care is one of the firm’s largest practice areas, and we’ve built a strong team of 275 professionals who provide industry-related accounting, auditing, and consulting services to over 2,500 clients that span the health care continuum. We provide solutions, not just services, and will keep you up to date with industry changes. Data as of March 2019

Industry Expertise

Crater Lake— A monument to perseverance, North America’s deepest lake filled to 1,949 feet over 720 years.

275+

health care professionals

39

health care partners

2,500+

clients nationwide Leadership involvement with AICPA Health Care Expert Panel and HFMA National Principles and Practice Board Participation in 30+ national, regional, and state health care industry events

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Hospitals & Health Systems

Moss Adams has a dedicated Hospitals Practice serving more than 390 hospitals and hospital systems, ranging in size from 15 to over 1,000 beds, across the nation. Our work extends well beyond traditional accounting services and includes consulting and assistance on an array of issues in health care financial management. We leverage our deep knowledge of the national marketplace and local competitive environments to provide customized solutions that make a difference to your organization. Who we serve:

Integrated health systems
Tertiary care teaching hospitals
Hospital districts
University-based hospitals
Community and sole community hospitals
Critical access hospitals
Pediatric hospitals
For-profit and not-for-profit organizations

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Health Plans, Insurance & Risk- Bearing Organizations

In today’s health care landscape, managed care risk-bearing organizations (RBOs) come in many different forms including health plans, accountable care organizations, independent physician associations, and integrated delivery networks. We serve the needs of over 200 clients ranging in size and structure from large, billion-dollar member insurers to small, captive insurers. In addition to tax and assurance services, we also focus

n operational and systems infrastructure, and our services and knowledge of the insurance

managed care market have been used for numerous litigation matters involving payers and

providers. There’s opportunity for fresh approaches due to mounting financial pressures affecting

profitability, increased federal and state regulations, and shifting patient populations. Listed in 2019 Best's Review of Top 25 Audit and Actuarial Firms, and ranked 15th of Health Auditors Moss Adams is backed decades of experience in risk-based health care, our professionals understand the unique obstacles you face and can help solve your most complex challenges. Who we serve:

HMOs
Insurance exchanges
Exclusive provider
rganizations
Risk pools
Self-ensured pools
TPAs
Medicare Advantage plans
Medicaid health plans
ACOs
CCOs
Knox-Keene plans
Dental plans

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Ancillary Health Care

Change: In health care it’s a phenomenon that’s having a profound effect on not just hospitals and physician associations but also providers across the entire spectrum of care. As you navigate new delivery models and evaluate alternatives, are you positioning your organization for future success? Moss Adams works with a variety of specialty health care organizations. Just as we do for our more than 675 ancillary health care clients, we can help you anticipate your needs and deliver solutions designed to bolster your organization’s underlying financial and operational fundamentals. Who we serve:

Behavioral health
ACOs
Ambulatory surgery centers
Community health centers
Health care focused private equity firms
Imaging centers
Pharmacies
Wound centers
Physical therapy clinics

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Long-Term Care

More than 170 long-term care organizations across the nation rely on us for help with some of their most important decisions. We strive to offer an exceptional level of health care expertise as well as the personal, partner-level attention you’ve come to expect. And like our clients, we’re active in the long-term care community—we’re members of several industry associations, including LeadingAge, the American Health Care Association, the National Investment Center, and many of their affiliated state organizations. Decades of experience, up-to-date knowledge, and a personal approach that’s customized to your specific needs: These are just a few of the reasons we’re more than just accountants to our clients—we’re their trusted business resources. Who we serve:

CCRCs
Skilled nursing facilities
Retirement centers
Hospital-based home health agencies
HUD facilities
Assisted living

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Medical Groups & Physicians

Your practice is unique. You work hard to deliver the highest quality service to patients at an affordable cost while trying to maintain your business margins. Like the way you care for a variety of patients, we serve a wide range of medical groups and physician practices. From small clinics with only a few physicians to large integrated groups with several hundred, we have the experience to help you focus on what’s important: your

patients. In addition, we’ve worked with several faculty practice groups affiliated with large universities. In

working with nearly 1,000 medical group and physician practices, our team understands the regulatory and

perational issues medical groups face and can provide you with best practices and identify opportunities for

improvement. Solutions we provide:

Benchmarking
Business financial planning
Regulatory cycle management, assessment, and implementation
Succession planning
Strategic business planning

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Insights & Resources

In today’s fast-paced world, we know how precious your time is. We also know that knowledge is key. We’ll keep you informed to help you stay abreast of critical industry issues. Moss Adams closely monitors regulatory agencies, participates in industry and technical forums, and writes about a wide range of relevant accounting, tax, and business issues to keep you informed. We also offer CPE webinars and events which are archived and available on demand, allowing you to watch them on your time.

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You’re invited

November 7-8, 2019

Red Rock Resort & Casino Las Vegas, Nevada

James Carville Famed liberal campaign consultant, political author, and commentator Susan Dentzer Senior health care policy expert, author, and journalist Karl Rove Iconic conservative political strategist, pundit, and op-ed contributor for The Wall Street Journal Jeff Flake Former U.S. Senator from AZ Executives and members of the C-suite in health care, life sciences, technology, and venture capital Donald Crane President and CEO America’s Physician Groups John Kitzhaber, M.D. Former Governor of Oregon Named one of Modern Healthcare’s 100 Most Influential People in Healthcare

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What Do Attendees Say?

“Excellent presentations with highly relevant themes. One of the best conferences I have attended in last decade. Facility and services were excellent.” —Patrick Connell VP of Behavioral Health, Compliance, and Government Relations, Boys Town The best way to gage a conference’s value is through direct feedback from the audience and speakers. Here are a few things attendees had to say about our past annual conferences. “A very stimulating discussion…” —former US Senator Joe Lieberman Politician, lobbyist, attorney, and past conference keynote speaker “I was very impressed with the caliber of people in attendance. The Moss Adams conference gathers a group of highly dedicated professionals with a demonstrated commitment to health…to have important conversations about health care, today.” —former US Senator Tom Daschle Politician, lobbyist, and past conference keynote speaker We also invite you to view selected sessions from the 2018 conference, Disruption | Innovation | Transformation, at the link below. Click here to view selected sessions. “I was quite amazed… at the quality of the conference.” —Bill Pace CFO, Eskaton “Relevant topics with knowledgeable speakers.” —Laurie Hefty Controller, Colorado Permanenete Group “The audience is very smart. They get it.” —former US Senator Howard Dean Politician and past conference keynote speaker “Great dialogue, great structure…” —former US Speaker of the House Newt Gingrich Political leader and past conference keynote speaker “I’ve been eight times. It’s one of the best conferences every year from a content

perspective. It’s my favorite conference.”

—Warren Maxwell CFO, First Choice Health Network, Inc.

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2018 Health Care Conference

Still deciding if you’d like to attend? We’ll make it easier on you. Here’s a recap of our 2018 Health Care Conference by the numbers.

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THANK YOU

Brian Conner, Partner Ben.Mack@mossadams.com (209) 955-6114 Elizabeth Lasnier, Manager Elizabeth.Lasnier@mossadams.com (415) 677-8270