REPORT ON RESULTS OF 2011 AUDITS OF: Stony Brook University Hospital, - - PowerPoint PPT Presentation

REPORT ON RESULTS OF 2011 AUDITS OF:

Stony Brook University Hospital, Stony Brook University University Hospital of Brooklyn – State University

• f New York Health Science Center of Brooklyn

SUNY Board of Trustees SUNY Board of Trustees

University Hospital of the State University of New York Upstate Medical Center

SUNY Board of Trustees SUNY Board of Trustees Audit Committee Presentation Audit Committee Presentation October 26, 2012 October 26, 2012

Presentation Outline Presentation Outline

• Required Communications to

Required Communications to those those Charged with Charged with Governance Governance

• Highlights of Audited Financial Statements

Highlights of Audited Financial Statements

Required Communications Required Communications with those Charged with those Charged with those Charged with those Charged with Governance with Governance

Required Communications Required Communications with those Charged with Governance with those Charged with Governance g

Auditor’s Responsibility under Generally Accepted Auditing Standards

• Plan and perform an audit of the annual financial statements as of December 31, 2011 to
• btain reasonable assurance about whether the financial statements are free of material

misstatements, whether caused by error or fraud. An audit in accordance with auditing standards generally accepted in the United States of America does not provide absolute assurance relative to or any guarantee of the accuracy of the financial statements and is subject to the inherent risk that errors or fraud if they exist may not be detected subject to the inherent risk that errors or fraud, if they exist, may not be detected.

• Professional standards also require that we obtain a sufficient understanding of the

Hospitals’ internal control to plan the audits of the financial statements. However, such understanding is required for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control. Our audit procedures may identify significant deficiencies or material weaknesses in internal control which would be communicated, in writing. As a result of our audit procedures, we did not identify any significant deficiencies or material weaknesses in internal control significant deficiencies or material weaknesses in internal control.

• The auditor is responsible for communicating significant matters related to the financial

statement audits that are, in the auditor’s professional judgment, relevant to the ibili i f h h d i h i i h fi i l i responsibilities of those charged with governance in overseeing the financial reporting process.

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Qualitative Aspects of Accounting Practices

• Generally accepted accounting principles provide for the Hospitals to make

y p g p p p p accounting estimates and judgments about the accounting policies and financial statement disclosures.

• Management is responsible for the selection and use of appropriate accounting policies.
• No new accounting policies were adopted in 2011 with the exception of the adoption of
• No new accounting policies were adopted in 2011 with the exception of the adoption of

Accounting Standards Update (ASU) 2010‐23, Health Care Entities (Topic 954): Measuring Charity Care for Disclosure. The application of existing policies was not changed during 2011.

• We noted no transactions entered into by the Hospitals during the year for which there is

a lack of authoritative guidance or consensus.

• All significant transactions have been recognized in the financial statements in the proper

period.

The accounting policies used by the Hospitals are described in note 1 to the financial statements for SUNY Upstate and note 2 to the financial statements for Stony Brook and Brooklyn.

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Management Judgments and Accounting Estimates

• Accounting estimates are an integral part of the financial statements prepared by

management and are based on management’s knowledge and experience about past and management and are based on management s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because

• f the possibility that future events affecting them may differ significantly from those

expected.

• The most sensitive estimates affecting the Hospitals’ financial statements were:
• Allowances for doubtful accounts and allowances for contractual adjustments in order to present

patient accounts receivable at the net realizable amount.

• The Hospitals operate under reimbursement contracts with third parties which provide for

various retroactive and prospective adjustments and settlements.

• The Hospitals maintain insurance coverage for professional and general liability through the NYS

self insurance program. A provision is made for estimated medical malpractice claims (including estimates of the ultimate costs for both reported claims and claims incurred but not reported) based on information provided by the Office of NYS Attorney General and estimated actuarial based on information provided by the Office of NYS Attorney General and estimated actuarial

• assumptions. The Hospitals record an offsetting receivable for the same amount.
• SUNY Upstate’s actuarial assumptions used to determine the annual pension cost and net

pension obligation for the Retirement Plan for Former Employees of Community General Hospital.

• SUNY Stony Brook’s reserve on the loan to Stony Brook Business Ventures, LLC.

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Management Judgments and Accounting Estimates, Continued

• Certain financial statement disclosures are particularly sensitive because of their

i ifi fi i l Th i i di l ff i significance to financial statement users. The most sensitive disclosures affecting the financial statements were:

• Brooklyn
• The disclosure of the acquisition of Long Island College Hospital in note 1.
• Th di

l f i tt i t 2b

• The disclosure of going concern matters in note 2b.
• The disclosure of the blending of the Downstate at LICH Holding Company,
• Inc. within note 1.
• The disclosure of the SUNY line of credit in June 2012 in note 2u.
• Upstate
• The disclosure of the acquisition of Community General Hospital in note 1a.
• The disclosure of the Retirement Plan for Former Employees of Community

General Hospital in note 7. p

• Stony Brook – there were no sensitive disclosures identified during the audit.

We evaluated the key factors and assumptions used to develop these estimates in determining that they are reasonable in relation to the financial statements taken as a

• whole. The financial statement disclosures are neutral, consistent and clear.

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Corrected and Uncorrected Misstatements

• Professional standards require us to accumulate all known and likely misstatements identified

during the audit, other than those that are trivial, and communicate them to the appropriate level of management. In addition, significant adjustments recorded in conjunction with management have been disclosed:

• Upstate – the following misstatement was corrected by management:
• Capital assets and capital transfers were both increased by approximately $4m to record

additional building costs.

• Upstate – the following unadjusted differences, which are considered to be immaterial, were not

recorded by management:

• Understatement of the balance sheet of $169k and understatement of changes in net assets
• f $329k, related to net revenue charge postings, depreciation, and employee benefits

expenses.

• Stony Brook – the following entries were recorded by management:
• Other revenue and other assets were both decreased by $7m to reduce the SBBV loan to net

realizable value.

• Net patient service revenue increased and due to third‐party payors decreased by

approximately $6.4m to record settlement activity.

• Malpractice expense and accrued liability increased and state appropriations and the related

receivable increased by approximately $9.8m to adjust to the actuarial valuation.

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Corrected and Uncorrected Misstatements, Continued

• Stony Brook – the following unadjusted differences, which are considered to be

immaterial, were not recorded by management:

• Overstatement of the balance sheet of $1.1m, overstatement of operating loss of

$1.4m, and overstatement of change in restricted net assets of $2.6m, related to restricted contribution receivable, rent, depreciation and employee benefit , , p p y expenses.

• Brooklyn – the following entry was recorded in conjunction with management:
• Net patient service revenue and patient accounts receivable were both decreased

by $3m to adjust patient accounts receivable to net realizable value by $3m to adjust patient accounts receivable to net realizable value.

• Brooklyn – the following unadjusted difference, which is considered to be immaterial,

was not recorded by management:

• Understatement of the balance sheet and changes in net assets of $670k, related to

t h ti f LICH net revenue charge postings for LICH.

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Disagreements with Management

• Professional standards define a disagreement with management as a financial accounting,

ti diti tt h th t l d t ti f ti th t ld b reporting or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor’s report. We are pleased to report that no such disagreements arose during the course of our audits.

Management Representations g p

• We have requested certain representations from management that are included in the

respective Hospitals’ management representation letters.

Management Consultations with Other Independent Accountants Management Consultations with Other Independent Accountants

• In some cases, management may decide to consult with other accountants about auditing

and accounting matters, similar to obtaining a “second opinion” on certain situations. If a consultation involves application of an accounting principle to the Hospitals’ financial t t t d t i ti f th t f dit ’ i i th t b d statements or a determination of the type of auditor’s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants.

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Other Information in Documents Containing Audited Financial Statements

• With respect to the supplementary information accompanying the financial statements,

d t i i i i f t d l t d th f t t d th d we made certain inquiries of management and evaluated the form, content and methods

• f preparing the information to determine that the information complies with U.S.

generally accepted accounting principles, the method of preparing it has not changed from the prior period, and the information is appropriate and complete in relation to our audits of the financial statements We compared and reconciled the supplementary audits of the financial statements. We compared and reconciled the supplementary information to the underlying accounting records used to prepare the financial statements

• r to the financial statements themselves.

Other Audit Findings or Issues

• We generally discuss a variety of matters, including the application of accounting

principles and auditing standards, with management each year prior to retention as the Hospitals’ auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. professional relationship and our responses were not a condition to our retention.

Hi hli ht f th Hi hli ht f th Highlights of the Highlights of the Audited Financial Statements Audited Financial Statements

Highlights of the Highlights of the Audited Financial Statements Audited Financial Statements

2011 2010 2011 2010 2011 2010 2011 2010 Upstate Stony Brook Downstate Total ASSETS 972,925 985,130 663,935 617,399 832,240 781,945 2,469,100 2,384,474 LIABILITIES 617,319 637,248 586,658 512,414 997,820 671,595 2,201,797 1,821,257 NET ASSETS 355,606 347,882 77,277 104,985 (165,581) 110,350 267,302 563,217 OPERATING REVENUES 850,481 832,555 619,683 542,034 556,752 464,328 2,026,916 1,838,917 OPERATING EXPENSES 902,554 829,105 685,195 574,505 674,095 513,629 2,261,844 1,917,239 CHANGE IN NET ASSETS 7,724 31,209 (27,707) 3,047 (275,931) (12,779) (295,914) 21,477 (In thousands of $)