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 of New York Health Science Center of Brooklyn University Hospital of the State University of New York Upstate Medical Center SUNY Board of Trustees SUNY Board of Trustees 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 obtain 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 responsibilities of those charged with governance in overseeing the financial reporting ibili i f h h d i h i i h fi i l i process.

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

Required Communications Required Communications with those Charged with Governance with those Charged with Governance g 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 of 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.

Required Communications Required Communications with those Charged with Governance with those Charged with Governance g Management Judgments and Accounting Estimates, Continued  Certain financial statement disclosures are particularly sensitive because of their significance to financial statement users. The most sensitive disclosures affecting i ifi fi i l Th i i di l ff i the financial statements were:  Brooklyn  The disclosure of the acquisition of Long Island College Hospital in note 1.  Th di  The disclosure of going concern matters in note 2b. l f i tt i t 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.

Required Communications Required Communications with those Charged with Governance with those Charged with Governance g 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 of $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.

Required Communications Required Communications with those Charged with Governance with those Charged with Governance g 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 net revenue charge postings for LICH. t h ti f LICH