By Deb Murphy
How would you feel if you found out your bottom line was $1.3 million less than you’d anticipated?
That was the crux of the auditor’s report to the Northern Inyo Hospital Board of Directors at last Wednesday’s meeting. The board took it pretty well, having been forewarned by Chief Executive Officer Victoria Alexander-Lane.
In reality, the $1.3 million, along with an additional $5.5 million over the last five years, is still there, safely tucked away to service the hospital’s Capital Appreciation Bonds in 2020. The funds simply had not been properly included as a liability in past audit reports.
The total, $6.8 million, is an accrued liability on the hospital’s bond issue. Capital Appreciation Bonds differ from the more common General Obligation Bonds in the way the interest and principal are paid back, according to Jeff Johnson, CPA title with Wipfli CPA and Consultants based in Wisconsin. Capital Appreciation Bonds are issued at a discount, making them more attractive to investors according to Johnson. The interest payments start when the bonds come due. That due date is 2020, so for the next six years, $1,326,585 will not show up on the hospital’s net position.
The auditing news wasn’t all bad news. Johnson told the board NIH’s patient days had increased by 300 days with an 8.4 percent revenue increase. The hospital’s operating margin compared favorably to other small hospitals. Just the net position, where the $1.3 million showed up, looked grim.
The report from the auditors indicated that the hospital was following private accounting standards versus government accounting standards, which is why the interest was not accounted for properly. The question I would want answered is why on earth the previous CFO or auditors or anyone involved in preparing the books… Read more »
This also ought to make one question the annual report of any firm they are interested in. It seems differences in accounting methods could allow private firms to hide costs from investors, which is not a good thing.
Make sure you check for for Embezzlement too, it seems to be a common practice in Northern Inyo.
Honestly, I am not an accountant but I was told by a senior person at NIH that the auditors found the 6 million dollar mistake not the CEO. The only thing she did was hire an auditor that could find the mistake that the previous CFO and auditors missed for… Read more »
Who do you think identified the need for new auditors? It certainly wasn’t the prior CEO/CFO that used the SAME auditors for years and years! It makes no difference if she’s a nurse or not. It was her job to to identify areas that needed attention. Homeowners in the area… Read more »
I think you need to recheck your numbers. The parenthesis around the 5.5 million appears to me to be a shortfall. I believe because it was discovered this year, this is the first year that the bond Interest has been set aside. Please verify this information. It would be vital… Read more »