The Eureka Springs Hospital Commission held a special meeting last Tuesday, Sept. 23, to accept the audit performed by Forvis Mazars based out of Little Rock. Michael Westerfield of Forvis went over the 2024 audit of hospital financial statements with Mayor Butch Berry and several members of council in the audience.
In response to a question by commissioner Brian Beyler, Westerfield took time to clarify money received by the hospital during the Covid pandemic that had been labeled as a liability. He explained that the commission had taken over operation of the hospital during the period when federal funding to help hospitals function during the pandemic was being allocated. The commission received those funds but they were sent using the tax ID of the previous management company. He said it is the belief of management that those funds were used correctly for the COVID-19 pandemic, but because those funds were issued to tax ID of the predecessor there is a question of whether the funds can be retained by commission.
Westerfield said that is a legal question and because of that, Forvis has disclosed those funds as “unearned revenue” noting that because those funds could be taken back by the federal government it is considered a liability. He said once a legal opinion is rendered that money will show on the statements as income.
He noted an increase cash of approximately $1.5 million from $6 million to $7.5 million between 2023 and 2024. He said while there was an increase of cash usage of $621,000, American Rescue Plan Act funding allowed for cash to be infused back into the hospital for operations, and that difference is the reason behind the increase of cash.
Operating revenue for 2024 was approximately $5.6 million compared to $5.9 million that Westerfield said is an expected decrease due to the transition to Rural Emergency Hospital, which is offset “somewhat” by the payments the hospital receives monthly for the designation through Medicare. He also said operating expenses “were consistent” at $8.2 million in 2024 compared to $8.5 million in 2023. He said that decrease is also anticipated as the facility moves to a focus on emergency care.
Westerfield explained that in 2024 the decrease in net position was around $250,000 with an operating loss of $2.6 million and said that primary difference of operating loss to net position loss has to do with American Rescue Plan Act funding that the state had access to and was given to the hospital, partially for switching designation to REH. Chair Sandy Martin said she was “pleasantly surprised” the net position loss was only $250,000 “considering what we went through during 2024.”
After Westerfield had finished his presentation, Martin asked if they had found “anything shocking” to which Westerfield replied they had not. He explained that adjustments were normal for smaller hospitals that have limited staff. It was noted that several of the deficiencies mentioned were a result of financial system changes and had been noted and steps taken to mitigate them in previous meetings.
We should NOT be PLEASANTLY SURPRISED to Learn from the audit
That you reduced your 2024 Income statement DOWN 1,290,554
That you adjusted your revenue $756,321 due to inflation billing practices
That you had to adjust $863,000 that was spent on Architect FEES for a project that will never be actualized
That Cash account reconciliations are not being completed accurately,
That accounts payable detail is not reconciled to the general ledger.
That Cutoff of accounts payable is not adequately monitored, resulting in improper recording of invoices across accounting periods.
That- The Chief Financial Officer (CFO) has the ability to issue purchase orders, approve invoices for payments, make computer entries to generate payments, change computer entries for accounts payable and disbursements, adjust all general ledger accounts, and reconcile bank balances and accounts payable. These conflicting duties present the
risk that the CFO could issue a fraudulent purchase order and invoice, then authorize a payment and conceal the balances through reconciliations and adjustments. Despite the presence of complementary controls, including 3-waymatching in accounts payable and checks requiring the signature of two Hospital Commissioners, the CFO’s ability tocomplete all functions in the cash outflows cycle presents higher risk that fraud could be perpetrated and concealed.
AND
Lets not be Plaeasantly Surprised to know that WITHOUT SUBSIDY
Our hospital operated at a LOSS was $2,649,046