richland parish hospital service district no. 1a dba ... · hospital service district 1a parish of...

FINANCIAL STATEMENTS

HOSPITAL SERVICE DISTRICT NO. 1A

PARISH OF RICHCAND DBI»HIf LOUISIANA

SEPTEMBER 30, 2007

Under provisions of state law, this report is a publicdocument. Acopy of the report has been submitted tothe entity and other appropriate public officials. Thereport is available for public inspection at the BatonRouge office of the Legislative Auditor and, whereappropriate, at the office of the parish clerk of court

Release Date tf I $ 10%* - f 7

FINANCIAL STATEMENTS

HOSPITAL SERVICE DISTRICT NO. 1A

PARISH OF RICHIAND, DELHI, LOUISIANA

SEPTEMBER 30, 2007

TABLE OF CONTENTS

STATEMENT PAGE

Independent Auditor's Report

Statement of Net Assets

Statement of Activities

Statement of Cash Flows

Notes to the Financial Statements

Supplemental Information:

Patient Service Revenues

Other Operating Revenues

Professional Services

General and Administrative Services

Governing Board Expenses

Report on Internal Control Structure and Compliance

A

B

C

SCHEDULE

1

2

3

4

5

i1

2 - 3

4

5

6 - 1 3

14 - 15

16

17

18

19

20 - 25

INDEPENDENT AUDITOR'S REPORT

Board of CommissionersHospital Service District No. 1AParish of RichlandDelhi, Louisiana

We have audited the financial statements of Hospital Service District No. 1A, dba RichlandParish Hospital (Hospital), a component unit of the Richland Parish Police Jury, State ofLousiana, as of September 30, 2007, and the year then ended. These financial statementsare the responsibility of the Hospital's management. Our responsibility is to express anopinion on these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards of theUnited States and Government Auditing Standards, issued by the Comptroller General of theUnited States and the Lousisiana Government Audit Guide, Those standards require that weplan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatements. An audit includes examining, on a testbasis, evidence supporting the amounts and disclosures in the financial statements. Anaudit includes assessing the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall financial statement presentation. Webelieve that pur audit provides a reasonable basis for our opinion.

In our opinion, the component unit financial statements referred to above present fairly,in all material respects, the financial position of Hospital Service District No. 1A,Parish of Richland, a component unit of the Richland Parish Police Jury, State ofLouisiana, at September 30, 2007, and the results of its operations and its cash flows forthe year then ended in conformity with accounting principles generally accepted in theUnited States of America.

In accordance with Government Auditing Standards/ we have also issued our report datedMarch 20, 2008, on our consideratin of the Hospital's internal control over financialreporting and our tests of its compliance with certain provisions of laws, regulations,contracts, and grant agreements and other matters. The purpose of that report is todescribe the scope of our testing of internal control over financial reporting andcompliance and the results of that testing and not to provide an opinion on the internalcontrol over financial reporting or on compliance. That report is an integral part of anaudit performed in accordance with Government Auditing Standards and should be read inconjuntion with this report in considering the results of our audit.

Our audit was made for the purpose of forming an opinion on the basic financial statementstaken as a whole. The supplementary information included in Schedules 1 through 5 ispresented for purposes of additional analysis and is not a required part of the basicfinancial statements. Such information has been subjected to the auditing proceduresapplied in the audit of the basic financial statements and, in our opinion, is fairlystated in all material respects in relation to the basic financial statements taken as awhole.

The Hospital has not presented Management's Discussion and Analysis that the GovernmentalAccounting Standards Board has determined is necessary to supplement, although notrequired to be a part of, the basic financial statements.

LANGLINAIS, BRdtlSSARD &Certified Public Accountants

March 20, 2008

HOSPITAL SERVICE DISTRICT NO. 1AParish of RichlandDelhi, Louisiana

STATEMENT OF NET ASSETS

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

Certificates of depositAccounts receivables, less allowance for doubtful

accounts of $ 2,309,423

Due from third party payers

Other receivables

Inventories

Prepaid expenses

Total Current Assets

$ 276,960

1,557,419

2,376,060

216,478

114,322

285,465

72.605

4,899,309

ASSETS WHOSE USE IS LIMITED:

By board for capital improvements:

Certificates of deposit 1,068,163

1,068,163

PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment, cost

Less accumulated depreciation

Total Property and Equipment

OTHER ASSETS:

Delhi Homecare, LLC investment

LHA trust deposits

Total Other Assets

TOTAL ASSETS

9,798,143

(6,466.295)

3,331,848

77,419

158,669

236,088

9,535,408

The accompanying notes are an integral part of these financial statements

- 2 -

HOSPITAL SERVICE DISTRICT NO. 1APariah of RichlandDelhi, Louisiana

STATEMENT A

SEPTEMBER 30, 2007

LIABILITIES AND NET ASSETS

CURRENT LIABILITIES

Current portion of long-term debt

Credit balances

Accounts payableDue to third party payers

Interest payable

Accrued salaries and related withholdings

Accrued vacation and holiday expense

Total Current Liabilities

298,704

49,847

307,463

629,186

2,211

435,834

179,748

1,902,993

LONG-TERM LIABILITIES:

Long-Term Debt:

Obligations under capital leaseCertificate of indebtedness

Total Long-Term Liabilities

699,907

216,500

916,407

TOTAL LIABILITIES

NET ASSETS

Invested in capital assets, net of related debt

Unrestricted

TOTAL LIABILITIES AND NET ASSETS

2,819,400

2,399,037

4,316,971

6,716,008

9,535,408


- 3 -

HOSPITAL SERVICE DISTRICT NO. 3AParish of HighlandDelhi, Louisiana

STATEMEKT OF ACTIVITIES

STATEMENT B

YEAR ENDED SEPTEMBER 30 f 2007

OPERATING REVENUES:

Net patient service revenues

Advalorem taxes

Other operating revenue

TOTAL OPERATING REVENUE

$ 13,422,553

128,916

1,198.332

14,749.801

OPERATING EXPENSES:

Professional services

General and administrative

Depreciation

Provision for doubtful accounts

TOTAL OPERATING EXPENSES

7,949,403

5,081,927

572,590

2,416,786

16,020,706

INCOME (LOSS) FROM OPERATIONS

NON-OPERATING REVENUES

Interest income

Interest expense

TOTAL NON-OPERATING REVENUES

CHANGS IN NET ASSETS

TOTAL NET ASSETS, BEGINNING

TOTAL NET ASSETS, ENDING

(1,270.905)

136,080

(50,8481

85,232

(1,185,6731

7,901,681

6,716,008


- 4 -

HOSPITAL SERVICE DISTRICT NO. 1AParish of RichlandDalhi, Louisiana

STATEMENT C

STATEMENT OF CASH FLOWS YEAR ENDED SEPTEMBER 30, 2007

CASH FLOWS FROM. OPERATING ACTIVITIES:

Cash received from patients

Ad valorem taxes

Cash payments to suppliers for goods and services

Cash payments to employees for services

Net Cash Flow from Operating Activities

CASH FLOW FROM CAPITAL AND RELATED FINANCING ACTIVITIES:

Acquisition of property and equipment

Proceeds of long term borrowing

Principal payments on long-term debt

Interest payments on long-term debt

Net Cash Used in Capital and Related Financing Activities

CASH FLOWS FROM INVESTING ACTIVITIES:

Proceeds from maturity of investments

Purchase of investments

Interest income

Net Cash Provided by Financing Activities

NET INCREASE IN CASH AND CASH EQUIVALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF TEAR

CASH AND CASH EQUIVALENTS AT END OF YEAR

$ 14,791,434

128,916

(5,983,355)

(9,004,8111

(67,8161

(631,150)

593,102

(258,370)

(50,84B1

(347.2661

916,857

(700,000)

136,080

352,937

(62f145)

339,105

276,960

CASH EliOWS FROM OPERATING ACTIVITIES:

Operating Income

Adjustments to reconcile operating income to net cash

provided by operating activities:

Depreciation and amortization

Provision for doubtful accounts

Increase in receivables and due from third parties

Decrease in inventories, prepaid expenses, other assets

Increase in accounts payable/accrued expenses

NET CASH PROVIDED BY OPERATING ACTIVITIES

$ (1,270,905)

572,590

2,416,786

(2,246,537)

16,263

443,987

(67,8161

The accompanying notes are an integral part of these financial statements.

- 5 -

HOSPITAL SERVICE DISTRICT 1AParish of RichlandDelhi, Louisiana

NOTES TO FINANCIAL STATEMENTS : SEPTEMBER 30. 2007

NOTE 1: DESCRIPTION OF REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES

Reporting Entity. Hospital Service District 1A, Parish of Richland (the Hospital)was created on April 18, 1989r by the Richland Parish Police Jury. The District iscomprised of and embraces the territory contained within Ward 1 of the Parish ofRichland, State of Louisiana, as constituted as of the date of the ordinance.

Effective October 1, 1989, Richland Parish Hospital Service District No. 1 (whichoperated hospitals in Delhi and Rayville) transferred operations of the Hospital inDelhi to Richland Parish Hospital Service District No. 1A, along with all relatedassets, liabilities, and equity.

The Hospital is a political subdivision of the Richland Parish Police Jury whosejurors are elected officials. The Hospital's commissioners are appointed by theRichland Parish Police Jury. As the governing authority of the Parish for reportingpurposes, the Richland Parish Police Jury is the financial reporting entity for theHospital. Accordingly, the Hospital was determined to be a component unit of theRichland Parish Police Jury based on Statement No. 14 of the National Committee onGovernmental Accounting. The accompanying financial statements present informationonly on the funds maintained by the governmental services provided by thatgovernmental unit or the other governmental units that comprise the financialreporting entity.

Use of estimates. The preparation of financial statements in conformity withgenerally accepted accounting principles requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of revenues and expenses during the reportingperiod. Actual results could differ from those estimates.

Proprietary fond accounting. The Hospital utilizes the proprietary fund method ofaccounting whereby revenue and expenses are recognized on the accrual basis.Substantially all revenues and expenses are subject to accrual.

Inventories. Inventories of drugs and supplies are stated at the lower of cost(first-in, first-out) or market.

Property, Plant and Equipment. Property and equipment acquisitions are recorded atcost. Depreciation is provided over the estimated useful life of each class ofdepreciable asset and is computed using the straight-line method. Equipment undercapital lease obligations is amortized on the straight-line method over the shorterperiod of the lease term or the estimated useful life of the equipment. Suchamortization is included in depreciation and amortization in the financialstatements. Interest cost incurred on borrowed funds during the period ofconstruction of capital assets is capitalized as a component of the cost ofacquiring those assets.

-6-

HOSPITAL SERVICE DISTRICT 1A•pay-i a>i of HighlandDelhi. Louisiana

NOTES TO FINANCIAL STATEMENTS : SEPTEMBER 30, 2007

NOTE 1: DESCRIPTION OF REPORTING ENTITY AND SUMMARY OF SIGNIFICANT ACCOUNTINGPOLICIES (cent)

Gifts of long-lived assets such as land, buildings, or equipment are reported asunrestricted support, and are excluded from the excess of revenues over expenses,unless explicit donor stipulations specify how the donated assets must be used.Gifts of long-lived assets with explicit restrictions that specify how the assetsare to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulationsabout how long those long-lived assets must be maintained, expirations of donorrestrictions are reported when the donated or acquired long-lived assets are placedin service.

Costs of borrowing. Except for capital assets acquired through gifts,contributions, or capital grants, interest cost on borrowed funds during the periodof construction of capital assets is capitalized as a component of the cost ofacquiring those assets. None of the Hospital's interest cost was capitalized in thefiscal year ended September 30, 2007.

Cash and cash equivalents. Cash and cash equivalents consist primarily of depositsin checking and certificates of deposit with original maturities of 90 days or less.Certificates of deposit with original maturities over 90 days are classified asshort-term investments. Cash and cash equivalents and short-term investments arestated at cost, which approximated market value. The caption "cash and cashequivalents" does not include amounts whose use is limited or temporary cashinvestments.

Advalorem Taxes. The Hospital levies a property tax on all property subject totaxation in the service district. A 6.15 mill tax runs for a period of ten years,beginning with the year 2002, and ending in 2012, to be dedicated and usedfor operating, maintaining, renovating, and improving emergency medical services.Property taxes are collected through the local sheriff's office and remitted, netof collection fees, to the Hospital. Property tax notices are mailed byNovember 15, each year, due by December 31, and are considered delinquent byJanuary 31.

Risk Management. The Hospital is exposed to various risks of loss from torts; theftof, damage to, and destruction of assets; business interruption; errors andomissions; employee injuries and illnesses; natural disasters; and employee health,dental, and accident benefits. Commercial insurance coverage is purchased forclaims arising from such matters.

Accounting- Standards. Pursuant to Governmental Accounting Standards Board (GASB)Statement No. 20, Accounting and Financial Reporting Jfor Proprietary Funds and OtherGovernmental Entities That Use Proprietary Fund Accounting, the Hospital has electedto apply the provisions of all relevant pronouncements of the Financial AccountingStandards Board (FASB), including those issued after November 30, 1989, that do notconflict with or contradict GASB pronouncements.

-7-

HOSPITAL SERVICE DISTRICT 1APariah of RichlandDelhi. Louisiana

NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30. 2007

NOTE 1:

Net patient service revenue. The Hospital has agreements with third-party payorsthat provide payments to the Hospital at amounts different from its establishedrates. Payment arrangements include reimbursed costs, discounted charges, and perdiem payments. Net patient service revenue is reported at the estimated netrealizable amounts from patients, third-party payors, and others for servicesrendered, including estimated retroactive adjustments under reimbursement agreementswith third-party payors. Retroactive settlements are provided for insome of the governmental payment programs outlined above, based on annual costreports. Such settlements are estimated and recorded as amounts due to or fromthird-party payors in the financial statements. The differences between theseestimates and final determination of amounts to be received or paid are based onaudits by fiscal intermediaries and are reported as adjustments to net patientservice revenue when such determinations are made.

Wet assets. Net assets consist of net assets invested in capital assets {propertyand equipment), net of related debt; restricted net assets; angl unrestricted netassets. Net assets invested in capital assets, net of related debt consist ofcapital assets net of accumulated depreciation and outstanding balance of anyrelated debt that is attributable to the acquisition of the capital assets.Restricted net assets are those assets that are externally restricted by creditors,grantors, contributors, or laws and regulations, or those restricted byconstitutional provisions and enabling legislation. Unrestricted net assets consistof all other assets. When both restricted and unrestricted resources are availablefor use, it is the Hospital's policy to use restricted first, then unrestrictedresources as they are needed.

NOTE 2: MAJOR SOURCE OF REVENUE

The Hospital participates in the Medicare and Medicaid programs as a provider ofmedical services to program beneficiaries. The Hospital derived approximately 55%of its gross patient service revenue for the year ended September 30, 2007, frompatients covered by the Medicare and Medicaid programs. Included in net patientservice revenues for the year ended September 30, 2007, is additional reimbursementfor Medicaid Uncompensated Care Adjustments of $934,386.

NOTE 3: NET PATIENT SERVICE REVENUE

The Hospital has agreements with third-party payors that provide for payments to theHospital at amounts different from its established rates. A summary of the paymentarrangements with major third-party payors follows.

Medicare Inpatient services, certain outpatient services, and defined capital andmedical education costs related to Medicare beneficiaries are paid based on a costreimbursement methodology. The Hospital is reimbursed for cost reimbursable itemsat a tentative rate with final settlement determined after submission of annual costreports by the Hospital and audits thereof by the Medicare fiscal intermediary. TheHospital's Medicare cost reports have been audited by the Medicare fiscalintermediary through September 30, 2006.

—8 —


NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2007

NOTE 3: NET PATIENT SERVICE REVENUE (cont)

Medicaid Medicaid inpatients are reimbursed a fixed rate per day for med/surg andpsychiatric patients. Outpatient services rendered to Medicaid programbeneficiaries are reimbursed under a cost reimbursement methodology, with certainlimitations and exceptions. The Hospital is reimbursed at a tentative rate withfinal settlement determined after submission of annual cost reports filed by theHospital and audits thereof by the Medicaid fiscal intermediary. The Hospital'sMedicaid cost reports have been audited by the Medicaid fiscal intermediary throughSeptember 30, 2006.

The Hospital has also entered into payment agreements with certain commercialinsurance carriers, and preferred provider organizations. The basis for payment tothe Hospital under some of these agreements includes prospectively determined dailyrates.

NOTE 4 r PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, by major category, is as follows at September 30,2007:

Asset life Beginning Endingin years Balance Additions Deletions Balance

Land $ 159,695 $ - $ - $ 159,695Land improvements 10 - 20 70,438 3,070 - 73,508Buildings 10 - 40 4,563,908 12,697 19,007 4,557,598Equipment 15 - 20 4,230,897 634,390 - 4,865,287Vehicles 3-4 142,055 - - 142,055

Total cost 9,166,993 650,157 19,007 9,798,143Less accumulated depreciation (5,893,7051 (572,590) - (6,466,2951Net Property, Plant and Equipment $3,273,288 $ 77,567 $ 19.007 $ 3,331,848

Included in equipment are assets under capital lease of $1,121,183.

NOTE 5: LONG-TERM DEBT

Long-term debt at September 30, 2007, consisted of the following:

Certificates of indebtedness, Series 02, with an interest rate of4.7%, maturing serially on February 1, of each year beginning in2002, with interest payable on February 1, and August 1, of eachyear, with the final maturity February 1, 2011 $ 282,300

Capital lease obligations, at varying rates of imputed interestfrom 3.75% to 4.79% collateralized by leased equipment 932,811

Total long-term debt 1,215,111

Less current portion 298,704

Long-term portion

-9-


NOTES TO FINANCIAL STATEMENTS

NOflE 5: LONG-TERM DEBT fcont)

Scheduled repayments on long-term debt

20082009201020112012

are as follows:

Principal$ 305,853

312,219301,559237,74057,740

SEPTEMBER

Interest$ 48,264 $

34,68220,6217,930752

30. 2007

Total354,117346,901322,180245,67058.492

Total $1.215,111 $ 112,249 $ 1,327.360

NOTE 6: INVESTMENTS

Assets Limited as to Use

The composition of assets limited as to use at September 30, 2007, is set forth inthe following table. Investments are stated at fair value.

Internally designated for capital acquisition:Certificates of deposit

Investment income and gains on assets limited as to use, cash equivalents, and otherinvestments are comprised of the following for the year ending September 30, 2007

Income:Interest income 48,B76

NOTE 7; CASH FLOWS SUPPLEMENTAL INFORMATION

Total interest paid by the Hospital for the year ending September 30r 2007, was$49,466.

NOTE 8: CONCENTRATIONS OF CREDIT RISK

The Hospital grants credit without collateral to its patients, most of whom arelocal residents and are insured under third-party payor agreements. The mix ofreceivables (net of allowances) from patients and third-party payers at September30, 2007, is as follows:

MedicareMedicaidCommercial and other third-party payors

41%1445

100%

-10-

HOSPITAL SERVICE DISTRICT 1Aof Rjchland

Delhi, Louisiana


NOTE 9: PENSION PLAN

The Hospital elected to withdraw from the Social Security System effective January1, 1993. In place of the Social Security System, the Hospital established a definedcontribution annuity plan. Employees are eligible to participate upon date ofemployment and, after one year of service, the employee is fully vested in theemployer's matching contribution. Contributions to the plan by the Hospital aredetermined by the Board of Commissioners, at a minimum of 6.2% of the participant'scompensation. The amount charged to pension expense under this plan was $ 487,727for the year ended September 30, 2007.

NOTE 10: UNCOMPENSATED CARE

The Hospital receives a disproportionate share payment for uncompensated care. Thispayment is based upon estimated uncompensated care cost and is subject to audit bythe Louisiana Department of Health and Hospitals. Coverage for uncompensated careis based on the State's fiscal year.

NOTE 11: FAJR VALUE OF FINANCIAL INSTRUMENTS

The following methods and assumptions were used by the Hospital in estimating thefair value of its financial instruments:

Cash and cash equivalents: The carrying amount reported in the balancesheet for cash and cash equivalents approximates its fair value.

Investments: Fair values, which are the amounts reported in the balancesheet, are based on quoted market prices for similar securities.

Assets limited as to use: These assets consist primarily of investments andinterest receivable. The carrying amount reported in the balance sheet isfair value.

Accounts payable and accrued expenses: The carrying amount reported in thebalance sheet for accounts payable and accrued expenses approximates itsfair value.

Estimated third-party payer settlements: The carrying amount reported inthe balance sheet for estimated third-party payor settlements approximatesits fair value,

Long-term debt: Fair values of the Hospital's revenue notes are based oncurrent traded value. The fair value of the Hospital's remaining long-termdebt is estimated using discounted cash flow analyses, based on theHospital's current incremental borrowing rates for similar types ofborrowing arrangements.

-11-



NOTE 11; FAIR VALUE OF FINANCIAL INSTRUMENTS (cent)

The carrying amounts and fair values of the Hospital's financial instruments atSeptember 30, 2007, are as follows:

CarryingAmount Fair Value

$$$$$$

276,9601,042,348925,256216,476629,186916,407

$$$$$$

276,9601,042,348925,256216,478629,186916,407

Cash and cash equivalentsAssets limited as to useAccounts payable and accrued expensesEstimated receivable from third party payorsEstimated third-party payor settlementsLong-term debt

NOTE 12: BANK DEPOSITS AND INVESTMENTS

State statutes authorize the Hospital to invest in obligations of the U.S. Treasury,certificates or other obligations of the United States of America, and timecertificates of deposit of state banks organized under the laws of Louisiana andnational banks having the principal office in the State of Louisiana. At September30, 2007, the Hospital had bank balances as follows:

Insured (FDIC)Collateralized by securities held by thepledging financial institution's trust departmentin the Hospital's nameTotal

Carrying Value

NOTE 13: COMPENSATED ABSENCES

$176,176

3,436,477$3,612,653

$2,800.377

Employees of the Hospital are entitled to paid days off and sick days depending onlength of service. The Hospital accrued $179,747 of vacation pay at September 30,2007. It is impracticable to estimate the amount of compensation for future un-vested sick pay and, accordingly, no liability has been recorded in the accompanyingfinancial statements. The Hospital's policy is to recognize the cost of un-vestedsick pay when actually paid to employees.

NOTE 14: PROFESSIONAL LIABILITY RISK

The Hospital participates in the Louisiana Patient's Compensation Fund {PCFJestablished by the State of Louisiana to provide medical professional liabilitycoverage to health care providers. The PCF provides for $400,000 in coverage peroccurrence above the first $100,000 per occurrence for which the Hospital is atrisk. The PCF places no limitation on the number of occurrences covered. Inconnection with the establishment of the PCF, the State of Louisiana enactedlegislation limiting the amount of healthcare provider settlement for professionalliability to $100,000 per occurrence and limited the PCF's exposure to $400,000 peroccurrence.

-12-

HOSPITAL SERVICE DISTRICT 1AParish of RichlandDelhi. Loui siana

NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2007

NOTE 14; PROFESSIONAL LIABILITY RISK (cont)

The courts have not tested the constitutionality of this legislation, although theLouisiana Supreme Court has decided that this limit does not apply in cases ofstrict liability. The Hospital's membership in the Louisiana Hospital AssociationTrust Fund provides additional coverage for professional medical malpracticeliability. The trust fund bills members in advance based upon an estimate of theirexposure. At policy year-end, premiums are re-determined utilizing actual losses ofthe Hospital.

NOTE 15: CRITICAL ACCESS STATUS

Effective October 1, 2005, the Hospital was approved for "critical access" statusunder the Medicare Rural Hospital Flexibility Program. The program allows states todesignate rural facilities as "critical access hospitals" if they are located asufficient distance from other hospitals, make available 24-hour emergency care,maintain no more than 25 inpatient beds, and keep inpatients no longer than 96 hours(except where weather or emergency conditions dictate, or a Peer Review Organizationwaives the limit). Payment for inpatient and outpatient services under this programis on the basis of reasonable cost.

NOTE 16: JOINT VENTURE

The Hospital entered into a cooperative endeavor agreement on August 15, 2001, withDelhi Homecare, LLC. The agreement's intention is to ensure that home healthservices are readily available to the residents of the Hospital's district. TheHospital participates in profits and losses equal to seventy-one percent within itsservice area. Outside of the Hospital's service area, the participation is loweredto twenty-nine percent. The Hospital's liability for losses is limited to theamount of the annual rent paid by Delhi Homecare, LLC. The Hospital does not havean equity interest in the cooperative endeavor, therefore accounts for thisarrangement using the cost method. The Hospital terminated its cooperative endeavoragreement effective October 1, 2003, with Delhi Homecare, LLC and entered into a newagreement. Under the terms of the new agreement, the Hospital agreed to change itsprofit sharing percentage from seventy-one percent and twenty-nine percent tothirty-three percent in exchange for $315,000 and a thirty-three percent equityinterest in Delhi Homecare, LLC. The $315,000 plus the $77,419 of equity interestacquired by the Hospital was reported as a gain on the gale of assets.

NOTE 17: AFFILIATED ORGANIZATION

Affiliated organizations include Richland Parish Hospital Service District No. 1,Richland Parish Hospital Service District No. IB, and the Richland Parish PoliceJury. The districts are related because they are all political subdivisions of theRichland Parish Police Jury who appoints their commissioners. During the fiscalyear ended September 30, 2007, the Hospital incurred and paid $6,665 to it'saffiliated organization, Richland Parish Hospital Service District No. IB, dbaRichardson Medical Center.

-13-

HOSPITAL SERVICE DISTRICT? NO. 1AParish of RichlandDelhi/ Louisiana

SCHEDULES OF PATIENT SERVICE REVENUES FOR THE YEAR ENDED SEPTEMBER 30, 2007

INPATIENT SERVICE REVENUES

Daily Patient Services:

Room and Board

Total

1,652,611

1,652.611

Other Nursing Services:

Operating room

Central supplies

Emergency service

Total

Other Professional Services:

Laboratory

EKG

Blood

Respiratory therapy

Radiology

Pharmacy

Therapy

Professional fees

TOTAL INPATIENT SERVICE REVENUE

12,087

71,195

45,338

128,620

444,042

47,310

101,260

1,138,548

297,349

2,126,933

167,716

311,686

4,634,844

6,416,075

- 14 -

HOSPITAL SERVICE DISTRICT NO. 1AParish of RichlandDelhi, Louisiana

SCHEDULES OF PATIENT SERVICE REVENUES FOR THE YEAR ENDED SEPTEMBER 30, 2007

OUTPATIENT SERVICE REVENUES

Other Nursing Services:

Operating room

Central supplies

Emergency service

Total

Other Professional Services:

Laboratory

EKG

Blood

Respiratory therapy

Radiology

Pharmacy

Cardiac rehab

Diabetic education

Lifecare

Therapy

Clinics

Professional fees

Total

TOTAL OUPATIENT SERVICE REVENUE

GROSS PATIENT SERVICE REVENUE

Less Contractual Adjustments

Net Patient Service Revenue before Disproportionate Share

Medicaid Uncompensated Care

NET PATIENT SERVICE REVENUE

741,530

81,165

903,016

1.725,711

1,822,641

158,698

10,085

230,071

965,757

859,921

149,394

14,545

1,825,250

516,655

3,161,571

689.925

10,404,513

12.130,224

18,546,299

6.058,132

12,488,167

934.386

$ 13,422.553

- 15 -


SCHEDULES OF OTHER OPERATING REVENUES FOR THE YEAR ENDED SEPTEMBER 30, 2007

Cafeteria and vendor sales $ 120,131Grant revenue 638,043

Rental income 15,000

Joint venture 345,331

Gain on sale of asset 30,500

Other 49,327

$ 1.198,332

-16 -


SCHEDULES OF PROFESSIONAL SERVICES FOR THE YEAR ENDED SEPTEMBER 30, 2007

Salaries and Fees:NursingOperating roomCentral supplyEmergency roomLaboratoryRadiologyPharmacyInhalation therapyCardiac rehabTherapyEKGClinicsLifecareOther

Total Salaries and Fees

Supplies and Other Expenses:NursingOperating roomCentral supplyEmergency roomLaboratoryRadiologyPharmacyInhalation therapyCardiac rehabTherapyEKGBloodClinicsLifecareOther

Total Supplies and Other Expenses

Total Professional Services

954,96860,84432,484

709,850

403,978

179,141

172,008

183,051

113,578

246,067

34,718

2,036,267363, 55275,169

5,565,675

32,106

6,850

157,719490,876397,481

99,691

401,617

43,948

8,679

6,090

2,981

67,450

399,309

252,197

16,7342,383,728

7,949,403

- 17 -

HOSPITAL SERVICE DISTRICT NO. 1APariah of Riohl&ndDelhi, Louisiana

SCHEDULE OF GENERAL AND ADMINISTRATIVE FOR THE YEAR ENDED SEPTEMBER 30, 2007

Salaries and Fees:

Administrative

Maintenance

Housekeeping

Medical records

Dietary

Total Salaries and Fees

1,362,147

99,587

95,100

204,282

179,092

1,940,208

Supplies and Other Expenses:

Administrat ive

Maintenance

Housekeeping

Medical records

Dietary

Total Supplies and Other Expenses

Total General and Administrative Services

2,475,435

431,879

45,841

26,237

162,327

3,141,719

5,081,927

-18-

HOSPITAL SERVICE DISTRICT NO. 1Parish of St. MaryFranklin, Louisiana

SCHEDULE OF GOVERNING BOARD EXPENSES _̂̂ _ YEAR ENDED SEPTEMBER 30, 2007

COMPENSATION

Eleanor Jones $Charles Black $

Jimmy Hopson $

Dr. Paul Grandon $

Nathon Monroe $

- 19 -

REPORT ON COMPLIANCE AND ON INTERNAL CONTROL OVER FINANCIALREPORTING BAJ3BP ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED

IK ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Board of CommissionersHospital Service District No. 1AParish of RichlandDelhi, Louisiana

We have audited the general purpose financial statements of Hospital Service District No. 1A,State of Louisiana, dba Richland Parish Hospital (Hospital), a component unit of the RichlandParish Police Jury, State of Louisiana, as of September 30, 2007, and have issued our reportthereon dated March 20, 2008.

We conducted our audit in accordance with generally accepted auditing standards of the UnitedStates and the standards applicable to financial audits contained in Government AuditingStandards, issued by the Comptroller General of the United States.

INTERNAL CONTROL OVER FINANCIAL REPORTING

In planning and performing our audit, we considered the District's internal control overfinancial reporting as a basis for designing our auditing procedures for the purpose ofexpressing our opinion on the financial statements, but not for the purpose of expressing anopinion on the effectiveness of the District's internal control over financial reporting.Accordingly, we do not express an opinion on the effectiveness of the District's internal controlover financial reporting.

Our consideration of the internal control over financial reporting would not necessarilydisclose all deficiencies in the internal control over financial reporting that might besignificant deficiencies or material weaknesses. However, as discussed below, we identifiedcertain deficiencies in internal control over financial reporting that we consider to besignificant deficiencies.

A control deficiency exists when the design or operation of a control does not allow managementor employees, in the normal course of performing their assigned functions, to prevent or detectmisatatements on a timely basis. A significant deficiency is a control deficiency, orcombination of control deficiencies, that adversely affects the entity's ability to initiate,authorize, record, process, or report financial data reliably in accordance with generallyaccepted accounting principles such that there is more than a remote likelihood that amisstatement of the entity's financial statements that is more than inconsequential will not beprevented or detected by the entity's internal control. We consider all deficiencies describedin the accompanying schedule of findings and questioned costs to be significant deficiencies ininternal control over financial reporting.

A material weakness is a significant deficiency, or combination of significant deficiencies,that results in more that a remote likelihood that a material misstatement of the financialstatements will not be prevented or detected by the entity's internal control. We consider thedeficiencies described in the accompanying schedule of findings and questioned cost as 2007-6through 2007-9 to be material weaknesses in internal control over financial reporting.

COMPLIANCE

As part of obtaining reasonable assurance about whether the District's financial statements arefree of material misstatement, we performed tests of its compliance with certain provisions oflaws, regulations, contracts and grants, noncompliance with which could have a direct and

material effect on the determination of financial statement amounts. However, providing anopinion on compliance with those provisions was not an objective of our audit and, accordingly,we do not express such an opinion. We consider findings 2007-1 to 2007-3 to be issues ofnoncompliance that are required to be reported under Government Auditing Standards.

The hospital's responses to the findings identified in our audit are described in theaccompanying schedule of findings and questioned costs. We did not audit the Hospital'sresponses and, accordingly, we express no opinion on it.

This report is intended for the information of the Hospital Service District No. 1A, State ofLouisiana, dba Richland Parish Hospital (Hospital) and the Legislative Auditor of the State ofLouisiana and is not intended to be and should not be used by anyone other than these specifiedparties.

We acknowledge with appreciation the courtesies extended our representatives during the audit.

Sincerely,

LANGLINAIS, BROUSSARZT & KOHLENBERGA Corporation of Certified Publib—Brf/countants

March 20, 2008

21

HOSPITAL SERVICE DISTRICT NO. 1APARISH OF HIGHLANDDELHI, LOUISIANA

SCHEDULE OF FINDINGS AND QUESTIONED COSTS AND MANAGEMENT'S CORRECTIVE ACTIONPLAN

For the year ended September 30, 2007

We have audited the financial statements of Hospital Service District No. 1A,dba Richland Parish Hospital of Richland Parish as of and for the year endedSeptember 30, 2007, and have issued our report thereon dated March 20, 2008. Weconducted our audit in accordance with generally accepted auditing standards andthe standards applicable to financial audits contained in Government AuditingStandardSt issued by the Comptroller General of the United States, and theprovisions of OMB Circular A-133. Our audit of the financial statements as ofSeptember 30, 2007 resulted in an unqualified opinion.

Section 1: Summary of Auditor's Reports

A. Report on Internal Control and Compliance Material to the FinancialStatements:

Internal Control

Material Weaknesses: YesSignificant Deficiencies: Yes

Compliance

Compliance Material to Financial Statements Yes

Section II: Financial Statement Findings

A - Issues of Non-compliance

Finding 2007-1: Software Coats

Condition: The hospital has incurred software costs for an entity unrelatedto its operations. This billing software resides on the hospital server.Hospital staff performs the billing function for this unrelated entity.

Criteria: Article 7 Section 14 of the Constitution of the State of Louisiana.

Zffect: This situation may constitute a misuse of public funds and/or property.

Recommendation: The software for the unrelated entity should be removed from thehospital's server, and the hospital should discontinue paying for any and allsoftware not related to the operations of the hospital.

Management Response: The software at issue was erroneously paid for by thehospital, and the amount of those payments have been refunded by the vendor. Nofurther payments will be made by the hospital. As a result, no hospital fundsremain expended for this software. The software resides on the hospital server,but is not maintained or serviced in any way by the hospital. Inasmuch as thehospital has excess computer capacity, the software's presence on the hospital'scomputer, without any related services from the hospital, is not a "thing ofvalue" within the meaning of Article 7, Section 14 of the LouisianaConstitution. Nevertheless, the hospital will adopt such policies as arenecessary to document the separateness of these practices and insure noviolation of law.

Finding 2007-2: Related Party Transactions

Condition: The hospital is a 33% owner in a joint venture in the operationsof Delhi Homecare, LLC. (a Home Health Agency). The hospital CEO receivesrental income from a building that he owns, which the Home Health Agencyoperates out of.

22



For the yaar ended September 30, 2007

Criteria: There is a prohibition against a public servant participating in atransaction in which he has a personal substantial economic interest if heeither reasonably can be expected to know involves his governmental entity, LAR.S- 42:1112 (A), or actually knows involves his governmental entity, LA R.S.42:1112(B).

Effect: This situation may be a conflict of interest.

Recommendation: The hospital needs to obtain further clarification from theethics board on this issue.

Management Response: A legal opinion was obtained prior to this transaction.All pertinent information is being submitted to the ethics board for furtherruling

Finding 2007-3: Billing Services

Condition: It appears that hospital resources (salaries, supplies, etc) arebeing used to perform billing services for an unrelated party.

Criteria: Article 7 Section 14 of the Constitution of the State of Louisiana.

Effect: Such use of hospital resources may constitute a misuse of public fundsand/or property.

Recommendation: Hospital Administration should ensure that hospital resourcesare utilized only for purposes directly related to the operations of thehospital.

Management Response: No hospital resources are being used to perform billingservices for an unrelated party. All personnel involved are directlycompensated by the third party, and the hospital does not compensate them forthe time they expend providing services to the third party. No hospitalsupplies or other "things of value" are used for that purpose. Nevertheless,the hospital will adopt such policies as are necessary to document theseparateness of these practices and insure no violation of law.

B- Significant Deficiencies

Finding 2007-4: Depreciated Assets

Condition: A number of fully depreciated assets that are no longer in use arebeing carried in the fixed asset accounts.

Criteria: To ensure good internal controls and best practices for governmentalentities.

Effect: This represents a significant deficiency in the hospital's internalcontrol system.

Recommendation: We recommend that a periodic review be Instituted to ensurethat fully depreciated assets no longer in use are removed from the fixed assetaccounts.

Management's Response: The hospital will adopt a policy of periodic review toensure that fully depreciated assets no longer in use are removed from the fixedasset accounts.

23


SCHEDULE OF FINDINGS AMD QUESTIONED COSTS AND MANAGEMENT'S CORRECTIVE ACTIONPLAN


Tindinq 2007-5: Conflict-off-Interest Policy

Condition: A conflicts-of-interest policy is needed.

Criteria : To ensure good internal controls and best practices for governmentalentities and to ensure compliance with ethics laws.

Iffeet: This represents a significant deficiency in the hospital's internalcontrol system.

Recommendation: We recommend the hospital adopt a formal policy coveringconflict of interest situations. The policy should identify all businessrelationships and other dealings between the hospital and its officers,directors, key employees, and other such parties with whom the hospital conductsbusiness. We also recommend that the hospital adopt a formal policy obtainingwritten conflict of interest statements from all officers, directors, and keyemployees on an annual basis. This written statement should identify allbusiness relationships and other dealings between the hospital and such parties.We strongly recommend that the policy be implemented and followed through toensure that the hospital is practicing acceptable methods of protecting itselffrom potential self-dealing issues.

Management Response: The hospital has a formal conflict of interest policy asdescribed in the Recommendation. The hospital is having it reviewed to make sureit fully complies with current law. The hospital is unaware of any businessrelationships or other dealings involving the hospital which violates existingstatutory prohibitions.

Finding 2007-6: Financial Statement Preparation

Condition: The Hospital relies on its outside auditors to assist in thepreparation of external financial statements and related disclosures.

Criteria : Under U.S. generally accepted auditing standards, outside auditorscannot be considered part of the Hospital's internal control structure, and,because of limitations of the Hospital's small accounting staff, the design ofthe Hospital's internal control structure does not otherwise include proceduresto prevent or detect a material misstatement in the external financialstatements -

Effect: This condition represents a material weakness in the Hospital'sinternal control system.

Reconanendation: The hospital's accounting personnel should continue to attendeducation courses to further their knowledge in the application of GenerallyAccepted Accounting Principles. The hospital should also continue outsourcingthe preparation of its financials to its independent auditors and carefullyreview the draft financial statements and notea prior to approving them andaccepting responsibility for their contents and presentation.

Management Response: The hospital will adopt and implement the Recommendations.

Finding 2007-7: Inventory

Condition: Year-end adjustments to inventory are not recorded.

Criteria : To ensure good internal controls and best practices for governmentalentities.

24

HOSPITAL SERVICE DISTRICT NO. 1APARISH OF RICHLANDDELHI, LOUISIANA




Recommendation: We suggest that the hospital adjust the general ledgerinventory accounts on an annual basis.

Management Response: The hospital will adopt and implement the Recommendations.

Finding 2007-8 Segregation of Duties

Condition: Several employees' duties are not segregated.


Effect: This condition represents a material weakness in the Hospital's internalcontrol system.

Recommendation: The authorization, recording, and reconciliation oftransactions and decisions and custody of assets related to those transactionsshould be segregated.

Management Response: The hospital will adopt and implement the Recommendationsto the extent possible within limitations imposed by the size of its staff.

Finding 2007-9 Vacation Policy

Condition: Continuous vacations are not mandatory for key employees.



Recommendation: Employees in key positions should be required to take acontinuous one-week vacation per year with another employee cross-trained toperform their duties.

Management Response: The hospital will adopt and implement the Recommendationsto the extent possible within limitations imposed by the size of its staff.

Section III: Management Letter Items

There are no management letter items at September 30, 2007.

25

MRR-27-2008 14:53 From: To: 3378936249 P.2

DELHIHOSPITAL

MtohMlW.Corn*

FINANCIAL STATEMENT 2007

Finding 2007-1: Software cost

Management Response: The software at issue was erroneously paid for by the hospitaland the amount of those payments have been refunded by the vendor. No furtherpayments will be made by the hospital, As a result/no hospital funds remain expendedforthis software. .

The software resides on the hospital server, butiknot maintained or serviced in any wayby the hospital inasmuch a* the hospital has excess computer capacity, the software's'r

presence on the hospital's computer, without any related services from the hospital,'« nota "thing of value" within the meaning of Arclcle 7,. Section 14 of the Louisiana ;Constitution.

Nevertheless, the hospital will adopt such policies as-are necessary to document theseparateness of these practices and insure no violation of law.

Finding 2007-2: ;> :

Management Response- A legal opinion was. obtained prior to this transaction. Ail ,pertinent information is being submitted to the ethics board for further ruling. f,-

2007-3-

Management Response; No hospital resources art bfeiiig used to perform billing servicesfor an unrelated party. AJI personnel involved are directly compensated by the thirdparty, and the hospital does not compensate them for the time they expend providing ><services to the third party. No hospital supplies or other "things of value" are used forthat purpose. Nevertheless, the hospital will adopt such policies as are necessary to.document the separateness of these practices and insure no violation of law. ll

.; I1- • '.^ -i.

L - - . - - •

MflR-27-2008 W:53 From: , To:3378936^49 P..3

DELHI _ RldiiandPafiihHoyHal' '' '

Finding 1007-4:

Management Response: The hospital will adopt a policy of periodic review lo ensure thatftilly depreciated assets no longer in use are removed from the fixed waet accounts

Finding 1007.5:• . , _, . - -. . . . . .v ,-jr.*;: .i'-.'..>»..- • fi> 'x i. -•. • ' , . - . 'J -- • .•• .. . ' .- . . ' , ' .". ".

Management Response: The hospital has a ̂ formal conflict oP interest policy as describedin the Recommendation. The hospital is Having :it reviewed to? make wire it fUlly complieswith currem law. The hospiul is unaware of aj^y business relationships or other dealingsInvolvingthehospital which violates existing statutory prohibitions

Finding 2007-6: ' ' .

Management Response: The hospitaJ will adopt and implement the Recommendations

Finding 2007-7: : , " . . - - . , , < • • -'-"^ \-v:;c^:;;:, ̂ ^.-^ - . • • . . • • • • - . - ; / - . -. . . . - . - • • • ' U'-'-^v.v^v.; •''•''••; l';v^ .•;.-.='. - ' - . _ . - • " - ' ' ' . - .Management Response: The hospital will 'adopt and impjement the Recommendaiion*.

yjndinB 2Q07>8: -, . . ....... . . . . . . . .'J;.. ,.,..;,. ,-:,; ,...;:,,,., .. -• . '. . . " ; - ' , . . " ' • : - .. . - • . " - : . ; ;^(J i'-:.--.--//..^'- - ' . ' . :"-" ; ' '::'; • ' ' ' ' : ' = ' : ' '

Management Response: The hospital will adopt and implememth« Re<^the extent possible within limitations impcjseft Ijy the size of its staff.

Finding 2007-9: , ;

Management Response: The hospital will adopt and implement the Recommendations tothe extent possible vyithin limiwions^Ihlpo^^ ^i

Michael W.Xaitcll, AdmtnJstratorRichland Parish Hospital

richland parish hospital service district no. 1a dba ... · hospital service district 1a parish of...

Documents