KPMG finds inconsistent accruals, invoicing and revenue-reconciliation issues; committee hears 30/60/90-day ‘quick wins’

KPMG told the Hospital Authority finance committee that its review of the hospital’s accounting and financial-reporting processes found multiple areas needing improvement, including inconsistent accruals, invoice-recording gaps, discrepancies in patient-revenue reporting and an allowance-for-doubtful-accounts methodology that auditors have flagged.

Hillary Simic, a partner with KPMG, said the firm began on-site work in May and focused on quick wins that could be implemented immediately, followed by longer-term process changes and year-end audit support. "We've come out and have been on-site for a few weeks, really working closely with the team to understand what the current state process is," Simic said.

KPMG director Chris Dixon outlined what the team described as "symptoms of an underlying problem": accruals recorded with different methods by different people, invoices entering the accounting process inconsistently and patient-revenue and accounts-receivable reconciliations that lack hospital-side controls over data provided by the revenue-cycle manager. Dixon said the allowance for doubtful accounts is being estimated in multiple ways and sometimes underestimates the hospital's exposure.

Dixon also flagged an example of lease accounting that went unrecorded: a sanitization-equipment lease entered into and received, but not recorded on the books for roughly 18 months. "That long gap, as you can imagine, causes issues in tracking your financials and measuring your net assets accurately," Dixon said.

KPMG described a set of quick wins already under way. Staff and consultants prioritized outreach to the 62 vendors that make up roughly 85% of expenses so accounting can obtain statements and better estimate accruals at month end. The KPMG team said it is tracking about 80 observations across accounts payable, accruals, revenue, leases and fixed assets and will measure improvements month to month using the month-end close and year-end processes.

Doctor Blackledge, who said he was appointed to the CFO role in February, welcomed KPMG’s work and said the improvements and the new finance hire introduced at the meeting will help stabilize reporting. KPMG said it will deliver an implementation roadmap with longer-term recommendations and will focus on June and August closes and year-end audit preparation.

Ending

KPMG and hospital finance staff characterized the immediate changes as measurable steps to improve the month-end close and the reliability of financial statements. The firm will return with follow-up reports and an implementation plan covering both quick wins and multi-quarter process changes.