External auditor issues unmodified opinion but finds repeated material weaknesses and control deficiencies in FY24 audit

Katie Farris, audit director at Crossland PLLC, told the Hospital Authority Finance Committee that Crossland issued an unmodified opinion on the fiscal year 2024 financial statements but reported internal control problems that the firm classifies as two material weaknesses and two significant deficiencies.

"We do not express an opinion on the effectiveness of the internal control," Farris said, "but we are required to disclose any findings that we might find in the course of performing our audit." She said the most important finding concerns the financial close and reporting process, including limited month-end reconciliation and weak review processes for third-party schedules from vendors such as Parallon and CareCloud.

Farris said audit procedures produced a list of auditor-proposed adjustments included in appendix A of the auditor—ooklet. In one summary she told the committee the net impact of audit adjustments for fiscal year 2024 was "approximately $10,000,000." In a later, more specific comment she noted that 15 auditor-proposed adjustments attached to the report had an approximate $2,000,000 effect on the hospital's change in position. She also said any remaining uncorrected misstatements were immaterial to the financial statements as a whole.

Committee members pressed for plain-language explanations. The chair summarized the findings as a recurring pattern: these internal-control weaknesses have been repeated in prior years and "make it incredibly difficult for you to make informed financial and operating decisions for the hospital," Farris said.

Hospital leadership acknowledged the findings. Dr. Blackledge, identified in the meeting as a hospital executive who presented later budget materials, said management received notice of the four findings and had already begun internal work to address them. "We have made a commitment to work with Ms. Farris and to put the right level of internal controls in place," he said, and asked for follow-up discussions on technical issues such as accounts-receivable valuation and reserve methodology.

The auditors reported significant delays in audit procedures that they attributed to the material-weakness matters; those delays are described in the schedule of findings in the auditors' report. Crossland provided a draft management representation letter (appendix B) and indicated the hospital would be asked to sign it as part of the audit completion process.

The committee and Crossland agreed the full board should hear the auditor's findings. The chair said Crossland would present to the full board and the finance committee will bring the finalized auditor reports forward for formal approval at the March meeting.

Ending: The committee did not vote to accept the audit at this meeting. Crossland flagged repeated internal-control deficiencies centered on monthly close and reconciliations, management acknowledged the issues and committed to corrective steps, and auditors and staff agreed to return with finalized reports and a March approval request.