HHC trustees approve contract negotiations to reestablish internal audit function, chair recuses

The Health and Hospital Corporation Board of Trustees on Feb. 18 authorized staff to negotiate a contract with the top-ranked respondent to a request-for-proposal for internal-audit services, approving an estimated budget of up to $1,330,000 for a two-year engagement.

The vote followed a presentation from interim CFO and assistant treasurer James Simpson, who summarized the RFP process, evaluation committee makeup and scoring. Simpson said six vendors responded, four were interviewed and the evaluation committee favored a firm that proposed a technology-enabled approach to continuous auditing and data-driven risk assessments.

The board heard that the corporation has not maintained a functioning internal-audit office since the early 2000s. Simpson reviewed the historical context: an internal-audit committee established in 1986 (resolution 303-1986) and an office of internal audit created in 1987 (resolution 33-1987), both cited in the procurement memo. Trustees also noted the board approved authorization to engage consulting services for internal audit in February 2024 (resolution 3-2024).

Before the audit discussion began, one trustee said he would recuse himself from discussion and voting because he is a retired partner of Crowe LLP and had earlier removed himself from the evaluation process to avoid any appearance of conflict. "I'm recusing myself from the discussion and voting, on the internal, audit proposal before the board out of an abundance of caution," the trustee said.

Simpson told trustees the evaluation committee included representatives from Eskenazi Health, Indianapolis EMS, the long-term-care division, Marion County Public Health Department and headquarters, and covered accounting/finance, corporate compliance, diversity/equity/inclusion, legal and personnel. The vendors interviewed included firms characterized in the memo as traditional, boots-on-the-ground audit firms and others proposing a technology-enabled model. The committee's scoring showed a narrow spread; the highest-ranked firm proposed a combination of data analytics, continuous monitoring and on-site work where needed.

Trustees asked about the price differential among finalists and about the diversity-business-enterprise (MBE/WBE/VBE) participation the proposers reported. Simpson said the recommended firm proposed an estimated 15% MBE participation and 3% VBE; no WBE percentage was listed in that firm's proposal, and staff said they would work with the chosen firm to improve those subcontracting numbers.

Trustee Flores moved to approve the recommendation and authorize contract negotiations; a second was recorded. The board conducted a roll-call vote; the motion passed with unanimous votes from trustees who participated in the vote. The trustee who announced a recusal did not participate in the vote.

Why it matters: Trustees said reestablishing internal audit is intended to provide independent, objective examinations and to strengthen controls across HHC’s hospitals, ambulance service, long-term care and public-health operations. The board directed staff to proceed with negotiations consistent with HHC purchasing policy and return final contract documents for execution after legal review.

The board recorded an estimated maximum two-year cost of $1,330,000 for the engagement; Simpson said the procurement contemplates an initial one-year agreement with option to extend and negotiate a second year.

The board did not adopt a signed contract during the meeting; formal execution will follow completion of negotiations and legal review.