Financial Audits

CHCC FY 2013 and 2012 Financial Audit

Summary


CHCC FINANCIAL INFORMATION INSUFFICIENT, INADEQUATE, AND INCOMPLETE

(The following summary is based on the independent auditor’s report prepared by Deloitte & Touche and does not constitute an audit report.  See links below for the full audit reports.)

The Commonwealth Healthcare Corporation (CHCC) received a Disclaimer of Opinion on its financial audit for the second consecutive year, Fiscal Years 2013 and 2012.  A Disclaimer of Opinion is issued by an independent auditor when they were unable to obtain sufficient evidence to form an opinion on the financial statements of the agency or there is substantial doubt about the agency’s ability to continue as a going concern.   

Key Issues

Quality of Financial Information

Financial information obtained from CHCC was insufficient, inadequate, or incomplete which prevented the auditor from expressing an opinion on the accuracy of CHCC’s financial statements.  The lack of information included the following areas:

  • Capital assets, accumulated depreciation, and depreciation expenses were not recorded,
  • Receivables, inventories, liabilities, payroll, and related revenues, expenses could not be substantiated due to inadequacies in accounting records,
  • Data regarding a litigation settlement of $1.8 million was not made available,
  • Federal grant compliance could not be determined for a $1.4 million award because documentation was not made available.

Going Concern Issue

There is substantial doubt about CHCC’s ability to continue as a going concern.  This means that CHCC may not have the resources to continue operating in the foreseeable future.  Recurring and increasing losses and negative cash flows may create an unsustainable position for CHCC that may result in its inability to pay vendors, employees, and meet other essential operating costs.

Material Weaknesses

The audit identified 15 material weaknesses in FY 2013, an increase of 67% from the previous year’s nine weaknesses.  A material weakness is a deficiency or combination of deficiencies in internal control such that there is a reasonable possibility that a material misstatement of the agency’s financial statements will not be prevented, or detected and corrected on a timely basis.  Material weaknesses may jeopardize the award of federal funds.

Conclusion

CHCC lacks the processes, procedures, and internal controls that would facilitate the production of accurate and verifiable financial information that would assist stakeholders and decision makers to make informed decisions on the outlook and operations of the organization in the foreseeable future.  CHCC’s lack of reliable billing and collection procedures is a cause of recurring losses and negative cash flows that result in the doubtful going concern issue.  These conditions are not acceptable for the CNMI’s only public healthcare provider and must be remedied as quickly as possible to avoid endangering the health and welfare of its residents.

Financial Statements and Independent Auditors' Report- View

Independent Auditors' Report on Internal Control and on Compliance- View

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Last Updated 3/9/2015 3:08:37 PM