County, hospital district audits cite financial difficulties

GRANT COUNTY — Reports issued last week from the Washington State Auditor's Office have found financial problems with two Grant County entities.

Reports found fault with the finances of Grant County Hospital District No. 2 and the financial reporting of Grant County.

Auditors found the hospital district to be complying with laws and regulations, as well as its own policies, but did find that the hospital district had insufficient funds to cover its financial obligations. Grant County Hospital District No. 2 includes Quincy Valley Medical Center, Quincy Valley Hospital and Quincy Valley Convalescent Center.

The auditor's office said in its report that it became aware of the district's severe cash flow problems in 2002 and that it was paying bills with registered warrants.

Registered warrants are used to cover short-term daily operational expenses and long-term debt obligations during cash shortfalls, according to the state auditor's office.

According to the report, auditors found a fund balance deficit of $1.7 million to finish 2003. At the same time the district also had outstanding registered warrants in the amount of about $230,000.

This was the first finding at Grant County Hospital District No. 2 reported by state auditors in a few years. Auditors have reported two more findings with the hospital district in the last five years, both in 2001.

The hospital district has attempted to make changes in its daily operations to address cash shortfalls, but the auditor's report stated that the hospital may not have had enough time for changes to help overcome its shortfalls.

Quincy Valley Medical Center Administrator John Perushek said in response to the report that his hospital was cutting the use of warrants considerably and said the hospital would be warrant free by the end of 2005.

"That's the goal and it will happen sometime this year," he said.

Perushek said the hospital has made tremendous progress in the past year becoming more stable financially. He added that the new system just takes time, saying the hospital files Medicare and Medicaid cost reports in April.

The district said in its response that it converted 18 of its nursing home beds to swing beds and has also converted the hospital to a Critical Access Hospital. Hospital representatives said in their response that it has not yet seen the full impact of those changes, and said it will not know the full effect of those changes until their Medicare cost report is filed this year.

The hospital also said in its response that they have contracted with Quorum Health Resources to provide consulting services in some hospital operational areas.

WSAO spokesperson Mindy Chambers said the financial condition of Grant County Hospital District No. 2 is one that the office has seen in a number of small-rural hospitals throughout the state. Chambers added that the auditor's office would follow-up next year see the district's progress.

The WSAO also issued a report last week on the finances of Grant County, finding that the county lacked sufficient internal controls over accounting and financial reporting.

State auditors however found no problem during the county's federal single audit, released with the audit on financial statements. The Federal Single Audit is utilized if a government spends more than $300,000 in federal grant money, according to the state auditor's office. The Federal Single Audit Report stated that Grant County qualified as a low-risk auditee.

State auditors said in their report on financial statements that they couldn't complete a financial statement audit because the county did not file its 2003 annual report with the WSAO on time.

State law requires the Grant County Auditor's Office to file its financial report within 150 days of the end of the year. Grant County Auditor Bill Varney said that the report was complete with the exception of the notes financial statements. Varney also acknowledged that the county did not comply with the new GASB 34 reporting format.

Chambers said that this was the first year in the last several years that the financial reporting of the county had yielded a finding.

State auditors cited turnover in the county auditor's office and inexperience with new accounting rules as a reason for the lack of reporting.

Grant County Commission Chair LeRoy Allison also cited major staffing changes in the Grant County Auditor's Office for the incomplete reporting. Allison also cited new GASB 34 accounting rules, that was a relatively new program that was phased in earlier than expected.

Varney said the county had seen staffing changes, and said he was occupied with the new primary system and governor's race. The county's chief accountant retired in the spring of 2004, having been in that position since 1982. Varney said in the county's response that a portion of the county's annual financial report had been completed, but the county had trouble finding a replacement for the chief accountant.

Varney added that the county did manage to get the new chief accountant trained and was able to complete the report except for the notes on the financial statements and the compliance with GASB 34.

Varney stated that the county's plan was to start the 2004 annual report process and have it completed prior to the due date, adding that the report would be compliant with the GASB 34 software.

"I am confident that with the experience and training the new chief accountant has attained, that together we can achieve this goal," Varney said in the response.