The following is a listing of the Fresno County grand jury’s finding and recommendations along with the responses by the Kingsburg Tri-County Health Care District:
Finding 1: The District was not responsive to numerous requests for financial information that may substantiate the District’s audited financial statements, indicating they did not have the requested information. This leads the grand jury to question the validity of the Audit Reports.
Recommendation 1: The Fresno County grand jury recommends that a certified public accountant or public accountant be enlisted by the Fresno County Auditor to conduct annual audits of the financial accounts and records of the District beginning with the year the hospital closed.
Response 1: The District respectfully disagrees with this finding insofar as the deadlines set by the grand jury to provide documents were usually very short and unrealistic, and despite that, the District is of the opinion that it actually provided legally appropriate responses to each request for documentation, in a reasonably timely manner. The recommendation has already been implemented through the use of a certified public accountant, which has been and will continue to be the District’s practice for annual audits.
Finding 2: The District provided the grand jury with a signed and dated (October 15, 2016) audited financial statement for FYE June 30, 2015. When questioned, the District identified the audit as a “draft” and provided an “updated” audit. The existence of two different signed and dated FYE June 30, 2015, audit reports is not professional practice.
Recommendation 2: The Fresno County grand jury recommends that Kingsburg Tri-County Healthcare District evaluate the performance of its professional advisers/contractors and consider selecting new advisers at least every three years.
Response 2: The District generally agrees with this finding except that the ‘signature’ was actually a computer font in the style of handwriting, not a manual or wet signature by a human hand. On Nov. 15, 2016, the District responded to the grand jury’s Nov. 12, 2016, repeated request for, among other things, the completed [Fiscal Year] 2014-15 audit and the grand jury was informed that it was not yet approved by the District’s Board and therefore there was no final audit report to report. What was at the time believed to be the final draft was provided as early as possible to the grand jury. However, further revisions or corrections were subsequently made and then a corrected final version was provided to the grand jury with an explanation. In hindsight, the District should have delayed providing the [Fiscal Year] 2014-15 report to the grand jury but did not know that further revisions would be needed until after it was provided to the grand jury. The District is aware that commencing as of Fiscal Year 2013-14, Health and Safety Code section 12410.6 requires the District to select a new auditor after six consecutive fiscal years using the same auditor. Therefore, the grand jury’s three-year recommendation is not warranted and will not be implemented. However, the District intends to issue a request for proposals for auditing services for the District’s Fiscal Year 2017-18 annual audit.
Finding 3: The District elected to write-off their 2011 and earlier accounts payable liabilities by resolution despite the fact that they had sufficient cash flow to support payment.
Recommendation 3: None.
Response 3: The District generally agrees with this finding. However, because the alleged liabilities were legally unenforceable, the District’s Board of Directors felt that paying public funds which the District was not legally required to pay, could be inconsistent with fiduciary obligations to protect those public monies so that they can be used to fund health services and programs for the benefit of the residents of the District. As there was no recommendation, no recommended action will be implemented.
Finding 4: The grand jury was unable to obtain some requested financial documentation regarding the District’s financial condition. Receipt and disbursement of tax revenue could not be delineated from the documentation, which was provided by the District.
Recommendation 4: None.
Response 4: The grand jury was provided with final copies of the District’s audited financial statements for all of the fiscal years requested. These included tax revenues. Additionally, on or about Feb. 17, 2017, the District provided to the grand jury all of its banking statements which showed all activity in the trust accounts, which held the tax revenues. Finally, on or about Dec. 2, 2016, and again on Dec. 12, 2016, the District, in writing, offered the grand jury the opportunity to inspect records at the District’s office and would certainly allow the grand jury to inspect the District’s final audited financial statements and banking statements at the District’s office. Presumably, the grand jury obtained tax revenue disbursement records from the County tax collectors, which are public records, and did not find any discrepancies between those disbursements and what was deposited into the bank accounts, otherwise a finding to the contrary would have been noted in the grand jury report and no such finding was made. As there was no recommendation, no recommended action will be implemented.
Finding 5: It appears the District Board of Directors relied heavily on outside contractors and may have abdicated their fiduciary responsibilities.
Recommendation 5: None.
Response 5: The District agrees that it has relied upon outside consultants because after it closed its financially acute-care hospital and skilled-nursing facilities, the District no longer had any in-house employees. The District respectfully disagrees that its Board of Directors may have abdicated fiduciary responsibilities. The grand jury report is unclear as to which, if any, Board decisions were the focus of this finding and the grand jury failed to identify which of the various fiduciary responsibilities may have been abdicated. Moreover, there are no grand jury findings of financial or any other form of official misconduct whatsoever. As there is no recommendation, no recommended action will be implemented.
Finding 6: The District has displayed a lack of sound financial management.
Recommendation 6: None.
Response 6: The District respectfully disagrees with this finding. The District’s audited financial statements show the District went from a total net position in deficit prior to emerging from bankruptcy, to a positive total net position of over $2 million. A final payment was made to fully retire debt which was subject to the court-approved bankruptcy plan, around November 2013. Since that emergence from bankruptcy, the Board of Directors has made discretionary decisions which have substantially improved the District’s financial position, including leases of District facilities. As there was no recommendation, no recommended action will be implemented.