County to review 2010 BRHS audit, upsets Piland’s reappointment | Eastern North Carolina Now

    The Beaufort County Board of Commissioners applied quite a bit of muscle to firmly center Beaufort Regional Health System on the dual track to recovery, at its general meeting on Tuesday. With the four proposals from institutions seeking to merge with BRHS in and under review, the commissioners seemed to pick up the pace on their course to salvage the financial solvency of the hospital. At the meeting, the board took its final step toward the purchase of BRHS real estate, so the hospital can pay its debt service to the county and have operating capital; appointed a three-man team from the county to oversee the upcoming BRHS audit; and steered the membership of the hospital board even farther away from its composition under ex-BRHS CEO Bill Bedsole and his cronies.

    The commissioners unanimously agreed to empower Beaufort County and BRHS staff to sign whatever documents will be necessary to transfer the 19 parcels of hospital land over to Beaufort County. They also agreed to allow County Manager Paul Spruill and County Finance Director Jim Chrisman to approve the details of the $4.8-million First-Citizens Bank loan that the county will use to fund the purchase. Beaufort County Attorney William P. Mayo said he is hoping that the closing will occur within the next 10 days, as soon as the lender finishes reviewing the title commitment.

    Commissioner Hood Richardson, as the county's representative on the BRHS hospital board, and as champion of the sometimes controversial dual track approach to recovery, delineated, before the board, some of the most egregious revelations uncovered by the 2009 BRHS audit. The first had to do with the auditing company, itself--Dixon Hughes. Not only has the company refused multiple invitations to speak with the Beaufort County commissioners about the audit, which many of them felt necessary given the circumstances, according to Richardson; but Dixon Hughes didn't arrive on site to begin compiling the audit until Dec. 7, 2009, over two months past the Sept. 30 end of the 2009 fiscal year, according to Commissioner Jay McRoy. Therefore, the 2009 audit report wasn't issued until May 3, 2010.

    "They produced an audit that was about three to four months late from when they should have produced it, because, usually, within 90 to 120 days after you close a business you should have the audit in your hands," confirmed Richarson.

Richardson makes the case for appointing a team of Beaufort County politicians and employees to review the 2010 Beaufort Regional Health System audit.

    Dixon Hughes excused their tardiness by saying, "Significant delays and difficulties were encountered at year-end as many of the requested items were not available at the beginning of scheduled fieldwork as previously discussed with management. Additional delays were encountered to resolve a number of outstanding items after fieldwork was completed."

    Whatever the reason for the delay, it surely kept hospital board members and Beaufort County commissioners unaware, for longer than is traditionally considered acceptable, of the actual extent of the losses incurred by BRHS in 2009. BRHS CFO Chris Riggs had reported roughly $300,000 in losses; but the audit discovered that losses were closer to $1.5. According to Dixon Hughes, BRHS overstated its income for 2009 by $1.15 million. BRHS CFO Chris Riggs submitted his resignation last month.

    Richardson said that auditing companies take such misstatements of income very seriously.

    "They claim a material misstatement is the worst thing that you can find in an audit. I guess, other than to claim fraud," he said.

    Dixon Hughes said that BRHS could avoid such numerical discrepancies in their books if they set up "workable set of checks and balances on each employee" to reduce occasions of error and fraud. The company also said that BRHS needed to start writing down all of its bad debt and settling the books from each department on a monthly basis.

    Richardson spoke at length about the necessity of not only creating a system of checks and balances within the hospital, but also making sure that the BRHS CEO and CFO work to prevent and detect error and fraud. Richardson said he personally discovered a $473,000 investment credit in the books that should not have been there, but that it has since been cleared up.

    "They point out, quite rightly, in here that you can still have segregation of duties, and if people collude with each other you can still wind up with a set of books that's not right," said Richardson. "It's up to management to see to it that this thing works the way it's supposed to work."

    Richardson, McRoy and Commissioner Al Klemm admitted that there are still several holes in the audit, which leave many questions unanswered. Richardson suggested that the county and the hospital split the cost of a flash audit of the hospital's finances. The commissioners agreed, instead, to wait until the impending annual audit and simply hire a new auditing firm that will be on the ground by Sept. 30, the day the 2010 fiscal year ends, to complete the audit in a timely manner. The board also appointed Beaufort County Manager Paul Spruill, Beaufort County Finance Officer Jim Chrisman and McRoy, who has worked as an auditor, to meet with the new auditing firm, along with the hospital board, when reviewing the 2010 audit.

    The commissioners went on to unanimously approve the reappointment of the new BRHS Authority Board Chairwoman Alice Mills Sadler, whose term is set to expire. They also unanimously agreed that Suzanne Gray should be the replacement for hospital board member Curtis Potter, who had requested not to be reappointed at the expiration of his term. Nevertheless, when it came time to reappoint Jack Piland (part of the old majority under ex-BRHS Authority Board Chairman Sandy Hardy), despite his desire to stay on the board, the commissioners voted to replace him with Howard Cadmus. The vote was 5 to 2, with McRoy and Klemm voting in favor of reappointing Piland.