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PACA MH/DS Fiscal and Data Committee Mini-Conference Identifying Red Flags in Audits

PACA MH/DS Fiscal and Data Committee Mini-Conference Identifying Red Flags in Audits. Introductions and CPA Continuing Professional Education Credit. Introductions Michael Wassil, CPA, MBA Consulting Partner The Binkley Kanavy Group, LLC CPE sign-in s heet. Agenda. Objectives

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PACA MH/DS Fiscal and Data Committee Mini-Conference Identifying Red Flags in Audits

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  1. PACA MH/DSFiscal and Data Committee Mini-ConferenceIdentifying Red Flags in Audits

  2. Introductions andCPA Continuing Professional Education Credit • Introductions • Michael Wassil, CPA, MBA Consulting Partner The Binkley Kanavy Group, LLC • CPE sign-in sheet

  3. Agenda • Objectives • Targeted Analysis Techniques • Other Red Flags • Closing Comments

  4. Objectives • High profile and/or risky decisions: • Transition or transfer of consumers to new providers? • Startup of new provider services or sites? • Other?

  5. Objectives • Provide financial statement analysis techniques to aid decision making and timely respond to providers that are or may become: • Financially unstable • Non-compliant with contractual terms and regulations

  6. Targeted Analysis Techniques • Financial statements: • Needs of different users vary (e.g. banks, creditors, members, donors, counties, joinders, etc.) • Commonly encountered perceptions • Filters and trends

  7. Targeted Analysis Techniques – Liquidity Ratios • Will the provider be able to deliver services in the future? • Will the next payroll be paid?

  8. Targeted Analysis Techniques – Liquidity Ratios • Can a payment or budget approval delay be weathered?

  9. Targeted Analysis Techniques – Liquidity Ratios • Are landlords and critical vendors being paid timely?

  10. Targeted Analysis Techniques – Liquidity Ratios • Quick Ratio

  11. Targeted Analysis Techniques – Debt Ratios • Can the provider obtain financing to fund its existing operations or a new service or site?

  12. Targeted Analysis Techniques – Debt Ratios • Can the provider obtain financing to fund its existing operations or a new service or site?

  13. Targeted Analysis Techniques • Additional considerations: • Available line of credit balances • Liquid investments and marketable securities

  14. Targeted Analysis Techniques • Symptoms of being financially unstable or “ill” • Staff turnover • Hiring delays • Service delays, etc.

  15. Targeted Analysis Techniques • Common causes of financial instability • Claim submission delays and errors from a lack of staff training or awareness • Fiscal staffing or systems not keeping pace with growth • Lack of short-term cash flow planning and forecasting • Limited banking relationships • Accounting processes and reliance on auditors

  16. Targeted Analysis Techniques • Benefits: • Reduced decision making risk • Opportunity to provide additional guidance or set expectations • Avoidance of audit findings

  17. Targeted Analysis Techniques Questions?

  18. Other Red Flags • Sales of county/joinder owned fixed assets and real estate (Statements of Cash Flow) • Related party or affiliate transfers, loans, purchases, sales and guarantees (Footnotes) • Going concern, qualifications and disclaimers (Independent Auditor’s Report) • Lawsuits and other legal contingencies (Footnotes) • Concentrations in revenues, workforces, locations and other factors (Footnotes)

  19. Other Red Flags • Debt or lease covenant violations that can accelerate required payments (Footnotes) • Volatile employee benefit plan funding requirements (Footnotes) • Discontinued operations and impaired assets (Income Statements / Statements of Activities and Footnotes) • Accounting errors (Balance Sheets / Statements of Financial Position) • Sale and leaseback transactions (Footnotes)

  20. Other Red Flags • Conditions and restrictions on significant contributions and other funding sources (Footnotes) • Unresolved audit findings, questioned costs and illegal acts (Schedules of Findings, Questioned Costs and Prior Audit Findings)

  21. Other Red Flags Filter Tools

  22. Closing Comments Michael Wassil, CPA MBA Consulting Partner The Binkley Kanavy Group, LLC Email: Wassil@BinkleyKanavy.com Phone: (412) 434-0477 Ext.207

  23. The Binkley Kanavy Group The Binkley Kanavy Group thanks you for attending We are a professional services firm that operates throughout the Commonwealth. We offer auditing and consulting services to our niche markets of County and Local Governments and Human Service Organizations. Our practice leaders and experts are: Brian Binkley, CPA, Managing Partner Thomas Kanavy, CPA MBA, Partner County, Local Government and Provider HealthChoices Audit and Consulting Audit Practice Leader Practice Leader Binkley@BinkleyKanavy.comKanavy@BinkleyKanavy.com (412) 434-0477 X204 (412) 434-0477 X203 Michael Wassil, CPA MBA, Consulting Partner County and Provider Consulting Practice Leader Wassil@BinkleyKanavy.com (412) 434-0477 X207 We invite you to visit our provider management services web page at http://www.binkleykanavy.com/industries/provider_monitoring_management_services.html

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