Organization Restructuring to Reduce Expenses, Improve Financial Performance
SPRINGFIELD, VT–– It was announced on Feb. 13 that a forensic and certified independent audit, both ordered by Springfield Medical Care Systems’ (SMCS) Board of Directors and shared with the State of Vermont’s Agency of Human Services, are providing “important information to the organization’s leadership as it considers necessary changes that will help the health system move toward a strengthened financial outlook,” said SMCS.
The forensic audit, conducted by the BerryDunn accounting firm, reviewed documents, such as bank statements, check disbursements, credit card statements and payroll distributions, from October 2017 through December 2018. Auditors also talked to employees inside the organization. Auditors found no evidence of funds being used improperly, such as for personal gain, said SMCS.
“Our Board ordered this audit to explore and review records and review and implement improvements to internal controls, so we can keep providing quality care to this community,” said Michael Halstead, Interim Chief Executive Officer. “The forensic audit does show that at times, former leadership did not report to our Board all of the information that was needed to make strategic decisions. That is something we are fixing.”
In order to safeguard the organization’s assets, the forensic audit suggests that the Board and leadership should review internal controls, training and the Board’s investment policies, which all agree must all be addressed. Governance and financial management are among the priorities as decisions are made for the organization’s future.
“It’s important to note that the audit did not reveal anything that could have affected patient care,” Halstead added. We will implement changes necessary to help get us back on solid financial footing.”
The full audit of SMCS, was also conducted by BerryDunn and covers the time period ending September 30, 2018. It shows a significant operating loss and also provides specific guidance to leadership about financial challenges.
“This is the audit information we were expecting,” said Halstead. “Since our management team arrived in Springfield to see the situation up close, we had a good sense of the numbers we were dealing with and what it will take to reverse the financial trends. The audit confirms what we believed to be the case – increased patient revenues did not exceed the growth in expenses which led to a low cash position.”
The audit shows that approximately two-thirds of SMCS’s loss was due to increases in employee benefit costs. It also shows SMCS provided approximately $2 million in charity care for members of the community.
The auditors noted that the System provided them with all of the sufficient and appropriate evidence in order to complete their examination, said SMCS.
“This audit information will prove valuable as we complete the difficult, but necessary job of working with the community to secure the financial future of this organization,” added Halstead.
The organization announced earlier that approximately 27 positions will be eliminated. System-wide wage reductions will take effect February 24, 2019, and include 10% for salaried positions, 4% for hourly staff, and a negotiated amount from contracted staff. A spokesperson said at the time that "To be clear, the situation is fluid, and it is possible further staffing adjustments will be necessary. The need to identify further cost savings remains.”