Financial Audit of the John A. Burns School of Medicine of the University of Hawaii_part1

Financial Audit of the John A. Burns School of Medicine of the University of Hawaii A Report to the Governor and the Legislature of the State of Hawaii Report No. 03-02 May 2002 This is trial version www.adultpdf.com THE AUDITOR STATE OF HAWAII Office of the Auditor The missions of the Office of the Auditor are assigned by the Hawaii State Constitution (Article VII, Section 10). The primary mission is to conduct post audits of the transactions, accounts, programs, and performance of public agencies. A supplemental mission is to conduct such other investigations and prepare such additional reports as may be directed by the Legislature. Under its assigned missions, the office conducts the following types of examinations: 1. Financial audits attest to the fairness of the financial statements of agencies. They examine the adequacy of the financial records and accounting and internal controls, and they determine the legality and propriety of expenditures. 2. Management audits, which are also referred to as performance audits, examine the effectiveness of programs or the efficiency of agencies or both. These audits are also called program audits, when they focus on whether programs are attaining the objectives and results expected of them, and operations audits, when they examine how well agencies are organized and managed and how efficiently they acquire and utilize resources. 3. Sunset evaluations evaluate new professional and occupational licensing programs to determine whether the programs should be terminated, continued, or modified. These evaluations are conducted in accordance with criteria established by statute. 4. Sunrise analyses are similar to sunset evaluations, but they apply to proposed rather than existing regulatory programs. Before a new professional and occupational licensing program can be enacted, the statutes require that the measure be analyzed by the Office of the Auditor as to its probable effects. 5. Health insurance analyses examine bills that propose to mandate certain health insurance benefits. Such bills cannot be enacted unless they are referred to the Office of the Auditor for an assessment of the social and financial impact of the proposed measure. 6. Analyses of proposed special funds and existing trust and revolving funds determine if proposals to establish these funds are existing funds meet legislative criteria. 7. Procurement compliance audits and other procurement-related monitoring assist the Legislature in overseeing government procurement practices. 8. Fiscal accountability reports analyze expenditures by the state Department of Education in various areas. 9. Special studies respond to requests from both houses of the Legislature. The studies usually address specific problems for which the Legislature is seeking solutions. Hawaii’s laws provide the Auditor with broad powers to examine all books, records, files, papers, and documents and all financial affairs of every agency. The Auditor also has the authority to summon persons to produce records and to question persons under oath. However, the Office of the Auditor exercises no control function, and its authority is limited to reviewing, evaluating, and reporting on its findings and recommendations to the Legislature and the Governor. THE AUDITOR STATE OF HAWAII Kekuanao‘a Building 465 S. King Street, Room 500 Honolulu, Hawaii 96813 www.adultpdf.com The Auditor State of Hawaii OVERVIEW Financial Audit of the John A. Burns School of Medicine of the University of Hawaii Report No. 03-02, February 2003 Summary The Office of the Auditor and the certified public accounting firm of Deloitte & Touche LLP conducted a financial audit of the John A. Burns School of Medicine of the University of Hawaii for the fiscal year July 1, 2001 to June 30, 2002. The audit examined the financial records and transactions of the school; reviewed the related systems of accounting and internal controls; and tested transactions, systems, and procedures for compliance with laws and regulations. We found deficiencies in the internal control practices of the school. The school’s administration and management of its contracts with health care organizations that provide training and medical services are deficient. The contracts require the organizations to reimburse the school for salary, fringe benefit, and professional malpractice insurance premium costs of faculty providing medical services for the respective organizations while conducting training. We found that all of the contracts, 28 during FY2001-02, were signed and executed subsequent to the contract start date. School faculty provided services for at least four months and approximately $2.3 million in expenses were incurred, before the health care organizations could be billed. As a result, the school’s cash flow was negatively impacted and interest that could have been earned on the amounts outstanding was lost. Also, the performance of services in the absence of executed contracts could expose the school to potential disagreements with the health care organizations and legal risks. We also found that the school does not complete final reconciliations of the amounts due from the health care organizations in a timely manner. As of mid-October 2002, the final reconciliations for FY2001-02 were not completed, and bills that would cover the final month of service, as well as any necessary adjustments, had not been sent out. Here also, the school’s cash flow was negatively impacted as funds remained outstanding for about four months and any potential interest income was lost. Finally, we found that the school does not comply with University of Hawaii policies and procedures regarding conflict of interest situations involving school faculty. University faculty are encouraged to promote the state’s cultural and economic development by utilizing their special abilities and skills in research, teaching, or other areas over and above their university positions. However, limits are placed on such outside employment to ensure that employment does not interfere with the faculty’s primary obligation to the university. University faculty are required to submit disclosure forms and outside employment Tforms. We found that a significant portion of these forms were either not www.adultpdf.com Report No. 03-02 February 2003 completed or were not submitted in a timely manner. We also found that the policies and procedures were not enforced by school administrators. By not enforcing the requirement for submitting disclosure forms and outside employment forms, potential conflict of interest situations which interfere with an employee’s obligation to the school may not be identified or adequately resolved. Employees could spend too much time supplementing their income with outside activities at the expense of their responsibilities to the school. Also, in cases where research is funded by non-university sources, the sponsor may even sanction the university, if appropriate, because of a conflict of interest. Recommendations and Response We recommend that the school revise the way it handles contract negotiations with health care organizations, and commence services only after contracts are finalized and executed. The school should also review the process used to prepare the final contract reconciliations and ensure that the final bills are sent out in a timely manner. We also recommend that the school enforce policies, procedures, and deadlines for completion and submission of the annual disclosure forms and outside employment forms. The university agrees with our recommendations and responded that it has already taken steps to implement some of our recommendations. Marion M. Higa Office of the Auditor State Auditor 465 South King Street, Room 500 State of Hawaii Honolulu, Hawaii 96813 (808) 587-0800 This is trial versionX (808) 587-0830 www.adultpdf.com Financial Audit of the John A. Burns School of Medicine of the University of Hawaii A Report to the Governor and the Legislature of the State of Hawaii Conducted by The Auditor State of Hawaii and Deloitte & Touche LLP Submitted by THE AUDITOR STATE OF HAWAII Report No. 03-02 February 2003 This is trial version www.adultpdf.com ... - tailieumienphi.vn