Since this post was published Slabbed was contacted by Singing River Hospital Spokesman Richard Lucas. This snippet tells the tale:
Our laundry contract, as it has been for many years, is with Crown Health Care Laundry Services out of Pensacola, Florida. We do not have nor have we ever had a contract with Mississippi Laundry Services.
I appreciate the fact that Mr. Lucas contacted Slabbed with that clarification. The other entities are now screaming “follow-up” and I will be doing just that to see if we can gain additional clarity. That will be in part two. ~ Doug
By now anyone with any sort of remote connection to the Jackson County political establishment has heard the rumors of sweetheart deals between the Singing River Health System and certain insiders. Those rumors have been alluded to several different places and that makes this post a twofer as Slabbed will explore these rumors, why people are talking (beyond the obvious in the implosion of the employee pension fund due to management willfully not funding it) and plus that twofer in how this internet thingy works.
I begin with the DMR = SRHS meme, which first surfaced here in the local feedback loop with the feedback loop confirmed here. The gang at Singing River Hospital are no doubt feeling a bit embattled and rightfully so. Pundits, bloggers and muckrakers are a competitive group and there was no way I was gonna let Wayne Weidie have all the fun no sir. Two days ago I sent the following email (partially redacted for dramatic effect) to Hospital Spokesman Richard Lucas:
I am the publisher of the Slabbed New media website found at www.slabbed.org. I have been following and have covered certain aspects of the financial problems being experienced by the Singing River Hospital System. Along those lines several of my readers have sent me tips regarding alleged insider sweetheart contracts between the Hospital, Hospital <redacted> , and Mr. <redacted> son. Additionally one of the companies is allegedly also owned by Scott Walker, who is now in Federal Prison.
While these contracts may be shielded by the exemption enjoyed by the Hospital in the Mississippi Public Records statute I am contacting you to confirm or deny the existence of these related party transactions. If the answer is none of your business under the Mississippi public records law, that is fine too. I simply want to give you guys a chance to respond in advance of my upcoming publication on this topic and the rumors swirling around SRHS.
Thank you for any information you can provide me regarding these companies and their dealings with SRHS.
As I write this my email to Mr. Lucas has not garnered a reply but the next morning this appeared in the Mississippi Press: Continue reading “Analysis: Rumors of sweetheart insider contracts swirling around Singing River Hospital (Updated)”
Once I advised a client that was planning their cash flow needs for the coming year that should the business achieve a DSO of under 30 days then it could reduce its Trade Receivables outstanding by over 40% in dollar terms. Because of the nature of the contracts and their terms, the subject business was able to reduce both its DSO and trade receivables thus the amount of cash required to finance “the turn” was greatly reduced. This folks is called managing by the numbers and it not only works, but is typically the hallmark of the way best in class organizations are managed.
And by way of comparison we have this from the past weekend:
SRHS mess: Board minutes shed light on financial troubles, but meetings secret ~ Karen Nelson and Anita Lee
The hospital received a waiver from bond covenants and was able to finalize the audit June 21, according to the trustees’ minutes. The county did not receive the audit until July 9 — more than four months after the deadline. Crews told trustees he had negotiated a bond covenant allowing Singing River to have 55 days’ cash on hand, as opposed to 60, by Sept. 30. Crews reported to the board Sept. 25 that 56 days’ cash was on hand, but it was likely to decrease to 51 days when payroll was run later in the week.
So they would comply with bond covenants, Crews and Anderson suggested the board allow them to establish a line of credit for up to $5 million at Merchants & Marine Bank. Trustees unanimously approved the request. The Board of Supervisors also had to approve an increase in Singing River’s borrowing authority, according to a trustees’ resolution attached to the minutes.
This of course does not count the multiple refunding of bonds previously issued beginning in 2008 per my perusal of EMMA. So what was accomplished from a money standpoint by these gyrations? First off a local bank made some money because credit facilities are not free. So beyond paying a banker what did the financial engineering accomplish? Continue reading “The difference in managing by the numbers and being a slave to them”
So here I am today folks periodically reading bond indentures, a very old SHRS audit report from back in the days when things were still groovy financially as well as Jackson County’s audits. First off I am not so pleased to report I have only found about half of SHRS’ debt on EMMA and there is a message there about Jackson County not being current on their 2014 submissions. The other half of the $100 million dollars in debt is as of this point still a mystery to me.
My point is not to tantalize with the fact I have been doing copious amounts of due diligence on this subject but to make a point to the fairly large contingent of the finance and accounting community that reads this project. Neither Jackson nor Forrest Counties include their component units in with the primary government for financial reporting purposes and both get adverse opinions on the discretely presented component units presented in the annual audits along with unqualified opinions on the primary governments. To the extent it is clear the county owned hospitals are magnitudes larger financial critters than their primary governments (which omit them from their consolidated financials) and Jackson County taxpayers are potentially on the hook for a financial guarantee of over $100 million dollars related to the omitted financials, how in the heck can the primary government not be disclaimed due to the sheer materiality of the omission by failing to consolidate the Primary government and component units. SHRS had audits performed that would allow for consolidation, it appears the case here is that Jackson County simply refused to consolidate its financials to include the Hospital.
My point is had Jackson County properly presented its financial statements and consolidated County Government and its component unit at the Hospital, management at the Hospital would not have been able to conceal their financial problems for as long as they did.
As for Jackson County’s financial statements, file them under materially misleading as the financial guarantee of the bonds is presented, just not any information that would allow the end user to figure the risk of the contingent financial guarantee of the SHRS bonds from turning into a 5 mil property tax assessment borne by the taxpayer to pay for bad decisions that were made in secret.
I’ll have more a bit later.
I’ve followed the unfolding Singing River Hospital financial disaster from afar and thus far have managed to not look at a single audit or financial report as I’m currently neck deep in paying work. That said I have seen woeful misinformation spread about Defined Benefit Pension Plans during the course of the reporting. Defined Benfit plans, if properly run, can still be an excellent and cost effective employee benefit and it is there we begin because many have been looted out and then dumped on the taxpayers:
Looting the Pension Funds ~ Matt Taibbi
‘Retirement Heist’: How Firms Trimmed Pensions ~ Interview with former WSJ Reporter Ellen Schultz, WTEST
At Singing River Hospital, the pension fund was not looted. Instead it was simply not funded by the hospital to the point now where management now claims that the plan is actuarially unsound. The implications of not funding a qualified defined benefit plan, which likely had mandated minimum funding requirements, are legion.
For instance, when most people think of qualified pension plans they think IRS, because it is the IRS that writes the regulations for plan qualification and actually approves the plans both when they are established and terminated. However it is not the IRS that Singing River Hospital needs to worry about in this instance as it is the Department of Labor, specifically the Employee Benefits Security Administration that would handle the potential ERISA violations associated with the media disclosures involving the Singing River defined benefit plan and that is the bad news because while the IRS “audits”, the DOL “Investigates”. Having handled a DOL Investigation once or twice in my time practicing public accounting, I can say first hand it is far better to have the IRS show up than the DOL when it comes to this subject matter.
All that said the Singing River financial debacle could keep an enterprising business writer busy for weeks as the ramifications of seeing yet another defined benefit pension plan crash and burn are literally legion. Here are a few things that come to mind: Continue reading “A few keys to understanding Singing River Hospital disaster: Part 1”