[A] forensic audit discovered no illegal activity but found financial managers at Springfield Hospital were not forthcoming and made “material misstatements” the year before the troubled hospital almost closed.
BerryDunn, a New Hampshire accounting firm, reviewed financial records for the hospital between Oct. 1, 2017 and Dec. 3, 2018, after the board discovered the hospital was months behind in payroll taxes and was facing penalties.
The forensic audit highlighted a financial transparency problem at the troubled hospital the year before the state bailed out the hospital with an $800,000 loan.
“As board members…the most significant of these (concerns) is the lack of transparency of financial information for you to be able to rely on to make the decisions,” the report said.
Most of the forensic audit focused on former CFO Scott Whittemore, who was terminated from his position Dec. 3, according to the report.
The report faulted Whittemore and other financial management for not being forthcoming about the severity of the hospital’s financial situation.
BerryDunn, which performed a concurrent financial audit, found the hospital’s operating loss increased about $2 million from 2017 to 2018. The hospital lost about $14 million in two years.
“This factor, and the resulting impact on cash flows, raise substantial doubt about its ability to continue,” the financial audit said.
The forensic audit said those downward revisions to the figures suggested there was a “material misstatement of the monthly financial reporting.”
The firm looked for payments made to fictitious vendors and fictitious employees. BerryDunn reviewed credit cards used by people within the organization, including former CEO Tim Ford. The firm also checked if any unauthorized payments had been made to Whittemore, but found no illegal activity.
“The results of the limited and specific procedures we performed did not identify instances we believe to be misappropriation of assets for personal gain by or for the CFO during the period,” the report said.
While there was no missing money, the audit said Whittemore departed from hospital procedures on more than one occasion. Whittemore reimbursed himself for three payments without proper authorization, the forensic audit found.
Whittemore’s three reimbursements last year totaled about $2,500 for hospital equipment purchases and $122 for a “farewell lunch” for an employee.
“While the explanation and supporting documentation for the two items purchased does not appear unreasonable, the required second signature approval for equipment purchases was missing and therefore is a departure from the policy,” the forensic report said.
The audits demonstrate concerns Green Mountain Care Board chair Kevin Mullin raised in December about Whittemore not being forthcoming about the hospital’s financial situation during a budget presentation last fall.
Whittemore worked at Springfield Hospital about 20 years until he was abruptly fired by Ford, the former CEO, Whittemore said. Ford departed from the hospital less than a week after Whittemore.
Whittemore dismissed claims that he wasn’t transparent about the financial issues, explaining he repeatedly warned board members about the need to cut expenses over the past two years.
“Neither the board nor most of the operational managers took any positive action,” Whittemore said in an interview.
Whittemore said he paid for bills that were critical to keeping the hospital open when cash flow became a problem. He opted to pay late fees for bills he viewed as noncritical.
The dire financial situation has become clearer since the change in upper level management. Last month, the state loaned Springfield Hospital $800,000, matching a loan the hospital also received from Berkshire Bank. Hospital administrators are continuing to review finances and recently laid off 27 employees.
Springfield Hospital Interim CEO Mike Halstead wasn’t surprised by the findings in the audit report.
“It’s what we expected,” Halstead said. “The findings from the auditors were basically that there were no indication of any misappropriation of assets…It was a useful report from that standpoint.”
The audit was conducted because “the board was concerned about the magnitude of financial results that were much different from what they were expecting,” Halstead said.
The forensic report leaves unanswered questions as to how the hospital’s financial situation appeared to turn so quickly without the board cutting expenses.
“It’s basically saying there’s a transparency issue, which I’m already aware of,” Agency of Human Services Secretary Al Gobeille said. “That’s not new information to me.”
Gobeille was planning to meet with hospital officials on Feb. 20 to go over the report.
Tom Huebner, who was appointed by Gov. Phil Scott to help the hospital through its turmoil, said the hospital would use the report to improve accounting policies and practices.
“I thought it was a helpful piece of information,” Huebner said.