FINDINGS, CONCLUSIONS, AND RECOMMENDATIONS
INADEQUATE PROCEDURES FOR ACCOUNTS PAYABLE
The P&S did not have adequate procedures in place to determine accounts payable at the end of each fiscal year.
P&S management reviewed payments made 30 days after fiscal year end in search of vouchers which should be recorded as accounts payable. However, due to the untimely payment of vouchers in both fiscal years 2003 and 2002, vouchers approved and paid after 30 days from fiscal year end were not recorded as accounts payable.
Accounts payable at June 30, 2003 and 2002 were understated by $47,984 and $22,344, respectively. (Finding 1, page 14)
We recommended and P&S officials agreed to implement additional procedures to improve the accuracy of the year end balance of accounts payable.
CREDIT BALANCES IN ACCOUNTS RECEIVABLE
P&S continues to be unable to accumulate credit balances due to patients or other responsible parties at year end, and therefore continues to be unable to adequately account for credit balances in patient accounts receivable balances.
Credit balances in accounts receivable were approximately $900,000 at June 30, 2000 and $1.6 million at June 30, 2002. Since our last audit, P&S has devoted additional staff and resources to resolving these credit balances and reversing the historical trend. Due to increased efforts, P&S was able to decrease the credit balances to $1.3 million at June 30, 2003.
Credit balances of $1.3 million were deducted in arriving at gross accounts receivable of approximately $25 million at June 30, 2003.
P&S officials indicated that P&S still does not have the capability through its software to break down the amount of credit balances between those that are due back to patients and other responsible parties and those that require other types of adjustments. Therefore, P&S has not segregated refunds due to patients and other third party payers in its statement of net assets. (Finding 2, pages 15 – 17)
We recommended that P&S develop a method to accumulate those credit balances due to patients or other responsible parties in order to properly state accounts receivable at fiscal year end. We further recommended that P&S continue to review all credit balances greater than one year old currently in the system to ensure that all applicable monies are refunded or necessary adjustments are posted to the accounting records.
P&S officials concurred with our recommendation.
CASH CREDIT RISK
P&S consistently maintains a cash account with a bank balance greater than the Federal Deposit Insurance Corporation’s (FDIC) insured amount of $100,000.
At June 30, 2003 and June 30, 2002, the uninsured balances were $770,988 and $749,828, respectively.
Prudent business practices require that assets not be subject to uninsured risk. (Finding 3, page 18).
We recommended, and P&S officials agreed to take the necessary measures to ensure that cash balances do not exceed the insured amount of $100,000.
Agency responses were provided by Mr. Peter Cadwell, Chief Financial Officer for Physicians and Surgeons, Inc.
AUDITORS' OPINION
Our auditors stated the June 30, 2003 financial statements of the Physicians and Surgeons, Inc. are fairly presented in all material respects.
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WILLIAM G.HOLLAND, Auditor General
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SPECIAL ASSISTANT AUDITORS
Kerber, Eck & Braeckel LLP were our special assistant auditors for this engagement.
