The Crimson Press Curriculum Center

First Page and the Assignment Questions:
    In late April, Lawrence Higgins, President of the Board of Trustees of Van Nuys Community Hospital, was reviewing the report of the hospital’s independent auditors (Exhibit 1). Included with the report were the hospital’s financial statements for 2009 with comparative figures for 2008.

   In reviewing the auditors’ report, Mr. Higgins was not particularly surprised. He knew that the hospital had been experiencing some financial difficulties, and that discussions had been underway for most of 2009 and into 2010 about how to deal with them. Indeed, he had been heavily involved in the decision to terminate inpatient acute care services earlier in the month. He was particularly concerned, however, about the auditors’ statement that there was “…substantial doubt about the Hospital’s ability to continue as a going concern.”

   In an effort to better understand the auditors’ perspective, Mr. Higgins decided to scrutinize carefully the financial statements and then to use them to assist him in structuring the agenda for the upcoming board meeting.

Assignment:

1.    Identify and analyze the underlying causes of the issues that you think are the most important with regard to (a) the hospital’s revenues and expenses, (b) the hospital’s working capital position), and (c) the auditor’s opinion letter.

2.    In light of your answers to Question 1, prepare a set of recommendations that Mr. Higgins can distribute to the board for its consideration prior to its next meeting.