Incomplete 2013 audit is issue
A delay in Tehachapi Valley Healthcare District's 2013 audits caused some raised eyebrows recently when a major credit rating agency pulled its rating of the hospital bond on Aug. 18.
Moody's Corporation withdrew its rating from the healthcare district's $63 million bond used for the construction of the new hospital, according to a Aug. 18 investor update from the company. Moody's reason: a lack of information from the healthcare district, specifically audits from the 2013 fiscal year.
Eugene Suksi, interim chief executive officer for the healthcare district, confirmed the withdraw of the credit rating.
"The TVHD audit of the 2013 fiscal year is not yet complete," Suksi said in an email on Aug. 25. "Once it is finished a copy will be provided to Moody's and I anticipate that they will restore a rating when they have received sufficient information."
Suksi, who took over the reigns of the healthcare district from Evan Rayner in July, said he has never encountered a scenario where a late audit affects a major bond rating.
He added that "it should have little effect on the district and the construction of the new hospital," which has already seen some setbacks on its construction schedule.
"The bond proceeds have already been received by the district," Suksi said.
Moss Adams, the company performing the 2013 audit, is new to the TVHD scene. The healthcare district switched from TCA Partners, who had long conducted audits for the district, according to Suksi.
"With the change in auditors, Moss Adams has had some questions about historical data and identified that a few changes to the prior year audit (2012) were appropriate," Suksi said.
Suksi said that TCA Partners will "restate" its 2012 audit, without any apparent significant changes, and Moss Adams will complete the 2013 audit.
"It is anticipated that the entire process will finally be complete in a few weeks," Suksi said.
For Moss Adams to continue its audit, however, will cost the healthcare district an additional $30,000. This is in addition to the $100,000 it has been paid since the auditing firm took the contract in April 2013, according to Chet Beedle, the district's chief financial officer.
Beedle revealed the extra cost at the healthcare district's Aug. 27 meeting.
In contrast, TCA Partners has agreed to conduct its restatement of the 2012 audit for free. Beedle said the only thing to change would be the valuation of the property donated by the Broome family for the site of the new hospital.
TCA will be conduct the audit for the 2014 fiscal year.
Spending $30,000 requires board action; the CEO's spending authorization is capped at $25,000.
Beedle said that Moss Adams would need notification by Sept. 1. However, the board could not approve the transaction because it was not on the Aug. 27 agenda.
Moody's pulling of its rating, however, will not directly impact the bond value. Both Beedle and board president noted the bond is paid for through Tehachapi area property taxes.
The district has been through some tumultuous times on the management front with former CEO Alan Burgess resigning in September 2013, followed by the departure of William Van Noy later in 2013. Van Noy was hired in February 2012 to succeed CFO Joe Demont, who had been with the district for five years. Interim CFO Beedle was hired in December 2013.