Federal and State Financial Assistance Programs

Transcription

1 Federal and State Financial Assistance Programs Dallas County Hospital District dba Parkland Health & Hospital System (A Component Unit of Dallas County, Texas) Year ended September 30, 2016

2 Dallas County Hospital District dba Parkland Health & Hospital System (A Component Unit of Dallas County, Texas) TABLE OF CONTENTS Page REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS REQUIRED BY GOVERNMENT AUDITING STANDARDS 2 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON COMPLIANCE FOR EACH MAJOR FEDERAL AND STATE PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE AND THE STATE OF TEXAS SINGLE AUDIT CIRCULAR 4 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS REQUIRED BY UNIFORM GUIDANCE AND THE STATE OF TEXAS SINGLE AUDIT CIRCULAR 7 SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS FOR THE YEAR ENDED SEPTEMBER 30, NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS FOR THE YEAR ENDED SEPTEMBER 30, SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED SEPTEMBER 30, SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS 16

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9 DALLAS COUNTY HOSPITAL DISTRICT (A Component Unit of Dallas County, Texas) SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS FOR THE YEAR ENDED SEPTEMBER 30, 2016 Amounts Passed Federal Identifying Through Grant Name CFDA Number Number Expenditures to Subrecipients EXPENDITURES OF FEDERAL AWARDS U.S. Department of Health and Human Services: Direct HIV-Related Training and Technical Assistance (AIDS Education Training Center) U1OHA $ 2,090,241 $ 1,232,124 HIV-Related Training and Technical Assistance (AIDS Education Training Center) U1OHA ,770 HIV-Related Training and Technical Assistance (AIDS Education Training Center) H4AHA ,656 69,497 Subtotal ,381,667 Healthy Start Initiative (Eliminating Disparities in Perinatal Health - Dallas Healthy Start) H49MC ,065 Healthy Start Initiative (Eliminating Disparities in Perinatal Health - Dallas Healthy Start) H49MC ,635 Subtotal ,235,700 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) (Health Center Cluster - HOMES) H80CS ,725 Health Center Program (Community Health Centers, Migrant Health Centers, Health Care for the Homeless, and Public Housing Primary Care) (Health Center Cluster - HOMES) H80CS ,050,085 Subtotal ,933,810 Poison Center Support and Enhancement Grant Program (Poison Stabilization and Enhancement Program) H4BHS ,304 Poison Center Support and Enhancement Grant Program (Poison Stabilization and Enhancement Program) H4BHS ,218 Subtotal ,522 Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease (Ryan White Part C Outpatient EIS Program) H76HA ,620 Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease (Ryan White Part C Outpatient EIS Program) H76HA ,040 Subtotal ,660 Coordinated Services and Access to Research for Women, Infants, Children, and Youth (Ryan White Part D (IV) Women, Infants, Children, Youth and Affected Family Members AIDS Healthcare) H12HA ,738 Total Direct from U.S. Department of Health and Human Services 8,083,097 Agency for Healthcare Research and Quality: Passed through from Women & Infants Hospital of Rhode Island: Research on Healthcare Costs, Quality and Outcomes (Generalizing TESTPILOT-Agency for Healthcare Research and Quality) ,500 Total passed through from Women & Infants Hospital of Rhode Island 5,500 Passed through from The John Hopkins University: HIV Research Network Contract Unknown HHSA ,089 Total passed through from The John Hopkins University 140,089 Passed through from Vizient, Inc.: ACA-Transforming Clinical Practice Initiative: Practice Transformation Networks (PTNs) - Transforming Clinical Practice Initiative ,125 Total passed through from Vizient, Inc. 43,125 Passed through from University of Texas Southwestern Medical Center: National Center for Advancing Translational Sciences (UTSW Center for Translational Medicine) GMO ,842 Cancer Cause and Prevention Research (Developing a Self-Persuasion Intervention Promoting Adolescent HPV Vaccination) GMO ,986 Affordable Care Act (ACA)-Primary Care Residency Expansion Program (Primary Care Residency Expansion) GMO ,424 Cancer Centers Support Grants (PROSPR Center: Colon Cancer Screening in a Safety Net) GMO ,391 Cancer Centers Support Grants (Parkland-UT Southwestern Prosper Center : Colon Cancer Screening in a Safety Net Cervical Supplemental) GMO ,910 Subtotal ,301 Research on Healthcare Costs, Quality and Outcomes (UT Southwestern Center for Patient Centered Outcomes Research/Research on Healthcare Costs, Quality and Outcomes) GMO ,850 Diabetes, Digestive, and Kidney Diseases Extramural Research (Improving Chronic Disease Management with PIECES (ICD-9)) GMO , ,200 Total Passed through from University of Texas Southwestern Medical Center 1,059,

10 DALLAS COUNTY HOSPITAL DISTRICT (A Component Unit of Dallas County, Texas) SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS FOR THE YEAR ENDED SEPTEMBER 30, 2016 Amounts Passed Federal Identifying Through to Grant Name CFDA Number Number Expenditures Subrecipients Passed through from Texas Department of State Health Services: Temporary Assistance for Needy Families (Breast & Cervical Cancer - Temporary Assistance to Needy Families) $ 79,573 Social Services Block Grant (Breast & Cervical Cancer - Social Services Block Grants) ,536 Cancer Prevention and Control Programs for State, Territorial and Tribal Organizations financed in part by Prevention and Public Health Funds (Breast & Cervical Cancer-Affordable Care Act) ,912 Maternal and Child Health Services Block Grant to the States (Child Health & Dental - Maternal & Child Health Services Block Grants to States-Title V) ,700 HIV Prevention Activities_Health Department Based (Routine HIV Screening Services) ,432 HIV Prevention Activities_Health Department Based (Routine HIV Screening Services) ,460 Subtotal ,892 Total passed through from Texas Department of State Health Services 904,613 Passed through from Women's Health and Family Planning of Texas: Family Planning_Services (Title X) none 2,292,157 Family Planning_Services (Title X HIV A) none 159,600 Family Planning_Services (Title X HIV B) none 55,000 Family Planning_Services (Long Acting Reproductive Contraception) none 228,101 Total passed through from Women's Health and Family Planning of Texas 2,734,858 Passed through from Dallas County Health and Human Services: HIV Emergency Relief Project Grants (Ryan White Part A Formula) none 3,830,096 HIV Emergency Relief Project Grants (Ryan White Part A Supplemental) none 1,551,545 HIV Emergency Relief Project Grants (Ryan White Part A Minority AIDS Initiative) none 44,464 Subtotal ,426,105 HIV Care Formula Grants (Ryan White Part B Formula) none 1,683,701 Total passed through from Dallas County Health and Human Services 7,109,806 Passed through from Community Council of Greater Dallas: Empowering Older Adults and Adults with Disabilities through Chronic Disease Self-Management Education Programs financed by Prevention and Public Health Funds (PPHF) none 866 Total passed through from Community Council of Greater Dallas 866 Total U.S. Department of Health and Human Services 20,081,499 U.S. Department of Transportation: Passed through from Texas Department of Transportation: National Priority Safety Programs (Child Passenger Safety Training) IPCOGD-G-1-YR ,802 National Priority Safety Programs (Child Passenger Safety Training) IPCOGD-G-1-YR ,609 Subtotal ,411 State and Community Highway Safety (Give Kids a Boost) IPCOGD-G-1-YR ,010 State and Community Highway Safety (Give Kids a Boost) IPCOGD-G-1-YR ,592 Subtotal ,602 Total U.S. Department of Transportation 148,013 U.S. Department of Justice: Passed through from State of Texas Office of the Governor Criminal Justice Division: Crime Victim Assistance (Rapid Response for Victims) ,992 Crime Victim Assistance (Victims of Crime Assistance Grant-Enhanced Crisis Support Project) Subtotal ,730 Violence Against Women Formula Grant (Comprehensive Victim Intervention Services) ,120 Violence Against Women Formula Grants (Violence Against Women Act Comprehensive Training) ,001 Violence Against Women Formula Grants (Violence Against Women Act Comprehensive Training) ,083 Violence Against Women Formula Grants (Violence Against Women Act Comprehensive Training) ,221 Subtotal ,425 Total U.S. Department of Justice 333,155 TOTAL EXPENDITURES OF FEDERAL AWARDS $ 20,562,667 $ 1,635,

11 DALLAS COUNTY HOSPITAL DISTRICT (A Component Unit of Dallas County, Texas) SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS FOR THE YEAR ENDED SEPTEMBER 30, 2016 Grant Name Identifying Number Expenditures Amounts Passed Through to Subrecipients EXPENDITURES OF STATE AWARDS Texas Department of State Health Services: Direct Breast & Cervical Cancer - Community Health Services $ 249,611 Epilepsy - Community Health Services ,416 Primary Health Care - Community Health Services-Primary Health Care ,741 Senior Outreach Services Project - Community Health Services ,351 Expanded Primary Health Care ,361,013 Healthy Texas Babies ,902 Passed through from Dallas County Health and Human Services: Texas HIV Health and Social Services 159,591 Total Texas Department of State Health Services 8,605,625 Texas Department of Transportation: EPIINJ/IPC Injury Epidemiology & Surveillance Branch/Injury Prevention Center ,905 Total Texas Department of Transportation 41,905 Texas Department of Family and Protective Services: Passed through from the United Way of Metropolitan Dallas: Project Healthy Outcomes through Prevention and Early Supports-NFP none 20,972 Project Healthy Outcomes through Prevention and Early Supports-IPC Purple Crying none 18,032 Total Texas Department of Family and Protective Services 39,004 Commission on State Emergency Communications: Commission on State Emergency Communications-Poison Services ,727,965 Total Commission on State Emergency Communications 1,727,965 Office of the Attorney General of Texas: Sexual Assault Prevention and Crisis Services (SAPCS-State) ,226 Other Victims Assistance Grant ,484 Total Office of the Attorney General Texas 91,710 Texas Health and Human Services Commission: Nurse Family Partnership ,739 Nurse Family Partnership B 24,648 Total Texas Health and Human Services Commission 876,387 University of Texas Southwestern Medical Center: Aging and Geriatric Education - Next Steps GMO ,564 Total University of Texas Southwestern Medical Center 2,564 Cancer Prevention and Research Institute of Texas: Passed through University of Texas Health Science Center San Antonio: STOP HCC-Evidence Based Hepatocellular Cancer Prevention Targeting Hepatitis C Virus / ,171 Passed through University of Texas Southwestern Medical Center: Cancer Genetic Services for Rural and Underserved Populations in Texas none 29,966 Total Cancer Prevention and Research Institute of Texas 35,137 TOTAL EXPENDITURES OF STATE AWARDS $ 11,420,297 TOTAL EXPENDITURES OF FEDERAL AND STATE AWARDS $ 31,982,965 $ 1,635,821 See notes to schedule of expenditures of federal and state awards

12 Dallas County Hospital District dba Parkland Health & Hospital System (A Component Unit of Dallas County, Texas) NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS For the year ended September 30, 2016 NOTE 1 - GENERAL The accompanying schedule of expenditures of federal and state awards presents the activity of all federal and state awards of the Dallas County Hospital District dba Parkland Health & Hospital System ( Parkland ). Parkland s reporting entity is defined in Note 1 to Parkland s basic financial statements as of and for the year ended September 30, All federal awards received directly from federal agencies, as well as federal awards passed through other government agencies, and state awards are included in the schedule. The federal and state information in the schedule of expenditures of federal and state awards is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and the State of Texas Single Audit Circular. NOTE 2 - BASIS OF ACCOUNTING The accompanying schedule of expenditures of federal and state awards is presented on the accrual basis of accounting. NOTE 3 - INDIRECT COST RATE Parkland uses the applicable federally negotiated indirect cost rate and has elected not to use the ten percent de minimis indirect cost rate allowed under the Uniform Guidance

13 Dallas County Hospital District dba Parkland Health & Hospital System (A Component Unit of Dallas County, Texas) SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the year ended September 30, 2016 SECTION I - SUMMARY OF AUDITORS RESULTS Financial Statements Type of auditors report issued: Unmodified Internal control over financial reporting: Material weakness identified? No Significant deficiencies identified that are not considered to be material weaknesses? None reported Noncompliance material to financial statements noted? No Federal and State Awards Internal control over major programs: Material weakness identified? No Significant deficiencies identified that are not considered to be material weaknesses? No Type of auditors report issued on compliance forcan major programs: Any audit findings disclosed that are required to be reported in accordance with Uniform Guidance? Unmodified Yes

14 Dallas County Hospital District dba Parkland Health & Hospital System (A Component Unit of Dallas County, Texas) SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED For the year ended September 30, 2016 SECTION I - SUMMARY OF AUDITORS RESULTS - Continued Identification of major programs: CFDA/State Identifying Number Name of Federal and State Program or Cluster Major Federal Programs: HIV-Related Training and Technical Assistance Family Planning_Services Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease Diabetes, Digestive, and Kidney Diseases Extramural Research Major State Programs: Expanded Primary Health Care Commission on State Emergency Communications-Poison Services Dollar threshold used to distinguish between Type A and Type B programs: Federal: $750,000 State: $342,609 Auditee qualified as low-risk auditee- Federal? Auditee qualified as low-risk auditee- State? Yes Yes SECTION II - FINDINGS RELATED TO THE FINANCIAL STATEMENTS None noted

15 Dallas County Hospital District dba Parkland Health & Hospital System (A Component Unit of Dallas County, Texas) SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED For the year ended September 30, 2016 SECTION III - FINDINGS AND QUESTIONED COSTS RELATED TO THE EXPENDITURES OF FEDERAL AND STATE AWARDS Finding #: CFDA #: Grant Title: Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease Federal Award Number: H76 HA Federal Award Year: 2015 Federal Agency: Pass-through Entity: Type of Finding: Compliance Requirement: U.S. Department of Health and Human Services N/A Control deficiency and noncompliance Reporting Criteria or Specific Requirement: Grantees are required to report program outlays and program income on a cash or accrual basis, as prescribed by the Federal awarding agency. Reports must be complete and accurate and include all applicable accounts (e.g., program income, expenditure credits, loans, interest earned on Federal funds, and reserve funds). Condition: We noted that program income was not reported on the SF-425 Federal Financial Report for Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease Program (Ryan White Part C Outpatient EIS Program) which caused inaccurate reporting on the SF-425 Federal Financial Report. Questioned Costs: None. Identification of a repeat finding: This is not a repeat finding from the immediate previous audit. Cause: Personnel responsible for the reporting function did not thoroughly assess the requirements of the report to ensure proper determination of the amounts to be reported as program income

16 Dallas County Hospital District dba Parkland Health & Hospital System (A Component Unit of Dallas County, Texas) SCHEDULE OF FINDINGS AND QUESTIONED COSTS - CONTINUED For the year ended September 30, 2016 Context: Parkland is required to submit the SF-425 Federal Financial Report on an annual basis. Although Parkland is tracking program income, it was not reported on the SF-425 Federal Financial Report. Effect: Parkland s submission of inaccurate federal reports could lead to inquiries and increased oversight by the grantor, as well as penalties or loss of funding. Recommendation: We recommend that the Parkland review the specific instructions for preparation of the form and communicate requirements to all employees with responsibility for preparing the annual report. In addition, the reports prepared should be reviewed by an appropriate level of supervisory management prior to submitting and filing such reports. Views of Responsible Officials: Prior to submission of the year-end report, Grants Specialist will complete the year-end report checklist to ensure accurate reporting of grant expenditures and program income as applicable. The checklist has been amended to include program income. The checklist will be completed by the Grants Specialist and submitted along with the final report to the Director for review and concurrence prior to submission to the grantor. The 2015 SF-425 Federal Financial Report for this grant was amended on November 30, 2016 to reflect the program income earned

17 Dallas County Hospital District dba Parkland Health & Hospital System (A Component Unit of Dallas County, Texas) SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS For the year ended September 30, 2016 SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS Finding #: Grant Title: Nurse Family Partnership State Number: State Award Year: 2015 State Agency: Type of Finding: Compliance Requirement: Texas Health and Human Services Commission Significant Deficiency Eligibility Criteria or Specific Requirement: Per the Texas State Health and Human Services Commission grant requirements, Parkland is required to determine that program participants have income below 185% of the poverty level. Condition: During our testing, we noted there was no evidence of supervisor review of the eligibility files, and Parkland was not verifying that participants were at or below 185% of the poverty level. Instead, Parkland obtained Medicaid cards in order to test eligibility. Medicaid eligibility for pregnant women is 198% of the poverty level. Since Parkland did not obtain participant income data, they are at risk of non-compliance with grant eligibility requirements for participants who were Medicaid eligible but were not below 185% of the poverty level. Questioned Costs: Unknown Context: As part of participant eligibility determination, Parkland was not verifying that participants were at or below 185% of the poverty level. Instead, they were only obtaining the participant s Medicaid cards. As such, we were unable to determine how many of the participants met the income requirements for the program. Effect: Without adequate controls over eligibility, Parkland is at risk of non-compliance with grant requirements and loss of future grant funding. Income information was not obtained from the participants in order to verify if this compliance requirement was met. Therefore, we are unable to verify that our sample of 19 participants meets this eligibility requirement

18 Dallas County Hospital District dba Parkland Health & Hospital System (A Component Unit of Dallas County, Texas) SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS - CONTINUED For the year ended September 30, 2016 Cause: Parkland s personnel responsible for the eligibility function did not thoroughly assess the requirements of the program to ensure proper determination of eligibility for the participants. Additionally, a review of eligibility requirements per participant was not evidenced by documentation. Recommendation: We recommend that Parkland ensure grant employees are trained on all grant eligibility requirements and that Parkland implement a supervisory review process of participant files to ensure participants meet the stated eligibility requirements. Status of Prior Year Corrective Actions: Parkland Nurse Family Program implemented the training process for eligibility for all team members on December 18, Three additional Parkland Nurse Home Visitors were hired this year and were oriented with the audit recommendations regarding screening clients for eligibility. Since instituting this policy, the Nurse Family Partnership have identified the applicants who were declined admission referrals who were not below 185% of poverty level

19 Dallas County Hospital District dba Parkland Health & Hospital System (A Component Unit of Dallas County, Texas) CORRECTIVE ACTION PLAN Audit Finding Reference: Planned Corrective Action: Grants Specialist will complete the year-end report checklist to ensure accurate and timely reporting of grant expenditures and program income as applicable. The checklist has been amended to include Program Income. The checklist will be completed by the Grants Specialist and submitted along with the final report to the Director for review and concurrence prior to submission to the grantor. The 2015 Federal Financial Report for Ryan White Part C was amended on November 30, 2016 to reflect the program income earned. Name of Contact Person: Shelia Fisher Director Grants Management Dallas County Hospital District 8435 N. Stemmons Freeway, Suite 900 Dallas, TX Shelia.fisher@phhs.org Completion Date: December 1, 2016

20 Dallas County Hospital District dba Parkland Health & Hospital System (A Component Unit of Dallas County, Texas) Financial Statements as of and for the Years Ended September 30, 2016 and 2015, Supplemental Schedules as of September 30, 2016, and Report of Independent Certified Public Accountants

21 DALLAS COUNTY HOSPITAL DISTRICT dba Parkland Health & Hospital System (A Component Unit of Dallas County, Texas) TABLE OF CONTENTS MANAGEMENT S DISCUSSION AND ANALYSIS (Unaudited) 3 12 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2016 and 2015: Statements of Net Position 15 Statements of Revenues, Expenses, and Changes in Net Position 16 Statements of Cash Flows Notes to Financial Statements SUPPLEMENTAL SCHEDULES Schedule of Changes in Net Pension Liability and Related Ratios 42 Schedule of Employer Contributions 43 Page

22 DALLAS COUNTY HOSPITAL DISTRICT dba Parkland Health & Hospital System (A Component Unit of Dallas County, Texas) MANAGEMENT S DISCUSSION AND ANALYSIS (Unaudited) Our discussion and analysis of Parkland Health & Hospital System s ( Parkland ) financial performance (excluding affiliates) provides an overview of the financial activities for the fiscal years that ended on September 30, 2016 ( FY16 ) and 2015 ( FY15 ). Please use in conjunction with Parkland s basic financial statements Highlights There were many significant accomplishments in 2016 that positively impact patient care: Quality, Safety and Outcomes Efficiencies Parkland s Emergency Department and the Rees-Jones Trauma Center received the 2016 Texas Preparedness Leadership Award for Outstanding Service in Response to the 2016 Dallas Police Shootings. Recognized by the American College of Surgeons National Surgical Quality Improvement Program ( ACS NSQIP ) as one of 60 ACS NSQIP participating hospitals that have achieved meritorious outcomes for surgical patient care. Received the 2016 Gage Award for quality from America s Essential Hospitals for the Antibiotic Self-Care Program, which teaches patients how to self-administer intravenous drugs at home, reducing hospital time and cost burdens and freeing up hospital beds for individuals needing more acute inpatient care. Awarded the Get With The Guidelines Heart Failure Gold Plus Quality Achievement Award for implementing specific quality improvement measures for the diagnosis and treatment of heart failure patients, the American Heart Association s highest quality achievement award. One of only 98 hospitals which earned the 2015 Leapfrog Top Hospital Award. This award recognizes Parkland s commitment to provide the safest, highest quality healthcare to patients. Parkland s new hospital was named as one of the 50 Greenest Hospitals in America by Becker s Hospital Review for the variety of programs and initiatives in place to reduce waste output, energy consumption, water use and general environmental footprint. For the third consecutive year, recognized as one of the nation s Most Wired Hospitals by Hospital & Health Networks for excellence in using technology to fill gaps in care and improve the efficiency of care delivery. 3

23 Financial Highlights Net position decreased $26 thousand between FY15 and FY16. Net position decreased $280 million (25%) between FY14 and FY15 due to the recognition of the net pension liability related to the adoption of GASB 68. Total assets and deferred outflows of resources increased $100 million (5%) between FY15 and FY16 due to an increase in cash collections from government programs receivables and an increase in deferred outflows as a result of pension accounting changes related to the adoption of GASB 68. Total assets and deferred outflows decreased $2 million (less than 1%) between FY14 and FY15 primarily due to the reduction of assets limited to use for construction of the new Parkland Hospital. During fiscal years 2016 and 2015, Parkland made the following significant investments: - Completion and relocation of Parkland s laboratory services in August 2016 into a new state-of-the-art facility adjacent to the new hospital, - Completion and relocation to the new Parkland Hospital in August 2015, and new and additional equipment and software for the new Parkland Hospital, - Acquisition of twelve nursing homes in the Dallas-Fort Worth area in February Financial Analysis The Statement of Net Position and the Statement of Revenues, Expenses, and Changes in Net Position: These statements report information about Parkland s resources and its activities that describe the financial results of the fiscal years presented, and Parkland s financial position at the end of each year. Net position is the difference between assets, deferred inflows and outflows, and liabilities. Over time, increases or decreases in Parkland s net position are one indicator of whether Parkland s financial health is improving or deteriorating. Other non-financial factors, such as changes in Parkland s patient base; measures of the quality of services provided; and local, state, and federal economic factors are also considered. 4

24 Table 1: Summary Statement of Net Position (Amounts in thousands) Dollar Change Percentage Change Assets Current assets $ 442,522 $ 414,333 $ 28, % Capital assets, net 1,697,535 1,701,839 (4,304) -0.3% Noncurrent assets and deferred outflows of resources 130,839 54,876 75, % Total assets and deferred outflows of resources 2,270,896 2,171,048 99, % Liabilities and Net Position Long-term debt outstanding 705, ,401 (15,245) -2.1% Capital leases 13,572 13,968 (396) -2.8% Other liabilities and deferred inflows of resources 696, , , % Total liabilities and deferred inflows of resources 1,414,753 1,314,879 99, % Net position Invested in capital assets, net of related debt 978, ,912 6, % Unrestricted (122,664) (115,743) (6,921) 6.0% Total net position 856, ,169 (26) 0.0% Total liabilities and net position $ 2,270,896 $ 2,171,048 $ 99, % Dollar Change Percentage Change Assets Current assets $ 414,333 $ 371,661 $ 42, % Capital assets, net 1,701,839 1,536, , % Noncurrent assets and deferred outflows of resources 54, ,960 (210,084) -79.3% Total assets and deferred outflows of resources 2,171,048 2,172,750 (1,702) -0.1% Liabilities and net position Long-term debt outstanding 720, ,502 (10,101) -1.4% Capital leases 13,968 12,900 1, % Other liabilities and deferred inflows of resources 580, , , % Total liabilities and deferred inflows of resources 1,314,879 1,037, , % Net position Invested in capital assets, net of related debt 971, , , % Unrestricted (115,743) 342,943 (458,686) % Total net position 856,169 1,135,670 (279,501) -24.6% Total liabilities and net position $ 2,171,048 $ 2,172,750 $ (1,702) -0.1% Overall, total assets and deferred outflows of resources increased 5% from 2015 to 2016 and decreased less than 1% from 2014 to Current assets increased 7% from 2015 to 2016 and 12% from 2014 to 2015 due to an increase in cash and cash equivalents and patient accounts receivable. Capital assets, net, decreased less than 1% from 2015 to 2016 due to an increased rate of accumulated depreciation related to the completion and capitalization of the new hospital. Capital assets, net, increased 11% from 2014 to 2015 due to construction costs of the new hospital. 5

25 Noncurrent assets and deferred outflows of resources increased 138% from 2015 to 2016 due to reclassification of assets limited to use from current to noncurrent based on the changing expectations related to the timing of release of funds tied to expenditures. Noncurrent assets and deferred outflows of resources decreased 79% from 2014 to 2015 due to expenditure from assets limited to use related to the new Parkland Hospital construction. Deferred outflows of resources of $47 million were recorded in 2016 and $28 million in 2015 related to the recognition of the net pension liability in accordance with GASB 68. Liabilities increased 8% from 2015 to 2016 primarily due to an increase of $72 million in net pension liability related to the adoption of GASB 68. Liabilities increased 27% from 2014 to 2015 due to an increase of $336 million in net pension liability, also related to the adoption of GASB 68. Table 2: Summary of Revenues, Expenses and Changes in Net Position (Amounts in thousands) Operating revenues: Net patient services $ 772,813 $ 666,489 $ 561,343 Government programs 217, , ,602 Other 130,344 97,420 69,738 Total operating revenues 1,120, , ,683 Operating expenses: Salaries, wages, and benefits 1,016, , ,150 Purchased medical services 107, ,517 99,755 Supplies and other 310, , ,647 Pharmaceuticals 160, , ,167 Depreciation and amortization 103,496 63,992 53,640 Total operating expenses 1,698,614 1,477,733 1,302,359 Operating loss (577,845) (500,723) (478,676) Nonoperating revenues and expenses 533, , ,290 Capital contributions 44,235 56,195 3,805 Change in net position (26) 33,806 1,419 Net position beginning of year 856,169 1,135,670 1,134,251 Prior period adjustment - (313,307) - Net position end of year $ 856,143 $ 856,169 $ 1,135,670 Overall, operating revenues increased 15% from 2015 to 2016 and 19% from 2014 to Net patient services revenue increased 16% in 2016 and 19% in 2015, primarily due to both increased volumes and the acquisition of twelve nursing homes in Other operating revenues increased 34% in 2016 over 2015 due to an increase in replacement drugs, revenues related to participation in the Network Access Improvement Program ( NAIP ) 6

26 and supply rebates. Other operating revenues increased 40% from 2014 to 2015 due to an increase in replacement drugs and supply rebates. Overall, operating expenses increased 15% from 2015 to 2016 and 13% from 2014 to Salaries, wages, and benefits increased by 13% from 2015 to 2016 primarily due to an increase in the number of employees in conjunction with the opening of the new larger hospital, and increased patient volumes. Salaries, wages and benefits increased 12% from 2014 to 2015 due to the acquisition of the nursing homes and related staff. Other operating expenses increased 12% between 2015 and 2016 primarily due to an increase in pharmaceutical costs, and increased 16% between 2014 and 2015 primarily due to the additional expenses related to the acquisition of the nursing homes, and increased pharmaceutical costs. Overall, Parkland s operating loss increased 15% from 2015 to 2016 due to the items mentioned above. As the only public hospital in Dallas, Parkland receives ad valorem tax revenues to subsidize the cost of services provided to uninsured patients who qualify for tax-supported care. Although the expenses incurred to provide these services are recognized as operating expenses, accounting principles generally accepted in the United States of America ( GAAP ) require that ad valorem tax revenues be reported as nonoperating revenues. Nonoperating revenues and expenses increased 12% from 2015 to 2016, primarily due to an increase in ad valorem tax revenues and grants. Parkland s tax rate was 28.6 cents per $100 assessed valuation for both 2016 and Taxes are levied by Parkland and collected on behalf of Parkland by Dallas County. Patient Volumes Patient volumes at Parkland are measured on an inpatient and outpatient basis. Inpatient discharges increased 8% in 2016 to 40,652 compared to 2015 discharges of 37,773. Inpatient discharges decreased 2% in 2015 compared to 2014 volume of 38,660. Emergency department visits increased 5% to 235,034 in 2016 from 224,378 in The emergency department volumes decreased 2% in 2015 compared to the 2014 volume of 229,045. Combined outpatient visits, including on-campus outpatient visits, Community Oriented Primary Care and Acute Response Clinic visits, increased 5% to 1,080,668 in 2016 from 1,026,510 in The combined outpatient visits increased 2% for 2015 over 2014 volume of 1,005,663. 7

27 Capital Asset and Debt Financing At the end of both fiscal years 2016 and 2015, Parkland had $1.7 billion in capital assets, net of accumulated depreciation, as detailed in the notes to the financial statements. The components of Parkland s capital assets are as follows: Table 3: Capital Assets (in thousands) Dollar Percentage Change Change Capital assets Buildings $ 1,671,187 $ 1,595,871 $ 75, % Construction in progress 1,963 29,865 (27,902) -93.4% Capital Leases 14,546 14, % Land and improvements 144, ,052 28, % Equipment (including IT projects in progress) 709, ,487 17, % 2,541,543 2,448,821 92, % Accumulated depreciation and amortization (844,008) (746,982) (97,026) 13.0% Capital assets, net $ 1,697,535 $ 1,701,839 $ (4,304) -0.3% Capital assets Dollar Percentage Change Change Buildings $ 1,595,871 $ 547,492 $ 1,048, % Construction in progress 29,865 27,717 2, % Construction in progress - new Parkland Hospital - 1,038,879 (1,038,879) % Capital leases 14,546 12,937 1, % Land and improvements 116, ,314 (262) -0.2% Equipment (including IT projects in progress) 692, , , % 2,448,821 2,221, , % Accumulated depreciation and amortization (746,982) (685,510) (61,472) 9.0% Capital assets, net $ 1,701,839 $ 1,536,129 $ 165, % Overall, capital assets, net, decreased less than 1% from 2015 to Capital assets, net, increased 11% from 2014 to The major addition in 2015 was the completion of the new Parkland Hospital. 8

28 Table 4: Debt Financing - Bond-financed debt decreased $10 million due to principal payments made in 2016 and the amortization of premium. (in thousands) Tax-exempt Series 2009A Bonds, including premium $ - $ 9,847 Taxable Series 2009B Bonds 222, ,490 Taxable Series 2009C Bonds 457, ,740 Tax Exempt 2013 Bonds, including premium 39,636 39,849 $ 719,866 $ 729,926 9

29 2016 Budget Annually, Parkland prepares an operating and capital budget for approval by Parkland s Board of Managers, as well as the Dallas County Commissioners. Table 5 presents the approved budget in comparison to the 2016 actual results. Table 5: Performance Compared to Budget (Amounts in thousands) Budget Favorable/ Actual (Unfavorable) Operating revenues: Net patient services $ 772,813 $ 770,486 $ 2,327 Government programs 217, ,388 14,224 Other 130, ,122 21,222 Total operating revenues 1,120,769 1,082,996 37,773 Operating expenses: Salaries, wages, and benefits 1,016, ,503 (46,201) Purchased medical services 107, ,367 1,915 Supplies and other 310, ,803 34,513 Pharmaceuticals 160, ,324 (10,348) Depreciation and amortization 103,496 91,410 (12,086) Total operating expenses 1,698,614 1,666,407 (32,207) Operating loss (577,845) (583,411) 5,566 Nonoperating revenues and expenses Ad valorem tax support 535, ,661 (15) Gain/(loss) on sale/transfer of asset (111) - (111) Gain/(loss) on asset impairment (1,396) - (1,396) Grants and contributions 26,519 32,701 (6,182) Investment income 13,935 14,267 (332) Interest expense (41,009) (41,218) 209 Total nonoperating revenues and expenses 533, ,411 (7,827) Capital contributions 44,235 42,000 2,235 Change in net position $ (26) $ - $ (26) 10

30 Economic Factors Parkland s Board of Managers and management continue to monitor and consider many factors that have direct or indirect impact on future operations. These include: Impact of the Affordable Care Act; Dallas County s population growth, including growth in the number of uninsured that fall under Parkland s mission; Federal and state government funding programs, including the 1115 Transformation Waiver, Medicare, Medicaid, disproportionate share, and new programs, such as NAIP and the Quality Incentive Payment Program ( QIPP ); and Clinical workforce shortages, particularly in nursing. Significant Financial Practices Parkland has adopted financial practices designed to maintain its creditworthiness and to position Parkland to carry out its constitutionally defined mission of providing health care to the residents of Dallas County, as well as its fiduciary responsibility to the taxpayers of Dallas County. Those practices are as follows: Assets Limited To Use The Board of Managers sets aside funds for both long-term stability and capital improvements. Monthly Financial Reporting The Board of Managers meets monthly and reviews the financial statements from the prior month. This information is presented to show actual monthly and year-to-date revenues and expenses compared to budget and the prior year. Management provides explanations for significant variances. Pay-As-You-Go Capital Funding Historically, Parkland has maintained the practice of funding capital items under a pay-as-you-go process. In November 2008, Dallas County voters approved the necessary tax increase to issue bonds to partially fund the new Parkland Hospital. In September 2009, Parkland issued $705 million in voter-approved bonds for use in the construction of a new Parkland Hospital. In December 2013, Parkland issued an additional $38 million in bonds for continued construction costs for the new Parkland Hospital. Except for the construction of the new Parkland Hospital, Parkland has continued its practice of pay-as-you-go capital funding for routine capital expenditures. Budget Process The operating and capital budgets are proposed by Parkland management and endorsed by the Board of Managers. Final approval is obtained from the Dallas County Commissioners Court. The budgets remain in effect for the entire fiscal year. 11

31 Contacting Parkland s Financial Management This financial report is designed to provide our taxpayers, creditors, patients, and suppliers with a general overview of Parkland s finances and to show Parkland s accountability for the funds it receives. If you have questions about this report or need additional financial information, contact By Mail: Parkland Health & Hospital System 5200 Harry Hines Dallas, Texas Attention: John G. Moore, Executive Vice President and Chief Financial Officer By John.Moore@phhs.org 12

32 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS The Board of Managers Dallas County Hospital District dba Parkland Health & Hospital System Grant Thornton LLP 1717 Main Street, Suite 1800 Dallas, TX T F GrantThornton.com linkd.in/grantthorntonus twitter.com/grantthorntonus Report on the financial statements We have audited the accompanying financial statements of Dallas County Hospital District dba Parkland Health & Hospital System ( Parkland ), a political subdivision of the state of Texas and a discretely presented component unit of Dallas County, Texas and the discretely presented component units as of and for the years ended September 30, 2016 and 2015, and the related notes to the financial statements, which collectively comprise Parkland s basic financial statements as listed in the table of contents. Management s responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s responsibility Our responsibility is to express opinions on these financial statements based on our audits. We did not audit the financial statements of Parkland Foundation, a discretely presented component unit of Parkland, which represents 2%, 3%, and 1% of assets, net position and revenues, respectively, as of and for the year ended September 30, 2016, and 3%, 7%, and 3% of assets, net position and revenues, respectively, as of and for the year ended September 30, 2015, of the aggregate discretely presented component units. Those financial statements were audited by other auditors, whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Parkland Foundation, is based solely on the report of the other auditors. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to Parkland s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd

33 circumstances, but not for the purpose of expressing an opinion on the effectiveness of Parkland s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, based on our audits and the reports of the other auditors, the financial statements referred to above present fairly, in all material respects, the respective financial position of Parkland and its discretely presented component units as of September 30, 2016 and 2015, and the respective changes in financial position and, where applicable, cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Required supplementary information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 3 through 12 and the supplemental schedules on pages be presented to supplement the basic financial statements. Such information, although not a required part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. This required supplementary information is the responsibility of management. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America. These limited procedures consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other reporting required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report, dated December 20, 2016, on our consideration of Parkland s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Parkland s internal control over financial reporting and compliance. Dallas, Texas December 20, 2016 Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd

34 DALLAS COUNTY HOSPITAL DISTRICT Parkland Health & Hospital System and Affiliates (A Component Unit of Dallas County, Texas) STATEMENTS OF NET POSITION AS OF SEPTEMBER 30, 2016 AND 2015 (Amounts in thousands) Assets Parkland Health & Hospital System Parkland Community Health Plan, Inc. 12/31/ Discretely Presented Component Units Discretely Presented Component Units Parkland Center for Clinical Innovation Parkland Foundation Total Parkland Health & Hospital System Parkland Community Health Plan, Inc. 12/31/2014 Parkland Center for Clinical Innovation Current assets Cash and cash equivalents $ 149,071 $ 45,842 $ - $ 22,107 $ 217,020 $ - $ 38,326 $ - $ 52,318 $ 90,644 Short-term investments - 16,259-4,382 20,641-18,604-4,541 23,145 Assets limited to use 69, , , ,295 Ad valorem taxes receivable, less allowance for uncollectibe taxes of $15,477 in 2016 and $15,841 in , ,308 4, ,309 Patient accounts receivable, less allowance for uncollectible accounts $522,813 in 2016 and $525,465 in , , , ,762 Due from affiliates 9, ,671 3, ,104 Government programs receivable 48, , , ,626 Other receivables 17,796 5,907 1,644 3,563 28,910 23,756 6, ,884 33,616 Inventories and other assets 21, ,392 18, ,375 Total current assets 442,522 68,008 1,746 30, , ,333 63,247 1,530 59, ,876 Capital assets, net 1,697,535-15,413-1,712,948 1,701,839-12,594-1,714,433 Long-term investments - 108,247 1,014 3, , ,125-10, ,151 Assets limited to use 55, ,396 25, ,514 Other noncurrent assets ,784 4, ,061 6,951 Assets attributable to discontinued operations Total assets $ 2,195,453 $ 176,255 $ 18,173 $ 38,711 $ 2,428,592 $ 2,142,576 $ 198,372 $ 14,293 $ 75,853 $ 2,431,094 Deferred outflows of resources 75, ,443 28, ,472 Parkland Foundation Total Total assets & deferred outflows of resources $ 2,270,896 $ 176,255 $ 18,173 $ 38,711 $ 2,504,035 $ 2,171,048 $ 198,372 $ 14,293 $ 75,853 $ 2,459,566 Liabilities and Net Position Current liabilities Accounts payable and accrued expenses $ 190,645 $ 44,937 $ 1,150 $ 3,352 $ 240,084 $ 180,572 $ 44,254 $ 2,645 $ 2,208 $ 229,679 Due to affiliates ,237 1,124 20, , ,638 Due to third-party reimbursement programs 11, ,986 10, ,304 Government programs liability 44, ,272 11, ,123 Current portion long term debt 14, ,710 9, ,525 Current portion capital lease payable Interest payable 5, ,011 5, ,061 Other current liabilities 11,873 32, ,128 14,834 22,774 1,249-38,857 Total current liabilities 278,894 77,671 20,447 4, , ,794 67,389 15,865 2, ,562 Net pension liability 408, , , ,104 Other noncurrent liabilities 7, ,673 12, ,612 Long term debt 705, , , ,401 Capital leases 13, ,572 13, ,968 Liabilities attributable to discontinued operations Total liabilities $ 1,413,480 $ 77,671 $ 20,447 $ 4,476 $ 1,516,074 $ 1,314,879 $ 67,389 $ 16,233 $ 2,514 $ 1,401,015 Deferred inflows of resources 1, , Total liabilities & deferred inflows of resources $ 1,414,753 $ 77,671 $ 20,447 $ 4,476 $ 1,517,347 $ 1,314,879 $ 67,389 $ 16,233 $ 2,514 $ 1,401,015 Net position Invested in capital assets, net of related debt 978, , , ,912 Restricted ,699 32, ,260 72,260 Unrestricted (122,664) 98,584 (2,274) 1,536 (24,818) (115,743) 130,983 (1,940) 1,079 14,379 Total net position 856,143 98,584 (2,274) 34, , , ,983 (1,940) 73,339 1,058,551 Total liabilities and net position $ 2,270,896 $ 176,255 $ 18,173 $ 38,711 $ 2,504,035 $ 2,171,048 $ 198,372 $ 14,293 $ 75,853 $ 2,459,566 See notes to financial statements. 15