A forensic audit of West Jefferson Medical Center’s books won’t be the only review occurring after numbers at the center of last year’s hospital lease deal missed the mark by tens of millions of dollars, Jefferson Parish President Mike Yenni pledged Friday.
Additional steps will be “taken towards ensuring that the public” receives its due from the parish’s deal to lease the publicly-owned West Jefferson Medical Center to private operator LCMC Health, Yenni said in a statement.
Yenni, who took office in January, did not elaborate on those steps immediately, saying he would outline them at a news conference at his East Bank office at 11:30 a.m. Monday.
A unanimously approved Jefferson Parish Council measure co-sponsored by Councilmen Paul Johnston and Ben Zahn this week called for the parish to hire a nationally-recognized forensic auditing firm to investigate the hospital’s accounting statements and practices.
Whichever firm is chosen would also scrutinize audits previously prepared by West Jefferson’s local external auditor for discrepancies and any deviations from acceptable standards, among other things, the measure said.
Johnston, whose district includes the hospital, insisted that neither he nor his colleagues were accusing anybody of wrongdoing with the move to hire a forensic auditor.
Nonetheless, forensic audits are designed to determine if an agency’s books are problematic, whether because of fraud, theft or other issues.
The call for the forensic audit comes after parish consultant Joshua Nemzoff informed Jefferson officials that as much as $28 million in unanticipated parish expenses associated with the lease had been discovered since the deal with LCMC closed Sept. 30, when Yenni predecessor John Young was still parish president.
Those expenses occurred because unaudited financial statements from the hospital overstated its net assets while understating various fiscal obligations, such as insurance and pension liabilities, said Nemzoff, who helped the parish secure the deal under a contract that expired in September.
Moreover, the hospital’s longtime auditor — Postlethwaite & Netterville — recently admitted that its 2014 audit of the hospital had overstated the hospital’s net earnings by $9 million, said Nemzoff, who was brought back to work for the parish under a new agreement approved last month.
The auditor indicated it would need to restate or reissue the audit, Nemzoff said.
That revelation meant West Jefferson’s internal financials for 2014 were off target by at least a combined $18.5 million, not including the miscalculations pertaining to insurance and pension obligations.
The reason: The audit had shown that West Jefferson earned $9.5 million less than the hospital had reported in unaudited financial data provided to LCMC both before the lease deal closed and the audit was completed.
Notably, the 2014 audit was one of the reasons the total amount of rental fees LCMC would need to pay to lease the hospital was cut by $25 million last year, late in negotiations.
Executives who ran West Jefferson on behalf of the hospital before the lease deal but now report to LCMC have defended the bookeeping at the facility, saying it is not unusual for financial numbers to be adjusted after closer review.
Nemzoff, for his part, has suggested that the parish seek to hire one of the so-called “Big Four” auditors — PricewaterhouseCoopers, Ernst & Young, Deloitte, or KPMG — to probe West Jefferson’s books.
“If you decide that there is a concern that all of the ... issues are not simply a perfect storm of human error then you have what I will politely refer to as a problem,” Nemzoff wrote to officials this week.
LCMC Health ultimately agreed to lease the Marrero hospital for a minimum of 45 years in return for paying the parish $200 million in rental fees, $340 million in capital improvements and at least $31 million on other payments.
Yenni said both the decision to bring Nemzoff back months after the deal closed as well as the call for the forensic auditor showed the level of concern his administration and Parish Council members had regarding the lease.
“This is the people’s hospital and money,” Yenni said in his announcement of Monday’s news conference. “I will do what is necessary to protect both.
“The public has a right to know all that went on behind closed doors before this administration began leading Jefferson Parish.”