National accounting firm to examine West Jefferson hospital’s books after lease deal inaccuracies surface _lowres

Advocate staff photo by SHERRI MILLER -- West Jefferson Medical Center in Marrero on Thursday, Dec. 18, 2014.

The Jefferson Parish Council is turning to a national accounting firm to figure out why West Jefferson Medical Center’s financial books contained inaccurate data when the parish leased the publicly-owned hospital to a private operator last year.

The council voted Wednesday to hire Ernst & Young to review “all financial aspects” of the agreement to lease West Jefferson to LCMC for at least 45 years in return for about a half-billion dollars in rent and building improvements.

While Parish President Mike Yenni’s administration must negotiate the contract’s length and price, the accounting firm indicated in its bid that it believed it could do the job for between $325,000 and $475,000, parish Finance Director Tim Palmatier said.

In March, parish consultant Joshua Nemzoff warned that monetary statements from the hospital had understated some of the financial obligations that would remain parish responsibilities under the lease deal, including insurance and pension liabilities.

He said the errors could mean as much as $28 million in extra expenses for the parish, which during lease negotiations had to settle for $25 million less in rental fees than initially anticipated because of another set of miscalculations.

In response, the council voted to conduct a forensic audit of West Jefferson’s accounting practices. Forensic audits are designed to determine whether there are problems with an agency’s books, whether from honest mistakes, fraud or anything in between.

Six auditing firms bid for the job, but two were disqualified for improperly filling out paperwork. A committee evaluating the four remaining firms gave the two highest scores to Ernst & Young and KPMG: 319 and 323 points, respectively, out of a maximum 330.

Councilman Paul Johnston, whose district includes the hospital, said he moved to select Ernst & Young after firm representatives flew to New Orleans and gave an impressive presentation to parish officials.

He said he also liked that the firm’s team includes former FBI agents and several employees with no local connections.

It was unclear whether KPMG’s bid was lower. It indicated only that it could work for an hourly rate of $185 to $425, depending on staffing, Palmatier said. But Senior Assistant Parish Attorney Jacques Molaison said price isn’t the sole factor on such specialized contracts, where expertise level also is important.