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4615.1 REV-1 – APPENDIX 9 FINANCIAL STATEMENT PRESENTATION - 1
APPENDIX 9
FINANCIAL STATEMENT PRESENTATION
A. Minimum Account Presentation
- Compliance Requirement. The books and records of the Mortgaged property and of the project shall be kept in accordance with the requirements of the Secretary.
- Refer to Healthcare Entities – AICPA Audit and Accounting Guide using the Natural Classification of accounts for general presentation. However see subparagraph (3 and 4 below) for required accounts
- The following specific accounts/account groups of the Mortgagor are required by HUD. However, the Mortgagor may show additional detail. a. Cash and Cash Equivalents b. Net Patient Receivables c. Total Current Assets d. Net Plant, Property, and Equipment e. Assets with Limited Use f. Total Assets g. Accounts payable and accrued expenses h. Salaries and Benefits payable i. Current portion of long term debt & capital leases j. Long term capital debt and Leases k. Total Liabilities l. Shareholders’ Equity^1 m. Unrestricted Net Assets (If applicable) n. Temporarily Restricted (If applicable) o. Permanently Restricted (if applicable) p. Patient Service Revenue Net of Contractual Allowances and Discounts q. Provision for Bad Debts r. Net Patient Service Revenue less Provision for Bad Debts s. Other Operating Revenue t. Total Operating Revenue u. Salaries & wages v. Physician Salaries & Wages w. Employee Benefits x. Professional Fees y. Supplies and expenses z. Depreciation and Amortization aa. Interest Expense (^1) Owner’s Equity for a Partnership, Net Assets for Not-for-Profits
4615.1 REV-1 – APPENDIX 9 FINANCIAL STATEMENT PRESENTATION - 2 ab. Bad Debt Expense ac. Total Operating Expenses ad. Income from Operations ae. Non Operating Income and/or Expenses af. Extraordinary items/ Income taxes ag. Net Income ah. Information on certain other accounts/account groups is required, and may be part of the supplemental information or notes. This includes: (1) Allowances against patient receivables (2) Accumulated Depreciation (3) Qualified liquid investments (a HUD defined account 2 ). (4) Net inpatient Revenue (5) Net outpatient Revenue (6) Charity care (7) The MRF Balance required, and actual (8) Changes in Shareholder’s Equity 3 (9) Distributions to Owner/related organizations^4
- HUD may require the following accounts: a. Hospital Held Non Liquid Qualified Investments b. Related Entity Liquid Investments c. Related Entity Non-liquid investments
- Income from operations that are not a part of the Mortgagor^5 but deposited in the Mortgagor’s account is to be classified as non-operating revenue to the extent that the revenue differs from the related expense.
- Income from investments and contributions shall be classified as non-operating income.
- Depreciation and interest expense are to be included in operating expenses.
- See Appendix 8-1 for Account Groupings and Definitions. (^2) See Appendix 8-1. (^3) Owner’s Equity for a Partnership, Other Changes in Net Assets for Not-for-Profits (^4) Includes distributions for Activities of the corporation excluded from the Mortgagor. This account should also be a line item on the Statement of Cash Flows. (^5) See Appendix 8-3 for definition of Mortgagor.
ACCOUNT GROUPINGS AND DEFINITIONS - 1
APPENDIX 9-
ACCOUNT GROUPINGS AND DEFINITIONS
The following chart shows the typical accounts that are included in the account heading for financial reporting to HUD and submission of Form 92422-OHF (Financial and Statistical Data for HUD Reporting). This chart is not intended to restrict the separate accounts that a hospital may have on its balance sheet. Certain headings have been omitted such as Accumulated Depreciation or Net Patient Revenue as the heading itself is self-definitive and standard throughout the healthcare industry. Additional accounts should be classified based on the pattern. MAIN HEADING TYPICAL ACCOUNTS Cash and Temporary Investments Cash Cash on hand Savings Checking CDs Marketable securities Investments Short-term investments Assets limited as to use-current portion only Accounts Receivable, net Patient Accounts Receivable net Accounts Receivable, gross Patient Accounts Receivable gross Other Receivable Other Receivable Qualified Liquid Investments Qualified Liquid Investments Board Designated for Capital Improvements Other non-current assets (if investments) LESS amount pledged on line of credit LESS amount pledged on letter of credit LESS amount due to underfunding of self insured fund LESS amount due to underfunding of pension fund
ACCOUNT GROUPINGS AND DEFINITIONS - 2 Limited Use or Designated Assets Assets limited as to use Debt Escrow Fund Mortgage Reserve Fund Deferred financing costs Permanently restricted assets Investment in affiliates Assets tied up by a Letter of Credit (LOC) Self-insured trust Pension Fund Restricted by Donor PLUS amount pledged on line of credit PLUS amount pledged on letter of credit PLUS amount due to underfunding of self insured fund PLUS amounts due to underfunding of pension fund Deferred Tax Asset Net Plant Property and Equipment Total Fixed Assets (net of accumulated depreciation) Property and equipment, net Property, Plant and Equipment Land Improvement Real Estate Building Improvement Leasehold Improvements Construction in Progress Accumulated depreciation accounts related to the above Accounts Payable and Accrued Expenses Accounts Payable Accrued Expenses Accrued interest payable Trade Accounts Payable Other Accrued Expenses Other, Construction & retainage payable Current Portion of Long-Term Debt Current portion of capital debt Current portion of mortgages Current portion of notes payable Current portion of long term lease obligations Current portion of equipment purchases
ACCOUNT GROUPINGS AND DEFINITIONS - 4 Total Salaries and wages Salaries and Wages (Do not include salaries and wages for physician employees unless employed as other than a physician such as a CEO who is also a physician.) Salaries and wages -Physician Salaries & wages of physicians Employee Benefits Professional Fees Contract Physician Fees Total Supply Expense Supplies Purchased services and other contract services Utilities Insurance Other expenses [Note: some hospitals prefer to exclude utilities, insurance, and other expenses from supply expense and restrict this account to supplies, office supplies, central sterile supply, etc. It is acceptable to group these items in a separate grouping titled “Other Operating Expenses.”] Non-operating revenue Non-operating revenue Contributions Grants Interest income Investment income Net realized gains & investment income Net assets released from restrictions for capital assets Gain on disposal of property and equipment Income less expenses of non-mortgaged entities Minority interest in consolidated subsidiary Non-operating expense Non-operating expense Non-operating losses Change in additional minimum pension liability Loss on sale of assets Loss on disposal of assets Loss on disposal of property and equipment
ACCOUNT GROUPINGS AND DEFINITIONS - 5 Extraordinary Items and Income Taxes Cumulative effect of accounting change Gains or losses on the extinguishment of debt Accelerated depreciation due to the HUD insured project Income taxes unless specifically authorized in writing by HUD Losses or Gains from sale of equipment Losses or Gains from discontinued operations Other Changes in Net Assets This is a catch-all field for any other causes for changes in Net Assets such as a change in accounting principle, distribution (or contributions) of Net Assets, an increase or decrease due to restatement of prior period earnings, gifts of permanently restricted assets, additional paid in capital, etc. It is equal to the current period total net assets less the amount of total net assets from the prior year annual financial statements, less unrecognized gains and losses, less changes in temporarily restricted assets.
ACCOUNT GROUPINGS AND DEFINITIONS - 7 Qualified Liquid Investments (cont’d) Liquid investments. Investments designated by the board for future use or for general capital improvements and that are not part of the Equipment Replacement Reserve Fund (or similar fund) nor excluded by any of the other categories listed in this definition may be classified as Qualified Liquid Investments and shall not be excluded because of the designation by the board. Hospital Held Non Liquid Qualified Investments This account includes amounts that meet all of the criteria for Qualified Liquid Investments except:
- They could not be made available for general operational use within six months, or
- They were classified as alternative investments. Assets Whose Use is Limited: For the mortgagor, this is the total of the non- current portion of all restricted or temporarily restricted assets whose use is limited. It includes the Mortgage Reserve Fund and any reserve accounts such as self-insurance reserves or pension reserves. Do not add back the current portion of this item that has been designated as a current asset in the financial statements. Plant, Property, and Equipment This is the total land, land improvements, plant, property, fixed assets, and equipment, moveable equipment, and medical equipment recorded on the balance sheet in accordance with GAAP for the mortgagor. Accounts Payable For the mortgagor, this item should reflect what is owed on materials, supplies, utilities, and other personnel expenses. Exclude accrued salaries, wages, employee benefits, professional fees and accrued interest. Current portion of Long Term Debt and Capital Leases For the mortgagor, this includes the current portion of all types of capital debt including current portion of leases (with more than one year of duration) recorded on the balance sheet.
ACCOUNT GROUPINGS AND DEFINITIONS - 8 Long Term Debt and Capital Leases This should include all capital debt that is not included in current liabilities including capital leases and other leases (with more than one year of duration) that are recorded on the balance sheet for the mortgagor. It does not include any related bonds as they are not a part of the mortgagor. Generally Accepted Accounting Principles distinguish the net assets of a corporation with appropriate descriptions depending on the organizational structure of the entity. Section 242 uses the following mapping for the treatment of these items and entering data on the Quarterly Data Request. Unrestricted Net Assets This should be for only the mortgagor. For profit entities Common stock issued and outstanding Common stock shares Retained earnings Paid in capital Partner’s capital Not-for- Profit entities Unrestricted Net Assets Governmental entities Unrestricted Net assets Invested in capital assets net of related debt Temporarily Restricted Net Assets marked as temporarily restricted for the mortgagor. Permanently Restricted Assets held by a related foundation for the benefit of the hospital may be entered on this line if they appear on the balance sheet, otherwise only enter assets for the Mortgagor. Enter assets restricted as to use. Patient Revenue net of contractual allowances and discounts Follow Health care industry practice Provision for Bad Debts Bad debts related to patient care in accordance with Healthcare industry practice Net Patient Service Revenue net of Bad Debts Follow healthcare industry practice.
ACCOUNT GROUPINGS AND DEFINITIONS - 10 Net Income Net Income Revenues in excess of expenses Related Entity Liquid Investments Investments that are held by a Financially Related Organization as defined by GAAP, and (1) can be made available to the Mortgagor, (2) are designated for the sole benefit of the Mortgagor, (3) are included in the audited financial statements of the Mortgagor as Beneficial Interest in Net Assets Held by a Financially Related Organization, (4) are unencumbered, and (5) have a: (a) stated maturity of six months or less, plus (b) the estimated liquidation value of investments which could be liquidated within six (6) months Related Entity Non-liquid Investments Investments that meet the definition of Related Entity Liquid Investments except for condition (5).
SAMPLE FORMS - 1
APPENDIX 9-
SAMPLE REPORTS
(See following pages)
SAMPLE FORMS - 3 Schedule 1 ABC Hospital (Sample Not-For-Profit) Balance Sheet of Mortgagor Date Other Consolidated Mortgagor Activities Health System Assets Current Assets: Cash and Cash equivalents xxx xxx xxx Gross Patient Receivables xxx xxx xxx less allowance for uncollectible accounts and contractual allowances xxx xxx xxx Net Patient Receivables xxx xxx xxx Other Receivables xxx xxx xxx Inventories xxx xxx xxx Other Current Assets xxx xxx xxx Total Current Assets xxx xxx xxx Qualified Liquid Investments 11 xxx xxx xxx Hospital Held Non Liquid Qualified Investments 12 xxx xxx xxx Other Long Term Investments xxx xxx xxx Investments Limited as to Use^13 xxx xxx xxx Net Property and Equipment xxx xxx xxx Other Assets xxx xxx xxx Total Assets xxx xxx xxx (^11) Qualified Liquid Investments are used for certain ratios, if they can be clearly identified in the audit report. See the rider to the Regulatory agreement for a definition of Qualified Liquid Investments. Qualified Liquid Investments, Hospital Held Non Liquid Qualified Investments, and Other Long Term investments may make up a single line item on the Consolidated Financial Statements, but be broken into separate line items on the consolidating schedule. (^12) If required by covenants (^13) Cash and investments restricted as to purpose related to a bond issuance or backing a letter of credit supporting a bond issuance should be classified as Other Activities. Cash and Investments restricted as to purpose by the FHA insured loan such as the Mortgage Reserve Fund should be classified as Mortgagor. Cash or investments backing a letter of credit should be classified as limited as to use.
SAMPLE FORMS - 4 Schedule 1 (cont.) ABC Hospital (Sample Not-For-Profit) Balance Sheet of Mortgagor Date Other Consolidated Mortgagor Activities Health System Liabilities and Net Assets Current Liabilities Current Portion of Long Term Debt xxx xxx xxx Accounts Payable and Accrued Liabilities xxx xxx xxx Accrued interest payable xxx xxx xxx Accrued Salaries & Benefits xxx xxx xxx Due to Affiliates xxx xxx xxx Payables to third-party payors xxx xxx xxx Other Current Liabilities xxx xxx xxx Total Current Liabilities xxx xxx xxx Long-term debt & leases, net of current portion^14 xxx xxx xxx Other Long-term debt xxx xxx xxx Total Liabilities xxx xxx xxx Net Assets Unrestricted Net Assets xxx xxx xxx Temporarily Restricted Net Assets xxx xxx xxx Permanently Restricted Net Assets xxx xxx xxx Total Net Assets xxx xxx xxx Total Liabilities and Net Assets xxx xxx xxx (^14) The unpaid principle balance (less the current portion) of the FHA insured note will be listed under the Mortgagor. Any amounts outstanding on a bond issuance will be listed as Other Activities.
SAMPLE FORMS - 6 Schedule 2A ABC Hospital Sample Not-For-Profit Statement of Operations of Mortgagor Year Ended ___________ Other Consolidated Mortgagor Activities Health System Revenue: Net Inpatient Revenue xxx xxx xxx Net Outpatient Revenue xxx xxx xxx Patient Service Revenue (net of contractual allowances and discounts) xxx xxx xxx Provision for Bad Debts xxx xxx xxx Net Patient Service Revenue xxx xxx xxx Other Operating Revenue xxx xxx xxx Total Operating Revenue xxx xxx xxx Operating Expenses Salaries and Wages xxx xxx xxx Physician Salaries and Wages xxx xxx xxx Employee benefits xxx xxx xxx Professional Fees xxx xxx xxx Supplies xxx xxx xxx Bad Debts xxx xxx xxx Interest xxx xxx xxx Depreciation and Amortization xxx xxx xxx Other xxx xxx xxx Total Expense from Operations xxx xxx xxx Operating Income (loss) xxx xxx xxx Non-operating Revenue (Expense)^16 Investment Income xxx xxx xxx Contributions xxx xxx xxx Provision for income taxes xxx xxx xxx Other xxx xxx xxx Total Non-Operating Income (loss) xxx xxx xxx Excess of Revenue over Expenses xxx xxx xxx Unrealized gains and losses on other than trading securities xxx xxx xxx Net assets released from restriction used for purchase of property & equipment xxx xxx xxx Transfers from (or to) parent xxx xxx xxx Increase in unrestricted net assets xxx xxx xxx (^16) Note per the Regulatory Agreement that investment income, contributions, tax revenue are classified as non- operating income.
SAMPLE FORMS - 7 Schedule 2B ABC Hospital Sample For-Profit Statement of Operations of Mortgagor Year Ended ___________ Other Consolidated Mortgagor Activities Health System Revenue: Net Inpatient Revenue xxx xxx xxx Net Outpatient Revenue xxx xxx xxx Patient Service Revenue (net of contractual allowances and discounts) xxx xxx xxx Provision for Bad Debts xxx xxx xxx Net Patient Service Revenue xxx xxx xxx Other Operating Revenue xxx xxx xxx Total Operating Revenue xxx xxx xxx Expenses Salaries and Wages xxx xxx xxx Physician Salaries and Wages xxx xxx xxx Employee benefits xxx xxx xxx Professional Fees xxx xxx xxx Supplies xxx xxx xxx Bad Debts xxx xxx xxx Interest xxx xxx xxx Depreciation and Amortization xxx xxx xxx Other xxx xxx xxx Total Expenses xxx xxx xxx Operating Income (loss) xxx xxx xxx Non-operating Income (loss)^17 Investment Income xxx xxx xxx Provision for income taxes xxx xxx xxx Other xxx xxx xxx Total Non-Operating Income (loss) xxx xxx xxx Net Income (loss) xxx xxx xxx Retained earnings, beginning of year xxx xxx xxx Retained earnings, end of year xxx xxx xxx (^17) Note per the Regulatory Agreement that investment income, contributions, tax revenue are classified as non- operating income.
