2019 Audit Results: Alameda Health System — A Public Hospital Authority June 30, 2019 Board of Trustees Dear Board of Trustees: Thank you for your continued engagement of Moss Adams LLP. We are pleased to have the opportunity to Alameda Health System meet with you to discuss the results of our audit of the financial statements of Alameda Health System (the Health System) for the year ended June 30, 2019. The accompanying report, which is intended solely for the use of the Board and management, presents important information regarding the Health System’s financial statements and our audit that we believe will be of interest to you. It is not intended and should not be used by anyone other than these specified parties. We conducted our audit with the objectivity and 1 independence that you expect. We received the full support and assistance of the Health System’s personnel. We are pleased to serve and be associated with the Health System as its independent public accountants and look forward to our continued relationship. We look forward to discussing our report or any other matters of interest with you during this meeting. Agenda • Auditor Opinion and Report • Statements of Net Position • Operations • Communication with Those Charged with Governance • GASB Accounting Updates 2 Auditor Opinion & Report Scope of Services We have performed the following services for Alameda Health System: • Annual financial statement audit as of and for the year ended June 30, 2019 • Annual single audit as of and for the year ended June 30, 2019 We have also performed the following nonattest services: • Assisted in the drafting the financial statements of Alameda Health System 4 • Assisted with tax preparation services Auditor Report on the Financial Statements Unmodified Opinion • Financial statements are presented fairly and in accordance with U.S. GAAP • GAGAS and Uniform Guidance audit reports are unmodified 5 Statements of Net Position Assets and Deferred Outflows (in millions) 2017 = $670 $300 2018 = $650 $250 226 2019 = $755 $200 189 174 154 151 145 7 $150 135 127 120 111 98 $100 90 87 81 71 $50 24 24 24 19 16 9 $0 Cash and Patient A/R, Due from Other current Capital Restricted Deferred cash net 3rd party assets assets, net cash outflows equivalents equivalents Liabilities and Deferred Inflows (in millions) $600 2017 = $955 502 $500 2018 = $925 2019 = $1,055 $400 388 342 8 $300 201 181 $200 170 129 131 109 113 98 86 $100 64 72 56 55 62 57 60 29 30 $0 A/P Due to Other current Liquidity Net pension Other Deferred 3rd party liabilities facility liability noncurrent inflows liabilities Net Patient Service Accounts Receivable Dollars (in millions) % Net Revenues $150 $127 $120 $125 30.0% $98 22.5% 21.2% $100 25.0% 20.0% 15.3% $75 9 15.0% $50 10.0% $25 5.0% $0 0.0% 2017 2018 2019 2017 2018 2019 Operations Income Statements Year-to-Year Comparison Total Operating Expenses (in millions) June 30, 2019 June 30, 2018 $1,075 $1,027 Salaries, Wages 69% & Benefits 68% Physician Contract 11 Services Purchased Services 9% 9% Materials & Supplies Facilities 8% 7% Depreciation & Amortization 8% 8% Other 3% 3% 2% 3% 1% 2% Communication with Those Charge with Governance • Significant accounting policies • Accounting estimates are reasonable • No audit adjustments 12 • No issues discussed prior to our retention as auditors • No disagreements with management • No awareness of instances of fraud or noncompliance with laws and regulations GASB Accounting Updates GASB Accounting Updates • GASB Statement No. 87, Leases. Effective for the Health System beginning July 1, 2020. • GASB Statement No. 89, Accounting for Interest Cost Incurred Before the End of a Construction Period. Effective for the Health System beginning July 1, 2020. • GASB Statement No. 84, Fiduciary Activities. Effective for the Health System beginning 14 July 1, 2019. 15 THANK YOU Final Draft 11/7/2019 DRAFT Report of Independent Auditors and Financial Statements with Required Supplementary Information Alameda Health System, a Public Hospital Authority (a Component Unit of the County of Alameda, California) FINALJune 30, 2019 and 2018 Table of Contents MANAGEMENT’S DISCUSSION AND ANALYSIS (UNAUDITED) .......................................................................... 1 REPORT OF INDEPENDENT AUDITORS .............................................................................................................. 17 FINANCIAL STATEMENTS Statements of Net Position ................................................................................................................................... 20 Statements of Revenues, Expenses, and Changes in Net Position .................................................................... 22 Statements of Cash Flows ................................................................................................................................... 23 Notes to Financial Statements ............................................................................................................................. 25 REQUIRED SUPPLEMENTARY INFORMATION (UNAUDITED) Supplementary Pension and Postemployment Benefit Information (unaudited) ................................................. 65 SUPPLEMENTARY INFORMATION Schedule of Expenditures of Federal Awards ...................................................................................................... 67 Notes to Schedule of Expenditures of Federal Awards ....................................................................................... 68 REPORT OF INDEPENDENT AUDITORS ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS ......................................... 70 REPORT OF INDEPENDENT AUDITORS ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY UNIFORM GUIDANCE; AND REPORT ON SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS REQUIRED BY THE UNIFORM GUIDANCE AND SUPPLEMENTARY SCHEDULE OF STATE OF CALIFORNIA EMERGENCY MANAGEMENT AGENCY GRANT EXPENDITURES .......................................... 72 SCHEDULEFINAL OF FINDINGS AND QUESTIONED COSTS .......................................................................................DRAFT 75 SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS .......................................................................................... 78 SUPPLEMENTARY SCHEDULE OF STATE OF CALIFORNIA EMERGENCY MANAGEMENT AGENCY GRANT EXPENDITURES ..................................................................................................................... 79 Management’s Discussion and Analysis DRAFT FINAL Alameda Health System A Public Hospital Authority Management’s Discussion and Analysis As of and for the Years Ended June 30, 2019 and 2018 INTRODUCTION The management’s discussion and analysis is intended to serve as a narrative overview and analysis of the financial performance for Alameda Health System – A Public Hospital Authority (Health System) for the fiscal years ended June 30, 2019 and 2018. This overview serves as an introduction to the audited financial statements, which can be found on pages 17-66 of this report. It should be read in conjunction with the more detailed information contained within the accompanying financial statements. The annual report consists of the Health System’s management’s discussion and analysis, basic financial statements, notes to those statements, and required supplementary information. The basic financial statements include the Statements of Net Position, Statements of Revenues, Expenses, and Changes in Net Position, and Statements of Cash Flows. Together, they provide an indication of the Health System’s financial health. The Statements of Net Position include all of the Health System’s assets, deferred outflows, liabilities, and deferred inflows utilizing the economic resources measurement focus and accrual basis of accounting. It also provides information as to which components of net position are categorized as net investment in capital assets, restricted or unrestricted for general purposes. The Statements of Revenues, Expenses, and Changes in Net Position report all of the revenues and expenses that have contributed to the change in net position during the fiscal year. It includes all of the Health System’s operating and nonoperating transactions. The Statements of Cash Flows present information about the cash receipts and cash payments of the Health System during the most recent fiscal year. These statementsDRAFT show the effects on financial position of cash provided by and used in operating, investing, and noncapital and capital and related financing activities. When used with related disclosures and information in the other financial statements, the information in the statement of cash flows helps readers assess the Health System’s ability to generate cash flows, its ability to meet its obligations as they come due, and its needs for external financing. The basic financial statements include the financial position and activity of the Alameda County Healthcare Foundation as a discretely presented component unit, and also include the financial position and activity of the Alameda Health Partners as a blended component unit of Alameda Health System. Notes to the financial statements provide additional information that is essential to the full understanding of the data provided in the Health System’s financial statements. FINAL 1 Alameda Health System A Public Hospital