m m m m n HOUSTON COUNTY HEALTH CARE AUTHORITY .u ,U FINANCIAL STATEMENTS for the years ended September 30, 2018 and 2017 .u u u 1] 1] ,1] u D 0 0 0 D CONTENTS Independent Auditor's Report 1-3 Management's Discussion and Analysis 4-14 Financial Statements: Statements of Net Position 15-22 Statements of Revenues, Expenses and Changes in Net Position 23-30 Statements of Cash Flows 31-42 u Notes to Financial Statements 43-100 u Required Supplementary Information: u Schedule of Funding Progress 101 Changes in Net 0 PEB Liability and Related Ratios 102 Schedule of Contributions 103-105 u Additional Information: u Independent Auditor's Report on Supplemental Information 106 u Board of Directors and Executive Officials (Unaudited) 107-108 Combining Schedule of Financial Position of Southeast Alabama u Medical Center 109-112 Combining Schedule of Activity of Southeast Alabama Medical Center 113-116 D Government Auditing Standards Report: D Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters D Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 117-118 0 u u ~raffin Tucker INDEPENDENT AUDITOR'S REPORT The Board of Directors Houston County Health Care Authority u Dothan, Alabama Report on the Financial Statements u We have audited the accompanying financial statements of the business-type activities, the major funds (Southeast Alabama Medical Center, Alabama College of Osteopathic Medicine, and u Medical Center Barbour), and the governmental fund, the major fund (Cooperative District of Southeast Alabama) of Houston County Health Care Authority as of and for the years ended September 30, 2018 and 2017, and the related notes to the financial statements, which collectively u comprise the Authority'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 D fraud or error. Auditor's Responsibility D Our responsibility is to express opinions on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of D 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 0 material misstatement. Continued 0 1 0 D Let's Think Together. Draffin & Tucker. LLP I CPAs and Advisors I www.draffin-tucker.com P.O. Box 71309 I 2617 Gillionville Road I Albany, GA 31708-1309 I (229) 883-7878 D 5 Concourse Parkway, Suite 1250 I Atlanta, GA 30328 I (404) 220-8494 m An audit involves performing procedures to obtain audit evidence about the amounts and disclosures m 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 the Authority's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Authority'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, the financial statements referred to above present fairly, in all material respects, the respective financial position of Southeast Alabama Medical Center, Alabama College of Osteopathic Medicine, Cooperative District of Southeast Alabama, and Medical Center Barbour as of September 30, 2018 and 2017 and the respective changes in their financial position and cash flows for the years then ended in accordance with accounting principles generally accepted in the United u States of America. u Emphasis of Matters As discussed in Note 1 to the financial statements, in 2018 the Authority adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 75, Accounting and u Financial Reporting for Post employment Benefits Other Than Pensions, as amended by GASB Statement No. 85, Omnibus 2017. Accordingly, beginning net position was restated to reflect the change in accounting principles by reducing the previously reported net position to reflect the u increase in the OPEB obligation as calculated under GASB Statement No. 75. Our opinion is not u modified with respect to this matter. As discussed in Note 1 to the financial statements, in 2018 the Authority terminated agreements related to operations of Medical Center Barbour. Our opinion is not modified with respect to this matter. D 0 D Continued D 2 m rn Other Matter Required Supplementary Information Accounting principles generally accepted in the United States of America require that the Management's Discussion and Analysis on pages 4 to 14, and Schedule of Funding Progress, Changes in Net OPEB Liability and Related Ratios and Schedule of Contributions on pages 101 through 105 be presented to supplement the basic financial statements. Such information, although not a 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. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which 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. u Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 28, u 2019, on our consideration of the Authority'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 the Authority's 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 Authority's internal control over financial reporting and compliance. u u ~~t;g~~~. 't. -J,f D January 28, 2019 D 0 D 0 3 Southeast HEALTH Management's Discussion and Analysis For The Year Ended September 30, 2018 Our discussion and analysis of Houston County Health Care Authority (Authority) and its affiliate's financial performance provides an overview of the Authority's financial activities for the fiscal years ended September 30, 2018 and 2017. This information should be used in conjunction with the independent auditor's report and the Authority's audited financial statements. Background and Overview The Houston County Health Care Authority (Authority) currently does business as "Southeast Alabama Medical Center" (SAMC). On June 12, 2018, the Authority announced changing the name n of the health system to Southeast Health with a roll out date of October 1, 2018. The Authority is also the sole member of The Alabama College of Osteopathic Medicine, Inc. (ACOM) which is an Alabama nonprofit corporation. A nine member Board of Directors governs the affairs of ACOM. u ACOM was established in 2010 and operates a college of osteopathic medicine. The Authority is also one of three members of the Cooperative District of Southeast Alabama (District) and appoints three of its five board members. The other two members are the City of Dothan, Alabama and n Houston County, Alabama. The District was established in 2010 to finance and own the medical college building and equipment which is leased to ACOM. In March 2015, Statera Health, LLC (Statera) was formed with the Authority as the sole member. The purpose of Statera is to develop and operate a clinically integrated network of health care providers in Houston County, Alabama and surrounding areas which are able to provide population health management and to drive improvement