Pine Valley audit finds clean opinion but flags internal controls; facility reports operating loss and state repayment demand

Marissa Powers, audit supervisor with Johnson and Block, told the Pine Valley Committee on the evening the firm issued an unmodified ("clean") opinion on Pine Valley's audited financial statements for the year ended Dec. 31, 2023, but identified two material weaknesses: limited segregation of duties and material adjusting journal entries. "We did issue an unmodified opinion, which is a good clean opinion," Powers said.

The finding on segregation of duties reflected the facility's small staff size, Powers said, and the other finding involved adjusting journal entries the auditors proposed and Pine Valley recorded. She also noted a pension-related swing driven by state entries: Pine Valley recorded a net pension liability of roughly $1.3 million this year where it had previously reported an asset, a change that "comes directly from the state," she said.

Why it matters: an unmodified opinion signals the financial statements are reliable for users, but material weaknesses indicate internal controls need strengthening to reduce the risk of misstatement. The pension and deferred-outflow figures are driven by state-calculated values and are outside facility control, limiting local remedies.

Key numbers presented by the auditor: total assets and deferred outflows were presented at about $25.7 million, total liabilities roughly $19.0 million, and ending net position about $3.8 million. For 2023 the facility reported operating revenues of about $10.4 million and operating expenses of about $11.4 million, producing an operating loss just under $1 million and a loss before transfers of roughly $1.2 million. After intergovernmental transfers the change in net position was a small positive amount (just over $8,000), the auditor said.

Powers walked the committee through revenue sources and trends: Medicaid (including family care) made up the largest share of operating revenues (about 52%, roughly $5.4 million), Medicare about 24% (about $2.5 million) and private pay about 14%. She said some supplemental or deficit-reduction payments from the state have declined in recent years, reducing an important revenue source for many nursing homes.

State repayment demand: Administrator (name not specified) told the board that state auditors have asked Pine Valley to return about $82,000 after reviewing supplemental payment calculations tied to cost reports. "They wanted Pine Valley to return $82,000 to them," she said. Staff said they plan to appeal the finding while weighing whether to pay the amount in one check to avoid extended bookkeeping and rate adjustments.

Debt and cash position: the audit presentation noted long-term debt of about $16.3 million with the principal due in 2024 just over $1 million; the facility paid off one bond in March 2023. Committee members and staff discussed operating cash: the facility has roughly three months of operating cash on hand, and managers said they are monitoring cash flow given the combination of lower supplemental payments and higher wage-driven expenses.

Board action and next steps: the committee received the audit presentation and discussed next steps to address internal controls, work with their cost-reporting consultant on the state repayment appeal, and continue monitoring cash and reimbursement trends. The auditor and staff recommended targeted internal-control changes to address segregation of duties and to document adjustments clearly in monthly close procedures. The board did not take a separate vote on the audit report itself during the meeting.

The committee adjourned following routine business and operational reports.