Your accounting firm, Pennypacker & Vandelay, LLC, has been asked by the Chairman of Harris Memorial Hospital and Harris Community Foundation to attend the annual board meeting to present the report of the Independent Auditors. The purpose of the presentation is to give the Board the financial highlights of the annual financial statements and advise them of any unusual events both current and in the foreseeable future that might impact the overall financial statements. The managing partner of the firm has asked you as a Director in the Health Advisory Department to make the presentation to the board. Question: Develop a board of Directors financial presentation (power point-10 slide limit) based on the Case Example, displayed in our text in Appendix Chapter 9-A, for Harris Memorial Hospital and Harris Community Foundations Audited Financial Statements and Footnotes. In preparing your comments and analysis, be sure to address the type of opinion rendered included in the report of the Independent Auditor (Pennypacker & Vandelay, LLC) and use the format in Chapter 13, (Table13-7) and (Figure13-4) to display your analysis and explanation for the comparative years December 31, 20X7 and 20X6. Based on your analysis explain the variances and what actions can be taken by management to improve the financial presentation for the next calendar year 20X8. Also, consider in your presentation any pending legislation activity (Sequestration, ACA or HITECH provision relating to HIPAA, or Community Benefit Analysis required by PPACA through the completion of Form 990) that you think might be helpful to the board in understanding the current environment.

Here are the tables: Table 13-7

Forecasted Financial Ratios for OHF 20X7 20X8 20X9 20X0 20X1

Total margin percentage 3.9 4.9 4.9 5.0 5.0

Operating margin percentage 1.3 2.3 2.0 1.7 1.4

Nonoperating revenue % 2.6 2.9 3.0 3.2 3.5

ROE percentage 8.2 9.7 8.8 8.5 8.0

Liquidity Current 1.11 1.11 1.09 1.09 1.09

Days in accounts receivable 54.8 54.8 54.8 54.8 54.8

Days cash on hand (short term) 20.0 20.0 20.0 20.0 20.0

Capital structure

Equity financing percentage 44.1 46.4 48.7 50.9 53.0

Long-term debt to equity, % 63.3 55.6 49.1 43.2 38.4

Cash flow to debt percentage 14.9 17.4 18.0 18.8 19.6

Times interest earned 2.65 3.19 3.31 3.43 3.59

Activity Total asset turnover 0.93 0.91 0.89 0.87 0.85

Fixed asset turnover 2.32 2.37 2.43 2.52 2.63

Current asset turnover 4.44 4.44 4.44 4.44 4.44

Other ratios Average age of plant 8.8 9.3 9.7 10.2 10.7

Appendix 9A

Table 9A-1 Harris Memorial Hospital and Harris Community Foundation Combined Balance Sheets (in thousands)

December 31, 20X7

December 31, 20X6

Assets

Current assets

Cash and cash equivalents

$ 82,815

$ 59,696

Assets limited as to use, current portion

5,327

5,088

Accounts receivable

Patients, less allowance for doubtful accounts

70,025

59,939

($25,302 in 20X7 and $23,014 in 20X6)

Other

28,990

24,995

Supplies

7,078

6,663

T

Assets limited as to use
For donor-restricted purposes	84,440	67,826
Board designated for specific purposes	382,835	378,413
Held by trustees under bond agreements	51,038	25,937
	518,313	472,176
Less current portion	5,327	5,088
	512,986	467,088
Property and equipment, net	563,349	458,829
Other assets	34,476	34,302
Total assets	$ 1,305,046
$ 1,116,600
Liabilities and net assets
Current liabilities
Accounts payable	$ 32,572	$ 24,631
Accrued expenses and other liabilities	58,878	53,725
Due to third-party payers	7,380	12,633
Current maturities of long-term debt	4,692	5,908
Total current liabilities	103,522	96,897
Long-term debt, less current maturities	439,597	332,354
Contingent professional liabilities	33,260	48,487
Due to broker	15,128	19,608
Other liabilities	20,713	5,298
Postretirement benefit obligation, other than pensions	8,207	7,694
Total liabilities	620,427	510,338
Net assets
Unrestricted	600,179	538,436
Temporarily restricted	55,213	40,393
Permanently restricted	29,227	27,433
Total net assets	684,619	606,262
Total liabilities and net assets	$ 1,305,046	$ 1,116,600

otal current assets

194,235

156,381