Audit Report on New York City Health + Hospitals’ Oversight of Its Auxiliaries

Executive Summary

The New York City Health and Hospitals Corporation, known as Health + Hospitals (H+H), operates the largest public healthcare system in the United States. Through multiple locations and facilities, H+H provides inpatient, outpatient, and home-based services in all five boroughs of the City. Among other things, H+H manages 11 acute care hospitals which provide a wide range of services, including trauma care, specialties services, and mental health services.

Funds used to support H+H’s operations come from a variety of sources, including not-for-profit auxiliary organizations (Auxiliaries) established to assist hospital facilities in raising funds to be used for the procurement of goods and services and to enhance their patient care. H+H’s current health system includes 22 Auxiliaries, including the Children of Bellevue, Metropolitan, and Queens Auxiliary.

The creation of Auxiliaries and their relationship to H+H is recognized in H+H’s By-laws. The Auxiliaries are required to follow H+H’s “Operating Procedure 10-20” and work closely with their associated hospital facilities to provide funds to enhance patient care. As reported in our previously released Audit Report on the Financial and Operating Practices of the Children of Bellevue, Inc. (FP19-100A), issued June 23, 2020, we found that the Children of Bellevue did not follow the latest version of H+H’s Operating Procedure 10-20. Following that audit, our office commenced this audit to further review the extent of oversight H+H provided to its 22 Auxiliaries.

We conducted this audit to determine whether H+H implemented sufficient control procedures to effectively monitor the performance and fiscal activities of its Auxiliaries.

Audit Findings and Conclusions

The audit found that H+H did not implement sufficient oversight procedures to properly oversee its numerous Auxiliaries. Specifically, we found that H+H did not execute agreements with any of its Auxiliaries to govern their operations, including their fundraising activities and any other activities intended to enhance patient care. In addition, H+H did not enforce its Operating Procedure 10-20, dated November 1, 2010. H+H stated that it considered this operating procedure outdated and chose to no longer enforce it. Therefore, for Calendar Years 2018 through 2020, H+H did not have current operating policies for the Auxiliaries to follow. On April 19, 2021, H+H updated its operating procedure relating to the Auxiliaries. However, during our scope period, no operating procedure was in effect, and H+H had only the Auxiliaries’ finalized financial statements as a possible source of detailed written information about their activities. However, the finalized financial statements provided insufficient information since they only enabled a retrospective view of the entities and omitted key pieces of information, such as a review of the internal control structure. Moreover, submission of these financial statements were delayed at least a year and a half after the close of Calendar Year 2018. To date, only 18 of the 22 Calendar Year 2018 financial statements have been received by H+H.

Audit Recommendations

To address the issues raised by this audit, we make the following four recommendations to H+H.

H+H should:

• Execute written agreements with all Auxiliaries to provide the necessary guidance, restrictions, reporting requirements, and other critical stipulations;
• Review policies and procedures applicable to all Auxiliaries to ensure that:

• • each Auxiliary operates in an effective and efficient manner and in the best interest of the hospital facilities;
  • a sufficient control structure is emphasized and required as a component of each Auxiliary’s operations; and
  • all operational and financial positions and major events of the supporting organizations are communicated to H+H in a timely manner;

• Ensure the timely completion and release of all Auxiliary finalized financial statements; and
• Expand the oversight procedures of reviewing finalized financial statements to include practices that would allow H+H to assess each Auxiliary’s performance and identify areas of concern throughout the year.

Agency Response

In its response, H+H disagreed with two audit recommendations and stated that the other two recommendations have already been addressed. Specifically, H+H disagreed with the recommendations that it execute written agreements with all Auxiliaries, and that it expand oversight procedures to assess the Auxiliaries finances and performance. Regarding the recommendation to implement policies and procedures to more closely monitor the Auxiliaries, H+H stated it agreed a new operating procedure was needed but that it had already adopted one. H+H also stated that the recommendation that it ensure timely completion and release of financial statements had already been addressed. H+H further stated that it has “already taken many of the steps the Comptroller would recommend.”