LSU Health Care Services Division Has Inadequate Property Agreements, Problems with Equipment Control

Louisiana State University’s Health Care Services Division (HCSD) did not have completed agreements with its hospital partner for use of state assets, and continued to have problems keeping track of equipment, the Legislative Auditor said in a report released today.

Auditors found that HCSD and LSU did not have complete, signed agreements for all equipment, buildings, and parking lots being used by the partner managing University Medical Center New Orleans (UMCNO). As a result, the auditors identified significant potential misstatements in HCSD’s 2016 annual fiscal report.

The auditor’s report disclosed that the agreement for the use of equipment purchased by the state for UMCNO was not signed as of June 30, 2016, and did not contain a listing of equipment to be leased. However, the private partner began using equipment in August 2015 and made payments to HCSD based on a payment schedule prepared by the partner.

In a similar arrangement, a 10-year lease agreement for the partner’s use of equipment located in the Interim LSU Public Hospital in New Orleans, effective on June 24, 2013, did not contain an agreed-upon Exhibit A listing the annual lease payment by equipment item as required by the agreement. The partner has made annual rental payments based on a schedule that was not agreed upon by all parties and only outlined rental payments through fiscal year 2016.

In addition, for the second consecutive year, HCSD did not ensure equipment purchased for UMCNO was considered for tagging and entry into the state’s asset management system. LSU, through HCSD, is responsible for monitoring the hospital partner’s compliance with state property control requirements. As of June 30, 2016, purchases made by the state’s Office of Facility Planning and Control totaling approximately $75 million had not been analyzed to determine if they were subject to the Louisiana Property Assistance Agency’s reporting requirements or if they were properly reported in HCSD’s financial statements.

Auditors also found that assets assigned to the Interim LSU Public Hospital totaling $1.2 million could not be located by the hospital managing partner. HCSD was unable to locate a total of $2.1 million (or 93%) of the $2.2 million remaining Earl K. Long Medical Center movable property not being leased to the private partner.