Question C4.3 is based on the following case.

Goodfellow & Perkins LLP is a successful mid-tier accounting firm with a large range of clients across Texas. During 2022, Goodfellow & Perkins gained a new client, Brookwood Pines Hospital (BPH), a private, not-for-profit hospital. The fiscal year-end for BPH is June 30. Goodfellow & Perkins is performing the audit for the fiscal year-end June 30, 2023.

BPH provides medically necessary care to patients, regardless of their ability to pay. Both uninsured and underinsured patients are offered discounts of up to 100% of charges based on their income as a percentage of the federal poverty-level guidelines. BPH does not pursue collection of these accounts; therefore, they are not reported in patient service revenue and accounts receivable. The cost of providing the charity care is included in operating expenses.

BPH's investments consist of mutual funds, common equities, corporate and U.S. government debt issues, state and municipal government debt issues, and trusts. A majority of the investments are the result of charitable contributions to the hospital by generous donors. Earnings from the investments are used to cover the costs of the charity care. BPH is also eligible for certain government grants to help cover the costs of the charity care.

Selected financial statements and other financial information are provided below. Since BPH operates as a non-for-profit, it reports assets, liabilities, and net assets. (Note: Net assets takes the place of equity since there are no owners.)

Brookwood Pines Hospital Statement of Financial Position (in thousands)
	June 30, 2023	June 30, 2022
Assets
Cash and cash equivalents	$43,077	$36,361
Short-term investments	22,725	49,338
Patient accounts receivable, net	119,380	99,962
Current portion of pledges and grants receivable, net	9,208	5,099
Current portion of insurance recoverable	2,364	1,953
Inventory	10,740	10,056
Other current assets	25,792	23,193
Total current assets	233,286	225,962
Long-term investments	915,088	807,321
Property and equipment, net	576,432	538,981
Prepaid pension cost	19,760	7,248
Insurance recoverable, less current portion	11,619	10,723
Other assets, net	31,535	28,463
Total assets	$1,787,720	$1,618,698
Liabilities and net assets
Accounts payable	$ 38,431	$ 39,547
Accrued salaries and benefits	52,361	50,754
Grants payable, current portion	6,459	8,459
Accrued expenses and other current liabilities	19,209	27,380
Due to third-party payors	72,494	67,687
Current accrued liabilities under self-insurance programs	15,709	14,965
Current maturities of long-term debt	5,040	4,928
Short-term debt	14,550	0
Long-term debt subject to short-term refinancing agreements	0	53,132
Total current liabilities	224,253	266,852
Long-term debt, net, less current maturities	220,796	179,530
Accrued liabilities under self-insurance program, less current portion	82,618	82,559
Grants payable, less current portion	13,245	16,489
Other liabilities	42,669	48,336
Total liabilities	583,581	593,766
Net assets:
Without donor restrictions	1,138,140	962,652
With donor restrictions	65,999	62,280
Total net assets	1,204,139	1,024,932
Total liabilities and net assets	$1,787,720	$1,618,698

Brookwood Pines Hospital Statement of Operations Year Ended June 30 (in thousands)
		2023		2022
Revenue
Net patient service revenue		$791,572		$706,073
Estimated uncollectible accounts		(33,675)		(25,810)
Net patient service revenue after estimated uncollectible accounts		757,897		680,263
Rental and other revenue		42,727		41,975
Net assets released from donor restrictions and federal and state grants		4,541		4,407
Total revenue		805,165		726,645
Expenses
Salaries and employee benefits	$377,895		$344,360
Supplies	146,172		126,633
Purchased services	89,774		79,391
Depreciation and amortization	47,858		45,630
Insurance	17,430		18,132
Rent and utilities	15,218		13,935
Repairs and maintenance	14,722		14,563
Interest	7,351		8,874
Texas hospital assessment	17,227		14,081
Other	21,324		21,151
Total expenses		754,971		686,750
Operating income		50,194		39,895
Nonoperating gains (losses)
Investment return		109,212		25,951
Change in fair value of certain investments		6,254		(6,202)
Contribution of DeLaune unrestricted net assets		0		64,995
Grants provided		(3,362)		(4,458)
Other		1,630		(489)
Total nonoperating gains, net		113,734		79,797
Excess of revenues over expenses		$163,928		$119,692

Selected information from the cash flow statement is as follows (in thousands):

Item		2023		2022
Net cash provided by operating activities		$63,648		$67,903
Net cash used in investing activities		(60,394)		(75,300)
Net cash provided by financing activities		3,463		3,706

C4.3 Analytical procedures Analysis: Using BPH's financial data, perform analytical procedures to gain an understanding of BPH. Conduct a trend analysis, common-size analysis, and ratio analysis. Based on your analysis, document in a memo your understanding of the client, potential problem areas (accounts at risk of material misstatement), and any other special concerns. (Note: Some ratios provided in the text may need to be modified for a not-for-profit organization. If necessary, use the internet for additional research about financial ratios used in the hospital industry.)