On June 7, Hanger, Austin, Texas, filed a current report, Form 8-K, with the U.S. Securities and Exchange Commission (SEC), in which it discloses the findings of the audit committee’s investigation into circumstances surrounding accounting errors that led to the restatement of certain prior financial statements. The initial scope of the investigation, which began in 2015, focused on inventory, leases, the depreciation of the company’s patient management and electronic patient records system, and accounts receivable allowances in certain periods. Records from the first quarter of 2010 through the second quarter of 2014 were examined.
The audit committee concluded the following:
- Certain former employees and former officers, including in some instances the former chief financial officer (CFO) and former chief accounting officer (CAO), more likely than not, engaged in inappropriate historical accounting practices related to management estimates and certain accruals.
- An inappropriate “tone at the top” was set by the former chief executive officer (CEO), former CFO, and former CAO that contributed to a weakness in Hanger’s overall control environment. Specifically, emphasis placed by former executive management on meeting or beating consensus earnings per share and achieving certain financial targets may have resulted in certain inappropriate accounting decisions and entries.
None of these practices involved current officers, per the findings of the investigation.
Concurrent with the SEC filing, Hanger President and CEO Vinit Asar provided a statement. “Hanger has been working diligently to remediate various accounting issues that have delayed our financial filings with the SEC and also led to the need to restate certain previously filed financial statements,” he said. “We are committed to this process and the extensive review and correction it has entailed….”
The following are among the measures Hanger has already instituted:
- Hiring a new CFO, principal accounting officer, and corporate controller
- Strengthening accounting processes and controls
- Hiring additional highly qualified employees and consultants
- Implementing compliance training, led by the current CEO and new CFO, with key leaders and employees
- Investing in infrastructure and systems to reduce reliance on manual processes
“We are continuing to assess the time needed to prepare and file our financial statements and we still believe the earliest we will begin making our filings is the fourth quarter of 2016,” Asar said. “As a 155-year-old company with a long history of change and growth, we are committed to a Hanger culture that ensures we operate at the highest standards.
To access the Form 8-K, visit www.hanger.com/investors/Pages/SEC-Filing.aspx.