AdCare Health Systems, Inc.’s (NYSEAMEX:ADK) Martin Brew resigned as the long-term care provider’s chief financial officer on Monday in relation to extensive accounting errors impacting the company’s financial statements for all of 2012.
In March, AdCare announced it would be postponing the release of its financial results for the fourth quarter and year end 2012 and its previously announced conference call discussing the results, originally scheduled for March 27, 2013.
The company’s Tuesday statement revealed that its accounting issues extended much further than 2012’s fourth quarter, however.
The Audit Committee of AdCare’s board of directors has concluded that the company’s previously issued financial statements for each quarter in 2012 are not reliable due to errors in the financial statements which were identified in connection with the audit of AdCare’s end-of-2012 financial statement.
After looking further into the accounting and financial issues related to these and “other potential errors,” the Audit Committee engaged counsel for assistance with the matter, said AdCare in a Tuesday statement.
Now that the inquiry has been completed, the Audit Committee has helped correct “certain errors” relating to accounting and financial matters and has identified “certain material weaknesses” in the company’s internal control over financial reporting, AdCare said.
Those material weaknesses include—among other things—weakness in AdCare’s ability to “appropriately account for complex or non-routine transactions,” along with issues in the quality and sufficiency of AdCare’s finance and accounting resources.
“In light of the foregoing, Martin D. Brew resigned as the Company’s Chief Financial Officer on April 15, 2013, and the Company has commenced a search for a new Chief Financial Officer,” the company announced on Tuesday. “Mr. Brew will continue to serve the Company in an accounting and financial support role during the transition period. In addition, the Company has enhanced its engagement with GBQ Partners, LLC, a Columbus, Ohio based accounting and consulting firm, to assist the Company with accounting matters while it completes its search for a new Chief Financial Officer.”
AdCare also announced it will be delaying the previously-announced restatements of its financial statements for all four quarters in 2012 beyond the original April 16, 2013 extended deadline for the company’s Annual Report.
However, the senior care provider did provide a preliminary unaudited consolidated balance sheet as of Dec. 31, 2012, along with a consolidated statement of operations for each quarter in 2012 along with a consolidated year-end statement of operations for 2012.
AdCare expects to restate its financial statements for the 2012 quarters, file its Form 10-K, and file its Form 10-Q for the quarter ended March 31, 2013 by June 30, 2013. The company expects to incur continued significant professional services costs related to the Audit Committee review and inquiry, which will be recognized in the first and second quarters of 2013.
Written by Alyssa Gerace