A financial review of the quasi-government body that runs most of the state's rural hospitals faults the Hawaii Health Systems Corp. on several points, but also criticizes the corporation for dragging its feet during the evaluation.

The review performed for the state Office of the Auditor found the corporation's procurement and asset management policies were inconsistent with state laws and that it doesn't protect sensitive information in its computers to the degree it should.

It was also faulted for not having consistent adherence to billings, collections and receivables policies across its properties because it had not collected all the money it could.

Established in 1996, the HHSC oversees the main hospitals on Maui, the Big Island and Lana'i, as well as rural community hospitals on Kaua'i and O'ahu. The Office of the Auditor along with accounting firm Accuity LLP conducted a financial review for the HHSC's 2006 fiscal year, examining procedures, reports, records and other items to determine if the corporation was in compliance with state procurement laws and wether its financial statements conformed to applicable accounting procedures.

The reviewers said they were unable to render an opinion on the HHSC's financial statements because its management refused to sign a representation letter acknowledging its responsibility for the fair presentation of its financial statements. The reviewers reported they also did not get adequate responses to some inquiries, delaying the review.

The HHSC yesterday said its staff members provided thousands of pages of documents and spent more than 100 hours of staff time responding to the auditor's requests.

"We specifically want to address the issue of staff cooperation with the auditor because that issue strikes at the core of public confidence," the HHSC said in a statement. It noted the corporation is regularly audited by an outside firm, Deloitte & Touche.

"HHSC has participated in numerous audits in the last 12 years, including annual accountability and compliance audits," the corporation said in its statement. "Of these audits, only the state auditor has ever accused HHSC staff of being uncooperative."

The HHSC noted the state's procurement code was not set up to run hospitals and that lawmakers have been deciding which part of the code is applicable to the HHSC. It said it also has procedures in place to detect any inappropriate access to its information systems.

The reviewers also found that, because of a weakness in the HHSC's billings, collections and receivables policies, the corporation lost about $204,000 it was due from Medicare and Medicaid because it had not met deadlines.

The corporation responded that no hospital can fulfill 100 percent of collection goals given the complexity of healthcare revenue processes and that it has developed internal controls to constantly monitor collections.

"We do not want our disagreements to diminish HHSC's on-going commitment to developing better quality healthcare for our island communities," Thomas Driskill Jr., HHSC's president and chief executive officer said in a press statement, adding that no wrongdoing, malfeasance, significant losses or misappropriation of public funds were found during the 21-month review.

The auditor's report said the corporation had been extremely critical of its approach and had disputed nearly all of its individual findings.

But "we believe the report presents an accurate and balanced analysis of the corporation," the report said.