the statistical sampling model was applied with a 95% confidence level to the population as a result of the methodology applied, our sample yielded 324 items for testing. all donations to the gift fund staff development account during the period under audit were selected to determine whether the nation's intended or patients were incorrectly reported to staff development some accounts. however, donations to a pigeon- related account for not collected at the risk of error in recording non-patient related donations to pigeon- related accounts was considered to be low. as you can see from the slide, the audit covered six fiscal years from 2005 to 2010. over this time, the gift fund

increased $430,000, from $2.51 million, as noted at the beginning fund balance for 2004, 2005, to -- this translates into a decline of approximately $72,000 per year. during the period under audit, annual donation remained consistent from year to year and averaged 115,000 over the six- year audit period. however, contributions to kind significantly by approximately 75,000 in fiscal year 2008 and 2009. we contribute this to the economic climate and income and adjustments, which is comprised of dividend and interest income, and the annual accounting entry to report unrealized gains and losses average approximately $110,000 from year to year. this amount is subject to market trends, it may fluctuate from

year to year, as seen by the low of approximately $20,000 in fiscal year 2005, and a high of $164,000 in 08. excluding 2010, a non adjustment was posted. this is further detailed here and in the upcoming slides. annual expenditures increase through fiscal year 2009, however the increases were not drafted with the exception of fiscal year 2007. this amount includes a journal entry of approximately $176,000, which represents a transfer of patient funds to clear a cash deficit in a capital projects fund held by laguna honda. during the course of the audit, these funds were returned to the patient account and are included in fiscal year 10 income and adjustment total of 207,000. this item was discussed in finding 1.2 of the report and will be representative --

explained in our discussion of findings. net income deficit. while the spanish did not appear to be drastic, it was noted that apple you are out of the six fiscal years under audit, lebanon on the gift fund incurred net losses averaging a profit $130,000. well it does not acute -- appear that the gift fund is that immediate risk of depletion, we recommend management of the fund balance. this will be discussed in the coming slides. as it relates to corrective action by liberal on the hospital, -- laguna honda hospital, in may 2010, the comptroller's office accounting operations section perform the limited review specifically examining the accounting processes used to deposit donations into the fund, to allocate in addition to various accounts, and to record expenditures from the fund. in order to determine if the department's process is consistent with city accounting

practices and at here is to administer code section 10.100 through 201 that created the gift fund, the review found the record a transaction to be consistent the general purpose of the fund and in line with city accounting practices. however, the comptroller recommended the department held separate employee development from the gift fund. in addition to laguna honda removing staff developments of accounts, from within the gift fund, it was noted that prior to the onset of the audit build work, that laguna honda accounting session performed an internal review of donations and expenditures for both patients and staff related sub accounts in the gift fund. the laguna honda accounting section staff identified incorrect postings and corrected its record. paris included two checks designated to reimburse patient related activities and amounts from the staff related accounts that were not specifically

designated at a staff related, and accumulated interest, misallocated to staffs of accounts. the total amount for this transaction was $127,700. with regard to revenue findings, for revenue for donations, and the audit team reviewed all 50 transactions and -- in staff related accounts during the audit period, totaling $192,000. the audit found at laguna honda reported donations in 10 different donation not specifically intended for staff and operating income generated from facility rentals into staff development account. laguna honda also recorded divisions to staff accounts which left documentation supporting intent and purpose, or the restriction of the donation to the fall was led will provide a depiction of the findings by type.

for the 50 transactions a selected which represents all revenue recorded into the staff account, such as those for training, education, and administrative items during the audit period, the audit team tested a total of $192,483, which is represented in the total column on the table of the slide. the audit found in this period that laguna honda correctly recorded $37,319, or 90% of the nation's intended for staff and to staff related accounts, and incorrectly recorded what under $51,739, 79% of the nation's. interest and operating income in to staff related sub accounts of with 127 727,000 has been corrected, as a priest in mentioned and return by laguna

honda to patient related sub accounts as previously discussed. supervisor campos: could i ask you a quick question on that? any findings as to how that happened? the incorrect recording? >> good morning, supervisors. nicholas delgado. during the course of the audit, these items were brought to our attention. they were identified as simple accounting errors. the coating on the receipt tags that were used to deposit these into the financial system were coded incorrectly. it was identified by laguna honda but they showed it to us. >> this resulted in approximately 24,000, 16% of revenue recorded into step account for which the autumn recommended additional correction. as was noted earlier, laguna honda did their own internal

audit and made a huge correction. this was the remainder which the audit identified as 24,000. the amount recorded incorrectly was comprised of $37,102 representing two checks that were designated to reimburse patients related activities. 17,750 of checks mostly for family and production companies. 5004 and a $30 and operating income recorded at donations to staff accounts. 1200 staff related sub accounts but amounts are not explicitly designated as staff related. 90,200 to $7 in accumulated interest missed allocated to staff some accounts.

as it relates to our expenditure findings, laguna honda did not provide supporting documentation for 35% of the 324 samples tested. they provided 212 of those expenditures, supporting documentation for each transaction. for the remaining records of 112, there were not able to locate the supporting documentation within the house. however, the audit staff looked into the city's accounting system and found in the memo of accounting system, the reasons why those funds were expended. as a result, compliance audit speaks too, are you comply with a particular law and administered a code? that is why we actually spoke about the missing documentation, although we were able to

identify what that was. as a result, it became an audit finding. because we did not follow section 8 of the san francisco and administrative code, which requires city departments to maintain financial records for five years. as a matter of compliance, we needed to maintain the source records in house. supervisor campos: did you have a finding as to why that was the case? was it a case where people did not know there was a requirement about? >> they were aware of the requirement, but they attributed these documents to staff turnover over the course of six years. documents were misplaced as well as the various sunshine or ms. requests. dr. mitch were misplaced during that time as well. supervisor campos: was it more of a record-keeping -- >> exactly. most of their records were kept

in paper form in boxes in storage. they were unable to find them. supervisor campos: is there a record keeping policy that the hospital has? >> they do have a record keeping policy, correct. >> so of the 212 expenditures reviewed for the six fiscal years under audit, we found we had varying instances of not having the proper approvals, not having the proper supporting documentation, some instances where vendor to not provide invoices for payment. instances that a staffed signature of the laguna honda administrator was used. while this may not be an efficient way of demonstrating the approval of documents that

have been previously reviewed, laguna honda has not consistently used the staff signature. also, when using a stamped signature, it is very important how the custody of that stamp is maintained, so that it is not used in an improper manner. laguna honda has no policies and procedures which govern the recording of gift fund transactions. 14 of the 17th asian-related sub accounts. of the sample of the to the 12 audits, a laguna coded similar gift fund expenditures to bearing some accounts and at least 18 instances and did not note any sub account in 48 instances. if some accounts are not noted on the invoices and supporting documentation by for personnel prior to admission to accounting for payment, then the risk is increased at a proper account will be charged and funds for specific purposes may be

misspent. laguna honda gift fund policy does not clearly defined eligible and appropriate expenses for the gift fund so that it can manage the funds substantial expenditures to plan for the sustainability of the gift fund. the gift fund policy includes the sub account codes to be used for expenditures such as community outings, bus trips, dining charges, including charges to the attrition department. however, other recurrent expenditures are not always listed in their policy. really, the big item here is working with their board and ensuring there is an annual budget, that there is a definition of what the expenditure should be or should not the threat of the year. they do have a baseline of expenditures based on our review of the varying types of expenditures used within the organization. >>supervisor campos: how is the

appropriateness of an expenditure decided? what is the process? >> do you mean specifically for the approval process? most of the expenditures were recurring. they were the laguna honda express bus trips to a giants game, lunch in the park or something. those would go to the director of therapeutic services. it would be paid directly to the county system. it varied, in terms of whether or not there was an approval signature on the actual document or not. therefore, that is why we have the finding. >> i would like to point out, as stated on the slide, for the example of expenditures reviewed, laguna honda charged patients benchers to the account.

staff fund expenditures to staff bundle the account. at no time during the course of the audit could we say that there was fraud within the process. as it relates to administrative findings, the san francisco administrative code section 10.100 route 201 specifically states that all expenditures from the fund require the approval of the public health commission now call the san francisco health commission. according to the gift funds original policies and procedures which govern the use and administration of the gift fund, the commission's approval of expenditures appear to be accomplished through a gift on management committee composed of at least three employees and one patient. the policies did to get fund chair person is to prepare quarter of expenditure statements or presentation to

laguna honda's executive administrator and to the joint conference committee, a body that includes the health commission and leaders of laguna honda and san francisco general hospital. through revisions made of the internal policy, the administrative code requirement that the health commission must approve all expenditures was effectively eliminated. according to laguna honda's former cfo, six years ago, separate somesubaccounts were created in the city under the gift fund to receive donations from staff and other agencies which paid for staff training events and acknowledgement gifts. by treating the subaccounts, for the benefit of patient only, laguna honda increase the perception that patient and were being misused. as previously discussed, this was rectified at laguna honda as

of july 1, 2010. that came about after the limited review performed by the comptroller's office. supervisor campos: on that point, in your presentation, there is a line item that included subaccount man for patients benefit. what are the kinds of things that that moneys are intended for patients for are being sent it on for line item? >> i'm sorry, i am confused. supervisor campos: or donation was intended for the benefit of a patient, what were those names ever spent on? >> it is a bit convoluted in the slide. there are 17 patient-related account within the gift fund. four staff-related. at the time of the audit. those four staff-related collected funds separately from the patient funds. those were used for meals,

administrative meetings, employee of the month awards, and what not. it was a completely separate from patient-related expenditures. supervisor campos: members of the public will have an opportunity to speak. if we could let the department continued. >> patient-related expenditures, bus trips, computers, books, items that they can have with in hospital. supervisor campos: what i am getting to is this perception that there were things intended for patient use that were spent -- that were not spent on that now on staff. >> over the expenditure to be reviewed, that was not the case. supervisor campos: if you could continue please. >> as previously mentioned,

laguna honda's portfolio was valued at 835,000 as of june 30, 2010. according to the laguna honda cfo, the portfolio is updated at the end of each fiscal year to obtain the market value reporting purposes, but otherwise untouched until that time. in other words, the fund is adjusted up and down based on market value as of june 30 of each year. these assets may lose value over time, but with active management, some of the holdings may be sold to avoid substantial losses allowed by the administrative code. and upon approval by the commission. basically, the audit had requested that laguna honda actively manage the fund, just to ensure, to run the year, that if we were going to potentially have a loss, perhaps we could sell. additionally, i demonstrated on slide 5, laguna honda had not

manage the use of gift fund expenditures to earn the sustainability of gift fund. from 2004 through 2005, 2009, 2010, expenditures totaled $1.8 million. while the audit found no legal or other requirement for city funds to be managed to ensure sustainability, nor does it appear that the gift fund was at immediate risk of depletion, laguna honda should plan for maintaining the gift fund to benefit its patience for the many years it is feasible. in fiscal year 2006, 2007, its financial records show an adjustment of $176,000, for which there is no record in the annual report presented to the board of supervisors and health conditions. this entry was identified by the

laguna honda cfo during the course of the audit and was brought to our attention. the amount in the journal entry, which was initiated by laguna honda, and damaging gift fund expenses and the rolling out a negative fund balance capital fund for laguna honda. this was approved by the comptroller's office. as this was deemed an inappropriate use of gift funds, laguna honda and office of the comptroller arranged to reverse the adjustment to return the fund to the gift fund in fiscal year 09-10. supervisor campos: could you say more about that? what exactly happened? >> what laguna honda found was come as they did their review of the record, they noticed an adjustment of $176,000. that adjustment was used to cover a capital project expense

deficit that needed to be dealt with within the accounting record. supervisor campos: so this is the capital expenditure that had a gap of $176,000. they used the gift fund -- >> to address that need. yes, it was approved. once we discovered it, we all took the necessary action to reverse that particular transaction. supervisor campos: any sense of how something like that happens? you were talking about record- keeping being an issue. how would that happen? >> unfortunately, at the time, the currency of zero was not the cfo at the time. what we could find -- the city's financial system notepad demonstrates it was a transfer.

it was during the year and the closing process. from what we can see, it looks like something to be done at year's end and to be reversed the following year, which was never done. supervisor campos: did someone approve the transfer? >> it was initiated by the comptroller's office. supervisor campos: within the laguna honda, who approved the transfer? >> i cannot recall, but it would go to the cfo to approve the transaction. >> with that in mind, the return of funds did not include potential interest earned, had a $176,000 remained in the gift fund. we had recommended laguna honda performance calculation of the potential interest earned. the patient is funded accordingly. in general, what we recommended

over all to laguna honda is that it needs to work with the health commission to implement a complete gift fund policy. it needs to work with the office of the treasurer and tax collector to consider methods to actively manage the gift fund portfolio. it needs to return donations and interest of $18,000 to the patient gift fund in addition to the 127 which already been returned. estimate potential interest that would have been turned on the principal balance of the $176,000 and received for properly it knowledge and receiving all of its foundations and develop controls to enter all gift fund expenditures conform to policies. supervisor campos: thank you very much. i do not know if you have anything else in your presentation. i would like to give an opportunity to the department of

public health, commissioner melara from the health commission. i know a number of steps have been taken. i have certainly spoken to our public health director, who has made it clear she is serious, has been serious, as your department, to make sure that all proper procedures are followed, and that the findings of the audit are addressed, and a number of steps have already been taken. i do not know, commissioner, if you want to come up, and talk about everything that the health commission has already done to address these issues. part of this process is not only identify what has happened, but also an opportunity for the public to know all the steps you have taken. >> absolutely, supervisor campos, my name is sonia melara,

the vice-president of the health commission, also the chair of the joint conference committee of the laguna honda hospital. i am here to let you know, on march 1, the commission accepted the new policies and procedures that had been put in place to ensure this matter is not repeated in the future. one of two areas that we were very concerned about, that are already being put in place -- one is the removal of the staff of accounts from the patient gift fund, to create a better transparency. no one can say that things are being placed in the wrong account if it is altogether. the second one that we were concerned about is a requirement

by the city code to give reports to the commission. we realize in the last years, the hospital has been going through its rebuild. we had new administrative overturned because of the past director dying. there are a lot of things that are being done possibly overlooked some of the things that needed to be done. at this particular point, we are very satisfied with the policies and procedures in place. they are all based on the recommendations by this city comptroller's office. supervisor campos: commissioner, to get some more specifics on something that you said. one of the findings was the finding of the health commission. i understand the complications -- it would be impractical to expect the health commission is going to approve every single expenditure as it happens.

what i have seen some agencies do is there is a mechanism of ratification -- whether it is a monthly basis, the expenditures come to the commission for review and approval. i am wondering what that mechanism will look like, in terms of ensuring there is someone on the ground that has some say over what is appropriate and is accountable for that, but ultimately making sure it is the commission that approves the expenditure. >> absolutely. that is -- there is a council in place that includes patients and hospital staff. there is a required report to the commission on a quarterly basis. so we are going to hear about these decisions quarterly.

that is the way we plan to address this. obviously, we do not expect to look and every little expense, but look at it from a more policy and directed process. that is our role, to be the people who've been the policy. supervisor campos: one of the things that was -- this idea that you would try to fill in a gap of deficit in the capital account with money being transferred from the patient gift fund. i do not think that is a good practice. i am wondering what steps are being taken to address an issue like that. >> one of the things that our chief financial officer -- from the health department -- he is here and can answer some specific questions. from a policy perspective, my hope is we will a