those items and make sure that does not happen. supervisor campos: maybe we can hear from him. thank you. >> good morning, supervisors. chief finance officer for the health department. i have been at the health department for 10 years. this is something that has occurred on my watch. we, obviously, in terms of accounting errors made, we feel badly about those. but i think there are a few things we need to clarify. to begin with, the issue of the $176,000 reclassification. at the end of each physical year, when the city goes through its period 13, close of the books in preparation for the kaffir, there are a number of activities that take place between the controller and hospital around looking at balances, project accounts where

there may be overspending in one, under spending in another. the gift spending accounts look very much like project accounts, in terms of the way they are structured and appear in the system. we did identify that this had happened a few years ago. what our records show -- and i want to be clear. i do not believe it was clear in the explanation. the initial communication with laguna honda, that funds should be moved from this gift fund account to capital project accounts came from the comptroller. it did not come from laguna honda hospital. we have the notepad that shows the sequence. the individual comptroller's office made that recommendation. it was one of many adjustments that happened on your end. the person receiving that instruction should have known

better. certainly, should have realized this was not appropriate, but apparently did not. with all the other entries coming through, it was just signed off on an entry was made. when we identified it later, we knew it had to be corrected. in fairness, i need to say the initial communication saying we needed to do this came from the comptroller's office. a bit different from how it was characterized in the presentation. certainly, in the audit report, the detailed audit report, makes that a bit more clear. you can look that up in the report issued by the comptroller. a couple of points i would like to make to start out with. number one, there is one statement in that report that is very key. i just want to reemphasize it now. on page 19 of the report, also in the power point, the statement by the comptroller is "for the sample of expenditures

reviewed, the audit team found laguna honda charged patient gift fund expenditures to patient subaccounts and charged staff development and gift fund expenditures to staff subaccounts." it is important we understand this. at the end of the day, it speaks to whether there was any use of patient money for the benefit of anything of than the patients, vice versa. there was good, discreet accounting in terms of where expenditures were charged in the accounting for this. that is important. the other point i would like to make from the presentation is that, with the exception of a few items that were exceptions here, the large bulk of things that appear in the audit were identified by their laguna honda accounting staff, corrected as part of the june 30

close. i do not think that is easy to pull out of this, including the $176,000. that was corrected through the audit. all of these things we had worked on and identified. the topic on the missing records, we are looking back over a six-year period. in the four months prior to the audit being started, it was early september 2010, we have responded to 150 public inquiries about the gift fund contained in 26 public records requests come and provided over 1500 pages of copies, going back many years, to three individuals who have submitted the request.

that was the environment we have just come out of. as librarians, being able to return documents to their corporate file, locating them again, there was a breakdown. this is no excuse, but it is important to understand the context of the situation we found ourselves in. in terms of the public disclosure process, we have had four public hearings, three before our joint conference committee, which is a subcommittee of the health committee which meets at laguna honda. commissioner melara chairs that committee. one hearing before our help commission that approved our final set of policies and procedures. i think if you look at those policies and procedures, you will see that -- no. 1, all of

the accounting adjustments recommended by the controller had been made. the policy itself provides for a very strict policy for reviewing and approving expenditures, acknowledging donor contributions, making detailed quarterly reports to the conference committee at laguna honda, so that every transaction, receipts, disbursements, can be reviewed by the commissioners. that is something that we can be to do. -- that we need to do. for me, when i look at the accounting errors, as badly as we feel about them, a couple of things are important to keep in mind. the first is, they have no affect on the availability of funds available to fund the pension activities. we have had between $1.6 million and $2.1 million over those six

years. at no time were we able to fully fund patient activities on an ongoing basis. that is one thing that is important. i think the other thing -- and this is certainly not an excuse, and i do not operate it as an excuse -- but it is useful to appreciate that we have an accounting staff of under 10 at laguna honda managing a $190 million hospital, worker all of the issues associated with a 5 $1 million rebuild of the hospital, equipment, and managing this gift on simultaneously. in barnet, the amount of resources we have to focus on is not large. their duties are split among management, hiring, payroll, billing and collection for the hospital. they are also responsible for monitoring changes in state and

federal regulation that impact our reimbursement. so there is a great deal going on in addition to the gift fund. if i were to look at the single greatest shortcoming over the past several years, what i think is the most significant issue, somewhere along the line, the administration and our finance division lost track of the requirements in that had been code that the help commission approved policy changes. where policy changes were made over eight period of years, there was a lack of transparency in having those policy changes reviewed. i look at the changes themselves, i do not feel there was anything division about the change itself. reasonably good policy that made sense at the time, as we moved from the 1990's, when this at minto was first established, to a changing environment, when the needs of the patients at laguna honda were changing over time,

the population was changing, needs to fund staff education and development were also significant. those are all issues that needed attention. at the end of the day, our failure to take these to the health commissioner is the significant failing in administering this fund. so, if i could answer your questions. supervisor campos: i do not know that i have any. the only comment i have is -- i give the department of public health credit for the fact that you cooperated with this audit, provided the information. i think the points you made are well taken. i still think, though, what we have seen in this audit is certainly not ideal. i understand the issue of the

health commission not being involved, but that is a serious issue in my book. beyond that, the thing about something like a patient gift fund -- i think there is a special obligation that we have to the public and to the people who make that effort, to write that check, many of whom may not be welcome individuals, but really care what is happening to the patients. we have, i think, and added obligation to make sure that we do everything right, and that it is not just the reality of proper management, but also the perception of proper management. i think that is very important. i do think that with something like this, you want to make sure you have all the records, that there are no gaps in that, and to the extent that record retention was an issue, that is

something we have to address. even if the comptroller's office is the one that raised the issue of transferring money from the patient gift fund to a capital project, if you have the right systems in place, you are never going to let that happen because you have to know that there is something sacred about the patient gift fund, that you are not going to touch it, as important as a capital project might be. i appreciate where you are coming from, but i do think there were serious problems here that have to be addressed. i am grateful the commission is taking the steps to do that. i know the health director is doing that as well, but i think we owe that to the patients, to the people who take time, who make the sacrifice to make that donation.

that is why this is so important and so serious. with something like this, you learn from your mistakes and move forward. the last offensive you are, the better. altman lake, we want to do what is right for the patients, for the people, in honor of the contribution these folks made. >> i completely agree. there was a period of years where we experimented with trying to consolidate to the greatest extent possible our finance team. that included for a number of years, when the budget deficits were high, we eliminated the finance director in the controller's position that existed at laguna honda, and attended to consolidate the finance director function with the san francisco general hospital, for both hospitals and the controller function also.

when we discovered in that process, while many of the accounting activities at laguna honda are fairly static, not that difficult to manage, there is a need for a greater finance presence around issues such as this. in many cases, detailed transactions do not get the oversight they need. so we now have a finance director position included in our budget for laguna honda on an ongoing basis separate and apart from san francisco general. we also have a senior financial analyst to assist in that management. both of these are new positions that did not exist prior to a year ago. we were able to bring those positions in, in connection with the rebuild, as part of the transition budget, and now we are working with the mayor's

office, comptroller's office, to make sure that that is part of a new honda. as i said before, we feel very badly about the errors we made and are concerned about the impression it can leave with the public, people who donate who would otherwise be inclined to donate to laguna honda to donate to the patients. i did want to say, the administrator -- executive the administrator for laguna honda is also here if you have questions of her. our interim cfo is also here, if you have questions for her, about the detailed accounting process. supervisor campos: why don't we open this up to public comment. i do not know if my colleagues have any questions. commissioners, did you want to add anything else?

>> thank you for bringing this up and the opportunity to give us information we have and the progress we have made on this issue. if you can do anything about the weather, i will appreciate it. supervisor campos: we will work on it. members of the public that have signed up to speak -- and then any member of the public that has not signed up who would like to speak. you each have three minutes. >> supervisors, thank you. i was the attending physician for the spanish focus community. in 2009, laguna honda cut out the cultural food program from my spanish board and the bus trips for my patients. they said the gift fund had no money. i do not know how they can stand

here and tell you that the patients were never deprived of anything, when the state of california licensing and certification issued a citation against laguna -- laguna hospital for cutting the bus trips. it was because the patients complained and told them they were told they had no money. in addition to that, in 2009, at the same time they're cutting our programs, they had an $8,000 staff barbeque funded by the gift fund. when we requested information about the gift fund, we were harassed and intimidated. we complain to the whistleblower program in march of last year. we complain to the ethics commission in march of last year. we repeatedly testified in front of the health commission and told them everything they are claiming they are now going to do. nothing happens. then we went to the media. we went to the west side server. civil grand jury.

they listened to us. the audit refunded a total of $350,000 to the patients. therefore, how can he stand here and tell you that no patient money was used for staff? we have checks that were signed into staff accounts that were made out by volunteers in four patients activities by the prior ceo of laguna honda. staff accounts have been room -- removed, and policies changed, but those policies were in place. in press releases, they have called us detractors, claimed we were making false statements, that we were attacking the gift fund and hospital, and they claimed they were exonerated by this audit. those statements are still sitting on the laguna honda website for everyone to see.

what about the perpetrators of this injustice? they are still running laguna honda. the whistle-blowers and i are out. we resigned under pressure. is this how laguna honda and san francisco promotes accountability for wrongdoers and protect whistleblowers? supervisor campos: thank you. next speaker. >> good morning, supervisors. my name is dr. derek kerr. i was a gift fund whistleblower and i received a life after 20 years of service at laguna honda. the problem here is laguna honda forgot that this was a patient gift fund. it became a laguna honda gift fund, but it was always a patient gift fund. the audit showed $350,000 was misappropriated and had to be refunded. it also showed staff accounts,

80% of the money in the staff accounts along to patients, not in the staff accounts, so they were spending from staff accounts for staff activities, so the spending was ok, but the initial money inside did not belong there and had to be refunded. six months before this audit, comptroller ben rosenfield, issued a review of the gift fund that found nothing wrong and was used to discredit our concerns. i am submitting the controllers whitewash review for your examination to compare with the final audit. but even the final audit was flawed. major fiscal irregularities that we reported were not addressed. every issue that was addressed, we had reported. the audit also wrongly points out that the problem was due to a lack of policies and lack of

oversight mechanisms. but in fact, laguna honda had excellent gift on policy and oversight mechanisms until they were indicted in 2004. then, thousands of dollars were spent on staff and administrative amenities, while patients amenities were cut. all in violation of the administrative code. we pointed this out, even the controller's review did not find a violation of the administrative code. our reporting of these problem was met by disparaging press releases and workplace retaliation. we learned that the city whistleblower program does not respond to, nor does it protect whistle-blowers who report wrongdoing by high-level executives. thank you for this opportunity. supervisor campos: thank you. next speaker please. >> good morning. my name is patrick shaw.

i am shocked by some of the testimony that has been given to you by city staff. surely, mr. delgado cannot believe $151,000 was incorrectly deposited had not been spent on staff. they bring up page 19 of the csa on it, but they ignore page 22, in which it says the audit team was not able to determine the cause of the discrepancies, nor in many cases, where subaccounts charges were correct or incorrect. for commissioner melara, a woman has no shame. quarterly reports to the health commission -- just adopted on march 1 -- are not going to the full commission. they are going to a subcommittee, the jcc.

under sonia melara's leadership, they have withheld full reporting to the health commission. in fact, the december 3 hearing at laguna honda to except the comptroller's office, ms. melara introduced a motion to take no action on the report. in fact, the report was never discussed by the health commission. she asked only during a meeting of the health commission that the power point presentation, presented on december 3, should be forwarded to the health commission. they never discussed in public the audit. the claim that the audit had been discussed and used is incorrect. when the commission met on march 1, they only discussed the

changes to the policy, not the audit. i draw your attention to my written public testimony, that i encourage chapter 26 of yours, to see as public record. the period of the audit needs to be backed up to january 2003 to examine the donations to laguna honda hospital from volunteers inc, totaling $225,000 which has not been examined. pushing it back another 22 months will yield only another 16 deposits or so in the gift fund. surely, that is not onerous on the audit function. despite numerous requests to commissioner is,the jcc, a

laguna honda gift fund page has been removed. i would like your assistance in forcing the hospital -- supervisor campos: thank you. next speaker. >> hello, good morning, supervisors, president chiu, and my district supervisor mark farrell. my name is norman bruce. i was a former employee of laguna honda. i did not know any of these administrators personally or even know what they are doing. i noticed a lot of unsavory things going on during the time i was employed, but they were not even close to what we are seeing now. we are seeing a lack of justice

because these administrators happen to be administrators. they are not lower echelon people, they are administrators. nobody looks at their competence to do their job. nobody looks at their misuse of city funds, funds that should be used for patients. nobody has looked at it. and if you do the time, you should -- crime, you should to the time. nobody is being prosecuted. it is like robbing a bank. i robbed $350,000. ok, i have taken $350,000, and then somebody finds out, you took $350,000. so i take that $350,000 and i hand it back to the bank. do you think that i would not be

prosecuted? you bet i would. this is my point. we are honoring people that have stolen public money, that have been incompetent at their jobs, and they continue to hold their jobs while being incompetent because they are public administrators. this should not be the case. and then, on top of all of this, we are honoring mr. john canelli. he died at his job. but before he died, he made sure that the patients did not have any say about the gift fund. that was removed. so let's hear some justice. supervisor campos: is there any other member of the public that

would like to speak? please come forward. >> good morning, supervisors. my name is douglas yepp. i would like to thank supervisor campos for this hearing. it is long overdue. it shows he is a true champion of the poor and needy in san francisco. secondly, i still do not see my district 7 supervisor here. this item concerns his district, but i would like to know why he still repeatedly refuses to talk to the press and to his own constituents about what is happening here. he thinks it is not a problem, and i am saying, look. if you have the nerve to quit the health service board, as reported by "the chronicle, " maybe you ought to think about whether you are in the right line of work for district 7. secondly, i want to bring up the

instance of dr. john ulrich. the department of public health punished and won a million dollar judgment against the county of san francisco for the way he was treated. i think the laguna honda situation is another instance of where the department of public health spends hundreds of thousands of dollars going after with tour -- whistle-blowers like rivera, kerr, ulrich, and myself. this hearing is proof that there is -- there are other ideas that everyone should listen to before they walk out of the room. especially those that run the city. number one, obstruction of justice. number two, dereliction of duty. number three, abuse of power

under the color of authority. my last comment, i would like to mention. bernie madoff, enron, and ponzi schemes all had one common theme. most of them, if all of them, had auditors who failed miserably to protect the common people, and that is why the country is the way it is. also, i would like to bring up the point that last week, president obama held a conference on bullying. i was surprised it came up because i was under the impression that he might have included, that not only are there bullys for children, but there are plenty of bullies trying to distract honest public employees from doing their job, basically going around whistle-