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 be able to catch 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, wo a