Report 2009-042 Recommendation 1 Responses

Report 2009-042: Children's Hospital Program: Procedures for Awarding Grants Are Adequate, but Some Improvement Is Needed in Managing Grants and Complying With the Governor's Bond Accountability Program (Release Date: May 2009)

Recommendation #1 To: Health Facilities Financing Authority, California

The authority should verify that it has the legal authority to require grantees that are not in the UC system to deposit grant funds paid in advance of project expenditures in an interest-bearing account and, if it has such authority, require that grantees earn interest on grant funds. In addition, the authority should develop and implement procedures to ensure that it promptly identifies and collects interest earned on those advances.

1-Year Agency Response

According to the authority, its legal counsel advised that there are no legal impediments to requiring hospitals not in the UC system to establish interest-bearing accounts. As such, the authority indicated it formed a working group, which has met, to determine how best to implement this recommendation. The authority decided it is not going to pursue regulations at this time, but is now advising grantees to establish interest-earning accounts. However, the authority indicated that it has internally agreed to remain flexible in this area in that, to the extent a grantee demonstrates extenuating circumstance to justify the use of noninterest-bearing accounts, it will consider their position on a case-by-case basis. Additionally, regulations that became effective in November 2009 for the Children's Hospital Program require that credit for investment earnings on any previously released portion of a grant should be paid to the authority prior to the final release of grant funds to the grantee. The authority stated that, at the time of the final disbursement of grant funds, it determines the total interest earned on the advances and that amount is deducted from the final disbursement, thereby effectively collecting the interest earned. In addition, the authority indicated that staff routinely collect and review bank statements to identify the interest earned over the course of the grant. (See 2011-406 p. 56)

California State Auditor's Assessment of 1-Year Status: Fully Implemented

All Recommendations in 2009-042

Agency responses received after June 2013 are posted verbatim.