Report 2018-102 Recommendation 8 Responses

Report 2018-102: Tulare Local Healthcare District: Past Poor Decisions Contributed to the Closure of the Medical Center, and Licensing Issues May Delay Its Reopening (Release Date: October 2018)

Recommendation #8 To: Tulare Local Healthcare District

To ensure that it uses bond proceeds for allowable purposes and improves its consistency and accountability in processing payments from bond proceeds, by April 2019 the district should formalize and document policies and procedures for verifying that it uses bond proceeds for allowable purposes and for approving expenditures paid from general obligation bond proceeds.

Annual Follow-Up Agency Response From February 2023

8) Bond proceeds are to be accounted for separately and, as indicated, tracked independently. Legal counsel will be engaged regarding any concerns identified with the potential utilization of funds. Any future receipt of General Obligation Bond funds will be treated in a manner similar to that identified in the last paragraph of response 2 above. In addition, the board has formed a separate committee (currently recognized as the "Tower Construction Committee") to provide guidance and direction to the board on any construction projects. Meetings of the Tower Construction Committee are held at least quarterly.

Board members, committee members, and the general public currently have access to all legally available TLHCD records, either at scheduled meetings, by use of www.tularelocalhealthcaredistrict.org, or through a Freedom of Information Act request.

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented

Annual Follow-Up Agency Response From October 2021

Progress has been delayed due to COVID-19 but the District will be creating new procedures to include specific reporting and/or documentation requirements to facilitate and record monitoring and comparison of expenditures and progress against measures of performance and timelines.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

Annual Follow-Up Agency Response From November 2020

The District will be creating new procedures to include specific reporting and/or documentation requirements to facilitate and record monitoring and comparison of expenditures and progress against measures of performance and timelines.

California State Auditor's Assessment of Annual Follow-Up Status: Pending

1-Year Agency Response

Written policy approved by the Tulare Local Healthcare District Board on 24 April 2019.

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

Although the district implemented a policy requiring the CEO and CFO to submit a report to the Board for approval of expenditures, the District does not provide any procedures or guidance as to the contents of that report or the specificity of the information it should contain. It also does not establish procedures to address how the district plans on verifying that bond proceeds are used for allowable purposes.

6-Month Agency Response

We were delayed in bringing on new staff to implement the appropriate recommendations, but Board members are working to amend our policies and hope to approve them at our next regular board meeting on April 24.

California State Auditor's Assessment of 6-Month Status: Pending

60-Day Agency Response

The District no longer has bond funds. Establishing a policy by April 2019 in anticipation that the District will seek bond financing at some indeterminate time in the future would require the District to anticipate the requirements of unknown bondholders at an unknown time in the future.

The District concurs with the substance of the recommendation and will update its policies in accordance with the recommendation prior to the receipt of any future bond funds.

California State Auditor's Assessment of 60-Day Status: No Action Taken

We do not agree with the district's statement that establishing a policy by April 2019 requires the district to anticipate requirements that are unknown. The district can and should formalize and document policies and procedures for verifying that it uses bond proceeds for allowable purposes and for approving expenditures. The specific allowable purposes can be defined at the time of bond issue but would be evaluated in the already established policies and procedures. Lacking such policies and procedures, the district risks that it could again spend bond funds inappropriately, similar to those we identified in our audit report.

All Recommendations in 2018-102

Agency responses received are posted verbatim.