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West of Twin Peaks Observer
July–August 2008
Audit the Health
Department
by George Wooding
How can it be the City Controller has never performed a full financial
audit of San Francisco’s Department of Public Health (DPH)?
In November 2003 voters passed Proposition C expanding the Controller’s audit responsibilities, requiring two-tenths of one percent of the City’s budget be diverted to performing audits. Mayor Newsom’s proposed $6.5 billion Fiscal Year 08-09 budget should dedicate $13 million for audit services.
Since Prop. C’s implementation in July 2004, DPH has been required to set aside approximately $8.6 million over the past four fiscal years for Controller audit services. DPH is required to set aside an additional $3 million for audit services from its $1.5 billion 08-09 budget. How has DPH’s $12 million audit fees been spent?
Both San Francisco property owners and renters must demand a comprehensive financial audit be performed on DPH before voting on November’s gigantic general obligation bond measure to rebuild San Francisco General Hospital (SFGH). It’s almost three times larger than any bond measure in San Francisco’s history, likely to cost $1.7 billion dollars, assuming zero future cost overruns.
DPH is San Francisco’s largest and most financially irresponsible department. Every bond measure DPH has been involved with has either been massively reconfigured after opening (the Mental Health Rehabilitation Facility), or has been substantially reduced in scope. Laguna Honda Hospital (LHH) has been reduced from a planned 1,200 beds to only 780. Although LHH’s rebuild is now smaller by 420 beds, the 780 beds to be constructed are currently forecasted to cost $642 million, $241 million — or 60 percent — over the initial budget; yet cost overruns continue rising [Editor’s note: See accompanying article].
Having over 7,000 employees (6,000 full-time equivalents), DPH consumes $1.5 billion, or 23 percent, of the City’s $6.5 billion budget. Two-thirds of San Francisco’s $1.5 billion discretionary budget goes to DPH. San Francisco spends more per person annually on public health than other cities by a huge margin: In 2005, San Francisco spent approximately $400 on every man, woman, and child - six times more than the $64 national average. If the SFGH bond passes, per capita public health expenditures will skyrocket.
Never subjected to a comprehensive audit, DPH misspends voters bond money as it pleases, since DPH administration has zero respect for voters. After receiving bond financing, DPH routinely changes project parameters, redirecting bond funds to pet projects, salaries, and special-interest health groups. Voters were originally told LHH’s rebuild would be a long-term care facility for frail, elderly, and disabled San Franciscans. LHH’s mission was recently changed to serve 90-day, short-term stay rehabilitation patients. Money earmarked for LHH’s rebuild is being diverted to shipping patients back into the community or to out-of-county placement, given the shortage of appropriate local housing. DPH’s recent mid-year budget cuts and next year’s budget eliminate community services to LHH residents being dumped into the community. This isn’t what 139,000 voters approved passing LHH’s 1999 rebuild bond.
SFGH’s deceptive bond measure is riddled with hidden costs: $30 million preparing the bond; $887.4 million to construct the replacement hospital; $157 million for furniture, fixtures, and equipment; and $640.3 million for debt service, totaling over $1.7 billion. But there’s additional hidden costs: Back-up generators to power the hospital. Cost: Unknown. Anticipated campus master planning activities, including seismic retrofit of 462,935 gross square feet in six existing steel framed, unreinforced masonry/brick buildings. The retrofit of these 93-year-old buildings will occur AFTER the construction of the new hospital, if funding becomes available. Cost: Unknown and open-ended. Add the helipad. Cost: $6.8 million.
Expect budget trickery. Mayor Newsom’s administration announced June 19 it will return $9 million for health and human services after suddenly finding “miscalculations” in next year’s City budget. Most of the money — $6.8 million — comes from General Funds his administration earmarked for SFGH’s helipad. Now Newsom claims the helipad will be funded from November’s bond. DPH increased SFGH’s rebuild cost by $6.8 million, without increasing the bond amount, already creating project cost overruns. This malfeasance with DPH budget planning is exactly why the LHH rebuild is, at minimum, a quarter of a billion dollars over budget and may rise. Does DPH believe San Francisco voters are idiots, not paying attention, or both?
Douglas Yep, an 18-year employee at SFGH and 14-year resident of District 7, is a candidate seeking to unseat incumbent Supervisor Sean Elsbernd. Yep says he’s basing his campaign on “fiscal responsibility issues, including budget irregularities of LHH’s rebuild fiasco and SFGH’s upcoming rebuild.” Yep has requested a full financial audit of DPH, curious why one has never been performed. While Yep has raised many questions regarding competency of current DPH administrators, Elsbernd — having insider knowledge serving on the Budget and Finance Committee — has remained curiously silent.
Too little, too late, and inadequately, the City just released Controller Ben Rosenfield’s report on DPH entitled “Performance and Efficiency Review: Department of Public Health.” Rosenfield’s cover letter states “The Controller’s Office has issued this report in response to requests from City leadership and community advocates to audit DPH.” Rosenfield failed issuing an audit of DPH; his report merely analyzes DPH’s services, efficiency of operations, patients, and payer mix.
Why won’t the City fully audit DPH? What are officials afraid of finding? A financial audit of DPH may well uncover not only has DPH misspent and misused hundreds of millions of tax-payer dollars, but may also expose DPH’s wide open, dirty secret: That it has failed departmentwide to collect hundreds of millions of dollars in revenue for greater than a decade due to billing failures that DPH administrators have simply refused to rectify. The City’s fear may be that independent auditors tend to uncover millions misspent, and millions left uncollected.
The LHH rebuild is the worst bond disaster in San Francisco history. It’s time DPH becomes accountable to voters. An independent prosecutor or grand jury should investigate the LHH replacement project. The same DPH administrators who screwed up the LHH rebuild so badly should be fired for incompetence, not given a second opportunity to screw up SFGH’s rebuild. San Francisco voters shouldn’t hand DPH any more bond financing until a thorough, independent audit of DPH is performed.
Plan voting “No” on
November’s $1.7 billion SFGH bond scheme.
George Wooding
West of Twin Peaks Central
Council