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Report 2011-113 Highlights - March 2012

Salinas Valley Memorial Healthcare System:

Increased Transparency and Stronger Controls Are Necessary as It Focuses on Improving Its Financial Situation

HIGHLIGHTS

Our audit of the fiscal management of the Salinas Valley Memorial Healthcare System (Health Care System) highlighted the following:

  • The Health Care System does not have a formal policy for compensating its chief executive officer (CEO) and other executives.
  • The board of directors (board) has made decisions regarding executive compensation in violation of the Ralph M. Brown Act, which requires conducting meetings in an open manner to keep the public informed of its actions.
  • The Health Care System's executives were granted compensation at the upper level of industry practices.
    • The former CEO, who retired in April 2011, received $4.9 million in retirement and severance benefits over four years.
    • The salaries of the vice presidents employed as of August 2011 ranged from $272,000 to $341,000, and the former CEO's salary was $668,000 in 2011.
  • We identified two instances in which conflict-of-interest laws may have been violated.
  • About 25 percent of the Health Care System's employees and consultants that it identified as needing to file statements of economic interests for 2010 had not filed them as of September 2011—more than five months after the filing deadline.
  • The Health Care System did not consistently document how it selected contractors in cases for which it was not required by law to use a competitive process.
  • The Health Care System reported operating losses during fiscal years 2009-10 and 2010-11, sustaining an operating loss of $7.4 million in the latter fiscal year alone.
  • By offering incentives to resign and imposing involuntary separations, the Health Care System reported reducing staffing by 341 positions from July 2010 through October 2011.














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