Report 2009-042 All Recommendation 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

Recommendation #2 To: Health Facilities Financing Authority, California

To ensure that it meets the objectives contained in the program regulations for the completion of grant-funded projects, including obtaining certification that projects are completed and grants do not exceed project costs, the authority should take the steps necessary to ensure that it promptly executes its project completion checklist, determines any additional steps it needs to perform to close out grants, and finalizes and implements the necessary steps to ensure that grant closeout procedures are followed.

1-Year Agency Response

The authority stated that after it receives certification by the grantee that the project is complete and receives the supporting documents required by the regulations, the authority begins execution of the project completion checklist within 10 business days of receiving these documents from the grantee. When completing the checklist, the authority determines whether any additional steps are needed to close out the grant. The authority stated that it employs its best efforts to close out grants within 90 days of receiving the closing documents. To the extent that the grantees' ability to supply documents or information delays closure of the grant beyond 90 days, the authority will take all steps necessary to close the grant as soon as is reasonably practicable. (See 2011-406 p. 57)

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

Recommendation #3 To: Health Facilities Financing Authority, California

As the authority has decided that it desires to comply with the governor's executive order to provide accountability for the use of bond proceeds, it should develop and submit to Finance an accountability plan for its administration of the program bonds. In addition, it should take the necessary steps to periodically update Finance's bond accountability Web site to provide public access to information regarding its use of the bond proceeds.

1-Year Agency Response

According to the authority, Finance approved the authority's bond accountability plan in March 2010. However, it also indicated that the bonds authorized by the 2004 act are not eligible for the governor's bond accountability Web site because the site is intended for bonds approved by voters in 2006 and later. According to the program manager for the Children's Hospital Program, Finance told her that it is in the process of programming its bond accountability Web site to include additional bonds, such as those authorized by the Children's Hospital Bond Act of 2008; however, Finance was unable to provide the authority with an estimate of when the programming will be completed. In the interim, the authority has posted its bond accountability plan for the Children's Hospital Bond Act of 2008 on its Web site, which includes a list of approved projects and a map showing the location of the projects. (See 2011-406 p. 57)

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.