September 15, 20152015-042
The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
Sacramento, California 95814
Dear Governor and Legislative Leaders:
As authorized by California Health and Safety Code, sections 1179.25 and 1179.58, the California State Auditor presents this audit report concerning the Children’s Hospital Program (program).
This report concludes that the California Health Facilities Financing Authority (authority), which administers the program, has awarded and disbursed most of the bond proceeds from the Children’s Hospital Bond Acts of 2004 (2004 act) and 2008. The authority’s activities related to awarding grants generally complied with laws and regulations. Further, the authority has a process for monitoring grants and has made payments to grantees in accordance with the law. Additionally, the authority established a process to ensure that its requests for, and the subsequent sale of, general obligation bonds to finance the program are reasonable and appropriate, resolving the high fund balance issue discussed in our previous report.
On the other hand, the authority adopted amendments to its program regulations that directly conflict with provisions in the act. The 2004 act gives each grantee hospital until June 30, 2014, to apply for funds until the hospital reaches its grant limitation. After this date, if funds remain, the 2004 act allows any of the eligible hospitals to apply for them and the authority is required to make the remaining funds available for this purpose. In May 2014 the authority adopted amendments to the program regulations to extend the application deadline to June 30, 2018. However, the amended regulations prohibit eligible hospitals that already received awards up to the grant limit from submitting any applications for additional funding until July 1, 2018. As a result, the authority’s amendments to the program regulations effectively reserve $67.9 million in remaining 2004 act funds for Loma Linda—the only hospital awaiting a 2004 act award as of June 30, 2014.
ELAINE M. HOWLE, CPA