Charitable donations to a patient gift fund will be transferred to a San Francisco hospital’s operating account, if Laguna Honda Hospital (LHH) and the City Controller implement a new plan.
This violates both San Francisco’s Administrative Code 10.100-201 codified in 2000, and LHH’s long-standing policy #45-01, which formerly indicated charitable patient donations couldn’t be used for hospital operations.
The November 1998 version of LHH’s gift fund policy clearly stated “This ‘restricted’ fund is available neither to support the minimum obligation of the City to operate the Hospital nor to fund routine City expenditures …”
Administrative Code Section 10.100-201 stipulates charitable donations contributed for the general benefit and comfort of LHH’s patients shall be used “without expenses other than what may be necessary for proper maintenance [of the patient gift fund]” in a public trust account.
Shortly after John Kanaley was appointed as LHH’s Executive Administrator in November 2004, he started changing policy #45-01.
When Kanaley took over, LHH’s patient gift fund balance was $2 million.
By August 2005 Kanaley managed to establish three staff education accounts embedded within the patient gift fund, without informing individual donors or LHH’s principal patient-donations benefactor, Laguna Honda Volunteers, Inc.
Between 2004 and June 2010 the gift fund was depleted by $1.3 million, without the knowledge of donors — who to this day haven’t been informed of how much money was re-directed from patient amenities to the three so-called staff “education” sub-accounts Kanaley created in 2005.
Doctors Rivero and Kerr, who uncovered gift fund expenditure irregularities, have documented from limited public records that, at minimum, $348,000 in questionable expenses occurred since July 2005.
On May 10, 2010 the staff education sub-accounts had a combined balance of $33,519. The next day, it was awarded $89,998 in earned interest — something Bernie Maddoff might engineer — bringing their balances to $123,517.
Now, LHH and the City Controller are planning to move the staff education balances, including interest, into a new “staff development” fund within LHH’s operating account — without restitution of funds for patients misdirected to staff — as a “floor” to calculate future appropriations.
They promise to use only donations made to staff in future years.
This is highly unethical; they should return misbegotten patient funds and create a “floor” based on actual donations to staff.
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