In a scathing report, the Tulare County Grand Jury recommended that the Tulare Local Healthcare District fully disclose how it spent $85 million in bond money on the never-completed expansion of Tulare Regional Medical Center.
Issuance of the bond money began in 2007, but 700 change orders and more than 5,000 requests for information made during construction elevated the costs of the expansion by more than $17.5 million.
And even before construction began on the new, 107,000-square-foot hospital tower, district officials were made aware that the total cost of the project likely would exceed $120 million — much more than the $85 million in general obligation bonds that voters in the healthcare district approved in 2005.
Despite knowing the available funds would be insufficient to cover the project’s full cost, the county Grand Jury members say hospital officials opted to move forward with the construction.
“It appears that [hospital officials] either intentionally or unintentionally failed to comprehend the issue of the cost differential between the $85 million in bond authorization and the total project cost estimated to be well in excess of $100 Million,” states the report posted Thursday on the Grand Jury’s website.
“TLHCD attempted to justify their position by unsupported estimates of reserves and projection of future revenues,” it continues.
The hospital responded Thursday night.
“The Tulare Local Health Care District Board of Directors takes seriously the findings of the Tulare County Grand Jury’s preliminary report and investigation into the expenditure of the proceeds of the previous hospital bond,” according to a written statement. “Our Board will conduct a thorough investigation and prepare a formal response to the report. It is important to note that the concerns raised by the grand jury pre-date our management agreement with HCCA, which has completely turned around the hospital’s finances, finished construction of the outside of the tower and is developing a plan to complete the project and provide our community with the state-of-the-art hospital it deserves.”
The current board of directors is made up of three of the five members who were on the board during portions of construction, including Chairman Sherrie Bell, Dr. Parmod Kumar, and Richard Torrez. A recall of the three failed in 2013.
Phase I of the expansion hasn’t been completed because money for it ran out. Phase two remains on the drawing board.
“The 2005 voter-authorized $85 Million in bonds has been completely expended. At the time this report was drafted, TLHCD had only an uncompleted and non-functional structure to show for it,” the Grand Jury reports.
Many in Tulare call it the empty shell.
In addition, the five-page report accuses TLHCD officials of withholding financial information about the hospital expansion from the public and of failing to inform the public about the dire financial situation of the expansion plans.
The report states that the investigation was initiated in response to a complaint claiming “willful failure on the part of the TLHCD Board of Directors to disclose details surrounding the expenditure of proceeds from the bonds.”
It also cites claims of gross malfeasance in managing the construction of Phase 1 of the hospital expansion.
The grand jury is comprised of private citizens appointed annually and serve as a public watchdog, investigating claims of malfeasance and irregularities by county and municipal agencies.
Naming its report on TRMC “Tower of Shame,” it states the investigation involved looking at financial statements and minutes of hospital board meetings, construction and expense data and interviews with hospital and residents in the hospital district.
Among the Grand Jury’s findings and facts uncovered:
•TLHCD’s board created a bond oversight committee to oversee spending of the bond money, but the district “routinely withheld pertinent information and financial data from the Bond Oversight Committee, thus rendering the committee incapable of performing its oversight function.”
•That committee failed to follow up on its requests for detailed financial information, necessary for the independent oversight of the spending of bond funds.
•From January of 2010 through December of 2015, there was an absence of detailed disclosure of financial aspects for Phase 1 of the tower project in the board minutes, and the minimal amount that was disclosed was found to be inaccurate.
•TLHCD often failed to disclose pertinent information related to the financial aspects of Phase I that the public was entitled to have.
•From 2008 to 2014 TLHCD’s board hired, fired, hired again and fired again the same individual as Chief Executive Officer of the hospital district, incurring hundreds and thousands of dollars in costs for severance payments.
Shawn Bolouki was paid nearly $1 million to come back in 2013 before being unanimously voted out a year later.
•A significant delay in construction of Phase I occurred due to the delamination of the concrete poured by a contractor on the upper floors of Tower I. This led to litigation resulting in TLHCD being ordered to pay the contractor $7.9 million, a cost taxpayers in the hospital district will have to pay.
•TLHCD didn’t engage the services of an independent construction manager until Feb. 26, 2013, more than four years after construction on Phase I of the expansion project began.
•Strict and complex statutes regarding public disclosure of information pertaining to spending the bond money “appear to have been routinely circumvented by the TLHCD Board of Directors.”
As for the Grand Jury’s recommendation for TLHCD, they include disbanding the Bond Oversight Committee and creating a new one fully authorized to access the finances for Phase 1 and that the board of directors undergo training — without delay — in governmental transparency and disclosure requirements for the expenditure of public funds.
More importantly, the report recommends that the TLHCD board release to the general public — also without delay — a full disclosure explaining the “manner in which proceeds from the sale of $85 million in bonds were expended from September of 2007 through December of 2015.”
Hospital district officials have the right to challenge the claims and recommendations in the report.
The report didn’t touch upon the hospital district’s efforts to get another bond initiative on a ballot this year in hopes of raising $55 million to pay for the completion of the tower project.
March 24, 2016
Visalia Times-Delta
By David Castellon
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