The Department of Public Health distributes more than $1 million in gift cards to nonprofits and clients. (Kevin N. Hume/S.F. Examiner)

Audit finds health department failing to track gift cards

Cards obtained with federal grant funds distributed to nonprofits for use with clients

The City called on departments two years ago to tighten up oversight of their increasing use of gift cards. A new audit on one public health program shows one reason why.

The Department of Public Health’s HIV Health Services unit distributed to clients more than $1 million in gift cards to places like Subway, Burger King and farmers markets during a four year period, but failed to properly oversee their use.

That means they have been “at risk of loss or misappropriation,” the City Controller’s audit said.

The gift cards are purchased using federal funding through the Ryan White HIV/AIDS Program and provided to partnering nonprofits to distribute to clients. They can be used as incentives for things like making medical appointments or attending educational workshops.

“HHS provides gift cards to partner agencies that have no controls to prevent the cards from being lost or misappropriated,” wrote Mark de la Rosa, the City Controller’s acting chief audit executive. “In fiscal years 2015-16 through 2018-19, HHS distributed $1,159,535 in gift cards to its partner agencies but did not visit any of these sites to evaluate their control environments until 2017-18. And when HHS did begin its site visits, they were inadequate.”

In one HHS visit of a partner agency, for example, they “found that 328 fast food, Muni, and taxi gift cards worth $1,155 were unaccounted for.”

“In 2017-18 HHS did not verify the handling of $638,852 gift cards, or 86 percent of the value of cards that had been distributed in 2015-16 through 2017-18,” he wrote.

The audit comes as the value of the gift cards the program distributes and the number agencies getting them have more than doubled in the past four years. There are about 8,000 uninsured or under-insured people living with HIV in San Francisco who receive care through the federal Ryan White Program.

Four years ago, the number of gift cards distributed totaled 21,946 with a value of $172,305. Four years later there were 80,922 gift cards distributed costing $416,102.

In total the program distributed 206,283 gift cards totaling $1.2 million during the past four years. That includes 22,648 gift cards for Burger King, 53,000 gift cards for farmers markets and 38,990 gift cards for grocery stores, which have the largest dollar amount at $389,900.

The gift cards also include tokens to ride Muni and paper vouchers to pay for taxi rides.

The Department of Public Health “welcomed this audit and thorough investigation,” said Dr. Hali Hammer, director of ambulatory care for the San Francisco Health Network.

“The audit found no misappropriation of funds, but identified risks that DPH has been able to mitigate with stricter controls,” Hammer said.

Hammer said that “gift cards are a common element of contingency management, a longstanding and evidence-based approach in HIV care.”

Gift cards to fast food places may seem contrary to nutritional values of a health department, but Hammer said that “a lot of our focus on improving engagement in HIV care is in communities of color, which often have food deserts.”

“Advocates in these communities have successfully resisted restrictions on where gift cards can be spent, so some fast food can be included — but gift cards for stores like Safeway and farmers’ markets are much more common,” Hammer said.

The audit made 19 recommendations to improve oversight and the department has either already implemented them or is in the process of doing so.

Among those changes, the department said it would by Feb. 28 update its policies for the program to ensure better accounting for the gift cards by the partner agencies including having them “conduct and document their inventory counts with date of the count, count totals by type of gift card, discrepancies found, and the names and signatures of employees conducting and supervising the count.”

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