City auditors report unmodified financial opinions but flag PUC material weakness and hospital billing errors

External auditors presented the city’s fiscal 2019–20 audit results to the Government Audit and Oversight Committee on Dec. 2, saying they issued unmodified opinions on the financial statements but reported two audit findings that the city is addressing.

KPMG highlighted a material weakness at the San Francisco Public Utilities Commission tied to criminal actions filed against the former PUC general manager, saying because the matters involved executive management they "constitute material weakness," and that PUC and the city controller are conducting internal assessments and public integrity reviews to strengthen controls. Auditor Lisa Avis said the finding stemmed from actions that did not result in material misstatements of financial statements but nevertheless raised control‑environment concerns.

MGO reported a significant deficiency related to San Francisco General Hospital’s accounts receivable. Auditor Annie Louie said adjustments recorded in the hospital’s Epic patient accounting system were not properly translated to the city’s financial reporting system; management agreed, adjusted the FY2020 financial statements and has implemented revised procedures and monthly review processes to prevent recurrence.

Controller Ben Rosenfield told the committee that the city and outside auditors operate under different scopes: financial statement audits focus on whether numbers are presented fairly, while forensic or public integrity work pursues wrongdoing and system‑level control failures. Rosenfield said the controller’s office and the city attorney have issued public integrity reports and are continuing investigations and follow‑up audits where warranted.

Auditors also reported on federal award compliance for pandemic‑related grants, saying certain FEMA disaster grant expenditures were initially claimed outside eligible performance periods; management reversed the ineligible charges and strengthened processes for future claims. Auditors said the federal single‑audit process remains subject to further OMB guidance and timelines are extended for some CARES‑related programs.

Committee members asked whether the "tone at the top" findings at PUC should trigger similar scrutiny elsewhere. KPMG explained that the PUC finding arose from entity‑specific audit work: a separate audit of PUC identified executive‑level issues that are significant for that entity’s financial controls but were not, at the time of the audit, pervasive to the city‑wide financial statements.

The committee filed the hearing after auditors said enterprise financial statements are expected to be issued in December and the annual comprehensive financial report in January, with auditors continuing remaining single‑audit work into early 2022 as federal guidance is finalized.