Coxcastle Nicholson► Cox, Castle & Nicholson Llp*

There is a lack of transparency with regard to where the El Camino Hospital District spends tax revenues. Tax revenues from the 1% tax levy, tax revenues from the 2006 bond measure, and hospital operating revenues are intermingled in published audits. The District provides no published detailed breakdown of how tax revenues are actually spent, such that the public may determine whether monies are well spent. Response to Finding 1: The District respectfully disagrees with Finding 1. As noted in the CGJ Report, all meetings of the District are open to the public, videotaped and available on the El Camino Hospital website for www.coxcastle.com Los Angeles | Orange County | San Francisco Honorable Richard J. Loftus, Jr. August 16, 2011 public review. Each tax-dollar expenditure is specifically authorized by the District at such a public meeting. In addition, separate annual budgets of the District and the non-profit El Camino Hospital Corporation (the "Hospital") are reviewed and approved by the District and Hospital boards, respectively, at videotaped public meetings. Meeting agendas, board packets and minutes are available online as well. Consolidated financial statements are required by accounting practices and are a standard for financial reporting for government agencies and others. The District's independently-audited financials are thorough, exhaustive and complete. As recognized in the CGJ Report, financial statements for both the District and the Hospital are subject to annual review by independent auditors that are made available for public review. Specifically, the District's and the Hospital's financial statements are independently audited annually by Moss-Adams, LLP, and published on the website. The audits are also published in the local newspapers of Los Altos, Mountain View, and Sunnyvale. The independent audit breaks out financial information for each of the District's operating entities on an individual basis, including stand-alone financial information regarding the District which can be found in the supplemental schedules. The District is a vigilant steward of the public money it receives. The District board ensures that District funds are expended for the benefit of the District and the people served by the District. As noted in the CGJ Report, the District annually publishes a Community Benefit Report to explain how District "tax receipts are used ... for community benefit." This report includes an accounting of the District's Community Benefit programs, the numbers of persons served and the benefits paid. Moreover, the District follows best financial practices, including those pertaining to the expenditure of funds from the proper accounts, and has a compliance committee to oversee such expenditures. The District is committed, however, to ensure that such expenditures are documented in the most transparent and open manner and thus agrees with the Civil Grand Jury's recommendation to provide more detailed itemized financial information specific to the District, as discussed below.

There is no one who is accountable to the District taxpayers as to how taxpayer monies are spent. Every member of the District board is on the Corporation board, and as such, every member of the District board is responsible for management and profitability of the Corporation. Should a conflict arise, such as the Corporation wanting to purchase and operate a facility outside of the District's SOI, it is unclear how the essentially common board would be able to successfully represent the independent interests of the District. Response to Finding 2: The District respectfully disagrees with the first sentence of Finding 2. It is not true that no one is accountable as to how taxpayer monies are spent. Indeed, there are five such people whose primary responsibility is to the District and therefore, by extension, to the taxpayers of the District – the publicly elected District board members. The elected District board members are well aware of their responsibilities to the District, and they take this responsibility seriously. The second sentence of Finding 2 is correct in stating that every District board member is also on the Hospital board. However, these boards meet separately, and when meeting as a board of the District, the board members are acting solely on behalf of the District. The Hospital is owned by the District, and ultimately by the people of the District, and it is the District board's responsibility to see that it is cared for in the most appropriate manner. The District is proud to be the ultimate owner of a District hospital that answers to the community, and knows that without community support for the Hospital (both financial and human support), the Hospital may become susceptible to being acquired by a for-profit based corporation or a chain of non-profit hospitals where decisions about local health care are made in a distant city and/or with an emphasis on profitability. The District board is 100% committed to maintaining the District's ownership of the Hospital and to do Honorable Richard J. Loftus, Jr. August 16, 2011 that, the District understands that the District's loyalty and commitment must remain with the District residents and taxpayers. The District respectfully disagrees with the last sentence of Finding 2. If an issue should arise where the interests of the District and the Hospital were in conflict, the District board is clear that its responsibility is to serve the best interests of the District. As a practical matter, there is rarely if ever any conflict of interest by having the District board members also serving on the Hospital board, because decisions that benefit the Hospital are generally also decisions that benefit the District, as the sole owner of the Hospital, and vice versa.

Board members do not seem to know whether they represent a District or a Corporation, switching roles as needed and ignoring certain responsibilities of being a special district, such as communication with LAFCO. Response to Finding 3: The District respectfully disagrees with Finding 3. The elected officials constituting the District board are fully aware that their obligation as District board members is to represent the District and the people served by the District. The District board does not ignore its responsibilities as a special district, and is aware of and fulfills its obligations to LAFCO as required by applicable laws. The District board has provided the community with a world class hospital that is recognized both Honorable Richard J. Loftus, Jr. August 16, 2011 within the District and in communities afar as being a cost effective health care provider whose doctors, nurses, and other health care professionals provide quality of care and quality of experience. The Civil Grand Jury report specifically recognizes the District board and congratulates the hospital for being so successful.