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Sequoia Healthcare District corrects books
December 08, 2011, 04:03 AM By Bill Silverfarb Daily Journal staff

The Sequoia Healthcare District mistakenly reimbursed two employees thousands of dollars for health insurance in-lieu payments paid over a three-year period, an independent auditor told the board last night.

The district had reimbursed three employees for amounts thought to be underpaid related to the in-lieu payments and the district’s auditor, Vavrinek, Trine, Day & Co., combed through the district’s financial documents to find that one of the employees had indeed not received the in-lieu payments while the other two had. The auditor also found that at least one employee’s pay raise was miscalculated.

District employees can either opt-in for health insurance, a $1,200 a month benefit, or receive a $400 monthly payment instead.

The district audits its books annually but there was some debate among district directors last night whether the auditor would have found the discrepancies if it were not for the digging and prodding of Jack Hickey, a board director who actually advocates for the dissolution of the health care district based on it collecting millions annually in local property taxes.

The in-lieu payments previously appeared on payroll statements as a separate line item, but the district’s payroll vendor, PayChex, started folding the payments into the employees’ gross pay, causing the district to mistakenly reimburse the two employees money they thought they had not received. The amount was not made public last night but it was likely in the $15,000 to $20,000 range, according to documents provided by Hickey.

Hickey had originally questioned about $26,000 in expenditures related to the in-lieu payments after going over the district’s cash disbursements and check registry.

The two employees essentially got paid twice, the district’s Chief Executive Officer Lee Michelson told the Daily Journal yesterday.

To reconcile the matter, the two employees will not receive the in-lieu payments for about the next 18 months, Michelson said. If for some reason their employment terminates, he said, the employees would have to pay the district a lump-sum payment.

"It was an administrative error,” Michelson told the board last night. "We were upfront with the auditors about the potential discrepancies.”

The district made payroll adjustments of $26,384.40 in August to the three employees, said Hickey, that appeared to be a mistake.

In his digging through the check registries and cash disbursements, Hickey questioned the expenditures and determined himself that it appeared the in-lieu payments had been made over the two-year period, in contrast to Michelson’s statements that they had not.

Essentially, the two employees had their in-lieu payments paid in advance, Michelson said.

The payroll error was a result of a computer conversion problem at PayChex, he said.

He did credit Hickey for looking closely at the books and said Hickey was probably more aware of the situation than the other district directors were.

But Hickey would not lay blame on PayChex last night, saying rather it was the district’s fault for "cutting the check.”

Hickey usually votes against the rest of the board and voted against accepting the auditor’s report last night, despite it reinforcing Hickey’s findings.

The district doles out millions a year to local nonprofit agencies that provide health care services to the disadvantaged in southern San Mateo County.

Bill Silverfarb can be reached by email: or by phone: (650) 344-5200 ext. 106.

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