Nashville General Hospital has no documentation to support 85 percent of the credit card purchases made by three top hospital officials over a two-year period, according to a new Metro internal audit.

The audit, dated Aug. 28, found that transactions from the three credit-card holders at the cash-strapped safety-net hospital totaled $401,419 in 2016 and 2017.

The largest expenses include nearly $32,000 spent on airfare, $22,000 spent at a deli sandwich chain and $20,000 spent at movie theaters.

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Hospital leaders are allowed to use government credit cards to make small purchases of less than $1,000 on behalf of the hospital, but city auditors say they can’t verify that these purchases benefited the hospital due to a lack of receipts kept by officials.

The hospital could not produce documents for 40 out of 47 of the transactions to auditors. That includes no credit card statements and transaction receipts for any purchases made prior to April 2017.

The three officials who have credit cards are hospital CEO Joseph Webb, Executive Assistant Dawn Thomas and Director of Marketing Cathy Poole.

Missing receipts blamed on staff turnover

The audit — a comprehensive review of the procurement processes for the hospital — comes as the hospital’s finances have been under heightened scrutiny after the facility has required millions in emergency supplemental funding in recent years.

Although auditors, by reviewing the website of J.P. Morgan Chase Credit Card, were able to determine which vendors received the payments — and how much was spent —they were unable to determine whether it was to support the mission of the hospital because of the lack of documentation.

In an Aug. 21 letter to Metro Auditor Mark Swann, Webb said the hospital administration has reviewed the audit's findings and accepts the audit staff's recommendations.

Poole, the hospital’s spokeswoman and one of the three credit-card holders, said the lack of receipts in the accounts payable files for the credit cards was due to high turnover within the finance department of the hospital.

"We are aware that some of the receipt files were misplaced during staff transition," Poole said. "Our new approach will ensure this will no longer be an issue.”

New credit card policy being developed

The audit says the hospital lacks policies and procedures detailing the hospital management's intention on the use of credit cards, review and approval, and reconciliation with credit card statements.

But at the audit's recommendation, Poole said the hospital has now developed a corrective action plan that includes rerouting credit card usage to Webb’s executive assistant. Poole said the hospital is also developing "a comprehensive policy" on credit card usage.

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Poole said none of the expenses were identified as inappropriate. She also said the hospital's "process was being refined during a critical time" during the findings, noting the administration was working to secure a permanent chief financial officer.

Poole said the hospital's goal is to continue "being good stewards of taxpayer dollars.”

All spending related to hospital expenses, official say

The Metro Audit Committee is set to discuss the audit at its monthly meeting Tuesday.

At-large Councilman Bob Mendes, who sits on the six-member committee, said he wants to reserve judgment until he gets more information about the sample size of the audit and an explanation for the travel and other spending.

"But clearly having documentation is what should happen," Mendes said. "Without knowing more about what the sample size was and whether there was any follow-up to figure out the purpose of the expenses, it's hard to know whether to be a little bothered or a lot bothered."

Top credit-card spending includes:

$21,712 to Jason's Deli, which the hospital says was for catering;

$20,017 to Regal Cinemas, which the hospital says was for gift certificates for employee birthdays;

$31,888 collectively to Southwest Airlines, American Airlines and Delta Airlines, which the hospital says was for air travel of hospital-related trips.

Other credit card spending during the two-year period includes $12,609 to the National Committee for Quality Assurance; $10,533 to Pista Print for printing services; $7,970 to Liberty Party Rental for product renting for events; $7,626 to Indeed for recruiting; and $7,280 to The Tennessean for newspaper advertisements.

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Poole said each of the items were "related to hospital expenses.”

She said the Regal Cinemas charges were used for full-time employees, who received birthday cards with two movie tickets enclosed. The Vista Print charges went toward invitations for events hosted by the hospital.

She said Jason's Deli was used to cater breakfast and lunch meetings, an employee orientation and other standing hospital meetings. The party rentals were for an annual community health fair, a Doctor's Day, a cancer survivorship event event and a radiological technology school graduation. The Tennessean ads were for recruiting nurses, she said.

For the current 2018-19 fiscal year, Mayor David Briley and the Metro Council provided a $46.1 million hospital subsidy — $11.1 million then the $35 million subsidy given in recent years. Hospital leaders had been unable to operate within the $35 million from the city, forcing multiple mid-year supplemental funding requests to the council.

In all, the hospital paid $120.7 million to vendors in 2016 and 2017, according to the audit.

Purchases above $10,000 must be through competitive sealed bids under the hospital policy. Purchases between $4,000 and $10,000 can be made in the open with three written quotations, while purchases between $1,000 and $4,000 need only verbal quotations. Purchases below $1,000 can take place on the open market.

Purchasing policy not consistently practiced; bidding rules not followed

The audit found that the hospital's payments are "generally" supportive of the hospital's mission, excluding the credit card purchases, given the lack of documentation.

But it also found the hospital authority's purchasing policy was not consistently practiced within departments.

Out of 60 sampled purchases, the audit says, 27 did not follow the authority's bidding policy. Thirteen of the 27 examples were instances where proposals and competitive sealed bids should have been required.

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"The procurement functions of identifying vendors, obtaining bids, and maintaining bid documentation are responsibilities of hospital departments with little oversight from a centralized procurement function," the audit reads. "There are no detailed procedures to guide departments on how to perform these procurement functions."

The hospital's management, in its response to the auditor, committed to establishing a policy to bid out supplies and equipment that are not covered by their contracted group purchasing organization.

"We will establish bid processes, communications and record-keeping to meet the highest standards of accountability," the hospital's response says.

Audit finds late payments to Meharry Medical College

Among other findings, the audit also says the hospital's payments to vendors have not been made by established terms and pricing of their contracts — a long-standing issue for the hospital, which has struggled to pay invoices on time.

Out of 60 sampled invoices over the two-year period, 50 invoices — 83 percent — were not paid within payment terms.

While the audit found proper procurement controls are “generally in place” — and that larger vendors were paid on average within 60 days — it found an exception for payments to Meharry Medical College, the hospital’s partner school.

The hospital, for example, made a $4.4 million payment to Meharry this past February for invoices that dated back to 2014.

Reach Joey Garrison at 615-259-8236, jgarrison@tennessean.com and on Twitter @joeygarrison.