San Francisco is known for its restaurants and more recently a controversial surcharge many eateries tack on to each bill.

Restaurant owners said the fee is necessary to provide city-mandated employee healthcare, but a large chunk of the money never goes to the employees.

Customers of Cafe des Amis in San Francisco's Marina district pay a healthy San Francisco surcharge.

The additional fee can also be found on the menu at Luna Park in the Mission.

The extra cost can also be found be on a diners tab at 2223 in the Castro.

According to officials, a lot of money is being allocated for healthcare, but only a fraction is actually being used by employees.

Through a public records act request, KTVU obtained pages of information restaurants file every year to prove they're complying with the city's universal health care program.

What KTVU uncovered has one supervisor leveling fraud accusations.

Last year, the three restaurants previously mentioned set aside a combined $165,000 for health care reimbursement accounts for their un-insured workers, but less than $2,600 went to employees.

San Francisco Supervisor David Campos said he was shocked to learn that the $50 million companies earmarked in the special health care funds last year didn’t benefit workers. Instead, the money went back to worker's supervisors.

"I think that it is simply wrong for businesses, these restaurants, to charge consumers for healthcare when in reality they are not providing it," Campos said. "I think that is outrageous.”

Under the San Francisco law, employers are required to spend a certain amount on health coverage per employee.

They can meet the requirement in three ways: purchase health insurance, pay directly into a city-run system, or contribute to the health reimbursement accounts.

Businesses have found a loophole. Some restaurants put restrictions on how the accounts can be used.

KTVU obtained one employer's plan that shows that the funds can’t cover health insurance premiums or even dental or vision expenses, leaving a large sum unused at the end of the year that employers can scoop up and use for anything.

"When the law says that you as the employer have to spend money on healthcare, that spend means spend,” Campos said. "It doesn't mean keep it in an account and then pocket it."

While businesses can spend the unused funds generated by their surcharge however they want, they can also set the surcharge as high as they want.

At San Francisco’s Wayfare Tavern, diners pay an additional 3.5 percent.  

Across the city, at Max's Opera Café, an additional 5.4 percent was added to each bill.

"I assume that it is being monitored by someone and that it is taken care of," said Mary Samsom, a San Francisco resident.

The city actually has no authority over Healthy SF surcharges, or how they are spent.

At Zazie in Cole Valley, owner Jennifer Piallat said she doesn't use the reimbursement accounts for her employees.

Instead, she does what most employers do and provides health insurance.

She does it through a $25 per person surcharge.

'We pulled in $118,000 in our surcharge last year and we spent $122,000,” Piallat said.

She said she believes she's struck the right balance between doing right by her employees and customers.

Legislation was approved earlier this week with a final vote next week to tighten guidelines, reduce loopholes and allow more time before an employer can cash in those surcharges.