BILL ANALYSIS �
AB 1580
Page 1
Date of Hearing: May 7, 2014
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Mike Gatto, Chair
AB 1580 (Yamada) - As Amended: March 19, 2014
Policy Committee: Veterans
AffairsVote: 7-2
Urgency: No State Mandated Local Program:
No Reimbursable:
SUMMARY
This bill imposes review measures and controls on the
expenditure of California Veterans Home Morale, Welfare, and
Recreation (MWR) funds by requiring that for proposed MWR
expenditures of more than $5,000, proposed contracts of more
than $25,000 per year, or proposed contracts of more than
$100,000, all of the following shall apply:
1)The administrator of the Veterans Home proposing the
expenditure shall submit the proposed expenditure or contract
to the secretary of the Department of Veterans Affairs (DVA)
for approval. The secretary shall consider the advisory
opinion of the department's legal counsel, or another reviewer
designated by the department, and any other relevant
information to determine whether an expenditure or contract
will be approved.
2)Prior to and upon execution of a proposed expenditure or
contract, DVA shall provide written notification, as
specified, in the form of a draft expenditure proposal to the
Veterans' Home Allied Council or to another body representing
the residents of the affected home or homes.
FISCAL EFFECT
Ongoing GF costs in the range of $150,000 for the equivalent of
1.5 personnel years to DVA to review MWR fund expenditures.
COMMENTS
1)Rationale . The author's intent is to implement the
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recommendations of a 2013 State Auditor's report that was
highly critical of MWR fund use and abuse at the Yountville
Home.
2)The MWR fund was established in 1999 by SB 281 (Chesbro) to
provide veteran home administrators additional funding to
provide for the general welfare of residents beyond medical
and housing needs. Each home maintains an individual MWR fund.
Monies are deposited into individual funds through a variety
of means including proceeds generated from the Veterans' Home
Exchange, revenue from prisoner-of-war special license plates,
funds from golf course green fees and range ball fees, accrued
interest in the account, the recovered cost of care collected
from residents' estates, and public donations. The amount of
money in each account varies from home to home, ranging from
about $4 million at the largest home at Yountville, to $7,000
at the recently established West Los Angeles home.
3)An October 2013 California State Auditor's investigation
report entitled, Wastefulness, Failure to Comply With State
Contracting Requirements, and Inexcusable Neglect of Duty
revealed that over a two-year period from January 2010 to
December 2011, the Yountville Veterans Home administrator
executed two contracts using MWR funds without consulting
CalVet executive officials, legal counsel, or residents of the
Home. The report found both contracts violated state
contracting practices and that little or no information had
been shared between the administrator of the home and DVA
headquarters. Further, the Department of General Services was
not consulted in its role as the agency overseeing state
leasing requirements.
4)Specifically, according to the auditor's report :
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| "The administrator wasted over $652,000 by executing two |
| contracts-one to build an adventure park on the grounds of the |
| home and the other to operate a caf� and tavern at the home. |
| |
| "The administrator entered into the contract with a vendor to |
| build an adventure park on grounds leased from the home |
| without making any effort to find out how the residents felt |
| about an adventure park being built on the grounds and without |
| consulting with anyone at Veteran Affairs headquarters or |
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| anyone at the California Department of General Services |
| (General Services), which has sole authority to lease veterans |
| home property. |
| |
| "Veterans Affairs spent over $228,000 in state funds to halt |
| construction of the adventure park when Veterans Affairs' |
| executives learned of it two months after construction had |
| commenced. |
| |
| "The administrator executed a contract with a vendor to |
| operate a caf� and tavern without conducting any research into |
| the advisability of accepting the vendor's terms and without |
| soliciting proposals from any other vendors. |
| |
| "The contract to operate the caf� and tavern charged the |
| vendor rent of only $1 per year to occupy space at the home. |
| Further, the home agreed to pay the vendor a $75,000 annual |
| management fee and to subsidize the cost of operating the two |
| businesses. |
| |
| "Even though General Services advised Veterans Affairs to |
| terminate the contract to operate the caf� and tavern, |
| Veterans Affairs allowed the contract to continue until the |
| vendor ultimately relinquished operation of the two |
| businesses, over a year later and after paying over $424,000 |
| to the vendor. |
| |
| "The administrator's former supervisor neglected his duty to |
| oversee the administrator's activities and, therefore, did not |
| prevent the unwise, unlawful, and wasteful contracting from |
| occurring." |
| |
|5)Auditor's Recommendation. "We recommended that Veterans Affairs |
| implement specific contracting policies consistent with state |
| requirements and that its recreation fund contracts be reviewed and |
| approved by Veterans Affairs attorneys and the secretary of Veterans |
| Affairs prior to execution. Further, to ensure greater oversight of the |
| recreation fund maintained by each of the veterans homes, |
| |
| |
| we recommended that Veterans Affairs require a separate list |
| of certain expenditures from the recreation fund. Also, we |
| recommended that appropriate disciplinary action be taken |
| against the administrator. Finally, we recommended that the |
| Legislature consider increasing statutory controls over the |
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| management of the recreation fund." |
| |
|6)Does the MWR fund merit additional review and reorganization? |
| Though perhaps beyond the scope of this bill, current issues |
| with the fund raise questions as to whether the fund's sources |
| and structure are appropriate and efficient. The Assembly |
| Veterans Affairs Committee analysis raised a series of |
| fundamental questions: |
| |
| Should funds recovered as unreimbursed costs of care, paid by |
| the state and recovered at state expense, be deposited into |
| the MWR accounts? |
| |
| MWR accounts have traditionally been maintained in banks local |
| to each Home and managed locally, often with a single local |
| authorized signatory at each Home. This presents security and |
| fraud concerns. Perhaps funds should be held in state |
| accounts. |
| |
| Should the eight homes have disparate MWR fund amounts? |
| Perhaps the funds should be managed systemwide, pooled and |
| apportioned according to population, rather than by each home. |
| |
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Analysis Prepared by : Geoff Long / APPR. / (916) 319-2081