BILL ANALYSIS �
AB 1580
Page 1
ASSEMBLY THIRD READING
AB 1580 (Yamada)
As Amended March 19, 2014
Majority vote
VETERANS AFFAIRS 7-2 APPROPRIATIONS 12-0
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|Ayes:|Quirk-Silva, Medina, |Ayes:|Gatto, Bocanegra, |
| |Brown, Eggman, Fox, | |Bradford, |
| |Muratsuchi, Salas | |Ian Calderon, Campos, |
| | | |Eggman, Gomez, Holden, |
| | | |Pan, Quirk, |
| | | |Ridley-Thomas, Weber |
|-----+--------------------------+-----+--------------------------|
|Nays:|Ch�vez, Grove | | |
| | | | |
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SUMMARY : Institutes review measures and controls on the
expenditure of Morale, Welfare, and Recreation funds.
Specifically, this bill :
1)Requires that for proposed expenditures of Morale, Welfare,
and Recreation Fund (MWR) moneys 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:
a) The administrator of the Veterans Home proposing an
expenditure shall submit the proposed expenditure or
contract to the secretary of the Department of Veterans
Affairs (CalVet) for approval. The secretary shall consider
the advisory opinion required in b) below and any other
relevant information when determining whether an
expenditure or contract will be approved.
b) The proposed expenditure or contract shall be reviewed
by legal counsel of the department, or another similarly
qualified reviewer designated by the secretary. The
reviewer shall issue an advisory opinion to the secretary
identifying those laws and regulations with which the
proposed expenditure or contract or execution of the
contract must comply, and any other relevant legal issues
that may arise with respect to compliance with those laws
and regulations.
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c) Prior to the execution of a proposed expenditure or
contract, the department shall provide written notification
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.
The draft expenditure proposal shall include, but is not
limited to, a description of the intent of the project that
is the subject of the proposed expenditure or contract,
estimated costs, and an approximate timeline of execution.
The Veterans' Home Allied Council or other body
representing residents of the affected home or homes shall
have the opportunity to respond to the draft expenditure
proposal and the department shall consider any responses
provided.
d) Upon the execution of the expenditure or contract, the
department shall provide written notification to the
Veterans' Home Allied Council or another body representing
residents of the affected home or homes. The notification
shall identify the purpose of the project, costs, and who
is the recipient or recipients of the moneys distributed
from the MWR.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, ongoing General Fund costs in the range of $150,000
for the equivalent of 1.5 personnel years to CalVet to review
MWR fund expenditures.
COMMENTS : The Morale Welfare and Recreation (MWR) fund was
established in 1999 by SB 281 (Chesbro). The Legislature
intended to provide veteran home administrators with an
additional funding tool to provide for the general welfare of
residents beyond their medical and housing needs. Each home
maintains an individual MWR. 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 any donations from the public. The amount of money in each
account varies from home to home, ranging from an account in
excess of $4 million at the largest home at Yountville, to an
account of $7,000 at the recently established West Los Angeles
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home. Home administrators, at the direction of the Secretary of
CalVet, have discretion over how monies within the fund are
spent.
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 office
officials, appropriate legal counsel, or residents of the Home.
These contracts included a zip line adventure park for use by
the public and residents of the home and a tavern that did not
comply with state leasing requirements. In the construction of
the adventure park, the contract included provisions which
leased over 200 acres of state land for $1 per year and involved
the clearing of untouched natural lands without a California
Environmental Quality Act review. Under the contract executed by
the administrator, the home would receive 10% of any net income
generated from operating the park after subtracting all
operating expenses including salaries with no revenue guaranteed
if revenues did not exceed expenses. Once the contract was
discovered by CalVet officials, it cost the state $228,612 to
extricate itself from the contract and to dismantle the nearly
completed zip line tour. When the administrator pursued the
second contract leasing the on-sight tavern, she failed to
initiate a process to solicit competitive bids, eventually
resulting in a contract by which the Veterans Home paid an
outside management company $75,000 per year to manage the
tavern. Included in the deal, MWR funds were used to cover all
start-up costs for the venture and any monthly expenses not
covered by sales for the first year of the contract. Only 25% of
the profits generated from the enterprise would be deposited
into the MWR fund after all other expenses were covered; however
there was no guarantee the venture would be profitable. In
exchange for being permitted to establish a business on state
property, the vendor was paid and subsidized with
state-controlled funds. When the terms of the contract were
discovered and terminated by CalVet officials a year and a half
later, the home had paid the vendor $424,307.
The report discovered both contracts violated state contracting
practices and little or no information had been shared between
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the administrator of the home and CalVet headquarters prior to
the execution of the contracts. Further, the Department of
General Services was not consulted in its role as the agency
overseeing state leasing requirements. In total, $652,919 were
wasted in state-managed funds.
The report highlighted several key deficiencies in the current
administration of MWR funds. Though the administrator is
authorized to use MWR funds with the approval of the Secretary
of CalVet, home administrators have historically been granted
sole authority over decision making regarding the use of the
fund. Further, each contract was executed with little or no
legal oversight, which presumably would have discovered both
contracts violated state law and required review by the
Department of General Services. Finally, residents of the home
were unaware of the two contracts being executed involving MWR
funds; only discovering the construction of the adventure park,
nominally built for their benefit, when helicopters were seen
flying overhead with construction material.
This bill implements certain recommendations of the October 2013
investigation by instituting controls, oversight, and resident
notification and input concerning the expenditure of MWR funds.
Also, as recommended by the investigation it strikes a balance
by permitting smaller expenditures to be encumbered by somewhat
less process so that small expenditures may be more quickly
made.
Analysis Prepared by : John J. Spangler / V.A. / (916)
319-3550
FN: 0003592