BILL ANALYSIS �
SENATE COMMITTEE ON VETERANS AFFAIRS
Senator Ben Hueso, Chair
BILL NO: AB 1580 HEARING DATE: 6/24/14
AUTHOR: Yamada
VERSION: 3/19/24
FISCAL: Yes
VOTE: Majority
SUBJECT
Veterans' homes: Morale, Welfare, and Recreation (MWR) Fund.
DESCRIPTION
Existing law:
1.Provides for establishment and operation of the Veterans Home
of California, within the Department of Veterans Affairs
(CalVet), at various sites for aged and disabled veterans and
their nonveteran spouses, who meet certain eligibility
requirements.
2.Requires that the administrator of each home campus maintain
an MWR Fund that shall be used - at the discretion of the
administrator and subject to the approval of the secretary -
to provide for the general welfare of the veterans.
(More detail on existing MWR law is contained in the
Background section.)
This bill institutes review measures and controls on the
expenditure of MWR funds.
More specifically, it requires that for:
1. Proposed expenditures of MWR Fund moneys of more than
$5,000; and
2. Proposed contracts of:
- More than $25,000 per year, or
- More than $100,000.
All of the following shall apply:
a. The home administrator proposing the expenditure or
contract shall submit the proposal to the CalVet secretary
for approval. The secretary shall consider the advisory
opinion required in (b) below in and any other relevant
information.
b. The proposal shall be reviewed by the CalVet legal
counsel or other similarly qualified reviewer designated
by the secretary. The reviewer shall issue an advisory
opinion to the secretary identifying laws and regulations
governing approval or execution of such expenditures or
contracts.
c. Prior to execution of a proposed expenditure or
contract:
1) CalVet shall provide written notification in the
form of a draft expenditure proposal to the home's
Allied Council or other body representing the residents
of an affected home. 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.
2) The 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 CalVet shall consider any responses
provided.
d. Upon execution of the expenditure or contract, CalVet
shall provide written notification to the Allied Council
or another representative body affected homes. The
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notification shall identify the purpose of the project,
costs, and who is the recipient or recipients of the
moneys distributed from the MWR Fund.
BACKGROUND
CalVet's Veterans Homes Division provides rehabilitative,
residential medical care and services in a homelike environment
for all veterans (and eligible veteran spouses) residing in the
State's eight veterans homes, which are located in Barstow,
Chula Vista, Fresno, Lancaster. Redding, Ventura, West Los
Angeles, Redding, and Yountville. As of early 2013, more than
1,700 members resided in these veterans homes.
Morale, Welfare and Recreation Funds
Existing law:
1.Authorizes MWR funds to be used for, but not be limited to,
the following:
a. Operating the Veterans' Home Exchange store, hobby shop,
motion picture theater, library, and band, and any other
function that is operated for the morale, welfare, and
recreation of the veterans;
b. Paying for newspapers, chapel expenses, welfare and
entertainment expenses, sport activities, celebrations, and
any other activity that is for the morale, welfare, and
recreation of the veterans.
2.Prohibits MWR funds from being used for: (1) medical or any
related treatment; (2) maintenance of the home's physical
plant; or (3) any function, operation, or activity not
directly related to the morale, welfare, or recreation of the
veterans.
3.Provides that certain portions of the estates of deceased
veteran residents may be recovered by CalVet for obligations
owed to CalVet, including costs of a veterans care in excess
of the reimbursement for that care made by the United States
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Department of Veterans Affairs (VA).
4.Requires that residents, upon admission to the home and
monthly thereafter, be informed about these provisions to
recover unreimbursed costs of care.
5.Provides that the recovered funds are not returned to the
State General Fund, but, instead, are deposited into the MWR
fund account for the home at which the veteran resided at
death.
The MWR fund obtains its funding from several sources,
including:
a. The estates of deceased residents, who die without heirs
or owing money to the home for the cost of their care.
b. Donations from taxpayers when filing their state tax
returns.
c. Revenues from the issuance of prisonerofwar license
plates;
d. Other donations;
e. Interest earned from investments made with MWR Fund
moneys; and
f. Revenues from businesses operated using the MWR Fund.
As of June 30, 2012, the amount of money held in the MWR funds
maintained by six veterans homes (less Fresno and Redding)
totaled more than $8 million. Approximately $5 million was held
in the MWR fund of Yountville, the oldest and largest home
campus.
Although MVC � 1047 allows a home administrator to spend MWR
moneys for the benefit of the residents of the home, other state
laws impose requirements on the manner in which this is done,
particularly when it entails leasing stateowned land.
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Recent Controversy and Audit
In October 2013 the California State Auditor released an
investigative report (i2011-0837) entitled, Wastefulness,
Failure to Comply With State Contracting Requirements, and
Inexcusable Neglect of Duty. The report 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 one dollar per year and
involved the clearing of untouched natural lands without a CEQA
review. Under the contract executed by the administrator, the
home would receive 10 percent 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 percent 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 deficiencies in the
administration of MWR funds. Though the administrator is
authorized to use MWR funds with the approval of the CalVet
Secretary, 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 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.
COMMENT
Committee staff comments :
1.This bill requires CalVet's legal counsel or similarly
situated individual to review home-generated expenditure
proposals. CalVet already has a process in place for all its
other purchasing and contract review actions. Is that existing
review process adequate, perhaps even superior, for this
bill's purposes?
2.Although not derived from tax or fee payers, MWR funds are
state funds. Traditionally, MWR accounts have been maintained
in local banks near each campus and managed locally, often
with a single local authorized signatory at each home. This
approach opens the door to fraud or unchecked error; indeed,
it might be considered an administrative relic that does not
reflect current best accounting practices. Should this bill do
more to ensure that these funds receive additional,
professional oversight and security?
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Related Legislation
AB 1739 (Allen, Ch. 95, Stats. 2012) allows the administrator
of a state veterans' home to enter into an agreement with the
home's allied council to authorize the council to operate MWR
Fund activities such as a hobby shop, movie theater, library,
band, and to pay for such things as newspapers, entertainment,
sports activities, celebrations and other activities for the
benefit of the veterans.
SB 10 (Evans, Ch. 265, Stats. 2011) establishes a Veterans'
Home Allied Council for each of California's Veterans Homes
and permits each council to represent veterans who reside in
the veterans' homes in matters before the Legislature if each
council, in the course of providing that representation,
complies with certain requirements.
POSITIONS
Sponsor: Author.
Support: Veterans Caucus of the California Democratic Party
Oppose: None on file.
Analysis by: Wade Cooper Teasdale
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