Our audit of the California Department of Veterans Affairs (CalVet) highlighted the following:
The mission of the California Department of Veterans Affairs (CalVet) is to deliver the innovative services veterans and their families need to be successful, productive Californians in the most efficient and cost-effective manner through aggressively collaborating with key stakeholders and partners. To accomplish its mission, CalVet's Veterans Homes Division has a goal of providing the State's aged and disabled veterans with rehabilitative, residential medical care and services in a homelike environment for all veterans (members) residing in the State's six active veterans homes located in Yountville, Barstow, Chula Vista, Ventura, Lancaster, and West Los Angeles.1 As of the end of January 2013, more than 1,700 members resided in these veterans homes. CalVet is scheduled to begin admitting veterans in October 2013 at two new veterans homes located in Fresno and Redding.
Currently, there is unused space in some of the veterans homes because the number of veterans the homes can accommodate based on their budgets is less than the number of veterans the homes are licensed to serve. As of the end of January 2013, the total number of licensed beds available for members at the veterans homes was 2,248, while the total budgeted capacity was 1,781, and the six active veterans homes were at nearly 96 percent of their budgeted capacity. CalVet records also indicated that there were 563 veterans on waiting lists due to space limitations. According to CalVet estimates, some veterans on the waiting list at the Veterans Home of California-Yountville (Yountville veterans home) currently face a waiting time of five years or more. On the other hand, some veterans on the waiting list at the Veterans Home of California-Chula Vista (Chula Vista veterans home) are projected to gain admission in no more than six months. Unless they receive additional funding, the veterans homes will not be able to increase the number of members they can admit. However, according to the chief financial officer of CalVet's Veterans Homes Division (chief financial officer), CalVet is not currently seeking funding to increase the budgeted capacity at the Yountville and Chula Vista veterans homes and the Veterans Home of California-Barstow.2 She told us that this is because CalVet is currently preparing to open two new veterans homes in Fresno and Redding, as well as increasing the occupancy in the skilled nursing level of care at the Veterans Home of California-West Los Angeles. The chief financial officer indicated that CalVet will formally assess the State's bed capacity for veterans' needs after the veterans homes in Fresno and Redding are licensed to determine the most appropriate number of beds for the different levels of care offered at each veterans home.
Additionally, CalVet has not maximized its ability to generate revenue for the care provided to its members. The funding for the annual operating expenses of the veterans homes comes from the State's General Fund, and any revenues that the Veterans Homes Division receives are subsequently remitted to the General Fund. These sources of revenue include payments from the United States Department of Veterans Affairs; reimbursements from federal, state, or private insurance plans—including the Medicare and Medi-Cal programs; and the fees that CalVet charges its members. Between fiscal years 2009-10 and 2011-12, CalVet generated revenues to offset less than half of the cost to operate its veterans homes. However, according to the chief financial officer, before 2012 CalVet did not have policies and procedures for consistently monitoring and increasing the amount of revenue generated at the veterans homes. For example, CalVet headquarters did not have adequate controls in place to ensure that the veterans homes were consistently enrolling and monitoring the status of their members in maintaining coverage in all medical insurance and federal government-funded income programs for which the members were eligible. For example, CalVet headquarters did not have a process to monitor whether eligible members were enrolled in private medical insurance plans or in the Medicare and Medi-Cal programs.3 By not monitoring the number of members enrolled in these medical insurance plans and programs and comparing them to the number of members who were eligible to receive those benefits, CalVet could not ensure that it was maximizing revenue from these sources. According to the chief financial officer, CalVet staff are now educating members about their health care options and signing them up for coverage when eligible.
State laws and CalVet policies also limit its ability to recover the full cost of providing care to members of veterans homes while they are living at a home and from using funds collected from members' estates after they pass away to offset the costs of their care. Under state law, CalVet can use only a member's annual income in determining the member's fee that CalVet may charge; it is not allowed to consider a member's assets other than income—which may include personal or real property, stocks and bonds, and automobiles—in the calculation. Moreover, state law limits the total fees members pay to a certain percentage of their annual income, depending on the level of care he or she receives.4 For example, according to state law, members at the domiciliary level of care may be charged no more than 47.5 percent of their annual income for member fees, while members in skilled nursing care may be charged no more than 70 percent of their annual income. Therefore, most members pay only a portion of their actual costs of care while living at the veterans home. Because CalVet offsets less than half of its annual operating expenditures for the veterans homes with funds from existing revenue sources, it should analyze its cost-recovery models, including an evaluation of the state laws that limit the amount of revenue CalVet can collect for the care it provides to its members at the homes. We believe such an analysis would provide CalVet with useful information that could help it determine how best to offset the costs charged to the General Fund for providing care to members.
CalVet's 2012 strategic plan includes an objective to increase utilization of the unused space at the veterans homes through collaborative relationships with nonprofits, veteran service organizations, and private entities. According to our legal counsel, there are legal restrictions that may limit CalVet's ability to utilize unused space at its homes. We noted that CalVet has taken some steps to better utilize unused space at its veterans homes to generate additional revenue and to serve additional veterans through leases and a public-private partnership agreement with another entity.5 CalVet's leasing records indicate that, as of November 2012, it had 38 active leases with other entities, including leases for employee housing at the Yountville veterans home. We also noted that CalVet generally worked with the California Department of General Services when necessary to obtain that agency's approval for CalVet's active leases. For fiscal year 2011-12, the Veterans Homes Division generated approximately $198,000 in revenue from these lease agreements. Although CalVet does not have a formal process for coordinating with the veterans homes to evaluate opportunities to better utilize unused space and increase revenue, the assistant deputy secretary of capital assets stated that CalVet plans to document annually the results of its evaluations of the homes for such opportunities.
In addition to leasing unused space, as of November 2012, CalVet had one public-private partnership agreement to serve more veterans than it currently serves in unused space at a veterans home. This agreement enables the Pathway Home, LLC (Pathway Home) to use space and utilities at the Yountville veterans home at no charge in exchange for providing a program of mental health care services to recently separated veterans and active-duty military personnel who have served in Iraq and Afghanistan. However, because CalVet has not monitored the agreement, it does not know whether the Pathway Home has provided the services specified in the agreement or how successful the program is. According to its assistant deputy secretary of capital assets, CalVet plans to include reporting requirements in the agreement currently being renegotiated with the Pathway Home that will allow CalVet to track and monitor the program at the Yountville veterans home to evaluate the success of the partnership and to ensure that the Pathway Home has provided the services specified in the agreement. Although CalVet has not formalized its process for securing additional partnerships, it indicated that it will include measurable outcomes in its new and existing partnership agreements that will allow CalVet to track and monitor them to evaluate the success of those agreements.
CalVet also has a strategic objective to connect veterans with the benefits and services they need to excel, but limited outreach personnel hinders its ability to conduct outreach; thus, many veterans may be unaware of benefits and services for which they may be eligible. However, to increase its outreach efforts within its limited resources, CalVet also uses technology-based strategies to reach a larger number of veterans. For example, CalVet's Web site provides general information about the services CalVet provides for veterans, as well as links to information about various veterans' benefits. Moreover, CalVet is developing a new electronic outreach tool called CalVet Connect. The feasibility study for this tool indicates that it will serve as an integrated veteran contact and demographic database that will enable registered users to actively maintain their contact information and identify areas of interest, thus enabling them to receive targeted benefit and service provider information. The California Technology Agency approved the feasibility study in December 2012. CalVet estimates that CalVet Connect will cost approximately $1.3 million, with a planned completion in February 2014.
In reviewing the veterans homes' purchasing practices, we concluded that CalVet could benefit from analyzing its current purchasing model and strengthening the oversight of its purchasing practices. CalVet has not conducted a formal analysis comparing its current purchasing model, in which the active veterans homes execute their own purchasing decisions for non-information technology (non-IT) goods and services, to a centralized model in which CalVet headquarters would be more involved in purchasing for the active veterans homes. Without a thorough cost-efficiency analysis, CalVet could be missing opportunities to leverage its increased buying power and create a more efficient purchasing process by moving to a centralized purchasing model. The assistant deputy secretary for the financial services division acknowledged that such an analysis will provide CalVet an opportunity to look at the finer details of the processes, needs, similarities, and differences among the veterans homes, and she anticipates that CalVet will complete this analysis by December 2013. We also found that CalVet failed to provide adequate oversight and guidance to ensure that purchases made at the individual veterans homes followed state purchasing requirements. As a result, our review of 30 CalVet purchases that occurred during fiscal year 2011-12 found that 12 did not comply with state purchasing requirements. This included eight instances in which the veterans homes did not follow state purchasing requirements to report purchases over $5,000 to the California Department of Fair Employment and Housing. In January 2013 CalVet instituted new internal controls for purchasing at the veterans homes, including biannual training for both new and current purchasing staff regarding state purchasing requirements.
To ensure it is maximizing its ability to serve veterans in the State's veterans homes, CalVet should follow through with its plan to assess the bed capacity of the homes for veterans' needs after the homes in Fresno and Redding are licensed to determine the most appropriate number of beds for the different levels of care offered at each home.
To ensure that it maximizes its ability to generate revenue at all the veterans homes and better cover the costs of providing care to its members, CalVet should do the following:
To better utilize unused space at the veterans homes, and to serve more veterans within legal restrictions, CalVet should do the following:
To better reach a larger number of veterans who might not otherwise learn about and take advantage of benefits and services to which they are entitled, CalVet should continue to use technology, including implementing CalVet Connect.
To more effectively and efficiently meet state purchasing and procurement requirements, CalVet should do the following:
In its response, CalVet did not dispute the audit findings and agreed to implement the recommendations.
1 Under certain conditions, a veteran's spouse may also reside in a veterans home and is counted in that veterans home's census.
2 According to CalVet's budget officer, CalVet currently has approval from the California Department of Finance and the Legislature for incremental funding (or funding in phases) to operate the Veterans Home of California-West Los Angeles and is scheduled to receive full funding for that home in fiscal year 2014-15. In addition, according to the chief financial officer, CalVet did not need to seek funding for the Veterans Home of California-Lancaster and Veterans Home of California-Ventura because those veterans homes are already operating at full capacity.
3 Medi-Cal is a medical assistance program financed by the State and the federal government.
4 The State's veterans homes provide the following levels of care: domiciliary care, residential care for the elderly, intermediate care, and skilled nursing care.
5 Some of CalVet's lease agreements are with other private entities and are thus public-private agreements; however, because these agreements were not designed to better utilize unused space at the veterans homes to serve more veterans, we included them in our analysis of CalVet's lease agreements that we discuss on page 31.