CSA
Summary
Read the report at California State Auditor ↗
May 2013
California Department of
Veterans Affairs
It Has Initiated Plans to Serve Veterans Better and
More Cost-Efficiently, but Further Improvements
Are Needed
Report 2012-119
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Elaine M. Howle State Auditor
Doug Cordiner Chief Deputy
May 9, 2013 2012-119
The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814
Dear Governor and Legislative Leaders:
As requested by the Joint Legislative Audit Committee, the California State Auditor presents this
audit report concerning the California Department of Veterans Affairs’ (CalVet) management
of the California veterans homes, including its efforts to improve operational efficiencies and
revenue generation, and its planning efforts to leverage resources to serve more veterans.
This report concludes that although CalVet generated revenues to offset less than half of
the cost to operate its veterans homes between fiscal years 2009–10 and 2011–12, it did not
begin developing standardized policies and procedures to monitor and increase the amount
of revenue generated at all of the homes until 2012. In addition, state laws and CalVet policies
limit its ability to recover the full cost of providing care to veterans (members) 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. We further identified that statutory licensing requirements and
budget constraints have limited the number of beds available in the homes, resulting in unused
space. Although CalVet has taken some steps to better utilize this unused space through lease
agreements and a public-private partnership agreement with another entity to serve more
veterans than it currently serves, it needs to formalize its process for increasing utilization of
unused space and monitoring the success of its partnership agreements. Moreover, our legal
counsel identified several state and federal legal restrictions that may limit CalVet’s ability to
utilize the unused space at the homes.
Further, we noted that limited resources have impeded CalVet’s outreach efforts to connect
veterans with their benefits and services. In addition, we identified that CalVet needs to enhance
its oversight and guidance for referring veterans needing long-term care to other facilities
when it cannot admit them to one of its homes. We also identified weaknesses in CalVet’s
oversight and guidance to ensure that purchases made at the homes follow state purchasing
requirements; CalVet took steps during the audit to address these weaknesses. Finally, CalVet
has not conducted a formal analysis of its current purchasing model for the homes to ensure
that it is the most efficient and cost-effective way to purchase goods and services.
Respectfully submitted,
ELAINE M. HOWLE, CPA
State Auditor
555 Capitol Mall, Suite 300 Sacramento, CA 95814 916.445.0255 916.327.0019 fax www.auditor.ca.gov
Blank page inserted for reproduction purposes only.
California State Auditor Report 2012-119 v
May 2013
Contents
Summary 1
Introduction 7
Audit Results
The California Department of Veterans Affairs Could Do More to
Maximize the Revenue It Receives 19
CalVet Is Increasing Its Oversight of Staffing Levels at the
Veterans Homes 27
CalVet May Have Opportunities to Utilize Unused Space at the Veterans
Homes Through Leasing and Partnerships With Other Entities 28
Limited Resources Impede CalVet’s Outreach Efforts to Inform
Veterans of Benefits and Services Available to Them 35
CalVet Needs to Enhance Its Oversight and Guidance to Its
Veterans Homes for Referring Veterans Needing Long-Term Care
to Other Facilities 39
CalVet Should Analyze Its Current Purchasing Model and Strengthen
Oversight of Its Purchasing Practices 42
Recommendations 45
Appendix
Total Capacity and Census of Veterans at the Veterans Homes 49
Response to the Audit
California Department of Veterans Affairs 53
vi California State Auditor Report 2012-119
May 2013
Blank page inserted for reproduction purposes only.
California State Auditor Report 2012-119 1
May 2013
Summary
Results in Brief Audit Highlights . . .
The mission of the California Department of Veterans Affairs Our audit of the California Department
(CalVet) is to deliver the innovative services veterans and their of Veterans Affairs (CalVet) highlighted
families need to be successful, productive Californians in the the following:
most efficient and cost-effective manner through aggressively
collaborating with key stakeholders and partners. To accomplish its » Budget constraints and licensing
mission, CalVet’s Veterans Homes Division has a goal of providing restrictions have resulted in unused space
the State’s aged and disabled veterans with rehabilitative, residential in some of the veterans homes.
medical care and services in a homelike environment for all
veterans (members) residing in the State’s six active veterans homes » CalVet has not maximized its ability to
located in Yountville, Barstow, Chula Vista, Ventura, Lancaster, generate revenue for the care provided
and West Los Angeles.1 As of the end of January 2013, more to the veterans residing in its homes.
than 1,700 members resided in these veterans homes. CalVet is
scheduled to begin admitting veterans in October 2013 at two new » State laws and CalVet policies limit its
veterans homes located in Fresno and Redding. ability to recover the full cost of providing
care to veterans while they are living at a
Currently, there is unused space in some of the veterans homes home and from offsetting these costs with
because the number of veterans the homes can accommodate funds collected from veterans’ estates
based on their budgets is less than the number of veterans the after they pass away.
homes are licensed to serve. As of the end of January 2013, the total
number of licensed beds available for members at the veterans » Even though it has taken steps to utilize
homes was 2,248, while the total budgeted capacity was 1,781, and unused space to generate revenue through
the six active veterans homes were at nearly 96 percent of their leases, CalVet does not have a formal
budgeted capacity. CalVet records also indicated that there were process for evaluating opportunities to
563 veterans on waiting lists due to space limitations. According better utilize unused space.
to CalVet estimates, some veterans on the waiting list at the
Veterans Home of California–Yountville (Yountville veterans home) » CalVet does not monitor its sole
currently face a waiting time of five years or more. On the other public‑private partnership agreement
hand, some veterans on the waiting list at the Veterans Home of with another entity involving unused
California–Chula Vista (Chula Vista veterans home) are projected space; therefore, it is unable to evaluate
to gain admission in no more than six months. Unless they receive the success of the agreement.
additional funding, the veterans homes will not be able to increase
the number of members they can admit. However, according to the » Legal restrictions may limit its ability
chief financial officer of CalVet’s Veterans Homes Division (chief to fully utilize the unused space at the
financial officer), CalVet is not currently seeking funding to increase veterans homes.
the budgeted capacity at the Yountville and Chula Vista veterans
homes and the Veterans Home of California–Barstow.2 She told us » To increase its outreach efforts within its
that this is because CalVet is currently preparing to open two new limited personnel resources, CalVet uses
technology‑based strategies to reach a
larger number of veterans.
1 Under certain conditions, a veteran’s spouse may also reside in a veterans home and is counted in
that veterans home’s census.
» CalVet could benefit from analyzing
2 According to CalVet’s budget officer, CalVet currently has approval from the California
its current purchasing model and
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 strengthening the oversight of its
funding for that home in fiscal year 2014–15. In addition, according to the chief financial officer,
purchasing practices.
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.
2 California State Auditor Report 2012-119
May 2013
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,
3 Medi-Cal is a medical assistance program financed by the State and the federal government.
California State Auditor Report 2012-119 3
May 2013
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.
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.
4 California State Auditor Report 2012-119
May 2013
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
California State Auditor Report 2012-119 5
May 2013
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.
Recommendations
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:
• Continue to implement standardized policies and procedures
throughout the veterans homes to increase revenue, including
its policies and procedures for identifying and enrolling eligible
members into federal, state, and private insurance programs, such
as the Medicare and Medi-Cal programs.
• Analyze its cost‑recovery model, including an evaluation of
the state laws that limit the amount of revenue that CalVet
can collect for the care it provides to its members at the
veterans homes.
6 California State Auditor Report 2012-119
May 2013
To better utilize unused space at the veterans homes, and to
serve more veterans within legal restrictions, CalVet should do
the following:
• Develop and implement procedures for periodically evaluating
all of the veterans homes to identify opportunities to enhance its
use of unused space and increase revenue generation, including
documenting the results of its evaluations.
• Develop a formal process to seek out additional public‑private
partnership agreements to utilize unused space at the veterans
homes to serve more veterans than it currently serves.
• Identify measures to facilitate monitoring the success of its
public-private partnership agreement with the Pathway Home at
the Yountville veterans home.
• As part of its 2013 renegotiations with the Pathway Home,
CalVet should document its review and evaluation of any legal
restrictions that may limit this agreement.
• For any future public‑private partnership agreements, CalVet
should specify measures in the agreements that will allow it to
monitor and assess the success of the agreements, and should
document its review and evaluation of any legal restrictions that
may limit its authority to enter into the agreements.
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:
• Analyze its current purchasing model to ensure that it is the
most efficient and cost-effective use when purchasing non-IT
goods and services for the veterans homes.
• Continue implementing quality‑assurance policies to
strengthen its oversight of its purchasing practices, including
conducting on-site reviews of the purchasing practices of the
veterans homes.
Agency Comments
In its response, CalVet did not dispute the audit findings and agreed
to implement the recommendations.
California State Auditor Report 2012-119 7
May 2013
Introduction
Background
More military veterans live in California than in any other state.
For federal fiscal year 2012, the United States Department of
Veterans Affairs (VA) estimated that 1.9 million veterans resided
in California, making up nearly 9 percent of the total estimated
United States veteran population. 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. According to its 2012 strategic plan, CalVet has a
strategic goal to increase the accessibility and utilization of assisted
living and long-term care, housing, and other benefits and services
to veterans and their families. The strategic plan also states that
CalVet organizes its efforts to serve veterans into three core
program areas: Veterans Homes, CalVet Home Loans, and
Veterans Services. In the Audit Results, we discuss how CalVet is
implementing some of the elements of the strategic plan, including
strategic objectives to increase revenues and reduce operating costs
in the veterans homes, to increase utilization of unused space at
the homes, and to connect veterans with the services they need
through outreach.
Veterans Homes Division
The mission of CalVet’s Veterans Homes Division is to provide the
State’s aged and disabled veterans with rehabilitative, residential,
and medical care and services in a homelike environment.
In keeping with its mission, the Veterans Homes Division assumes
primary responsibility for CalVet’s strategic objective of providing
the highest-quality long-term care and residential services to
veterans (members) residing in the State’s veterans homes.6 Figure 1
on the following page provides a timeline for the opening of each
of California’s six active veterans homes, located in Yountville,
Barstow, Chula Vista, Ventura, Lancaster, and West Los Angeles.
CalVet is scheduled to begin admitting veterans in October 2013 at
two additional veterans homes in Fresno and Redding.
6 Under certain conditions, a veteran’s spouse may also reside in a veterans home and is counted in
that home’s census.
8 California State Auditor Report 2012-119
May 2013
Figure 1
Locations of California Veterans Homes and Timeline of Opening Dates
Redding*—
Fresno*— 2013
West Los Angeles—
Lancaster—
Ventura— 2010
Chula Vista— 2000
Barstow— 1996
Yountville— 1884
CalVet policies state that California veterans who are age 55 and
older and were honorably discharged from active military service
are eligible to apply for admission into one of the State’s veterans
homes; however, this age requirement is waived for disabled
veterans. Of California’s estimated 1.9 million veterans in federal
SRAEY
211
RREEDDDDIINNGG*
YYOOUUNNTTVVIILLLLEE
FFRREESSNNOO*
BBAARRSSTTOOWW
LLAANNCCAASSTTEERR
WWEESSTT LLOOSS AANNGGEELLEESS
VVEENNTTUURRAA
CCHHUULLAA VVIISSTTAA
Source: California Department of Veterans Affairs’ (CalVet) fiscal year 2013–14 Budget Estimate Package provided to the Legislature (unaudited).
* According to CalVet planning documents, the Veterans Home of California–Redding and the Veterans Home of California–Fresno are not scheduled
to begin admitting veterans until October 2013.
California State Auditor Report 2012-119 9
May 2013
fiscal year 2012, 1.2 million, or 63 percent, were age 55 or older and
thus were potentially eligible for admission into a veterans home.
State regulations provide that eligible veterans are admitted on a
first-come, first-served basis; however, when a veteran indicates an
urgent need for admission, the regulations also require CalVet to
evaluate various factors when considering the request, such as
whether the veteran is homeless or has a distinguished service
record. State regulations also require CalVet to refuse admission
to veterans with medical conditions or disabilities that require
resources not available at a veterans home, such as certain medical
specialists or equipment, or to veterans with a current history of
behavioral patterns that would be incompatible with a safe
environment at a veterans home.
The State’s veterans homes provide various levels
of care to their members. These levels of care, Levels of Care Provided at the
which are defined in the text box, include State’s Veterans Homes
domiciliary care, residential care for the elderly
Domiciliary care: Provides minimum care and supervision
(residential care), intermediate care, and skilled
for members who are able to perform all the activities of
nursing care (skilled nursing). Table 1 on the
daily living.
following page shows the levels of care available at
Residential care for the elderly: Provides assistance and
each of the veterans homes. In addition to the levels
supervision in activities of daily living.
of care, CalVet provides outpatient clinics on the
sites of most of its veterans homes, as a service to Intermediate care: Provides skilled nursing supervision and
their members. These clinics provide comprehensive, supportive care to members on less than a continuous basis.
multidisciplinary assessments, as well as ongoing
Skilled nursing care: Provides skilled nursing and supportive
primary care to address members’ routine medical
care to members on an extended basis, including 24-hour
needs. All of the veterans homes have outpatient inpatient care, with medical, nursing, dietary, pharmaceutical,
clinics except for the homes at Lancaster and rehabilitation services, and an activity program.
Ventura, whose members are served by the clinic in
Sources: Titles 12 and 22, California Code of Regulations.
the Veterans Home of California–West Los Angeles
(West Los Angeles veterans home).
Delays in Opening Veterans Homes
Although construction of CalVet’s new veterans homes in Fresno
and Redding was completed in April 2012, CalVet had to delay
opening these homes because, according to the undersecretary
of the Veterans Homes Division, funding was not provided in
the state budget to operate the homes during fiscal year 2012–13.
Consequently, as mentioned earlier, these veterans homes are not
scheduled to begin admitting veterans until October 2013.
The governor’s proposed fiscal year 2013–14 budget includes
$24.4 million for the Veterans Home of California–Fresno (Fresno
veterans home) and $14.3 million for the Veterans Home of
California–Redding (Redding veterans home). The governor’s
budget also proposes to set aside an additional $27 million for the
10 California State Auditor Report 2012-119
May 2013
continuing activation of the Fresno and Redding veterans homes
and notes that this amount will be refined in the spring of 2013 to
reflect the detailed requirements for operating these homes. As
Table A in the Appendix indicates, the Fresno and Redding veterans
homes are designed to serve up to 300 and 150 veterans in both
residential care and skilled nursing, respectively. Further, CalVet
developed a plan to begin admitting members to both of these
veterans homes starting in October 2013, with a goal of reaching
full capacity at the Redding veterans home by July 2015 and full
capacity at the Fresno veterans home by November 2016.
Table 1
Levels of Care Available at the California Veterans Homes
Locations of the Veterans homes
LeVeL of care YountViLLe Barstow chuLa Vista Lancaster Ventura west Los angeLes fresno* redding*
Domiciliary care
Residential care for
the elderly
Intermediate
nursing care
Skilled nursing care
Source: California Department of Veterans Affairs’ Web site.
* The veterans homes at Fresno and Redding are not scheduled to begin admitting veterans until October 2013.
According to the admissions coordinator for the Veterans Homes
Division, CalVet will not officially begin accepting applications for
the Fresno and Redding veterans homes until June 2013; however,
CalVet has already received letters of interest from veterans seeking
to reside in these homes. As of February 2013 CalVet records
indicated that a total of 1,105 veterans had submitted letters of
interest regarding the new veterans homes, with 421 veterans
showing interest in the Fresno home and 684 expressing interest
in the Redding home. However, the admissions coordinator told us
that these numbers could include duplicates, because some veterans
may have submitted letters of interest to both homes.
According to the chief financial officer for the Veterans Homes
Division (chief financial officer), the skilled nursing unit at the
West Los Angeles veterans home admitted its first member in
October 2012, more than two years after initially projected, due
in part to the lack of a full-service kitchen, which prevented CalVet
from meeting state licensing requirements for that level of care.
The West Los Angeles skilled nursing unit is currently licensed for
72 beds. The assistant deputy secretary of capital assets informed
California State Auditor Report 2012-119 11
May 2013
us that in April 2013 the State Public Works Board approved CalVet
beginning construction of a full-service kitchen. Once the kitchen
is constructed, CalVet’s goal is to have the California Department of
Public Health (Public Health) license the West Los Angeles skilled
nursing unit to the full physical capacity of 312 beds. The assistant
deputy secretary for capital assets estimated that the kitchen at the
West Los Angeles veterans home will take 18 months to complete.
Using current CalVet occupancy plans for the veterans home,
we project that the skilled nursing unit at the West Los Angeles
veterans home will reach full capacity in February 2017.
Oversight of the Veterans Homes by State and Federal Agencies
The California Veterans Board (Veterans Board) is responsible
for determining the policies for all operations of CalVet but is not
involved in its day-to-day operations. The Veterans Board consists
of seven members appointed by the governor and subject to
confirmation by the Senate. The Veterans Board also hears appeals
by California veterans who have applied for benefits and wish to
appeal any decision made by any division of CalVet.
Furthermore, Public Health’s licensing and certification program is
responsible for licensing all skilled nursing and intermediate care
facilities in California, and licenses these facilities in the veterans
homes offering such care. In addition to licensing these health
facilities, state law requires Public Health to inspect all skilled
nursing and intermediate care facilities at least once every two years
for compliance with state laws and regulations. Moreover, on behalf
of the federal Centers for Medicare and Medicaid Services, Public
Health serves as the state survey agency that conducts periodic
federal recertification inspections at participating skilled nursing
and intermediate care facilities, which include veterans homes, and
it provides inspection results to the homes.
Similar to Public Health’s licensing of health care facilities, the
California Department of Social Services (Social Services) licenses
state residential care facilities, including those in the California
veterans homes. State law requires Social Services to conduct site
visits as often as necessary to ensure the quality of care provided,
and the visits must occur at least once every five years. If Social
Services identifies any deficiencies, it must notify the veterans home
in writing.
State law normally requires the California Department of General
Services (General Services) to supervise state department goods
contracts that exceed $100 and to approve state department service
12 California State Auditor Report 2012-119
May 2013
contracts that exceed $5,000. However, state law allows General
Services to delegate purchasing authority in higher amounts to state
departments that adequately meet state purchasing requirements.
Currently, CalVet has a delegated purchasing authority of up to
$50,000 for competitively bid, non-information technology (non-IT)
goods and up to $250,000 for non-IT purchases made from small
businesses or disabled veteran business enterprises. According to state
law, General Services must perform purchasing authority audits once
every three years to ensure that departments are conducting their
purchases correctly and may withdraw a department’s purchasing
authority if it finds that the department’s purchases are not in
compliance with state purchasing requirements. In addition, state
law authorizes General Services to lease veterans home property on
terms that are in the best interest of the home. In October 2010,
to address deficiencies in its policies and procedures, CalVet
developed standardized leasing procedures that required CalVet to
work with General Services in establishing its leases.
The VA conducts on-site inspections of the veterans homes annually
to determine compliance with applicable requirements for the
different levels of care, including requirements concerning medical
care and staff qualifications. If the VA identifies a deficiency at a
veterans home as part of its inspection, the VA will document the
home’s corrective action plan to address the deficiency and follow up
to determine whether the home adequately addressed the finding.
Funding Sources for the Veterans Homes
CalVet’s primary source of funding is the State’s General Fund, and
it spends a significant portion of its General Fund budget on its
veterans homes. The Veterans Homes Division is responsible for
administering the State’s veterans homes, and the funding for the
annual operating expenses of the homes comes from the General
Fund. According to the governor’s proposed fiscal year 2013–14
budget, in fiscal year 2011–12 CalVet’s funding from the General
Fund totaled $194 million—with $189 million of that amount
representing General Fund expenditures for administering the
veterans homes in that fiscal year, including approximately
$152 million spent on the operation of the homes, expenditures
for the support of the homes by CalVet headquarters, and
revenue bond repayments. This $189 million in General Fund
expenditures represents nearly 98 percent of CalVet’s funding
from the General Fund, with the remaining 2 percent partially
funding the Veterans Services Division, which provides services
and assistance to California’s veterans, dependents, and survivors.
California State Auditor Report 2012-119 13
May 2013
CalVet receives revenue from several sources for the
services it provides to the members of its veterans Primary Sources of Revenue for the Veterans Homes
homes. As indicated in the text box, these revenue
United States Department of Veterans Affairs (VA):
sources include payments from the VA;
reimbursements from federal, state, or private • Per Diem: A daily amount paid to each home for each
insurance plans—including the Medicare and member, depending on level of care.
Medi-Cal programs; and the fees that CalVet • Aid and Attendance: Funding for members with a disability
charges its members. Revenues that the Veterans who need assistance with activities of daily living.
Homes Division received are subsequently remitted
Medicare: For those members enrolled in the program,
to the General Fund to offset General Fund
the California Department of Veterans Affairs (CalVet) may
expenditures. However, these sources reimburse
receive reimbursements for care provided to members by the
only a portion of the General Fund’s expenditures.
veterans homes, as well as reimbursement for certain other
As Figure 2 on the following page indicates, for expenses, such as those related to members’ pharmaceuticals.
fiscal year 2011–12, the operating expenditures
Medi-Cal: State-option medical assistance program that
for the veterans homes were approximately
includes federal matching funds to provide essential medical
$152 million, while the revenues received amounted
care and services to preserve health, alleviate sickness, and
to about $70 million. Thus, CalVet generated
mitigate handicapping conditions for members whose
sufficient revenues in fiscal year 2011–12 to offset
income is not sufficient to meet their individual needs.
approximately 46 percent of the cost to operate its
Private Insurance: CalVet receives payments from
veterans homes. We discuss CalVet’s goals and
a member’s private insurance, including health
plans to generate additional revenue at the veterans
maintenance organizations.
homes in the Audit Results.
Member Fees: According to state law, CalVet charges a
percentage of a member’s annual income as determined by
The Effect of CalVet’s Budget and Staffing his or her level of care.
Requirements on Occupancy in the Veterans Homes
Lease Agreements: Lease income generated from the
state-owned property at the veterans homes.
The veterans homes are subject to statutory
Sources: Title 38, Code of Federal Regulations, Section 51;
licensing requirements and state budget allocations VA memorandum detailing the rates for the fiscal year 2012–13
that limit the number of beds available for veterans per diem program; the Web site for the Medicare program,
www.medicare.gov; California Military and Veterans Code,
and result in unused space at the homes. The
Section 1012.3; State Medi-Cal Web site, www.medi-cal.ca.gov;
veterans homes must meet legal requirements and California State Accounting and Reporting System
financial reports.
regarding the number of nursing staff compared
to the number of members for skilled nursing,
intermediate care, and residential care.7 In addition,
the number of nursing staff a veterans home can employ is limited
by its budget. Therefore, the number of members that a veterans
home can admit is linked to the number of nursing staff that its
budget enables it to employ. For instance, state law requires that
there be 3.2 hours of nursing care available per patient day at the
skilled nursing level of care. This ratio is based on the total number
of nursing care hours available in a given day divided by the average
number of members at the skilled nursing level of care on that day.8
Thus, if a skilled nursing facility had 10 members in a given day, the
7 Domiciliary care is not a licensed level of care, and therefore there are no state staffing requirements.
8 State law defines nursing hours to include work performed by aides, nursing assistants, orderlies,
registered nurses, and licensed vocational nurses.
14 California State Auditor Report 2012-119
May 2013
facility would need 32 nursing care hours available that day to meet
the required ratio of 3.2 nursing hours per patient day. However, as
Figure 3 indicates, CalVet’s total budgeted capacity, which equates
to the number of members the veterans homes can collectively
serve given their resources and funding, is less than the licensed
capacity that Public Health or Social Services has approved for all
veterans homes, resulting in unused space. We discuss these staffing
requirements in more detail in the Audit Results.
Figure 2
Total General Fund Expenditures and Reimbursements for
California’s Active Veterans Homes
Fiscal Year 2011–12
(In Millions)
Other—$0.5
Federal aid and attendance—$2.4
Medicare—$4.9
Medi-Cal—$7.3
Member fees*—$18.5
Total revenue
generated—$69.9 Federal per diem—$36.3
Unreimbursed General Fund
expenditures—$81.8
Total General Fund expenditures
for the Veterans Homes—$151.7
Sources: California State Accounting and Reporting System reports for fiscal year 2011–12.
Note: We excluded the Veterans Home of California–Fresno and the Veterans Home of California–
Redding because they are not scheduled to begin admitting veterans until October 2013.
* Veterans that reside in the California veterans homes are charged an annual fee based on their
annual income and level of care at their veterans homes.
Figure 3 is based on Table A in the Appendix and presents, as of
the end of January 2013, the total physical, licensed, and budgeted
capacities of the six active veterans homes, as well as the total census
and number of veterans on waiting lists for these veterans homes.
As Figure 3 shows, the total number of licensed beds available for
California State Auditor Report 2012-119 15
May 2013
members at the veterans homes was 2,248, while the total budgeted
capacity at the veterans homes was 1,781. At the same time, there
were 1,706 veterans in the veterans homes—nearly 96 percent of their
collective budgeted capacity. In addition, there were 563 veterans on
waiting lists due to space limitations at the veterans homes as of the
end of January 2013. According to CalVet estimates, veterans on
the waiting list for skilled nursing at the Veterans Home of California–
Yountville (Yountville veterans home) currently face a wait time of
five or more years before they may be admitted. On the other hand,
veterans on the waiting list for skilled nursing at the Veterans Home
of California–Chula Vista (Chula Vista veterans home) are currently
projected to gain admission in no more than six months.
Figure 3
Total Capacity and Census as of the End of January 2013 at the California Veterans Homes
Physical capacity:* According to the California Department of Veterans
Affairs (CalVet) budget officer, the total number of beds, and thus veterans,
2,545 that the veterans homes were originally built, or remodeled, to accommodate.
Licensed capacity:† The number of beds the California Department of Public
2,248 Health (Public Health) and the California Department of Social Services (Social
Services) licenses the veterans homes to operate, plus the number of beds
that CalVet designated for domiciliary care.
1,781
Budgeted capacity: According to CalVet's budget officer, the total number
of beds that the veterans homes plan to operate given their current
1,706 resources and funding.
Census, January 2013: The number of veterans occupying beds in the
veteran homes system as of the end of January 2013.
563
Waiting list: The number of veterans who have submitted complete
applications to the veterans home and whom CalVet has determined qualify
for admission. These veterans have not been admitted due to budgetary space
0 5000 1,000 1,500 2,000 2,500 3,000 limitations at the veterans homes and are thus not counted in the total census.
Sources: Data on physical capacity and budgeted capacity are from CalVet’s 2013–14 Budget Estimate Package submitted to the Legislature. Data on licensed
capacity are from Public Health and Social Services. Data on the census and waiting lists are from CalVet’s internal reporting documents (unaudited).
* This number excludes the physical capacity of the Veterans Home of California–Fresno (Fresno veterans home) and the Veterans Home of California–
Redding (Redding veterans home). According to CalVet planning documents, the Fresno and Redding veterans homes are not scheduled to begin
admitting veterans until October 2013. The Fresno and Redding veterans homes are designed to serve up to 300 and 150 veterans, respectively.
† Domiciliary care is not a licensed level of care. Bed totals are based on physical capacity and shown for consistency.
Unless they receive additional funding, the veterans homes will
not be able to increase the number of members they can admit.
According to the 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.9 She told us that this is because CalVet is currently preparing
9 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
West Los Angeles veterans home 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
16 California State Auditor Report 2012-119
May 2013
to open the two new veterans homes in Fresno and Redding, as
well as increasing the occupancy in the skilled nursing level of care
at the West Los Angeles veterans home. The chief financial officer
indicated that CalVet will formally assess the State’s bed capacity
for veterans’ needs after the Fresno and Redding veterans homes
are licensed, in order to determine the most appropriate number
of beds at each level of care at each veterans home.
Scope and Methodology
The Joint Legislative Audit Committee (audit committee) directed the
California State Auditor to perform an audit of CalVet’s management
of the California veterans homes, including its efforts to improve
operational efficiencies and revenue generation, and its planning
efforts to leverage resources to serve more veterans. The analysis the
audit committee approved contained nine separate objectives. We list
the objectives and the methods we used to address them in Table 2.
Table 2
Audit Objectives and the Methods Used to Address Them
audit oBjectiVe method
1 Review and evaluate the laws, Reviewed relevant laws, regulations, and other background materials.
rules, and regulations significant
to the audit objectives.
2 Determine how the system of • Interviewed key officials at California Department of Veterans Affairs’ (CalVet) headquarters.
care for veterans homes is funded, • Reviewed CalVet’s and other state accounting records to identify the federal, state, and private sources of
including the extent to which funding for the veterans homes compared to its annual expenditures.
private and federal Department
• Reviewed relevant statutes regarding the amount of money CalVet may collect for the care provided to
of Veterans Affairs’ (VA) payments
the veterans (members) residing in the veterans homes.
and fees cover costs.
• Reviewed the development and implementation status of CalVet’s policies and procedures designed to
increase revenue and offset the costs associated with caring for its members.
3 Assess the levels of care • Interviewed key officials at CalVet’s headquarters.
(residential, assisted living, • Reviewed relevant CalVet documents related to nursing staff levels and plans for standardizing staffing
skilled nursing) provided by levels across all the veterans homes.
each home and the staffing
• Reviewed CalVet documents related to compliance by the veterans homes in meeting nursing
standards used by the homes.
staff-to-member ratios in the veterans homes.
Determine whether these
staffing standards affect • Reviewed pertinent external audits to identify any relevant findings or recommendations.
the cost-efficiency and the
occupancy goals and objectives
of the homes.
for the Veterans Home of California–Lancaster and Veterans Home of California–Ventura because
those veterans homes are already operating at full capacity.
California State Auditor Report 2012-119 17
May 2013
audit oBjectiVe method
4 Determine whether CalVet • Interviewed key officials at CalVet’s headquarters.
leases property or its facilities • Reviewed relevant court decisions and legal opinions.
to other entities and whether
• Reviewed and assessed CalVet’s leasing policies and procedures.
opportunities exist to generate
additional revenue from • Reviewed CalVet’s existing lease agreements and tested a selection of those leases to determine
unused capacity. whether CalVet followed its leasing policies and procedures and obtained approval from the California
Department of General Services when necessary.
• Reviewed CalVet’s and other state accounting records to identify the amount of revenue generated from
its leases.
5 Identify any legal restrictions • Interviewed key officials at CalVet’s headquarters.
that may prevent CalVet from • Our legal counsel reviewed relevant statutes, regulations, court decisions, and legal documents including
partnering with third parties deeds, grant agreements, and bond statements.
to fully utilize property and the
• Reviewed a consultant’s report regarding the ongoing needs and long-term planning for facilities and
unused capacity of the homes.
building at the Veterans Home of California–Yountville.
6 Determine whether the veterans • Interviewed key personnel at CalVet’s headquarters and the six active veterans homes.
homes system’s purchasing • Reviewed pertinent state manuals regarding state purchasing and procurement requirements.
and procurement decisions
• Reviewed and assessed CalVet’s purchasing and procurement policies and procedures.
are centralized or made by
individual homes. Review and • Reviewed a selection of CalVet’s purchases and tested those purchases to ensure compliance with
assess the veterans homes’ state requirements.
procurement policies and • Reviewed pertinent external audits to identify any relevant findings or recommendations.
procedures for efficiency
and cost-effectiveness.
7 For veterans that CalVet • Interviewed key personnel at CalVet’s headquarters and the six active veterans homes.
determines need long-term • Reviewed and assessed the veterans homes process for referring veterans to other facilities.
care, assess the process CalVet
• Obtained relevant CalVet documents regarding referring veterans to other facilities.
uses to decide whether some
veterans could be served in
other facilities, such as nursing
homes that receive funding
from the VA.
8 Evaluate CalVet’s planning • Interviewed CalVet officials to determine how it established its strategic goals.
process for the veterans’ homes, • Reviewed relevant CalVet planning documents, including CalVet’s strategic plan to identify the goals,
including its projections of the action plans, and measures of success associated with its long-term strategy.
California veteran population,
• Determined CalVet’s methods to communicate its strategic planning goals to the veterans homes.
and determine whether it has
a long-term strategy to fully • Evaluated the procedures CalVet used to monitor the implementation and track the success of its
fund and operate the homes at strategic initiatives at the veterans homes.
full capacity. • Examined the policies and procedures that CalVet is developing to ensure that the veterans homes are
operating near budgeted capacity.
• Reviewed CalVet’s method for identifying the needs of California’s future veteran population and how it
estimates the resources it will require to meet those needs.
9 Review and assess any other • Interviewed key personnel at CalVet’s headquarters.
issues that are significant to • Reviewed and assessed CalVet’s policies and procedures for outreach to returning veterans to ensure that
CalVet’s management of the they are informed about available services.
veterans homes system of
• Reviewed a feasibility study report for approval of a new CalVet system designed to better connect
care and meeting the needs
veterans with available services.
of returning veterans.
• Reviewed CalVet’s efforts to obtain additional resources to enhance its outreach efforts.
Sources: California State Auditor’s analysis of Joint Legislative Audit Committee audit request number 2012-119, and information and documentation
identified in the table column titled Method.
18 California State Auditor Report 2012-119
May 2013
Blank page inserted for reproduction purposes only.
California State Auditor Report 2012-119 19
May 2013
Audit Results
The California Department of Veterans Affairs Could Do More to
Maximize the Revenue It Receives
The California Department of Veterans Affairs (CalVet) has not
maximized its ability to generate revenue for the care provided
to veterans (members) who reside in the State’s veterans homes.10
Between fiscal years 2009–10 and 2011–12, CalVet generated
revenues to offset about half of the cost to operate its veterans
homes. CalVet has only recently begun developing policies and
procedures to monitor and increase the amount of revenue
generated at the veterans homes. In addition, state laws and CalVet
policies limit its ability to recover from members the full costs of
their care while they reside at a veterans home. For example, state
laws require CalVet to apply any money it collects from the estate
of a deceased veteran to a fund at the veterans home where the
member lived, rather than remitting it to the State’s General Fund
to offset the cost of the member’s care. As a result, CalVet is limited
in its ability to offset the costs of care provided to its members.
Until Recently, CalVet Provided Little Oversight of the Processes Veterans
Homes Used to Recover the Costs of Caring for Members
As discussed in the Introduction, CalVet receives funding for
the veterans homes from the General Fund, and the revenue the
homes generate by providing services to members is remitted
to the General Fund. As part of its 2012 strategic plan, CalVet
identified an objective to increase revenue and reduce operating
costs in the veterans homes, thus becoming less dependent on the
General Fund. However, according to the chief financial officer
for the Veterans Homes Division (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.
According to the chief financial officer, before CalVet developed in
2011 a strategy for increasing revenue, it was focused primarily on
providing quality care to its members, rather than on generating
revenue. Moreover, she indicated that although CalVet received
quarterly and annual reports from each of the veterans homes,
CalVet headquarters did not have adequate controls in place to
ensure that the homes were consistently enrolling and monitoring
the status of their members in maintaining coverage in all medical
10 Under certain conditions, a veteran’s spouse may also reside in a veterans home and is counted in
that home’s census.
20 California State Auditor Report 2012-119
May 2013
insurance and federal government-funded income programs
for which the members were eligible. For example, CalVet
headquarters did not have a process in place to monitor whether
eligible members were enrolled in the Medicare and Medi-Cal
programs.11 By not monitoring the number of members enrolled
in the Medicare and Medi-Cal programs and comparing them to
the number of members who were eligible to receive benefits from
those programs, CalVet could not ensure that it was maximizing
CalVet did not ensure that the revenue from Medicare and Medi-Cal. In addition, according to
veterans homes were receiving the chief financial officer, CalVet did not ensure that the veterans
the maximum amount of revenue homes were receiving the maximum amount of revenue for all
for all services provided to veterans. services provided to veterans.
State regulations require veterans seeking admission to a veterans
home to be participating in a qualified private, federal, or state
health service plan, including the Medicare and Medi-Cal
programs, or have an application pending for such coverage.
Because CalVet headquarters did not have procedures to monitor
the number of members enrolled in Medicare and Medi-Cal
before 2011, it is not clear whether all the veterans homes were
following this requirement. Moreover, according to a California
Veterans Board (Veterans Board) policy, once admitted into a
veterans home, a member must maintain, if eligible, participation
in a health service plan or risk being discharged from the home.
According to the chief financial officer, officials at the veterans
homes are currently encouraging members to maintain insurance
after they are admitted into the homes. However, she indicated that
CalVet currently does not discharge members that do not maintain
insurance. Moreover, she told us that CalVet wants to establish
regulations to implement certain portions of the Veterans Board’s
policy requiring members of veterans homes to maintain insurance,
which would give the policy the force of law. She further indicated
that the Veterans Homes Division is working with CalVet’s legal
affairs division regarding any restrictions that may prevent CalVet
from enforcing this policy. If CalVet implements this policy as a
regulation, it likely would have the beneficial effect of decreasing
CalVet’s unreimbursed costs of care.
As Figure 4 indicates, in fiscal years 2009–10 through 2011–12, CalVet
generated sufficient revenues to offset about half of the cost to operate
its veterans homes. According to the chief financial officer, CalVet
recognizes the importance of fiscal accountability and has developed
and instituted oversight policies to improve revenue generation at the
veterans homes. For example, CalVet’s new oversight policies include
a policy implemented in May 2012 that directs the veterans homes to
submit monthly reports to CalVet that include information in a range
11 Medi-Cal is a medical assistance program financed by the State and the federal government.
California State Auditor Report 2012-119 21
May 2013
of areas, such as emergent budget or revenue issues and the status of
cost reduction initiatives. Moreover, to offset the costs of care
provided to members and generate additional revenue by enrolling
more members eligible for Medi-Cal into that program, CalVet
provided training in September 2012 for staff at all the veterans
homes on the process of enrolling their members in Medi-Cal.
According to the chief financial officer, no single health care coverage
plan covers a member’s full cost of care. As a result, CalVet staff
are educating members about their health care options and signing
them up for coverage when eligible. CalVet also plans to coordinate
a member’s benefits to maximize reimbursement for the billed costs
among various health coverage plans.
Figure 4
California Department of Veterans Affairs Revenues and Expenditures
for the Veterans Homes
Fiscal Years 2009–10 Through 2011–12
Expenditures
Revenues
$160
$151.7
$143.7
140
$129.2
120
100
80
$69.9
$65.9
60 $59.2
40
20
0
2009–10 2010–11 2011–12
Fiscal Years
snoilliM
nI
Sources: California State Accounting and Reporting System reports for fiscal years 2009–10,
2010–11, and 2011–12.
Note: We excluded the California Veterans Home–Fresno and the California Veterans Home–
Redding because they are not scheduled to begin admitting veterans until October 2013.
Further, according to the chief financial officer, since 2012 CalVet
has been in the process of implementing an electronic health
record system at all the veterans homes that will streamline its
medical billing process and reduce the chance of human error when
22 California State Auditor Report 2012-119
May 2013
preparing electronic claims, enabling it to maintain accurate records
of the number of veterans enrolled in federal, state, or private
insurance plans, including the Medicare and Medi-Cal programs.
The chief financial officer anticipates that the new electronic health
record system will be fully operating in all eight veterans homes by
the end of 2014.
We believe CalVet will experience Because these policies to implement CalVet’s 2011 strategy to
an increase in revenues if it and the generate additional revenue at the veterans homes were developed
veterans homes follow through in or implemented in mid- to late-2012, it is too soon to know their
implementing the steps designed impact. However, if CalVet and the veterans homes follow through
to monitor and improve CalVet’s in implementing the steps designed to monitor and improve
revenue generating process. CalVet’s revenue generation process, we believe the department
will experience an increase in revenues.
State Laws and CalVet Policies Limit the Amount of Money That CalVet
Can Recover for the Care It Provides to Veterans
State laws limit CalVet’s 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. The costs of providing
care to members include expenses for room, board, and care at
the veterans homes, as well as expenses for medical care. These
costs are offset primarily by payments from the United States
Department of Veterans Affairs (VA), insurance reimbursements,
and the fees that CalVet charges its members.
Under state law, CalVet can use only a member’s annual income in
determining the member’s fee that it 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 a member’s annual income,
depending on the level of care he or she receives.12 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 (skilled
nursing) 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 a veterans home.
In addition to state laws limiting members’ fees to a percentage
of their annual income, CalVet has policies that limit the amount
that it can collect in member fees. As Table 3 indicates, CalVet has
12 The State’s veterans homes provide the following levels of care: domiciliary care, residential care
for the elderly, intermediate care, and skilled nursing care.
California State Auditor Report 2012-119 23
May 2013
established dollar limits on the maximum amount that the veterans
homes may charge members as monthly member fees. For example,
CalVet policy caps members’ fees at $5,600 per month for skilled
nursing care. In addition, CalVet instituted an income-retention
policy that allows members of a veterans home to retain $165 of
their monthly income, regardless of fee calculations. This may result
in occasions where members’ fees are reduced to ensure that they
retain at least $165 per month. According to the chief financial officer,
although these policies may limit the amount of revenue that it can
generate, CalVet instituted them to ensure that all members have
some money each month for their personal use. However, according
to our legal counsel, a court would likely hold that these policies
constitute unenforceable underground regulations because they
were not properly adopted as regulations in accordance with the
Administrative Procedure Act, which requires CalVet and other state
departments to allow public comments on proposed regulations.
Table 3
Factors That the California Department of Veterans Affairs Uses in Determining the Unreimbursed Cost of Care of
Veteran Residents at Veterans Homes as of March 2013
memBer account cost items memBer account cost offset items
Daily room and board charges (per level of care) for Member fees:
veterans (members) residing at the veterans home: State law requires that members pay a percentage of their annual income as member
• Domiciliary care: $95* fees. The fees are derived from all sources of a member’s income and then calculated at a
percentage based on the member’s level of care. Further, the California Department of
• Residential care: $95
Veterans Affairs (CalVet) established dollar limits on the maximum amount of member
• Intermediate care: $140
fees it may charge and allows members to keep $165 per month, which in some instances
• Skilled nursing care: $175†
may result in a member’s fees being less than the calculated percentage of income.
Other expenditures: • Domiciliary care: 47.5 percent of income (fee capped at $2,400 per month)
Any expenditure that a veterans home pays for a • Residential care: 55 percent of income (fee capped at $4,500 per month)
member’s care and outside services. An example of this • Intermediate care: 65 percent of income (fee capped at $5,000 per month)
type of expenditure is a member’s costs associated with
• Skilled nursing care: 70 percent of income (fee capped at $5,600 per month)
outside physician visits.
Federal per diem (daily rate) paid by the U.S. Department of Veterans Affairs:
• Domiciliary and residential care: $41.90
• Intermediate care and skilled nursing care: $97.07
Federal aid and attendance:
Monthly stipend capped at $1,038 for some veterans and their family members needing
additional assistance with activities of daily living.
Insurance payments:
Federal, state, or private insurance plans, including Medicare and Medi-Cal programs.
Final Calculation: Total Charges – Member Fees and Other Cost Offset Items = $ Unreimbursed Cost of Care
Sources: California State Auditor’s analysis of federal and state laws and regulations, and CalVet policies and procedures.
* According to CalVet’s current room and board rates, the rate for the domiciliary level of care at the Veterans Home of California–Barstow is $65.
† According to CalVet’s current room and board rates, the rate for the skilled nursing level of care at the Veterans Home of California–Yountville is $365.
24 California State Auditor Report 2012-119
May 2013
Table 3 shows, for the different levels of care at the veterans homes,
the room and board charges and the percentage of members’
income that CalVet uses in determining members’ fees, as well as
the other factors CalVet considers in determining the unreimbursed
cost of care for members. As an example of CalVet’s calculation of
a member’s cost of care, a member at the skilled nursing level
of care whose annual income is $24,000 ($2,000 x 12 months)
would be limited to paying $16,800 per year in member fees
(70 percent of $24,000). In addition CalVet would receive roughly
$35,430 in annual per diem from the VA ($97.07 x 365 days). Thus,
CalVet would generate a total of roughly $52,230, not including
other potential revenue, such as other payments from the VA or
insurance reimbursements. However, this hypothetical member’s
room and board costs would be approximately $63,875 ($175 x
365 days) annually, not including any potential unreimbursed
costs associated with medical care. Therefore, in this hypothetical
scenario, CalVet’s cost for caring for the member for one year
would exceed the care-related payments by $11,645. Following this
methodology, CalVet maintains for each member a running total of
all costs associated with the member’s care, the amount of revenue
generated to offset the costs, and the net unreimbursed cost of care,
according to CalVet’s chief of cost accounting and support. To help
CalVet needs to pursue all additional ensure that CalVet is successful in meeting its strategic objective
sources of revenue, including of increasing revenues and decreasing costs in its veterans homes,
insurance reimbursements and VA it is critical that CalVet pursue all additional sources of revenue,
payments, to assist in offsetting the including insurance reimbursements and VA payments, to assist in
member’s cost of care. offsetting the member’s cost of care.
State law also limits CalVet’s ability to use funds collected from
members’ estates after they pass away to offset the cost of their care.
Specifically, although state law permits CalVet to collect from a
member’s estate an amount no more than the unreimbursed cost of
care for the member, none of the money collected reimburses CalVet
for those costs, except for a deceased member’s funeral expenses.
Instead, state law specifies that the money CalVet collects from a
member’s estate must go to the Morale, Welfare, and Recreation
Fund at the veterans home where the member resided rather than
the General Fund, which was the source of funding for the member’s
care while residing at the home. According to a senior staff counsel
in CalVet’s legal affairs division, after a member passes away, CalVet’s
Estates Recovery Unit determines whether there are unreimbursed
costs of care for the member and whether there are assets from
which CalVet might be able to collect. If such assets exist, CalVet
tries to collect a portion of them, if it is legally and financially
prudent to do so.
State law established the Morale, Welfare, and Recreation Fund at
each veterans home to provide for the general welfare of veterans,
including paying for costs associated with entertainment expenses,
California State Auditor Report 2012-119 25
May 2013
sports activities, and celebrations. For example, the Veterans
Home of California–Yountville (Yountville veterans home) used
the proceeds from its Morale, Welfare, and Recreation Fund in
fiscal year 2010–11 to support a library at that home. In addition
to receiving money collected from deceased members’ estates,
the Morale, Welfare, and Recreation Fund at each of the veterans
homes includes money received from other sources, such as
revenues derived from the issuance of prisoner-of-war special
license plates and from donations. Table 4 provides the balances for
fiscal year 2011–12 in the Morale, Welfare, and Recreation Fund at
each of the veterans homes. As Table 4 indicates, the three oldest
veterans homes—at Yountville, Barstow, and Chula Vista—have
established the largest Morale, Welfare, and Recreation Fund
balances. For example, the Yountville veterans home reported
a fund balance of approximately $4.9 million at the end of
fiscal year 2011–12. During that same fiscal year, it collected
approximately $1.7 million from the estates of deceased members,
while it spent approximately $1.5 million from the fund.
Table 4
Morale, Welfare, and Recreation Fund Balances for Each of the Veterans Homes
amounts coLLected in fiscaL
moraLe, weLfare, and moraLe, weLfare, Year 2011–12 from the estates of other sources of funding
recreation fund— and recreation fund deceased Veterans who resided at for the moraLe, weLfare,
caLifornia cumuLatiVe totaL BaLances expenditures for the Veterans homes (memBers) and and recreation fund in
Veterans home as of june 30, 2012* fiscaL Year 2011–12 had unreimBursed costs of care fiscaL Year 2011–12†
Yountville $4,880,421 $1,453,076 $1,694,227 $141,074
Barstow 1,780,609 107,892 176,666 78,392
Chula Vista 1,600,729 308,759 580,028 8,606
Lancaster 1,094 76 1,138 32
Ventura 9,576 1,809 0 10,880
West Los Angeles‡ 0 0 0 0
Totals $8,272,429 $1,871,612 $2,452,059 $238,984
Sources: California Department of Veterans Affairs’ (CalVet) year-end financial reports for the fiscal year ending June 30, 2012 (unaudited).
* These amounts are cumulative totals of the Morale, Welfare, and Recreation funds at the various veterans homes that include collections from
members’ estates during fiscal year 2011–12.
† In addition to revenue from members’ estates, the other sources of funding for the Morale, Welfare, and Recreation Fund included interest revenue
and miscellaneous revenue, among other sources.
‡ CalVet did not report a balance or activity for a Morale, Welfare, and Recreation Fund at the California Veterans Home–West Los Angeles for the
fiscal year ending June 30, 2012.
State law prohibits CalVet from using money from the
Morale, Welfare, and Recreation funds for medical treatments,
maintenance of a veterans home, or any other activity not directly
related to the morale, welfare, or recreation of the veterans
living at the homes. Moreover, CalVet cannot use these funds to
reimburse the costs its legal affairs division incurs when collecting
26 California State Auditor Report 2012-119
May 2013
assets from deceased members. According to CalVet’s legal affairs
division, the total unreimbursed costs of care for the 228 members
who passed away while in the care of the veterans homes in
2011 was $27.4 million. As of April 2013 CalVet had collected
approximately $2.5 million for 216 of the 228 cases it had closed,
none of which reimbursed CalVet for the unreimbursed cost of
care it provided. According to a senior staff counsel in CalVet’s legal
affairs division, there were no additional assets to collect for the
216 closed cases. He also informed us that the total unreimbursed
costs for 2012 was $24.2 million, and CalVet is following its process
for collecting available assets from the estates of members who
passed away in that year.
CalVet’s current cost recovery model results in members accruing
a significant amount of unreimbursed costs of care. For CalVet to
become more cost-efficient and still provide veterans with quality
care, it should reevaluate its current model of recovering costs.
According to the governor’s proposed fiscal year 2013–14 budget,
the cost to the General Fund for operating the veterans homes
is anticipated to rise from $189 million in fiscal year 2011–12 to
an estimated $310 million by fiscal year 2013–14.13 As mentioned
in the previous section, CalVet currently offsets about half of its
annual operating expenditures with funds generated from existing
CalVet should analyze state laws revenue sources. Thus, CalVet should analyze its cost recovery
limiting its ability to collect actual model, including evaluating the state laws that limit the amount of
costs of care from members and revenue CalVet can collect for the care it provides to its members at
examine whether a change in the veterans homes. For example, CalVet should analyze state laws
law could result in collecting limiting its ability to collect the actual costs of care from members
additional revenue. while they are living at the home, and examine whether a change in
the law could result in CalVet collecting additional revenue to offset
its direct and indirect costs of care, including administrative costs
incurred by CalVet’s legal affairs division when attempting to collect
assets after members pass away. In addition, CalVet should examine
the laws creating the Morale, Welfare, and Recreation Fund at each
of the veterans homes and determine whether these funds could
sustain themselves using investments, donations, and other sources
of revenue. We believe that an evaluation of its cost recovery
model, such as we have outlined here, would provide CalVet with
useful information that could help it determine how best to offset
the unreimbursed costs to the General Fund of providing care
to members.
13 According to the fiscal year 2011–12 Governor’s Budget, CalVet was initially budgeted $251 million
for operating the veterans homes for that fiscal year, but that amount was subsequently reduced
in the fiscal year 2011–12 Budget Bill to roughly $204 million, of which CalVet ultimately spent
$189 million.
California State Auditor Report 2012-119 27
May 2013
CalVet Is Increasing Its Oversight of Staffing Levels at the Veterans Homes
Until recently CalVet provided limited oversight of staffing at the
veterans homes. According to CalVet’s assistant deputy secretary
of veterans homes operations (assistant deputy secretary of
operations), before January 2012 the individual veterans homes
were responsible for ensuring that staffing levels on any given
day met state and federal requirements. These requirements
include state regulations mandating that veterans homes licensed
as intermediate care or skilled nursing facilities meet specific
nurse-to-member ratios on a daily basis.14 Further, although state
laws do not specify staffing ratios for veterans homes licensed as
residential care facilities, state regulations require sufficient staff at
these facilities to provide the services necessary to meet members’
needs.15 Because CalVet must staff the veterans homes to meet state
and federal requirements, each home must have a certain number
of care staff, which are limited by each home’s budget.
The assistant deputy secretary of operations indicated that CalVet
has been increasing its oversight of staffing levels at each of the
veterans homes to ensure that the homes provide quality care in
as cost-efficient a manner as possible. For example, he told us that
CalVet implemented standardized nurse-to-member ratios in
all the veterans homes to meet its 2012 strategic goal of creating
fiscal and operational efficiencies while ensuring members’ quality
of care. Specifically, according to a November 2011 e-mail from
CalVet’s assistant deputy secretary of operations to the veterans
homes, the individual homes are responsible for meeting specified
targeted ranges of nurse-to-member ratios for each licensed level
of care—skilled nursing, intermediate care, and residential care for
the elderly (residential care).
The Veterans Homes Division’s director of health care services
(health care director) stated that, to assess whether the veterans
homes are meeting these targeted ranges, since January 2012 he has
been reviewing spreadsheets that the homes complete and submit
to headquarters each week showing the numbers of members and All the active veterans homes
staff at each licensed level of care. We reviewed these spreadsheets reported each week to CalVet and
for 2012 for all six of the active veterans homes and found that they identified whether each one was
clearly identified whether a home was within the targeted range for within the targeted range for the
the applicable nurse-to-member ratio. We noted three instances applicable nurse‑to‑member ratio.
in which veterans homes reported staffing ratios that were either
14 The term nurse-to-member ratio corresponds to the term nursing hours per patient day used in
state law. State law defines nursing hours to include work performed by aides, nursing assistants,
orderlies, registered nurses, and licensed vocational nurses. We use the term member in place of
patient to refer to veterans residing in the state veterans homes.
15 Domiciliary care is not a licensed level of care, and therefore there are no state
staffing requirements.
28 California State Auditor Report 2012-119
May 2013
above or below the targeted range for six or more months during
the year. We discussed all three instances with the health care
director, and based on the information he provided us regarding
the circumstances at each of the veterans homes, we concluded
that they had valid reasons for falling outside the targeted ranges.
For example, in an instance in which the residential care facility at
the Yountville veterans home was below the targeted staffing ratio
range for seven months in 2012, the health care director explained
that the Yountville veterans home did not have enough budgeted
staff positions during the period in question in its residential care
facility to meet the targeted ratio range. He further told us in
April 2013 that CalVet is looking at creative options to leverage
existing staff within the home as well as considering seeking
additional staff positions to address this shortage in staff positions
at the Yountville veterans home.
In addition to standardizing and monitoring nurse-to-member ratios,
CalVet is in the process of developing a standardized staffing model
for the veterans homes. According to the assistant deputy secretary of
operations, the development of a standardized staffing model for all
service departments at the veterans homes is one of CalVet’s action
steps for meeting its strategic goal of providing the highest-quality
long-term care and increasing fiscal efficiencies in each state veterans
home. In January 2013 CalVet provided us with a draft standardized
staffing model for all the veterans homes. CalVet anticipates
approval from the California Department of Finance (Finance) for
implementation of the staffing model in fiscal year 2014–15. The
health care director told us that he will be responsible for tracking
the implementation of the standardized staffing model at the veterans
homes and will use a spreadsheet that calculates the difference
between the number of positions that a veterans home has and the
number of positions designated by the model.
CalVet May Have Opportunities to Utilize Unused Space at the
Veterans Homes Through Leasing and Partnerships With Other Entities
Statutory licensing requirements and state budget constraints
have limited the number of beds available for veterans, resulting
in unused space at the homes. To better utilize this unused space,
CalVet leases some of its unused space at its veterans homes and
has a public-private partnership agreement to serve more veterans
CalVet does not currently have a than it currently serves using other space.16 However, CalVet does
formalized process for increasing not currently have a formalized process for increasing utilization of
utilization of unused space at
its homes through leasing or by
securing additional partnerships. 16 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 home to serve more veterans, we included them in our analysis of CalVet’s
lease agreements that we discuss on page 31.
California State Auditor Report 2012-119 29
May 2013
unused space at its homes through leasing or by securing additional
partnerships, and our legal counsel identified several legal restrictions
that may limit CalVet’s ability to utilize unused space at its homes.
Legal Restrictions May Limit CalVet’s Ability to Utilize Unused Space at
the Veterans Homes
As discussed in the Introduction, the veterans homes are subject
to statutory requirements and state budget allocations that limit
the number of beds available for veterans, resulting in unused
space at the homes. To better utilize its unused space, CalVet’s
2012 strategic plan includes an objective to increase utilization
of the unused space at the veterans homes at no cost to the State,
with innovative programs for veterans through collaborative
relationships with nonprofits, veteran service organizations, and Promises the State made when
private entities. However, our legal counsel noted that there are obtaining property for the veterans
legal restrictions resulting from promises the State made when homes and when financing their
obtaining the property for the veterans homes and when financing construction could impede CalVet’s
their construction that could impede CalVet’s ability to partner ability to partner with third parties
with third parties to lease property at the homes. For example, each to lease property at the homes.
of the State’s veterans homes was constructed on land that was
granted to the State by public or private entities under a deed, and
some of these deeds contain restrictions that may limit the State’s
ability to lease the property. Further, the terms of the construction
grants provided to CalVet by the VA may limit the State’s authority
to lease portions of the veterans homes to third parties. Specifically,
each of the agreements for the federal construction grants provides
that the federal government may require the State to repay the
grants if the State does not use the facilities funded by the grants
“principally” for veterans homes. Our legal counsel concluded that
as long as the State’s principal purpose for the property is to provide
veterans homes, CalVet would not violate this term of the grants.
In addition, the construction of some of the facilities at the veterans
homes was financed with the proceeds of tax-exempt bonds,
including facilities at the new homes in Fresno and Redding.17
Federal law generally limits the amount of private business activities
that may take place within the facilities financed with these
bonds to an economic value of no more than 10 percent of the bond
proceeds, depending on the type of use. If CalVet exceeds this
limit, the bonds would lose their tax-exempt status. When issuing
those bonds, the State promised to adhere to this limitation on
17 According to the Internal Revenue Code, the interest paid by the State to bondholders is exempt
from federal income taxation because such interest payments are not counted as part of the
bondholder’s income.
30 California State Auditor Report 2012-119
May 2013
private activities. Consequently, our legal counsel noted that CalVet
must ensure that it does not violate the terms of the bonds and risk
their tax-exempt status.
Our legal counsel also identified some state laws that may limit
CalVet’s ability to lease to or to partner with other entities to utilize
unused space at the veterans homes. For example, under state law,
the California Department of General Services (General Services) is
normally required to be involved in executing leases of property at the
veterans homes. Further, California Government Code, Section 19130,
may limit CalVet’s ability to enter into agreements with third parties
to provide services at the veterans homes, such as food preparation
services, when such services are a significant element of the agreement.
Specifically, California Government Code, Section 19130, limits the
ability of state agencies such as CalVet to enter into service contracts
by specifying under what conditions such contracts are permissible.
Those conditions include that the contract will achieve cost savings,
or that the contract is for services that are not available in civil
service, or that it is for a new state function.
Regarding contracts that are for a new state function, Military
and Veterans Code, Section 1011(c), enacted in 1996, provides that
the veterans homes in Barstow, Chula Vista, Lancaster, and Ventura
are a new state function and that CalVet may use contractors to
operate these homes. However, our legal counsel noted that this
law may conflict with a 1997 California Supreme Court decision
that invalidated a law that deemed certain duties of the California
Department of Transportation as new state functions that could
be performed by contractors.18 Specifically, the court held that the
law violated the “implied civil service mandate” of the California
Constitution because the duties covered by the law had been
historically performed adequately and competently by civil service
employees, and therefore, private contracting was not permissible
to perform these duties. Thus, it is not clear whether CalVet could
justify contracting for services at these veterans homes solely upon
the basis of Section 1011(c), or whether it would need to additionally
justify that the contract meets another of the conditions spelled out
in California Government Code, Section 19130.
Ultimately, our legal counsel concluded that these laws and promises
must be considered together when CalVet considers entering into or
making leases or executing service contracts. For example, even if a
CalVet would need to ensure that a deed that granted property to CalVet would not prohibit the State
lease or service contract would not from entering into a lease with a third party for certain property at
violate a promise made in a federal a veterans home, CalVet would also need to ensure that the lease
construction grant agreement or a would not violate a promise made in a federal construction grant
bond statement. agreement or a bond statement.
18 Professional Engineers in California Government v. Department of Transportation (1997) 15 Cal.4th 543, 572.
California State Auditor Report 2012-119 31
May 2013
As discussed in the Introduction, in October 2010, to address deficiencies
in its policies and procedures, CalVet developed standardized leasing
procedures that required it to work with General Services in establishing
its leases. Although we noted that CalVet generally worked with General
Services to obtain that agency’s approval when necessary for CalVet’s
lease agreements active as of November 2012 at the veterans homes, we
identified an instance in which CalVet could not provide evidence that
it had followed state law. Specifically, CalVet’s assistant deputy secretary
of capital assets could not provide any evidence that CalVet considered
California Government Code, Section 19130, when it entered into a
public-private partnership agreement at the Yountville veterans home with
the nonprofit organization the Pathway Home, LLC (Pathway Home) that
includes some service-related activities. He told us that its agreement
with Pathway Home expired at the end of December 2012, and CalVet
is currently receiving services from Pathway Home without a contract.
Nevertheless, he told us that CalVet is in the process of negotiating a new
agreement and that a component of those negotiations will include a
documented evaluation of California Government Code, Section 19130,
regarding this agreement. We discuss CalVet’s agreement with the Pathway
Home in more detail later in the report.
CalVet Needs to Formalize Its Process for Leasing the Unused Space at the
Veterans Homes
CalVet has taken some steps to meet its strategic goal to better utilize
unused space at its veterans homes to generate additional revenue and
to serve additional veterans. However, a lack of formal planning has
limited its success in this area. CalVet’s leasing records indicate that as
of November 2012, it had 38 active leases with other entities. Of these
leases, 36 were at the Yountville veterans home, and 20 of these 36 leases
were for employee housing. For fiscal year 2011–12, the Veterans Homes
Division generated approximately $198,000 in revenue from its 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.
Although CalVet has some agreements with other entities to analyze
long-term planning issues at the Yountville veterans home, it does CalVet does not have a formalized
not have a formalized process to implement its strategic goal for process to implement its strategic
identifying opportunities to utilize unused space at its other veterans goal for identifying opportunities
homes. In July 2011 CalVet contracted for a comprehensive master plan to utilize unused space in all its
for its Yountville veterans home that was completed in January 2013. veterans homes.
Among other things, the master plan identified ongoing needs for
facilities and long-term planning issues for the Yountville veterans
home and recommended ways to use existing buildings and property.
For example, the master plan noted that the Yountville veterans home
32 California State Auditor Report 2012-119
May 2013
presents opportunities to generate revenue through the potential
development of property on the perimeter of its campus, such as
a privately developed and operated inn and replacement of the
current employee housing.
The master plan also evaluated the home’s existing buildings and
identified several deficiencies, such as the size of the rooms for
members in skilled nursing care in the N. M. Holderman building.
Specifically, the master plan noted that nearly all of the members’
rooms are double occupancy yet are smaller than the size of a
single-occupancy room for skilled nursing care at the Veterans
Home of California–Fresno (Fresno veterans home). According to
CalVet’s current five-year capital outlay infrastructure plan (capital
outlay plan) that was submitted to Finance in July 2012, CalVet
already plans to replace the current skilled nursing care facility in
the N. M. Holderman building with a new 280-bed building directly
adjacent to that building. The capital outlay plan indicates that the
building project will be funded partly through VA construction
grants. However, according to CalVet’s assistant deputy secretary
of capital assets, the State’s funding for the remainder of the project
has not yet been identified. The capital outlay plan proposes that the
State’s share of financing be considered during fiscal year 2013–14.
Once the new nursing care facility is built, the capital outlay plan also
indicates that space will be available at the N. M. Holderman building
for domiciliary care.
The master plan further recommends that CalVet create a water
management plan for the Rector Reservoir, which is owned by
CalVet and is located across the Napa Valley from the Yountville
veterans home property. The reservoir provides water to
the veterans home and the town of Yountville. For example, the
CalVet may explore its options for master plan recommends that CalVet determine the viability of
selling water to other entities from selling additional water from the Rector Reservoir or selling the
the Rector Reservoir, which it owns reservoir. CalVet has an agreement with the California Department
and provides water to the Yountville of Water Resources for that agency to conduct a study of the Rector
veterans home and the town Reservoir to assist CalVet in making decisions related to water
of Yountville. supply contracts involving the reservoir. The agreement states
that the study will review the reservoir’s current and projected
water supply yield through 2020, among other things. According
to the assistant deputy secretary of capital assets, the study is
also intended to analyze factors that may affect CalVet’s use of
the water, and he anticipates that the study will be completed
before the end of May 2013. He further stated that once the study
is finished, CalVet will evaluate it to determine the feasibility of
its recommendations. For example, if the study determines that
additional water yields are available, CalVet may explore its options
for selling water to other entities.
California State Auditor Report 2012-119 33
May 2013
According to the assistant deputy secretary of capital assets, CalVet
is in the process of evaluating the master plan for the Yountville
veterans home, and by December 2013 will prioritize the suggested
recommendations to ensure cost-effectiveness and the highest
quality of care for veterans served at the Yountville veterans home.
He further stated that once CalVet has completed its internal
evaluation of the master plan, it intends to formally incorporate
a specific set of milestones and objectives into its 2012 strategic
plan. These milestones and objectives will include receiving
requested input from interested parties, including control agencies,
stakeholders, and local leaders, as well as recognizing any barriers
to achieving the objectives selected as priorities. In addition,
he stated that CalVet will incorporate the renovation or new
construction options it has identified during the internal review
process into its five-year planning process, including its capital
outlay plan.
The assistant deputy secretary of capital assets further noted
that CalVet does not intend to contract for master plans for the
other veterans homes because they are not experiencing issues
similar to those the Yountville veterans home is facing due to
its age. Nevertheless, he indicated that to ensure that the Veterans
Homes Division is meeting the goals of CalVet’s 2012 strategic
plan, the division is working with the administrators at each of the The Veterans Homes Division is
veterans homes to evaluate whether there are any opportunities to working with each veterans home
utilize unused space. For example, the administrator of the Veterans to evaluate opportunities to utilize
Home of California–Ventura (Ventura veterans home) told us that unused space, such as working on a
she is working with CalVet headquarters regarding a potential potential contract for a cell phone
contract for a cell phone tower at that veterans home to generate tower at the Ventura veterans home.
additional revenue; however, she anticipates that it may take until
December 2013 to finalize the agreement. 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. We would expect that after
CalVet determines the appropriate number of beds at each level of
care at each veterans home subsequent to the licensing of the Fresno
veterans home and the Veterans Home of California–Redding, it
would use those determinations in identifying its unused space.
CalVet Needs to Secure Additional Public‑Private Partnership Agreements
at the Veterans Homes and Monitor the Success of Its Partnerships
Although CalVet has, as one of its strategic objectives, the goal of
establishing collaborative partnerships to better utilize unused space
at the veterans homes and serve more veterans, it does not have a
formalized process for securing additional partnerships and has not
34 California State Auditor Report 2012-119
May 2013
monitored the success of its existing agreement. To meet its strategic
objective, CalVet has had, since September 2012, an assistant deputy
secretary specifically tasked with actively establishing collaborative
relationships with nonprofits, veterans service organizations, and
private entities to identify potential public-private partnerships at the
veterans homes that will use unused space and serve more veterans.
That assistant deputy secretary told us that part of CalVet’s process
is to work with the administrators at each of the veterans homes to
identify potential public-private partnerships. Further, he told us that
CalVet had developed a matrix to track its efforts toward meeting
this strategic objective. However, the tracking document is of limited
value because it does not currently specify when efforts included in
the document were initiated or the most recent status of the efforts.
According to the assistant deputy secretary, beginning in March 2013
he would periodically review the tracking document and update it as
needed to reflect CalVet’s efforts to identify potential opportunities for
public-private partnership agreements. Moreover, he indicated that,
as part of CalVet’s annual review of its strategic plan, CalVet staff will
conduct a formal planning review and document the Veterans Homes
Division’s efforts in this area over the previous year. While we believe
this effort could be helpful to CalVet in identifying approaches that
have been successful, we also believe it would be beneficial for CalVet
to develop a forward-looking process for establishing public-private
partnership agreements that incorporates these approaches.
As of November 2012 CalVet had one public-private partnership
agreement to serve more veterans than it currently serves involving
unused space at a veterans home. This agreement enables the 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. The Yountville
veterans home has had a contract with Pathway Home since 2008.
Although the agreement specifies that CalVet may monitor the
Because CalVet has not monitored program’s quality assurance measures and may request reports as
its one public‑private partnership needed, CalVet has not done so or otherwise monitored the program’s
agreement, it does not know success. Because CalVet has not monitored the agreement, it does
whether the services and goals not know whether the Pathway Home program has provided the
specified in the agreement have services specified in the agreement or whether this agreement’s goals
been provided or that the goals have been successful. According to CalVet’s assistant deputy secretary
have been successful. of capital assets, CalVet did not monitor the success of the program
because the current agreement did not require it to do so. However,
the State Contracting Manual recommends that state entities monitor
and document the performance of contracted services. CalVet’s
assistant deputy secretary of capital assets indicated that CalVet is
currently renegotiating its contract with Pathway Home for 2013 and
CalVet plans to include reporting requirements in the new agreement
currently being negotiated with Pathway Home that will allow
CalVet to track and monitor the program to evaluate the success of
California State Auditor Report 2012-119 35
May 2013
the partnership and to ensure that Pathway Home has provided the
services specified in the agreement. Nevertheless, Pathway Home
currently has 34 beds at the Yountville veterans home licensed by the
California Department of Social Services as a social rehabilitation
facility and is also certified by the California Department of Health
Care Services as a transitional residential treatment program.
The executive director of Pathway Home indicated that, as of
January 1, 2013, it had nine clients in its transitional residential
treatment program. Moreover, he told us that the program opened
in 2008, and by the end of February 2013 it had served a total of
290 veterans through its inpatient services and 88 veterans through
outpatient supportive services. In addition, he reported that as
of August 2012, the program had received completed follow-up
surveys from approximately 35 percent of veterans who completed
the treatment program, and the survey respondents reported a
significant decrease in symptoms of post-traumatic stress disorder
and a significant improvement in their quality of life. However,
because CalVet is not monitoring the program, it does not know
how successful the collaboration is in serving more veterans.
In addition to the Pathway Home program, the assistant deputy
secretary of capital assets told us that CalVet is currently in
discussions with a research group at the University of California,
Davis, hospital to implement a mental health program in the
unused space at the Yountville veterans home that would provide
brain research and psychiatric treatment for veterans. However, he
indicated that CalVet is still negotiating this agreement and has not
finalized funding or a timeline for its completion.
To better use unused space at its veterans homes, CalVet should CalVet should develop a formalized
develop a formalized process for identifying, securing, and evaluating process for identifying, securing,
public-private partnership agreements with other entities that and evaluating public‑private
could provide more services to veterans. One model CalVet could partnership agreements that could
consider for such an approach is viewing the partnerships as pilot provide more services to veterans.
programs that require monitoring and evaluation to determine the
success of the partnership and whether such a partnership could
be successful at other veterans homes. CalVet indicated that it will
include measurable outcomes in its new and existing public-private
partnership agreements and that it will track and monitor them to
evaluate their success.
Limited Resources Impede CalVet’s Outreach Efforts to Inform
Veterans of Benefits and Services Available to Them
CalVet conducts multiple forms of outreach to California
veterans. The Veterans Services Division’s (Veterans Services)
outreach activities aim to make all California veterans aware of
36 California State Auditor Report 2012-119
May 2013
benefits and services for which they may be eligible. However,
resource limitations have constrained the outreach capabilities
of Veterans Services. Consequently, it utilizes technology as
one strategy for reaching veterans who might not otherwise learn
about the benefits and services available to them.
Limited Field Personnel and a Lack of Contact Information Hinder
Veterans Services’ Ability to Conduct Outreach to Veterans
CalVet has a strategic objective to connect California’s veterans with
the services they need to excel in the 21st century. Veterans Services
is responsible for most of this outreach effort, including connecting
veterans to their benefits and services. CalVet acknowledged in its
2012 strategic plan that in order to inform California veterans about
the benefits to which they are entitled, it must first know where each
veteran is and how best to reach him or her. However, according
to CalVet’s field operations manager, there is no reliable master
list of California veterans that the VA or any other entity produces.
Thus, CalVet employs multiple outreach strategies to locate veterans
in California, including veterans recently separated from active duty.
One strategy for locating veterans is for CalVet staff to attend veterans’
events. CalVet has eight field outreach staff and a field operations
manager who are responsible for locating veterans and providing
them with information about and referrals for benefits and services.
To meet this responsibility, its field outreach staff attend a variety of
veteran-specific events, including the federal Transition Assistance
program and Yellow Ribbon events for returning veterans. Federal law
established the Transition Assistance program to provide employment
assistance and other transitional services to members of the armed
forces who are being separated from active duty. Similarly, federal law
established the Yellow Ribbon program for members of the reserve
components of the armed forces to help facilitate access to services
to support their health and well-being through multiple phases of
the deployment cycle, including post-deployment. According to the
field operations manager, because California veterans may attend
federal veterans’ events in other states where they are stationed at the
time of their discharge, CalVet’s outreach to veterans at these events
in California will not reach all of the State’s veterans. However, he
explained that veterans who do not attend federal veterans’ events in
California may have opportunities to connect with CalVet at other
outreach events, such as job or health fairs.
According to CalVet’s field operations manager, when field
outreach staff attend veterans’ events, they provide veterans with
information about their benefits and collect contact information.
The benefit information is included in the Veteran’s Resource Book,
which CalVet staff provide to all veterans at these events.
California State Auditor Report 2012-119 37
May 2013
The Veteran’s Resource Book is a CalVet publication that describes
a wide range of benefits and services available to veterans,
including education benefits and information about employment
opportunities. In addition, the Veteran’s Resource Book includes
information about the VA health care system and VA mental health
services for veterans, such as treatment programs for veterans
suffering from post-traumatic stress disorder and screenings for
traumatic brain injury.
To collect contact information for veterans at the veterans’ events,
CalVet uses a reintegration form that asks for the veteran’s name,
address, phone number, and e-mail address. The reintegration form
also provides veterans the opportunity to request information
from CalVet about a wide range of topics, including information on
state benefits, CalVet’s home loan program, health care benefits,
and compensation and pension benefits. According to CalVet’s
procedures for capturing a veteran’s contact information on the
reintegration form, the information is entered into a database called
the CalVet Corps System. When information from a veteran is
entered, the database generates an automatic e-mail to the veteran
that contains hyperlinks to information about specific benefits and
services that the veteran requested on the reintegration form. In
addition, according to information obtained from CalVet’s chief of
application and web support, the database generates a notification
e-mail containing the veteran’s contact information and sends it to
CalVet’s partners. For example, the database notifies the veteran’s
county veteran service officer, an individual appointed by a county
to assist veterans with presenting and pursuing claims, such
as claims for pension, disability, and health care benefits. As of
January 2013, according to a report we obtained from the chief
of application and web support, the CalVet Corps System contained
information on nearly 65,000 California veterans. In addition to
printed versions, both the reintegration form and the Veteran’s
Resource Book are available in electronic form on CalVet’s Web site.
Because it has limited staff, the field operations manager told us
that CalVet staff members cannot always attend the veterans’
events that are held. As a result, he told us that he prioritizes major
outreach events, such as Transition Assistance programs. He also
indicated that when his staff is unable to attend a veterans’ event, he
will typically offer to coordinate with the sponsors of the event and Due to the limited number of
send printed materials related to veterans’ benefits and services, field outreach staff who attend
such as the Veteran’s Resource Book. Nonetheless, due to the limited veterans’ events only in California,
number of field outreach staff and the fact that they attend veterans’ many veterans may continue to be
events only in California, many veterans may continue to be unaware of benefits and services for
unaware of benefits and services for which they may be eligible. which they may be eligible.
38 California State Auditor Report 2012-119
May 2013
CalVet has attempted to get additional funding to increase its
outreach efforts. According to the field operations manager, funding
constraints for personnel and other resources have, at times,
limited the volume and quality of CalVet’s outreach to veterans.
To address the need to expand its outreach efforts, in January 2012,
CalVet pursued a total of $22 million in funding from the VA
spread across seven program years for purposes that included
increasing the number of field outreach staff positions from eight to
22 over that time frame. According to CalVet’s secretary, senior
staff from the VA provided a verbal reply that no funding of the
request would be forthcoming in federal fiscal year 2012, but that
the VA would review the request again in federal fiscal year 2013.
According to CalVet’s budget officer, as of March 2013, CalVet
has not submitted a similar request for additional state funding to
expand its field outreach efforts, including field outreach staff, for
budget year 2013–14.
Veterans Services Uses Technology‑Based Outreach Efforts to Better
Reach Veterans
To increase its outreach to veterans within its limited resources,
Veterans Services also uses technology-based strategies to
reach veterans who might not otherwise learn about veteran
benefits and services to which they are entitled. For example,
CalVet’s Web site provides general information about the
To provide news and information of services CalVet provides for veterans as well as links to information
interest to veterans, CalVet offers a about various veterans’ benefits. Further, CalVet offers a mobile
mobile application for smartphones application for smartphones and similar electronic devices and has
and has a social media presence on a social media presence on Facebook and Twitter to provide news
Facebook and Twitter. and information of interest to veterans.
CalVet is also developing a new electronic outreach tool called CalVet
Connect. According to CalVet’s strategic plan, CalVet Connect will
be a web-based portal that will help meet the needs of veterans
by providing education and referrals to service providers. In
December 2012 the California Technology Agency approved CalVet’s
feasibility study for the new system. The feasibility study indicates
that CalVet Connect will serve as an integrated veteran contact and
demographic database that will allow registered users to actively
maintain their contact information and identify areas of interest,
thus enabling them to receive targeted benefit and service provider
information. Moreover, CalVet intends to integrate the new system
with its current social media platforms, including Facebook and
Twitter. The California Technology Agency’s approval letter indicates
that CalVet Connect will cost approximately $1.3 million and will be
funded through the General Fund and a reimbursement from the
California State Auditor Report 2012-119 39
May 2013
Assembly Speaker’s Office. CalVet’s chief information officer stated
that CalVet selected a vendor for this project in April 2013, with the
implementation planned for completion in February 2014.
CalVet Needs to Enhance Its Oversight and Guidance to Its Veterans
Homes for Referring Veterans Needing Long-Term Care to Other Facilities
As discussed in the Introduction, CalVet may deny a veteran
admission to a veterans home for several reasons, including
a lack of space or to comply with state regulations requiring
CalVet to refuse admission to veterans with medical needs that
the home cannot meet or with a current history of behavioral
issues that would be incompatible with a safe environment at a
veterans home. In addition, CalVet has a policy that a veteran
who does not have a disability must be age 55 or over to qualify
for admission to a veterans home. According to our legal counsel,
a court would likely hold that this age policy meets the definition
of a regulation in state law, but it was not properly enacted as a
regulation in accordance with the Administrative Procedure Act,
which generally requires state agencies to allow public comments
on a proposed regulation. Thus, our legal counsel concluded that a
court would likely hold that the policy constitutes an unenforceable
underground regulation.
Although state law does not impose a duty on CalVet to refer
veterans to other entities after one of its veterans homes places
them on a waiting list or denies them admission, staff at each of
the homes indicated that they refer such veterans to other State
veterans homes, or facilities and programs within their region,
such as VA alcohol and drug treatment programs, nonprofit
organizations that provide veteran services, and private nursing
homes. For example, according to the lead social worker at the
Ventura veterans home, if a veteran is denied admission due
to drug or alcohol addiction, staff members will provide the
names of treatment programs in the area. Upon completion of
a treatment program, the veteran may reapply for admission
into the Ventura veterans home. Moreover, the lead social worker
at the Veterans Home of California–Lancaster told us that the
home may deny admission to some veterans who suffer from severe Because CalVet provides no
post-traumatic stress disorder because they exceed the level of care oversight or guidance for referral
offered at the home. Nevertheless, she told us that staff members practices, it cannot ensure that
at the veterans home will refer those veterans to other facilities, its veterans homes are providing
such as a VA Vet Center. Staff members at all of the veterans homes adequate options to veterans
told us that CalVet headquarters provides no oversight or guidance placed on a waiting list or denied
for these referral practices, thus it cannot ensure that its veterans admission to a home.
homes are providing adequate and appropriate referral options to
veterans who have been placed on waiting lists or denied admission
into a home.
40 California State Auditor Report 2012-119
May 2013
To standardize the management CalVet approved a new policy during our audit that will
of admissions and waiting lists at standardize the management of admissions and waiting lists at
each of the veterans homes, CalVet each of the veterans homes. In January 2013 CalVet implemented
implemented its Pre‑Admission its Pre-Admission Tracking System (tracking system) to serve as
Tracking System. a standardized tool for prioritizing the admission of veterans to
the veterans homes and managing the waiting lists. According
to the procedure manual for the tracking system, the principal
purpose of the system is to make the application process as fair
and transparent as possible. For example, to ensure a standardized
process for managing the waiting lists, the new system can
prioritize applicants by home and level of care required, and other
veterans homes can review the status of an application. Further, the
tracking system’s policy requires that each veterans home contact
those veterans who have been on its waiting list for more than
six months by mail or telephone to verify that the veteran is still
interested in remaining on the waiting list. This process will help
ensure that the waiting lists at the veterans homes do not become
outdated. However, because CalVet only recently implemented and
required the use of the final version of the tracking system, we could
not determine how effective it will be in managing the admissions
priorities and waiting lists of the veterans homes. According to
the chief financial officer, CalVet is currently working on an audit
process that headquarters can use to periodically validate correct
use of the tracking system and ensure its success. We believe
that, once implemented, this process will allow CalVet to provide
oversight to ensure that the tracking system is used consistently by
all of the veterans homes.
Another policy approved during our audit is designed to
standardize and facilitate the admission of homeless veterans in
need of long-term care and provide guidance regarding referrals
of homeless veterans to other facilities. According to the policy,
homeless veterans who are seeking admission into a veterans home
go through an expedited preadmission process that should be
completed within one business week. Furthermore, staff members
are required to provide homeless applicants who are not eligible
for admission into a veterans home with referrals to shelters
and programs for homeless veterans available in the community
or within the VA. This policy, if followed, should be helpful in
ensuring consistent approaches are used at the veterans homes
in evaluating homeless veterans for admission and in referring
those that homes are unable to admit. We believe a similar policy
that provides guidance and oversight for all referrals would be
consistent with CalVet’s strategic goal to provide the highest quality
of care and services to California’s veterans, and would help ensure
that the veterans homes are consistent in providing adequate and
appropriate referral options to veterans who cannot be immediately
served in the homes.
California State Auditor Report 2012-119 41
May 2013
In addition to the expedited preadmission process for homeless
veterans, the Veterans Homes Division also partners with other
entities that conduct targeted outreach to homeless veterans. For
example, in March 2011 CalVet entered into an agreement with
New Directions, Inc. (New Directions) to provide outreach services
for homeless veterans at no cost to the State. New Directions is
a nonprofit organization that provides services and programs to
assist homeless veterans with the challenges of life after combat
and military service. The agreement specifies, in part, that
New Directions will work with CalVet staff to perform outreach
and place eligible homeless veterans with disabilities in permanent
housing at the Veterans Home of California–West Los Angeles
(West Los Angeles veterans home). Further, the agreement
specifies that New Directions will provide a day program for
formerly homeless residents living at the West Los Angeles veterans
home that will include peer support groups and substance abuse
assistance. As of January 2013 CalVet has received three referrals
from New Directions; one veteran was admitted but elected not to
enter the home, and CalVet is still reviewing the other two referrals.
According to an assistant deputy secretary for CalVet, it does
not monitor the success of this agreement, including tracking the
referrals it receives from New Directions, because the agreement
does not require such monitoring. CalVet’s chief financial officer
stated that, as a good business practice, to help ensure effective
coordination and communication with New Directions, CalVet
will continue to schedule training and support for New Directions’
outreach and case management staff regarding the admissions
criteria for the West Los Angeles veterans home.
In addition to the agreement with New Directions, in July 2011
CalVet entered into an agreement at the West Los Angeles
veterans home with the Salvation Army Haven that established
a collaborative partnership to facilitate the transfer of homeless
veterans from transitional programs and supportive housing to
permanent housing at the West Los Angeles veterans home. The
agreement is for three years, and there is no cost to either party.
Under the terms of the agreement, CalVet has the responsibility
to facilitate the admission process and offer a higher-priority
admission ranking to applicants referred by the Salvation Army
Haven who have successfully completed its program and who also
meet the admission requirements at the veterans home. Like the
agreement with New Directions, this agreement does not require
CalVet to track or monitor the referrals, and the chief financial
officer indicated that CalVet has not tracked the referrals from this
partnership in the past. According to the executive director of the
Salvation Army Haven, five veterans from the program have been
admitted into the veterans home since 2011.
42 California State Auditor Report 2012-119
May 2013
CalVet has not monitored its Because CalVet has not monitored its outreach efforts with these
outreach efforts with partnered entities, its ability to determine whether they are successful is
entities; thus, it has limited ability limited. The assistant deputy secretary stated that, to help ensure
to determine whether they the effectiveness of the agreements, CalVet will include measurable
are successful. outcomes in its new and existing agreements for veteran outreach
and will track and monitor them to evaluate the success of the
agreements. Evaluating these agreements will allow CalVet to
determine whether they are worthwhile collaborations and whether
they could be successful at other veterans homes.
CalVet Should Analyze Its Current Purchasing Model and Strengthen
Oversight of Its Purchasing Practices
CalVet has not conducted a formal analysis of its current
purchasing model to ensure that it is the most efficient and
cost-effective for purchasing goods and services for the veterans
homes. Moreover, CalVet has not provided adequate oversight and
guidance to ensure that purchases made at the individual veterans
homes follow state purchasing requirements. According to state
law, CalVet may have its delegated purchasing authority reduced or
revoked if it does not comply with state purchasing requirements.
CalVet Has Not Adequately Assessed Its Current Purchasing Model
for the Veterans Homes to Ensure That It Is the Most Efficient and
Cost‑Effective
According to the assistant deputy secretary for the financial services
division, CalVet currently operates using a purchasing model
for non-information technology (non-IT) goods and services in
which the active veterans homes execute their own purchasing
decisions, but it has not conducted a formal assessment of how its
purchasing model compares to a centralized model in which CalVet
headquarters would be more involved in purchasing for the active
homes.19 In light of the anticipated expansion of the number of
active veterans homes from six to eight by October 2013, we believe
it makes good business sense for CalVet to evaluate its current
purchasing model for efficiency and cost-effectiveness. Without
a thorough cost-efficiency analysis, CalVet could be missing
opportunities to leverage its increased buying power and to create
a more efficient purchasing process by moving to a centralized
purchasing model.
19 According to the assistant deputy secretary for the financial services division, CalVet headquarters
performs the purchasing for all new veterans homes until Finance approves funding to hire
purchasing staff at the veterans homes. She also told us that CalVet headquarters conducts
the purchasing of all IT goods and services for all the veterans homes.
California State Auditor Report 2012-119 43
May 2013
The assistant deputy secretary for the financial services division also
told us that CalVet, as well as the veterans homes, currently benefit
from using leveraged purchasing agreements, including California
Multiple Award Schedules which, according to the State Contracting
Manual, enable General Services to streamline state purchases by
removing repetitive, resource-intensive, costly, and time-consuming
bid processes by departments. She further stated that if CalVet
moved to a centralized purchasing model, it would have the
opportunity to leverage its buying power. According to the assistant
deputy secretary for the financial services division, CalVet has not
engaged in any discussion or analysis about changing to a centralized
purchasing model. However, she agreed that such an analysis will
provide CalVet with an opportunity to look at the finer details of the
processes, needs, similarities, and differences among the veterans
homes. She anticipates that CalVet will complete this analysis by
December 2013.
CalVet Lacks Effective Oversight and Guidance to Ensure That Its Veterans
Homes Comply With State Purchasing and Procurement Requirements
Our review of purchases at each of the six active veterans
homes revealed that none of them consistently follows all state
purchasing requirements. As discussed in the Introduction,
General Services delegated purchasing authority to CalVet.
In 2011 General Services conducted an audit of CalVet’s delegated
purchasing authority and identified a number of deficiencies.
Our review of a selection of 30 purchases confirmed that many
of the errors that General Services identified are still occurring. In our review of 30 purchases
Specifically, in our review of five purchases made by each of the totaling $550,000 made by the
six active veterans homes during fiscal year 2011–12 totaling nearly six active veterans homes, we
$550,000, we identified 12 purchases in which the homes did not identified 12 purchases in which the
comply with state purchasing requirements, and the errors we homes did not comply with state
found were the same as those that General Services identified. For purchasing requirements.
example, we found eight instances in which veterans homes did
not report purchases over $5,000 to the California Department
of Fair Employment and Housing as required by state purchasing
requirements, a deficiency identified by General Services in its
2011 audit.
The errors we identified occurred because CalVet has not provided
adequate training or guidance to ensure that its staff members
responsible for procurement are sufficiently aware of the State’s
purchasing requirements. For example, purchasing officials at
three of the veterans homes admitted that they lacked knowledge
of or training in some state purchasing requirements. CalVet’s
assistant deputy secretary of the financial services division and
managers at each of the veterans homes agreed with our findings,
and CalVet is taking steps to improve its oversight and guidance to
44 California State Auditor Report 2012-119
May 2013
ensure that the homes comply with state purchasing requirements.
For instance, in January 2013, the assistant deputy secretary of the
financial services division instituted new internal controls over
purchasing for the veterans homes, including biannual training for
both new and current purchasing staff regarding state purchasing
requirements. Moreover, the assistant deputy secretary of the
financial services division directed all the veterans homes to follow
certain best-purchasing practices identified by General Services,
including the use of a checklist for each purchase file to ensure
that all required documents are included in the files. In addition,
beginning in May 2013, the new controls require staff from CalVet
headquarters to conduct biannual internal purchasing reviews at
each of the veterans homes to ensure, among other things, that all
required documentation is in the purchase files.
If CalVet does not comply with state According to state law, if CalVet does not comply with state
purchasing requirements, General purchasing requirements, General Services may reduce or revoke
Services may reduce or revoke its its delegated purchasing authority. Without delegated purchasing
delegated purchasing authority. authority, state law indicates that departments may purchase,
without supervision from General Services, only non-IT goods
costing less than $100. If CalVet and the veterans homes follow
through in implementing the steps CalVet designed to improve its
purchasing processes, we believe it will experience fewer errors in
its purchases.
We also noted during our testing that CalVet’s policies and
procedures did not accurately reflect state purchasing requirements.
For example, CalVet’s purchasing procedures did not include the
requirement for it to report purchases over $5,000 to both the State
Contract and Procurement Registration System and the California
Department of Fair Employment and Housing. In addition, the
sequence of steps listed in CalVet’s administrative manual to
follow when purchasing non-IT goods was incorrect. Specifically,
according to state law, a department that is contemplating a
purchase must first consider whether the California Prison
Industry Authority (prison industry authority) can fulfill the
department’s purchasing need. However, CalVet’s administrative
manual directed its purchasers to consider using small businesses
or disabled-veteran business enterprises to meet their purchasing
needs before considering the prison industry authority. In our
review of CalVet’s purchases, we identified one instance in which
the Veterans Home of California–Chula Vista contracted with a
vendor without first considering the prison industry authority.
CalVet’s assistant deputy secretary for the financial services division
acknowledged these errors in its administrative manual, and
CalVet revised its administrative manual in January 2013 to comply
with state requirements regarding the correct sequence of steps
for purchasing.
California State Auditor Report 2012-119 45
May 2013
Recommendations
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:
• Continue to implement standardized policies and procedures
throughout the veterans homes to increase revenue, including
its policies and procedures for identifying and enrolling
eligible members into federal, state, and private insurance
programs, such as the Medicare and Medi-Cal programs.
• Analyze its cost‑recovery model, including an evaluation of
the state laws that limit the amount of revenue that CalVet
can collect for the care it provides to its members at the
veterans homes.
To better ensure that the veterans homes are providing quality care
as cost-efficiently as possible, CalVet should continue monitoring
the nurse-to-member ratios in the homes and work with the homes
as necessary to help them meet the targeted ratios. In addition,
CalVet should provide similar oversight to the veterans homes in
implementing the standardized staffing model, once it is finalized.
To better utilize unused space at the veterans homes, and to
serve more veterans within legal restrictions, CalVet should do
the following:
• Use the information in the Yountville veterans home master plan
to develop a plan for using unused space at that home to generate
revenue and/or serve more veterans.
• Develop and implement procedures for periodically evaluating
all of the veterans homes to identify opportunities to enhance
use of unused space and increase revenue generation, including
documenting the results of its evaluations.
• Develop a formal process for identifying, securing, and
evaluating public-private partnership agreements with other
entities that could provide services to more veterans than it
currently serves, and update its tracking matrix to include the
dates when such efforts were initiated or the date of the most
recent status of those efforts.
• Identify measures to facilitate monitoring the success of its
public-private partnership agreement with the Pathway Home
at the Yountville veterans home, as well as its agreements
with New Directions and Salvation Army Haven at the
West Los Angeles veterans home.
46 California State Auditor Report 2012-119
May 2013
• As part of its 2013 renegotiations with Pathway Home, CalVet
should document its review and evaluation of any legal
restrictions that may limit this agreement.
• For any future public‑private partnership agreements, CalVet
should specify measures in the agreements that will allow it to
monitor and assess the success of the agreements, and it should
document its review and evaluation of any legal restrictions that
may limit its authority to enter into the agreements.
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 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 ensure that it is providing the highest quality of services to
veterans, CalVet should do the following:
• Implement oversight and guidance policies to ensure that its
veterans homes are providing adequate and appropriate referral
options to veterans who have been placed on the waiting list or
denied admission into a home.
• Improve its tracking system policy by developing oversight
controls so that the system is used consistently by all of the
veterans homes.
To allow for public input and to prevent any legal challenges
that its policy of capping members’ fees, its $165 monthly
income-retention policy for members, and its age and admission
policy are unenforceable underground regulations, CalVet
should adopt these policies as regulations in accordance with
the Administrative Procedure Act.
To more effectively and efficiently meet state purchasing and
procurement requirements, CalVet should do the following:
• Analyze its current purchasing model to ensure that it is the
most efficient and cost-effective to use when purchasing non-IT
goods and services for the veterans homes.
California State Auditor Report 2012-119 47
May 2013
• Continue implementing quality assurance policies to
strengthen its oversight of its purchasing practices, including
conducting on-site reviews of the purchasing practices of the
veterans homes.
We conducted this audit under the authority vested in the California State Auditor by Section 8543
et seq. of the California Government Code and according to generally accepted government auditing
standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate
evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives
specified in the scope section of the report. We believe that the evidence obtained provides a
reasonable basis for our findings and conclusions based on our audit objectives.
Respectfully submitted,
ELAINE M. HOWLE, CPA
State Auditor
Date: May 9, 2013
Staff: John Billington, Project Manager
Ralph M. Flynn, JD
Ryan Grossi, JD
Mejin Leechor, MPP
Sara Noceto
Scott R. Osborne, MBA
Legal Counsel: Scott A. Baxter, JD
For questions regarding the contents of this report, please contact
Margarita Fernández, Chief of Public Affairs, at 916.445.0255.
48 California State Auditor Report 2012-119
May 2013
Blank page inserted for reproduction purposes only.
California State Auditor Report 2012-119 49
May 2013
Appendix
TOTAL CAPACITY AND CENSUS OF VETERANS AT THE
VETERANS HOMES
The California Department of Veterans Affairs (CalVet) has six active
Veterans Homes of California—Yountville (Yountville veterans home),
Barstow (Barstow veterans home), Chula Vista (Chula Vista veterans home),
West Los Angeles (West Los Angeles veterans home), Lancaster (Lancaster
veterans home), and Ventura (Ventura veterans home)—and two additional
homes in Fresno and Redding that are scheduled to begin admitting veterans
in October 2013. Table A shows, as of the end of January 2013 for each level
of care, the physical, licensed, and budgeted capacities, as well as the census of
the number of veterans (members) residing at each home and the number
of veterans on the waiting lists for each of the veterans homes.20 As described in
the Introduction, the State’s veterans homes provide the following levels of care
to their members: domiciliary care, residential care for the elderly (residential
care), intermediate care, and skilled nursing care (skilled nursing).
Table A
Capacity and Total Veteran Census as of the End of January 2013 at the California Veterans Homes
percentage of
Budgeted Budgeted capacitY Veterans on
capacitY census as fiLLed according to waiting List as
phYsicaL fiscaL Year of the end of census as of the end of the end of
home LeVeL of care capacitY* Licensed capacitY† 2012–13‡ januarY 2013§ of januarY 2013 januarY 2013II
All Veterans Skilled nursing 1,027 607 482 447 92.7% 253
Homes
Intermediate care 324 324 165 147 89.1 214
Residential care 634 307 285 269 94.4 39
Domiciliary care 1,010 1,010# 849 843 99.3 57
Totals 2,995 2,248 1,781 1,706 95.8% 563
Veterans Home Skilled nursing 295 295 231 218 94.4% 159
of California–
Intermediate care 204 204 105 100 95.2 214
Yountville
Residential care 48 48 48 40 83.3 6
Domiciliary care 682 682# 637 625 98.1 6
Totals 1,229 1,229 1,021 983 96.3% 385
Veterans Home Skilled nursing 60 60 40 37 92.5% 3
of California–
Intermediate care 120 120 60 47 78.3 0
Barstow
Residential care 56 NA NA NA NA NA
Domiciliary care 164 164# 120 108 90.0 4
Totals 400 344 220 192 87.3% 7
Veterans Home Skilled nursing 180 180 180 170 94.4% 19
of California–
Intermediate care NA NA NA NA NA NA
Chula Vista
Residential care 56 55 33 28 84.9 14
Domiciliary care 164 164# 92 110 119.6 47
Totals 400 399 305 308 101.0% 80
20 Under certain conditions, a veteran’s spouse may also reside in a veterans home and is counted in that veterans
home’s census. continued on next page . . .
50 California State Auditor Report 2012-119
May 2013
percentage of
Budgeted Budgeted capacitY Veterans on
capacitY census as fiLLed according to waiting List as
phYsicaL fiscaL Year of the end of census as of the end of the end of
home LeVeL of care capacitY* Licensed capacitY† 2012–13‡ januarY 2013§ of januarY 2013 januarY 2013II
Veterans Home Skilled nursing 312 72 31 22 71.0% 72
of California–
Intermediate care NA NA NA NA NA NA
West Los Angeles
Residential care 84 84 84 84 100.0 14
Domiciliary care NA NA NA NA NA NA
Totals 396 156 115 106 92.2% 86
Veterans Home Skilled nursing NA NA NA NA NA NA
of California–
Intermediate care NA NA NA NA NA NA
Lancaster
Residential care 60 60 60 58 96.7% 0
Domiciliary care NA NA NA NA NA NA
Totals 60 60 60 58 96.7% 0
Veterans Home Skilled nursing NA NA NA NA NA NA
of California–
Intermediate care NA NA NA NA NA NA
Ventura
Residential care 60 60 60 59 98.3% 5
Domiciliary care NA NA NA NA NA NA
Totals 60 60 60 59 98.3% 5
Veterans Home Skilled nursing 60 Not yet licensed** 0 0 0.0% 0
of California–
Intermediate care NA NA NA NA NA NA
Redding**
(Redding Residential care 90 Not yet licensed** 0 0 0.0 0
veterans home) Domiciliary care NA NA NA NA NA NA
Totals 150 Not yet licensed** 0 0 0.0% 0
Veterans Home Skilled nursing 120 Not yet licensed** 0 0 0.0% 0
of California–
Intermediate care NA NA NA NA NA NA
Fresno**
(Fresno Residential care 180 Not yet licensed** 0 0 0.0 0
veterans home) Domiciliary care NA NA NA NA NA NA
Totals 300 Not yet licensed** 0 0 0.0% 0
Sources: Data on physical capacity and budgeted capacity at each of the veterans homes from the California Department of Veterans Affairs’ (CalVet)
2013–14 Budget Estimate Package submitted to the Legislature. Data on licensed capacity are from the California Department of Public Health
(Public Health) and the California Department of Social Services (Social Services). Data on census and veterans on waiting lists are from CalVet’s internal
documents (unaudited). Information regarding the levels of care are from Title 22, California Code of Regulations. Information regarding the status of
the Fresno veterans home and the Redding veterans home are from CalVet’s internal planning documents.
NA = The level of care is not currently available at the particular veterans home.
* Physical capacity: According to CalVet’s budget officer, the number of beds, and thus veterans (members) that each veterans home was built, or
remodeled, to accommodate.
† Licensed capacity: The number of beds Public Health and Social Services licenses a veterans home to operate, plus the number of beds that CalVet
designated for domiciliary care.
‡ Budgeted capacity: According to CalVet’s budget officer, the number of beds that each veterans home plans to operate given its current resources
and funding.
§ Census: The number of veterans occupying beds in a veteran home as of the end of January 2013.
II Veterans on waiting list: The number of veterans who have submitted complete applications to a veterans home and whom CalVet has determined
qualify for admission on paper. These veterans have not been admitted due to budgetary space limitations at the veterans home and are thus not
counted in the total census.
# Domiciliary care is not a licensed level of care. Bed totals are based on physical capacity and shown for consistency.
** According to CalVet’s planning documents, the Fresno veterans home and the Redding veterans home are not scheduled to begin admitting
veterans until October 2013. According to the chief financial officer of the Veterans Homes Division, the residential care at both of these veterans
homes should be licensed by July 2013, and the skilled nursing at both of these veterans homes should be licensed by November 2013.
California State Auditor Report 2012-119 51
May 2013
As of the end of January 2013, only two of the active veterans
homes—Lancaster and Ventura—were operating at or near their
full physical capacity. The disparity between physical capacity and
budgeted capacity is caused by licensing restrictions and budget
allocations that limit the number of beds available for veterans.
Table A shows that the budgeted capacity at each of the veterans
homes, which equates to the number of veterans each home can
serve based on current resources and funding, is usually lower than
the licensed capacity. For example, the Yountville veterans home is
currently licensed for 204 intermediate care beds, but it is budgeted
for only 105 beds at that level of care. Unless CalVet receives
additional funding, its veterans homes will not be able to increase
the number of members they can admit.
As discussed in the Introduction, CalVet is increasing capacity in
the veterans homes system and then plans to assess needs at the
different levels of care statewide. 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 veterans homes in Yountville, Barstow, and
Chula Vista because it is preparing to open two new homes in
Fresno and Redding, as well as increasing the occupancy in the
level of skilled nursing at the West Los Angeles veterans home.
In addition, the chief financial officer indicated that CalVet does
not need to seek funding for the Lancaster and Ventura veterans
homes because those veterans homes are already operating at or
near full capacity. The chief financial officer indicated that CalVet
will formally assess the State’s bed capacity for veterans’ needs
after the Fresno and Redding veterans homes are licensed, to
determine the most appropriate number of beds at each level of
care, at each home. The chief financial officer anticipates that the
new veterans homes will be licensed in 2013 and estimates that
the formal assessment will begin at the end of fiscal year 2013–14.
Table A shows that, as of the end of January 2013, CalVet’s census
was at nearly 96 percent of its budgeted capacity for all levels of
care at the veterans homes. According to the chief financial officer,
the census at a veterans home may not match its budgeted capacity
because of residents (members) transitioning between levels of care
due to their medical needs. For example, if a member residing in a
residential care facility at a veterans home must spend a period of
time at a hospital, the member will often return to the home at the
skilled nursing or intermediate care level to recuperate until he or
she is able to return to residential care.
One veterans home had a census that was above its budgeted
capacity for one level of care as of the end of January 2013. The
Chula Vista veterans home had 110 members at the domiciliary care
52 California State Auditor Report 2012-119
May 2013
level, which is greater than its 92 budgeted beds for that level of
care. According to CalVet’s budget officer, at the domiciliary level
of care, the actual daily census in a veterans home may be greater
than the budgeted capacity because staffing requirements at that
level of care are minimal and the care provided is less expensive.21
As Table A shows, nearly half of the total current budgeted capacity
across all of the veterans homes is devoted to domiciliary care
for members.
21 Domiciliary care is not a licensed level of care, and therefore there are no state
staffing requirements.
California State Auditor Report 2012-119 53
May 2013
STATE OF CALIFORNIA EDMUND G. BROWN JR., Governor
DEPARTMENT OF VETERANS AFFAIRS
OFFICE OF THE SECRETARY
POST OFFICE BOX 942895
SACRAMENTO, CALIFORNIA 94295-0001
Telephone: (916) 653-2158
Fax: (916) 653-2456
April 23, 2013
Ms. Elaine M. Howle, CPA
555 Capitol Mall, Suite 300
Sacramento, CA 95814
RE: California Department of Veterans Affairs Audit Report no. 2012-119
The Department of Veterans Affairs (CalVet) thanks the Bureau of State Audits (BSA) for the
opportunity to review and respond to draft report no. 2012-119. We value the audit team’s
professionalism and appreciated their acknowledgement of the positive initiatives implemented
by CalVet over sucha short periodof time. Beginningin 2011, with the new CalVet Veterans
Homes leadership,an aggressive streamlining and standardizing effort was undertakenin the
Veterans homesto provide premier care for our aged and disabled veterans in the most cost
effective manner.
We areactively analyzingdepartmental operations to ensure the efficient and effective use of
resourcesthrough initiatives outlined in our strategic plan.While our vision and focus is clear, it
is important to note that there are several significant projects that CalVet Homes Division is
implementing simultaneously. We are ramping up the West Los Angeles home,and opening both
Fresno and Redding Veterans homes. We are implementing the electronic health recordsystem,
which includes new processesfor accounting and billing, and implementing a statewide
pharmaceutical distribution system-Talyst. With so many foundational changes occurring within
the CalVet Homes Division, we recognize,as the auditors have noted,that it is still too early to
be able to thoroughly evaluate the success of many of our strategies,and we appreciate their
recommendations to ensure we are closely monitoring our progress.
California is home to the nation’s largest veteran population,seventypercent of whom are over
the age of 50. To fulfill the state’s commitment to providing premier long-term care for veterans,
CalVet proudly administers eight Veterans homes with a firm commitment to effectively and
efficiently delivering quality care to our Nation’s warriorsand their families. This audit report
recognizesour efforts and makes recommendations in nine major areas. CalVet has already
implemented a number of changes that address these recommendations as outlined below.
RECOMMENDATIONS
RECOMMENDATION # 1:Continue to implement standardized policies and procedures
throughout the Veterans homes to increase revenue, including its policies and procedures for
identifying and enrolling eligible members into federal, state and private insurance programs
such as the Medicare and Medi-Cal Programs.
CalVet RESPONSE # 1: BSA’s recognition of the standardized policies and procedures put in
place to increase revenue, therebydecreasing the General Fund burdenis appreciated. CalVet is
firmly committed to effectively and efficiently overseeing the cost recovery of services provided
by the Veterans homes. Within 60 days, CalVet will develop additional policies and procedures
which specifically address identifying and enrolling eligible members into all insurance programs
HONORING CALIFORNIA’S VETERANS
54 California State Auditor Report 2012-119
May 2013
Ms. Elaine M. Howle, CPA
April 18, 2013
Page 2
for which they are eligible. CalVet will use the expanded functionality of the new electronic
health record system to maximizing the department’s ability to recover its cost from multiple
payers through coordination of benefits.
RECOMMENDATION # 2: Analyze its cost recovery model, including an evaluation of the
state laws that limit the amount of revenue that CalVet can collect for the care it provides to its
members at the homes.
CalVet RESPONSE # 2:CalVet recognizes that our fee structure and collection of
unreimbursed cost of care,mandatedby the Military and Veterans Code,is different than most
states that charge veterans based on the cost of care rather than a percentage of income. CalVet
will analyze theimpact a revisedfee structure would have on veterans,and develop legislative
recommendations after collaboration withtheCalVet Board andveteran stakeholders.In
addition, CalVet will examine the lawscreating the Morale, Welfare, and Recreation Fund at
each of the Veterans homes as recommended to determine if each of these funds could sustain
themselves.
RECOMMENDATION # 3: CalVet should continue monitoring the nurse-to-member ratios in
the veterans homes and work with the veterans homes as necessary to help them meet the
targeted ratios.In addition, CalVet should provide similar oversight to the Veterans homes in
implementing the standardized staffing model, once it is finalized.
CalVet RESPONSE # 3:As recognized in the audit report, CalVet provides oversight to the
Veterans homesonstaffing ratios. CalVet researched the nurse-to-member and staff-to-member
ratios of private and public entities and based our standards on this research. As indicated in the
report, we developed nurse-to-member ratios metricsin November 2011,and we will continue to
provide quality care while controlling costs. Moreover, CalVet willcontinue to work with the
Department of Finance on developing a standardized staffing model for the Veterans homeswith
an anticipated approval for implementation for Fiscal Year 2014-15.
RECOMMENDATION # 4: To better utilize unused space at the veterans homes, and to serve
more veterans within legal restrictions, CalVet should:
• Use the information in the Yountville veterans home master plan to develop a plan for
using unused space at that veterans home to generate revenue and/or serve more veterans.
• Develop and implement procedures for periodically evaluating all of the veteran homes
to identify opportunities to enhance its use of unused space and increase revenue generation,
including documenting the results of its evaluations.
• Do a formal process for identifying, securing, and evaluating public-private partnerships
with other entities that could provide more services to veterans, and update its tracking
matrix to include the dates when such efforts were initiated or the date of the most recent
status of those efforts.
• Identify measures to facilitate monitoring the success of its partnership agreement with
the Pathway Home program at the Yountville veterans home, as wellas its agreements with
New Direction and Salvation Army Haven at the West Los Angeles veterans home.
• As part of its 2013 renegotiations with the Pathway Home, CalVet should document its
review and evaluation of any legal restrictions that may limit this agreement.
• For any future public-private partnership agreements, CalVet should specify success
measures in the agreements that will allow it to monitor and assess the success of the
agreements, and it should document its review and evaluation of any legalrestrictions that
may limit its authority to enter into the agreements.
HONORING CALIFORNIA’S VETERANS
California State Auditor Report 2012-119 55
May 2013
Ms. Elaine M. Howle, CPA
April 18, 2013
Page 3
CalVet RESPONSE # 4:BSA recognized stepsCalVet hastaken to better utilize unused space
at the homes to generate additional revenue and serve more veterans.
CalVet is currently in the process of evaluating theYountville Veterans homemaster plan for
opportunities to increase revenue and increase services to veterans. Once an internal evaluation
has been completed the Department intends to formally incorporate a specific set of milestones
and objectives into the Departments strategic planby the summer of 2013.
As part of the 2013 renegotiations of the Pathway lease, CalVetintends to document any legal
restrictions that may limit the agreement. CalVet further intends to confirm with DGS Real Estate
Services Branch that any legal restrictions have been addressed by the State in compliance with
the State contract and/or government code.
Evaluation or monitoring criteria has been developed and will be included in the renegotiated
lease between the State and the Pathway Home Inc. program. Monitoring criteria will be
developed in collaboration with New Directions Inc. and Salvation Army Haven to ensure that
the success of each program will be monitored. CalVet included metrics for review and
evaluation of program success in the renegotiations with the Pathway Home Inc. and is waiting
for response from the program’s leadership.
Monitoring criteria for public private partnerships will be developed by June 30,2013. All new
PublicPrivatePartnerships will have monitoring criteria and reporting included within any new
agreement.
RECOMMENDATION # 5: CalVet should follow through with its plan to assess the bed
capacity of the homes for veterans’ needs after the homes at Fresno and Redding are licensed to
determine the most appropriate number of beds for the different levels of care offered at each
veterans home.
CalVet RESPONSE # 5: CalVet continuesto be committed to assessing bed capacity and need
on an ongoing basis. CalVet will do a formal study after the Redding and Fresno homes are
licensed as noted in this audit.
RECOMMENDATION # 6: To betterreach 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.
CalVet RESPONSE # 6: CalVet will continue to use technology to reach Veterans by
developing CalVet Connect. A vendor has beenselected and will be awarded the contract in
April 2013. The project is expected to start on May 1, 2013. This is a reportable project to the
California Technology Agency and they are providing Project Oversight. We anticipate
launching CalVet Connect in February 2014.
RECOMMENDATION # 7: To ensure that it is providing the highest quality of services to
veterans, CalVet should:
• Implement oversight and guidance polices to ensure that its veterans homes are
providing adequate and appropriate referral options to veterans who have been placed on
the waiting list or denied admissions into a veterans home.
• Improve its Pre-Admission Tracking System policy by developing oversight controls so
HONORING CALIFORNIA’S VETERANS
56 California State Auditor Report 2012-119
May 2013
Ms. Elaine M. Howle, CPA
April 18, 2013
Page 4
that the system is used consistently by all the veterans homes.
CalVet RESPONSE # 7: As part of its continuing efforts to improve its programs, prior to the
completion of the audit, CalVet developed an audit matrix for monthly review of the Pre-
Admission Tracking System. Within 60 days the departmentwill develop an audit schedule to
ensure that the system is used consistently by all the Veterans homes. Also, within 60 days
CalVet will develop policies on referral options provided to veterans who have been placed on
the waiting list or denied admissions into a Veterans home.
RECOMMENDATION # 8: To allow for public input and to prevent any legal challenges that
its policy of capping members’ fees, its $165 monthly income-retention policy for members, and
its age and admission policy are unenforceable underground regulations, CalVet should adopt
these policies as regulations in accordance with the Administrative Procedure Act.
CalVet RESPONSE # 8: CalVet is firmly committed to allowing public input and expects to
complete the preliminary rulemaking activities for each of these three proposed regulations by
the end of August2013. After the rulemaking process has been completed,and upon Officeof
Administrative Law approval,the proposed regulations will be enacted.
RECOMMENDATION # 9: To more effectively and efficiently meet state purchasing and
procurement requirements,CalVet should.
• Analyze its current purchasing model to ensure that it is the most efficient and cost-
effective
• Continue implementing quality assurance policies to strengthen its oversight of its
purchasing practices, including on-site reviews of the purchasing practices of the veterans
homes
CalVet RESPONSE # 9:CalVet agrees toanalyze its purchasing model,and concurs with the
December 2013 time period provided in this audit. As part of its continuing efforts to improve
that process, CalVet has alreadyimplemented a checklist and expects to complete the initial on-
site reviews of each of the Veterans homes by June 2013.
CalVet is committed to following through on the recommendations by the BSA within the
timeframes indicated above. Again, we appreciate the opportunity to respond to this audit report.
If you have further questions or need clarification on any portion of our response, please do not
hesitate to contact me at (916) 653-2158.
Sincerely,
(Signed by: Peter J. Gravett)
PETER J. GRAVETT
Major General (Retired)
Secretary
HONORING CALIFORNIA’S VETERANS
California State Auditor Report 2012-119 57
May 2013
cc: Members of the Legislature
Office of the Lieutenant Governor
Little Hoover Commission
Department of Finance
Attorney General
State Controller
State Treasurer
Legislative Analyst
Senate Office of Research
California Research Bureau
Capitol Press