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HomeMy WebLinkAboutStaff Report 7351 CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR October 17, 2016 The Honorable City Council Palo Alto, California Policy and Services Committee Recommendation to Accept the Disability Rates and Workers' Compensation Audit The Office of the City Auditor recommends acceptance of the Disability Rates and Workers' Compensation Audit. At its meeting on June 14, 2016, the Policy and Services Committee approved and unanimously recommended that the City Council accept the report. The Policy and Services Committee minutes are included in this packet. Respectfully submitted, Harriet Richardson City Auditor ATTACHMENTS:  Attachment A: Disability Rates and Workers' Compensation Audit (PDF)  Attachment B: Policy and Services Committee Meeting Minutes Excerpt (June 14, 2016) (PDF) Department Head: Harriet Richardson, City Auditor Page 2 CITY OF PALO ALTO OFFICE OF THE CITY AUDITOR June 14, 2016 The Honorable City Council Palo Alto, California Disability Rates and Workers' Compensation Audit In accordance with the Fiscal Year 2016 Annual Audit Work Plan, the Office of the City Auditor has completed the Disability Rates and Workers’ Compensation Audit. The audit report presents 5 findings with a total of 15 recommendations. The Office of the City Auditor recommends that the Policy and Services Committee review and recommend to the City Council acceptance of the Disability Rates and Workers’ Compensation Audit. Respectfully submitted, Harriet Richardson City Auditor ATTACHMENTS:  Attachment A: Disability Rates and Workers' Compensation Audit (PDF) Department Head: Harriet Richardson, City Auditor Attachment A Page 2 Attachment A   Disability Rates and  Workers’ Compensation Audit  June 2016  Office of the City Auditor      Harriet Richardson, City Auditor  Yuki Matsuura, Senior Performance Auditor  Lisa Wehara, Performance Auditor II       Attachment A   Page intentionally left blank    Attachment A Office of the City Auditor   ●   250 Hamilton Avenue, 7th Floor   ●   Palo Alto, CA 94301   ●   650.329.2667  Copies of the full report are available on the Office of the City Auditor website at:  http://www.cityofpaloalto.org/gov/depts.aud/reports/performance.asp      OFFICE OF THE CITY AUDITOR  EXECUTIVE SUMMARY:  Disability Rates and Workers’ Compensation Audit  June 2016  PURPOSE OF THE AUDIT  The audit objectives were to determine if the City's Workers’ Compensation policies and Injury and Illness Prevention  Program are implemented in a manner that minimizes injuries and illnesses and workers' compensation costs.  REPORT HIGHLIGHTS  Finding 1: The City’s Injury  and Illness Prevention  Program (IIPP) is  comprehensive but has lost  its effectiveness due to the  loss of its City Safety Officer  (Page 7)  The City has a comprehensive safety manual to help protect City employees from work‐ related injuries and illnesses. However, the manual has not been updated since 2000, and has  lost its effectiveness as its procedures, forms, and tools have become outdated. While the  number of workers’ compensation claims filed decreased in FY 2015 and has generally  decreased since FY 2009, the City may face a future increase in workplace injuries and  illnesses if the IIPP remains outdated.  Key Recommendations to the City Manager’s Office:   Allocate sufficient resources to implement and maintain the City’s IIPP and to monitor the  City’s compliance with the program.   Update the safety manual to redefine the roles and responsibilities and ensure compliance  with Cal/OSHA standards and other applicable safety laws.   Review departmental procedures and safety requirements to ensure they align with the  revised IIPP and City policy and procedures.   Work with York and departments to identify useful safety statistics, appropriate recipients  of this information, and establish an automated process for those statistics to be  provided.   Identify training opportunities to minimize common injuries, and coordinate with  departments to ensure regular training is provided to employees.  Finding 2: Injured employees’  benefit eligibility is not  accurately and completely  tracked and monitored,  resulting in both  overpayments and  underpayments of workers’  compensation benefits (Page  14)  The City does not have an effective process or tools to monitor benefit eligibility and the  work status of injured employees, resulting in both overpayments and underpayments of the  benefits paid to injured employees. The City’s workers’ compensation benefit structure is  highly complex due to additional City‐provided benefits defined by City policy and labor  agreements. This complexity also resulted in some disability leave payments being incorrectly  reported as compensation to CalPERS. HR staff track eligibility of each injured employee  manually because the City’s SAP system is not configured to support administration of these  benefits. York relies on HR staff to immediately communicate any changes in the work status  of injured employees to ensure that benefit eligibility is updated and communicated to the  injured employee in a timely manner as required by state law.  The former City Safety Officer used to play a key monitoring role and facilitated  communication between the City and York, but roles and responsibilities became unclear as  HR was reorganized and the processes changed. Lack of monitoring resulted in multiple  instances of benefit overpayment and underpayment.  Attachment A      Key Recommendations to the City Manager’s Office:  Continue working with ASD and CalPERS to address the disability leave benefits that were  incorrectly reported as compensation to CalPERS.   Review the 22 claims that accounted for 87 percent of the additional city benefits in  Exhibit 11, and take necessary action to address any errors identified.   Review the existing disability leave management process in Exhibit 12 and determine the  optimal monitoring structure, update the tools and procedures, and allocate sufficient and  skilled resources.   HR work with ASD to ensure that the data necessary for disability leave management is  captured through time reporting in SAP to support the process.   Work with York to identify and train responsible HR staff, and maintain online access to  York data for analyzing claims, payment transactions, and trends.  Finding 3: The City has not  met the state requirement  for timely reporting of its  workers’ compensation  claims to York, potentially  causing the cost of claims to  increase (Page 24)  California law requires employers to report within five days of their knowledge every  occupational injury or illness that results in lost time beyond the date of the incident or  requires medical treatment beyond first aid. The City has not met this requirement, which  could result in penalties and could also increase the cost of claims. A recent study concluded  that claims with more than a two‐week delay in reporting involve a longer period before the  injured worker can return to work, take longer to close, and are more complex to settle.  Key Recommendations to the City Manager’s Office:   Streamline the workers’ compensation reporting process and improve the accuracy and  completeness of the claim forms.  Finding 4: The City has not  ensured that York met all  contract terms (Page 29)  The York contract includes various terms that could help the City reduce its workers'  compensation costs, such as cost reduction guarantees and utilization review. While most  requirements are met, there are some that the City has not required York to fulfill. The City  could better manage its claims and reduce costs by fully using services York is required to  provide under the contract.  Key Recommendations to the City Manager’s Office:   Create a list of key contract terms and assign staff to monitor and follow up on York  performance against each term   Work with York to streamline the monthly, quarterly, and annual reporting process by  leveraging online access to York data  Finding 5: Workers’  compensation revenues,  costs, and performance data  are not clearly reported for  informed decision making  (Page 31)  The Workers’ Compensation Fund accounts for administration of the City’s workers’  compensation program, and the revenues and expenditures are reported in the City's  comprehensive annual financial report and budget documents. However, the Workers’  Compensation Fund does not include all of the City’s workers’ compensation costs, and the  costs presented in the budget documents are difficult to understand the nature and true cost  of each line item. Without a clear understanding of the workers’ compensation costs, Council  and management may not be able to make informed decisions regarding the City’s workers’  compensation related programs.  Key Recommendations to the City Manager’s Office:   HR work with ASD’s Office of Management and Budget to clarify the presentation of the  workers’ compensation costs in the City’s budget documents   Work with York to identify useful performance measures and establish procedures to  ensure reliable reporting of performance data using a consistent methodology.  Attachment A     TABLE OF CONTENTS  Objective ................................................................................................................................................. 1  Background ............................................................................................................................................. 1  Scope ...................................................................................................................................................... 5  Methodology .......................................................................................................................................... 5  Finding 1:   The City’s Injury and Illness Prevention Program (IIPP) is comprehensive but has lost its  effectiveness due to the loss of its City Safety Officer ................................................................ 7  Recommendations ........................................................................................................................... 13  Finding 2:  Injured employees’ benefit eligibility is not accurately and completely tracked and monitored,  resulting in both overpayments and underpayments of workers’ compensation benefits...... 14  Recommendations ........................................................................................................................... 22  Finding 3:  The City has not met the state requirement for timely reporting of its workers’ compensation  claims to York, potentially causing the cost of claims to increase ............................................ 24  Recommendations ........................................................................................................................... 27  Finding 4:  The City has not ensured that York met all contract terms ............................................................. 29  Recommendations ........................................................................................................................... 30  Finding 5:  Workers’ compensation revenues, costs, and performance data are not clearly reported for  informed decision making ......................................................................................................... 31  Recommendations ........................................................................................................................... 34  Appendix 1: The City’s Workers’ Compensation Costs ........................................................................ 35  Appendix 2: City Manager’s Response ................................................................................................. 37       Attachment A     ABBREVIATIONS   4850  ASD  AWW  CAL/OSHA  CalPERS  CSAC   DIR  EMS  FTE  FY  HR  IIPP  MOA  PD  RMI  SEIU  TD  TPA  California Labor Code Section 4850  Administrative Services Department  Average weekly wage  California Occupational Safety and Health Act  California Public Employees' Retirement System  California State Association of Counties  Department of Industrial Relations  Emergency medical service  Full‐time equivalent  Fiscal year  Human Resources  Injury and illness prevention program  Memorandum of agreement  Permanent disability  Repetitive motion injury  Service Employees International Union  Temporary disability  Third party administrator    Attachment A Disability Rates and Workers’ Compensation Audit 1      INTRODUCTION   Objective The audit objectives were to determine if the City's Workers’  Compensation policies and Injury and Illness Prevention Program are  implemented in a manner that minimizes injuries and illnesses and  workers' compensation costs.  Background California State law requires employers to have workers’  compensation insurance, either by purchasing a policy or through  self‐insurance, and pay workers’ compensation benefits. Employees  are entitled to receive prompt, effective medical treatment for on‐ the‐job injuries or illnesses regardless of fault and, in return, are  prevented from suing employers for those injuries.  The City of Palo Alto is permissibly self‐insured for workers’  compensation up to $500,000 per claim, and has a workers’  compensation insurance policy through California State Association  of Counties (CSAC) Excess Insurance Authority, a joint powers  authority, with excess coverage up to the statutory limits set by the  state of California. 1 The City’s workers’ compensation policy states  that City employees and elected or appointed public officials are  generally covered under workers’ compensation, while volunteers  are not. The Risk Manager in the City’s Human Resources (HR)  Department is responsible for administering workers’ compensation  benefits.  State Oversight The California State Department of Industrial Relations (DIR),  through its Division of Workers’ Compensation: 1) administers  workers’ compensation laws, 2) resolves disputes over workers’  compensation benefits, and 3) provides information and assistance  about the workers’ compensation system. The DIR’s Office of Self  Insurance Plans is responsible for oversight and regulation of  workers’ compensation self‐insurance in California.  Third Party Administrator  (TPA)  The City has contracted with York Risk Services Group (York), a third  party administrator, since July 2006 to administer the City’s workers’  compensation claims. York claims examiners, on behalf of the City,  determine what benefits should be paid or rendered under the  applicable workers’ compensation laws in each reported claim, and  pay benefits out of City funds. The City maintains control over  authorizing appeals, settlements, awards, and all other decisions  related to benefits.                                                               1 The maximum amount depends on various factors, such as type of benefit, loss date, or nature of injury or illness.  Attachment A Disability Rates and Workers’ Compensation Audit 2      Workers’ Compensation  Claim Types and Benefits  There are three types of workers’ compensation claims:   First aid – Minor medical treatment only, as defined by state law   Medical only – Medical treatment only beyond first aid   Indemnity – Medical treatment and wage support when the  employee cannot return to work  Exhibit 1 describes workers’ compensation benefits state law  requires the City to pay.    EXHIBIT 1  Workers’ Compensation Benefits Required by State Law  Benefit Category Benefit Provided by the City  Medical Treatment All reasonable and necessary medical care and incidental costs, including  transportation. The City generally is not liable for the cost of medical treatment  obtained by the employee before the City was notified of the injury.  Salary Continuation  for Safety Employees  (4850)  Eligible public safety employees (e.g., firefighters, police officers) can receive up to 365  days of full salary while on disability leave in accordance with California Labor Code  Section 4850.  Temporary Disability  (TD)  Employees who are unable to work for more than three days while recovering from  injury can receive two‐thirds of gross wages tax free up to 104 weeks within five years  from the date of injury. There are two types of TD benefits:   Temporary Total Disability benefits – payments to an employee who cannot work  at all while recovering.   Temporary Partial Disability benefits – payments to an employee who can work  part‐time while recovering.  Permanent Disability  (PD)  When maximum recovery is achieved and a permanent injury remains, the employee  may receive a settlement based on the level of permanent disability, type of injury,  continuing medical treatment, and the employee’s age and occupation.  Death  The dependents receive burial expenses up to $10,000* and benefit payments up to  $320,000,* depending on the number of dependents.  Supplemental Job  Displacement  Benefits  A Supplemental Job Displacement Voucher up to $6,000,* payable to a state  accredited training school to assist with retraining, if the City cannot provide  modified  or alternative work to accommodate permanent work restrictions.  * The maximum benefit set by the state of California for injuries on or after January 1, 2013.  Source: California state laws and City policies    City’s Workers’ Compensation  Claims and Costs  It is difficult to identify trends in the City’s workers’ compensation  claims without understanding the unique nature and severity of  individual cases. Exhibit 2 shows that the number of claims filed by  City employees has decreased by half in the last decade, from 154 in  fiscal year (FY) 2006 to 74 in FY 2015. However, the number of claims  does not always correlate with the cost of claims, which is highly  dependent on the severity of each case. The FY 2015 number is also  Attachment A Disability Rates and Workers’ Compensation Audit 3      likely to increase as employees sometimes report at a later date their  injuries or illnesses that originated in the past.  Exhibit 3 shows that indemnity claims comprise the majority of the  City’s cost for workers’ compensation claims, representing more  severe injuries and illnesses with higher medical cost, wage support,  and in some cases, the cost of litigation and settlement. Although the  cost of claims incurred has decreased by 61 percent, from  $2.9 million in FY 2006 to $1.1 million in FY 2015, the cost of newer  claims is expected to increase as claims develop (e.g., a knee injury  later requiring surgery). For example, the total cost of FY 2013 claims  was $1 million as of June 30, 2013, but increased to $3.2 million by  June 30, 2015. Spikes in the cost of claims incurred in FY 2012 and  FY 2013 were due to two separate claims involving an unusually  severe injury or illness that progressed over time.    EXHIBIT 2  Number of Workers’ Compensation Claims Filed by Fiscal Year of Loss  As of June 30, 2015   Source: York data    80 76 75 73 71  45 56 42 59  36  74  57 56 57  38  46  45  39  45  37  6 9 5  5  4 1  1  4  1  0 20 40 60 80 100 120 140 160 180 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Indemnity Medical Only First Aid Number of claims may increase as  more are filed after the loss date  Attachment A Disability Rates and Workers’ Compensation Audit 4      EXHIBIT 3  Cost of Claims Incurred and Paid by Fiscal Year of Loss  Valued as of June 30, 2015   *  The actual cost paid as of June 30, 2015, for claims grouped by fiscal year of their loss dates. The difference between the  estimated cost incurred and the actual cost paid becomes smaller as the injured employees receive benefits and the  older claims are closed.  Source: York data    Injury and Illness Prevention  Program (IIPP)  The City’s safety policy requires all employees to comply with all  California Occupational Safety and Health Act (Cal/OSHA) standards,  all applicable safety laws, and the City’s injury and illness prevention  manual (the safety manual). Cal/OSHA requires employers to  establish and implement a written injury and illness prevention  program (IIPP), and regularly update it to maintain its effectiveness.  According to Cal/OSHA, an effective IIPP must:  • Fully involve all employees, supervisors, and management  • Identify employees’ exposure to specific workplace hazards  • Correct identified hazards in an appropriate and timely manner  • Provide effective training  Modified Duty Program Helping an injured employee return to work with modified or  alternative duty can benefit both the City and the employee in  multiple ways. Not only can the City reduce workers’ compensation  costs and retain experienced employees, the employees can also  avoid financial stress and continue to be productive. Wages will be  the same rate of pay the employee received in his/her regular  $2.9 $2.1 $2.7 $2.6 $2.5 $1.9 $2.8 $3.2 $2.1 $1.1 $2.6 $1.9 $2.5 $2.1 $2.2 $1.4 $2.0 $1.7 $1.2 $0.5 $0.0 $0.5 $1.0 $1.5 $2.0 $2.5 $3.0 $3.5 FY 2006 FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Mi l l i o n s Estimated Cost Incurred Actual Cost Paid* Indemnity claims represent about 98% of the costs Costs are expected to  increase as claims develop Attachment A Disability Rates and Workers’ Compensation Audit 5      assignment. City policy limits modified work assignments to 180 days  unless there are extenuating medical reasons approved by the Risk  Manager.  Scope We reviewed the City’s workers’ compensation claims and related  financial and operational data for the injuries and illnesses that  occurred from FY 2011 through FY 2015. Our analysis focused on  indemnity claims involving four departments that represent over  90 percent of the City’s indemnity claims cost: Police, Fire, Utilities,  and Public Works. We did not review the actual claim files, medical  records, or legal records.   Our comparison of the City’s data to York’s data was limited because:  We could not obtain the dates of disability leave covered by each  York voucher, so we compared the amount of York vouchers that  reflected the City’s disability leave payments to the actual City  payments based on the voucher issuance date. Any vouchers  reissued to make adjustments resulted in discrepancies if they  covered prior disability leave dates.   There was not a common unique data field. Although we used  the name as a common field, the employee’s name in the City’s  data sometimes differed from the claimant’s name in York’s  data, which required us to visually compare names to identify  employees.  Methodology To accomplish our audit objective, we:   Interviewed staff from the HR, the Administrative Services  Department (ASD), Police, Fire, Utilities, and Public Works  departments to understand the City’s workers’ compensation  processes.   Reviewed California DIR publications, California laws and  regulations, City policies and procedures, and labor agreements  to understand the laws, regulations, and requirements related to  the workers’ compensation claims filed by City employees.   Reviewed the City’s Comprehensive Annual Financial Reports,  Operating Budget documents, City data, and other departmental  records, including safety committee minutes for Fire, Utilities  (Water‐Gas‐Wastewater Field Operations, Electric Field  Operations), and Public Works.   Interviewed York staff, including claims examiners and the  account manager, and reviewed York data.   Identified risks that could prevent achieving the program  objectives and procedures implemented to mitigate the risks.  Attachment A Disability Rates and Workers’ Compensation Audit 6       Mapped relevant processes in coordination with HR and ASD  staff.   Compared the disability leave benefits recorded by York to the  benefits the City actually paid to the injured employees from  FY 2013 through FY 2015. Selected 22 employees with a  difference of $10,000 or more between York records and City  benefit amounts paid, and reviewed their workers’ compensation  claim data, York check register records, City’s financial records,  and the employees’ timecards. Worked with HR and ASD staff  and York staff to identify causes for the differences and  determine if the benefits were paid accurately in accordance with  state law and City policies.  Data reliability To assess the reliability of the data needed to answer the audit  objective, we reviewed the data for completeness, consistency, and  reasonableness, and discussed issues we identified with  knowledgeable City and York staff. We also cross‐referenced multiple  reports generated from the City’s SAP system and York’s system to  further understand the data and related processes.2  Although our assessment identified some discrepancies between the  City’s data and York data, we were able to understand the sources of  discrepancies and isolate them or make manual adjustments to  support our audit findings and conclusions. From these efforts, we  believe the information is sufficiently reliable for this report.  Compliance with government  auditing standards  We conducted this audit of disability rates and workers’  compensation in accordance with our FY 2016 Annual Audit Work  Plan and 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 objective. We believe  that the evidence obtained provides a reasonable basis for our  findings and conclusions based on our audit objective.  We would like to thank management and staff in the Human Resources, Administrative Services,  Police, Fire, Utilities, Public Works departments and the City Attorney’s Office for their time,  cooperation, and assistance during the audit process.                                                                 2  SAP is the City’s enterprise resource planning system that supports the City’s core business functions, including  accounting, purchasing, and utilities.  Attachment A Disability Rates and Workers’ Compensation Audit 7      Finding 1 The City’s Injury and Illness Prevention Program (IIPP) is  comprehensive but has lost its effectiveness due to the  loss of its City Safety Officer   The City has a comprehensive safety manual to help protect City  employees from work‐related injuries and illnesses. However, the  manual has not been updated since 2000, and has lost its  effectiveness as its procedures, forms, and tools have become  outdated. While the number of workers’ compensation claims filed  decreased in FY 2015 and has generally decreased since FY 2009, the  City may face a future increase in workplace injuries and illnesses if  the IIPP remains outdated.  The City’s Injury and Illness  Prevention Program is no  longer effective  The City Safety Officer is responsible for maintaining an effective IIPP,  but the City has not had a City Safety Officer since 2013. HR went  through a series of reorganizations beginning in FY 2014, but it did  not redefine the roles and responsibilities over the IIPP. As a result,  the City Safety Officer’s responsibilities went unfulfilled while  departments have stopped referring to the manual in favor of their  own departmental safety procedures or practices.  The City has not had a City  Safety Officer since July 2013  due to HR reorganization  The safety manual assigns the City Safety Officer the responsibility to  maintain an effective IIPP by ensuring regulatory compliance and  coordinating all City safety activities. However, the City has not had a  City Safety Officer since the previous officer retired in July 2013. HR  went through a series of reorganizations beginning FY 2014, and  implemented a new business partner model where each department  was assigned to one of the HR business partner teams that provide a  wide range of human‐resource related services for their  departments.  HR did not revise the safety  manual to realign it with the  new business partner model  Upon reorganization, HR did not revise the safety manual procedures  or redefine the roles and responsibilities over the IIPP to ensure the  IIPP remains effective and sufficient resources are allocated to  administer the program. Between November 2013 and June 2015, HR  hired four Senior HR Administrators to lead each business partner  team. However, their involvement in the City’s IIPP has been minimal  because their job duties cover a wide range of other high priority HR  areas, and their workload, as they are trained and learn on the job,  has been full with pressing issues and no capacity left for injury and  illness prevention efforts. Exhibit 4 shows that HR staffing for the IIPP  decreased from 1.75 in FY 2011 to 0.54 in FY 2015, while the  department’s staffing increased slightly during the same period, from  16.34 in FY 2011 to 16.70 in FY 2015. This indicates that HR  Attachment A Disability Rates and Workers’ Compensation Audit 8      reallocated its resources away from the IIPP to other functions,  rather than losing a position due to a budget reduction.     EXHIBIT 4  HR Staffing and Cost to Administer the IIPP (General Fund)   FY 2011 FY 2012 FY 2013 FY 2014 FY 2015  HR Authorized Staffing – IIPP  1.75  1.00  1.02  0.54  0.54  HR Administration Cost – IIPP  $190,976  $155,518  $93,136  $75,113  $85,034  Source: City’s financial records    Citywide safety committees  have not been established as  required  The City is required to establish certain safety committees and hold  meetings as specified by its policies and labor agreements. Although  departments hold regular safety committee meetings, the citywide  committees shown in Exhibit 5 have not been established as  required. The Citywide Safety Committee, for example, is designed to  monitor departmental safety activities and monitor compliance with  safety and occupational health standards and practices, but it has not  met for years.    EXHIBIT 5: Safety Committees not Established  Safety  Committee Authority Composition Frequency Functions  Citywide Policy and Procedures  (3‐01/HRD)  SEIU MOA  SEIU Hourly MOA  Safety Manual  Ten members with equal  union and management  membership*  Upon call Review safety standards, act as  an advisory group to the  departmental safety  committees, and review all  departmental safety programs  Civic  Center  (City Hall)  SEIU MOA  Safety Manual  One facilities management,   one building inspection,  and two union  representatives, and the  City Risk Manager**  As  needed**  Safety matters of the Civic  Center (City Hall)  Ergonomics SEIU MOA None specified None  specified  Provide management with  recommendations on  safe  ergonomic work practices   *  Service Employees International Union (SEIU) Memorandum of Agreement (MOA)  ** According to the SEIU MOA. However, the safety manual includes the City Safety Officer, not the Risk Manager, in the  composition and requires the meeting to take place at least quarterly.  Source: City policies and procedures and labor agreements     In addition, the responsibilities of the City Risk Manager and City  Safety Officer are not consistently defined in the City’s policies and  procedures, safety manual, and labor agreements. For example, the  safety manual states the City Safety Officer is responsible for the  Attachment A Disability Rates and Workers’ Compensation Audit 9      functions of the Citywide committee, while City procedures assign  the responsibility to the Risk Manager. HR did not clarify the  assignment of responsibility as part of the reorganization.  Ergonomic training  workshops have not been  provided as required  The SEIU labor agreement also requires that management develop  and provide training workshops on safe ergonomic work practices at  least twice a year and immediately adopt Cal/OSHA ergonomic  standards as part of the IIPP. The Cal/OSHA ergonomics standard  requires every employer that had at least two workers report a  Repetitive Motion Injury (RMI), as diagnosed by licensed physicians  within a 12‐month period, to implement a program designed to  minimize RMIs. The program must include a worksite evaluation,  control of exposures that have caused RMIs, and employee training.  Because there were two to four workers’ compensation claims  involving RMIs in each of the last five fiscal years, the City is subject  to this requirement.   Since its reorganization, HR has not had the resources to identify and  coordinate ergonomic training that the former City Safety Officer did  in the past. While the City increased its annual budget for ergonomic  evaluations from $25,000 to $55,000 in FY 2016, its current expense  is focused on office environments where office furniture and  equipment are improperly set up.  Industry specific ergonomic  training may prevent certain  sprain and strain injuries  Studies show the importance of a comprehensive ergonomics  program in preventing sprains, strains, and RMIs.3 Strains and sprains  are the highest priority concern for all public safety workers in terms  of injury frequency and amount of lost work time, and back injuries  are the most common for police and emergency medical service  (EMS) responders who often lift and carry injured people when on  medical calls.  Exhibits 6 and 7 show that strain and sprain injuries represented  more than half of the City’s indemnity claims, both in incurred cost  (52 percent) and in number of claims filed (59 percent) from FY 2011  through FY 2015. Public safety employees filed more than half  (56 percent) of the claims.  While general interventions (e.g., maintaining a healthy body weight  and staying physically fit) may have a beneficial effect on activities                                                               3  Preventing Sprains, Strains, and Repetitive Motion Injuries (2012, State Building & Construction Trades Council of  California); Occupational Safety and Health for Public Safety Employees (2008, RAND Institute for Civil Justice and  Infrastructure, Safety, and Environment).  Attachment A Disability Rates and Workers’ Compensation Audit 10      such as foot pursuits by police officers, specific ergonomic  interventions (e.g., training, modification to equipment) are more  effective in addressing certain risk factors, such as working in  awkward body postures and performing the same or similar tasks  repetitively. As part of their negotiated benefits, public safety  employees have a wellness or fitness program available.    EXHIBIT 6  Top Five Injuries or Illnesses for Indemnity Claims  From FY 2011 through FY 2015, Valued as of June 30, 2015   Nature of Injury or Illness Number of Claims Filed % Cost Incurred (in millions) %  Strain 120 50% $4.4 40%  Sprain 21 9% $1.3 12%  Respiratory Disorders 7 3% $2.2 20%  Laceration 6 3% $0.6 6%  Cancer 4 2% $0.5 4%  Other 80 34% $2.0 18%  Total 238 100% $10.9 100%  Source: York data    EXHIBIT 7  Number of Indemnity Claims Filed for Strain or Sprain Injury by Body Part  From FY 2011 through FY 2015   Department  Lower  Back Knee Shoulders Multiple Other Total %  Fire 6 11 6 4 18 45 32%  Police 11 5 4 6 8 34 24%  Utilities 4 6 3 2 7 22 16%  Public Works 3 2 2 0 13 20 14%  Other 4 2 1 0 13 20 14%  Total 28 26 16 12 59 141 100%  Source: York data    Police, Fire, Utilities, and  Public Works departments  incur the City’s highest  workers’ compensation costs  Exhibit 8 shows that a majority of the City’s indemnity claims (over  80 percent in number and over 90 percent in incurred cost) are filed  by employees from four departments: Police, Fire, Utilities, and  Public Works. Public safety officers who are charged with protecting  the public, such as police officers and firefighters, have a much  higher incidence and cost of injuries that result in workers’  compensation claims than other public employees. Utilities and  Public Works employees also face higher risks of injury due to the  nature of their job duties.  Attachment A Disability Rates and Workers’ Compensation Audit 11      EXHIBIT 8  Number of Indemnity Claims Filed, Cost Incurred, and Industrial Disability Retirement  By Department From FY 2011 through FY 2015, Valued as of June 30, 2015  Department  Number of Claims Filed   Industrial Disability Retirement  Accepted Denied Total %  Cost Incurred  (in millions) % Number  Average Age  at Retirement  Fire 54 15 69 29%$2.9 26% 6 50  Police 51 13 64 27%$4.7* 43% 9** 40  Utilities 32 6 38 16%$1.5 13% 0 N/A  Public Works 26 4 30 13%$1.3 12% 0 N/A  Others 31 6 37 16%$0.6 6% 1 43  Total 194 44 238 100%$10.9 100% 16 44  *  Includes two claims with unusually high severity filed in FY 2012 and FY 2013, valued at $0.5 million and $2.2 million,  respectively.  ** One of the Police employees was not a safety officer.  Source: York data and City’s personnel records     Exhibit 9 shows that employees with one of five job titles comprise  67 percent of the total indemnity claim costs incurred from FY 2011  through FY 2015. During this period, 87 employees with these job  titles filed 115 indemnity claims, with 19 employees filing two or  more indemnity claims.    EXHIBIT 9  Top Five Job Titles by Cost of Indemnity Claims Incurred  From FY 2011 through FY 2015, Valued as of June 30, 2015   Job Title Department  Cost Incurred  (in millions)  % of City  Total  Number of  Claims Filed  % of City  Total  Police Officer Police $4.3 39% 51 21%  Fire Fighter/Paramedic Fire $1.1 10% 31 13%  Fire Captain Fire $0.8 7% 12 5%  Heavy Equipment Operator Utilities, Public Works $0.7 6% 7 3%  Firefighter Fire $0.6 6% 14 6%  Total  $7.4 67% 115 48%  Source: York data    16 industrial disability  retirements resulted from  workers’ compensation cases  in the last five years  During the last five fiscal years, 16 City employees retired with  industrial disability, and 14 of them were safety employees. Safety  employees and other eligible members of the California Public  Employees' Retirement System (CalPERS) may qualify for an  industrial disability retirement if they are unable to return to work  because of a job‐related injury or illness that is expected to be  permanent or last indefinitely. While an employee must be at least  Attachment A Disability Rates and Workers’ Compensation Audit 12      age 50 and have a minimum of five years of service credit to be  eligible for a service retirement, there are no age or vesting  requirements for an industrial disability retirement. If approved,  employees generally receive the greater of:   50 percent of the highest average monthly salary within the last  three years, tax free; or   A higher percentage of the salary depending on the years of  service credit, but only the first 50 percent is tax free.  Reducing the number of industrial disability retirements is in the best  interest of both the employees and the City. The sooner employees  retire, the more contributions the City must make to fund the future  obligations of retirement benefits, while the disabled employees face  a reduced income with the inability to work. All 16 retirees had filed  one or more workers’ compensation claims involving a sprain, strain,  cumulative, or repetitive motion injury prior to applying for an  industrial disability retirement. Preventing these injuries could  potentially reduce the number of disability retirements among safety  employees.  Departments do not have  access to York injury and  illness records to better  identify and correct hazards  One of the City Safety Officer’s responsibilities is to maintain safety  statistics on City employees and participate as needed in  departmental safety committees, and direct activities of those  involved in the daily management of employee safety, including  safety training and hazard identification. In the absence of the City  Safety Officer, departmental safety committees and safety  coordinators have lost access to the workers’ compensation  statistics, which could have helped them develop better safety  programs focused on prevention of high frequency or high cost  injuries and illnesses. York staff stated that regular reporting of  safety statistics can be customized for each department and  automated using their system, as is done for their other clients.  Some of the City’s workplace  postings are outdated  All employers in California must post information regarding safety  rules, regulations, and workers’ compensation benefits in areas  frequented by employees where it may be easily read during the  workday. Although HR annually purchases labor law posters and  distributes them to City facilities to meet this requirement, there was  outdated information posted in multiple locations, including the  names and phone numbers of the City’s occupational health service  provider and the workers’ compensation claims administrator. At  City Hall, there was only one poster displayed on the A level, in an  area that may not be seen by all employees. Most of the information  posted by other departments on other City Hall floors also contained  outdated information.  Attachment A Disability Rates and Workers’ Compensation Audit 13        Recommendations We recommend that:   1.1. The City Manager allocate sufficient resources to implement  and maintain the City’s IIPP and to monitor the City’s  compliance with the program.   1.2. HR update the safety manual, including supplemental tools and  guidance posted on the intranet, to ensure:   The roles and responsibilities over the IIPP are redefined.   The City’s IIPP complies with all Cal/OSHA standards and  other applicable safety laws.   1.3. HR review departmental procedures and safety requirements  to ensure they align with the revised IIPP and City policy and  procedures.   1.4. HR work with York and departments to identify useful safety  statistics, appropriate HR and departmental recipients of this  information, and reporting frequency, and establish an  automated process for those statistics to be provided.   1.5. HR identify industry‐specific ergonomics and general wellness  training opportunities to minimize common injuries, and  coordinate with departments to ensure regular training is  provided to employees.       Attachment A Disability Rates and Workers’ Compensation Audit 14      Finding 2 Injured employees’ benefit eligibility is not accurately and  completely tracked and monitored, resulting in both  overpayments and underpayments of workers’  compensation benefits   The City does not have an effective process or tools to monitor  benefit eligibility and the work status of injured employees, resulting  in both overpayments and underpayments of the benefits paid to  injured employees. The City’s workers’ compensation benefit  structure is highly complex due to additional City‐provided benefits  defined by City policy and labor agreements. This complexity also  resulted in some disability leave payments being incorrectly reported  as compensation to CalPERS. HR staff track eligibility of each injured  employee manually because the City’s SAP system is not configured  to support administration of these benefits. York relies on HR staff to  immediately communicate any changes in the work status of injured  employees to ensure that benefit eligibility is updated and  communicated to the injured employee in a timely manner as  required by state law.  The former City Safety Officer used to play a key monitoring role and  facilitated communication between the City and York, but roles and  responsibilities became unclear as HR was reorganized and the  processes changed. Lack of monitoring resulted in multiple instances  of benefit overpayment and underpayment, as described below.  The City provides workers’  compensation disability leave  benefits beyond what is  required by state law  City policies and labor agreements provide additional workers’  compensation disability leave benefits to City employees beyond the  state requirement, as shown in Exhibit 10. The City pays these  disability leave payments directly through employees’ paychecks.  York is contractually required to determine and track benefits to be  paid or rendered under the applicable workers’ compensation laws,  and does not track these additional City benefits. York issues  vouchers to record the City’s disability leave payments, and in  theory, this amount is less than the actual City payments by the  amount of additional City benefits.  As shown in Exhibit 11, the City made disability leave payments of  $2.4 million from FY 2013 through FY 2015, which was about  $570,000 more than the amount of vouchers issued by York  ($1.8 million) during the same period.    Attachment A Disability Rates and Workers’ Compensation Audit 15      EXHIBIT 10  City’s Workers’ Compensation Disability Leave Benefits Direct Payroll Categories   Benefit Category  Payroll Code  (Tax Free) Benefits under State Law Additional Benefits by the City  Salary Continuation for  Safety Employees  (Labor Code 4850)  7200 *Full salary up to 365 days N/A  Salary Continuation for  Nonsafety Employees  7200 N/A *Full salary for the initial 60 calendar  days following the injury  Temporary Disability  (TD)  7100 **Two‐thirds of gross wages  lost up to 104 weeks within  five years from the date of  injury; subject to the weekly  maximum amount set by  state law  *The greater of the amount  determined under state law or two‐ thirds of full salary regardless of the  state weekly maximum (City Policies  and Procedures 3‐03/HRD, last  updated in 2000)  ***Medical  Appointments  7200 N/A Can be coded as disability leave on  the timecard  * As of the date processed by the City’s payroll. The amount of full salary is often different from the average weekly  wage (AWW) calculated in accordance with the California Labor Code.  ** York determines the AWW by going back one year from the date of injury in accordance with the California Labor  Code. The AWW must consider various factors such as overtime and scheduled wage increases.  ***  The City Policy and Procedures 3‐03/HRD state, “The injured employee is entitled to one day of TD (temporary  disability) for each day of wages actually lost when submitting to medical examination at the request of the City or  the Workers' Compensation Appeals Board and when off work for a medical examination to prove his/her contested  claim.  Source: Auditor’s analysis of state law and city policies and procedures    EXHIBIT 11  Summary of Disability Leave Payments   Fiscal Year  Vouchers Issued by York  (Benefits Required by State Law)  Additional  City Benefits*  City Payroll Payments Made  (Includes Additional City Benefits)  2013 $460,454 $232,825 $693,279  2014 $788,390 $213,017 $1,001,407  2015 $595,236 $124,060 $719,297  Total $1,844,080 $569,902 $2,413,983  * Includes errors the City made in paying disability leave benefits.Quantifying the monetary impact of each case would  involve in‐depth analysis of the timecard data and case files.  Source: City’s financial records and York data    Some disability leave  payments have been  incorrectly reported to  CalPERS as compensation  The California Public Employees’ Retirement System (CalPERS)  defines reportable compensation that should be included in a  member’s “compensation earnable” for the purpose of determining  the member’s retirement allowance. The City has been reporting all  workers’ compensation disability leave benefits included in  Exhibit 11, captured under the payroll codes 7100 and 7200, as  Attachment A Disability Rates and Workers’ Compensation Audit 16      compensation. However, CalPERS confirmed that only salary  continuation for safety employees as defined in Labor Code section  4850 is reportable to CalPERS, and other disability leave benefits,  including temporary disability and any other salary continuation  plans offered by the employer, are not reportable. HR has been  aware of this issue and stated that it has been working with ASD and  CalPERS to address it.  The City’s disability leave  payments included errors  The former City Safety Officer used to track benefit eligibility of  injured employees and communicate the status to York staff. HR  business partners have been tasked with this function since the  reorganization, but the change was implemented without the new  process being defined or the business partners being fully trained.  We reviewed 22 claims that accounted for about $493,300  (87 percent) of the additional city benefits in Exhibit 11, and  identified multiple errors:    In 3 cases, the City paid disability leave benefits totaling about  $221,600, before the claims had been accepted and York  determined if the employees were entitled to the benefits. One  of the claims was later accepted, and the settlement took into  account payments made by the City. Estimated overpayments  for the other two claims, which were denied, total about  $33,600.   In 2 cases, the City amended the employee's timecard after a  settlement to pay out accrued sick or vacation leave in  accordance with City policies and labor agreements but did not  take into account the disability leave check that York had already  issued. These employees either retired or resigned prior to the  settlement and were no longer on the City’s payroll. Estimated  overpayments total about $23,900.   In 8 cases, HR did not track the first 60 calendar days of salary  continuation for nonsafety employees in accordance with City  policies, resulting in estimated overpayments totaling about  $44,700 to seven employees and an underpayment of about  $3,500 to one employee.   In 14 cases, York vouchers did not reflect the employee's  timecard coding. For example, York issued vouchers after the  employee had returned to work, or conversely, York stopped  issuing vouchers when the employee was still on disability leave.  Quantifying the monetary impact of each case would involve an  in‐depth analysis of the timecard data and case files.  Attachment A Disability Rates and Workers’ Compensation Audit 17      A highly manual process  requires timely  communication to work  Exhibit 12 shows that the City’s disability leave management process  is highly manual because the City’s SAP system is not configured to  support the process. HR business partners are required to track the  injured employees' work status and benefit eligibility by reviewing  the work status notes issued by the treating physicians that describe  work capacities and restrictions and updating the HR work status  tracking sheet.  To limit the use of disability leave payroll codes to eligible  employees, HR business partners manually set a limited number of  hours, called “buckets,” to be charged to disability leave for salary  continuation (7200 time code in SAP), temporary disability (7100  time code in SAP), and modified duty (1000 time code in SAP), for  each employee based on the work status notes. The HR business  partners are also required to periodically run an SAP time report to  ensure that employees are coding their timecards appropriately.    EXHIBIT 12  The City’s disability leave management process      Source: Auditor’s analysis of City policies and procedures.    Attachment A Disability Rates and Workers’ Compensation Audit 18       This process relies heavily on the timely communication of work  status through multiple parties:   Employees obtain and immediately submit the work status note  to the supervisor   Supervisors immediately forward the note to the HR business  partner team (sometimes with a copy to York)   HR business partner teams forward the note to the York claims  examiner, determine benefit eligibility, and update the time  buckets   York claims examiners determine and update benefit eligibility  and send a notice to the employee with a copy to HR   If any of the individuals in this chain of communication is absent,  cannot get to the note, or is not trained to take timely and  appropriate action, the process may not work, creating unnecessary  delay. Department staff reported that the time buckets often run out  even if the work status note had already been submitted, and it  prevents the employee from using appropriate disability leave  payroll codes on the timecard until the buckets are adjusted. HR staff  reported that they do not always receive work status notes timely,  and are unable to update the buckets before the payroll period ends.  HR business partners do not  have effective tools to  monitor work status and time  reporting  The former City Safety Officer used to centrally monitor injured  employees’ work status and facilitate communication between  supervisors and York. The HR reorganization decentralized this  monitoring function without effective tools being implemented,  which left the business partners, most of them newly hired upon the  reorganization, unsure of how to use the tools provided. Business  partners reported that they do not have the capacity to proactively  monitor the work status or time reporting of the employees on  workers’ compensation due to their demanding workload with other  priorities. Without complete and accurate information on the work  status of all injured employees, the City is unable to ensure they  return to work in a timely manner or determine the true cost of  workers' compensation disability leave.  HR work status tracking sheet  not a useful tool  Their shared tool, the HR work status tracking sheet, is not designed  effectively to track the work status of injured employees. For  example, there are no columns to document key dates such as the  date released back to modified duty or date returned to full duty.  Business partners rely more on their calendar, email, or paper file  records to track the status. Most information on the report was  either incomplete or inaccurate regarding the employees’ work  status.  Attachment A Disability Rates and Workers’ Compensation Audit 19      Payroll codes used for time  reporting do not fully support  the disability leave  management process  The business partners also run an SAP time report for monitoring  disability leave, but the payroll codes are not structured to capture  all information necessary for efficient, systematic monitoring:   Salary continuation and medical appointments share the same  payroll code (7200), and the report cannot distinguish the two.  Timecard information does not include the date and type of  injury as required by the payroll procedures, and leave is not  clearly tracked by specific claims. HR reported that it has been  working with ASD to create a separate code for medical  appointments.   The modified duty code (1000) is also used by employees who  are on modified duty due to nonwork related injury or illness.  These employees are required to note on the timecard that the  modified duty is nonindustrial. Only 2 percent of the total  modified duty hours was noted as nonindustrial during the 5‐ year period, but the notes were inconsistent. It is questionable if  all employees with nonindustrial injuries enter the notes in SAP  or if supervisors review the notes to ensure accurate and  complete time recording.   About 40 percent of the Fire Department’s modified duty leave is  coded as 24‐hour shift (1200), because 24 hours exceeds the  daily maximum set for coding modified duty (1000) in the SAP  system. HR staff was not aware of these modified duty hours  coded as 24‐hour shift.  Exhibits 13 and 14 summarize the disability leave and modified duty  hours recorded in SAP from FY 2011 through FY 2015.    EXHIBIT 13  Disability Leave Hours* by Department from FY 2011 through FY 2015    FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Total FTE**  Police 7,102 4,300 6,848 7,770 5,872 31,890 18.7  Fire 3,624 4,805 5,015 7,953 6,770 28,168 16.5  Utilities 2,317 1,423 2,632 4,697 4,766 15,833 9.3  Public Works 1,372 2,659 3,428 6,187 1,890 15,536 9.1  Others 501 972 1,095 643 580 3,791 2.2  Total 14,916 14,158 19,017 27,250 19,878 95,219 55.8  * Includes hours coded as disability leave for medical appointments  ** Full‐time equivalent. Based on the productive time of 1,706 hours (2,080 hours x 82%) used by ASD’s Office of  Management Budget.  Source: City’s financial records    Attachment A Disability Rates and Workers’ Compensation Audit 20      EXHIBIT 14  Modified Duty Hours* by Department from FY 2011 through FY 2015    FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Total FTE**  Police 5,784 5,611 3,121 4,322 4,662 23,500 13.8  Fire*** 419 560 972 3,632 1,898 7,481 4.4  Utilities 2,792 1,963 1,765 853 1,199 8,572 5.0  Public Works 3,677 5,648 1,935 2,422 1,821 15,503 9.1  Others 2,754 2,333 159 1,096 893 7,235 4.2  Total 15,426 16,115 7,952 12,325 10,473 62,291 36.5  *  Includes modified duty hours resulting from employees’ personal injuries.  ** Based on the productive time of 1,706 hours (2,080 hours x 82%) established by ASD using a consultant’s study.  *** Includes 24‐hour modified duty hours coded 1200, which was 41 percent of the total Fire Department modified duty  hours.  Source: City’s financial records     The Disability Pay section of the City’s payroll procedures (2‐06/ASD,  last updated in 2001) contains outdated instructions for disability  time reporting, because procedures were written for the old process  involving manual paper timecards, before SAP was implemented.  Better data tracking needed  to measure the true cost and  effectiveness of the modified  duty program  Exhibits 13 and 14 also demonstrate the importance of monitoring  modified duty hours and the additional staffing impact. From  FY 2011 through FY 2015, 158 employees worked a total of about  62,300 hours, or 39 FTEs of modified duty, including six employees  whose modified duty exceeded 180 days during the five‐year  period.4 State workers’ compensation law requires the rate of pay  for modified duty to stay the same as the employee’s regular  assignment without any impact on benefits or accruals, and the City  cannot hire new employees to fill the regular duty positions while  employees are out on disability or modified duty.  As a result, those regular duty positions need to be backfilled, often  with overtime, unless overstrength positions are available or  temporary employees are hired to fill the gap.5 The cost of backfilling  can be significant. However, there was insufficient information on  the timecards to quantify the actual financial impact of overtime  charged for filling in for a disabled employee. The Fire Department                                                               4 The City’s modified duty policy, Policy and Procedures 3‐02/HRD, limits modified duty assignments to 180 days unless  there are extenuating medical reasons that are approved by the Risk Manager. The Risk Manager confirmed that she  approved five of the six cases. The unapproved case involved three separate indemnity claims, and the employee was  back on full duty between injuries.  5  Overstrength positions are additional positions, over and above the quantity approved in the Table of Organization,  authorized to cover temporary shortages in staffing.  Attachment A Disability Rates and Workers’ Compensation Audit 21      reports the number of FTE positions that require backfilling in its  quarterly performance report.   Similarly, we could not systematically evaluate whether the City is  successful at getting employees back to work as soon as medically  appropriate to minimize loss of productivity and disruption of  service. Neither the City nor York record when the employee has  received a medical clearance from the treating physician, and as  mentioned earlier, the HR work status tracking sheet did not  accurately and completely capture key dates such as when the  employee was released to modified duty or returned to full duty.  HR business partners do not  have the technical expertise  to determine benefit  eligibility and must  coordinate with York  Administration of workers’ compensation claims is highly complex  and technical, involving various laws and regulations. HR business  partners do not have prior background in workers' compensation  and do not possess York’s technical expertise. York makes the initial  eligibility determination to accept, delay, or deny the claim within  the first 14 days after the City learns about the injury. Throughout  the life of the claim, York relies on City staff to immediately  communicate any changes in the work status of injured employees  so that benefit eligibility is updated and communicated to the  injured employee in a timely manner.  HR business partners do not  review benefit notices issued  by York  York is required by state law to send benefit notices to the claimants  with a copy to HR to explain:  • How disability leave payment amounts were determined.  • When and why benefits are delayed, denied, starting, changing,  or ending (with a list of all benefits paid).  These notices contain critical information regarding benefit  eligibility, and should be closely reviewed to ensure that the work  status report and time reporting are consistent with York’s eligibility  determination. The business partners were not trained to review  these notices, and therefore, did not identify discrepancies.   Because York does not track additional City benefits, the notices are  based on the benefits as required by state law, and do not always  reflect the benefits the employees actually receive from the City.  York also provides a monthly Payment Transaction Report, which  lists checks and vouchers that York issued on behalf of the City, but  the business partners do not review the vouchers to ensure that the  information is consistent with the benefits paid through payroll.  For the business partners to be able to effectively monitor  employees’ benefit eligibility and time reporting, they need to be  equipped with better tools and fully trained to:  Attachment A Disability Rates and Workers’ Compensation Audit 22       Interpret the benefit notices and vouchers issued by York   Understand eligibility criteria for additional City benefits   Facilitate communication between York and departments   Monitor consistency between York records and City records  HR business partners do not  have access to York data  The City Safety Officer used to have online access to York’s system to  view all claims documentation and to export data to analyze claims,  payment transactions, and trends. As of December 2015, none of the  HR business partners had such access to York data. York recently  implemented a new risk management information system that  provides a user‐friendly interface with graphical information,  analytics, and reports. HR stated that it plans to have York provide  access to the new system and training to enhance its ability to  monitor claims and payment transactions.  Recommendations We recommend that HR:   2.1. Continue working with ASD and CalPERS to address the  disability leave benefits that were incorrectly reported as  compensation to CalPERS.   2.2. Review the 22 claims that accounted for 87 percent of the  additional city benefits in Exhibit 11, and take necessary action  to address any errors identified.   2.3. Review the existing disability leave management process in  Exhibit 12 and determine the optimal monitoring structure,  update the tools and procedures, and allocate sufficient and  skilled resources to ensure:  a. Benefit eligibility and work status of injured employees is  accurately, completely, and timely tracked including:   Start date of disability   Date released back to work by the treating physician   Date returned to modified duty, including the  assignment and payroll code used   Date returned to full duty  b. Any changes in work status are communicated to York  c. Disability leave time buckets are updated as soon as HR is  notified of the status change.  d. Benefit notices and vouchers issued by York are consistent  with the timecards and actual benefits paid through payroll. Attachment A Disability Rates and Workers’ Compensation Audit 23      e. Employees comply with the City policy requiring timely  submission of work status notes.   2.4. Work with ASD to ensure that the data necessary for disability  leave management is captured through time reporting in SAP  to support the process, including:  a. Revising the City’s payroll procedures, Policies and  Procedures 2‐06/ASD, to provide clear instruction for  reporting disability leave on SAP timecards.  b. Configuring the SAP system to:   Track compensation reportable to CalPERS separately.   Track medical appointments that qualify as disability  leave by creating a separate payroll code.   If feasible and cost‐effective, limit the number of days  each employee can code disability leave or modified  duty on their timecard based on their position.   2.5. Work with York to identify and train responsible HR staff, and  maintain online access to York data for analyzing claims,  payment transactions, and trends. Establish and maintain  written procedures for granting, monitoring, and removing  access to the York data and appropriate handling and  safeguarding of the data.       Attachment A Disability Rates and Workers’ Compensation Audit 24      Finding 3 The City has not met the state requirement for timely  reporting of its workers’ compensation claims to York,  potentially causing the cost of claims to increase   California law requires employers to report within five days of their  knowledge every occupational injury or illness that results in lost  time beyond the date of the incident or requires medical treatment  beyond first aid. The City has not met this requirement, which could  result in penalties and could also increase the cost of claims. A recent  study concluded that claims with more than a two‐week delay in  reporting involve a longer period before the injured worker can  return to work, take longer to close, and are more complex to  settle.6  Delays in reporting caused by  various reasons, and further  affected by HR reorganization  Exhibit 15 shows that only 52 percent of the claims were reported to  York within 5 days from the City’s knowledge in FY 2015, as  compared to 70 percent in FY 2011 and 83 percent in FY 2012. This  decline coincides with the loss of the City Safety Officer and the HR  reorganization. The City Safety Officer used to support department  staff in timely completion of the required forms, but this role has  diminished as HR implemented the new business partner model  without redefining the reporting process.    EXHIBIT 15  Number of Days from Knowledge to Date Reported to York (Excludes Denied Claims)  Number of Days  FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Total  Claims % Claims % Claims % Claims % Claims % Claims %  5 days or less 57 70% 75* 83% 51 68% 49 53% 34 52% 266* 66% 6 to 10 days 14 17% 5 6% 16 21% 16 17% 16 25% 67 16% 11 to 30 days 9 11% 4 4%5 7% 22 24% 10 15% 50 12% 31 to 60 days 0 0% 2 2%1 1%1 1%3 5% 7 2% 61 days or more 2 2% 4 4%2 3%5 5%2 3% 15 4% Total 82 100% 90 100% 75 100% 93 100% 66 100% 405 100% *  Includes one claim that was reported to York before the City’s knowledge. York set up this claim based on the medical  legal evaluator’s opinion for an old claim involving a cumulative injury.  Source: York data    City policies are in place to  meet the state requirement  City policies require employees to report all known or even potential  work‐related injuries to their supervisors as soon as possible.                                                               6  The Relationship Between Accident Report Lag and Claim Cost in Workers Compensation Insurance, May 2015, National  Council on Compensation Insurance Inc.  Attachment A Disability Rates and Workers’ Compensation Audit 25      Supervisors must immediately provide a copy of the Employee Claim  Form (State form DWC‐1), to the employee for the employee section  to be completed. Once returned, supervisors must complete the  employer section of the DWC‐1, the Employer’s Report of  Occupational Injury (State form 5020), and the Supervisor's Report of  Injury/Exposure (City form), and forward all three forms to HR within  24 hours. HR then forwards the forms to York, if they are not already  copied on the email.   State law requires the City to submit the Form 5020 to the third  party administrator within five days from the date the injury is  reported by the employee. State law also requires the TPA to decide  whether to accept, deny, or delay the claim within 14 days after the  employer learns about the injury or illness. The claim can be delayed  for 90 days after the injury is reported by the employee if there are  any issues requiring investigation or medical evaluation. In such  cases, the TPA must send a letter to the injured employee explaining  the reason for the delay, what information is needed, and when a  decision will be made. If there are unreasonable delays in temporary  disability payments, the injured employee could be awarded a total  of 25 percent of each late payment, up to $10,000. Although we did  not identify any instances of penalties, If the employer or TPA  discovers such delays prior to the employee claiming a penalty, a  self‐imposed penalty in the amount of 10 percent of the late  payment can be paid within 90 days of the date of discovery, in lieu  of the 25 percent penalty.Exhibit 16 shows the City’s reporting  process.    Attachment A Disability Rates and Workers’ Compensation Audit 26      EXHIBIT 16  The City’s workers’ compensation claim reporting process       Source: Auditor’s analysis of City policies and procedures    Manual paper forms cause  delays and insufficient or  missing information  Until recently, supervisors had to manually complete a hard copy of  the required forms. Manual forms cause:   Delays – If the injured employees were not on site when the  injuries were reported, supervisors had to either hand deliver or  mail the Employee Claim Forms (DWC‐1) to have the employees  complete, sign, and return.   Insufficient information – Some fields, such as a description of  how the injury/illness occurred, may not have enough room for  the supervisor to provide sufficient detail, requiring the HR  business partner team or York claims examiner to follow up. For  example, the Police Department does not use the City form and  instead documents the required information in a memo because  the department policy and procedures require detailed  documentation of the incident and description of the injury.   Missing information – Form 5020 includes fields that may not be  readily available to supervisors, such as gross wages, date of hire,  and location code, which is different from the codes defined in  Attachment A Disability Rates and Workers’ Compensation Audit 27      SAP. Many supervisors leave these fields blank, expecting the HR  business partner team to fill out the missing fields. However,  York reported that the forms submitted by the City are often  incomplete.  HR recently made electronic, fillable state forms available to  employees on the City’s intranet and is planning to add the capability  to electronically sign and submit.   The state forms require sensitive, confidential information, such as  social security numbers, and need to be handled with great care. City  policies and procedures provide no additional guidance as to how to  obtain or safeguard personnel or payroll information. York stated  that it is a common practice for HR staff to complete and submit  Form 5020 on behalf of the supervisors, which helps ensure that  personnel and payroll information is entered accurately and that  sensitive information is safeguarded within the HR department.  Availability of the immediate  supervisor or HR staff may  cause further delays  Even when the employee immediately reports his or her injury, the  supervisor or the responsible HR business partner may be absent or  may not get to the forms right away to take necessary action. To  address this issue, the Fire Department now requires staff to notify  all battalion chiefs of any injury to ensure timely paperwork  completion when the direct supervisor is off work. Battalion chiefs  are also required to copy both deputy fire chiefs and administrative  staff when submitting claim forms to the HR business partner team.  Similarly, the Police Department copies York when submitting the  forms to HR, which notifies York of the need to follow up on the  injury.  Using York’s online claims  reporting and modified City  form can streamline the  process and improve accuracy  of the claims data  Most fields on the City form are included in the other two state  forms, and there is an opportunity to significantly streamline the  reporting process. York encourages its clients to use its online claims  reporting for the Form 5020 submission, which prevents simple  errors with a drop‐down list of valid entries and does not allow  submission of an incomplete form. As of March 2016, Utilities  Electric Operations is the only business unit that consistently uses it.  Form 5020 is the source of most of the City’s workers’ compensation  claims data recorded by York. Improving the accuracy and  completeness of the Form 5020 could greatly enhance the ability of  the York claims examiners to provide their service in a timely  manner.  Attachment A Disability Rates and Workers’ Compensation Audit 28      Recommendations We recommend that HR:   3.1. Streamline the workers’ compensation reporting process and  improve the accuracy and completeness of the claim forms by:   Revising the procedures to clarify the roles and  responsibilities. This should include determining whether  departments should be responsible for completing only the  Employee Claim Forms (DWC‐1) and Supervisor’s Report of  Injury and Exposure (City form), with HR staff being  responsible for completing the Form 5020.   Revising the City form for supervisors to complete with  necessary information that can be easily copied and pasted  to the Form 5020.   Ensuring the use of York’s online claims reporting to submit  the Form 5020, and having appropriate and trained staff  enter any sensitive personnel or payroll information.   Making the required forms and procedures available online  in one place with clear instructions and adding electronic  signature capability, if feasible and cost‐effective.   Regularly reviewing the forms, procedures, and  performance to ensure their compliance with state law.       Attachment A Disability Rates and Workers’ Compensation Audit 29      Finding 4 The City has not ensured that York met all contract terms   The York contract includes various terms that could help the City  reduce its workers' compensation costs, such as cost reduction  guarantees and utilization review.7 While most requirements are  met, there are some that the City has not required York to fulfill. The  City could better manage its claims and reduce costs by fully using  services York is required to provide under the contract.  The City could reduce cost of  claims by fully using York  services  The following contract terms are not fully met:   Quarterly file review – York is required to coordinate and attend  quarterly file review meetings with HR and department staff to  discuss strategies to help employees return to work, close claims,  and minimize costs. However, these meetings had not been  regularly and effectively carried out recently due to staff  turnover and scheduling issues on both sides.   Required reports – York has not provided certain required  reports, such as a report of claims with no activity for the  previous six months. These reports are readily available from the  York system, and can be replaced with HR’s direct online access  to the system data. As described in Finding 2, York does not track  the City’s additional disability leave benefits, and its reports do  not always reflect the benefits actually paid by the City.   Indemnity claim closure ratio – The cost reduction guarantee  section of the contract requires York to pay $5,000 to the City if  at least 32 percent of the indemnity claims reported during each  fiscal year are not closed by the end of that year.8 HR was not  aware that York did not achieve the required ratio for FY 2013  and had not made the required payment.  No data available to evaluate  York performance for  returning employees to  modified duty  York is also required to aggressively pursue a release to modified  duty for all City employees through written and verbal  communication with the medical provider. The contract also states  that employees on lost time status shall be returned to modified  work status within 30 days if an appropriate position is available. As  described in Finding 2, HR does not have data necessary to monitor  York performance because neither HR nor York track modified duty  completely and accurately.                                                               7  Utilization review (UR) is a process of reviewing medical treatment recommended by a physician to determine if it is in  accordance with the medical treatment utilization schedule. All employers or their workers' compensation claims  administrators are required by law to have a UR program.  8  The City and York subsequently agreed to revise the contract language to base the closure ratio on claims closed within  12 months from reporting to York.  Attachment A Disability Rates and Workers’ Compensation Audit 30      Recommendations We recommend that HR:   4.1. Create a list of key contract terms and assign staff to monitor  and follow up on York performance against each term,  including recovery of $5,000 from York for not meeting the  indemnity claim closure ratio for FY 2013.   4.2. Work with York to streamline the monthly, quarterly, and annual  reporting process by leveraging online access to York data (see  recommendations 1.3 and 2.5).       Attachment A Disability Rates and Workers’ Compensation Audit 31      Finding 5 Workers’ compensation revenues, costs, and performance  data are not clearly reported for informed decision  making   The Workers’ Compensation Fund accounts for administration of the  City’s workers’ compensation program, and the revenues and  expenditures are reported in the City's comprehensive annual  financial report and budget documents. However, the Workers’  Compensation Fund does not include all of the City’s workers’  compensation costs, and the costs presented in the budget  documents are difficult to understand the nature and true cost of  each line item. Without a clear understanding of the workers’  compensation cost, Council and management may not be able to  make informed decisions regarding the City’s workers’ compensation  related programs.  The City’s budget documents  do not clearly present  workers’ compensation costs  There are multiple elements to the City’s workers’ compensation  cost structure, and the City’s budget documents do not clearly  present those elements to assist Council and management in  understanding the complete cost information. Including a simple  narrative to assist readers in navigating and understanding the  complete cost structure could enhance the City’s ability to better  allocate its resources.  The City’s Workers’  Compensation costs are  included in separate areas of  the budget document  The City’s Workers’ Compensation Fund does not include:   Disability leave benefits – Disability leave benefits paid directly  by the City through its payroll, which are included in the  department budgets.    HR administration costs – HR staff cost to administer the IIPP and  workers’ compensation program, which is included in the  General Fund.  As shown in Exhibit 17, the actual total cost is much higher than the  cost included in the Workers’ Compensation Fund. In addition, the  estimated self‐insured liability fluctuates year over year based on the  estimate of unpaid claim costs and expenses developed by an  actuarial study. If we exclude this liability, we can see the total  workers’ compensation cost actually paid by the City in a given year.  Different conclusions may be drawn depending on the line item used  to evaluate the workers’ compensation program.    Attachment A Disability Rates and Workers’ Compensation Audit 32      EXHIBIT 17  The City’s Workers’ Compensation Cost   Workers’ Compensation Fund FY 2011 FY 2012 FY 2013 FY 2014 FY 2015  Claims paid* $2,269,098 $2,069,975 $1,468,630 $2,451,424 $2,184,858  Change in estimated self‐insured liability**$2,527,098 $1,813,409 $559,747 $485,109 ($1,656,783)  CSAC excess insurance premium $285,530 $263,399 $398,376 $454,032 $461,365  Actuarial services $4,850 $4,750 $4,750 $4,750 $2,375  TPA administration fees $238,083 $294,667 $226,684 $232,050 $230,006  State self‐insurance fees $45,564 $52,180 $69,252 $45,993 $93,259*** Workers’ Compensation Fund Subtotal $5,370,224 $4,498,379 $2,727,038 $3,673,358 $1,315,080  Disability leave benefits (direct payroll) $688,167 $504,032 $693,279 $1,001,407 $719,297  HR administration cost (General Fund)  $313,157  $314,319  $200,948 $182,866  $221,260  Grand Total $6,371,548 $5,316,730 $3,621,265 $4,857,631 $2,255,637  Adjusted Total (excludes change in  estimated self‐insured liability) $3,844,450 $3,503,321 $3,061,518 $4,372,522 $3,912,420  *  Represents checks issued by York on behalf of the City, and does not include disability leave benefits paid directly  through the City’s payroll.  ** Determined based on an actuarial study. The City is required to record a liability for the ultimate cost of claims and  expenses associated with all reported and unreported claims in accordance with accounting standards.   ***  Includes about $9,300 in ergonomic evaluation expenses that should have been recorded in the General Benefits Fund.   Source: City’s financial records     Exhibit 18 shows that the budget line items under the Workers’  Compensation Fund do not always represent the underlying costs.  For example, administrator fees paid to York and State self‐insurance  fees are presented as part of salaries and benefits. Without  additional explanation, readers may assume salaries and benefits  under this fund represent HR staff cost to administer the workers’  compensation program, which instead is included in HR’s General  Fund budget.    Attachment A Disability Rates and Workers’ Compensation Audit 33      EXHIBIT 18  The City’s budget presentation of the workers’ compensation revenues and costs        Source: Auditor’s analysis of the City’s financial records    Performance data does not  reflect the City’s actual  performance  Our annual performance report includes performance data for  workers’ compensation as shown in Exhibit 19. HR provides the  numbers based on York data, but as described in Finding 2, York  data does not accurately and completely reflect the City’s actual  performance because York:   Does not track the additional disability leave benefits  provided by the City.   Does not have accurate and complete records of the injured  employees’ work status.  As a result, estimated cost and claims paid are generally  understated, and days lost to work related illness or injury do  not reflect the actual number of days the injured employees  were off work on disability as recorded in the SAP timecards.    Attachment A Disability Rates and Workers’ Compensation Audit 34      EXHIBIT 19  Workers’ Compensation Performance Data    Estimated cost  incurred1  (in thousands)  Claims Paid1  (in thousands)  Estimated cost  outstanding1  (in thousands)  Number of claims  filed with days  away from work2  Days lost to work‐ related illness or  injury3  FY 06 $2,858 $2,601 $258 80 ‐  FY 07 $2,114 $1,937 $177 76 2,242  FY 08 $2,684 $2,460 $224 75 1,561  FY 09 $2,628 $2,145 $483 73 1,407  FY 10 $2,521 $2,165 $356 71 1,506  FY 11 $1,918 $1,402 $516 45 1,372  FY 12 $2,843 $1,963 $880 56 1,236  FY 13 $3,182 $1,713 $1,469 42 1,815  FY 14 $2,088 $1,217 $871 59 1,783  FY 15 $1,121 $518 $602 36 1,366  Change from:  Last year ‐46% ‐57% ‐31% ‐39% ‐  FY 06 ‐61% ‐80% +134% ‐55% ‐23%    1  Estimates of claim costs incurred during each fiscal year, and associated costs paid and outstanding as of June 30, 2015.  Costs are expected to increase as claims develop. Prior‐year costs were updated to reflect current costs as of  June 30, 2015.  2  Restated to reflect the number of claims filed during each fiscal year that resulted in days away from work as of  June 30, 2015. Numbers may increase as claims develop.  3  Based on calendar days. Federal requirements limit each claim to 180 days.  Source: City of Palo Alto 2015 Performance Report     Recommendations We recommend that HR:   5.1. Work with ASD’s Office of Management and Budget to clarify  the presentation of the workers’ compensation costs in the  City’s budget documents.   5.2. Work with York to identify useful performance measures and  establish procedures to ensure reliable reporting of  performance data using a consistent methodology.  Attachment A Disability Rates and Workers’ Compensation Audit 35      APPENDIX 1: The City’s Workers’ Compensation Costs    EXHIBIT 20  The City’s Workers’ Compensation Cost    FY 2011 FY 2012 FY 2013 FY 2014 FY 2015  Workers’ Compensation Fund    Claims paid* $2,269,098 $2,069,975 $1,468,630 $2,451,424 $2,184,858  Change in estimated self‐insured liability**$2,527,098 $1,813,409 $559,747 $485,109 ($1,656,783)  CSAC excess insurance premium $285,530 $263,399 $398,376 $454,032 $461,365  Actuarial services $4,850 $4,750 $4,750 $4,750 $2,375  TPA administration fees $238,083 $294,667 $226,684 $232,050 $230,006  State self‐insurance fees $45,564 $52,180 $69,252 $45,993 $93,259*** Workers’ Compensation Fund Subtotal  $5,370,224 $4,498,379 $2,727,038 $3,673,358 $1,315,080   Disability Leave Benefits (Payroll)       Police $317,099 $193,488 $365,163 $386,892 $257,413  Fire $250,445 $181,709 $164,299 $258,035 $238,475  Utilities $61,703 $41,221 $60,585 $160,664 $146,044  Public Works $43,921 $62,048 $78,557 $173,007 $58,813  Others $15,000 $25,566 $24,675 $22,809 $18,552  Disability Leave Benefits Subtotal $688,167 $504,032 $693,279 $1,001,407 $719,297  HR Administration Cost (General Fund)         Injury and Illness Prevention Program $190,976 $155,518  $93,136 $75,113 $85,034  Worker's Compensation Program $122,182 $158,801 $107,812 $107,753 $136,227  HR Administration Cost Subtotal $313,157 $314,319 $200,948 $182,866 $221,260  * Represents checks issued by York on behalf of the City, and does not include disability leave benefits paid directly  through the City’s payroll.  ** Determined based on an actuarial study, and includes claim costs incurred but not reported.  *** Includes about $9,300 in ergonomic evaluation expenses that should have been recorded in the General Benefits Fund.  Source: City’s financial records    Attachment A Disability Rates and Workers’ Compensation Audit 36      EXHIBIT 21  Number of Indemnity Claims Filed* by Department by Fiscal Year of Loss  As of June 30, 2015    FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Total %  Police 7 18 10 15 14 64 27%  Fire 16 18 6 19 10 69 29%  Utilities 10 3 11 12 2 38 16%  Public Works 3 8 7 7 5 30 13%  Others 9 9 8 6 5 37 16%  Total 45 56 42 59 36 238 100%  * Includes denied claims  Source: York data    EXHIBIT 22  Cost of Indemnity Claims Incurred by Department by Fiscal Year of Loss  Valued as of June 30, 2015    FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 Total %  Police $294,487 $1,344,485* $2,434,200* $298,675 $351,797 $4,723,643 43%  Fire $764,297 $865,850 $241,461 $455,446 $544,447 $2,871,501 26%  Utilities $440,441 $5,771 $140,473 $826,783 $42,513 $1,455,980 13%  Public Works $303,986 $436,044 $198,444 $274,319 $80,530 $1,293,323 12%  Others $85,690 $144,714 $139,430 $180,478 $53,345 $603,657 6%  Total $1,888,901 $2,796,864 $3,154,008 $2,035,701 $1,072,632 $10,948,104 100%  * The FY 2012 increase is due to one Police claim valued at $0.5 million, and the FY 2013 increase is due to another claim  valued at $2.2 million.  Source: York data    Attachment A Disability Rates and Workers’ Compensation Audit 37      APPENDIX 2 – City Manager’s Response      Attachment A Disability Rates and Workers’ Compensation Audit 38    The City Manager has agreed to take the following actions in response to the audit recommendations in this report. The City Manager will report progress on  implementation six months after the Council accepts the audit report, and every six months thereafter until all recommendations have been implemented.  Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  Finding 1: The City’s Injury and Illness Prevention Program (IIPP) is comprehensive but has lost its effectiveness due to the loss of its City Safety  Officer.  1.1. The City Manager allocate sufficient  resources to implement and maintain the  City’s IIPP and to monitor the City’s  compliance with the program.   Concurrence: Agree Target Date:  December 1, 2016  Action Plan: The Human Resources Department  requested a new dedicated position (1 FTE) in  FY17 Budget.  As soon as the position is approved  and can be filled this position will review and  update the City’s IIPP to ensure effective program  compliance.    1.2. HR update the safety manual, including  supplemental tools and guidance posted on  the intranet, to ensure:  • The roles and responsibilities over the  IIPP are redefined.  • The City’s IIPP complies with all Cal/OSHA  standards and other applicable safety  laws.   Concurrence: Agree Target Date:  March 2017  Action Plan: Once appropriate staff resources are  in place, the roles and responsibilities can be  reestablished to ensure the safety manual (IIPP)  is reviewed and updated as necessary.  While a few safe work practices have been  updated, such as the Heat Stress Prevention  Guidelines in July 2014, a thorough review will be  conducted and any necessary updates will be  completed.  1.3. HR review departmental procedures and  safety requirements to ensure they align  with the revised IIPP and City policy and  procedures.   Concurrence:Agree Target Date:  December 15, 2016  Action Plan:  HR is in process of securing a safety  specialist to conduct periodic inspections of City  facilities for hazard assessment.  This  comprehensive evaluation will include  Attachment A Disability Rates and Workers’ Compensation Audit 39    Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  determining if any corrections need to be  completed, including updating or implementing  work procedures.  1.4. HR work with York and departments to  identify useful safety statistics, appropriate  HR and departmental recipients of this  information, and reporting frequency, and  establish an automated process for those  statistics to be provided.   Concurrence: Agree Target Date:  December 16 , 2016  Action Plan:  HR will work with York to identify  useful reports that identify injury and illness  trends and implement an automated process for  those reports to be emailed to department  representatives.  1.5. HR identify industry‐specific ergonomics and  general wellness training opportunities to  minimize common injuries, and coordinate  with departments to ensure regular training  is provided to employees.   Concurrence: Agree Target Date:   September 16, 2016  Action Plan:  HR will coordinate industry‐specific  ergonomic training, similar to training provided  to Parks maintenance employees in 2010 and  Library employees in 2014.  We agree industry‐ specific ergonomic training serves as a reminder  for example, that the best way to prevent back  injuries is to develop habits that reduce the strain  placed on the back.  Finding 2: Injured employees’ benefit eligibility is not accurately and completely tracked and monitored, resulting in both overpayments and  underpayments of workers’ compensation benefits.  2.1. HR continue working with ASD and CalPERS  to address the disability leave benefits that  were incorrectly reported as compensation  to CalPERS.   Concurrence: Agree Target Date:   February 2017  Action Plan:  HR worked with Payroll to identify  wage codes and required corrections needed to  fix CalPERS payroll report.  Attachment A Disability Rates and Workers’ Compensation Audit 40    Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  2.2. HR review the 22 claims that accounted for  87 percent of the total additional city  benefits difference in Exhibit 11, and take  necessary action to address any errors  identified.   Concurrence: Agree Target Date:  July 2016  Action Plan:  HR working on timecard  amendments to address errors with 2 Public  Safety officers whose claims were initially  delayed when claims first submitted and final  determination resulted in denial and non‐ acceptance.  2.3. HR review the existing disability leave  management process in Exhibit 12 and  determine the optimal monitoring structure,  update the tools and procedures, and  allocate sufficient and skilled resources to  ensure:  a. Benefit eligibility and work status of  injured employees is accurately,  completely, and timely tracked including:  • Start date of disability  • Date released back to work by the  treating physician  • Date returned to modified duty,  including the assignment and payroll  code used  • Date returned to full duty  b. Any changes in work status are  communicated to York  c. Disability leave time buckets are updated  as soon as HR is notified of the status  change.  d. Benefit notices and vouchers issued by  York are consistent with the timecards  and actual benefits paid through payroll.   Concurrence: Agree Target Date:  December 16, 2016  Action Plan:  a. HR is exploring better methods to track  temporary disability and return‐to‐work  status accurately, completely and timely.  b. HR will also improve process of  maintaining timely communication with  York.  c. HR staff will explore how to improve  management of disability leave buckets  in SAP.  d. HR will explore how to audit benefit  notices and vouchers issued by York to  ensure they are consistent with  timecards.  This would be a manual  process that may not be able to be  supported.  e. HR will work with supervisors to ensure  employees comply with City policy  requiring timely submission of work  status notes.  f. HR will explore options for improved  disability leave management and  Attachment A Disability Rates and Workers’ Compensation Audit 41    Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  e. Employees comply with the City policy  requiring timely submission of work  status notes.  tracking as part of the SAP replacement  RFP process.  2.4. HR work with ASD to ensure that the data  necessary for disability leave management is  captured through time reporting in SAP to  support the process, including:  a. Revising the City’s payroll procedures,  Policies and Procedures 2‐06/ASD, to  provide clear instruction for reporting  disability leave on SAP timecards.  b. Configuring the SAP system to:  • Track compensation reportable to  CalPERS separately.  • Track medical appointments that  qualify as disability leave by creating a  separate payroll code.  • If feasible and cost‐effective, limit the  number of days each employee can  code disability leave or modified duty  on their timecard based on their  position.   Concurrence: Agree Target Date:  February 2017  Action Plan:  a. HR following up with ASD Payroll on  feasibility to revise City payroll procedures;  otherwise, will include steps in City’s  Workers Compensation policy.  b. ASD and HR have determined how to code  public safety temporary disability as  “PERSable” and non‐public safety temporary  disability as “non‐PERSable” by using  different SAP codes.  ‐ A separate timecard code (7600) is being  developed to track medical  appointments.  ‐ Limiting the number of hours each  employee can code disability leave can  be accomplished when disability leave  bucket is established; may not be feasible  for modified duty and requires further  review.  2.5. HR work with York to identify and train  responsible HR staff, and maintain online  access to York data for analyzing claims,  payment transactions, and trends. Establish  and maintain written procedures for  granting, monitoring, and removing access to  the York data and appropriate handling and  safeguarding of the data.   Concurrence: Agree Target Date:  December 2016  Action Plan:  Training will be provided to HR staff  newly assigned to oversee workers  compensation.  Attachment A Disability Rates and Workers’ Compensation Audit 42    Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  Finding 3: The City has not met the state requirement for timely reporting of its workers’ compensation claims to York, potentially causing the  cost of claims to increase.  3.1. HR streamline the workers’ compensation  reporting process and improve the accuracy  and completeness of the claim forms by:  • Revising the procedures to clarify the  roles and responsibilities. This should  include determining whether  departments should be responsible for  completing only the Employee Claim  Forms (DWC‐1) and Supervisor’s Report  of Injury and Exposure (City form), with  HR staff being responsible for completing  the Form 5020.  • Revising the City form for supervisors to  complete with necessary information that  can be easily copied and pasted to the  Form 5020.  • Ensuring the use of York’s online claims  reporting to submit the Form 5020, and  having appropriate and trained staff enter  any sensitive personnel or payroll  information.  • Making the required forms and  procedures available online in one place  with clear instructions and adding  electronic signature capability, if feasible  and cost‐effective.  • Regularly reviewing the forms,  procedures, and performance to ensure  their compliance with state law.   Concurrence: Partially Agree  Target Date:  February 2017  Action Plan:  HR agrees the reporting process  needs to be improved and streamlined.  HR will  determine if using York’s online claim reporting  to submit the Form 5020 is most efficient  process.  As an alternative, HR will evaluate  ability to create DocuSign Form 5020 which  Department would initiate, completing facts  related to employee filing claim and details  regarding injury or illness.  DocuSign Form 5020  could then be submitted by departments to HR  staff who would complete salary data.  HR staff  could then submit DocuSign form to York.  Attachment A Disability Rates and Workers’ Compensation Audit 43    Recommendation Responsible  Department(s)  Agree, Partially Agree, or Do Not Agree  and Target Date and Corrective Action  Plan  Status  Finding 4: The City has not ensured that York met all contract terms.  4.1 HR create a list of key contract terms and  assign staff to monitor and follow up on York  performance against each term, including  recovery of $5,000 from York for not meeting  the indemnity claim closure ratio for FY 2013.   Concurrence: Agree Target Date:  July 29, 2016  Action Plan:  HR will create a list of key contract  terms that require follow‐up.  New HR staff  assigned to administer workers compensation  program will monitor and follow up with York  regularly on contract terms.  4.2. HR work with York to streamline the  monthly, quarterly, and annual reporting  process by leveraging online access to York  data (see recommendations 1.3 and 2.5).   Concurrence: Partially Agree  Target Date:  August 30, 2016  Action Plan:  The York data is readily available,  currently 8 reports are provided to HR monthly.   However the contract calls out for reports that  are no longer in use.  This can be cleaned up in  next contract RFP and in any future contracts.     HR will review reporting capabilities to determine  how to improve use of data.  Finding 5: Workers’ compensation revenues, costs, and performance data are not clearly reported for informed decision making.  5.1. HR work with ASD’s Office of Management  and Budget to clarify the presentation of the  workers’ compensation costs in the City’s  budget documents.   Concurrence: Agree Target Date:  December 16, 2016  Action Plan:  HR staff will meet with Budget  Manager to clarify presentation for workers  compensation costs for FY18 Budget and  determine changes or improvements.  5.2. HR work with York to identify useful  performance measures and establish  procedures to ensure reliable reporting of  performance data using a consistent  methodology.   Concurrence: Partially Agree  Target Date:  January 2017  Action Plan:  HR will explore best practice  performance measures and establish procedure  to ensure reliable reporting.    Attachment A Special Meeting June 14, 2016 Chairperson DuBois called the meeting to order at 6:10 P.M. in the Community Meeting Room, 250 Hamilton Avenue, Palo Alto, California. Present: DuBois (Chair), Kniss, Scharff Absent: Berman Agenda Items 1.Disability Rates and Workers' Compensation Audit. Chair DuBois: I guess we'll go on to Item 1, which is disability rates and workers' compensation audit. Council Member Kniss: I'll be listening. I'm going to grab some tea. Harriet Richardson, City Auditor: I know that you're not feeling well, so I'm going to try and get through this first item. Council Member Kniss: How did you know that? Ms. Richardson: Beth told us that we might lose a quorum. I'm going to try and get through the first item (crosstalk) ... Council Member Kniss: I'll make it for a little while. Ms. Richardson: ... little more time for the second item. Harriet Richardson, City Auditor, here to present the audit of disability rates and workers' compensation. Yuki Matsuura was the Senior Auditor on this, and she can't be here tonight. Lisa Wehara, who worked on this audit, is right over here in the audience. Vice Mayor Scharff: Welcome. Ms. Richardson: I'm assuming you've read the audit. Instead of going through the normal process, I have a PowerPoint that talks about the—(inaudible) the PowerPoint—audit scope objectives and the findings and the recommendations. What I really want to do is just skip over to the main finding, which is Finding Number 1, and spend a little bit of time on that. If Attachment B you have questions, we also have Sandra Blanch here from Human Resources (HR), who works as the Risk Manager for the City. We also have a representative from York Risk Services Groups. Sherri is—where'd she go— right back here, in case you have any questions for her. York is our third- party administrator for workers' compensation. The main finding is that the City's injury and illness prevention program has lost its effectiveness, and there's several reasons for that. The main one is that when the previous City Safety Officer left the City, that position was cut. His duties were distributed among all of the different Staff, the Senior HR Analysts in People Strategy and Operations (PSO). PSO reorganized; they redistributed the Staff, but yet they did not provide appropriate training to those people on workers' compensation. They've been working with an outdated safety manual that describes how to do things in a way other than what they currently do. There's also been a lack of Citywide safety committee meetings. There's also been insufficient City employee training throughout the City on safe, economic work practices, which increases the risk that you're going to have more repetitive motion injuries. Our recommendations really focus a lot on making sure that adequate resources are provided to the workers' compensation program. Right now, we have not seen an increase in injuries or costs since that loss. As that position remains unfilled, the risk increases that you're going to have more costs because people don't know how to adequately monitor the programs to minimize those costs. That's really what I wanted to focus on for this first audit. I think Suzanne wanted to make some comments regarding the audit. Suzanne Mason, Assistant City Manager: I just wanted to comment that our response is in the audit. I really appreciate Sandra's work on responding. I do think with reduced resources and dedicated resources to a program such as injury prevention and workers' compensation monitoring, there's a loss. You can't take a job and divide it among five people and make sure that every day you're staying on top of the program, making sure training is happening. Last night in the budget, you adopted the budget that included a dedicated position focused on workers' comp funded through our insurance fund. I think that's going to pay dividends and that we will be able to focus. I do think we are also working on securing the services of a Safety Officer on a contractual basis for the City. The Utilities Department does have a Safety Officer and does a very good job. They're a significant part of our workforce. It is important that we have someone providing our safety inspection. Finally, I know that—Sandra has shared with me and York that York does have a computer solution that can help us address the timeliness on some of the issues. We've been using a manual process. The computer system that's recently been updated by York will allow us to do immediate reporting from departments directly to York and Human Resources simultaneously. That will dramatically improve some of the findings addressed in this report. I don't Attachment B want to spend a lot of time going into detail; we can respond to detail. I do think the dedicated position in combination with the contracted Safety Officer functions and then the new computerized system that we'll be implementing Citywide, that York's providing, will address most of this audit. Ms. Richardson: From our perspective, the dedicated resources were really the big concern here. As Suzanne said, you start splitting up those tasks and you start losing the effectiveness because people don't know exactly what their responsibilities are and the law, what the law requires them to do. Council Member Kniss: Tom, could I ask a quick question? Just a little ... Chair DuBois: I was just going to say could we just go straight to questions. Council Member Kniss: Just to inform us on this. You didn't include any measurements, data or so forth. Is it in here somewhere and I didn't see it? Ms. Richardson: You mean comparisons with other jurisdictions? Council Member Kniss: Also percentage-wise what's happened with us. You said it's costing us more, right? Ms. Richardson: The risk is that it will cost us more. When you look at Exhibits 2 and 3 on Packet Pages 12 and 13, you see some fluctuation and you see '14 and '15 actually look like they've gone down, but what happens a lot of times is the full cost of the claims is not known within a short period of time. Those costs will continue to go up for the recent years until those claims are fully closed. If you go back to our Performance Report, which isn't part of this, you'll see that there's some open claims pretty far back. Part of that is because some of these costs continue over a period of years. Right now, our number of claims did go down. Fiscal Year (FY) '13 is where we lost the City Safety Officer. You're still seeing some of the effect of what that person did. Now as we start seeing in the program in the day-to-day operations some of the things that are happening, we can see that it's likely that those costs are going to start going up because they don't know how to administer the ... Council Member Kniss: What we should do is take this way back to 2006? Is this a good judge of what that person did? Ms. Richardson: I think from 2006 ... Vice Mayor Scharff: What page are you on? Ms. Richardson: Packet Page 12 and 13. Exhibits 2 and 3. Attachment B Chair DuBois: Do you know how it's accounted for in a particular year? When expenses come in for 2014, do they hit our books this year or do they go back? Ms. Richardson: I'm not certain on that. Sandra Blanch, Assistant Director of Human Resources: Yes, they do. Chair DuBois: The expense is actually incurred in this year even though it was a claim from 2014? Ms. Blanch: Right. Ms. Richardson: You track the claims also by year. Ms. Blanch: By year. Council Member DuBois: Your file. Ms. Richardson: Yeah. From an accounting perspective, it's different than from a claims perspective. Chair DuBois: Why don't we just go to broad questions? Do you want to continue? Council Member Kniss: That's fine. We'll just kind of keep chiming in, I think. Vice Mayor Scharff: Are you happy with the City Manager's response? Ms. Richardson: Yes. There were two that they indicated that they partially agreed. Vice Mayor Scharff: We're back on page ... Ms. Richardson: It's Packet Page 51, which is going to be your Page 42. They said they partially agreed with Recommendation 3.1 and, on the next page, with 4.2. When I read those, they actually sounded like they agreed. I wasn't sure why they said partially agree on those. Vice Mayor Scharff: What Suzanne said sounded slightly different, which was you were going to recreate their form in DocuSign. Have you decided now to use the York form directly? Ms. Mason: I think we are going to use the York form. They've just improved their system, and it sounds like it's going to work for us. Vice Mayor Scharff: Are you going to update that partially one. Attachment B Ms. Mason: No, we just met recently. Ms. Blanch: Yes. I think the auditor had recommended for HR to do all of the entry. We would disagree with that mandate. The department would do part of the entry, and HR would finish the entry. Ms. Mason: The idea is you're in a department, and someone comes in injured. You go right into the system and enter, which is a best practice. It immediately goes to HR and York, so we're all in a more timely basis. Vice Mayor Scharff: Sounds good. You're good with that? It sounds good to me. Ms. Richardson: Yes. Vice Mayor Scharff: Were there any other partially agrees? Ms. Richardson: Just those two. Vice Mayor Scharff: That's the first one. The second one was ... Ms. Richardson: 4.2. It's on the quarterly reporting. Monthly, quarterly and annual reporting. Ms. Mason: Basically what we wanted to say is that we think that we need to—we are getting reports, but we need to work on tailoring those. For the most part, some of the reports that were originally in the contract are not as useful. We need to work together—we do get information, and they do report to us. We do have a good working relationship; there's regular telephonic meetings, but we do need to make sure we're looking at the right data. Council Member Kniss: Is anyone from York here? Ms. Mason: Yes. Council Member Kniss: I missed the introduction. Sherri Adams, York Risk Services Group: I'm Sherri Adams. I'm the Senior Account Manager. Council Member Kniss: Thank you. Vice Mayor Scharff: Sherri, since we've mentioned you, do you have any comments on any of this, of how we could streamline it better, or do you agree with the auditor's recommendation? Attachment B Ms. Adams: I do. Council Member Kniss: Why don't you come join us? Vice Mayor Scharff: Come sit down at the mike. Ms. Adams: I do agree with the findings. We worked really closely with Lisa and Yuki, providing the information, the Claims Examiner, the Unit Manager. When we talk about the reports and some of the items that were in the contract, the original contract is from 2006. We've updated processes. Things have changed here at the City. I think it's just revising those, seeing what we can use. Loss of the Safety Officer, I think some of those reports got lost in the that shuffle as well. I've been on the account for 1 1/2 years and have been here multiple times to meet and try and come up with new and creative ways to help. It truly is a partnership. I think there's a lot of things that we can help the City with as we move forward. Like I said, we're here as a partner. Vice Mayor Scharff: We're going to be making changes to the York contract, is that part of it or not? I was confused about that. Ms. Mason: Really the primary amendment would be what reports they're providing to us and what frequency. Vice Mayor Scharff: Will there be a cost associated with that or not? Ms. Adams: No. Chair DuBois: It sounded like some departments were already dual reporting to York and HR at the same time. Ms. Richardson: Only Utilities. Chair DuBois: You're saying now everybody's going to do that? Ms. Mason: Basically it would streamline this. Their new addition to the system streamlines it, so that Utilities puts in and it goes directly to (inaudible). Chair DuBois: I think Utilities was already doing that, but other departments weren't. Ms. Blanch: We would work with ... Chair DuBois: Are all departments going to be? Attachment B Ms. Blanch: Correct. We would work with all departments to get them to enter the report into the system. Chair DuBois: Then York would automatically get it? Ms. Blanch: Right. Council Member DuBois: I have a few questions here. Ms. Mason: It would shorten the timeframe. Chair DuBois: In the text, it said there were some State laws that we're not in compliance with. Are those just reporting timeliness or ... Ms. Richardson: It's primarily reporting timeliness. There's a risk that you could get fined if an employee doesn't report the injury—if the City doesn't report the injury within five days of the date of knowledge. In discussion with Suzanne, she indicated that she's not aware of the State actually having fined anyone. York may be from their experience. We haven't experienced any fines, so we did add that to the report, that we haven't experienced a fine but the risk is there. Ms. Mason: We want to be in compliance. That's one of the reasons for this change. Chair DuBois: How long do employees have to report an injury? It sounded like sometimes that takes a while. Do they have to report within some ... Ms. Mason: They're supposed to report it immediately. The common story is "I tripped. I thought I was fine. Two weeks later, I'm not feeling fine. I'm not getting better the way I thought I would." That's always ... Chair DuBois: There was also some talk—I guess we had a comprehensive safety manual, and then it said departments have their own manuals. I guess the question is are those department manuals comprehensive and do they include the general information. Ms. Richardson: I believe the department manuals are pretty comprehensive, particularly the four departments that Yuki and Lisa looked at. With the Citywide manual not being completely up-to-date, we've requested as one of our recommendations that the City update the Citywide manual and then make sure that the department manuals align with that. We want to make sure there's some consistency in how the departments are doing things. Chair DuBois: I see Police Chief Burns here. I actually had a question about Police. It looks like about 40 percent of our costs are in the Police Department. Attachment B I was wondering do you guys do anything extra or different about training for safety in general? Ms. Mason: Sit here so you have the microphone. Council Member Kniss: Maybe you can weave firefighters in at the same time. As I recall, Police and Fire are usually the high numbers. Dennis Burns, Police Chief: Dennis Burns from the Police Department. We have a pretty robust kind of wellness program, which includes strengthening, endurance, diet. We get training on that on a regular basis. That's intended to be a preventative method. We also have a number of policies in place. The nature of police work, a lot of it involves safety. Officers are evaluated on that on an annual basis. We hold safety very serious. I think one of the reasons that some of the numbers were so high this year is we had two very unusual cardiac cases, where the officers will ultimately retire. A large chunk of the City's monies were paid on these two claims. I think Fire is similar. They really have a very strong wellness program. Again, it's focused on flexibility, strength and endurance. Their folks are evaluated regularly on their safety procedures. They're taken offline in the event that they show that they can't comport with these policies. Chair DuBois: Thanks. Mr. Burns: You bet. Chair DuBois: Do you have something? Vice Mayor Scharff: It seems like everyone's in agreement. There doesn't seem like there's any ... I guess I had some, I guess, questions. I was confused. Are we hiring a person in the budget to do this or are we contracting out for this person? Ms. Mason: No. We are actually hiring someone in HR to facilitate and monitor the program and get people back to work, make sure everything's being processed, to make sure training is taking place. There's many suggestions in this report. We added back a dedicated position that had been removed. It's being paid through the Insurance Fund. The reduction should pay for that position. Vice Mayor Scharff: When you say it's added to the Insurance Fund, every department is assessed something for the Insurance Fund. Correct? Ms. Mason: Right. Attachment B Vice Mayor Scharff: Do we expect the Insurance Fund to then not go up because there's—every department, if you have more people in the Police, are the Police assessed more? Is that how that works or is it everyone gets assessed the same? Ms. Mason: It's based on experience and exposure. It's a combination. Vice Mayor Scharff: On a department basis, right? Ms. Blanch: Yes. Ms. Mason: They get allocated, yes. Vice Mayor Scharff: Got it. Council Member Kniss: Just back to the Chief for a minute. As we look at these, I'm just looking at the numbers on Packet Page 12. Maybe there's a better one for us to look at. Looking at this, if we take it as 100 percent, what would you guess, Dennis, is the number of Police and Fire in that and ... Chair DuBois: Police were 40 percent of the total in terms of money. Council Member Kniss: It doesn't give it in terms of people. Chair DuBois: In terms of claims. Ms. Richardson: In terms of people ... Council Member Kniss: Yeah, claims. Are we going to figure claims equals people? Ms. Richardson: You might want to look at Exhibit 8, Packet Page 20. That might be more helpful to what you're asking. Council Member Kniss: If we look at—there are all kind of figures here, though. I don't think there's just one that I can pull everything from. Overall from looking at this, because I can remember from the County that Fire was often a big issue. I'm guessing it probably is here as well. That's the kinds of physical types of things that happen if you're in a fire or even in a paramedic job. You're more likely to get claims that cost. What this doesn't tell me here, unless I go through and analyze it, is what the overall price is. This is saying to me that you're about 1 1/2 times what Fire is. Is that right? Mr. Burns: I think for the use ... Attachment B Council Member Kniss: Because these are all stats, I know they're misleading. That's why I'm asking. Say more about this. Ms. Richardson: I think I can answer what she's asking. If you're referring to Exhibit 8, if you look at the $4.7 million, is that what you're referring to as the one? Council Member Kniss: Yeah. Ms. Richardson: As Chief Burns mentioned a little bit ago, there's two injuries that comprise a good portion of that. That's in the footnote. If you subtract those out, then it's $2 million for them. When you have an individual case that is really expensive, it's going to ... Council Member Kniss: You mean unusually high severity, is that what you're talking about? Ms. Richardson: Yes. You're going to have a higher cost that's disproportionate to the rest of your injuries. Council Member Kniss: I understand that. Maybe Dennis wants to just expand on that a little. Police and Fire are almost always where the cost lies or lays. Which one is it? Mr. Burns: Fire typically is ahead of Police or is more expensive than Police, because it's much more a—it's kind of labor intensive, almost like a blue collar job where there's a lot of lifting and twisting and pulling. There's just more opportunities with all the equipment that they're pulling and grabbing from their engines and their truck. There's just more opportunity ... Council Member Kniss: And lifting heavy people. Mr. Burns: Lifting people on the gurneys, exactly. Police officers tend to have a lot of repetitive motion injuries from getting in and out of cars or bending over and lifting different types of things. Some involving wrestling with people. Typically we see knees, backs and shoulders are going to be the most common injuries that you'll see from both Police and Fire. Again, we have two outlier cases that are very unique. Unique that they're similar and unique that they happened at the same time and that they were so expensive and so severe. Other than that, I think we're somewhat stable. I'd love to get them lower, but the reality of it is, as you know, flesh and blood and we break every now and then. Council Member Kniss: The other thing, Harriet, you talked about just briefly was how we compared with other jurisdictions that are similar. Attachment B Ms. Richardson: We didn't specifically put that in here, but we were pretty comparable. We did look at it, but we didn't put it in the report. Maybe we should have. Council Member Kniss: Just always this ... Ms. Richardson: We do have a chart that we could send to you, if you want to see that. Council Member Kniss: The reason I'm asking is sometimes there's something to be learned from other police and fire departments, not that our Police or Fire need to learn anything from anybody else, Dennis. Just because there are those times. Sunnyvale has the combination safety. It would be interesting to know how those are, but they have interchangeable roles, which is kind of fascinating. Chair DuBois: I think under Finding 1 you mention that we have outdated information that's posted. I didn't really see any of the recommendations address that. Is that included? Ms. Richardson: We tried to keep the recommendations somewhat high level. It's part of updating the whole manual and making sure that everything is the way it's supposed to be. When you update the manual, you look at the ... Chair DuBois: That was included. Ms. Richardson: It's meant to be included. The audit team actually went around to different facilities and looked at what was posted. There is quite a bit of outdated information posted. For example, in this building, it's on the A level, and not everyone goes down to that level and sees those posters. There should be something in each of the work areas that's visible to where people (crosstalk). Chair DuBois: Does anyone read the posters? Ms. Richardson: I don't know, but you are required to make sure that (crosstalk) ... Chair DuBois: If you're going to post it, it might as well be read. Vice Mayor Scharff: I'm not saying that. I just (crosstalk). Ms. Richardson: If you get injured, it helps you know what you're supposed to do. Attachment B Ms. Mason: I think it's also reflective of needing an update, because it really needs to be right on our computers, intranet site, so wherever you're at, you could access it, even if you're not at a bulletin board. Council Member Kniss: Since we have York here, I wonder if as we go along, whether there are things that you want to add to what our discussion is. You have the expertise in this. Ms. Adams: My only comment on the Police and Fire is they do have presumptions. When they do have certain injuries, there's a perception that they're accepted. That drives costs as well. Sometimes they're not rebutted, which means they're given that benefit. That can drive ... Vice Mayor Scharff: I saw that. It seemed like a lot of police officers and firefighters make claims that are denied. It's hard to deny police and firefighters, which means they must have been completely specious. Ms. Adams: We work through that with the City. We don't just flat deny a claim. The examiners work with the City. Sometimes there has to be an investigation, and there's some things that we need to find out. Sometimes they will deny a claim. Mr. Burns: On the Police side, every workers' comp claim or injury is investigated by the supervisor that day or ideally within the next couple of days. Vice Mayor Scharff: If you make an egregious claim—obviously there are things that are on the line. If you make one that's totally not true and fabricated, you look at it and say are there repercussions for doing such a thing? Mr. Burns: Sure. The District Attorney's Office has got a special unit that is funded by insurance companies that will go after, quite frankly, folks that are abusing the workers' comp process. Ms. Adams: We work with Probe Investigations. They are a highly respected, highly motivated group of folks who have prosecuted many, many cases. They've (crosstalk). Council Member Kniss: Highly motivated must be the ... Ms. Adams: They truly believe in what they do. We have a mini conference once a year. They come and present and let us know what they've collected during the year and returned to counties, cities and other public entities. Yes, there is a fraud unit that will investigate. There are specific things that they Attachment B look at when it's sent to them to determine whether it's being prosecuted or not. Ms. Blanch: These denials—I don't want you to get the wrong impression. Vice Mayor Scharff: No, I'm not (crosstalk). Ms. Blanch: These denials essentially were not found to be work-related; they weren't industrial injuries or illnesses. Ms. Adams: We also delay claims which allows 90 days for investigation to happen to see if it's truly a workers' comp injury. Council Member Kniss: That brings up a worse discussion. You can answer it or not, Dennis. If you find that somebody is making a claim that it's work- related, and yet it's discovered that it isn't, do we have a process that we go through? Mr. Burns: Sure. I don't think that we've had one of these cases. There's doing nothing, and then there's taking the case to the District Attorney's Office. In between it would be a policy violation or an internal affairs investigation where we would go ahead and see if we could prove, beyond a preponderance in an internal affairs investigation, did this person falsify some documentation or commit a fraud. Even though we don't think it's going to be provable at the "beyond a reasonable doubt" level, we could pursue that. Council Member Kniss: Thanks. I don't want to keep pushing on that, but I know that has to be an issue. Vice Mayor Scharff: That's the standard, a preponderance of evidence, for internal affairs and then beyond a reasonable doubt for the ... Mr. Burns: For a criminal. Typically and in most internal affairs investigations, you're going to want more clear and convincing before you're going to be taking somebody's property rights. Ms. Blanch: We would work with York to do an investigation. We wouldn't have our own Police Department doing the investigation. We have done those type of presentations to the District Attorney; it's been some time. They have the resources to take cases to the District Attorney. Mr. Burns: They're rather difficult cases, I think, for the District Attorney (DA) to prove. You could have somebody on video doing some sort of activity, and they could have a claim that they injured their back or their knee or something like that. Their response would be, "I was having a good day that day. I felt good," or "I felt good for the last few days." This is not my area of expertise, Attachment B but soft tissue injuries are difficult. You're going to get conflicting opinions from doctors in a court of law. Chair DuBois: Switching gears. I just wondered if we could make a note. One of the recommendations was to update SAP. It sounds like we're going to do that, but I wonder if we could capture a note that we also, when we move to the new Enterprise Resource Planning (ERP) process, design this process. Just to capture that, since it's coming up pretty soon. Ms. Richardson: IT is getting started. August 4th starts the first kickoff meeting on discussing requirements for the new ERP. Chair DuBois: On Packet Page 42, it talks about the performance reporting and not getting accurate data. It sounded like the SAP data (inaudible) were more accurate. I wondered if we could use the more accurate data in that report. Ms. Richardson: The difference there is that the State has a limit on the number of days that have to be reported. That's what's been going into the Performance Report. It doesn't truly capture when someone's been off longer than 180 days, because we stop counting based on (crosstalk). Chair DuBois: I'm asking can we switch that, use the better data. Don't you put together the Performance Report? Ms. Richardson: Right now we do. That's our next topic. Ms. Blanch: Based on data that we provide to the Auditor's Office. I think it's been a footnote in the data that says it's capped at the Federal limit. Ms. Richardson: Right, but we don't ever say what the total is. Vice Mayor Scharff: One other question. When did we get rid of the safety person? Ms. Richardson: 2013. What happened was he got sick and retired, I believe. Vice Mayor Scharff: He went on disability and retired. Ms. Richardson: The position was eliminated in the budget cycle. Vice Mayor Scharff: Why did we eliminate the position? What was our thinking? Was our thinking we'd save money? What was our thinking about that, and why has that thinking changed? Ms. Mason: I was not here. Attachment B Vice Mayor Scharff: It's easier that you weren't here, because you'd be more—there's no investment. You can say it was a bad decision. What was the reasoning behind it? Ms. Blanch: The reasoning was there were other areas that needed focus, and we changed to a business partner model rather than a functional area model. The thought was you could spread out the work amongst various Staff. Workers' compensation is so technical, that the Staff really couldn't focus on recruitment, employee relations issues and learn workers' comp all at the same time. Ms. Mason: This is just one of the things I've been working with Sandra and Rumi, as Rumi's approaching HR and restructuring. I think the business partner model, which you see often, has been ... Vice Mayor Scharff: What is the business ... Ms. Mason: I will share it. Vice Mayor Scharff: It'd be great (inaudible). Ms. Mason: It's the idea that you take specialized positions and you convert them to generalized positions assigned to departments. They become the end-all for that assigned department or departments. Vice Mayor Scharff: What do you mean the end-all? Chair DuBois: Each department has an HR person. Ms. Mason: You call me, Suzanne Mason, and I'm going to take care of everything. You have a one-stop shop. The problem with this—it's something that HR professionals really have been struggling with. I just have to say the (inaudible) that I've dealt with, if you expect that person to be your person dealing with labor, person dealing with workers' compensation (comp), recruiting all your vacancies, it is very hard, number one, to have an individual who has specialized knowledge, who has the ability to respond quickly, within five days of, making sure paperwork is moving. Rumi's coming in and working with Sandra. We are switching back to a more specialized focus. In dedicating this position as well, I do think this position will be dedicated, but some of the Safety Officer functions, the "in the field" functions, we're probably going to be contracting for. It's going to be a combination. It's really putting a specialized knowledge base and training around that person. Sometimes you feel like it may be more efficient and more customer-friendly to go with a more generalized approach. I think it's challenging. Attachment B Council Member DuBois: I'm sensitive to Liz here. Do we have a Motion on this? Vice Mayor Scharff: I'll move we accept the Audit Report. Council Member Kniss: Second. Vice Mayor Scharff: That's what you're looking for, right? Chair DuBois: Yep. (crosstalk) Council. MOTION: Vice Mayor Scharff moved, seconded by Council Member Kniss to recommend the City Council accept the Disability Rates and Workers’ Compensation Audit. Ms. Richardson: Did you want to make the Motion to have them modify those two recommendations before we forward it to—their response to those two recommendations before forwarding it to Council? Vice Mayor Scharff: You're fine with that? Ms. Richardson: It was the two we talked about, 4. ... Ms. Mason: You mean the partially? Ms. Richardson: Yes. There would be new responses. Ms. Mason: I think there's reasons that we feel it's partially. I think that some of the reason around some of the report changes was because we wanted them to change. Yes, I guess if it's technical that they're not providing the same, exact reports that were in the contract. I think it was done on purpose. It wasn't a mistake. Ms. Richardson: What I'm saying is that what you've written here is different than what you said tonight (crosstalk) ... Ms. Mason: You mean on the computer system. Ms. Richardson: ... and after having spoken with York about what you're actually going to be doing. Ms. Mason: With the computer system? We can also do that. Vice Mayor Scharff: There were two things. There were two partially agrees. The first one, I thought ... Ms. Richardson: 3.1 and ... Attachment B Vice Mayor Scharff: 3.1, I thought you said that your opinion has changed on that. Was I incorrect? Ms. Mason: I'm sorry. I meant our action plan, not our opinion. Our action plan is a little bit different. We have found that York's system with some of the modifications they recently made, might be a more effective way of doing this than the DocuSign system. Chair DuBois: Which was the recommendation from Audit. It sounds like you've agreed instead of partially agreed. Ms. Mason: We need to improve the reporting timeliness. Vice Mayor Scharff: Wait. You went through that too fast. I'm not sure. They still partially agree. Ms. Mason: We still partially agree. Vice Mayor Scharff: The part you partially agree—the part you don't agree with is which one under 3.1? Ms. Mason: Let me go through this again. Vice Mayor Scharff: I thought you were agreeing, so I'm confused. Ms. Mason: Their specific recommendations are about how we do it. We are saying we are going to do it differently than the specific recommendations. Vice Mayor Scharff: How are you going to do it differently? Ms. Blanch: In the first bullet, at the end of the sentence, it says with HR Staff being responsible for completing the Form 5020. We're proposing that the department will initiate the Form 5020. Ms. Mason: On the computer system. Ms. Blanch: On the computer system. HR will receive it or at the same time, complete the salary portion and submit to York. Ms. Mason: We think there's a computerized solution where this was suggesting a manual process. I feel partially agree—we agree the process needs improvement, but we are not agreeing on the way to do it. Ms. Richardson: I think you actually are, and maybe just the way the recommendation is worded isn't quite clear. I think the third bullet, I think, clarifies that we're saying that trained Staff, which could be PSO Staff, enter Attachment B the sensitive personnel or payroll information. When you look at it as a whole, I think you're actually agreeing with it. Vice Mayor Scharff: I don't think we should wade into that fight. I do think that what would be really helpful—I don't know if you guys agree. You can say partially agree, but then in the action plan, if Council's interested, you call out exactly what you're going to do differently than what it says in 3.1. That way any Council Member can look at it, who hasn't been on this Committee, because this goes on Consent. That way it's no confusion. I can't read your action plan and understand why you're partially agreeing after this discussion today. Ms. Mason: It's just a different process we're proposing to use. Vice Mayor Scharff: That's fine. Just say that. Say what that—just address the different bullets about what's different. Ms. Mason: If you want us to put agree—I guess where we're at is ... Vice Mayor Scharff: No, I don't. No, no. I do not want you to put agree. I want clarity. Remember I'm a lawyer. I look at the document, and I say, "I want you to match what's written here and say we are not doing the HR Staff, we're doing this." I want you to take each bullet and tell me what you're doing differently. That's what I want. I just want clarity. I actually think it's great if you don't agree. That's fine. That doesn't bother me one way or the other. I just want to know what you don't agree on and what you're doing. Ms. Mason: If you look at each of the bullets, they are not all that—they're sort of one process that looks to be pretty manual. We are suggesting that we think using the online claims reporting process is a better process. Chair DuBois: When I read it, it says ensure the use of York's online forms. You said you disagree; we're going to use DocuSign. Now it sounds like you've changed your mind and you're going to use York's online forms. That was my confusion. Ms. Mason: We'll redo it. Council Member Kniss: Could I ask one more subjective question? Do we find that this is more about saving money or about accurate reporting or about something else that maybe I can't define? Vice Mayor Scharff: Safety. Council Member Kniss: Yes, of course. Attachment B Ms. Richardson: I would say it's a mix. I think that by dedicating a resource you will save money in the long term. If you don't have people who are implementing an effective illness and injury prevention program, you're going to have more injuries. By having someone who's focused on that effort, you can keep your costs down. There's the accurate reporting just to make sure that we're compliant with State law and don't get fined. Council Member Kniss: Yes. That, of course ... Chair DuBois: We need another Motion. You're asking to change 3.1. Is that it? Vice Mayor Scharff: Yes, I'm asking her to change 3.1 and 4.2, that you stand by what you had here. You partially agree with what you wrote in this one. That's what I understood from the comments previously. INCORPORATED INTO THE MOTION WITH THE CONSENT OF THE MAKER AND SECONDER to add to the Motion, “including changes to Audit Findings 3.1 and 4.2 which will outline the related Action Plans that will be implemented by Staff.” MOTION AS AMENDED RESTATED: Vice Mayor Scharff moved, seconded by Council Member Kniss to recommend the City Council accept the Disability Rates and Workers’ Compensation Audit, including changes to Audit Findings 3.1 and 4.2 which will outline the related Action Plans that will be implemented by Staff. Council Member Kniss: Ready to vote. Chair DuBois: Yep. All in favor. Thank you, guys. MOTION PASSED: 3-0 Berman absent Council Member Kniss: Thanks. Thank you for coming from York. Ms. Adams: Yes, you're welcome. My pleasure. Attachment B