Blog note: this article frequently
references a grand jury report.
Orange County officials are
acknowledging oversight issues with a controversial fund that provides medical
insurance for current and retired sheriff’s deputies.
Called the "AOCDS Medical
Trust," it dates back to 1990, when the county shifted responsibility for
managing medical benefits to the AOCDS. Under the current labor contract,
the county pays into the fund, and the union ensures that deputes receive
benefits that are similar to what other county employees receive.
But that has not been the case,
according to grand jurors. AOCDS members have been allowed to pay much less
– nothing in some cases – for health care than other county employees,
according to the grand jury report, titled “Orange County Sheriff Medical
Insurance: County Failures in Negotiation, Documentation, Oversight, and
Transparency.”
At least twice in recent years,
the panel wrote, the fund has been used to subsidize the insurance payments
that retired deputies are supposed to cover, something that’s not done for the
county’s other employees.
“Allowing this accommodation to
continue for the active Sheriffs will certainly result in the County and its
non-Sheriff employees having to make up the future, increasingly large,
shortfall in retiree medical coverage,” stated the report, which was released
in June.
Union officials, meanwhile,
highlighted that they're providing "cost-effective and comprehensive
medical benefits" to members.
“As we expected, the grand jury
found no mismanagement, malfeasance or fraud connected to the AOCDS Medical
Trust,” union spokeswoman Kimberly Edds said in a statement.
But the panel's findings regarding
the questionable payments are latest in a string of warnings that date back to
2008. That year, an auditor, who was chosen by the union and county, found that
a lack of an anti-fraud program was a “significant deficiency” in preventing misstatements
in financial reports.
Four years after that audit
– with the recommendations not implemented – the trust underreported
the amount of money in one of its funds by $1 million, auditors later
discovered. County officials recently acknowledged that they didn’t insist that
the recommendations be put in place.
In its June report, the grand jury
asserted that after the county pays its monthly share into the trust, it
"effectively loses visibility and traceability of those funds.” Currently,
the county pays an average of $1,174 per month for each deputy, which adds up
to about $25 million in annual payments, according to the report.
In their formal response, approved
at the county supervisors' Aug. 25 meeting, supervisors and CEO Frank Kim
agreed that, “contrary to the terms” of the labor contract, non-county
employees of the union were receiving health coverage from the trust.
And when it comes to
subsidizing retirees’ share of the insurance costs, county officials
acknowledge they don't know whether county money was used.
“The Trust is comprised of
contributions from both the County, and eligible employees. Whether or not the
retiree health benefits are subsidized with County contributions or AOCDS
member contributions to the Trust is unclear,” the county response states.
They also agreed that auditors
have found “a number of internal control deficiencies” with the fund.
Edds, the AOCDS spokeswoman,
said the union repeatedly offered to “provide input and insight into the
Trust,” but “neither the county nor the grand jury was interested.”
Edds also disputed the notion
that retired deputies’ share of insurance costs were being improperly paid with
county funds.
“County medical contributions
have never been used to subsidize retiree premiums,” Edds said in her
statement. When subsidies were provided, she added, it came out of reserves
“comprised of members’ money – not County money.”
And, she added, the coverage
for AOCDS employees was never subsidized by county contributions.
As for the accounting
safeguards, Edds said an anti-fraud program was in fact implemented in 2009,
contrary to the grand jury's findings.
County officials also agreed with
the grand jury's finding that the contract with deputies doesn’t limit how the
fund’s roughly $15 million in reserves should be used.
Grand jurors attributed many of
the problems to “ambiguous language” in the county’s contract with sheriff’s
deputies, a “lack of initiative” by county officials to enforce the agreement,
a “lack of transparency,” weak negotiating, and “county politics.”
Grand jurors issued a series of
recommendations, including that the county take back its responsibility for
managing insurance programs and seek refunds from the union for funds that were
spent “inappropriately.”
The county CEO’s office says
they plan to analyze how feasible it would be to take back control over the
insurance programs, and report their findings to the CEO by December. As
for refunds, county staff say they will also take some time to study the issue.
The union, meanwhile, says it
has saved county taxpayers more than $38 million since 2003 by managing the
insurance, as opposed to having the county was running it.
September 15, 2015
Voice
of OC
By
Nick Gerda
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